Chapter 2: Governing Agencies

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• 2-1  Introduction
• 2-2  US Department of Labor
• 2-3  Department of Industrial Relations
  • 2-3-1  Wage Determinations
  • 2-3-2  General Determinations
  • 2-3-3  Prevailing Wages Monitoring
    • 2-3-3(A)  Monitoring and Enforcement of Department of Industrial Regulations Registration Requirements
• 2-3-4  Dispute Resolution for Prevailing Wages
• 2-3-5  Prevailing Wage Disputes and Collective Bargaining
• 2-3-6  Enforcement of the Prevailing Wages by Caltrans
• 2-3-7  Power of State to Regulate

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2-1 Introduction

This chapter provides an overview of the federal and state government agencies that establish and enforce the labor regulations and statutes for all public works projects.

2-2 US Department of Labor

The U.S. Department of Labor (DOL) is a federal agency with three overall functions. It protects the rights of workers and retirees, provides job training, and provides statistics related to employment, prices, and income. The DOL was created March 4, 1913, by President Taft.

There are more than 25 offices and agencies within the DOL, all led by the Secretary of Labor. The seven most notable agencies are:

• The Employee Benefits Security Administration, which is responsible for the regulation and support of private retirement plans, health plans, and other welfare benefit plans.
• The Wage and Hour Division, which enforces and administers child labor laws, workers compensation, and the U.S. minimum wage.
• The Office of Workers' Compensation Programs, which administers four major disability compensation programs and provides benefits to workers who experience work-related injury or occupational disease, or their dependents.
• The Employment and Training Administration, which provides job training programs through state and local agencies, and the federal Job Corps.
• The Occupational Safety and Health Administration, which enforces workplace safety standards.
• The Bureau of Labor Statistics, which provides statistics on the workforce.
• The Pension Benefit Guaranty Corporation, which pays private pensions if an employer cannot pay.

2-3 Department of Industrial Relations

The California Department of Industrial Relations (DIR) was established in 1927. Its mission is to improve working conditions for California's wage earners and to advance opportunities for profitable employment in California. DIR administers and enforces laws governing wages, hours and breaks, overtime, retaliation, workplace safety and health, apprenticeship training programs, and medical care and other benefits for injured workers. DIR also publishes materials and holds workshops and seminars to promote employment relations, conducts research to improve its programs, and coordinates with other agencies to target violators of labor laws and tax laws.

The DIR has the authority to make two determinations:

1. Whether a particular type of worker is covered by the prevailing wage laws
2. What the prevailing wage for that type of worker should be

The DIR director ascertains and considers wage rates and publishes them in determinations in accordance with California Labor Code Section 1770 et seq. The determinations provide a publicly available menu of crafts, classifications, or types of workers and their corresponding wage rates. The awarding body specifies the crafts, classifications, or types of workers needed to execute the contract and the corresponding wage rates in its call for bids and in the bid specifications for the contract. Thereafter, the contractor and any of their subcontractors under the same contract must pay not less than the prevailing wages pursuant to California Labor Code Section 1774. The awarding body must “take cognizance of violations” in accordance with California Labor Code Section 1726. Willful violation of any provision is a misdemeanor pursuant to California Labor Code Section 1777.

2-3-1 Wage Determinations

According to Section 1773 of the California Labor Code, the DIR director is responsible for making prevailing wage determinations. The same section specifies the factors to be considered in making such determinations.

The director is required to:

• Ascertain the applicable wage rates established by collective bargaining agreements and prevailing wage rates for federal public works within the locality and in the nearest labor market area.
• Where such rates do not constitute the prevailing rates in the locality, the director must consider data from the labor organizations, employers, or employer associations concerned.
• When the director determines that the prevailing wage rate for a particular craft, classification, or type of worker is the rate set in a collective bargaining agreement, the director may adopt the rate by reference. This determination must be effective for the life of such agreement or until the director determines that a different rate should be adopted.
• Under California Labor Code Section 1773, prevailing wage rates are observed within the locality and nearest labor market. If the comparison to federal wage rates suggests the rates are not prevailing, Section 1773 provides for the collection and consideration of data from labor organizations, employers, and employer associations.
• The U.S. Department of Transportation does not, as a matter of course, provide notice, opportunity for comment, and hearing, as would be required for the adoption of a regulation, before making a prevailing wage determination. Once a craft, classification, or type of worker is recognized, a particular rate of pay is established and issued as a formal determination.

2-3-2 General Determinations

The DIR director publishes the general determinations and distributes them to awarding bodies, contractors, and trade associations. Where the general rate does not apply, an awarding body may request a special determination pursuant to California Code of Regulation 16100(b)(B) and 16202.

A series of requests for special determinations for a particular classification may lead to a broad survey, which results in the classification being included in a general determination. Conversely, a classification may be found in a particular local market at the time of one award, and subsequently not used. A general determination does not require a survey unless the determination is challenged in a petition to review, which results in an investigation and survey.

2-3-3 Prevailing Wages Monitoring

The public works reforms brought about by Senate Bill 854 (Stat. 2014, chapter 28) made several changes to the laws governing how the DIR monitors compliance with prevailing wage requirements on public works projects. Some of these changes modified the responsibilities of awarding bodies. Some of SB 854's changes went into effect immediately because the bill was adopted as an urgency measure, but others were phased in.

Because it is a Legacy Program, Caltrans must monitor and enforce requirements of the Public Works Chapter of Labor Code, including all registration requirements.

2-3-3(A) Monitoring and Enforcement of Department of Industrial Regulations Registration Requirements

In accordance with Labor Compliance Policy Bulletin 20-1, “Contractor Registration Requirements,” Caltrans staff continually review work site records to verify all subcontractors are registered with DIR.

• Staff will enter the subcontractor’s information throughout the life of the project into DIR’s PWC-100, at: https://www.dir.ca.gov/pwc100ext/.
• Labor Compliance staff will verify that all contractors and subcontractors have renewed their registration annually, as required under Labor Code 1725.5(a), for the duration of the project.
• If a contractor or subcontractor is unregistered, Labor Compliance staff must notify the unregistered contractor by letter, and for Construction Division-administered projects, will copy the resident engineer.
• If an unregistered contractor is a subcontractor, the written notice will be sent to the prime contractor; copies will be sent to the subcontractor and resident engineer.
• The Labor Compliance office will notify DIR of any identified unregistered contractors and will not allow the unregistered contractor to continue work on the project.
• Upon completion of the project: Prime contractor must submit to Caltrans a list of all subcontractors who participated on the project. Upon receipt, Labor Compliance staff will verify that all contractors are registered with DIR and entered in the DIR Public Works Project Registration. Final payment should not be made to the prime contractor until at least 30 days after the complete list of subcontractors is received and reviewed.

Failure to comply with these requirements subjects the contractor, subcontractor, and Caltrans to penalties as described in Labor Codes 1771.1 and 1773.3.

2-3-4 Dispute Resolution for Prevailing Wages

In 1953, after DIR was assigned the task of resolving disputes regarding prevailing wage rates, it adopted regulation CCR 16000, defining “prevailing rate” as follows:

The term ‘prevailing rate’ means the rate being paid to a majority of workers engaged in a particular craft, classification or type of work within the locality if a majority of such workers are paid at a single rate. If there is no single rate being paid to a majority, the single rate (modal rate) being paid the greater number is prevailing. The effect of this definition is that the general prevailing rate is a quantity to be found, not construed through the calculation of an average or any statistical manipulation process. In each case, the operative rate is the one paid to the greatest number of actual workers.

2-3-5 Prevailing Wage Disputes and Collective Bargaining

The prevailing rate is derived from a process, such as collective bargaining. This process has been demonstrated in various wage surveys conducted by DIR. California Labor Code 1773 permits the director to adopt a rate established in a collective bargaining agreement and states that “such determination shall be effective for the life of the agreement or until the director determines that another rate should be adopted.” In most cases, DIR finds that the collective bargaining agreement rates prevail.

In accordance with California Labor Code Sections 1771 and 1773, and CCR 16100(b)(1), it is the responsibility of the awarding body to obtain the prevailing wage rates from the DIR director. Section 1773.2 mandates that the awarding body specify which crafts, classifications, or types of workers are needed to execute the contract. It must do so before seeking bids on the contract, so that wages are consistent among all bid proposals. Thus, the crafts, classifications, or types of workers are determined by the context of a location, time, and type of work. Awarding bodies typically refer contractors to the general prevailing wage determinations issued by the director.

Petitioners, including contractors, contractor organizations, and labor organizations, can ask the director to include a classification believed to be present in the local labor market, but not published in the director's general determinations. This process is called a “Petition To Review,” as described in California Labor Code Section 1773.4, and detailed in CCR 16302.

2-3-6 Enforcement of the Prevailing Wages by Caltrans

Pursuant to its authority as an approved Labor Compliance Program (LCP) and Labor Code Section 1771.5, Caltrans is responsible for the enforcement of prevailing wage requirements on its projects. Caltrans monitors compliance requirements by reviewing payroll and related reports, and initiates enforcement actions that may be warranted.

The provisions of this LCP require that Caltrans enforce standards set forth by state laws and regulations, and any Caltrans-specific policies and contract provisions. This includes:

• Payment of prevailing wage rates.
• Employment of properly registered apprentices.
• Submitting certified payroll records, including submission of fringe benefit statements as required. Reports must be complete and accurate.
• Conducting pre-job conferences with contractors or subcontractors.
• Withholding contract payments and imposing penalties for noncompliance.
• Submitting required annual reports to the DIR

In addition to requirements listed, Caltrans may audit contractors and subcontractors based on the following and Figure 2-A, “Inadequate Payroll Records:”

• Complaints received, verbally or in writing
• Delinquent, inadequate, discrepant payroll issues
  • Unresolved issues or unresponsive contractor or subcontractor
  • Repeated violations with no resolution
• Random audits

FIGURE 2‑A: INADEQUATE PAYROLL RECORDS

If a Caltrans investigation determines that payroll records are delinquent, inadequate, or deficient, Caltrans may withhold payment to contractors and subcontractors in accordance with Labor Code Section 1771.5. Caltrans may also withhold any amounts due to a contractor or subcontractor determined by Caltrans to be necessary to satisfy liabilities of the contractor or subcontractor for unpaid wages to workers under the contract pursuant to Labor Code Section 1727.

Ongoing failure by the contractor to provide the required documents will result in a referral by Caltrans to the DIR for a wage case with applicable penalties. 

If the contractor wishes to challenge the assessment and recover the funds withheld, it can file an action against the awarding body on its public works contract without the permission from the state or other authority.

2-3-7 Power of State to Regulate

A contractor’s independence does not override their responsibility to adhere to the requirements of state laws and regulations. Caltrans as the awarding body will verify compliance and adherence to the states’ laws and regulations.