On a California public works project, every worker must be paid at least the prevailing wage set by the Director of Industrial Relations (Lab. Code §1770). Projects of $1,000 or less are exempt (§1771). Most contractors must also register with the Department of Industrial Relations (DIR) and keep certified payroll records.
CSLB puts Public Works, Section 6 of the Law and Business exam, at about 5% of the exam. It lists three subtopics (prevailing wage, bonding and insurance requirements) and names the DIR Public Works Manual as a study resource (CSLB study guide). CSLB does not say how many questions that is. See also our Public Works notes.
What counts as public works
The main definition is construction, alteration, demolition, installation or repair work done under contract and paid for in whole or in part out of public funds (Lab. Code §1720(a)(1)).
- "Construction" includes preconstruction work such as inspection and land surveying, and postconstruction cleanup at the jobsite (§1720(a)(1)).
- "Public funds" is not only cash. Fees or loans that a public agency waives, reduces or forgives count, and so does an asset transferred for less than fair market price (§1720(b)).
- Private residential projects built on private property are not covered, unless built under an agreement with a state agency, a redevelopment or successor agency, or a local public housing authority (§1720(c)(1)).
- A small public subsidy does not turn a private project into public works. For most projects, "small" means less than $600,000 and less than 2% of the total project cost (§1720(c)(3)).
The prevailing wage rule covers only work done under contract, including maintenance contracts, not a public agency's own employees (§1771).
Prevailing wage: who sets it and what it includes
The Director of Industrial Relations sets the general prevailing rate of per diem wages. A contractor may pay more, never less (Lab. Code §1770). The prime contractor and every subcontractor must pay at least the specified rates to all workers on the contract (§1774).
The rate starts with the basic hourly rate paid to a majority of workers in that craft in the locality, or else the most common (modal) rate (Lab. Code §1773.9). Employer payments such as health and welfare, pension, vacation, travel and subsistence are part of the rate too (§1773.1(a)).
The awarding body must state the rates, or that they are on file at its office, in the bid papers and contract, and post the Director's determination at each job site (Lab. Code §1773.2).
Hours and overtime
Eight hours is a legal day's work on public work. Work is limited to 8 hours a day and 40 hours a week (Lab. Code §1810, §1811) unless the extra hours are paid at no less than 1½ times the basic rate of pay (§1815). A wage determination can set a lower overtime trigger, such as 7 hours a day or 35 a week (Public Works Manual §4.1.6).
Apprentices
A contractor that employs workers in an apprenticeable craft or trade on a public works contract must employ apprentices at the required ratio (Lab. Code §1777.5(d)):
- Ratio: at least 1 hour of apprentice work for every 5 hours of journeyman work (§1777.5(g)).
- Counting: journeyman hours over 8 a day or 40 a week do not count toward the ratio (§1777.5(h)).
- Before work starts: send contract award information to an apprenticeship program that can supply apprentices to the site (§1777.5(e)).
- Within 60 days after the work ends: send a verified statement of journeyman and apprentice hours to the apprenticeship program, and to the awarding body if it asks (§1777.5(e)).
- Who counts as an apprentice: only a registered apprentice in an approved program, with a written apprentice agreement, earns the apprentice rate (§1777.5(c)).
- Small contracts: these rules do not apply to contracts under $30,000 of a general contractor, or of a specialty contractor bidding directly rather than through a general or prime contractor (§1777.5(o)).
Certified payroll
Each contractor and subcontractor must keep accurate payroll records for each worker on the job (Lab. Code §1776(a)). The records show:
- name, address and social security number;
- work classification;
- straight-time and overtime hours worked each day and week;
- actual per diem wages paid.
The records are "certified" because each one contains, or is verified by, a written declaration under penalty of perjury that the information is true and correct and that the employer has complied with the prevailing wage and overtime rules (§§1771, 1811 and 1815) (§1776(a)).
| Duty | Deadline | Source |
|---|---|---|
| Send certified payroll electronically to the Labor Commissioner | At least once every 30 days while work is going on, and within 30 days after the last day of work | §1771.4(a)(3) |
| File a certified copy after a written request | Within 10 days after receiving the request | §1776(d), (h) |
| Tell the awarding body that the records have moved | Within 5 working days | §1776(g) |
| Keep records on a small project that needs no DIR registration | At least 3 years after the work is completed | §1771.4(a)(4) |
DIR registration
A contractor or subcontractor must be registered with DIR to bid on a public works contract, to be listed in a bid, or to work on one (Lab. Code §1725.5, §1771.1(a)). To register, it must show workers' compensation coverage, a contractor's license if one is needed, no unpaid back-wage liability, and that it is not debarred. It also must not have bid or worked on public works unregistered in the past 12 months. That bar is waived if the contractor has no other such violation in the preceding 12 months and pays an extra $2,000 penalty registration fee (§1725.5(a)(2)).
Registration is renewed every year on or before July 1, or up to three years at a time by prepaying the fees (§1725.5(a)(1)). The DIR Director sets the fees and posts them on DIR's website; the statute sets no fixed fee, but fees above $800 require formal rulemaking (§1725.5(a)(1)(A)). If a renewal was missed by mistake, the contractor can renew retroactively within 90 days by paying a penalty equal to the renewal fee (§1725.5(c)).
Small-project exemption: registration is not required on a project of $25,000 or less for construction, alteration, demolition, installation or repair, or $15,000 or less for maintenance (§1725.5(f), §1771.1(n)). Prevailing wage still applies above $1,000 (§1771).
Penalties
| Violation | Penalty | Source |
|---|---|---|
| Paying less than the prevailing wage | Up to $200 per worker per calendar day. The minimum is $40 unless it was a good-faith mistake that was promptly corrected, $80 if penalties were assessed on another contract in the past 3 years, or $120 if willful. The underpaid wages must also be paid to the worker | §1775(a) |
| Overtime violation | $25 per worker per calendar day | §1813 |
| Certified payroll not sent within 10 days of a written request | $100 per worker per calendar day until it is sent | §1776(h) |
| Electronic payroll not sent to the Labor Commissioner | $100 per day, up to $5,000 per project. No penalty until the records are 14 days late | §1771.4(a)(3) |
| Working while unregistered | $100 per day, up to $8,000, plus a stop order | §1771.1(g), (j) |
| Hiring an unregistered subcontractor | $100 per day, up to $10,000 | §1771.1(h) |
| Knowingly breaking the apprentice rules | Up to $100 per full calendar day; up to $300 per day for a knowing repeat within 3 years that results in required apprentice training not being provided | §1777.7(a) |
| Violating the law with intent to defraud | Barred from public works for 1 to 3 years | §1777.1(a) |
A prime contractor is not liable for a subcontractor's wage penalties unless it knew of the underpayment or failed to take four steps (Lab. Code §1775(b)):
- Put the required Labor Code sections in the subcontract.
- Review the subcontractor's certified payroll from time to time.
- Take corrective action, such as holding back funds.
- Get an affidavit of payment before making final payment.
Bonds and insurance on public works
- Payment bond: required of a direct contractor on a public works contract over $25,000, given before work starts. Contracts with a state entity follow a separate rule (Civ. Code §9550). It must be at least 100% of the contract amount, from an admitted surety insurer; a cash deposit cannot replace it (§9554).
- Bid security for cities: at least 10% of the bid. It can be cash, a cashier's or certified check, or a bidder's bond (Pub. Contract Code §20170, §20171).
- Performance bond for counties: the winning bidder on a county construction contract must give a bond for faithful performance (Pub. Contract Code §20129(b)).
- Workers' compensation: every public works contract must include a workers' compensation clause (Lab. Code §1860). Before starting work, the contractor files a signed certification with the awarding body that it will comply (§1861). See our workers' compensation guide.
Where getting paid works differently
On a public works project, an unpaid subcontractor, supplier or laborer can give a stop payment notice to the public entity or claim against the payment bond; the direct contractor cannot (Civ. Code §9100). A stop payment notice is due within 30 days after a notice of completion, acceptance or cessation is recorded, or 90 days after cessation or completion if none is recorded (§9356). For preliminary notice and private-job liens, see our mechanics lien deadlines guide.
Sources
- CSLB Law and Business Examination Study Guide
- DIR Public Works Manual (October 2023)
- California Labor Code sections 1720, 1725.5, 1770, 1771, 1771.1, 1771.4, 1773.1, 1773.2, 1773.9, 1774, 1775, 1776, 1777.1, 1777.5, 1777.7, 1810, 1811, 1813, 1815, 1860, 1861
- California Civil Code sections 9100, 9356, 9550, 9554
- California Public Contract Code sections 20129, 20170, 20171