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Labor Compliance Enforcement in California: Overview

Updated: Jun 13

A question that is often asked is why must we abide by all of these requirements. Well, not only is it outlined by the state of California in their labor codes, but there are also a handful of groups and agencies who enforce labor compliance on Public Works projects. Today we are going to be giving you an overview on Labor Compliance Enforcement and why it is imperative your company prioritizes compliance efforts.


California Labor Codes:


Labor codes establish the foundation of fair labor rights and requirements contractors working on public works construction projects must comply with. They address aspects such as prevailing wages, hour provisions, apprentice ratio requirements, training contributions payment to approved apprenticeship programs, and more... Read Labor Codes 1700-1800 as this encompasses the requirements mentioned above. It is so important for contractors to be knowledgeable about these laws. Some of the requirements laid out in these labor codes are extremely time sensitive so it is strongly recommended to understand the requirements before bidding on CA public works projects. Claiming you were unaware of said requirements is not a defense and you still risk getting penalized for non compliance.


Division of Labor Standards Enforcement (DLSE):


The Division of Labor Standards Enforcement plays a crucial role in enforcing labor laws in California. Their state investigators not only enforce labor compliance regulations but also advocate for workers rights ensuring that all employees on public projects are paid and treated fairly according to the law. From on site interviews to behind the scenes investigations with detailed review of contractor documentation, they serve as a reminder of the states commitment to upholding labor compliance standards. This compliance enforcement entity is instrumental in preventing exploitation and fostering a culture of openness and accountability, within the industry. If your project is undergoing an investigation, you will receive a records request letter to which you have 10 days to respond and submit the requested documentation. There is a late penalty of $100 per day for late submission. Should anything come back as non complaint in the investigation, a Civil Wage Penalty Assessment will be issued outlining the penalties applicable to your company and project. The DLSE has a Public Works Manual available on the DIR's website which can help you gain additional insight on how they operate and the requirements that fall under California Public Works projects.


Labor Compliance Monitors (LCM):


The proactive stance adopted by Labor Compliance Monitors is for adherence to the project’s requirements. By mandating subcontractors to provide all documentation for assessment, LCMs ensure that compliance is not just a box to tick but an ongoing endeavor. This diligent oversight not only assists in avoiding penalties but also cultivates a collaborative atmosphere where compliance is a mutual objective. LCM’s typically work for/with the Awarding Body or Prime contractor and can withhold payment until the subcontractor fixes their documentation and submits everything requested in a compliant manner. There are aspects to where a prime contractor can be jointly liable to their subcontractors for non compliance, which is why the role of the LCM is so important. You will likely see monthly RFIs (request for information) on projects with Labor Compliance Monitors. This is a way for them to communicate your status and request anything they need in order to release payment.


Labor Enforcement Task Force (LETF):


The Labor Enforcement Task Force is a group of state and federal agencies (including the DLSE previously mentioned) who inspect and combat the underground economy. Their investigation process typically lasts about an hour. Investigations include review of your records as well as employer and employee interviews. Any refusal to their inspection will urge them to obtain an inspection warrant. Anyone is able to submit a complaint to the LETF with leads on labor law violations and can opt to stay anonymous. The underground economy consists of wage theft, tax evasion, under-the-table compensation, unsafe work environments, and more. The purpose of the LETF is also to include a fair, compliant, and safe environment for employees and hold employers accountable for not following the law.


Labor Compliance Systems:


The emergence of digital systems for managing compliance has transformed how contractors produce and submit labor compliance documentation. Platforms such as LCPTRACKER and ELATIONS not only offer a secure means of submitting your data, but also feature warnings or flags built into the system to warn you of discrepancies. These warnings will not allow you to submit the document until the discrepancies are corrected. Labor compliance systems can also help streamline a Labor Compliance Monitor’s job as all subcontractor information is automatically available to review and organized in one place. It is up to the Awarding Body or Prime contractor whether or not to enforce use of a digital system, this should be located in your project's contract. If there is any mention of a digital system, you will be required to use the system for your project. We've included this section on our overview because these systems act as a slight compliance monitor and if contractors do not follow through with the project/system requirements, then payment can be withheld. Luckily, most if not all of these systems have user manuals to help walk you through how to use their system. Here at Prevailing Wisdom, we’ve worked in a long list of these systems and help produce and submit our client’s documents in the required portals to streamline the submission process.


Conclusion


In summary, compliance is required on California public works projects to ensure fair compensation, treatment, and transparency. There are a number of enforcement groups whose job is to ensure contractors are abiding by these requirements. Not knowing and not doing the research before signing a California public works project agreement will not protect you from non-compliance penalties. Operating in a non-compliant manner may catch up with you eventually and the penalties can be quite costly. To ensure you get paid on time, and to ensure a smooth investigation process, research your projects requirements, read the labor codes, talk to your prime for clarification, ask for labor compliance requirements/information pre-bid. This industry is not simple by any means, however researching and understanding what you are signing up for can help set you and your team up for success.


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