IR # 96-01
Friday, January 5, 1996

John Duncan
(415) 972-8835
Rick Rice
(714) 935-2812

Historic Reform of California'sPrevailing Wage Rules Proceeds --
Public Hearings Slated for February In Los Angeles and San Francisco

SAN FRANCISCO -- The California Department of Industrial Relations (DIR), proceeding with Governor Pete Wilson's order to amend the state's prevailing wage requirements for the benefit of state and local taxpayers, has scheduled public hearings to be held in Los Angeles and San Francisco during the last two weeks of February.

"The two changes that we have proposed will bring important components of California's prevailing wage regulations in line with federal requirements and those of all but two of the other states which have prevailing wage laws" said DIR director Lloyd W. Aubry, Jr. "Furthermore, our initial economic analyses conducted on these issues indicate that the proposed changes have the potential for saving the state and hard-pressed local governments and California taxpayers millions of dollars in the state's infrastructure needs during coming years. "

In his January 1995 budget message, the Governor requested that DIR review existing prevailing wage requirements for any needed regulatory or legislative changes. In budget documents, the Governor noted, "The state must reconsider the requirement that bidders pay prevailing wage. Competition is about getting the best available service at the lowest cost. Artificial barriers to competition, including specified wage requirements, work against government efficiency and eliminate otherwise qualified providers -- including minority- and women-owned businesses -- from competing for state contracts."

The regulatory reforms to be discussed at the public hearings include a new method for calculating the prevailing wage and repeal of a rule that requires an automatic increase in prevailing wages which are not in effect, but only scheduled in union contracts.

The proposed regulations change the method for determining the prevailing wage from the modal approach to a modified weighted average, which is the same approach used by the federal government. In other words, the prevailing rate will be the rate paid to a majority of the workers or, if no single rate is paid a majority, a weighted average will be used. This has been the federal rule since the early 1980's.

The modal approach required that the most frequently occurring wage rate be considered prevailing, taking no account of wages above and below that rate, even if paid to many more workers. This method often resulted in the wage rate under collective bargaining agreements qualifying as the prevailing wage, even if they were significantly higher than the wages paid to a majority of workers in a locality. Other than California, only Minnesota and Wisconsin use the modal method.

Hearings will be held on the change from the modal to the weighted average method on February 20, 1996 at 9:00 a.m. in the Auditorium of the Public Utilities Commission Building, 505 Van Ness Avenue in San Francisco and on February 26, 1996 at 10:00 a.m. at the Auditorium of the California State Building, 107 South Broadway in Los Angeles.

Public hearings concerning repeal of the rule requiring that prevailing wage rates must automatically increase under certain conditions will occur on February 22, 1996 at 9:00 a.m. in the Auditorium of the Public Utilities Commission Building, 505 Van Ness Avenue in San Francisco and again on February 27 at 10:00 a.m. in the Auditorium of the California State Building at 107 South Broadway in Los Angeles.

Anyone wishing to submit written comments relevant to the proposed changes to prevailing wage regulations may submit them to: Dorothy Vuksich, Chief, Division of Labor Statistics and Research, P.O. Box 420603, San Francisco, CA 94142. All written comments must be received no later than 5:00 p.m. on February 27, 1996. A copy of the proposed regulations and related material may be obtained by writing to the same address.


Note: Additional information can be found in the May-June 1995 Issue of DIR Bulletin