RESPONSES TO QUESTIONS ABOUT THE NEED FOR
AWARDING BODIES TO HAVE AN APPROVED
LABOR COMPLIANCE PROGRAM

Numerous statutes now require awarding bodies to adopt and enforce or to contract with a third party to adopt and enforce a labor compliance program with respect to certain public works projects. Labor Code section 1771.5(c) specifies that the labor compliance program must be approved in accordance with DIR regulations.

The purpose of this Notice is to address some frequent questions related to the requirements to have an approved program.

1. Is an awarding body required to obtain approval from the Director if the awarding body will contract with an approved third party program or programs for all required labor compliance enforcement?

NO. We have given some conflicting information on this in the past, but our present view is that the regulations do not require an awarding body to have a separate approval unless the awarding body intends to operate its own in-house program. The Director currently is not accepting or approving applications from awarding bodies that will not be doing any of their own labor compliance enforcement in house.

2. Are there any other regulatory requirements for an awarding body that will contract with an approved third party program or programs for all required labor compliance enforcement?

YES. Although an awarding body does not need the Director's approval to contract with another approved program for labor compliance enforcement, there are still some important requirements to observe when an awarding body is required by law to have a labor compliance program.

• The awarding body's governing body must make a written finding that it has contracted with an approved third party program. [Calif. Code Reg., title 8, section 16423(b)(1) and (2).]
• The awarding body must provide the Director with a copy of that written finding and notice of any contract or agreement with an approved third party program or programs. The awarding body must also notify the Director whether it intends to contract for labor compliance enforcement for all or only some of the public works projects in which the awarding body participates. [Calif. Code Reg., title 8, section 16423(b).]

This information serves several important functions, including (1) enabling the Department and public to determine who is providing labor compliance enforcement for the awarding body's public works projects, (2) enabling the Director to determine if the third party program has been approved, is filing all necessary reports, and is operating within the scope of any limitations or conditions indicated at the time of its approval, and (3) enabling the Director to quickly confirm for funding sources whether an awarding body has complied with a statutory requirement to have a labor compliance program.

3. Do the awarding body's conflict of interest rules apply to the third party labor compliance program?

YES. An approved third party program that contracts with an awarding body to provide labor compliance enforcement is performing a governmental function as the agent of that awarding body. As such, the program and its employees are subject to the conflict of interest provisions of the Political Reform Act, including the obligation of employees with decision-making authority to prepare and file FPPC Form 700 disclosure statements with the public entity or entities for which these services are being provided. If a program does not have sufficient decision-making authority to be subject to these Political Reform Act requirements, then the awarding body in fact is operating an in house program which must have its own separate approval from the Director. [See Labor Code section 1771.5(c) and Calif. Code Reg., title 8, section 16421(c).]

4. Can an awarding body with its own approved program also provide labor compliance enforcement for other awarding bodies?

POSSIBLY. The Director's regulations do not preclude an awarding body from having an approved third party program that may in turn contract with other awarding bodies to provide labor compliance enforcement. However, any entity that intends to operate as a third party program must seek approval under section 16426 of the regulations (rather than 16425) and must comply with any additional notice and reporting requirements for third party programs.

5. Are different approvals or different approved programs required for different types of projects (e.g. school bond vs. transit)?

NO. The regulations do not make distinctions among approved programs on the basis of project funding sources. The job of labor compliance enforcement is essentially the same regardless of the type of funding. An approved program that is operating within the scope of its capabilities and any limitations placed on its status and that is submitting all required notices and reports on a timely basis does not need a separate approval from the Director to work with different types of awarding bodies or funding sources.

6. Can an approved third party program obtain and confer the limited exemption set forth in Labor Code section 1771.5(a)?

NO. Labor Code section 1771.5(a) provides a limited exemption from prevailing wage requirements only to an "awarding body [that] elects to initiate and enforce a labor compliance program … for every public works project under the authority of the awarding body." This means that only the awarding body itself is eligible for the exemption based on enforcing labor compliance (whether in house or by contract with an approved third party program or some combination of the two) on all public works projects in which the awarding body participates. (See also Calif. Code Reg., title 8, section 16433.)

December 2006