Clarification a Registration Requirements Under SB 854

ELLISON WILSON ADVOCACY, LLC

GOVERNMENTAL AFFAIRS – LEGISLATIVE ADVOCACY

July 14, 2014

Department of Industrial Relations Office of Policy, Research, and Legislation (OPRL)

Re: Clarification a Registration Requirements Under SB 854

To Whom It May Concern:

I am writing on behalf of our client, the California Construction Trucking Association (“CCTA”) regarding information being disseminated by DIR staff that does not appear to be consistent with the law. Specifically, DIR staff is advising our members that they need to register (and pay a $300 fee) as contractors in order to perform work on public works projects.By way of background, CCTA, formerly known as the California Dump Truck Owners Association (CDTOA), is a 501(c)(6) trade association incorporated in 1941. CTTA represents over 1,000 construction industry related trucking compm1ies ranging in size from 1 truck to over 350 trucks whose business constitutes over 75% of the hauling of dirt, rock, sand, and gravel operations in the State. CCTA’s member employers provide work for approximately 4,000 drivers, mechanics, support personnel and managers. Approximately 60% of its members are sole proprietors- small one-truck independent owner-operators. CCTA’s members are dump truck operators, as well as a large segment of the construction industry that hauls oversized and overweight off-road vehicles and materials, plus lowbed/heavy-haulers, concrete pumpers, flatbeds, water trucks, oil tankers, pneumatics, concrete pumps, mixers and even street sweepers. Our members do not have contractor’s licenses issued by the Contactor’s State License Board, as they do not actually work on construction sites, but rather merely pick up and deliver materials to and from construction sites.

As you know, SB 854 was one of the recently enacted budget trailer bills, and it made some changes to the labor code, including the enactment of new section, Labor Code section 1725.5. That section provides, in pertinent part:

A contractor shall be registered pursuant to this section to be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any public work contract that is subject to the requirements of this chapter. For the purposes of this section, “contractor” includes a subcontractor as defined by Section 1722.1.

The section also provides for a $3 00 annual fee for registration.

As relevant here, the new registration requirement is expressly limited to “contractors” although it also applies to “a subcontractor as defined by Section 1722.1.” Labor Code section1722.1 provides as follows:

For the purposes of this chapter, “contractor” and “subcontractor” include a contractor, subcontractor, licensee, officer, agent, or representative thereof, acting in that capacity, when working on public works pursuant to this article and Article 2 (commencing with Section 1770).

Our members are neither contractors nor subcontractors, nor are they licensees, officers, agents, or representatives of contractors or subcontractors. Rather, they are material providers who often are hired by contractors or subcontractors to haul material to and from construction sites, but they do so as independent contractors of the hiring contractors or subcontractors, not as their agents or representatives.

Our client relayed to us that one of our members contacted various DIR staff (including Ms. Ying Wu and Mr. Christopher Kim) and was informed that she and other trucking companies were in fact required to comply with registration requirements in order to work on public works projects. When confronted with the fact that DIR’s own online registration system (see https://efiling.dir.ca.gov/PWCR/ActionServlet?action=displayPWCRegistrationForm) requires the registrant to input their contractor’s license#, (which our members do not have), we are informed that Ms. Wu told our member that DIR would provide trucking companies a “fake” number so they could register.

The law traditionally treats our members differently than contractors, despite the fact that our members are indirectly involved in construction projects. For example, Business and Professions Code section 7108.6 requires “contractors” to pay:

all transportation charges submitted by a duly authorized motor carrier of property in dump truck equipment by the 20th day following the last day of the calendar month in which the transp0rtation was performed, if the charges, including all necessary documentation, are submitted by the fifth day following the last day of the calendar month in which the transportation was performed.

However, as to the payments between contractors and subcontractors, a different law applies. The immediately preceding statute, Business and Professions. Code section 7108.5, requires:

A prime contractor or subcontractor shall pay to any subcontractor, not later than seven days after receipt of each progress payment, unless otherwise agreed to in writing, the respective an amounts allowed the contractor on account of the work performed by the subcontractors ….

These two “prompt -pay” statutes are significantly different. Subcontractors get paid within seven days of receipt of a progress payment, whereas our members must wait between 15 and 50 days to get paid. There would be no reason for the Legislature to enact such radically different prompt pay statutes if our members are in fact considered “subcontractors” under section 7108.5.

Indeed, such an interpretation would render section 7108.6 as surplusage. In statutory construction, “[a] construction making some words surplusage is to be avoided.” (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1387.) Any interpretation that our members were in fact subcontractors would render an ‘entire code section surplusage.

Because our members have never been deemed contractors or subcontractors in any context, I am respectfully requesting that you correct, in writing, the erroneous statements by DIR staff that our members (and all motor carriers similarly situated) are subject to the registration requirement. Alternatively, if you believe that our members are indeed subject to the registration requirement of Labor Code section 1725.5, please explain your interpretation of the law.

Thank you in advance for your prompt response.
Sincerely,

Brooks Ellison
General Counsel for CCTA