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Section 6 of 7 · about 5% of the exam

California Public Works for Contractors: Prevailing Wage, Certified Payroll, and DIR Registration

Updated

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)):

  1. Put the required Labor Code sections in the subcontract.
  2. Review the subcontractor's certified payroll from time to time.
  3. Take corrective action, such as holding back funds.
  4. 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

Read the Section 6 study notes: Public Works

Practice questions

Think of your answer first, then open the explanation.

  1. Public Works

    1. Under Labor Code section 1770, who determines the prevailing wage rates that must be paid on California public works?

    • A. The Director of the Department of Industrial Relations
    • B. The awarding body that pays for the project
    • C. The local building trades union in each county
    • D. The Registrar of the Contractors State License Board
    Show answer

    Correct answer: A

    • A. The Director of the Department of Industrial Relations

      Correct answer

      Correct. Section 1770 says the Director of the Department of Industrial Relations determines the general prevailing rate of per diem (daily) wages.

    • B. The awarding body that pays for the project

      Wrong. The awarding body does not set the rates; it states the Director's rates in the bid papers or keeps them on file, and posts the Director's determination at each job site.

    • C. The local building trades union in each county

      Wrong. A union does not set the legal prevailing rate; the Director of the Department of Industrial Relations does.

    • D. The Registrar of the Contractors State License Board

      Wrong. The Contractors State License Board licenses contractors but does not set wages.

    Explanation

    Labor Code section 1770 says the Director of the Department of Industrial Relations determines the general prevailing rate of per diem (daily) wages. The awarding body does not set the rates; under section 1773.2 it states the Director's rates in the bid papers or keeps them on file, and it posts the Director's determination at each job site. A union does not set the legal rate, and the Contractors State License Board licenses contractors but does not set wages. A contractor may pay more than the prevailing rate, but never less.

    Sources

  2. Public Works

    2. On a public works job, 2 workers each worked 10 hours a day, Monday through Friday, for 50 hours in the week. The contractor paid them only straight time for every hour. Under Labor Code section 1813, what penalty does the contractor owe for this overtime violation?

    • A. $125
    • B. $250
    • C. $500
    • D. $2,000
    Show answer

    Correct answer: B

    • A. $125

      Wrong. $125 counts only one worker (5 days x $25), but there are 2 workers, so there are 10 worker-days.

    • B. $250

      Correct answer

      Correct. The penalty is $25 per worker per calendar day: 2 workers x 5 days = 10 worker-days, and 10 x $25 = $250.

    • C. $500

      Wrong. $500 charges $25 for each overtime hour (20 hours) instead of each calendar day the worker worked overtime.

    • D. $2,000

      Wrong. $2,000 uses $200, the maximum daily penalty under section 1775 for underpaying prevailing wages, instead of the $25 overtime penalty under section 1813.

    Explanation

    Labor Code section 1813 sets a fixed penalty of $25 for each worker for each calendar day the worker is required or permitted to work more than 8 hours in a day and 40 hours in a week in violation of the overtime rules. Step 1: Each worker worked over 8 hours on 5 days, in a 50-hour week. Step 2: 2 workers x 5 days = 10 worker-days. Step 3: 10 x $25 = $250. $125 counts only one worker. $500 charges $25 for each overtime hour instead of each day (2 workers x 10 overtime hours = 20 hours; 20 x $25 = $500). $2,000 uses $200, the maximum daily penalty under section 1775 for underpaying prevailing wages. The contractor must also pay the unpaid overtime wages.

    Sources

  3. Public Works

    3. A contractor is hired for a $20,000 public works project to repair a city building. It has no other public works jobs. Under the Labor Code, must it register with the Department of Industrial Relations (DIR), and must it pay prevailing wages?

    • A. It must register, and it must pay prevailing wages
    • B. It must register, but it need not pay prevailing wages
    • C. It need not register, but it must pay prevailing wages
    • D. It need not register, and it need not pay prevailing wages
    Show answer

    Correct answer: C

    • A. It must register, and it must pay prevailing wages

      Wrong. DIR registration does not apply to a repair project of $25,000 or less, so this $20,000 job does not require registration.

    • B. It must register, but it need not pay prevailing wages

      Wrong on both points. Registration is not required for a repair project of $25,000 or less, and section 1771 requires prevailing wages on public works over $1,000.

    • C. It need not register, but it must pay prevailing wages

      Correct answer

      Correct. This $20,000 repair job fits the registration exception for projects of $25,000 or less, but section 1771 still requires prevailing wages on public works over $1,000.

    • D. It need not register, and it need not pay prevailing wages

      Wrong. Fitting the registration exception does not remove the wage duty, because section 1771 requires prevailing wages on public works projects over $1,000.

    Explanation

    Labor Code section 1725.5 says DIR registration does not apply to work on a public works project of $25,000 or less for construction, alteration, demolition, installation, or repair work. This $20,000 repair job is under that limit, so the contractor need not register. But Labor Code section 1771 requires prevailing wages on public works projects over $1,000, so the workers must still get at least the prevailing wage. The two dollar limits are different, so fitting the registration exception does not remove the wage duty.

    Sources

  4. Public Works

    4. The Labor Commissioner sends a public works subcontractor a written request for its certified payroll records. Under Labor Code section 1776, how soon must the subcontractor file a certified copy of the records?

    • A. Within 5 days after it receives the request
    • B. Within 10 days after it receives the request
    • C. Within 30 days after it receives the request
    • D. Within 60 days after it receives the request
    Show answer

    Correct answer: B

    • A. Within 5 days after it receives the request

      Too short. Section 1776 gives 10 days after receipt of the written request, not 5.

    • B. Within 10 days after it receives the request

      Correct answer

      Correct. A contractor or subcontractor must file a certified copy of the payroll records with the requesting entity within 10 days after receiving a written request.

    • C. Within 30 days after it receives the request

      Too long. The deadline is 10 days; 30 days comes from other public works rules, not this one.

    • D. Within 60 days after it receives the request

      Too long. The deadline is 10 days; 60 days comes from other public works rules, not this one.

    Explanation

    Labor Code section 1776 says a contractor or subcontractor must file a certified copy of its payroll records with the entity that asked for them within 10 days after it receives a written request. If it is late, it owes a penalty for each day and for each worker until it complies. Five days is shorter than the law requires. The 30-day and 60-day periods come from other public works rules, such as the monthly electronic payroll reports and the time to ask for review of a penalty assessment.

    Source

  5. Public Works

    5. A general contractor signs a $25,000 public works contract with a city. It will employ carpenters, and carpentry is an apprenticeable trade. Under Labor Code section 1777.5, must it employ apprentices on this contract?

    • A. No, because the contract is less than $30,000
    • B. No, because apprentices are needed only on federal projects
    • C. Yes, because the contract is more than $1,000
    • D. Yes, because carpentry is an apprenticeable trade
    Show answer

    Correct answer: A

    • A. No, because the contract is less than $30,000

      Correct answer

      Correct. Labor Code section 1777.5 does not apply to a general contractor's contract of less than $30,000, and this $25,000 contract is under that limit.

    • B. No, because apprentices are needed only on federal projects

      Wrong. The apprentice rules in section 1777.5 are California rules for state and local public works, not rules only for federal projects.

    • C. Yes, because the contract is more than $1,000

      Wrong. $1,000 is the limit for prevailing wages under section 1771, not for apprentices; section 1777.5 does not apply to a general contractor's contract under $30,000.

    • D. Yes, because carpentry is an apprenticeable trade

      Wrong. Carpentry being an apprenticeable trade matters only when the contract is large enough, and this $25,000 contract is below the $30,000 limit.

    Explanation

    Labor Code section 1777.5 does not apply to a general contractor's contract of less than $30,000. This $25,000 contract is under that limit, so the apprentice rules in that section do not apply. The $1,000 figure is the limit for prevailing wages under section 1771, so the contractor must still pay prevailing wages, but it is not the limit for apprentices. Carpentry being an apprenticeable trade matters only when the contract is large enough. The apprentice rules are California rules for state and local public works, not only for federal projects.

    Sources