Sacramento's surprise: Public works ready-mix delivery will be subject to prevailing wage

Many of us in the construction industry spent time this fall with one eye on Sacramento, hoping our legislators would at long last address the crumbling state of California's highways, roads and bridges.

Editorial boards, local agencies, citizen groups and construction industry and union leaders alike pressed for additional funding to improve our infrastructure.

When the legislative session ended, we were disappointed, again. No deal on additional funding was reached. 

While that unfortunate news grabbed recent construction-related headlines, the legislature did manage to pass and get Gov. Jerry Brown's signature on several lower-profile bills impacting the construction industry.

This article focuses on one of those bills, Assembly Bill 219. The passage of AB 219 means that, for the first time, the delivery of ready-mix concrete from a commercial plant to a public works job will be subject to prevailing wage.

Highlights from the bill:

1. AB 219 will apply to all public jobs awarded after July 1, 2016.

2. After that date, ready-mix drivers will be entitled to prevailing wage for each round-trip delivery to a public work, beginning with loading of the concrete at the batch plant and ending upon return to the plant.

3. The applicable prevailing wage will be the one for the geographic area in which the batch plant is located.

4. Each ready-mix supplier to a public job will be required to enter into a written subcontract with its contractor customer.

5. Ready-mix suppliers will be required to submit certified payroll records to their contractor customers and the project's prime contractor (if that's a different entity), including certification by the individual driver within three working days after the driver has been paid for the prevailing wage work.

For those of us in the ready-mix concrete business, these are pretty remarkable changes.

The laws and regulations that govern the construction industry have always drawn a clear distinction between the performance of construction work and the supply of construction materials. The Department of Industrial Relations confirmed that distinction in 2000 when department officials examined whether ready-mix concrete delivery to a public job constituted prevailing wage work, and concluded it did not.

AB 219 supersedes that DIR determination, and marks several "firsts" for the California construction industry – all of which will add cost, risk and potential confusion for concrete suppliers and contractors.

For example:

- Ready-mix suppliers will be forced to develop an accounting and payroll infrastructure to process and submit certified payroll records.

- Those certified payroll processes must have the capacity to "split up" each driver's records, as public work ready-mix delivery pay records will have to be separated from private work delivery pay records, on a daily basis.

- In what appears to be an unprecedented provision in the California prevailing wage laws, ready-mix suppliers will be required to obtain from each driver a formal certification that they performed the work duties shown in the certified payroll record, prior to those records being submitted.

- Ready-mix suppliers and contractors will be forced to negotiate subcontracts on all public works, rather than relying on purchase orders. (However, those subcontracts must only cover prevailing wage law terms, not other terms such as indemnity and insurance provisions.)

- Finally, under the prevailing wage laws, contractors are ultimately responsible for their subcontractor's unpaid prevailing wages and unpaid penalties resulting from improper wage payment or improper certified payroll record submission. As a result, public works contractors will be taking on more risk as their ready-mix supply "subcontractors" attempt to abide by these new requirements after July 1, 2016.

When we talk with contractors and material suppliers from other regions of the country, they love to joke at our expense about how complex and difficult the California regulatory environment is. The passage and implementation of AB 219, it's safe to say, will give them a few more laugh lines.