Changes to California Prevailing Wage Law: Implications for Solar Projects

13 February 2014 Renewable Energy Outlook Blog

Recent changes to California’s prevailing wage laws highlight the importance of complying with them. Prevailing wage laws are aimed at ensuring that a contractor’s ability to win a public works contract is not based on paying lower wages than a competitor pays. Contractors are required to set the same wage rates when bidding on a public works project, comply with daily and weekly overtime pay requirements, and maintain accurate payroll records. Prevailing wages vary by trade craft and location, and a matrix of the State’s prevailing wages can be found at the Department of Industrial Relations website.

A contractor or subcontractor that fails to comply with prevailing wage requirements risks facing a potentially costly action for unpaid wages, penalties, liquidated damages and fees/costs. The State Legislature recently increased the risk of exposure for prevailing wage violations by (1) extending the period of time (from 180 days to 18 months) during which state authorities may sue a company for violations, (2) providing that the time limits for bringing an action are “tolled” when the contracting parties fail to provide required notices to the state, and (3) broadening the number of authorities who may seek liquidated damages and penalties in an enforcement action.

Prevailing wage laws may apply to a solar project where any part of the project is paid for “out of public funds.” This includes situations where the project is merely subsidized by a state or local entity (e.g., rent forbearance, rent credits, waiver of fees, or the transfer of assets for less than fair-market value). The laws also apply where the construction contract is purely between private parties, but the property will have at least 50 percent of its space leased by a public agency after completion.

In light of the increased risk of exposure created by these changes, contractors should take extra precautions to ensure their projects comply with California’s prevailing wage laws. Contractors should ensure that notices of project completion are timely filed with county recorders and the Labor Commissioner’s office. Accurate payroll records should be kept well past project completion (four years is advisable). Where state guidelines are not on point or are unclear, contractors may request a written determination about a specific construction project.

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