Governor Terminates Prevailing Wage Penalties

Unfortunately, the Governor Schwarzenegger vetoed AB 2002, which would have increased the penalties from $50 to $100 per day. This bill which was sponsored by the Los Angeles Unified School District, sought to stem the tide of underpayment of prevailing wages on its projects. The Governor apparently does not see the need for the stick with regards to this issue. The governor in his veto message said:

While I strongly support efforts to ensure compliance with our prevailing wage laws, the proponents of this measure have failed to demonstrate a need for the increased penalties or evidence that simply doubling penalties and creating new liabilities is an effective way of achieving greater compliance. Strong enforcement of existing laws, as well as concerted public outreach and education of employers, will do far more to ensure compliance with our laws than simply indiscriminately doubling penalties.

While strong enforcement of the labor laws is happening with more sophisticated Labor Compliance programs, contractors are not discouraged from breaking the law. In fact with the small penalties there becomes an economic disincentive for public agencies to take legal action against contractors. The LAUSD provided the following testimony about prevailing wage violations.

Since 2003, the District has initiated over 1,700 cases in which a contractor or subcontractor has failed to pay the appropriate prevailing wage. As a result of our Labor Compliance Program, the District has recovered more than $6 million in back wages and penalties. Of the more than 1,700 cases, 218 cases required legal action and have cost the District more than $2.7 million to litigate.

Hopefully Assembly Member de Leon will introduce this bill next year. But I think it was a great shot at doing the right thing.