Posted on October 16th, 2017
Prevailing wages in California can be very confusing for California employers. I have had some clients get into some trouble in this area because there is not a ton of helpful and easy to understand information out there on it.
This article aims to clear things up and make sure you’re complying with all the prevailing wage laws.
California employment laws are making it increasingly difficult for employers to do business in the state.
A major reason for this is some of the laws are very difficult to understand based on what your situation is. And one of the most confusing and frustrating rules of all are those regarding prevailing wages in California.
Prevailing wage laws are the subject of great debate in the state of California. These rules can significantly impact employment practices. Here are a few of the key points you need to know.
What are Prevailing Wages?
The term “prevailing wage” refers to the pay rate that government authorities have determined to be the norm. This varies by:
- Geographic location
- Labor class
- Type of project
The rate is typically determined based on local data and is usually equal to the area’s union rates.
This is different from prevailing minimum wages, which commonly track minimum wage laws in the geographic area.
Who Determines Prevailing Wages in California?
In the state of California, prevailing wages are determined by the California Department of Industrial Relations (DIR). The director analyzes an area and determines a uniform prevailing per diem rate. This is updated twice a year, on the 22nd of February and August.
How do Prevailing Wages Impact California Employers?
The general purpose of prevailing wage calculation is to give organized labor a fair chance when bidding for government contract bids.
Federal law requires employers working under Federal contracts to pay their employees the prevailing wage. This helps ensure that non-union employers can’t significantly underbid due to the savings they recognize by underpaying their employees.
The state of California also enforces similar laws. All bidders for public works projects use the same wage rates.
The rules also cover work done on single-family homes and apartments less than four stories high if the work is paid for using public funds.
Special Overtime Rules
California prevailing wage laws require that any work over 8 hours a day or 40 hours per week must be paid at overtime rates. This rate is to be 1.5 times the regular prevailing pay rate.
When an employee works over 12 hours in a single day or over 8 hours on the 7th day, they must be paid double time.
Prevailing rate employees are also paid overtime on weekends, regardless of how many hours have been worked during the week. Work done on recognized legal holidays may also require overtime pay.
Shift differential pay may be required for work that requires odd hours or multiple shifts.
Who Must Pay Prevailing Wages in California?
Prevailing wage rules apply to private contractors and sub-contractors providing labor for public works contracts of $1,000 or more.
Public works contracts include any of the following services, if they are paid for with public funds:
- Construction
- Preconstruction work
- Demolition
- Installation and repair
- Design
- Utility
- Irrigation
- Reclamation
- Carpet laying
- Construction clean-up
It’s important to note that construction licenses don’t necessarily have to have been issued for prevailing wage rules to apply.
Privately owned property can also be subject to prevailing wages in California. This applies if 50 percent or more of the property will be leased to the state or a political subdivision upon completion of construction.
Registration Requirements
Public works contractors must register with the DIR on an annual basis. The current registration cost is $400, and it runs on a fiscal basis from July 1st through June 30th.
The registration requirements are as follows:
- Worker’s compensation coverage must be in place
- Only registered public works contractors may be used as subcontractors
- Must hold all necessary state board licenses
- No delinquent unpaid wages owed to employees
- No penalty assessments owed to any enforcement agency
- Cannot be under Federal or state debarment
- Cannot be in prior violation of the registration requirements
A contractor who is in violation for the first time in 12 months can still complete the registration process. Additional penalties will apply.
Penalties for Failure to Register
Contractors who are required to register and have failed to do so will not be allowed to work or bid on public contracts. They can also be removed from any current public works contracts.
Eligible contractors who had a single violation in 12 months must pay a penalty of $2,000 in addition to the $400 registration fee.
Contractors who mistakenly fail to renew but continue to work are allowed a 90-day grace period. In this case, registration can be renewed by paying an extra $400 penalty in addition to the $400 registration fee.
Two or more violations within a 12-month period can result in disqualification from working on public works projects for up to 12 months at a time.
Monitoring and Enforcement
Prevailing wages in California are monitored by the DIR and, in some cases, by Labor Compliance Programs (LCP). Nonexempt contractors must file electronic certified payroll records.
These records are submitted to the Labor Commissioner. Submissions must be done at least monthly, and best practices recommend weekly submission.
Penalties for Failure to Follow Prevailing Wage Laws
The requirement to pay prevailing wages is not something employers should try to avoid.
Prevailing wage violations can result in employees being awarded back wages. Employers can also be hit with large civil penalties.
California Labor Code Section 1775 provides for penalties of up to $200 per underpaid worker, per day.
False payroll certifications or willful violations of prevailing wage laws can result in misdemeanor charges.
Second-place bidders can also bring about lawsuits against prevailing wage violators. This is based on the presumption that the winning bidder was able to come up with the bid due to unfair wage practices.
Do You Have Questions About Prevailing Wages in California? Contact Us Today.
At Defend my Biz, our number one priority is protecting California employers. We understand how difficult it is to remain compliant in the ever-changing legal landscape.
Frivolous lawsuits can seriously damage your reputation and hurt your bottom line. Make sure your business is protected. Discuss your employee problems with a qualified attorney who specializes in employment law.
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