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"Other" in California Prevailing Wage Creeps Higher

The California Department of Industrial Relations does not determine state prevailing wage rates for construction trades by surveying contractors or workers or by using statistics gathered by the California Economic Development Department. By law, the state uses union agreements to set prevailing wages. Thus, the prevailing wage is always the “union wage.” And the geographical region of a prevailing wage is based on the jurisdictional boundaries of the relevant union.

Calculating a prevailing wage starts when a union official provides the Department of Industrial Relations with its master labor agreement negotiated with representatives of contractors signatory to the union. State personnel then review the union agreement and identify all of the payments an employer is required to make per hour worked by an employee represented by the union. Those payments are assigned to categories identified in state law and added up to determine the prevailing wage.

For example, the state calculates the prevailing wage for a inside wireman electrician working in Sacramento County by identifying and adding up all the payments made by a National Electrical Contractors Association (NECA) contractor per hour worked by an inside wireman represented by the International Brotherhood of Electrical Workers (IBEW) Local No. 340.

A prevailing wage determination includes a “Basic Hourly Rate” paid directly to the employee (from which union initiation fees and dues are deducted). Fringe benefits are categorized as “Health and Welfare,” “Pension,” “Apprenticeship and Other Training,” and “Vacation/Holiday.” There is also a Travel/Subsistence amount for workers who travel a certain distance from a certain location, as indicated in the master labor agreement.

Sacramento County Inside Wireman Prevailing Wage

Then there is the mysterious “Other,” comprised of payments to “worker protection and assistance programs or committees,” “industry advancement and collective bargaining agreements administrative fees,” and “other purposes” similar to those listed above. Basically, employer payments in master labor agreements that don’t fit in one of the direct employee fringe benefit categories get classified as “Other.”

“Other” was added to prevailing wage determinations on January 1, 2004 after the soon-to-be-recalled Governor Gray Davis signed the union-backed Senate Bill 868 in 2003. Union lobbyists and lawyers are very protective of this new category incorporated in prevailing wage rates and fought an effort in 2006 to impose regulations on it.

Federal and state law do not establish any specific regulations or reporting requirements for the trust funds that receive payments indicated in “Other.” Most of them file an annual Form 990 with the Internal Revenue Service, and they will file a Fair Political Practices Commission (FPPC) form when making a campaign contribution to a ballot measure. But union members are not informed about how these trust funds spend money, and these trust funds don’t need to file any reports with the federal Office of Labor-Management Standards (OLMS) or Federal Mediation and Conciliation Service (FMCS).

Sacramento County Inside Wireman Prevailing Wage - OtherDuring the past 16½ years, a little bit of taxpayer money has been diverted to these union-affiliated “Other” trust funds as workers represented by unions built government facilities and private developments with government funding. But now that “little bit” is becoming “quite a bit” in some cases.

On June 1, 2014, the master labor agreement for inside wiremen electricians in Sacramento County (and surrounding counties in the IBEW Local No. 340) increased Other from 47 cents to $3.47. On June 1, 2015, Other increased to $5.47. On June 1, 2016, Other increased to $7.47. The union informed the California Department of Industrial Relations that the money was going to “LMCT,” meaning a Labor-Management Cooperation Committee.

Sacramento County Inside Wireman Prevailing Wage LMCT Increase 2014IBEW Local 340 Wages as of June 1 2015Provisions in the IBEW Local No. 340 master labor agreement suggest this LMCC is the Sacramento Electrical Construction Industry Labor-Management Cooperation Committee. Gross receipts for this trust fund from June 1, 2014 to May 31, 2015 totaled $2,420,684. It gave a “distress grant” of $107,946 to the Shasta Butte Electrical Workers Training Fund. (94-2584061). It was also somehow “providing wage supplementation” to union employers to compete against non-union employers, perhaps through a program sometimes referred to as “job targeting.” No other specific expenditures are known.

Obviously “Other” is becoming a taxpayer-funded bonanza of millions of dollars to union-affiliated non-profit organizations that provide little information to union members, government, or the public. Consider the number of trades and the number of unions representing these trades in California. How much is being collected for “Other?” How is it being spent? Shouldn’t union members know where that money goes?

More relevant for the general public is knowing how much of that money goes to lobbying and campaigning. The California Department of Industrial Relations is supposed to exclude employer payments for political purposes from prevailing wage determinations. Perhaps the state needs to begin scrutinizing the expenditures of “Other” trust funds receiving $7.47 per hour on behalf of each worker.

Sources

International Brotherhood of Electrical Workers Local 340 Master Labor Agreement 2014-2017

International Brotherhood of Electrical Workers Local 340 Wage Rates as of June 1, 2015

California Prevailing Wage for Inside Wiremen Electricians in Sacramento County as of February 22, 2016 (before $2.00 increase June 1, 2016 for Other)

Sacramento Electrical Construction Industry LMCC Trust – IRS Form 990 – 2015

Sacramento Electrical Construction Industry LMCC Trust – IRS Form 990 – 2014

Sacramento Electrical Construction Industry LMCC Trust – IRS Form 990 – 2013

Sacramento Electrical Construction Industry LMCC Trust – IRS Form 990 – 2012

Sacramento Electrical Construction Industry LMCC Trust – IRS Form 990 – 2011

Sacramento Electrical Construction Industry LMCC Trust – IRS Form 990 – 2010

International Brotherhood of Electrical Workers (IBEW) Local 340 USDOL LM-2 2015

International Brotherhood of Electrical Workers (IBEW) Local 340 USDOL LM-2 2014

International Brotherhood of Electrical Workers (IBEW) Local 340 USDOL LM-2 2013

International Brotherhood of Electrical Workers (IBEW) Local 340 USDOL LM-2 2012

International Brotherhood of Electrical Workers (IBEW) Local 340 USDOL LM-2 2011

International Brotherhood of Electrical Workers (IBEW) Local 340 USDOL LM-2 2010

 


Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

Unions Await Fantastic Return on High-Speed Rail Political Investments

It’s a heady time to be a top construction union official in California, as the California High-Speed Rail Authority presumably now holds proposals from as many as five design-build consortiums to build the first segment of the $68 billion project.

If this project moves forward, it will become part of the pantheon of huge American infrastructure projects that unions cite when they brag about the lasting accomplishments of union labor. And unions can also claim an essential role in the politics behind its advancement.

Even before Californians had a chance to vote directly on funding for High-Speed Rail, union-affiliated labor-management cooperation committees made massive campaign contributions to stop statewide ballot initiatives in the mid-2000s that would have given property owners stronger rights against the government’s power of eminent domain, as a result complicating the High-Speed Rail Authority’s land acquisition plans.

For example, the State Building & Construction Trades Council Labor Management Cooperation Trust contributed $1 million in 2006 to the campaign to defeat Proposition 90, a statewide ballot measure to strengthen property rights. And in the spring of 2008, the California Construction Industry Labor-Management Cooperative Trust contributed $250,000 to this No on 98/Yes on 99 campaign committee to oppose another statewide ballot measure to protect property rights.

These two union-affiliated committees are authorized under the obscure Labor-Management Cooperation Act of 1978, a federal law signed by President Jimmy Carter and implemented by the Federal Mediation and Conciliation Service. There are no federal or state regulations specifically addressed toward these trusts, and these trusts do not have any reporting requirements to the U.S. Department of Labor’s Office of Labor-Management Standards. Unions use these trust funds routinely now to fund campaigns for and against state and local ballot measures in California. 

When Proposition 1A was on the November 2008 ballot asking California voters to authorize borrowing $10 billion for the high-speed rail project by selling bonds, unions provided a substantial portion of the campaign funding. Leading the charge was the California Alliance for Jobs, another labor-management cooperation committee authorized under the Labor-Management Cooperation Act of 1978.

As shown in the Operating Engineers Local 3 Northern California Master Agreement (page 42) and the Northern California District Council of Laborers Master Agreement (pages 14, 26), construction companies belonging to various business trade associations must pay an amount to the California Alliance for Jobs trust based on the number of hours worked by each employee represented by the union. These amounts are incorporated into the state-mandated construction wage rates (so-called “prevailing wages”) as part of the “Other” category of payments. This ambiguous category of employer payments was implemented as California Labor Code Section 1773.1(a)(7-9) when Governor Gray Davis signed Senate Bill 868 in 2003.

Through contributions, a $100,000 loan, and in-kind/non-monetary gifts, the California Alliance for Jobs was able to assist the campaign to pass Proposition 1A with $616,500, comprising 23% of the total amount raised by Californians for High Speed Trains – Yes on Proposition 1A – A Coalition of Taxpayer, Business, Environmental and Labor Groups and People from Across California Tired of Being Stuck In Traffic.

The national headquarters and the Northern California and Southern California locals of the Operating Engineers union combined for another $575,000, the Laborers union chipped in $100,000, and the State Building and Construction Trades Council of California gave $75,000. 

Top Ten Contributors to the Main Campaign Committee to Pass Proposition 1A (Includes Loans and Non-Monetary/In-Kind Contributions)

1

California Alliance For Jobs Rebuild California Committee

Union-Affiliated Labor-Management Cooperation Committee

$616,500

2

International Union of Operating Engineers Construction Union

$250,000

3

Operating Engineers Local Union No. 3 (Union & PAC) Construction Union

$250,000

4

Professional Engineers in California Government (PECG) Public Employee Union

$183,493

5

California State Council of Laborers Construction Union

$100,000

6

Parsons Brinckerhoff Americas Inc. Construction Design & Engineering

$76,500

7

AECOM Tech Corporation Construction Design & Engineering

$75,000

8

International Union of Operating Engineers Local No. 12 Construction Union

$75,000

9

Members Voice of the State Building Trades Construction Union

$75,000

10

HNTB Corporation Construction Design & Engineering

$63,000

Union involvement in pushing the high-speed rail wasn’t over with the 2008 election. In 2010 and 2011, when the California High-Speed Rail Authority was stumbling under a confused business plan and skyrocketing cost estimates, the head of the State Building and Construction Trades Council of California and regional building trade unions submitted commentaries to newspapers defending the planned rail program. And as appointees to the Board of Directors of the California High-Speed Rail Authority, the head of the State Building and Construction Trades Council of California and a representative of the Operating Engineers union kept the votes coming to move the project forward.

Now the unions get the rewards. Section 7.11.3 of the Request for Proposal for Design-Build Services for the first segment of the California High-Speed Rail project stated that “Proposers are advised that, subject to FRA [Federal Railroad Administration] approval, the Authority intends to develop a Community Benefits Agreement consistent with the Community Benefits Policy adopted by the CHSRA [California High-Speed Rail Authority] Board at its December 6, 2012 meeting with which the Contractor will be required to comply.”

And Section 10.1 of the Request for Proposal states that “The Authority [that is, the California High-Speed Rail Authority CEO Jeff Morales] will not make a recommendation for award of the Contract [to the California High-Speed Rail Authority Board of Directors] unless the successful selected Proposer has submitted the following…A letter of assent executed by the Proposer agreeing to be bound by the Community Benefits Agreement.”

This “Community Benefit Agreement” is commonly known as a “Project Labor Agreement.” In fact, a “draft” Project Labor Agreement is included as Addendum 8 in the High Speed Rail Authority’s bid documents for the Request for Proposal. (See my comprehensive analysis of the union “Community Benefits Agreement” for the California High-Speed Rail and the subsequent rebuttal from the Building and Construction Trades Department, AFL-CIO national headquarters.)

For construction unions, California’s High-Speed Rail project will yield a fantastic long-term return for their political investment. It remains to be seen if taxpayers see any worthwhile returns on their “investment” in paying for it.

Kevin Dayton is the President and CEO of Labor Issues Solutions, LLC and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.