Chapter 9: Determining Prevailing Wage Covered Work

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• 9-1 Introduction
• 9-2 State Law – Covered Versus Non-Covered Work
  • 9-2-1 Materials Sites
  • 9-2-2 Materials Plants
  • 9-2-3 Vendors, Suppliers and Fabricators
  • 9-2-4 Engineering Services and Specialists
    • 9-2-4(a) Engineering Consultants
    • 9-2-4(b) Engineering Labs and Surveyors Offices
    • 9-2-4(c) Specialists
  • 9-2-5 Equipment Rental Firms
  • 9-2-6 Repair of Equipment
• 9-3 Federal Law – Covered Versus Non-Covered Work
• 9-4 Owner-Operators
  • 9-4-1 Trucking – Onsite and Offsite Hauling
  • 9-4-2 Owner of Equipment Other Than Trucks
• 9-5 Ready-Mix Concrete

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9-1 Introduction

Caltrans is responsible for monitoring and enforcement of both federal and state labor laws on all public works projects subject to the payment of specified wages for work performed on the project. Any work subject to the payment of prevailing wages is considered covered work.

The term covered work is often summarized as work related to construction, alteration, demolition, installation, repair or maintenance. Any work funded by state or federal entities that falls into one of these categories is likely covered work.

Under federal regulations, every laborer or mechanic employed at the job site who performs work that is part of the contract work is subject to the labor provisions of the contract. The terms laborer and mechanic are defined in 29 CFR 5.2(m) and generally include workers whose duties are manual or physical in nature. Laborers and mechanics include apprentices, trainees, and helpers. The terms do not apply to workers whose duties are primarily administrative, executive, professional, or clerical, rather than manual. Generally, mechanics are considered to include any worker who uses tools or who is performing the work of a trade.

The laborer or mechanic may be:

• An employee of the prime contractor
• An employee of an approved or listed subcontractor
• A person or firm that furnishes on-site labor, including specialists, owners, corporate officers, partners, and rental companies furnishing fully operated equipment.

Under state regulations, work defined under Labor Code Sections 1720 and 1771, and the California Code of Regulations, covered work is broader and includes, in situations, work occurring not specifically on the job site such as off-haul to disposal or ready-mix concrete hauling and delivery and it may include work that is considered professional, such as inspection, testing, and land survey work.

The terms job site or site of the work are defined in 29 CFR 5.2(l) as applied to labor compliance are not limited to the geographic location or limits of the project. In addition, these terms include any location or facility established for the sole or primary purpose of contributing to the specific project. Typical examples include non-commercial material sites, borrow-pits established for a project, processing plants, fabrication yards, garages, or staging sites.

Essential criteria for determining covered work at a job site or off-site work is whether these facilities have been operating on a commercial basis before the award of the contract or whether that site is dedicated and established for the project and performs a commercially useful function exclusively for the project.

Note: Federal and state laws do not always agree, and Caltrans must enforce the most stringent law. When the distinction between covered and non-covered is not clear, contact the Division of Construction Labor Compliance unit for assistance.

9-2 State Law – Covered Versus Non-Covered Work

Public works, as defined in California Labor Code Section 1720(a), are the “construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds, except work done directly by any public utility company pursuant to order of the Public Utilities Commission or other public authority. For purposes of this paragraph, ‘construction’ includes work performed during the design, site assessment, feasibility study, and other preconstruction phases of construction including, but not limited to, inspection and land surveying work, regardless of whether any further construction work is conducted, and work performed during the postconstruction phases of construction, including, but not limited to, all cleanup work at the job site. For purposes of this paragraph, ‘installation’ includes, but is not limited to, the assembly and disassembly of freestanding and affixed modular office systems.”

California law and DIR precedential decisions require more work to be covered than federal law requires. Since the work is being performed in California, state law takes precedence over federal law when state law is more stringent. Table 9-A, “State Covered Work,” summarizes the type of work that is covered by state law.

TABLE 9‑A: STATE COVERED WORK

The following sections provide more detailed information on the work categories in the table.

9-2-1 Materials Sites

For labor compliance purposes, materials sites are considered to meet the definition of site of work under 29 CFR 5.2(l) when used exclusively for the project and considered covered work. Employees at these sites must be paid prevailing wages.

A materials site is covered if:

• The nature of the operation is noncommercial.
• The materials site is not controlled by the supplier.
• The material site is exclusive to the project.
• The materials loading operation is controlled by the contractor.

Typical situations for coverage determinations requiring the payment of prevailing wages include:

• A commercial source outside the project limits where the prime contractor loads a trucking company’s trucks.
• An imported borrow pit that is not open to the public, is located outside the project limits, and is used exclusively by the contractor for a specific project.
• A pit established by the contractor exclusively for a project to supply materials.

In all three of the previous examples, the work is covered, and the contractor is required to pay prevailing wages to employees.

9-2-2 Materials Plants

Materials, including aggregates, produced with any kind of portable, semi-portable, temporary crushing, screening, proportioning, batching, or mixing plant, are considered to have originated at a materials plant. Roadside production of materials produced by other than the contractor’s forces is considered as subcontracted pursuant to the contract labor standards.

When a materials plant has been established or reopened exclusively or nearly exclusively for supplying materials to a specific contractor for specific projects, and when these plants are not generally operated commercially, they are considered a site of the work under 29 CFR 5.2(I); therefore, they are covered for the payment of prevailing wages. Work involved in the establishment, reopening, and general operation of materials plants will likely be covered by the contract labor standards. Use the following guidelines to determine if a plant is commercial one that is not covered by contract labor provisions:

• The operator has obtained a permit to operate as a commercial plant.
• A business license has been obtained for the operation of the plant.
• A public weighmaster operates scales at the materials plant.
• The plant provides proof of sales to other agencies and the public.
• The plant is in operation before the project begins and remains in operation after the project is completed.

The prime contractor must demonstrate that the primary purpose of this materials plant is for general commercial operations. The contractor must provide proof that more than token sales have originated at this materials plant.

9-2-3 Vendors, Suppliers and Fabricators

Suppliers and fabricators of materials who are not subcontractors and who perform no work at the job site other than delivering materials are not subject to the contract labor requirements. However, a supplier or fabricator that is a subcontractor is subject to the labor provisions for that portion of the work performed at the job site. For example:

• Shop work during fabrication of structural steel is not subject to the contract labor requirements. The contract labor provisions cover any structural steel work performed after delivery of material to the job site even though shop personnel may perform it. This includes repair of damaged or defective work, and normal installation or erection.
• A fabrication site is set up exclusively for the project, either near the project or in the commercial plant.

Oil spreading by employees of asphalt suppliers is subject to prevailing wages in certain conditions. Only the time spent onsite spreading the material is covered work. Standby time is not. Coverage applies to oil spreading only when the employee, during one work week, has spent at least 20 percent of the total time worked spreading material on the specific project. Once a particular employee qualifies for coverage, all the actual spreading time that week is retroactively covered. Staggering employees to avoid coverage is permissible. Determine coverage of work for spreading of pavement reinforcing fabric in the same way.

At the job site, installation of any manufactured products such as mechanical and electrical equipment, bridge deck expansion and bearing assemblies, sign frames, precast or precast-prestressed concrete beams, and all similar fabricated items is covered work and subject to the contract labor provisions.

9-2-4 Engineering Services and Specialists

All firms that furnish engineering services, such as construction inspection, materials testing, and land surveying, at the job site, regardless of whether that firm is hired by the contractor or Caltrans, are subject to California Labor Code prevailing wage requirements. This is also true of a site set up solely to serve the project regardless of its location. The payment of prevailing wage rates is mandatory.

9-2-4(a) Engineering Consultants

Consultants who work on materials testing are paid prevailing wage rates whether the work is done on the job site or at state-owned facilities. In addition, travel time to and from one public work site to another to do materials testing such as travel time from a Caltrans project to a Caltrans lab is covered.

9-2-4(b) Engineering Labs and Surveyors Offices

Employees performing lab work or doing calculations at a consultant’s commercial facility, lab, or a surveyor’s office would not be covered.

9-2-4(c) Specialists

An independent firm that furnishes a special service or performs work of a specialized nature is considered a subcontractor with respect to the labor provisions and is subject to all contract labor requirements, regardless of the nature of the work, service, or method of payment.

9-2-5 Equipment Rental Firms

Equipment is often rented or leased by contractors from established commercial equipment rental firms. The prevailing wage rate provisions of the contract do not cover drop off, pick up, and incidental repair of this equipment when the equipment rental firm is not providing operators. When rented equipment used in the work, including extra work, is operated and maintained by employees of the equipment rental firm, the equipment rental firm is considered a subcontractor. The equipment rental firm and its employees need to register with DIR and are, in this situation, covered by the labor compliance requirements of the contract.

9-2-6 Repair of Equipment

General repair and maintenance of equipment used on the job site or at the site of work, including installing, overhauling, assembling, repairing, reconditioning, or other work on machinery, equipment, or tools used in or upon the work are a part of the work to be performed under the contract. The contract labor provisions cover mechanics and other employees working on machinery, equipment, or tools. These employees must be listed on the contractor’s or subcontractor’s certified payroll records. Established, independent commercial repair shops that have operated for a period of at least two months before the advertisement of the contract are not covered.

9-3 Federal Law – Covered Versus Non-Covered Work

Table 9-B, “Federal Law – Covered Versus Non-Covered Work,” highlights specific work covered by the federal Davis-Bacon Act.

TABLE 9‑B: FEDERAL LAW – COVERED VERSUS NON-COVERED WORK

9-4 Owner-Operators

Owner-operators fall into two groups: truck owner-operator drivers and owner-operated equipment other than a truck. As independent contractors, owner-operators are typically paid by the hour without employment taxes deducted and are considered a contractor or subcontractor for the purposes of prevailing wage. 

If the owner-operator is a licensed contractor, an approved subcontractor or recognized lower-tier subcontractor, they may submit a certified payroll on Forms CEM-2501, “Fringe Benefit Statement”; CEM-2502, “Contractor or Subcontractor Payroll”; and CEM-2503, “Statement of Compliance.”

If a review of payroll records shows that deductions for Social Security taxes or state unemployment insurance taxes are withheld for the owner-operator, it is an indication that the operator is an employee rather than an independent contractor. The next step is to conduct an employee interview with the owner-operator using Form CEM-2504, “Employee Interview: Labor Compliance / EEO.” If it is apparent that an owner-operator is an employee, all of the information required by on Form CEM-2504, including the equal employment opportunity portion, is to be filled out completely and brought to the attention of the Labor Compliance office.

Certifying Owner-Operator Status:

The following information is used to certify owner-operator status:

• Operator’s name as shown on all payrolls.
• Business address of the owner-operator.
• The owner-operator’s Social Security number.
• Operator work classification.
• Hours worked by the owner-operator as reported daily.
• Hourly rate of pay, for the owner-operated equipment other than trucks, should equal hourly rental rate plus prevailing wage rate. This can sometimes be lower if by canvassing rental companies, you determine the rates to be lower in the project area.
• Gross payment earned.

Verification of Truck Owner-Operator Status

To verify owner-operator status, the truck owner-operator must report hours worked on a certified payroll report. Owner-operators must have a California Highway Patrol (CHP) CA identification number on file in the Department Motor Vehicle (DMV) database. It is important to check the validity of the owner-operator status in the DMV database.

• The labor compliance representative should use the following criteria to determine if the trucker is an owner-operator or an employee:
  • The operator should be the registered owner of the vehicle. The name of the driver should match the name of the registered owner on the DMV registration.
  • If the legal owner is a firm or corporation, and the firm or corporate name is shown on the vehicle registration slip, request that the driver furnish evidence that they are leasing or purchasing the vehicle. It is common for the name of the finance or leasing company to be listed on the registration.
    • If the owner-operator is leasing or financing the vehicle, then the operator should be able to furnish such evidence.
    • If the owner operator is unable to substantiate purchase or lease of the equipment, they would not qualify as an owner-operator for this truck and potentially would be considered an employee.
• Insurance for the vehicle should be carried in the driver’s name. Further checking is required if the name on the policy does not match the name of the driver.
• The CHP CA identification number in the DMV database should be in the driver’s name. If the name on the CA number does not match the name of the driver, further investigation is warranted. The contractor must establish proof of ownership in cases where there is doubt of the validity of the owner-operator designation.
• If the ownership of a vehicle cannot be determined from the insurance, registration, or title, check the CHP CA identification number in the DMV database at the following website:

https://www.dmv.ca.gov/portal/vehicle-industry-services/motor-carrier-services-mcs/motor-carrier-permits/active-motor-carriers/

9-4-1 Trucking – Onsite and Offsite Hauling

Although truck owner-operators are generally considered independent contractors not subject to the prevailing wage rate requirements, under state law trucks are covered if the hauling activity is considered covered work, unless one of the exceptions in Figure 9-C, “Offsite Hauling – Trucking Exceptions,” apply:

FIGURE 9‑C: OFFSITE HAULING - TRUCKING EXCEPTIONS

Table 9-D, “Trucking Exceptions,” shows when a truck owner-operator’s scope of work is covered by prevailing wage.

TABLE 9‑D: TRUCKING EXCEPTIONS

Note 1: Wage rate constant throughout the duration of the contract

Note 2: Wage rate may increase after the expiration date of the work

PW = prevailing wage

9-4-2 Owner of Equipment Other Than Trucks

Owner-operators of general construction equipment other than trucks, such as graders, cranes, backhoes, excavators, and other equipment, are considered covered by both state and federal law. Workers must be paid at least the minimum prevailing wage rate in effect for the specific contract plus the appropriate equipment rental rate.

Calculating Owner-Operator Equipment Payment Breakdown

The labor compliance staff can determine the hourly wage rate due by deducting the prevailing equipment rental rate for the area from the gross hourly rate shown on the owner-operator listing. The contract rental rate without markup may be used as a guide. Since this may not be the local prevailing rate, it may be necessary to contact local rental agencies or other sources to estimate the actual prevailing equipment rental rate. Compare the estimated hourly wage rate to the applicable basic wage plus fringe benefits to determine compliance.

9-5 Ready-Mix Concrete

Assembly Bill 219 (AB 219), approved in October 2015, expands the definition of public works under the California Prevailing Wage Law to include the hauling and delivery of ready-mix concrete (California Labor Code Section 1720.9).

Section 1720.9 defines the ready-mix concrete and specifies that the rate of pay must be the current prevailing wage "for the geographical area in which the factory or batching plant is located" as determined by the Department of Industrial Relations. The statute also requires a written agreement between the party hauling or delivering ready-mix concrete and the party that engaged its services. The agreement must specify compliance with the Prevailing Wage Law.

Figure 9-E, “Application of Ready-Mix Concrete Labor Code Section 1720.9,” shows that the hauling or delivery company must provide certified payroll records under Labor Code Section 1776(a) to the party that engaged its services and to the general contractor within five working days after the employee has been paid, accompanied by a written time record. The time record must be certified by each driver for the performance of job duties.

FIGURE 9‑E: LABOR CODE 1720.9