New California law expands the definition of "public works," imposing prevailing wage obligations for construction, alteration, demolition, installation and repair work performed under certain private contracts in connection with renewable energy or energy efficiency improvements on public property. New California laws also stiffen the penalties for non-compliance and modify the enforcement mechanisms for prevailing wage obligations.
On October 9, 2011, Governor Edmund G. Brown, Jr. signed Senate Bill 136, answering in the affirmative the question of whether the definition of "public works" should be expanded to include certain work done under private contract in connection with renewable energy or energy efficiency improvements on property of the state or a political subdivision of the state. On one side, supporters of S.B. 136 argued that it will "put to rest a convoluted interpretation of the application of prevailing wages regarding energy service contracts," and close the "creative loophole" used by some local agencies to avoid requiring that prevailing wages be paid. On the other side, opponents argued that S.B. 136 is an unreasonable new prevailing wage mandate on private works of improvement because "power purchase agreements" that will be governed by the new law are for the purchase of generated power only, and requiring prevailing wage rates to be paid will, among other things, reduce the bottom line savings for public entities. Governor Brown also signed Assembly Bill 551, which increases the penalties for violations of the prevailing wage law,1 and Assembly Bill 436, which makes changes to the prevailing wage enforcement mechanisms.2
Existing California law defines "public works," for purposes of regulating public works contracts, as, among other things, construction, alteration, demolition, installation, or repair work done under contract (Labor Code Section 1720(a)) and "paid for, in whole or in part, out of public funds" (Labor Code Section 1720(b)). Significantly, except as specified, existing California law requires that not less than prevailing wage rates be paid to workers employed on public works, imposing misdemeanor penalties for a violation of this requirement. The new law adds Labor Code Section 1720.6, expanding the definition of "public works" to include certain work done under private contract, for the limited purposes of California’s prevailing wage law, which commences with Labor Code Section 1770.
Beginning January 1, 2012, construction, alteration, demolition, installation, or repair work done under private contract will be deemed "public works" when the following conditions exist:
- The work is performed in connection with the construction or maintenance of renewable energy generating capacity or energy efficiency improvements;
- The work is performed on the property of the state or a political subdivision of the state; and
Either of the following conditions exists:
- More than 50 percent of the energy generated is purchased or will be purchased by the state or a political subdivision of the state; or
- The energy efficiency improvements are primarily intended to reduce energy costs that would otherwise be incurred by the state or a political subdivision of the state.
Evidently, the third time is the charm for the proponents of the expanded definition of public works. Two nearly identical bills failed to pass—Assembly Bill 436 (Solorio), 2010-2011 Session, which was amended to address a different prevailing wage subject, as discussed briefly above, and Assembly Bill 677 (Solorio), 2009-2010 Session, vetoed by former Governor Arnold Schwarzenegger in the last legislative session.