NOTICE OF PROPOSED ACTION TO REPEAL
EXISTING CALIFORNIA CODE OF REGULATIONS,

TITLE 8, SECTION 232
AND TO ADOPT TITLE 8, SECTIONS 232.01 - 232.70

TITLE 8. DEPARTMENT OF INDUSTRIAL RELATIONS

NOTICE OF PROPOSED RULEMAKING

The California Apprenticeship Council ("Council") proposes to repeal existing California Code of Regulations, title 8, section 232 and to adopt regulations setting forth the procedures for the review of determinations of civil penalty or debarment under Labor Code section 1777.7 for violations of Labor Code Section 1777.5's requirements for the employment of apprentices on public works. The Council proposes to adopt these regulations as section 232.01 - 232.70 of Title 8 of the California Code of Regulations. The Council proposes to take this action after considering all comments, objections, or recommendations regarding the proposed action.

PUBLIC HEARINGS, WRITTEN COMMENT PERIOD, AGENCY CONTACTS,

Public Hearings:

At the hearings, any person may present statements or arguments, orally or in writing, relevant to the proposed action described in the Informative Digest. The Council requests, but does not require, persons who make oral comments also to submit a written copy of their testimony.

Written Comment Period:

Any person or authorized representative may submit written comments relevant to the proposed regulatory action to the contact person listed below. The written comment period closes on December 9, 2002 at 5:00 p.m., and the Council will only consider comments received by that deadline. Written comments may be submitted in person at one of the hearings or by letter, facsimile or e-mail as follows:

AUTHORITY AND REFERENCE

INFORMATIVE DIGEST / POLICY STATEMENT OVERVIEW

Overview:
Section 1777.5 requires that apprentices employed on public works shall be paid the prevailing rate of per diem wages for apprentices and shall only be employed in the trade for which the apprentice is registered. Among other things, Section 1777. 5 also requires contractors on public works to employ apprentices at a specified ratio (unless the contractor qualifies for an exemption to the ratio), to provide specified information to applicable apprenticeship programs that can supply apprentices, and to make contributions to the Council in the same amount that the Director of Industrial Relations ("Director") has determined is the prevailing amount of apprenticeship training contributions in the area of the public works site.

Section 1777.7 imposes on a contractor who knowingly violates Section 1777.5 a civil penalty of no more than $100 for each day of noncompliance. A second or subsequent violation of Section 1777.5 within a three year period is subject to a penalty of no more than $300 for each day of noncompliance. Section 1777.7 also provides that, if it is determined that a contractor has knowingly violated section 1777.5, the contractor may be denied the right to bid on a public works contract for a period of up to one year for a first violation and for a period of up to three years for a second or subsequent violation.

Section 1777.7 also provides that within specified time limits an affected contractor may request a hearing to review of a penalty or debarment. The hearing shall be heard by a person designated by the Administrator possessing the qualifications of an administrative law judge pursuant to Government Code section 11502. A contractor seeking review of a decision by the Administrator following a hearing may do so by a petition for writ of mandate pursuant to Code of Civil Procedure section 1094.5.
Section 1777.7 (g) provides that the interpretation and enforcement of Section 1777.5 and Section 1777.7 shall be in accordance with regulations promulgated by the Council. The purpose of this rulemaking is to carry out that mandate and set forth appropriate procedures that give effect to specific statutory requirements and afford due process to the parties involved in these proceedings.

By these proposed regulations, the Council intends to provide a complete set of rules governing public works determinations from issuance of the determination through the preparation of a record following the decision of the Administrator. Some repetition of statutory language was necessary to make these rules the most coherent and accessible guide for parties who become involved in these cases. The Council anticipates that some participants in these cases will be non-lawyers who will find it easier to follow regulations that set out the procedures completely rather than having to go back and forth between the statute and rules.

Consideration was given to the alternatives of either incorporating these hearings into one of the Council's preexisting administrative hearing systems or just adopting the hearing rules of the Administrative Procedure Act (found at Government Code section 11500 and following) for these proceedings. However, in light of the peculiar requirements of Section 1777.5 and section 1777.7, particularly the short time limits for commencing the hearing (90 days after receipt of a request for review) and making a decision (45 days after the hearing), neither alternative seemed feasible.

These regulations are modeled on regulations recently promulgated by the Department of Industrial Relations relating to prevailing wage determinations (CCR, title 8, subchapter 4, sections 187.01 - 187.70). For convenience, the Council's regulations have the same numbering as the Department's regulations.

There are no comparable federal regulations or statutes.

Proposed Regulations:

The Council proposes to repeal California Code of Regulations Chapter 8, section 232
and to adopt California Code of Regulations, Chapter 8, sections 232.01 - 232.70. Through these proposals, the Council intends to provide a complete set of rules governing hearings on determinations of violations of Section 1777.5, prevailing wage appeals, from issuance of the Assessment or Notice of Withholding through the preparation of a record following the Final Decision of the Administrator of Apprenticeship. Some repetition of statutory language was necessary to make these rules the most coherent and accessible guide for parties who become involved in these cases. The Council anticipates that some participants in these cases will be non-lawyers who will find it easier to follow regulations that set out the procedures completely rather than having to go back and forth between the statute and rules.

Consideration was given to the alternatives of either incorporating these hearings into one of the Council's preexisting administrative hearing systems or just adopting the hearing rules of the Administrative Procedure Act (found at Government Code section 11500 and following) for these proceedings. However, because of the peculiar requirements of Sections 1777.5 and 1777.7, including the short time frames for hearings and decisions with the due process requirements attendant to substantial evidence review, neither approach seemed feasible.

The primary source of the language used in these regulations is regulations recently promulgated by the Department of Industrial Relations relating to prevailing wage determinations (CCR, title 8, subchapter 4, sections 187.01 - 187.70. Other sources include Sections 1777.5 and 1777.7, the Administration Adjudication Bill of Rights (Government Code sections 11425.10 and following) and other parts of the Administrative Procedure Act, relevant cited provisions of the Code of Civil Procedure and the Evidence Code, and the rules governing hearings and appeals before the Occupational Health & Safety Appeals Board (8 Cal. Code Regs. sections 345 and following and the California Unemployment Insurance Appeals Board (22 Cal. Code Regs. sections 5000 and following).

A. General

Sections 232.01 - 232.12 set forth rules of general application throughout the proceedings.

Section 232.01 is an introductory provision setting forth the scope and application of the rules.
Section 232.02 sets forth definitions of terms used throughout the rules. Definitions were provided and in some cases terminology created to address two particular concerns: (1) providing shorthand terms such as "Determination" in order to avoid repeating cumbersome statutory language throughout the rules; and (2) providing "term of art" meanings to avoid definitional disputes based on other statutory or common usage meanings.

Section 232.03 sets forth rules for the computation of time, including extensions of time to respond or act when documents are served by mail. This is not a rule on proper methods of service, which is set forth later in Section 232.10.

Section 232.04 sets forth the standards governing the appointment of an impartial Hearing Officer in a given case. Subpart (b) specifies that Hearing Officers will be appointed from among the Director of Industrial Relations' own legal staff as has been customary in other cases in which the Director has the responsibility to conduct an administrative hearing. However, if no one is available from the Director's legal staff, the rule (and statute) provide that the Director may appoint a lawyer or administrative law judge from another one of the Department's divisions, other than the Division Apprenticeship Standards, which will usually be one of the parties. Subpart (c) incorporates the Government Code sections which set forth the minimum qualifications for serving as an administrative law judge (expressly required by Labor Code section 1742(b)) and the standards that would preclude an individual from hearing a particular matter (implied from the statutory requirement that the hearing officer be "impartial"). Through subpart (d) the Council intends to delegate the authority to appoint hearing officers in all cases to the Chief Counsel of the Office of the Director.

Section 232.05 sets forth the authority of hearing officers, which includes all adjudicative authority normally possessed by administrative law judges except that the hearing officer can prepare only a recommended decision, with final decision-making authority reserved to the Director (as provided in the statute). Subpart (b) is intended to clarify that the Director has no review or supervisory authority over the actions of the appointed Hearing Officer other than through the issuance or reconsideration of a final decision.

Section 232.06 specifies that hearing case records are available to the public as public records.
Section 232.07 sets forth the rules governing ex parte communications with the Hearing Officer or the Administrator. The Administrative Adjudication Bill of Rights (Government Code sections 11425.10 and following) requires certain standards, and this proposal incorporates those standards by reference. Subpart (g) addresses a particular concern regarding ex parte communications with the Administrator. The Administrator inevitably will hear about and discuss major labor and employment law issues with the public and with other parties who may participate in or be affected by these cases. Subpart (g) is designed to protect the integrity of the Administrator's role as decision-maker.

Section 232.08 specifies how non-parties may intervene or participate in a proceeding. Bonding companies and sureties may intervene as a matter of right if they do so promptly. Two options are proposed for intervention by another person. The employee(s), labor union or joint management committee or apprenticeship program who filed the complaint that led to the determination may intervene provided that they do so promptly and there is no good cause to deny their intervention. Other interested parties may intervene upon a showing of good cause. It should be noted that Government Code section 11440.50 suggests but does not require an agency to adopt a rule for permissive intervention.

Section 232.09 permits a party to be represented by a non-lawyer, consistent with the norm for administrative hearings. It also provides that when there is an authorized representative, service on that representative will control the running of deadlines, whether or not copies are also sent to the party. Subpart (d) requires parties and representatives to keep the hearing officer and other parties informed of their current address and telephone number.

Section 232.l10 sets forth the rules for serving documents and providing a Proof of Service. Subpart (e) provides that the Hearing Officer will maintain an official address record of parties and participants.

Section 232.11 permits fax and e-mail service and filing as allowed by statute and authorized by the hearing officer on a case by case basis. The intent is to encourage the use of such technologies provided they are not used in an abusive fashion or as a club against parties with limited resources.

Section 232.12 clarifies that Article 6 of the Administrative Adjudication Bill of Rights applies to these proceedings (as required by Government Code section 11425.10(b)). It specifies that ex parte communications between the Hearing Officer and the Director are permitted under Government Code section 11430.80(b). It also specifies that the formal hearing procedures of the Administrative Procedure Act (Government Code sections 11500 and following) will not apply to these proceedings except insofar as specific parts of those procedures have been incorporated into a given rule.

B. Determinations and Requests For Review

Sections 232.20 - 232.28 govern the issuance of the Determination and the filing of the Request for Review.

Section 232.20 reiterates the requirements for serving the Determination and clarifies what information must be included in the Determination.

Section 232.21 sets forth the opportunity to have an early settlement meeting with the Chief, DAS. Subpart (c) clarifies that the parties are not precluded from having later settlement discussions. Subpart (d) specifies that the early settlement procedures, whether observed or not observed, do not extend the time for filing a Request for Review.

Section 232.22 sets forth the time limits and requirements for filing of Request for Review, which is the appeal document in these proceedings. In accordance with the statute, the Request for Review must be served on the Administrator, but the rule encourages sending a courtesy copy to the Director's Legal Unit in order to facilitate prompt scheduling of the hearing. Subpart (e) requires the Request for Review to include a statement of the basis for the Request, and it permits the Hearing Officer to require a further specification of the basis for seeking review. The intent of this subpart is also to facilitate prompt scheduling by giving the Hearing Officer an early understanding of the potential issues.

Section 232.23 specifies where the Chief, DAS must transmit the Request for Review and other specified documents to commence the review proceeding.

Section 232.24 sets forth and explains the Chief, DAS's statutory duty to disclose the evidence it intends to use at the hearing. Subpart (d) precludes the Chief DAS from using evidence not disclosed within the statutory deadline, but also permits an affected contractor or subcontractor to extend the deadline. Subpart (e) excepts from this preclusion rule any after-acquired evidence that is promptly disclosed as well as evidence used solely to rebut new or collateral claims raised by another party.

Section 232.25 permits an affected contractor or subcontractor to withdraw a Request for Review, and it also sets forth procedures and time limits for seeking to reinstate a withdrawn Request.

Section 232.26 governs the authority of the Chief, DAS to dismiss or amend a Determination. Upon notice, which is intended to allow for objections and provide a cooling off period, the Chief, DAS will essentially have a near-automatic right to dismiss or to amend the Determination downward. A motion to amend a Determination upward will require a showing of good cause based upon new information.

Section 232.27 will permit cases to be disposed of early without the need for a hearing on the merits where it appears that either the Determination were not served or filed within the statutory time limits. The Hearing Officer will have discretion to decide whether or not to use this procedure as well as discretion not to recommend an early disposition when the evidence is uncertain. If the evidence shows that the Determination or Request was untimely, the Hearing Officer will recommend that the Administrator issue a final decision dismissing the Determination or Request. That decision will then be subject to reconsideration or judicial review in the same manner as any other final decision by the Administrator.

Section 232.28 specifies that a Determination that has not been appealed through the filing of a timely Request for Review is a "final order" within the meaning of the statute. Subpart (b) clarifies the duty of awarding bodies to retain and not disburse withheld amounts when an appeal remains pending as to at least one affected contractor or subcontractor.

Section 232.29 is left blank intentionally so that these regulations will have the same numbering as the Department of Industrial Relations' prevailing wage determinations under Labor Code section 1720 (CCR, title 8, subchapter 4, sections 187.01 - 187.70).

C. Prehearing Procedures

Sections 232.30 - 232.37 set forth prehearing procedures.

Section 232.30 sets forth the procedure for the scheduling of hearings and for continuances. Section 232.30 also provides that the time limits for hearings and seeking review are tolled under certain specified circumstances, including court orders and events beyond the Administrator's control.
Section 232.31 permits the Hearing Officer to hold a prehearing conference to facilitate preparation of the case for hearing.

Section 323.32 permits multiple cases to be consolidated for hearing and decision when appropriate, and it also authorizes consolidated matters to be severed.

Section 232.33 sets forth standards for prehearing motions, including required information and cut-off dates for motions that must be resolved in advance of the hearing. The intent is that such motions would be disposed of on paper without oral hearings, unless an oral hearing is requested and the matter involves a fundamental right, such as a compelled waiver of a privilege. Because of the short deadline for starting a hearing on the merits, the procedure is not intended for use for dispositive (e.g. summary adjudication) motions other than a timeliness challenge handled under Section 232.27 above.

Section 232.34 provides for the introduction of testimony by affidavit or declaration and for the treatment of that testimony as direct evidence (i.e. not hearsay) unless a party has requested an opportunity to cross-examine the witness. This procedure is authorized by the Administrative Procedure Act (Government Code section 11514) and is also a feature of judicial arbitration (California Rule of Court 1613) and economic litigation for limited civil cases (Code of Civil Procedure section 98). If another party requests the opportunity to cross-examine, this proposal places the burden of producing the witness on the party who offered the written testimony, which is the approach followed in Rule of Court 1613. If the witness cannot be produced for cross-examination, the written testimony will still be admissible but will be treated as hearsay evidence.

Section 232.35 provides that subpoenas and subpoenas duces tecum may be issued by a Hearing Officer or by an attorney for a party (consistent with an attorney's authority in civil cases and in adjudications under the Administrative Procedure Act). A subpoena duces tecum may require documents to be produced in advance of the hearing.

Section 232.36 sets forth a separate rule for compelling another party to attend and testify by issuing a Notice to Appear to that party's attorney in lieu of a subpoena.

Section 232.37 precludes depositions in most cases except when needed to obtain testimony from a party who cannot appear at the hearing. The statute contemplates that the Chief, DAS will have done a full investigation prior to issuing a Determination and that it will turn over its evidence to the party who files a Request for Review, similar to what occurs in criminal cases. This appears to be the only discovery contemplated by the statute, and a rule that would permit other investigative discovery appears to be incompatible with the statutory 90 day deadline for starting the hearing.

D. Rules Governing The Hearing

Section 232.40 provides for giving notice of the person appointed to serve as Hearing Officer as well as procedures and a time limit for objecting to that person's appointment.

Section 232.41 reiterates the 90 day deadline for commencing the hearing, and sets the county where the Hearing Officer is employed (San Francisco, Sacramento, or Los Angeles) as the default venue for the hearing. The parties may have the venue changed to another location that is more convenient to them but will have the burden to arrange for the availability of a suitable hearing site in that venue.

Section 232.42 sets forth customary standards for conducting hearings that are open to the public while giving the Hearing Officer the authority to protect information that is properly deemed confidential and to exclude witnesses prior to their testimony.

Section 232.43 sets forth customary standards for the conduct of hearings by a presiding officer in an administrative case.

Section 232.44 states the customary rule that administrative hearings are not bound by formal rules of evidence and that generally all relevant evidence is admissible unless subject to exclusion by reason of privilege or because unduly cumulative. Subpart (d) sets forth the customary standard governing the admissibility and weight accorded hearsay evidence in administrative cases.

Section 232.45 sets forth the authority of the Hearing Officer to take official notice (similar to judicial notice) of certain facts and information, including technical facts within the special expertise of the Department of Industrial Relations.

Section 232.46 sets forth the Hearing Officer's authority to act when a party fails to appear. Subpart (b) provides a procedure and deadline for a party to seek relief from the consequences of its failure to appear.

Section 232.47 sets forth the authority and procedure through which the Hearing Officer may certify a person for being in contempt or sanction a party for bad faith or frivolous tactics. This proposal follows the standards for administrative hearings found in the Administrative Procedure Act (Government Code sections 11455.10 – 11455.30).

Section 232.48 sets forth standards and procedures for obtaining the services of an interpreter, consistent with the requirements of the Administrative Procedure Act.

Section 232.49 provides that the Hearing Officer and Director will maintain and control the official Hearing Record and that the proceedings generally will be recorded by audiotape unless the Hearing Officer agrees to a different method. A parties may request a court reporter or other means for recording testimony but will then have the burden of procuring and paying for the reporter or other means.

Section 232.50 sets forth the respective burdens of the parties to come forward with evidence and then to persuade the decision-maker. The Director notes that the statute imposes differing burdens for certain findings and determinations.

Section 232.51 is left blank intentionally so that these regulations will have the same numbering as the Department of Industrial Relations' prevailing wage determinations under Labor Code section 1720 (CCR, title 8, subchapter 4, sections 187.01 - 187.70). .

Section 232.52 gives parties the right to file briefs prior to the hearing and to make a closing argument at the conclusion of the hearing. Subparts (b) and (c) give the Hearing Officer discretion to determine what post-hearing submissions will be permitted and include the option of drafting proposed findings.

Section 232.53 specifies the time when the hearing is deemed concluded for purposes of the 45 day deadline for the Administrator to issue a decision.

E. Rules Governing the Decision of the Administrator

Section 232.60 sets forth the statutory requirements for the contents and service of the Decision, including the statute's requirement that the Decision be served by first class mail pursuant to Code of Civil Procedure section 1013.

Section 232.61 sets forth the very limited time frame allowed by statute for the Administrator to reconsider a Decision. Subpart (d) notes that a Request for Reconsideration is neither a prerequisite for nor does it extend the time limits for seeking court review.

Section 232.62 specifies that the Decision issued under Rule 60 is a final decision for purposes of seeking court review unless the Administrator has issued a modified decision within the 15 days allowed under Rule 61. Subpart (c) provides that the deadline for seeking court review is determined from the date of service of the Decision and includes any extension of time (for service by mail) provided under Code of Civil Procedure section 1013.

Section 232.63 sets forth the obligation of a party seeking court review to designate and pay for preparation of the hearing record. There is an exception for parties granted in forma pauperis status, consistent with the requirements of the Code of Civil Procedure section 1094.5(a).
F. Statute of Limitations
Section 232.70 provides that a determination shall be issued and served within three years after the date of accrual.

Comparable Statutes and Regulations:

These proposals have been drafted to follow the requirements of Labor Code sections 1777.5 and 1777.7 1742 as well as provisions of California's Administrative Procedure Act that govern administrative adjudications before state agencies. These regulations are modeled on regulations recently promulgated by the Department of Industrial Relations relating to prevailing wage determinations (CCR, title 8, subchapter 4, sections 187.01 - 187.70). For convenience, the Council's regulations have the same numbering as the Department's regulations.

DISCLOSURES REGARDING THE PROPOSED ACTION

The Council has made the following initial determinations with respect to these proposals. The Council notes that these proposals implement Labor Code section 1777.7(f)'s mandate to adopt regulations setting forth hearing procedures concerning determinations of violations of Labor Code Section 1777.5, and these proposals impose no significant mandates, costs, or savings that are different or distinct from what the Legislature has required by statute. The Council invites further comment on these specific impacts.

Mandates on Local Agencies or School Districts:

The proposals do not impose mandates on local agencies or school districts.

Costs or Savings to State Agencies; Reimbursable Costs Imposed on Local Agencies or School Districts; other nondiscretionary costs or savings imposed on local agencies; and costs or savings in federal funding to the state:
The statute imposes increased costs on the Office of the Director of the Department of Industrial Relations, and these proposals specifically impose those costs on the Director's Legal Unit which will supply hearing officers and administer the hearing procedures.

The proposals do not involve any costs or savings in federal funding to the state.

Initial Determination of Economic Impact on Business:

The Council has made an initial determination that these proposals will not have a significant statewide adverse economic impact directly affecting businesses, including the ability of California businesses to compete with businesses in other states. The statute itself impacts only businesses that choose to enter into public works contracts, and it is neutral in its treatment of California businesses as compared to businesses from other states. The change from a system of court review to an administrative hearing procedure may result in some savings for businesses who appeal determinations, simply because administrative hearings are often cheaper than court litigation.

Known Cost Impacts on Representative Private Person or Business:

The Council is not aware of any cost impact that a representative private person or business would necessarily incur in reasonable compliance with these proposals.

Creation, Elimination, or Expansion of Jobs or Businesses (Results of Assessment under Government Code section 11346.3(b)):

The Council has made initial determinations that (1) these proposals will not affect the creation or elimination of jobs within the State of California; (2) these proposals will not affect the creation of new businesses or the elimination of existing businesses within the State of California; and (3) these proposals will not affect the expansion of businesses currently doing business within the State of California.

Reporting Requirements (Finding under Government Code section 11346.3(c)):

These proposals impose no reporting requirements on businesses.

Effect on Housing Costs:

These proposals have no effect on housing costs.

Effect on Small Business:
Small businesses that participate in public works projects may be affected by these proposals. These proposals implement statutory changes that are designed to streamline the process for appealing determinations of violations of Labor Code section 1777.5 by requiring administrative hearings rather than court litigation. Since administrative hearings are often more cost efficient for participants than court litigation, these changes may reduce costs for small businesses that appeal such determinations.

CONSIDERATION OF ALTERNATIVES

In accordance with Government Code section 11346.5(a)(13), the Council must determine that no reasonable alternative considered by the Council or that otherwise has been identified and brought to the Council's attention would either be more effective in carrying out the purpose for which the action is proposed or be as effective as the proposed action and less burdensome to affected private persons. Labor Code section 1777.7(f)) requires the Council to adopt hearing procedures, and as noted in Informative Digest above, the adoption of a new set of hearing regulations appears to be a more feasible approach for the particular requirements of this statute than attempting to incorporate preexisting schemes. The Council invites interested persons to present statements or arguments with respect to alternatives to the proposed regulations at the scheduled hearing or during the written comment period.

AVAILABILITY OF INFORMATION PERTAINING TO THE PROPOSED ACTION

The Council will have the rulemaking file available for inspection and copying throughout the rulemaking process. Initially the file will consist of this notice, the initial statement of reasons, and the text of the proposed regulations. The text of the file will be available at:

Website:

Rulemaking records, including the text of the proposed regulations may be accessed through the Department's Internet website at www.dir.ca.gov.

Availability of Changed or Modified Text:

After holding the hearings and considering all timely and relevant comments received, the Council may adopt the proposed regulations substantially as described in this notice. If the Council makes modifications which are sufficiently related to the originally proposed text, the modified text (with changes clearly indicated) will be made available to the public for at least 15 days before the Council adopts the regulations as revised. Any such modifications will also be posted on the website. Please send requests for copies of any modified regulations to the attention of the contact persons listed above. The Council will accept written comments on the modified regulations for 15 days after the date on which they are made available.

Availability of the Final Statement of Reasons and the Rulemaking File:

Upon completion, the Final Statement of Reasons will be available and the entire rulemaking file may be obtained from contact persons named in this notice.

AUTHORITY AND REFERENCE

The Director's authority to adopt these regulations is found in Labor Code sections 3071 (general authority to regulate apprenticeship) and 1777.7(f) (mandate to adopt regulations implementing Labor Code section 1777.5).

These proposals implement, interpret, and make specific the statutory requirements relating to the review of determinations of violations of Labor Code section 1777.5.

AUTHORITY: Labor Code sections 3071 and 1777.7.

REFERENCE: Labor Code sections 1777.5 and 1777.7.