Here’s why California developers must pay construction workers a fair wage

Special to The Bee
OCTOBER 27, 2017 5:00 AM

Eighty five percent of the costs associated with housing construction in California are unrelated to the wages or benefits paid to the workers who actually build it.

And since 1990, those wages, adjusted for inflation, have actually decreased by 25 percent and been redistributed into profit margins for developers, which are growing 50 percent faster than the cost of materials or labor.

Developers got most of what they wanted in housing reform legislation that Gov. Jerry Brown signed into law this month. And yet the building industry continues to complain about wages that are going to be paid to construction workers on certain projects.

The builders claim that they will need to raise prices to grow their already bulging bottom lines if they have to pay their workers enough to live. But there’s no real evidence to support this assertion.

In reality, the elimination of red tape on new housing construction likely will save most developers far more than any modest increase in their workers’ wages.

Peer-reviewed research on prevailing wages shows no impact on total project costs, because these standards promote skills training and quality workmanship that increase productivity and reduce spending on fuel and materials. And because they are market rates that reflect local cost of living, they save taxpayers the cost of subsidizing below market wages with welfare expenditures.

These aren’t abstract academic theories.

In 2015, the state of Indiana repealed its prevailing wage law. Earlier this year, the Indiana Assembly assistant Republican floor leader was asked about the effect on project costs. His response: “It hasn’t saved us a penny.”

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San Jose: Public projects valued at $6 million will require project labor agreements

PUBLISHED: October 24, 2017 at 1:09 pm | UPDATED: October 25, 2017 at 4:54 am
SAN JOSE — City lawmakers on Tuesday adopted a policy that requires contractors to hire at least some union workers on public projects valued at $6 million or more, including new libraries, fire stations and airport improvements.

The City Council adopted “project labor agreements” requirement on a 6-5 vote. The agreements require a contractor to hire some workers from a local union hall and pay state-mandated prevailing wages — what a majority of workers in a county’s largest city earn. Contractors also must provide fringe benefits and hire a number of apprentices from disadvantaged groups. Contractors will be allowed to hire 35 “core” workers from their own workforce with the rest hired through a union hall.

Private construction projects, those funded by federal dollars and city-funded affordable housing projects will be excluded. Santa Clara County, Los Angeles, San Francisco, Oakland, Cleveland and New York have all passed similar labor agreements.

Backers said the agreements will help ensure every worker has a fair chance of getting work and support families struggling to survive in Silicon Valley’s technology-driven economy. Critics said the move will stifle competition and inflate construction costs, meaning taxpayers get fewer public improvements for their tax dollars.

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Prevailing wage called “imperative” to housing bills

Oct. 10, 2017

State Building and Construction Trades Council President Robbie Hunter established a context in support of the prevailing wage in a Sacramento Bee story this week when he discussed how decent pay buys a highly skilled and trained work force that in the end cuts down on construction costs.

“Build it once, build it right,” the newspaper quoted Hunter as saying.

The Bee’s Oct. 8 story focused on the prevailing wage component included in five of the bills that were part of a housing package that was signed into law on Sept. 29 by Gov. Jerry Brown.

Three of the bills included an expedited approval process for contractors to get their projects built, including one piece of legislation, Senate Bill 35, which bypasses delays imposed by city councils and by a redundant environmental review process.

“Therefore,” Hunter said in a later statement, “it was imperative to have prevailing wage rates and a skilled workforce to assure that workers are paid a fair wage.”

As Hunter said in the video that accompanies the story, “If there is not a fair wage paid to the workers who are building a project, the very workers will be the ones who need the affordable housing.”

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One key to affordable housing crisis? Pay construction workers a living wage.

Special to The Bee
AUGUST 21, 2017 1:00 PM


No amount of project streamlining can solve California’s housing affordability problem by itself.

To lower prices, California needs to build a lot more housing. But to do that, it needs enough workers with the skills to do so safely and correctly. Prevailing wage standards, which function as a local minimum wage for skilled construction work, can help address these critical needs and improve the industry’s competitiveness in increasingly tight labor markets.

According to the National Association of Home Builders, the number of builders reporting “some or serious” labor shortages grew from 21 percent in 2012 to 56 percent in 2016. More workers are choosing not to work in construction because it is no longer the gateway to the middle class.

A recent study by Smart Cities Prevail showed that inflation-adjusted wages for California’s blue-collar construction workers have declined 25 percent since 1990. In some communities, more than half of these workers must rely on housing subsidies, and nearly 40 percent don’t have health insurance. The study also reveals that what were once middle-class incomes are being redistributed into the pockets of developers and builders, whose profits have grown 50 percent faster than either labor or material costs since 1992.

Sadly, there are even more disturbing racial disparities. According to a UCLA analysis, the share of immigrants in California’s construction workforce has grown from 13 percent to 43 percent since 1980. On average, Latinos are being paid just 68 cents for every $1 of their white counterparts. These trends have tracked a growing pattern of illegal wage theft by unscrupulous contractors. The Trump administration’s anti-immigrant rhetoric makes it less likely that workers will speak out against employers who cheat.

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Opinion: Wage discrimination in construction industry makes minimum standards a good idea

PUBLISHED: August 30, 2017 at 11:49 am
UPDATED: August 30, 2017 at 5:32 pm

Equal pay for equal work remains elusive, even here in progressive California.

A recent study by Smart Cities Prevail showed that Latinos make up two thirds of the construction workforce, yet only make about 70 cents on the dollar of white workers with the same skills. The study noted that Latino construction workers also are significantly more likely to be uninsured and to struggle with housing affordability.
Low minimum wage standards are one factor that contributes to these types of disparities.

California legislators are soon expected to consider streamlining development of more housing across our state. At its core, the proposal involves removing certain regulatory hurdles in exchange for guarantees that a small percentage of new developments will include “affordable” units.

A similar effort failed last year when no agreement was reached on wage standards for workers on streamlined projects.

According to industry research, workers’ wages and benefits are just 15 percent of the total cost of constructing housing. By comparison, profits for developers and contractors are 18 percent of costs and growing faster than the cost of labor.

And with labor standards being eroded, other problems have become more pervasive.

For example, wage theft occurs when employees are paid for fewer hours than they worked, less than legally required, or when their employer is paying in cash and cheating on payroll taxes. California’s construction industry has seen a 400 percent increase in wage theft since the 1970s-a period that has also seen a dramatic increase in the share of immigrants in our construction workforce.

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Understanding Wage Rates Under California’s Prevailing Wage Law

Richard E. Donahoo

California’s Prevailing Wage Law requires contractors to pay specific wage rates on public works projects. The rates are published by the State’s Department of Industrial Relations (“DIR”). The published rates include many different prevailing wage rates, which are based on the geographic location and the type of work that is performed. The rates are organized and published by the DIR in General Prevailing Wage Determinations, which set forth the rates for worker classifications (e.g., Laborer, Carpenter, Plumber, Operator). The specific rates applicable for each craft, classification, or type of work, and for each geographic locality throughout the state, can be located on the DIR website at Understanding how to read a General Determination is important to understanding the required rate.

Prevailing Wage Determinations

California Labor Code (section 1774) states that workers must be paid not less than the “specified prevailing rates of wages” to all workmen employed in the execution of the contract. These specific rates are found in the General Determinations, which correspond to the type of work actually performed by individual workers. As explained in the State’s Public Works Manual,

“A worker’s title or status with the employer is not determinative of an individual’s coverage by the prevailing wage laws. What is determinative is whether the duties performed by the individual on a public works project constitute covered work. An individual who performs skilled or unskilled labor on a public works project is entitled to be paid the applicable prevailing wage rate for the time the work is performed, regardless of whether the individual holds a particular status such as partner, owner, owner-operator, independent contractor or sole proprietor, or holds a particular title with the employer such as president, vice-president, superintendent or foreman. For example, a “working” foreman or a “working” superintendent – one who performs labor on the project in connection with supervisorial responsibilities – is entitled to compensation at not less than the prevailing rate for the type of work performed.”

The Basic Hourly Rate vs Total Rate

General Determinations include both a Basic Hourly Rate and the Total Hourly Rate for each location and classification. Employers are required by California law to pay employees the Basic Hourly Rate as the minimum hourly wage for all hours worked. The Total Hourly Rate includes the Basic Hourly Rate and additional compensation for “employer payments” which are typically fringe benefits such as health insurance, vacation, pension and other “fringe benefits.” Employers can choose to pay fringe benefits directly to employees as part of their wages or can obtain an offset for the employer’s “actual cost” of the benefit provided to the employee that was paid into a bona fide health, pension, vacation, or fringe benefit plan. Either way, the total compensation paid by the employer to the employee must match the Total Hourly Wage set by the Director in the General Determination.

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Raise wages, boost economy: Letters (CA)

By Letters to the Editor
September 6, 2017 at 12:01 am

Re: “State’s not-so-affordable housing plans” [Opinion, Aug. 31]: Your editorial advocates cutting the pay of construction workers to pad the profits of housing developers. Finally, we have an honest summation of the argument of the housing industry against the prevailing wage: profits before people.

The editorial, however, lacked credibility as well as heart. In outlandish fashion, it cited the recent bought-and-paid-for study funded by the California Homebuilding Foundation to say that the prevailing wage would result in a 37 percent increase in housing costs. The organization, of course, is made up of some of the biggest contractors and real estate developers in the state. And just as your editorial acknowledged, when it comes to maximizing profits, they’d rather pay their poverty wage than a prevailing wage.

In that process, distorting the truth and the facts is no big deal, and the predicted 37 percent housing cost increase that you quoted in your editorial has no basis in reality. In fact, it is up to six times higher than some numbers that the study’s same authors put out in some of their own previous reports.

More credible research puts the added cost of construction related to the prevailing wage at around 3 percent. The increase is then easily made up by savings associated with the skilled-and-trained prevailing wage work forc

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Builders, construction workers settle fight over California wage theft bill (CA)

SEPTEMBER 14, 2017 9:52 AM

A contentious proposal that would put California builders on the hook for wage theft violations by their subcontractors has advanced to Gov. Jerry Brown after a last-minute agreement between the author and opponents.

The Assembly on Wednesday sent to the governor’s desk Assembly Bill 1701, which would allow construction workers who have not been paid for a job to seek their back wages and benefits, with interest, from the general contractor, even if they did not work directly for that company on the project.

Both the building industry and construction trade unions lobbied heavily on the measure, by Assemblyman Tony Thurmond, D-Richmond, in the final weeks of session, plastering websites with digital advertisements, passing out fliers on the sidewalk outside the Capitol and setting up an electronic billboard across the street.

Unions argued that AB 1701 gives workers a legal remedy when subcontractors skip town or file for bankruptcy before paying employees, while the building industry warned that it could drive up the cost of construction and worsen California’s housing crisis by potentially forcing them to pay twice for labor.

Yet the measure received overwhelming support Wednesday when it came up for a vote in the Assembly, passing 52-13. Just before that, Thurmond said, he submitted a letter to the Legislature stating his intent to carry a follow-up bill. It will remove a section of AB 1701 that builders worried could be used to hold them liable for further monetary damages.

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It’s accountability time in the construction industry (CA)

Tony Thurmond’s Assembly Bill 1701 is a simple but powerful piece of legislation that will bring accountability to the private construction industry

By Robbie Hunter
This article was published on 08.17.17.

When it comes to protecting construction workers in the underground economy,the history of California has found that the buck stops . . . nowhere.

Most of the cheating, most of the rip-offs, most of the theft of workers’ wages takes place two or three rungs down from the general contractors at the top of the construction pyramid. There’s so much of it that the overwhelmed state Department of Industrial Relations can’t keep up on the enforcement end. The outcome: tens of thousands of construction and other blue-collar workers are denied hundreds of millions of dollars a year in lost wages, while the state is shorted somewhere between $8.5 billion and $28 billion a year by employers who don’t pay their taxes.

It’s a situation studied to death by academicians while lawmakers have hesitated to throw up the stop sign.

Finally, somebody in Sacramento is doing something about it. Assemblyman Tony Thurmond has taken the lead, and if his colleagues in the Legislature follow it, we might soon have a mechanism to crack down on the cheating.

Thurmond, a Democrat from Richmond, is the author of Assembly Bill 1701, a simple but powerful piece of legislation that will bring accountability to the private construction industry. The bill maintains that if you are the general contractor on a construction project, and if your sub-contractors-or even their “sub-subs”-stiff a worker out of his or her pay, you are liable. End of story.

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Labor Commissioner’s Office Files $6.3 Million Misclassification and Wage Theft Lawsuit against Glendale Construction Company (CA)

PR Newswire

Aug. 14, 2017, 01:55 PM

LOS ANGELES, Aug. 14, 2017 /PRNewswire-USNewswire/ — The Labor Commissioner’s Office has filed a lawsuit against Calcrete Construction, Inc. seeking $6,300,338 for multiple wage theft violations affecting a group of 249 construction workers and the willful misclassification of 175 workers as independent contractors.

An investigation launched in October 2016 uncovered the Glendale-based company’s failure to pay the workers for overtime hours, allocate pay for sick leave and provide proper wage statements. The lawsuit, filed in Los Angeles Superior Court, also seeks civil damages and penalties.

Beginning in August 2016, Calcrete forced its workers under threat of termination to sign contracts stating they were independent contractors. The company then used staffing agencies Dominion Staffing and Southeast Personnel Leasing to pay the workers.

“It is illegal for employers to use subcontractors to distance themselves from the obligation to pay workers, and we will use every tool to dissuade employers from this scheme,” said Labor Commissioner Julie A. Su. “This lawsuit aims to recover the money these misclassified workers should have been paid after years of wage theft.”

Calcrete employees typically worked 10-12 hours Monday through Friday and eight hours on Saturday. They were paid only their regular hourly rate and not for the 18-28 hours of overtime they regularly worked. This underpayment occurred for a nearly two- year period from 2014-16, the lawsuit specifies.

The lawsuit seeks:
  • Wages and damages of approximately $2,596,438 payable to the workers:
    • $352,000 in overtime wages
    • $1,244,438 in waiting time penalties
    • Over $1,000,000 (specific amount to be determined at trial) for unpaid sick leave and liquated damages
  • Penalties of approximately $3,703,900 payable to the state:
    • $2,625,000 in statuary penalties for willful misclassification
    • $78,900 in civil penalties.
    • Over $1,000,000 (specific amount to be determined at trial) for failure to provide proper wage statements

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