On January 1 of 2019, Assembly Bill 3018 (AB-3018) went into effect and placed new constraints on Californian general and subcontractors that work on government funded projects. Prior to the law, contractors were required to use a skilled and trained workforce consisting of 30% journeypersons that were graduates from apprenticeship programs or had equivalent work experience. Some trades were exempt from this requirement. After AB-3018 passed, the required percentage of skilled journeypersons went to 50%. Additionally, trades that were preciously exempt became subject to the 30% rule.
AB-3018 also created a schedule for increasing the skilled workforce percentage requirement, with the next phase going into effect on January 1, 2020. From this date forward, the required percentage of skilled journeypersons on a project must be at 60%. While no trades are exempt from AB-3018, some occupations will remain at the 30% rate, including:
- Acoustical Installer
- Cement Mason, Drywall Installer or Lather
- Marble Mason, Finisher, or Setter
- Modular Furniture or Systems Installer
- Operating Engineer
- Pile Driver
- Roofer or Waterproofer
- Stone Mason
- Terrazzo Worker or Finisher
- Tile Layer, Setter or Finisher
Currently, only contractors or subcontractors who employ a journeyperson for less than 10 hours of work in a month are exempt from AB-3018.
Non-Compliance with AB-3018
Contractors are required to submit monthly reports that prove that they and their subcontractors are complying with percentage requirements. If their report is incomplete, the awarding agency can withhold payment. If their report is incomplete due to negligence of a subcontractor, the awarding agency can withhold 150% of the value of the monthly bill of the subcontractor.
If the State Labor Commission rules that contractor is not in compliance, they can impose a penalty of up to $5,000 per month for the first violation. This increases to $10,000 per month for any future violations in a 3-year period. Additionally, they may face debarment from public projects for one to three years.
Under AB-3018, general contractors carry a lot of responsibility for the subcontractors that work under them. For instance, a general contractor may be liable for penalties issued against their subs if it’s found that they knew about their noncompliance. They are also required to monitor their subcontractor’s use of skilled and trained workers periodically. And before they pay their subcontractor’s final payment, they have to obtain a declaration under penalty of perjury that the sub satisfied all skilled and trained workforce requirements.
Staying compliant on prevailing wage jobs is a continuous struggle for contractors and subcontractors. Every step of the project must be carefully monitored, from tracking hours and assigning the pay rates to submitting complicated reports and certifying that all rules have been followed. Mistakes and oversites at any point in the process carries the risk of penalties that include legal actions, fines and even debarment from public projects. For most companies, tracking workforce and skilled labor requirements is a manual process. Fortunately, some contractors have found a software that will track and monitor these requirements for them.
Regarding AB-3018, the increased requirements going into effect on January 1 come with a new set of responsibilities. Being compliant will require construction companies to employ more journeypersons for each and every public works project. This comes with additional cost and may even cause staffing and recruitment problems. Read the complete language of AB-3801 or visit our blog for additional articles about this important topic.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.