Prevailing wage requirements

What counts as a public work

Under Labor Code §1720, a “public work” is construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds. It also covers related work such as design, site assessment, inspection, and land surveying.

“Public funds” means more than a check from a city. It also includes public land sold below fair market price, fees or loans that a public agency waives or reduces, and similar help (Labor Code §1720(b)). Maintenance contracts are covered too. Work a public agency does with its own employees (“own forces”) is not covered (Labor Code §1771).

Know this

Prevailing wages must be paid on public works projects of more than $1,000. Projects of $1,000 or less are exempt (Labor Code §1771).

Who sets the prevailing wage

The Director of Industrial Relations sets the prevailing rate for each craft, classification, or type of worker in each locality. The rate includes holiday and overtime pay. The awarding body (the public agency that gives out the contract) gets these rates from the Director (Labor Code §1773).

The awarding body lists the rates in the call for bids and the contract, or states that copies are on file at its main office (Labor Code §1773.2).
A copy of the Director's wage determination must be posted at each job site (Labor Code §1773.2).
The determination in effect on the date the project is advertised for bid applies to that project. New determinations take effect 10 days after they are issued (8 CCR §16204).

Fringe benefits are part of the wage

“Per diem wages” means the basic hourly rate plus employer payments for health and welfare, pension, vacation, travel, subsistence, and approved apprenticeship training (Labor Code §1773.1). Money you pay into a real benefit plan counts as a credit toward the total rate. Whatever part of the fringe amount you do not pay into a plan must be paid to the worker. Credits may not reduce the hourly straight-time or overtime wage in the determination, and there is no credit for benefits that other state or federal law already requires. The one exception is an increased employer payment made under a collective bargaining agreement: it may lower the hourly wage only if the basic hourly rate plus the increased payment still equals at least the prevailing rates and the payment is irrevocable unless made in error (Labor Code §1773.1(c)).

Worked example

Paying the full prevailing rate

The determination for a laborer shows a basic rate of $50.00 per hour plus $20.00 in fringe benefits, a total of $70.00.
The contractor pays $14.00 per hour into a health plan and a pension plan. That is a $14.00 credit.
Fringe still owed: $20.00 − $14.00 = $6.00. It goes to the worker as pay.
Hourly pay to the worker: $50.00 + $6.00 = $56.00. Check: $56.00 + $14.00 = $70.00.

Pay the worker at least $56.00 per hour.

The 8-hour day and overtime

Eight hours is a legal day's work on public contracts (Labor Code §1810). A worker's time is limited to 8 hours a day and 40 hours a week (§1811), unless the extra hours are paid at not less than 1½ times the basic rate for all hours over 8 in a day (§1815). The wage determination also lists the overtime and holiday rates you must use.