July 5, 2017

Public Works Contractor Reporting Requirements are Finally Relaxed

After several years of advocacy by school districts—particularly small and rural districts— and the Small School District Association (SSDA) the Legislature and Administration have agreed to a deal that would relax the onerous contractor registration requirements for public works projects, in exchange for changes to the penalties for non-compliance. The new provisions are described in detail below. Here are the major changes:

  • Reporting thresholds increased from $1,000 to $25,000 for new construction, alteration, demolition, installation, or repair work.
  • Reporting thresholds increased from $1,000 to $15,000 for maintenance projects.
  • New penalties established for non-compliance by contractors and awarding bodies.
Background on Public Works Enforcement

In 2014, the Legislature quietly amended a bill—it implemented the annual Budget Act—to expand the state’s labor compliance requirements for public agencies (see Senate Bill 854, Chapter 28, Statutes of 2014). The amendment occurred so late in the budgeting process that no public hearing was held to debate the merits of this policy change. Under the new law, all contractors would be required to annually register with, and pay a fee to, the Department of Industrial Relations (DIR) prior to engaging on any public works project of $1,000 or more. These contractors would also be required to submit certified payroll records to DIR.

School districts protested this action, but faced political hurdles due to resistance from the State Building and Construction Trades Council of California, which represents labor organizations.

The impact of SB 854 was particularly challenging for small, rural school districts. But the Small School District Association (SSDA) was relentless in its efforts with the Legislature, state agencies, and the Administration. This year, as DIR was seeking more revenue for compliance monitoring, and the labor unions were seeking greater penalties for non-compliance, SSDA brokered a compromise to raise the dollar threshold before the contractor reporting requirements would apply.

These changes will apply to ALL school districts.

New Public Works Provisions

Once the applicable bills are signed into law by the Governor (likely later this month), the following rules will apply.

The new provisions apply to any bid submitted on or after March 1, 2015, to any contract for public work executed after April 1, 2015, and to any public work performed on or after January 1, 2018, regardless of when the contract was entered.

  • Reporting thresholds increased from $1,000 to $25,000 for new construction, alteration, demolition, installation, or repair work.
  • Reporting thresholds increased from $1,000 to $15,000 for maintenance projects.
  • An awarding body now has 30 days from the award to provide notice to DIR (increased from 5 days in current law).
  • Annual fees for contractors and subcontractors have been increased from $300 to $400, as of July 1, 2017.

Contractor penalties (partial list):

  • Contractor and subcontractor fines for non-compliance with DIR registration are $100 per day in violation, not to exceed $8,000.
  • Loss of registration for current year and following year.

Awarding agency penalties:

  • For failure to provide notice within 30 days of award, $100 per day, up to $10,000 for each project.
  • The Labor Commissioner will determine the severity of the violation and amount of penalty and may waive the penalty for a first-time violation, if determined to be unintentional.
  • If an awarding agency makes a final payment to a contractor, but an unregistered contractor or subcontractor is found, a fine of $100 per day, up to $10,000, may be assessed.
  • If a “willful” violation has occurred with respect to two or more public works contracts in any 12-month period, the public agency shall be ineligible to receive state funds for one year.