Employee Relations 10/29/2010
Department of Industrial Relations Suspends Labor Compliance Program Regulations
Last week, the California Department of Industrial Relations
(DIR) proposed taking emergency action to suspend the effects of
the new SB 2X 9 regulations relating to labor compliance programs
As you recall, SB 2X 9, a 2009-10 Budget trailer bill, requires all public entities to pay a fee to DIR for LCP enforcement and monitoring in place of maintaining or creating their LCP. This fee applies to all projects funded through bonds issued by the state as well as specified design-build projects. Awarding bodies wishing to maintain existing LCPs may be eligible for a fee waiver from DIR, but only if the LCP covers all public works projects. SB 2X 9 specifically set limits on the fee amounts: for bond projects, the limit is one-quarter of one-percent of the state bond proceeds; for design-build projects, the fee limit is one-quarter of one percent of the total project cost.
This month, the state’s public works board (SPWB) sent a letter to DIR stating that, due to the recently adopted SB 2X 9 regulations, it would be unable to issue lease revenue bonds to pay for $17 billion worth of current capital outlay projects. SPWB explained that prior to issuing such bonds, the Attorney General issues an unqualified opinion letter which states that the issuance of SPWB lease revenue bonds are in compliance with all state law requirements. This letter is heavily relied upon by the investing public when the bonds are issued. The Attorney General has refused to provide these letters for bonds covered by the recently adopted SB 2X 9 regulations, as he is concerned about the legality of using bond funds to pay fees that don’t correlate with the cost of ensuring prevailing wage compliance on projects. As a result, hundreds of capital outlay projects will not receive the funding necessary for their completion.
If this emergency action is approved by the Office of Administrative Law, fee-based monitoring and enforcement will be suspended and DIR will restore labor compliance program requirements that existed for various categories of projects prior to August 1, 2010. Additionally, DIR will refund or reimburse fees paid for recently-awarded projects and suspend further action on LCP fee waiver requests and other issues pertaining to the implementation of SB 2X 9 until the legal issues underlying this emergency rulemaking are resolved. We will keep you apprised of any future actions on this subject.