FOR IMMEDIATE RELEASE
IR # 97-06
Monday, January 27, 1997

CONTACT:
Rick Rice
Louis Bonsignore
(415) 972-8835


State Prevailing Wage Rules Now Conform to Federal Law

SAN FRANCISCO -- Long awaited reforms to California's outdated prevailing wage regulations are now in place, announced Lloyd W. Aubry, Jr., director of the California Department of Industrial Relations.

"The regulatory changes, championed by Governor Wilson on behalf of the state's rural counties, cities and cash-strapped local districts, became effective today. California's prevailing wage rules now parallel those of the federal government and most other states," Aubry said.

"The reforms will ultimately offer millions of dollars in taxpayer savings on public works contracts in California, with particular impact in rural areas," he added. "Local governments, school, fire health and other special districts can now begin to realize cost savings and the ability to provide more and improved services to the taxpayers and consumers of their services."

The regulatory change affects two general areas of the state's prevailing wage regulations so that wages paid on public works projects will more accurately reflect those actually paid in the project area:

1. The change repealed a provision in the rules that calls for payment of higher wages on a particular project if the collective bargaining agreement upon which the prevailing wage is based calls for increases during the course of the project. For public works projects advertised for bids on or after today, January 27, 1997, the predetermined (commonly called the "double-asterisk") changes are no longer a part of the general prevailing rates of per diem wages. The rates at the time of the bid advertisement date for a project will remain in effect for the life of that project. However, if a project was advertised for bids before today and the determination in effect on the bid advertisement date included predetermined changes, then those changes must be paid for the life of that contract.

2. The method by which prevailing wages are calculated is now changed. When there is no single rate paid to the majority of workers in an area, rather than using the modal method (the most frequently occurring wage rate), prevailing wages will be calculated using a weighted average. This is the rule followed by the federal government under the Davis-Bacon Act and many states with state prevailing wage laws. Although the methodology is immediately changed, the more accurate wage rates will be phased in as the Division of Labor Statistics and Research (DLSR) conducts surveys of each classification in counties throughout the state. Anyone needing information on current wage rates should contact DLSR's prevailing wage unit at (415) 972-8628 Wage rates are also published on the Internet Homepage of the Department of Industrial Relations at http://www.dir.ca.gov.

After attempts to reform prevailing wage rules through legislative remedies over one year ago proved unsuccessful, Governor Wilson requested that the Department of Industrial Relations pursue regulatory changes under its administrative authority to reform California's outdated prevailing wage rules. After a series of public hearings, the regulations were submitted to, and approved by, the Office of Administrative Law and were filed with the Secretary of State on December 27, 1996.

Both federal and state prevailing wage laws, originally enacted in the 1930's, were intended to protect local workers from the downward effect that public works projects had on local wages. In those days government contracts were typically let to the lowest bidder and often crews were imported to an area to work on a project at much less than the prevailing wages of the community. The laws addressed this by requiring the payment of minimum wage rates equal to those prevailing in the community, thus giving the local work force an opportunity for employment on local public works. Local jurisdictions determined prevailing wages until 1976 when the function was centralized under the Department of Industrial Relations.

Primarily for ease of administration, DIR used the modal method, first adopted in 1956, to arrive at prevailing wage rates. Use of this method, which tends to favor collective bargaining rates, was probably appropriate during the 1950's when most construction workers were members of unions and their wage rates predominated. With the dramatic drop in union membership in the construction trades over the years, the modal methodology became costly and outmoded. Today only about 23.7 percent of California construction workers are union members, however under the modal method their wage rates disproportionately became the basis for about 92 percent of all prevailing wage rates and artificially inflated the cost of public works projects and unfairly burdens California taxpayers.

The regulatory changes effective today will counteract that effect and result in wage rates that more accurately reflect the actual prevailing wages of the community where the project is being built. In turn, this is expected to permit the construction of schools, public hospitals, libraries, roadways and other public property, without increasing overall costs.

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(Editor Note: The attached notice (link no longer valid) is being sent to all contractors licensed in the State of California to inform them of the change in regulations.)