Prevailing Wage Contract Escape Clauses
The California Labor Code requires you and your subcontractors to pay prevailing wages on California Public Works projects. The Labor Code also made you, as a prime contractor, responsible for paying the penalties if your subcontractor violated the prevailing statutes. As of January 1, 1998 the Labor Code has been modified to allow a prime contractor to escape liability for its subcontractors violations if certain requirements are met.
Specifically, you must have no knowledge of the failure of the subcontractor to pay the specified prevailing rate of wages to those workers and also comply with all of the following requirements:
(1) The contract executed between the contractor and the subcontractor for the performance of work on the public works project must include a copy of the provisions of California Labor Code Sections 1771, 1775, 1776, 1777.5, 1813, and 1815. The simplest way to provide copies of the sections is by including them as an exhibit to the subcontract. I have enclosed copies of the code sections for your use.
(2) You must monitor the payment of the specified general prevailing rate of per diem wages by the subcontractor to the employees, by periodic review of the certified payroll records of the subcontractor.
(3) Upon becoming aware of the failure of the subcontractor to pay his or her workers the specified prevailing rate of wages, you must diligently take corrective action to halt or rectify the failure, including, but not limited to, retaining sufficient funds due the subcontractor for work performed on the public works project.
(4) Prior to making final payment to the subcontractor for work performed on the public works project, you must obtain an affidavit signed under penalty of perjury from the subcontractor that the subcontractor has paid the specified general prevailing rate of per diem wages to his or her employees on the public works project and any amounts due pursuant to Labor Code Section 1813.
In order to mandate that the subcontractor sign such an affidavit you should include the following language in the subcontract:
“13.3 Attached hereto and incorporated herein by this reference are the provisions of California Labor Code sections 1771, 1775, 1776, 1777.5, 1813 and 1815. Subcontractor agrees to comply with all of the above-referenced provisions applicable to the performance of it’s work on this project. Specifically, the subcontractor agrees to:
a. Pay all workers not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed.
b. Pay all workers not less than the general prevailing rate of per them wages for holiday and overtime work fixed as provided in this chapter.
c. Adhere to the compliance measures outlined in Lit 1775(b) for any second tier subcontractor that the subcontractor chooses to use on this project.
d. Submit certified payroll records to the contractor on a weekly basis. Records shall be provided no later than 5 days following the last day of each workweek.
e. Comply with the applicable requirements and joint apprenticeship standards as required by Labor Code 1777.5.
The subcontractor prior to receiving final payment for work performed on this project shall sign an affidavit under penalty of perjury that the subcontractor has paid the specified general prevailing, rate of per diem wages to his or her employees for the proper craft needed to fulfill the obligations of the subcontract. The attached affidavit is incorporated into this subcontract.
The subcontractor agrees to indemnify and hold harmless the contractor for any violations of the above-referenced Labor Code provisions, which were caused by the subcontractor’s failure to comply with said provisions.”
A copy of a proposed affidavit is enclosed with this letter. A Copy of the statutes that must be included with the subcontract as an Exhibit are also included with this letter.
Assuming you comply with the statutory requirements you should be able to avoid the penalties that can be assessed against you for your subcontractors prevailing wage violations.