Study guide · Law & Business · Public Works
Public Works: Prevailing Wage, Apprentices and Bonds
About 44 minutes · 7 sections
What this guide covers
Public works is a different set of rules sitting on top of the job you already know how to build. Nothing about the construction changes. What changes is that a wage rate is set for you, a payroll record is owed whether or not anyone asks, an apprentice request has a clock on it, and a bond has to exist before you start. The first question is the one most worth getting right: whether the job is public works at all. It does not take a government building — work paid for in whole OR IN PART out of public funds counts, and a private development carrying a large enough public subsidy is inside the chapter. The second question is what your subcontractors expose you to. The prevailing wage penalty runs per worker per day, and a prime contractor is on the hook for a sub's underpayment unless it did four specific things, three of which had to happen before the problem appeared.
Key terms
- Public works
- Construction, alteration, demolition, installation or repair work done under contract and paid for in whole or in part out of public funds. The 'in part' half is what catches private projects. The prevailing wage duty also reaches contracts let for maintenance work.
- Prevailing wage
- The general prevailing rate of per diem wages for work of a similar character in the locality, as determined by the Director of Industrial Relations. It is a floor, not a target.
- Per diem wages
- More than the basic hourly rate. It includes employer payments for health and welfare, pension, vacation, travel, subsistence and apprenticeship or training programs.
- Certified payroll record
- The payroll record every contractor and subcontractor must keep on public works, showing six things per worker: name, address, social security number, work classification, straight-time and overtime hours each day and week, and actual per diem wages paid.
The rules the exam tests
11 rules · 8 minWhat is a public work
A privately owned project counts as public works when public funds pay any part.
For purposes of the prevailing wage chapter, public works is construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds. Exception: work a public utility company does directly under an order of the Public Utilities Commission or other public authority. Even so, construction, alteration, demolition, installation, or repair work on the electric transmission system located in California is a public works project for purposes of the chapter.
On the job
Read 'or in part' as the operative words. A job does not have to be a government building to be public works; a privately owned project carrying public money in it can be. That is the question to ask before anything else on this topic, because every other duty here follows from the answer.
Exact wording
For purposes of the prevailing wage chapter, 'public works' means construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds, except work done directly by a public utility company pursuant to an order of the Public Utilities Commission or other public authority. Notwithstanding that public-utility exception, construction, alteration, demolition, installation, or repair work on the electric transmission system located in California is a public works project for purposes of the chapter.
Public funds means any one of six acts by the state or a political subdivision.
Under Section 1720, "paid for in whole or in part out of public funds" means any one of six acts by the state or a political subdivision: paying money or its equivalent directly to or on behalf of the public works contractor, subcontractor, or developer; performing construction work on the project itself; transferring an asset of value for less than fair market price; paying, reducing, charging at less than fair market value, waiving, or forgiving fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations normally required to carry out the contract; lending money that is repaid on a contingent basis; or applying credits against repayment obligations owed to it.
On the job
Public money is not only a check: waived permit fees, land sold below market, a contingently repayable loan, or the city doing part of the work itself all count, so a developer who received no cash can still be inside the chapter.
Exact wording
For purposes of section 1720, 'paid for in whole or in part out of public funds' means any of six things: the payment of money or the equivalent of money by the state or a political subdivision directly to or on behalf of the public works contractor, subcontractor, or developer; performance of construction work by the state or political subdivision in execution of the project; transfer by the state or political subdivision of an asset of value for less than fair market price; fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations that would normally be required in the execution of the contract, that are paid, reduced, charged at less than fair market value, waived, or forgiven by the state or political subdivision; money loaned by the state or political subdivision that is to be repaid on a contingent basis; and credits applied by the state or political subdivision against repayment obligations to it.
Private homes on private land stay outside the prevailing wage chapter.
Public funding alone never brings a private residential project on private property into the chapter. The chapter applies only if the project is built under an agreement with a state agency, a redevelopment agency, a successor agency to a redevelopment agency when acting in that capacity, or a local public housing authority.
On the job
For private housing on private land the trigger is the agreement, not the money: without an agreement with one of the named agencies the chapter does not attach, however the project was financed.
Exact wording
Notwithstanding the definition of public funds, private residential projects built on private property are not subject to the prevailing wage chapter unless the projects are built pursuant to an agreement with a state agency, a redevelopment agency, a successor agency to a redevelopment agency when acting in that capacity, or a local public housing authority.
Five listed housing conditions each exempt privately owned residential projects from the prevailing wage chapter.
The exemption does not apply if the public funding program itself requires otherwise. It covers construction or rehabilitation of privately owned residential projects, and any one of these five is enough. One: self-help housing where the home buyers perform at least 500 hours of the construction work on the homes. Two: rehabilitation or expansion of a facility operated on a not-for-profit basis as temporary or transitional housing for homeless persons, with total project cost less than $25,000. Three: mortgage assistance, downpayment assistance, or rehabilitation of a single-family home provided to a household. Four: new construction, expansion, or rehabilitation of a facility a nonprofit develops to operate on a not-for-profit basis as emergency or transitional shelter and services for homeless adults and children, where the nonprofit provides at no profit at least 50 percent of total project cost from nonpublic sources; real property transferred or leased is excluded, and donated labor, materials, and architectural and engineering services count in total project cost. Five: public participation consisting of below-market interest rate loans for a project where occupancy of at least 40 percent of the units is restricted, by deed or regulatory agreement, for at least 20 years to individuals or families earning no more than 80 percent of the area median income.
On the job
Five housing-program shapes escape the chapter regardless of the de minimis arithmetic; the figures — 500 hours, $25,000, 50 percent, 40 percent of units for 20 years, 80 percent of area median income — are what a question would hang on.
Exact wording
Unless otherwise required by a public funding program, the construction or rehabilitation of privately owned residential projects is not subject to the chapter if any one of five conditions is met: a self-help housing project in which no fewer than 500 hours of construction work associated with the homes are to be performed by the home buyers; rehabilitation or expansion work on a facility operated on a not-for-profit basis as temporary or transitional housing for homeless persons, with a total project cost of less than $25,000; assistance provided to a household as mortgage assistance, downpayment assistance, or for the rehabilitation of a single-family home; new construction, expansion, or rehabilitation of a facility developed by a nonprofit organization to be operated on a not-for-profit basis as emergency or transitional shelter and services for homeless adults and children, where the nonprofit provides at no profit not less than 50 percent of the total project cost from nonpublic sources (excluding real property transferred or leased, and counting donated labor, materials, and architectural and engineering services in total project cost); or public participation that consists of below-market interest rate loans for a project in which occupancy of at least 40 percent of the units is restricted for at least 20 years, by deed or regulatory agreement, to individuals or families earning no more than 80 percent of the area median income.
Construction covers the survey crew before the job and the cleanup crew after it.
Construction includes work in the design, site assessment, feasibility study and other preconstruction phases, including inspection and land surveying, even if no further construction work follows, and it includes postconstruction phases, including all cleanup work at the jobsite.
On the job
The chapter reaches further at both ends than the word 'construction' suggests. Survey work that never leads to a build is still inside it, and so is the final cleanup crew. Those are the two crews most likely to be paid off the prevailing wage rate by a contractor who thinks the job has not started or has already finished.
Exact wording
For that definition, 'construction' includes work performed during the design, site assessment, feasibility study and other preconstruction phases — including inspection and land surveying — regardless of whether any further construction work is conducted, and work performed during postconstruction phases including all cleanup work at the jobsite.
A subsidy must be under $600,000 and under 2 percent to leave the project private.
An otherwise private development project does not become public works when the state or a political subdivision reimburses the developer for costs the public would normally bear, or provides, directly or indirectly, a de minimis public subsidy. A subsidy is de minimis only if it is both less than $600,000 and less than 2 percent of total project cost. For a project consisting entirely of single-family dwellings, less than 2 percent of total project cost is enough. The de minimis rule does not apply to a project advertised for bid, or a contract awarded, before July 1, 2021.
On the job
Both limbs must be satisfied, which is where this gets missed. A $500,000 subsidy on a $10 million project clears the dollar figure and fails the percentage, so the project is public works. Reimbursement of costs the public would normally bear is a separate ground with no dollar cap — it is not a subsidy at all.
Exact wording
If the state or a political subdivision reimburses a private developer for costs that would normally be borne by the public, or provides directly or indirectly a public subsidy to a private development project that is de minimis in the context of the project, an otherwise private development project does not thereby become subject to the chapter. A public subsidy is de minimis only if it is BOTH less than six hundred thousand dollars ($600,000) AND less than 2 percent of the total project cost; for a project that consists entirely of single-family dwellings it is de minimis if it is less than 2 percent of the total project cost. The de minimis rule does not apply to a project advertised for bid, or a contract awarded, before July 1, 2021.
On an all-single-family project, a public subsidy under 2 percent of project cost is de minimis.
This rule applies only when the project consists entirely of single-family dwellings. The public subsidy is de minimis if it is less than 2 percent of the total project cost. That single test replaces the general de minimis test.
On the job
One limb instead of two for this project type: the $600,000 dollar figure drops out entirely, and only the 2 percent test remains. That makes a large subsidy survivable on an all-single-family project in a way it would not be on a mixed one — so the composition of the development decides which test applies before the arithmetic starts.
Exact wording
Notwithstanding the general de minimis test, a public subsidy for a project that consists entirely of single-family dwellings is de minimis if it is less than 2 percent of the total project cost.
Agency-required public improvement work is public works. The private project behind it is not.
The state or a political subdivision requires a private developer to perform construction, alteration, demolition, installation, or repair on a public work of improvement as a condition of regulatory approval of an otherwise private development project. Only that improvement work falls under the prevailing wage chapter, and only if the agency contributes no more money, or the equivalent of money, to the overall project than performing that improvement work requires, and the agency keeps no proprietary interest in the overall project.
On the job
This is the partial-coverage case, and it is common in residential development: the offsite street, sewer or signal work is public works and the houses behind it are not. Both conditions must hold — a separate public contribution toward the housing itself, or a public stake in the project, takes the whole project out of the partial-coverage rule.
Exact wording
If the state or a political subdivision requires a private developer to perform construction, alteration, demolition, installation, or repair work on a public work of improvement as a condition of regulatory approval of an otherwise private development project, and the state or political subdivision contributes no more money, or the equivalent of money, to the overall project than is required to perform that public improvement work, and maintains no proprietary interest in the overall project, then only the public improvement work becomes subject to the prevailing wage chapter.
Pay the prevailing wage on every public works contract over $1,000.
The duty covers contract work only, including maintenance contracts — not work a public agency does with its own forces. Pay every worker at least the general prevailing rate of per diem wages for work of a similar character in the locality, and at least the general prevailing rate for holiday and overtime work. Projects of $1,000 or less are exempt.
On the job
The exemption is small enough to be a trap rather than a relief — a thousand dollars is a half-day of work for a small crew. Note that the holiday and overtime rates are separately determined; paying the straight-time prevailing rate and your own overtime multiplier is not compliance.
Exact wording
Except for public works projects of one thousand dollars ($1,000) or less, not less than the general prevailing rate of per diem wages for work of a similar character in the locality must be paid to all workers employed on public works, and not less than the general prevailing rate for holiday and overtime work. The section applies only to work performed under contract, not to work a public agency carries out with its own forces, and it applies to contracts let for maintenance work.
The call for bids must state that the Department of Industrial Relations monitors the project.
The contract documents must carry that statement as well, naming compliance monitoring and enforcement, on every public works project subject to the chapter. The Labor Commissioner may exempt a project from all or part of these requirements on either of two grounds: the awarding body has enforced an approved labor compliance program on all public works under its authority continuously since December 31, 2011, or the awarding body has entered into a collective bargaining agreement that binds all contractors performing work on the project and includes a mechanism for resolving disputes about the payment of wages.
On the job
Monitoring is the default rather than an escalation, and the contract says so before anyone bids. A contractor who treats certified payroll as something to produce if asked has misread which agency is already watching.
Exact wording
On public works projects subject to the chapter, the call for bids and the contract documents must specify that the project is subject to compliance monitoring and enforcement by the Department of Industrial Relations. The Labor Commissioner may exempt a project from all or part of these requirements where the awarding body has enforced an approved labor compliance program on all public works under its authority continuously since December 31, 2011, or has entered into a collective bargaining agreement that binds all contractors performing work on the project and includes a mechanism for resolving disputes about the payment of wages.
You send certified payroll records to the Labor Commissioner every 30 days. Nobody has to ask.
Every subcontractor owes the same duty. Furnish the section 1776 records directly, in the electronic format the Labor Commissioner prescribes on the department's website, at least once every 30 days while work is being performed and again within 30 days after the final day of work on the project — more often if the contract with the awarding body specifies. Fail to furnish them and the penalty is $100 for each day in violation, up to $5,000 per project, and the Labor Commissioner cannot levy it until the records are 14 days late. The penalty reaches only your own employees' records and only the contractor or subcontractor that actually failed to furnish them. If you are not registered because registration is not required under section 1725.5(f), you need not furnish the records, but you must retain them at least three years after completion of the work.
On the job
Certified payroll is not something to produce if asked — it goes to the Labor Commissioner electronically every 30 days whether or not anyone requests it, and the penalty for not sending it is separate from the section 1776 records-request forfeiture.
Exact wording
Each contractor and subcontractor must furnish the payroll records specified in section 1776 directly to the Labor Commissioner, in an electronic format in the manner the Labor Commissioner prescribes on the department's website, at least monthly or more frequently if the contract with the awarding body specifies — 'monthly' meaning at least once every 30 days while work is being performed on the project and within 30 days after the final day of work performed on the project. A contractor or subcontractor that fails to furnish the records is subject to a penalty of $100 for each day in violation, not to exceed $5,000 per project, which the Labor Commissioner may not levy until the records are 14 days late; the penalty attaches to records relating to the party's own employees and accrues only to the actual contractor or subcontractor that failed to furnish them. A contractor or subcontractor that is not registered because the project is one on which registration is not required under section 1725.5(f) is not required to furnish the records to the Labor Commissioner but must retain them for at least three years after completion of the work.
Take away
10 rules · 7 minPrevailing wages
Pay at least the prevailing rate on a public works contract. Every subcontractor owes the same.
The duty starts when you are awarded a public works contract, and it covers all workers employed in the execution of that contract. Any subcontractor under you must pay not less than the specified prevailing rates to those workers.
On the job
'Not less than' makes the determination a floor, not a target, and the duty runs down every tier of subcontract rather than stopping at the party who signed with the awarding body. A sub three tiers down owes the same rate.
Exact wording
The contractor to whom a public works contract is awarded, and any subcontractor under that contractor, must pay not less than the specified prevailing rates of wages to all workers employed in the execution of the contract.
Per diem prevailing wage includes employer payments as well as the basic hourly rate.
Employer payments for specified purposes count toward that wage: health and welfare, pension, vacation, travel, subsistence, and apprenticeship or other training authorized by section 3093 — training counts only so far as its cost is reasonably related to your contributions. If you seek credit for employer payments that are higher on public works than on the private construction you perform, you must compute the credit on an annualized basis. Annualization reaches all employer payments not made directly to the worker. You skip it only if you have an enforceable obligation to make the higher payments on future private construction, a project labor agreement requires the higher rate, or the payments go to the California Apprenticeship Council under section 1777.5. Contributions to defined contribution pension plans with immediate participation and essentially immediate vesting — the benefit vests within the first 500 hours worked — are credited in full. You carry the burden of showing the credit was properly calculated, and you must produce records of employee hours and employer payments on private construction when the Labor Commissioner asks. Without those records, the credit can be denied. Any annualization exemptions the director issued before January 1, 2026 are revoked.
On the job
This is why a contractor paying the basic hourly rate in cash can still be underpaying. The determination has two halves, and the employer-payment half can be satisfied by payments to a plan, fund or program, or by payments made directly to the worker — but it cannot simply be left out.
Exact wording
The per diem prevailing wage is not only the basic hourly rate: employer payments for specified purposes — including health and welfare, pension, vacation, travel, subsistence, and apprenticeship or other training programs authorized by section 3093 to the extent the cost of training is reasonably related to the amount of the contributions — are included in the per diem wages the determination requires. Where an employer seeks credit for employer payments that are higher for public works projects than for private construction it performs, the credit is computed on an ANNUALIZED basis — a rule that reaches all employer payments not made directly to the worker — unless the employer has an enforceable obligation to make the higher payments on future private construction, the higher rate is required by a project labor agreement, or the payments are made to the California Apprenticeship Council under section 1777.5; contributions to defined contribution pension plans providing immediate participation and essentially immediate vesting — meaning the benefit vests within the first 500 hours worked — are credited in full. The employer carries the burden of showing the credit was properly calculated, must produce records of employee hours and employer payments on private construction when the Labor Commissioner asks, and may be denied the credit if those records are not produced. Any exemptions to the annualization requirement issued by the director before January 1, 2026 are revoked.
Divide your plan contributions by every hour the worker put in that year. Private hours count.
Annualizing converts the employer's pension or medical plan contributions into an hourly amount. Divide the year's payments by all hours the employee worked in the year, public and private — not just that year's public works hours. The principle comes from federal Davis-Bacon enforcement: the employer takes credit only for the contributions attributable to the hours actually worked on covered public works.
On the job
This is the arithmetic the statute demands but never spells out. A contractor who pays $6.00 an hour into a plan on public work and $1.50 on private work does not get a $6.00 credit: the year's contributions are spread across every hour worked, so the credit lands somewhere between the two rates. Dividing by public hours alone is the error the rule exists to stop, because it would let a contractor fund the plan out of public jobs and count it twice.
Exact wording
Annualizing means converting the employer's contribution to a pension or medical plan into an hourly amount by dividing the payments by the total number of hours the employee worked in the year on ALL projects, public and private — not just the hours worked that year on public projects. The principle comes from federal Davis-Bacon enforcement, and it lets an employer take credit only for the contributions attributable to the hours actually worked on covered public works.
DIR public-works materials (manual, DAS forms) — pw-manual-4.2.6
You pay overtime on public works for every hour past 8 in a day.
Your employees may work more than 8 hours in a day and 40 hours in a week only if you pay at least 1½ times the basic rate of pay for all hours worked over 8 in a day.
On the job
Public works overtime runs on a DAILY eight-hour trigger, not merely the weekly forty. A crew working four ten-hour days is inside the weekly limit and owes premium pay for eight hours all the same — and the forfeiture attaches per worker per day.
Exact wording
Work performed by employees of contractors in excess of 8 hours per day, and 40 hours during any one week, is permitted upon public work only upon compensation for all hours worked in excess of 8 hours per day at not less than 1½ times the basic rate of pay.
You forfeit $25 per worker for each calendar day you run illegal overtime.
The $25 forfeiture is paid to the state or political subdivision. It counts each worker employed in the execution of the contract, for each calendar day that worker is required or permitted to work more than 8 hours in one calendar day and 40 hours in one calendar week in violation of this article.
On the job
A penalty that runs per worker per day, on top of the wages themselves. It is small enough per unit to look survivable and large enough across a crew and a schedule not to be: ten workers on a four-week overtime push is a four-figure forfeiture before anyone has argued about the wage rate.
Exact wording
A contractor or subcontractor must forfeit twenty-five dollars ($25) to the state or political subdivision for each worker employed in the execution of the contract for each calendar day during which that worker is required or permitted to work more than 8 hours in any one calendar day and 40 hours in any one calendar week in violation of this article.
You forfeit up to $200 per worker each day you pay below the prevailing rate.
As a contractor or subcontractor, you owe that money to the state or political subdivision, and the $200 ceiling runs for each worker for each calendar day or portion of a day. The Labor Commissioner sets the amount, weighing whether the failure was a good faith mistake you corrected promptly and voluntarily when it was brought to your attention, and whether you have a prior record of failing prevailing wage obligations. The penalty cannot be less than $40 per worker per calendar day unless it was that good faith mistake, promptly and voluntarily corrected. It cannot be less than $80 if you were assessed prevailing wage penalties within the previous three years on a separate contract, unless those penalties were withdrawn or overturned. It cannot be less than $120 if the Labor Commissioner determines the violation was willful as section 1777.1(c) defines it.
On the job
The ceiling is $200 but the floors do the work: only a promptly corrected good-faith mistake can take the penalty below $40, a prior assessment within three years doubles the floor, and a willful finding triples it — which is why correcting promptly and voluntarily when it is raised is the single most valuable thing available after a mistake.
Exact wording
A contractor or subcontractor that pays less than the prevailing wage rates must forfeit not more than two hundred dollars ($200) for each calendar day, or portion thereof, for each worker paid less than the prevailing rate, as a penalty to the state or political subdivision; the amount is set by the Labor Commissioner considering whether the failure was a good faith mistake promptly and voluntarily corrected when brought to the contractor's attention, and whether the contractor has a prior record of failing to meet its prevailing wage obligations. The range has floors as well as the ceiling: the penalty may not be less than $40 per worker per calendar day unless the failure was a good faith mistake promptly and voluntarily corrected; not less than $80 if the contractor or subcontractor was assessed prevailing wage penalties within the previous three years on a separate contract, unless those penalties were withdrawn or overturned; and not less than $120 if the Labor Commissioner determines the violation was willful as section 1777.1(c) defines it.
You owe no penalty for your subcontractor's underpayment unless you knew or missed a requirement.
As the prime contractor, you owe the penalty in two cases: you had knowledge of the subcontractor's failure, or you failed to comply with all four requirements. Missing any one of the four costs you the protection.
On the job
This is the most valuable provision on this topic for a general building contractor, and it is written as a safe harbor rather than a duty. Two independent ways to lose it: know about the underpayment — knowledge alone, however diligent the response — or fail any one of the four steps. It is not a defense you assemble after a claim — three of the four have to have happened already.
Exact wording
Where a worker employed by a subcontractor is not paid the prevailing rate, the prime contractor is not liable for penalties under this section unless the prime had KNOWLEDGE of the subcontractor's failure, or unless the prime fails to comply with ALL of four requirements.
As the prime you must meet all four requirements. The subcontractor's affidavit comes before final payment.
Four requirements apply to you as the prime. First, the subcontract must include a copy of the provisions of Labor Code sections 1775, 1771, 1776, 1777.5, 1813 and 1815. Second, monitor the subcontractor's payment of prevailing wages by periodically reviewing the subcontractor's certified payroll records. Third, once you become aware of a failure, diligently take corrective action to halt or rectify it, including but not limited to retaining sufficient funds due the subcontractor. Fourth, before making final payment, obtain an affidavit from the subcontractor, signed under penalty of perjury, stating that the subcontractor paid the prevailing rate and any amounts due under section 1813.
On the job
Four steps, each of which is a document or a habit rather than a judgment call. Note the sequencing: the statutes go in at subcontract execution, the payroll review runs during the job, and the affidavit is a precondition to the final check — which is the one moment a general contractor still has leverage.
Exact wording
The four requirements are: the subcontract must include a copy of the provisions of Labor Code sections 1775, 1771, 1776, 1777.5, 1813 and 1815; the contractor must monitor the subcontractor's payment of prevailing wages by periodic review of the subcontractor's certified payroll records; upon becoming aware of a failure the contractor must diligently take corrective action to halt or rectify it, including but not limited to retaining sufficient funds due the subcontractor; and before making final payment the contractor must obtain an affidavit signed under penalty of perjury from the subcontractor that it has paid the prevailing rate and any amounts due under section 1813.
The Labor Commissioner must serve a civil wage and penalty assessment within 18 months.
The Labor Commissioner's 18 months run from the later of two dates: the filing of a valid notice of completion in the office of the county recorder, or acceptance of the public work. The later date controls.
On the job
The exposure does not close when the job does. Eighteen months from the LATER of two events means a contractor can be assessed well over a year after final payment, which is why the certified payroll and the subcontractor affidavits have to survive the job rather than the billing cycle.
Exact wording
The Labor Commissioner must serve a civil wage and penalty assessment within 18 months after the filing of a valid notice of completion in the office of the county recorder, or within 18 months after acceptance of the public work, whichever occurs later.
The Director of Industrial Relations sets the prevailing wage rate. Your wage scale does not.
The Director's determination follows Section 1773's standards and is final except as Section 1773.4 provides. You may pay a worker on public work more than the prevailing wage, but you may not schedule overtime in violation of the overtime article.
On the job
The rate comes from the Director's determination, not the contractor's pay scale or a union agreement directly; paying more is always allowed.
Exact wording
The Director of the Department of Industrial Relations determines the general prevailing rate of per diem wages under the standards of section 1773, and that determination is final except as section 1773.4 provides. Nothing in the article prohibits paying a worker on public work more than the general prevailing rate, and the chapter does not permit overtime work in violation of the overtime article.
Take away
18 rules · 14 minApprentices, registration, and payroll records
follows you into any firm in which you hold any interest.
When the Labor Commissioner finds you committed two or more separate willful violations of the prevailing wage chapter within three years while performing a public works project, you are ineligible for up to three years to bid on a public works contract, be awarded one, or perform work as a subcontractor on a public works project. Willful means you knew, or reasonably should have known, your obligations under the public works law and deliberately failed or refused to comply. Debarment also reaches any firm, corporation, partnership or association in which you hold any interest, your responsible managing officer, and any supervisor, manager or officer the Labor Commissioner finds personally and substantially responsible for the willful violation. Shares in a publicly traded corporation are not an interest, unless you received the shares as compensation, after the debarment began, from an entity bidding on or performing public work.
On the job
Up to three years, with no minimum: the willful-violation trigger sets a ceiling and leaves the floor to the Labor Commissioner. What is fixed rather than discretionary is the reach — any firm in which the debarred contractor holds an interest is caught with it, so re-forming under a new name does not clear it.
Exact wording
Where the Labor Commissioner finds that a contractor or subcontractor performing a public works project has committed two or more separate willful violations of the prevailing wage chapter within a three-year period, that contractor or subcontractor — and any firm, corporation, partnership or association in which it has any interest — is ineligible for a period UP TO three years to bid on or be awarded a public works contract, or to perform work as a subcontractor on a public works project. For debarment purposes 'contractor or subcontractor' means the firm, corporation, partnership, or association and its responsible managing officer, as well as any supervisors, managers, and officers the Labor Commissioner finds personally and substantially responsible for the willful violation. A willful violation is one where the contractor knew or reasonably should have known of its obligations under the public works law and deliberately failed or refused to comply; and 'any interest' does not include shares held in a publicly traded corporation unless the shares were received as compensation, after debarment began, from an entity bidding or performing public work.
You face debarment of at least one year for intent to defraud.
The Labor Commissioner makes that finding on a public works project. You — and any firm in which you have any interest — cannot bid on or be awarded a public works contract, or work as a subcontractor, for not less than one year and not more than three years.
On the job
The fraud trigger is the one that carries a FLOOR. Two triggers, two different ranges, and merging them is the error: intent to defraud means at least a year off public work, while two willful violations could in principle draw a shorter period. The distinction is what the finding of intent buys.
Exact wording
Where the Labor Commissioner finds that a contractor or subcontractor performing a public works project is in violation of the chapter WITH INTENT TO DEFRAUD, that contractor or subcontractor — and any firm in which it has any interest — is ineligible for a period of not less than one year or more than three years to bid on or be awarded a public works contract, or to perform work as a subcontractor.
You must hold before you bid, are listed, or perform public works.
Registration under Labor Code section 1725.5 is what makes you qualified. Without it you may not bid, be listed in a bid proposal subject to Public Contract Code section 4104, or perform any public works contract subject to the prevailing wage chapter. For this purpose, contractor includes a subcontractor.
On the job
Registration is a separate gate from the CSLB license and catches people who assume the license is enough. It reaches listing as well as bidding, so naming an unregistered sub in your bid is itself the problem.
Exact wording
A contractor must be registered under Labor Code section 1725.5 to be qualified to bid on, be listed in a bid proposal subject to Public Contract Code section 4104, or engage in the performance of any public works contract subject to the prevailing wage chapter; for this purpose 'contractor' includes a subcontractor.
You must be registered by the award, even when a statute lets you bid unregistered.
Bidding unregistered is not a violation only if Business and Professions Code section 7029.1, or Public Contract Code section 10164 or 20103.5, authorizes the bid: you must be registered under section 1725.5 to perform public work when the contract is awarded.
On the job
A narrow relief with a hard back-stop. It permits the bid in specified circumstances but not the award, so a contractor relying on it has until award — not until the notice to proceed — to complete registration.
Exact wording
It is not a violation for an unregistered contractor to submit a bid that is authorized by Business and Professions Code section 7029.1 or by Public Contract Code section 10164 or 20103.5, provided the contractor is registered to perform public work under section 1725.5 at the time the contract is awarded.
Your bid stands if you mistakenly list a subcontractor without DIR registration.
No one can protest your bid or call it nonresponsive over an inadvertent listing of a subcontractor who is not registered under section 1725.5, provided any one of these is true: the subcontractor was registered before the bid opening; the subcontractor is registered and has paid the penalty registration fee within 24 hours after the bid opening; or another registered subcontractor replaces it under Public Contract Code section 4107. A subcontractor's failure to be registered is itself grounds under section 4107 for you to substitute a registered subcontractor, with the awarding authority's consent.
On the job
Listing an unregistered sub is a problem, but a curable one: 24 hours after bid opening to register and pay the penalty fee, or a section 4107 substitution.
Exact wording
An inadvertent error in listing a subcontractor who is not registered under section 1725.5 in a bid proposal is not grounds for a bid protest or for treating the bid as nonresponsive, provided that the subcontractor was registered before the bid opening; or is registered and has paid the penalty registration fee within 24 hours after the bid opening; or is replaced by another registered subcontractor under Public Contract Code section 4107. A subcontractor's failure to be registered is itself grounds under section 4107 for the contractor, with the awarding authority's consent, to substitute a registered subcontractor.
You and each subcontractor must keep a certified payroll record for every worker.
The record covers every journeyman, apprentice, worker or other employee on the public work, and shows six things for each: name, address, social security number, work classification, straight time and overtime hours worked each day and each week, and the actual per diem wages paid. Each record must contain, or be verified by, a written declaration made under penalty of perjury that the information is true and correct and that the employer has complied with sections 1771, 1811 and 1815 for the work its employees performed on the project. Certify the records and keep them available for inspection at all reasonable hours at your principal office, on the terms and to the requesters the law sets out.
On the job
Six data points per worker per day. The classification is the one contractors get wrong, because it decides which rate applies — putting a labourer's classification on an operator's hours underpays by the difference between two determinations, and the record proves it.
Exact wording
Each contractor and subcontractor must keep accurate payroll records showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker or other employee employed in connection with the public work. Each payroll record must contain, or be verified by, a written declaration that it is made under penalty of perjury, stating that the information in it is true and correct and that the employer has complied with sections 1771, 1811, and 1815 for the work its employees performed on the project; the records so enumerated must be certified and are available for inspection at all reasonable hours at the contractor's principal office, on the terms and to the requesters the section sets out.
The apprenticeship requirements do not apply when your contract is under $30,000.
Labor Code section 1777.5 exempts two contracts: a general contractor's, or a specialty contractor's where that specialty contractor is not bidding for work through a general or prime contractor. Each is exempt only when it involves less than $30,000.
On the job
A threshold worth holding precisely, because it is the first question on any apprenticeship item. Note it is measured on the CONTRACT rather than on the portion of work that is apprenticeable.
Exact wording
The apprenticeship requirements of Labor Code section 1777.5 do not apply where the contracts of general contractors, or of specialty contractors not bidding for work through a general or prime contractor, involve less than thirty thousand dollars ($30,000).
You must employ at least one hour of apprentice work for every five journeyman hours.
The apprenticeship standards you agree to be bound by set the maximum: in a particular craft or trade on the public work, your ratio of apprentice work to journeyman work may be no higher than the ratio those standards state. Except as the section provides otherwise, that ratio may never be less than one hour of apprentice work for every five hours of journeyman work. The Administrator of Apprenticeship may grant you a certificate exempting you from the ratio in a craft on a proper showing that you employ apprentices in that craft on all your contracts in the state at an annual average of not less than one apprentice hour for every five journeyman hours. An apprenticeship program, subject to the Administrator's approval, may grant a participating contractor or contractor association a certificate exempting it where the program finds one of the section's listed conditions — among them that unemployment in the area for the previous three-month period exceeded an average of 15 percent, that apprentices in training in the area exceed a 1-to-5 ratio, that the craft replaces at least one-thirtieth of its journeymen each year through apprenticeship training, or that assigning an apprentice to the work would jeopardize life, safety, or property, or the task is one a journeyman cannot train. Unless a collective bargaining agreement provides otherwise, if you request dispatch of an apprentice and require an application, testing, training, an examination, or another preemployment process as a condition of employment, you must pay the apprentice for that time, including travel time to and from it, at the prevailing per diem rate for apprentices in the trade. You owe no pay for that preemployment time if the apprentice was required to take a preemployment drug or alcohol test and failed it — again unless a collective bargaining agreement provides otherwise.
On the job
Two limbs pointing opposite ways, and the second is the one that binds most contractors. The standards' ratio is a CEILING on apprentice hours. The 1:5 is a FLOOR — at least one hour of apprentice work for every five journeyman hours. Reading only the ceiling turns a duty to employ apprentices into a limit on employing them, which is backwards.
Exact wording
The ratio of work performed by apprentices to journeymen employed in a particular craft or trade on the public work may be no higher than the ratio stipulated in the apprenticeship standards under which the apprenticeship program operates, where the contractor agrees to be bound by those standards; however, except as otherwise provided in the section, in no case shall the ratio be less than one hour of apprentice work for every five hours of journeyman work. The 1-to-5 floor is subject to exemption certificates: on a proper showing that a contractor employs apprentices in the craft on all of its contracts in the state at an annual average of not less than one hour of apprentice work for every five hours of journeyman labor, the Administrator of Apprenticeship may grant a certificate exempting the contractor from the ratio for that craft; and an apprenticeship program may, subject to the Administrator's approval, grant a participating contractor or contractor association a certificate exempting it from the ratio where it finds one of the section's listed conditions — among them that unemployment in the area for the previous three-month period exceeded an average of 15 percent, that the number of apprentices in training in the area exceeds a 1-to-5 ratio, that the craft is replacing at least one-thirtieth of its journeymen annually through apprenticeship training, or that assigning an apprentice to the work would jeopardize life, safety, or property or the task is one a journeyman cannot train. Unless a collective bargaining agreement provides otherwise, where a contractor requests dispatch of an apprentice and requires the apprentice to fill out an application or undergo testing, training, an examination, or other preemployment process as a condition of employment, the apprentice must be paid for the time spent on that activity, including any travel time to and from it, at the prevailing per diem rate for apprentices in the trade — except that, again unless a collective bargaining agreement provides otherwise, no compensation is owed for preemployment time where the apprentice was required to take a preemployment drug or alcohol test and failed it.
Send within ten days of signing or by your workers' first day.
You send contract award information to the applicable apprenticeship committee on DAS Form 140 or an equivalent writing. It is due within ten days of executing the prime contract or subcontract, and never later than your first day with workers employed on the public work. If you are not already approved to train, send it to every applicable committee whose geographic area of operation includes the project area.
On the job
Two deadlines, and the earlier one governs: ten days from signing, or the first day anyone is on site, whichever arrives first. The 'all applicable committees' limb catches the contractor who has never trained apprentices and therefore has no committee of its own to notify — which is most general building contractors the first time they take public work.
Exact wording
A contractor must provide contract award information to the applicable apprenticeship committee — using DAS Form 140 or an equivalent writing — within ten days of the date of execution of the prime contract or subcontract, but in no event later than the first day on which the contractor has workers employed upon the public work; a contractor not already approved to train must provide it to all applicable committees whose geographic area of operation includes the project area.
If you knowingly skip the contract award information, you stay in violation for the whole contract.
As the awarded contractor, you are in violation for the entire duration of the contract, so penalties under Labor Code section 1777.7 keep accruing. The violation ends only when the awarding body files a Notice of Completion, the record that the work is done.
On the job
A missed form is not a one-time penalty here — it accrues for as long as the job runs. That converts an administrative oversight at week one into a figure that scales with the schedule, and the clock only stops at the Notice of Completion rather than at the day someone notices.
Exact wording
Failure to provide contract award information, where that failure is known by the awarded contractor, is deemed a continuing violation for the duration of the contract, ending when a Notice of Completion is filed by the awarding body, for the purpose of determining the accrual of penalties under Labor Code section 1777.7.
Request apprentice dispatch in writing at least 72 hours ahead excluding weekends and holidays.
"Contractor" here covers general, prime, specialty and subcontractors. Each must employ registered apprentices at one hour of apprentice work for every five hours of journeyman labor unless an exemption applies; unless exempted, those computed hours must be worked before the contract ends, and the ratio is measured cumulatively over the project. Request dispatch from the applicable apprenticeship committee in writing — first class mail, facsimile or email — giving at least 72 hours notice, excluding Saturdays, Sundays and holidays, before the date apprentices are required. If that committee does not dispatch as requested, you must then request dispatch from another committee training that craft in the geographic area of the site. Except on projects with less than 40 hours of journeyman work, each request must be for not less than an 8-hour day per apprentice, or 20 percent of the estimated apprentice hours to be worked for you in that craft on the project, whichever is greater — unless you provide written evidence on request that circumstances beyond your control prevent it. Attach no conditions that circumvent your duty to pay for preemployment testing, training and examination. If a committee dispatches fewer apprentices than requested, you comply by employing those dispatched, provided that where more than one committee is able and willing to dispatch unconditionally, you requested dispatch from all committees training the craft whose geographic area includes the site, consecutively or simultaneously. A committee need not dispatch to a non-signatory contractor that declines to abide by and comply with its standards. If, after your written request, no committee dispatches or agrees to dispatch within 72 hours, and you agreed to employ and train apprentices under the committee's standards or these regulations, you are not in violation for failing to employ apprentices for the remainder of the project — provided you requested in enough time to meet the ratio. Dispatched apprentices must be registered apprentices training under standards that include the work processes you will perform on the project, may be assigned only work within those processes, and, where employed under the California Apprenticeship Council's rules, must at all times work with or under the direct supervision of a journeyworker. Abiding by a committee's standards imposes no financial or administrative obligation to a trust fund or employee benefit plan unless you have agreed to it.
On the job
Seventy-two working hours, not three calendar days — a Thursday request does not produce a Monday apprentice. And a committee failing to dispatch does not end the duty; it moves it to the next committee. The written request is also what evidences the effort when no apprentices arrive, so making it late costs the record as well as the labor.
Exact wording
'Contractor' for the apprenticeship regulations includes general, prime, specialty, and subcontractors, each of which must employ registered apprentices at the required one hour of apprentice work for every five hours of journeyman labor unless an exemption applies; unless an exemption has been granted, the computed apprentice hours must be worked before the end of the contract — the ratio is measured cumulatively over the project. A contractor must request the dispatch of required apprentices from the applicable apprenticeship committee by giving written notice of at least 72 hours — excluding Saturdays, Sundays and holidays — before the date on which one or more apprentices are required; where that committee does not dispatch as requested, the contractor must then request dispatch from another committee providing training in the applicable craft or trade in the geographic area of the site. Except for projects with less than 40 hours of journeyman work, each dispatch request must be for not less than an 8-hour day per apprentice, or 20 percent of the estimated apprentice hours to be worked for the employer in that craft on the project, whichever is greater, unless the employer can provide written evidence on request that circumstances beyond its control prevent it; requests are made in writing, by first class mail, facsimile, or email, and without conditions that circumvent the employer's duty to pay for preemployment testing, training, and examination. If a committee dispatches fewer apprentices than requested, the contractor is in compliance if it employs those dispatched — provided that, where more than one committee is able and willing to unconditionally dispatch, the contractor has requested dispatch from all committees training the craft whose geographic area includes the site, consecutively or simultaneously. A committee is not required to dispatch to a non-signatory contractor that declines to abide by and comply with its standards; conversely, if in response to a written request no committee dispatches, or agrees to dispatch, within 72 hours to a contractor that has agreed to employ and train apprentices under the committee's standards or these regulations, the contractor is not in violation for failing to employ apprentices for the remainder of the project — provided the request was made in enough time to meet the ratio. Dispatched apprentices must be registered apprentices training under standards that include the work processes the contractor will perform on the project, may be assigned only work within those work processes, and — where employed under the California Apprenticeship Council's rules — must at all times work with or under the direct supervision of a journeyworker; abiding by a committee's standards imposes no financial or administrative obligation to a trust fund or employee benefit plan unless the contractor has so agreed.
Leave journeyman overtime hours out when you compute the apprentice-to-journeyman ratio.
The apprentice-to-journeyman ratio applies during any day, or part of a day, when any journeyman works at the jobsite. Compute it from those journeymen's hours worked that day, excluding hours over 8 in a day or 40 in a week.
On the job
The ratio is computed daily, off journeyman hours actually worked, and overtime hours are excluded from the denominator. A contractor running long journeyman days does not thereby earn a larger apprentice obligation — but neither can it use overtime to dilute the ratio.
Exact wording
The apprentice-to-journeyman ratio applies during any day or portion of a day when any journeyman is employed at the jobsite and is computed on the basis of the hours worked during that day by the journeymen so employed; work performed by a journeyman in excess of eight hours per day or 40 hours per week may not be used to calculate the ratio.
You owe the state a civil penalty for each day of unregistered public work.
The penalty is $100 for each day of work performed in violation, and the total may not exceed an aggregate of $8,000. You pay it in addition to the penalty registration fee, and it applies to subcontractors as well as contractors. Section 1771.1 does not apply to a public works project of $25,000 or less for construction, alteration, demolition, installation, or repair work, or $15,000 or less for maintenance work.
On the job
Per day, capped at $8,000, and on top of the fee you would have paid anyway. The cap is what makes this a manageable mistake rather than a ruinous one — but it accrues from the first day of work, so discovering it late means the cap is already reached.
Exact wording
A contractor or subcontractor that engages in the performance of any public work contract without having been registered forfeits, as a civil penalty to the state, one hundred dollars ($100) for each day of work performed in violation of the registration requirement, not to exceed an aggregate penalty of eight thousand dollars ($8,000), in addition to any penalty registration fee. Section 1771.1 does not apply to work on a public works project of $25,000 or less for construction, alteration, demolition, installation, or repair work, or of $15,000 or less for maintenance work — the same thresholds as the registration exemption.
If you hire an unregistered lower tier sub on public works, you pay $100 a day.
Subcontract public work to an unregistered lower tier subcontractor and you — the higher tier contractor or subcontractor — forfeit $100 to the state for each day that sub works unregistered, capped at $10,000, in addition to or in place of other penalties. The Labor Commissioner sets the amount using the section 1775 severity standards, may waive a first-time violation that was unintentional and did not hinder monitoring and enforcement, and may not assess it where the sub's violation is due to the revocation of a previously approved registration.
On the job
The unregistered sub's own penalty caps at $8,000; the prime that hired it carries a separate $100-a-day exposure capped at $10,000 — so checking a sub's DIR registration before signing is the prime's problem, not only the sub's.
Exact wording
In addition to, or in lieu of, any other penalty or sanction, a higher tiered public works contractor or subcontractor found to have entered into a subcontract with an unregistered lower tier subcontractor to perform public work forfeits, as a civil penalty to the state, $100 for each day the unregistered lower tier subcontractor performs work in violation of the registration requirement, not to exceed an aggregate penalty of $10,000. The Labor Commissioner applies the section 1775 severity standards in setting the amount, may waive the penalty for a first-time violation that was unintentional and did not hinder monitoring and enforcement, and may not assess it where the lower tier subcontractor's violation is due to the revocation of a previously approved registration.
A contract with an unregistered contractor can be cancelled. It is still not void or unlawful.
The contract is subject to cancellation. But a contract for public work is not unlawful, void, or voidable solely because the awarding body, the contractor, or any subcontractor failed to register under section 1725.5 or 1771.1.
On the job
Working unregistered exposes the contractor to penalties and to cancellation, not to an illegal-contract defense against paying for the work already done.
Exact wording
A contract entered into with a contractor or subcontractor in violation of the registration requirement is subject to cancellation, but a contract for public work is not unlawful, void, or voidable solely because the awarding body, the contractor, or any subcontractor failed to comply with the registration requirements of section 1725.5 or section 1771.1.
You need no DIR registration on projects of $25,000 or less. Maintenance projects use $15,000 instead.
On a public works project, the exemption depends on the kind of work: construction, alteration, demolition, installation or repair projects of $25,000 or less, and maintenance projects of $15,000 or less. The exemption covers the registration requirement only.
On the job
Two thresholds for two kinds of work, and maintenance carries the lower one. Note this exempts REGISTRATION only — the prevailing wage duty has its own and far lower threshold at $1,000, so a $20,000 repair job needs no registration and still owes prevailing wages.
Exact wording
The registration requirement does not apply to work performed on a public works project of twenty-five thousand dollars ($25,000) or less when the project is for construction, alteration, demolition, installation or repair work, or on a public works project of fifteen thousand dollars ($15,000) or less when the project is for maintenance work.
You are excused from registration when the job is ruled public work after award.
The ruling comes from the Director under section 1773.5 or from a court, after the awarding body accepts your bid or awards the contract, and finds the work a public work under section 1771. Relief also requires both of these: the bid specification or contract documents never identified that portion of the work as a public work, and within 20 days after notice of the ruling is served on the awarding body you and any subcontractors are registered or are replaced by registered ones. Registration still applies to any later bid, bid proposal, contract, or work performed after that notice is served.
On the job
A contractor caught by a coverage determination it could not have seen at bid time is not penalized for having worked unregistered, but the relief is conditional on a 20-day registration cure and does not reach later work.
Exact wording
If, after an awarding body accepts a contractor's bid or awards the contract, the work covered by the bid or contract is determined to be a public work to which section 1771 applies — by a determination of the director under section 1773.5 or by a court decision — the registration requirement does not apply to that bid or contract, provided that the awarding body failed, in the bid specification or contract documents, to identify as a public work the portion of the work so classified; that within 20 days after notice of the determination or decision is served on the awarding body the contractor and any subcontractors are registered or are replaced by registered ones; and the requirement applies prospectively to any subsequent bid, bid proposal, contract, or work performed after the awarding body is served with that notice.
You forfeit $100 per worker for each calendar day certified payroll records are late.
A written request for certified payroll records starts a 10-day clock. Miss it and the $100 runs for each calendar day, or portion of a day, for each worker, until you strictly comply. On the Division of Labor Standards Enforcement's request, those penalties are withheld from progress payments then due. A subcontractor's failure to comply is not the prime contractor's penalty.
On the job
Per worker per day until compliance, and it is collected by withholding progress payments rather than by billing you. That combination is what makes a records request the fastest-escalating problem on this topic — but, unlike the underpayment safe harbor, a sub's records failure is flatly not the prime's penalty.
Exact wording
Where a contractor or subcontractor fails to comply with a written request for certified payroll records within the 10-day period, it forfeits one hundred dollars ($100) for each calendar day, or portion thereof, for each worker, until strict compliance is effectuated; on request of the Division of Labor Standards Enforcement those penalties are withheld from progress payments then due. A contractor is not subject to a penalty assessment under this section because of a subcontractor's failure to comply with it.
Take away
10 rules · 6 minBids, bonds, and relief from bids
Give your payment bond before work starts on a public works contract over $25,000.
If you are the direct contractor awarded a public works contract costing more than $25,000, give a payment bond before work starts. The officer or public entity that awarded the contract must approve the bond. Design professionals are exempt. So are contracts with a 'state entity' under Public Contract Code 7103(d); Public Contract Code 7103 governs those bonds.
On the job
Public work cannot be liened, so the payment bond is what stands in place of the mechanics lien for everyone below the direct contractor. The timing is the part contractors miss: the bond is due before work commences, not before the first payment application.
Exact wording
A direct contractor awarded a public works contract involving an expenditure in excess of twenty-five thousand dollars ($25,000) must, before commencement of work, give a payment bond to and approved by the officer or public entity by whom the contract was awarded. A design professional is not deemed a direct contractor for this purpose and is not required to give a payment bond, and the section does not apply to a public works contract with a 'state entity' as Public Contract Code section 7103(d) defines it — those bonds are governed by Public Contract Code section 7103.
The public entity must state the payment bond requirement in its call for bids.
The threshold is $25,000: the call for bids must include the payment bond requirement on any public works contract involving an expenditure above that amount. A payment bond is the surety bond that secures payment to workers and material suppliers.
On the job
The requirement is visible at bid time, which removes any argument that the bond premium was an unforeseen cost. Read the call for bids as the notice it is.
Exact wording
A public entity must state in its call for bids that a payment bond is required for a public works contract involving an expenditure in excess of twenty-five thousand dollars ($25,000).
Have an admitted surety insurer execute your public works payment bond.
An admitted surety insurer is a surety licensed in California. Write your payment bond for at least 100 percent of the total amount payable under the public works contract. A deposit in lieu of a bond does not count.
On the job
Three requirements that are each a way the bond can fail while looking satisfied. A bond written for the base contract but not the change orders falls under 100 percent; cash or a letter of credit is not a bond; and a surety that is not an admitted insurer leaves the awarding body holding paper it cannot enforce.
Exact wording
A public works payment bond must be in an amount not less than 100 percent of the total amount payable pursuant to the public works contract, must be in the form of a bond rather than a deposit in lieu of a bond, and must be executed by an admitted surety insurer.
Submit every city public works bid under sealed cover with one of four bidder's securities.
Bidder's security takes one of four forms: cash; a cashier's check; a certified check; or a bidder's bond executed by an admitted surety insurer. Make the checks and the bond payable to the city. No other form is accepted.
On the job
Bidder's security is what makes a bid a commitment rather than an opinion. Four accepted forms and no others — note that unlike the payment bond, cash and cashier's or certified checks are permitted here, so a contractor without a surety relationship can still bid.
Exact wording
On a city public works project all bids must be presented under sealed cover and accompanied by one of four forms of bidder's security: cash, a cashier's check made payable to the city, a certified check made payable to the city, or a bidder's bond executed by an admitted surety insurer and made payable to the city.
You forfeit your bidder's security if you fail to execute the contract you won.
Your bidder's security is the cash, check, or bidder's bond that came with your bid, and the city keeps its full amount. Forfeiture is the default; it stands except as the law otherwise provides, through the bid mistake relief route.
On the job
This is what the security is FOR, and it is the cost of walking away from a low bid you no longer want. The exception clause is where the bid-mistake relief route lives — forfeiture is the default, and relief has to be earned.
Exact wording
If the successful bidder fails to execute the contract, the amount of the bidder's security is forfeited to the city, except as otherwise provided.
You stay bound to your bid after a mistake unless the awarding authority consents.
You cannot change your bid to correct a mistake. Instead you may sue the public entity, in the county where the bids were opened, to recover the amount forfeited, without interest or costs. If you fail to recover judgment, you pay all the entity's costs in that suit, plus a reasonable attorney's fee fixed by the court.
On the job
There is no unilateral withdrawal. Either the awarding authority consents, or the contractor forfeits and sues to get the security back. Read the downside before choosing that route: losing does not simply leave you where you were — you pay the entity's costs AND its attorney's fee, on top of the forfeited security.
Exact wording
A bidder is not relieved of a bid because of a mistake except by consent of the awarding authority, and no change may be made in the bid; the bidder may instead bring an action against the public entity, in the county in which the bids were opened, to recover the amount forfeited, without interest or costs. If the plaintiff fails to recover judgment, the plaintiff must pay all costs incurred by the public entity in the suit, including a reasonable attorney's fee to be fixed by the court.
To be relieved of a bid, prove a clerical mistake and notify within five working days.
Missing one element defeats the claim. You must establish to the satisfaction of the court that a mistake was made; that you gave the public entity written notice within five working days after the bids opened, excluding Saturdays, Sundays, and state holidays, specifying in detail how the mistake occurred; that the mistake made your bid materially different from what you intended; and that the mistake happened in filling out the bid, not from an error in judgment or from carelessness in inspecting the site or reading the plans and specifications.
On the job
Four elements, and two of them defeat most claims. Five WORKING days from bid opening is a short clock that starts before an award is announced. And the mistake has to be clerical rather than judgment — underestimating the work is exactly the kind of error this does not relieve.
Exact wording
To be relieved of a bid on the ground of mistake, the bidder must establish to the satisfaction of the court that a mistake was made; that written notice was given to the public entity within five working days, excluding Saturdays, Sundays and state holidays, after the opening of the bids, specifying in detail how the mistake occurred; that the mistake made the bid materially different from what was intended; and that the mistake was made in filling out the bid and was not due to an error in judgment or to carelessness in inspecting the site or reading the plans and specifications.
If you claim a mistake or forfeit your bid security, you cannot bid that project again.
Claiming a mistake means asking to be relieved of your bid because of an error in filling it out. Forfeiting your bid security bars you from further bidding the same way. The bar covers only that one project.
On the job
Claiming the mistake ends your involvement with that project either way. It stops a contractor from using the mistake route to escape a low bid and then re-bidding the same job at a better number, which is what the rule exists to prevent.
Exact wording
A bidder who claims a mistake, or who forfeits its bid security, is prohibited from participating in further bidding on the project on which the mistake was claimed or the security was forfeited.
Public entity means the state, counties, cities and districts. A bid is any competitive construction proposal.
A public entity means the state, the Regents of the University of California, a county, city and county, city, district, public authority, public agency, or any other political subdivision or public corporation in the state. A proposal submitted to a public entity counts as a bid when the competitive bidding is for construction, alteration, repair, or improvement of any structure, building, road, or other improvement. Both definitions set the reach of the relief-from-a-bid rules that follow.
On the job
The relief-of-bidders chapter reaches every public entity and every competitive construction proposal; its relief and forfeiture rules are in the sections that follow.
Exact wording
For the chapter on relief of bidders, a 'public entity' means the state, the Regents of the University of California, a county, city and county, city, district, public authority, public agency, and any other political subdivision or public corporation in the state, and a 'bid' means any proposal submitted to a public entity in competitive bidding for the construction, alteration, repair, or improvement of any structure, building, road, or other improvement.
You forfeit only the difference between your bid and the second lowest bid.
If you are the successful bidder on a city public works contract and refuse or fail to execute it, the city council may award it to the next lowest responsible bidder. If the council awards to the second lowest bidder, your bidder's security is applied to the difference between your bid and that second lowest bid. Any surplus returns to you if you gave cash or a check, or to the surety if you gave a bond.
On the job
The security is a measure of damage, not a penalty. A bidder who walks away is charged what the walking away actually cost the city — the gap to the next bid it had to accept — and the remainder comes back. That is why a 10 percent bid bond does not mean the agency keeps 10 percent: the bond is a ceiling on the recovery, and the difference between the two bids is the recovery.
Exact wording
If the successful bidder on a city public works contract refuses or fails to execute it, the city council may award the contract to the next lowest responsible bidder. Where it awards to the second lowest bidder, the low bidder's security is applied to the difference between the low bid and the second lowest bid, and any surplus is returned — to the bidder if cash or a check was given, or to the surety if a bond was given.
Take away
Important numbers to know
Practical example
A city awards you a $400,000 paving contract at a community center. You are DIR-registered. You subcontract $60,000 of striping to a specialty contractor. The prevailing wage determination for the craft lists a basic hourly rate of $38.50 plus employer payments of $21.00. Your crew works four ten-hour days in week three.
Start with coverage. The contract is well over $1,000, so prevailing wage applies, and at $400,000 the apprenticeship requirements are in too — the $30,000 threshold is measured on the contract. Your DAS Form 140 was due within ten days of signing and in no event after the first day anyone was on site; if you have never been approved to train, it went to every applicable committee, not one. On the wage itself, the rate is $38.50 plus $21.00 in employer payments — a contractor paying $38.50 cash and nothing else is underpaying by the employer-payment half, and the penalty for that is up to $200 per worker per day. Week three is the interesting one: four ten-hour days is 40 hours, inside the weekly limit, and still owes 1½ times the basic rate for the eight hours over eight per day. Skip that and you forfeit $25 per worker for each of those four days on top of the wages. On the striping sub, your exposure is not automatic — but the safe harbour only holds if you did all four things, and three of them are already behind you: the six statutes had to be in the subcontract when you signed it, the periodic certified payroll review has to be happening now, and the affidavit under penalty of perjury is a precondition to the sub's final check. Knowledge of an underpayment destroys the harbour whatever the paperwork says. Finally, the payment bond: over $25,000, so it was due before commencement of work, at 100 percent of the contract, from an admitted surety — a deposit in lieu is not a bond.
Where people go wrong
Sounds right: Public works means a government building.
Where’s the catch?
Sounds right: If I pay above the basic hourly rate in cash I am safely over the prevailing wage.
Where’s the catch?
Sounds right: Public works overtime is the same 40-hour week as everywhere else.
Where’s the catch?
Sounds right: My CSLB license covers me for public work.
Where’s the catch?
Sounds right: If my subcontractor underpays, that is the subcontractor's problem.
Where’s the catch?
Sounds right: The apprenticeship paperwork can wait until I actually need an apprentice.
Where’s the catch?
Sounds right: A cash deposit or letter of credit works instead of a payment bond.
Where’s the catch?
Glossary
Every term this guide defines, in one place. Each is also defined where it first appears.
- DAS Form 140
- The contract award information a contractor sends the apprenticeship committee. Due within ten days of contract execution, and never later than the first day workers are on the job.
- Debarment
- Ineligibility to bid on, be awarded, or subcontract on public works for one to three years. It follows any firm in which the debarred contractor holds an interest. It also reaches the entity's responsible managing officer and any supervisor, manager, or officer found personally and substantially responsible for the willful violation.
- DIR registration
- Registration with the Department of Industrial Relations under Labor Code 1725.5. Separate from the CSLB license, required to bid, to be listed in a bid, or to perform — and it reaches subcontractors.
Keep going
- Practice questions for Law & Business — Public Works is 5% of the exam.
- Job scenario: The School District Job
- Every number on one page — this guide’s figures alongside every other Law & Business guide’s.
Test yourself: 8 questions for this guide
A paid account adds more ways to practice and prepare: study questions after every chapter, practice questions for every topic, timed practice exams, and job scenarios drawn from real jobs. A free account gets you one timed practice exam and saves your progress across devices. Here is one of this guide's questions:
A private developer builds a retail center on its own land. The city contributes $500,000 toward the project, which costs $12 million in total. Is this public works?
AnswerYes. The de minimis test requires BOTH limbs: less than $600,000 AND less than 2 percent of total project cost. $500,000 clears the dollar figure but is about 4.2 percent of $12 million, so the subsidy is not de minimis and the project is subject to the chapter. Had this been a residential project on private property, the first question would instead be whether it is built under an agreement with a state agency, redevelopment successor, or local public housing authority.
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