Most California contractors are no doubt familiar with the Division of Labor Statistics and Research’s (“DLSR”) determinations establishing the prevailing wage rate for public works projects. These determinations are accessible on the DLSR’s website, and set forth the applicable hourly wage rate for workers on these projects depending on their classification. The determination that will apply to a contractor will be one existing at the time of the contract bid date. Sounds simple enough – so what could possibly go wrong? For starters, if the project you are involved with will be a lengthy one, you may have to deal with the “double asterisk headache.” To fully understand this dilemma you must first understand its origins. The prevailing wage rates set forth in the DLSR’s determinations each have an expiration date that is followed by a single or double asterisk. The California Code of Regulations provide that:

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[p]revailing wage determinations with a single asterisk (*) after the expiration date which are in effect on the date of advertisement for bids remain in effect for the life of the project. Prevailing wage determinations with double asterisks (**) after the expiration date indicate that the basic hourly wage rate, overtime and holiday pay rates, and employer payments to be paid for work performed after this date have been predetermined. If work is to extend past this date, the new rate must be paid and should be incorporated in contracts entered into now . . . All determinations that do not have double asterisks (**) after the expiration date remain in effect for the life of the project. [Emphasis added] 8 Cal. Code. Reg. § 16204(b).”

The problems most often arise when an awarding body’s labor compliance program (“LCP”) incorrectly requires contractors to pay the rate set forth in subsequent determinations (as opposed to the predetermined increases set forth in the applicable determination) for work performed beyond an expiration date with a double asterisk. Frankly, this is surprising given the law’s clear position on this issue.

California Labor Code § 1773.6 states, in pertinent part:

“[i]f during any quarterly period the Director of Industrial Relations shall determine that there has been a change in any prevailing rate of per diem wages in any locality he shall make such change available to the awarding body and his determination shall be final. Such determination by the Director of Industrial Relations shall not be effective as to any contract for which the notice to bidders has been published.” [Emphasis added]

Furthermore, Labor Code § 1773.9(c) provides

“If the director determines that the general prevailing rate of per diem wages is the rate established by a collective bargaining agreement, and that the collective bargaining agreement contains definite and predetermined changes during its terms that will affect the rate adopted, the director shall incorporate those changes into the determination. Predetermined changes that are rescinded prior to their effective date shall not be enforced.”

In Richmond-San Rafael Bridge/Benicia-Martinez Bridge/San Francisco-Oakland Bay Bridge (Public Works Case No. 2004-023 – Decision onAdministrative Appeal), the Director emphasized that Labor Code § 1773.6 “precludes retroactive enforcement of new or modified prevailing wage rates after the notice to bidders has been published.” Id. at p. 30. This rule exists so that awarding bodies and competing bidders can estimate labor costs and enjoy pre-bid certainty.Metropolitan Water Dist. V. Whitsett (1932) 215 Cal. 400. However, the Legislature recognized the tension between providing awarding bodies and contractors with pre-bid certainty versus the potential danger of employees working on a lengthy project without market wage increases. Labor Code § 1773.9(c) addresses these competing interests by providing for predetermined increases that are tied to the current union collective bargaining agreement:

“The prevailing wage rates derived from union collective bargaining agreements, which have a schedule of certain future increases at set dates, will incorporate those predetermined obligations so that the prevailing wage rates are not static jobs, such as the ones at issue herein, which span many years.”

See Richmond-San Rafael Bridge/Benicia-Martinez Bridge/San Francisco-Oakland Bay Bridge (Public Works Case No. 2004-023), p. 7 n.6.

Contractors faced with the double asterisk headache should take heart; the law is on their side. However, a stubborn LCP may not agree despite the strong legal authority rejecting its position on this issue. Until the DLSR takes affirmative steps to address this matter, a contractor facing assessments on these grounds should write to the DLSRto request that it provide the contractor with a written response setting forth the DLSR’s official position on this issue.