prevailing wage laws apply to certain energy projects on public land starting in 2012

Prevailing Wage Laws Apply To Certain Energy Projects On Public Land Starting In 2012

January 25, 2012

       A new law will expand the type of work considered “public” in California. Specifically, the definition of “public works” will now include certain work done under private contracts in connection with renewable energy or energy efficiency improvements.

       Prior California law defined “public works” for purposes of regulating public works contracts as, among other things, construction, alteration, demolition, installation or repair work done under contract paid for, in whole or in part, with public funds. (Labor Code, § 1720.) The newly added Labor Code section 1720.6 expands the definition of “public works” to include certain work done under private contracts for the purpose of prevailing wage laws. California law requires workers employed on public works be paid at least the prevailing wage, which is often much greater than wages for comparable private contract work. (Labor Code, §§ 1770 et seq.) Failure to pay prevailing wages can lead to substantial penalties and possible license revocation.

       Now, construction, alteration, demolition, installation or repair work done under private contracts will be deemed a “public work” when the following conditions exist:

  • The work involves the construction or maintenance of renewable energy generating capacity or energy efficiency improvements;
  • The work is performed on the property of the state or a political subdivision of the state (i.e. city or county); and
  • Either one of the following conditions exist:
    • More than 50 percent of the energy generated is purchased or will be purchased by the state or a political subdivision of the state; or
    • The energy efficiency improvements are primarily intended to reduce the costs that would otherwise be incurred by the state or a political subdivision of the state.

       This law will affect all contractors on a project so employers must be diligent in determining whether a previously private contract will now be treated as public. For example, as a result of this law, employers must pay prevailing wages to workers on private jobs for independent power producers (“IPPs”) who sell or will sell generated power to a public entity (typically under so-called “power purchase agreements”).

       If you need assistance with wage compliance or have any labor or employment concerns, Marks, Finch, Thornton & Baird, LLP has a full service labor and employment group to assist you.