Bill Text: CA SB727 | 2021-2022 | Regular Session | Amended

California Senate Bill 727 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Labor-related liabilities: direct contractor.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2021-09-27 - Chaptered by Secretary of State. Chapter 338, Statutes of 2021. [SB727 Detail]

Download: California-2021-SB727-Amended.html

Amended IN Senate March 09, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill

No. 727

Introduced by Senator Leyva

February 19, 2021

~~An act to amend Section 1 of the Health and Safety Code, relating to health and safety.~~ An act to amend Section 218.7 of the Labor Code, relating to employment.

LEGISLATIVE COUNSEL'S DIGEST

SB 727, as amended, Leyva. ~~Health and safety.~~ Labor-related liabilities: direct contractor.

Existing law requires, for contracts entered into on or after January 1, 2018, a direct contractor, as defined, making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other private work, to assume, and be liable for, any debt owed to a wage claimant or third party on the wage claimant’s behalf, incurred by a subcontractor at any tier acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the original contract.
This bill would require, for contracts entered into on or after January 1, 2022, the direct contractor to also be liable for any contributions, deductions, and withholdings that the subcontractor was required to forward to the State of California on account of the performance of the labor and be liable for any relief the Labor Commissioner could seek against the subcontractor for the subcontractor’s failure to obtain and maintain valid workers’ compensation coverage as provided.
Existing law limits the direct contractor’s liability under those provisions to extend only to any unpaid wage, fringe or other benefit payment or contribution, including interest owed and provides that liability does not extend to penalties or liquidated damages.
This bill would extend the direct contractor’s liability to specified payments owed to the State of California, penalties, liquidated damages, and interest owed by the subcontractor on account of the performance of the labor.
Existing law authorizes the Labor Commissioner to enforce against a direct contractor the liability for unpaid wages pursuant to specified provisions, or through a civil action, and limits the direct contractor’s liability to unpaid wages, including any interest owed.
This bill would remove the limitation of liability and would provide that the Labor Commissioner may seek any relief against a direct contractor for its subcontractor’s failure to obtain valid workers’ compensation coverage, as provided. The bill would authorize the Employment Development Department to enforce against a direct contractor, pursuant to specified provisions, or through a civil action, the liability created for the subcontractor’s failure to make payments to the State of California, as provided.
Existing law requires, upon request by a direct contractor to a subcontractor, the subcontractor and any lower tier subcontractors under contract to the subcontractor to provide payroll records, as specified, of its employees who are providing labor on a private work and requires the payroll records to contain information sufficient to apprise the requesting party of the subcontractor’s payment status in making fringe or other benefit payments or contributions to a third party on the employee’s behalf.
This bill would require the subcontractor and any lower tier subcontractors to also provide records showing its reports and payments to the Employment Development Department.
The bill would make conforming changes.
~~Existing law establishes the Health and Safety Code.~~
~~This bill would make a technical, nonsubstantive change to a provision relating to that code.~~

Vote: MAJORITY Appropriation: NO Fiscal Committee: NOYES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

Section 218.7 of the Labor Code is amended to read:

218.7.

(a) (1) For contracts entered into on or after January 1, 2018, a direct contractor making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other private work, shall assume, and is liable for, any debt owed to a wage claimant or third party on the wage claimant’s behalf, incurred by a subcontractor at any tier acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the contract between the direct contractor and the owner. For contracts entered into on or after January 1, 2022, the direct contractor shall also be liable for any contributions, deductions, and withholdings that the subcontractor was required to forward to the State of California pursuant to the Unemployment Insurance Code on account of the performance of the labor and shall further be liable for any relief the Labor Commissioner could seek against the subcontractor for the subcontractor’s failure to obtain and maintain valid workers’ compensation coverage as required by law, which includes, but is not limited to, Section 3700.

(2) The direct contractor’s liability under this section shall extend ~~only~~ to any unpaid wage, fringe or other benefit payment or contribution, ~~including~~ payments owed to the State of California pursuant to the Unemployment Insurance Code, penalties, liquidated damages, and interest owed ~~but shall not extend to penalties or liquidated damages.~~ by the subcontractor on account of the performance of the labor.

(3) A direct contractor or any other person shall not evade, or commit any act that negates, the requirements of this section. This section does not prohibit a direct contractor or subcontractor at any tier from establishing by contract or enforcing any otherwise lawful remedies against a subcontractor it hires for liability created by the nonpayment of wages, fringe or other benefit payments, or contributions by that subcontractor or by a subcontractor at any tier working under that subcontractor.

(b) (1) The Labor Commissioner may enforce against a direct contractor the liability ~~for unpaid wages~~ created by subdivision (a) pursuant to Section 98 or 1197.1, or through a civil ~~action. The~~ action, and seek any relief against a direct ~~contractor’s liability shall be~~ contractor for its subcontractor’s failure to obtain valid workers’ compensation coverage as required by law, which includes, but is not limited ~~to unpaid wages, including any interest owed.~~ to, Section 3700.

(2) A third party owed fringe or other benefit payments or contributions on a wage claimant’s behalf may bring a civil action against a direct contractor to enforce the liability created by subdivision (a) in addition to penalties, liquidated damages, and interest as specified in subdivision (a). The court shall award a prevailing plaintiff in such an action its reasonable attorney’s fees and costs, including expert witness fees.

(3) A joint labor-management cooperation committee established pursuant to the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a) may bring an action in any court of competent jurisdiction against a direct contractor or subcontractor at any tier for unpaid wages owed to a wage claimant by the direct contractor or subcontractor for the performance of private work, including unpaid wages owed by the direct contractor, pursuant to subdivision (a). The court shall award a prevailing plaintiff in such an action its reasonable attorney’s fees and costs, including expert witness fees. Prior to commencement of an action against a direct contractor to enforce the liability created by subdivision (a), the committee shall provide the direct contractor and subcontractor that employed the wage claimant with at least 30 days’ notice by first-class mail. The notice need only describe the general nature of the claim and shall not limit the liability of the direct contractor or preclude subsequent amendments of an action to encompass additional wage claimants employed by the subcontractor.

(4) The Employment Development Department may enforce against a direct contractor, pursuant to the procedures in the Unemployment Insurance Code or through a civil action, the liability created by subdivision (a) for the subcontractor’s failure to make payments to the State of California required by the Unemployment Insurance Code.
~~(4)~~

(5) No other party may bring an action against a direct contractor to enforce the liability created by subdivision (a).

(c) Unless otherwise provided by law, property of the direct contractor may be attached, after trial, for the payment of any judgment received pursuant to this section.

(d) An action brought pursuant to this section shall be filed within one year of the earliest of the following:

(1) Recordation of the notice of completion of the direct contract, pursuant to Section 8182 of the Civil Code.

(2) Recordation of a notice of cessation of the work covered by the direct contract, pursuant to Section 8188 of the Civil Code.

(3) Actual completion of the work covered by the direct contract.

(e) This section does not apply to work performed by an employee of the state, a special district, a city, a county, a city and county, or any political subdivision of the state.

(f) (1) Upon request by a direct contractor to a subcontractor, the subcontractor and any lower tier subcontractors under contract to the subcontractor shall provide payroll records, which, at a minimum, contain the information set forth in subdivision (a) of Section 226, and which are payroll records as contemplated by Section 1174, of its employees who are providing labor on a private work, which payroll records shall be marked or obliterated only to prevent disclosure of an individual’s full social security number, but shall provide the last four digits of the social security number. The payroll records must contain information sufficient to apprise the requesting party of the subcontractor’s payment status in making fringe or other benefit payments or contributions to a third party on the employee’s behalf. The subcontractor and any lower tier subcontractors shall also provide records showing its reports and payments to the Employment Development Department.

(2) Upon request of a direct contractor to a subcontractor, the subcontractor and any lower tier subcontractors under contract to the subcontractor shall provide the direct contractor award information that includes the project name, name and address of the subcontractor, contractor with whom the subcontractor is under contract, anticipated start date, duration, and estimated journeymen and apprentice hours, and contact information for its subcontractors on the project.

(3) A subcontractor’s failure to comply with this subdivision shall not relieve a direct contractor from any of the obligations contained in this section.

(g) For purposes of this section, “direct contractor” and “subcontractor” have the same meanings as provided in Sections 8018 and 8046, respectively, of the Civil Code.

(h) Nothing in this section shall alter the owner’s obligation to timely pay a direct contractor as set forth in Sections 8800 and 8812 of the Civil Code, or a direct contractor’s obligation to timely pay a subcontractor as set forth in Section 7108.5 of the Business and Professions Code and Section 8814 of the Civil Code, or the penalties for failing to do so as set forth in Sections 8800 and 8818 of the Civil Code and Section 7108.5 of the Business and Professions Code, except that the direct contractor may withhold as “disputed” all sums owed if a subcontractor does not timely provide the information requested under paragraphs (1) and (2) of subdivision (f), until that information is provided.

(i) For any contract entered into on or after January 1, 2019, in order to withhold payments as disputed pursuant to subdivision (h), the direct contractor must specify, in its contract with the subcontractor, the specific documents and information that the direct contractor will require that the subcontractor provide under paragraphs (1) and (2) of subdivision (f). Subcontractors may include the same requirements in their contracts with lower tiered subcontractors and may withhold as disputed all sums owed if a lower tiered subcontractor does not provide the information requested under paragraphs (1) and (2) of subdivision (f), until that information is provided.

(j) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SECTION 1.Section 1 of the Health and Safety Code is amended to read:
1.
~~This act shall be known, and may be cited, as the Health and Safety Code.~~