CCTA Continues to Question The DIR’s $300 Pay-to-Play Fee

On July 14, we sent a letter to DIR questioning this new $300 tax to work on a Public Works construction job site as a result of yet another labor backed bill.

Promptly on August 4, DIR sent a response back to us saying that “Yes” all workers employed by contractors and subcontractors in the execution of any contract for public work are deemed to be employed upon public work.” Than the response spins two other kind of related court decisions into state laws have concluded that trucking companies that worked for a contractor or subcontractor and preformed an integral part of the contract where really “subcontractors” too. A copy of the DIR response in located on our website.

Based on the DIR’s twisted logic, owner-operators are subcontractors (but brokers may not be) and are subject to the fee even though they are not licensed by the Contractors State Licensing Board (CSLB).
We will likely be following-up with another letter and a strategy to accept or oppose the fee as determined by the CCTA Board in October. Below are additional details and questions about the new program.

Essentials of DIR’s Contractor Registration Program:

  • Contractors (and others) will be subject to a registration and annual renewal fee that has been set initially at $300. The fee is non-refundable and applies to all contractors subcontractors and those who intend to bid or perform work on public works projects (as defined under the Labor Code).
  • Contractors will apply and pay the fee online and must meet minimum qualifications to be registered as eligible to work on public works:
    • Must have workers’ compensation coverage for any employees and only use subcontractors and others who are registered public works contractors.
    • Must have CSLB contractor license if applicable to trade.
    • Must have no delinquent unpaid wage or penalty assessments due to any employee or agency.
    • Not under debarment.
    • Not in prior violation of this registration requirement once it becomes effective. However, first time violators will be able to avoid 12 month disqualification by paying an additional penalty.
  • The registration fee is not related to any project.  It is more like a driver’s license in that it entitles the registrant to bid on and perform public works.
  • DIR will post a list of registered contractors and subcontractors on its website so that awarding bodies and contractors will be able to comply with requirement to only use registered contractors and subcontractors.
  • Various protections are built in so that:
    • Contractor won’t be in violation for working on a private job that is later determined to be public work;
    • Inadvertent listing of unregistered subcontractor on a bid will not necessarily invalidate that bid;
    • Contract with unregistered contractor or subcontractor is subject to cancellation but is not void as to past work;
    • Unregistered contractor or subcontractor can be replaced with one who is registered;
    • Contractor whose registration has lapsed given grace period within which to pay a late fee and renew.

We See Many Problems

You all need to think about this list of “SB 854 PW Registration Essentials” and how this will apply to you and your business. There are many questions that come to us right off the bat so to speak, such as:

  1. Are all truckers now going to have to be “listed” on a public works contract just like a subcontractor? Both brokers and all truckers? Who likes this and who doesn’t? If you have to pay the fee maybe you should get the benefits!
  2. Which truckers have to enroll? The broker, the trucker, either or both? No owner-operator quotes hauling for contractors. Will owner-operators be considered employees of the broker “for purposes of this regulation only” and not be subject to this fee? So if brokers are the bidders and truckers are the workers, than shouldn’t they be exempt like all other workers?
  3. DIR will have to fabricate and maintain a new state non-contractor licensing (CSLB) numbering system for brokers/truckers and all other non-contractor unlicensed entities that are part of the “integral execution of the contract.” We get the on-site work, how about on and off-hauling. Delivery of materials and equipment by third parties. When are they and aren’t they a material supplier? Are professional engineers and workers subject? UPS/FedEx deliveries to PW jobs subject?
  4. The workers’ comp requirement – who thinks all of this is not a slipper-slope and is not going to get screwed-up for owner-operators and brokers?
  5. Is DIR going to collaborate with the CSLB to show the new licensing number they are creating for non-licensed contractors/entities?
  6. “Must have no delinquent unpaid wage or penalty assessments due to any employee or agency” the owner-operator community will love this one. Will they report broker, contractor and producer late pays to DIR now and DIR will investigate? This may be good for the industry!
  7. “Debarment” won’t or can’t apply to truckers since that don’t really have a contractor’s license?
  8. Late registration penalty – is it the chicken or the egg?
  9. If you have any additional thoughts, please send them.

Who Wants to Bet?

Last month I easily guessed (as did 99% of you) that California while in the running for the Tesla/Panasonic giga-plant would never be chosen as a place to build it. The plant is slated to employ 6,500 workers. For all the reasons we are addressing this month in this issue and the continued blindness of the left. The tipping point is very close.