Public works
California prevailing wage: what a contractor actually has to do
When the money is public, the pay rules change. On almost any public work over $1,000 you pay the rate the state sets, benefits included, keep certified payroll and — depending on size — register with DIR and hire apprentices. Penalties are counted per worker, per day, so a small mistake grows fast.
$1,000
Above this, prevailing wage applies.
$25,000
Construction above this: DIR registration.
$200
Maximum penalty per worker, per day, for underpaying.
What counts as a public work
Construction, alteration, demolition, installation or repair done under contract and paid for in whole or in part out of public funds (Labor Code §1720). Related design, site assessment, inspection and land surveying count too, and so do maintenance contracts.
“Public funds” is wider than it sounds: it includes public land sold below market value and fees or loans an agency waives or reduces. What's excluded is work the agency does with its own employees.
What applies at each project size
| Type and size | Prevailing wage? | DIR registration? |
|---|---|---|
| $1,000 or less | No | No |
| Construction, alteration, demolition, installation or repair: over $1,000 up to $25,000 | Yes | No |
| Maintenance: over $1,000 up to $15,000 | Yes | No |
| Construction over $25,000, or maintenance over $15,000 | Yes | Yes |
The most common mistake: thinking the small-project exemption removes prevailing wage. It doesn't. It only removes DIR registration and electronic payroll filing. Prevailing wage starts above $1,000, and even unregistered you keep certified payroll for at least three years (Labor Code §1771.4).
Working out what you owe
The determination gives you a basic rate plus fringe benefits. What you pay into a genuine benefit plan is a credit; whatever is left over goes to the worker in their paycheck (Labor Code §1773.1).
Example: a laborer
- 1.The determination says $50.00 basic rate plus $20.00 fringe: $70.00 total.
- 2.You pay $14.00 an hour into a health and pension plan. That's a $14.00 credit.
- 3.Fringe still owed: $20.00 − $14.00 = $6.00, paid to the worker as wages.
- 4.Hourly pay: $50.00 + $6.00 = $56.00. Check: $56.00 + $14.00 = $70.00.
Eight hours is a legal day's work on public contracts. Every hour over 8 in a day is paid at no less than 1½ times the basic rate (Labor Code §1810, §1815).
DIR registration
To bid, be listed in a bid, or work on a public work above the thresholds in the table, the contractor and every subcontractor must be registered with the Department of Industrial Relations (Labor Code §1725.5, §1771.1). To register you need workers' compensation, your CSLB license, no unpaid wage judgments, and not to be debarred.
- It renews every year, on or before July 1. You can prepay up to three years.
- DIR sets the fee and posts it on its website, up to $800 a year. Check the current amount there before you pay.
- If you missed renewal by mistake, you can renew retroactively within 90 days by paying a penalty equal to the fee.
- Working unregistered costs $100 a day, up to $8,000, plus a stop order barring you from public works.
Certified payroll
Every contractor and subcontractor keeps a record for each worker: name, address, Social Security number, classification, straight-time and overtime hours by day and week, and actual pay. Each record is signed under penalty of perjury (Labor Code §1776).
- You have 10 days to produce certified copies after a written request.
- Electronic payroll goes straight to the Labor Commissioner at least monthly while you work, and within 30 days after the last day of work.
- Copies given to the public have names, addresses and Social Security numbers blacked out.
Penalties: almost all of them are per worker, per day
| Violation | Penalty | Labor Code |
|---|---|---|
| Paying less than prevailing wage | Up to $200 per worker per day, plus the wages owed | §1775 |
| Breaking the overtime rules | $25 per worker per day | §1813 |
| Not producing certified payroll within 10 days | $100 per worker per day | §1776 |
| Not filing electronic payroll | $100 per day, up to $5,000 per project | §1771.4 |
| Working while unregistered with DIR | $100 per day, up to $8,000 | §1771.1 |
Do the arithmetic: three workers, five days of overtime paid at straight time, is 3 × 5 × $25 = $375 in penalties, plus the overtime owed. Serious or repeated violations can get you debarred from public works for 1 to 3 years (Labor Code §1777.1).
Public works also require bid, performance and payment bonds. See which bonds you need, and when.
FAQ
At what dollar amount does prevailing wage apply?
On public works over $1,000. Projects of $1,000 or less are exempt (Labor Code §1771). It's a very low bar — almost any job paid for with public money clears it.
Do I need DIR registration for a small job?
Not for construction of $25,000 or less, or maintenance of $15,000 or less. But that exemption only removes registration and electronic payroll filing. You still pay prevailing wage above $1,000, and you still keep certified payroll for at least three years.
Where do I find the rate I have to pay?
The Director of Industrial Relations publishes wage determinations by craft and by area. The awarding body puts them in the call for bids or says where they're on file, and you post a copy at every job site. The determination in effect on the day the project was advertised for bid is the one that applies.
Do fringe benefits count toward the wage?
Yes. Per diem wages are the basic rate plus employer payments for health, pension, vacation, travel and apprenticeship training. What you pay into a real benefit plan counts as a credit; whatever you don't pay into a plan goes to the worker as cash.
When do I have to hire apprentices?
If you use workers in an apprenticeable craft: at least 1 apprentice hour for every 5 journeyman hours. It doesn't apply to contracts under $30,000, and journeyman hours over 8 a day or 40 a week don't count toward the ratio.
Is the prime contractor liable when a sub underpays?
Not unless the prime knew, or failed to do four things: put the prevailing wage sections in the subcontract, review the sub's certified payroll, act when it learned of underpayment, and get a signed affidavit from the sub before final payment (Labor Code §1775(b)).
Prevailing wage is on the exam
Public works is a section of the Law and Business exam, and these numbers ($1,000, $25,000, 1 to 5, $200, $25) are among the most-confused. See where you stand with 20 free questions.
Official sources: Labor Code §1720 · Labor Code §1771 · Labor Code §1771.1 · Labor Code §1773.1 · Labor Code §1775 · Labor Code §1776 · Labor Code §1777.5 · DIR contractor registration · DIR wage determinations