Berkeley, Calif., Contractors Must Prove They Paid Workers

BLOOMBERG BNA

Berkeley, Calif., Contractors Must Prove They Paid Workers

  •  City passes what it calls nation’s first law requiring building contractors to prove they paid workers before obtaining occupancy permit
  •  Berkeley sponsor hopes law spreads to other cities

By Joyce Cutler

July 20 –Berkeley, Calif., enacted what it called the nation’s first law requiring contractors to prove they paid construction workers before they can get a permit allowing the building to be occupied.

Mayor Tom Bates (D) is a member of the Berkeley City Council, which unanimously adopted July 19 the requirement for contractors to submit proof they paid the construction workers and informed them of their rights before the city will issue a certificate of occupancy.

The requirement is aimed at preventing workers from getting stiffed by contractors who disclaim any responsibility for paying workers after the work is done.

The Berkeley law will ensure compliance with the California Wage Theft Protection Act “by requiring confirmation by owners, contractors and subcontractors of the rate of pay and other legally required information regarding mandatory and voluntary fringe benefits” under Labor Code § 2810.5, the ordinance says.

The law covers new construction of more than 30,000 square feet on projects not subject to local, state or federal prevailing wage requirements or that don’t have a valid project labor or community workforce agreement.

Doing What State Can’t.

The local labor-backed law fills a hole in state wage theft enforcement by putting the onus on contractors seeking to get the city to sign off on a project so they can start filling buildings with paying occupants.

“Cities are in regular contact with the contractors in ways the state government is not,” said Scott Littlehale, Northern California Carpenters Regional Council representative to Smart Cities Prevail, a construction industry nonprofit organization working on wage issues.

The state has “what we shall say is compliance capacity issues” to enforce the law, Littlehale told Bloomberg BNA July 19. “Cities are an invaluable potential partner.”

No Pay, No Permit.

Thirty days after getting a building permit, and every 30 days thereafter, contractors or subcontractors whose portion of the work exceeds $100,000 or 1 percent of the project’s value must attest to the city that workers received notices and wage statements that are compliant with state law.

Within 10 days of project completion, contractors and subcontractors must submit an updated list of the portions of construction and demolition work broken down by subcontracts and an updated and final list of the complete names and Contractors State License Board license numbers of entities that worked on the project.

If Berkeley confirms compliance and affirms that the state Labor Commissioner’s Office didn’t cite the project for not paying workers, it will then issue a certificate of occupancy.

Billions Lost.

California annually loses $8.4 billion to $28 billion in unpaid income, insurance and sales taxes from the underground economy, the state Department of Industrial Relations estimates.

The construction industry is second only to restaurants in labor standards violations as measured by state labor commissioner fines, the Berkeley law said.

Honest workers and construction companies are underbid by employers that submit artificially low project bids, Todd Stenhouse, spokesman for Smart Cities Prevail told Bloomberg BNA.

Wage theft affects roughly one in six California construction workers, or about 144,000 workers, Stenhouse said July 19. “Wage theft as a problem is not a right-left problem. It’s entirely a right and wrong problem.”

Missing Enforcement Link.

Construction workers who don’t receive all of their wages and mandatory benefits “are likely to discover that despite the best efforts of State enforcement officials, many employees continue to be victims of wage theft because they are unaware of their rights or the State lacks adequate resources to advocate on their behalf,” the Berkeley law said.

“This measure links our city’s responsibility for determining whether a construction project is completed with the principle of ensuring those who did the work are paid the wages they earned,” Councilmember Laurie Capitelli, who sponsored the measure, said in a statement.

“Whether as workers, businesses or taxpayers, we are all impacted by wage theft in some way. But we are not powerless to stop it, and that’s why I hope that other communities will soon join Berkeley in taking action,” she said.

By Joyce Cutler

To contact the reporter on this story: Joyce Cutler in San Francisco at [email protected].

To contact the editor responsible for this story: Susan J. McGolrick at [email protected]