First In The Nation Legislation Impacts California Contractors (California Constructor)

California Constructor, January/February 2014 See page 19

California Constructor (January/February 2014)

First In The Nation Legislation Impacts California Contractors

Robert Fried

Senate Bill 54, signed by Governor Brown on October 13, 2013, requires California refiners and their contractors to comply with modified prevailing wage, apprenticeship and journeyperson qualifications and training requirements on private refinery construction as of January 1, 2014.

It applies to workers engaged in construction, demolition and maintenance work performed at “chemical manufacturing and processing facilities that generate, store, treat, handle, refine, process, and transport hazardous materials.” This is further defined as “[a]n owner or operator of a stationary source that is engaged in activities described in Code 324110 or 325110 of the North American Industry Classification System (NAICS), as that code read on January 1, 2014.”

This means refinery locations which are required to file so-called “risk management plans” (RMPs) with state and federal governments.

The California Environmental Protection Agency, through the Office of Emergency Preparedness, and on a county by county basis, through local fire or emergency preparedness bodies, has first line responsibility for review of compliance of RMPs. No new enforcement mechanism was created by the statute, though the Legislature may revisit this issue in clean-up legislation.

Limited Exemptions

There are a few limited exemptions. This includes oil and gas extraction operations and certain “onsite work” such as catalyst handling and loading, chemical cleaning, or inspection and testing that was not within the scope of a prevailing wage determination issued by the Director of Industrial Relations as of January 1, 2013.

SB54 requires the payment of the general prevailing rate of per diem wages pursuant to the Labor Code. However refinery construction is not made a public work under Labor Code Section 1720, and public works prevailing wage requirement do not apply as they would on a public project.

Shift differentials, travel and subsistence, or holiday pay are not required, and health, pension and other fringe benefit deductions may reduce the basic wage paid as prevailing. While existing craft by craft prevailing wages remain within the statute, implementation may bring proposals for “maintenance” or multi-craft rates that may result in new prevailing wage classifications for refinery maintenance and shut down work.

Finally, SB 54 authorizes an exemption for extensions of contracts now in place for certain refinery work.

Apprenticeship Requirements

The apprentice requirements also vary from what public works contractors are familiar with. The statute requires the use of apprentices and that journeymen be graduates of state-approved apprenticeship program on a phased in basis over several years. There is a limited exception in shut down or “emergency” situations where sufficient qualified workers are not available. Moreover, state approved apprentice programs are authorized to grandfather in journeymen with sufficient experience.

Individuals enrolled in apprentice programs located outside California and approved for federal purposes pursuant to the apprenticeship regulations adopted by the U. S. Secretary of Labor may qualify for work. However, there is no provision for recognizing out-of-state apprentice rates.

The Division of Apprenticeship Standards is authorized to set up an advanced safety training program in consultation with apprenticeship programs and affiliated community colleges. These programs may, as a part of this process, modify their standards to provide specific training for maintenance or other refinery work. The “needs” test for apprenticeship program creation or expansion is different than existing law, in that it provides for the assessment of training needs based on the individual refinery location.

Descendent of Earlier Effort

SB 54 is a lineal descendant of an effort, in the late 1980s, to require the payment of prevailing wages on refinery construction as necessary to ensure “public safety.” That action, taken by the County of Contra Costa in a local zoning ordinance, was held to be an unlawful infringement of the National Labor Relations Act and labor contracts in place for refinery workers by the Ninth Circuit Court of Appeals in Chamber of Commerce vs. Bragdon (64 F.3d 497 (1995).

The AGC of California filed an amicus brief in support of the Chamber in that action. Legal challenges to the implementation of SB 54 have already been filed in state and federal courts. The initial focus of these cases echoes those in Bragdon, emphasizing conflicts under the National Labor Relations Act between industrial and construction unions in the refinery marketplace, as well to the lawfulness of the basic structure of the statute under California labor, prevailing wage and constitutional law.

Finally, although the California Department of Industrial Relations is not specifically identified as an agency with regulatory enforcement power with respect to SB54, its statutory role in setting prevailing wage rate and apprenticeship ensures its involvement. As a practical matter, it will have some role in the implementation of the statute as well as in crafting regulations to provide necessary implementation guidance. Contractors should also closely follow reports from AGC’s lobbyist team on the introduction of any “clean up” legislation in the upcoming legislative session

Robert Fried is a Partner at Atkinson, Andelson, Loya, Ruud & Romo. He can be reached at (925) 251-8515, rfried@aalrr or on Twitter @rfaalrr

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