(a) Existing tools for enforcement of labor standards in the construction industry do not meet the scale of the challenges in that industry. Over 300,000 state-licensed contractors performed more than $65 billion worth of permitted construction work in California in 2019. During fiscal year 2018-2019, the California Labor Commissioner conducted only 232 inspections in the construction industry, which yielded 336 citations for violations. The Labor Commissioner assessed $14.8 million in back-wages for these violations —the highest amount of any industry—and $3.3 million in penalties, but less than 2% of the back wages were collected, along with approximately 16% of the penalties. Resources for investigations and enforcement of the violations that are uncovered are inadequate.
(b) The City has an interest in preventing and remedying wage theft and other labor standards violations in the construction industry. Violations of labor standards harm workers and their families, undermine the City’s economic growth, provide employers with an unfair competitive advantage against law-abiding employers, and may create an atmosphere that leads to violations of construction safety and quality standards.
(c) California Labor Code Section 2810.5, added by the Wage Theft Protection Act of 2011, requires that all employers at the time of hire provide each employee with a written notice containing the employee’s pay rate and basis thereof (whether by hour, salaried, etc.), regular payday, sick leave benefits, and other specified information. California Labor Code Section 226 requires employers to provide employees with a detailed statement of the employee’s wages, hours worked, all deductions, net wages, and other specified information with the employee’s pay. City labor protections, including the Minimum Wage Ordinance, Labor and Employment Code Section 1.5(c); Paid Sick Leave Ordinance, Labor and Employment Code Section 11.6; and Health Care Security Ordinance, Labor and Employment Code Section 21.3(f), require employers in the City to maintain and provide the Office of Labor Standards Enforcement access to accurate payroll records and other documentation of compliance. Together, these requirements may help employees identify apparent errors in their pay and benefits so they can be addressed, and they help regulators audit compliance with City and State labor protections.
(d) This Article 81, in conjunction with amendments to the Building Code requiring Owners of certain residential construction projects to secure a surety bond for labor compliance as a condition of receiving a permit, will enhance compliance with these requirements in the City. This Article 81 will require Owners to maintain the labor compliance bond required under Building Code Section 106A.1.18 and to acknowledge that they may be held responsible, through forfeiture of the bond, for labor violations committed on the project. Further, it will require Covered Contractors to acknowledge their responsibility to comply with all applicable City and State labor standards including notice and recordkeeping requirements and to provide the City with access to their records upon request. Owners will further be required to provide the City with specified information about Covered Contractors, which the City will use to determine if Covered Contractors have any ongoing investigations or unresolved labor violations at the local level or unresolved labor violations at the State level for work on the project. That information will be used to determine if the labor compliance bond required may be released, reduced, or used to remedy a labor violation.
(e) The Legislature also has enacted licensing and certification requirements for electrical and fire sprinkler system installations in California Labor Code Section 108.1 and California Health and Safety Code Section 13110, respectively. This Article 81 will enhance compliance with these requirements in the City by requiring Covered Contractors to provide documentation of the certification and registration of electricians and sprinkler fitters.