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Compliance Monitoring Unit (CMU)
Labor compliance background
Historical Responsibilities: Historically, prevailing wage requirements were administered by awarding bodies, who by law were required to include prevailing wage requirements in their public works contract, to ascertain prevailing wage rates for the local community, to review certified payroll records, to take cognizance of violations, and to withhold contract payments from violators. Public officials who failed to carry out these responsibilities were potentially subject to criminal penalties. Over time some of these responsibilities were taken over by DIR and DLSE, but awarding bodies still have a shared responsibility for prevailing wage enforcement under current law, including but not limited to the duties under Labor Code section 1726 to take cognizance of violations and promptly report suspected violations to the Labor Commissioner.
Labor Compliance Programs: The term “labor compliance program” may refer in general to any kind of organized system or entity for monitoring or enforcing compliance with prevailing wage requirements on public works projects. For the purposes of laws administered and enforced by DIR, however, a Labor Compliance Program (“LCP”) refers to an entity that has been approved by the Director to monitor and enforce compliance with the state’s prevailing wage laws, following standards set by Labor Code section 1771.5(b) and the Directors’ regulations at Title 8, California Code of Regulations, sections 16421 – 16439. An “approved LCP” always refers to the entity that has been approved to do this work rather than its methodology or manual of operation.
The first LCP statute, Labor Code section 1771.5, offered the incentive of higher prevailing wage exemptions for any awarding body that initiated and enforced a labor compliance program on all of its public works projects. Subsequent legislation required awarding bodies to initiate and enforce an LCP or to contract with a third party to initiate and enforce an LCP on projects that were funded through specific bonds or built pursuant to a particular statutory authorization. One of the first and most prominent of these statutes was Labor Code section 1771.7 (adopted in 2002 through AB 1506), which required LCPs for school construction projects funded in any part by the 2002 or 2004 School Construction Bond Acts. As of 2011 there were about two dozen statutes that require awarding bodies to use an LCP for specified types of public works projects, including for several types of design-build projects.
The required use of LCPs for certain bond-funded and design-build projects came to be viewed as a flawed enforcement model. In 2009, legislation known as SBX2-9 was adopted to require the DIR to monitor and enforce prevailing wage compliance on all state bond-funded projects and other projects for which an LCP previously had been required. DIR then established the CMU as a new unit to carry out some of the specific monitoring functions performed by LCPs that historically had not been undertaken by DLSE. The new program was supposed to go into effect in August of 2010, but due to legal issues, implementation was delayed pending the adoption of clean-up legislation (AB 436) and conforming regulations. The program is now scheduled to become effective on January 1, 2012.
Requirement to use DIR’s Compliance Monitoring Unit (CMU) or Prescribed Alternative for state bond-funded and certain other types of public works projects beginning in 2012: Several statutes (known collectively as SBX2-9 and AB 436) require awarding bodies to use and pay for a fee for compliance monitoring and enforcement by the DIR on state bond-funded and other specified projects or use an acceptable alternative to monitor and enforce compliance on those projects. These requirements apply only to projects for which the public works contract is awarded on or after January 1, 2012. The types of projects covered by these requirements fall into three general categories:
- Projects funded by any state bond, except Proposition 84 (2006 Water project bond initiative).
- Projects coming under a special statutory authorization (most having to do with design-build) that requires monitoring and enforcement by the DIR or an acceptable alternative.
- Projects undertaken by an awarding body that chooses to comply with Labor Code §1771.5(f) and have the DIR monitor and enforce compliance on all of its projects.
Alternatives – in lieu of paying for DIR to monitor and enforce compliance on one of these projects, an awarding body may use one of these alternatives
- A previously-approved in house LCP, provided that (1) the LCP was approved or had applied for approval before January 1, 2012; (2) the LCP is used either for all projects undertaken by the awarding body or all projects that otherwise would require monitoring and enforcement by DIR; and (3) the awarding body does not contract with a third party to operate the LCP.
- A project labor agreement, specifically a “collective bargaining agreement that binds all contractors on the covered project and contains a mechanism for resolving wage disputes
- A complete list of statutes that require DIR monitoring and enforcement or an acceptable alternative, including descriptions of the types of projects covered, is available here http://www.dir.ca.gov/lcp/StatutesRequiringLCPs.pdf.
Requirements for public works projects that receive funds from Proposition 84 (2006 Water project bond initiative): A project that receives funds from Proposition 84 is not subject to DIR monitoring and enforcement, even if it receiving from another state-issued bond. Instead, awarding bodies must comply with Public Resources Code 75075, which requires the awarding body to adopt and enforce, or contract with a third party to enforce an LCP. The awarding body must be approved as an LCP by the Director of Industrial Relations, but it may contract with a third party to staff its program, provided that third party has the necessary training and experience in labor compliance enforcement. For more information about LCPs go here http://www.dir.ca.gov/lcp.asp.