NEW LEGISLATION IMPACTS RETENTION AND PAYMENT TERMS FOR PUBLIC WORKS PROJECTS

October 2011
Number 68

Governor Brown recently signed into law Senate Bill (SB) 293, which contains numerous changes to the law on public works construction contracts, including a requirement that the public entity withhold no more than 5% of the contract price as retention.

The Public Contract Code permits public entities to retain a percentage of the contract price from progress payments to a general contractor. Such “retention” is normally held by the public entity to cover, if necessary, the cost of defects or other issues arising from the work performed by the contractor and to cover stop notices if funds are available.  If not applied to cover the cost of such issues, retention funds are released following the completion of the project. Until now, public agencies have typically withheld 10% of the contract price, in reliance on Public Contract Code section 9203. Also, Public Contract Code section 7200 provides that the amount withheld by a public entity cannot exceed the percentage specified in the contract – in other words, the public entity cannot withhold more than it has been agreed upon in the construction contract.

SB 293 enacts a new statute, Public Contract Code section 7201, which provides that for contracts entered into after January 1, 2012, a public entity cannot withhold more than 5% of progress payments as retention. However, the new statute also provides that the public agency may withhold more than 5% on specific projects where the governing body of the public entity or designee finds that the project is “substantially complex” and therefore requires a higher retention amount. The findings must be made during a properly noticed and regularly scheduled public hearing prior to the bid and must be included in the bid documents, along with the higher retention amount.

Public Contract Code section 7201 is in effect until January 1, 2016, at which time it will be deemed repealed unless a new statute is enacted before that time. SB 293 includes similar provisions relating to the 5% retention cap for state entities under section 10261 of the Public Contract Code. However, SB 293 does not address section 9203, and therefore clean-up legislation may be needed.

Because this new legislation limits the amount a public agency can withhold as retention, agencies are well-advised to carefully track and, when possible, predict potential damages and costs incurred during the course of a project. If the withheld retention is not sufficient to cover the project’s damages and costs, then the agency may be forced to withhold from progress payments (assuming the contract permits it).

SB 293 also amends section 7108.5 of the Business and Professions Code, shortening the time by which a prime contractor or subcontractor must pay subcontractors from 10 days after receipt of each progress payment down to 7 days.

If you have questions or would like additional information on issues regarding managing public works projects, please contact one of our eight offices located statewide, visit our website, or follow Lozano Smith on Facebook.

Written by:

Ruth Mendyk
Shareholder and Facilities & Business Practice Group Co-Chair
Fresno Office
rmendyk@lozanosmith.com

Anne Collins
Associate
Sacramento Office
acollins@lozanosmith.com

© 2011 Lozano Smith

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NEW LEGISLATION REQUIRES PROP 39 AUDITS TO BE ANNUALLY REVIEWED BY CITIZENS’ OVERSIGHT COMMITTEE

October 2011
Number 67

Senate Bill (SB) 423 requires a school district, community college district, or county office of education to submit the performance and financial audits required for its Proposition 39 (Prop. 39) general obligation bond to the agency’s citizens’ oversight committee by March 31 each year. Prop. 39 amended theCaliforniaconstitution to allow a school district, community college district, or county office of education to pass a bond for the construction, reconstruction, rehabilitation, or replacement of school facilities by 55% voter approval, so long as the proposition seeking the bond required certain specific accountability measures. Two of the accountability measures are completing an annual, independent performance and financial audit and forming a citizens’ oversight committee to review and make recommendations regarding the use of bond proceeds. This new bill amends Education Code section 15286 to clarify that the audits should be reviewed on an annual basis by the citizens’ oversight committee.

If you have any questions regarding SB 423 or bond funds, please contact one of our eight offices located statewide, visit our website, or follow Lozano Smith on Facebook.

Written by:

Megan Macy
Shareholder and Facilities & Business Practice Group Co-Chair
Sacramento Office
mmacy@lozanosmith.com

Anne Collins
Associate
Sacramento Office
acollins@lozanosmith.com

© 2011 Lozano Smith

GOVERNOR SIGNS INTO LAW TWO BILLS RELATING TO PUBLIC EMPLOYEE ORGANIZATIONS

October 2011
Number 65

Governor Brown recently signed two bills relating to public sector labor laws. Senate Bill (SB) 609 limits the Public Employment Relations Board (PERB) to 180 days to decide appeals for unit certification and representation cases. Assembly Bill (AB) 646 amends the Meyers-Milias-Brown Act (MMBA) to require fact-finding before a public agency can implement its last, best and final offer.

SB 609
Under existingCalifornialabor laws, public employees have a right to organize and form bargaining units for purposes of representation and collective bargaining. These laws are administered by PERB and, among other duties, PERB rules on contested matters relating to the recognition, certification or decertification of public employee organizations. Recognition disputes can be appealed directly to the appointed PERB Board itself as a final step in the PERB administrative process.

SB 609, which Governor Brown signed on September 6, 2011, amends several public sector labor laws to limit the Board’s time to decide an appeal in a disputed representation case. Prior to the passage of SB 609, there was no time limitation for Board decisions to be made. SB 609 now gives the Board only 180 days to rule on an appeal from a PERB administrative law judge’s (ALJ) proposed decision regarding the recognition or certification of an employee organization.

The 180 days begins on the date the appeal is filed with the Board. Under the new legislation, the ALJ’s proposed decision is deemed to be the Board’s final order on the appeal if the Board fails to issue its decision within the 180 day time frame.

SB 609 affects the Educational Employment Relations Act (EERA), which applies to public school and community college employees, and the MMBA, which applies to municipal and public agency employees, and other labor acts administered by PERB.

AB 646
On October 9, 2011, the Governor signed AB 646 amending the MMBA to require fact-finding when public agencies and special districts reach impasse in negotiations. The MMBA requires public agencies and special districts to meet and confer in good faith regarding wages, hours and other terms and conditions of employment with representatives of recognized employee organizations. Under the MMBA, if the representatives of the agencies and the employee organization fail to reach an agreement, they may, but are not required to, mutually agree on the appointment of a mediator and equally share the cost.

Prior to the passage of AB 646, if the parties reached impasse, the MMBA provided that a public agency or special district could unilaterally implement its last, best and final offer. AB 646 now authorizes the employee organization to request that the matter be submitted to a fact-finding panel.

The fact-finding panel will consist of one member selected by each party as well as a “neutral” selected by agreement of the parties. The fact-finding panel is authorized to make investigations and hold hearings, and to issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence.

The new legislation prohibits a public agency or special district from implementing its last, best and final offer until at least 10 days after the fact-finder’s written findings of fact and non-binding recommended terms of settlement have been submitted to the parties, and the agency has held a public hearing regarding the impasse.

If you have any questions about these new laws or how they relate to your labor operations, please contact one of our eight offices located statewide, visit our website, or follow Lozano Smith on Facebook.

Written by:

Jenell Van Bindsbergen
Associate
Fresno Office
jvanbindsbergen@lozanosmith.com

Regina Garza
Associate
Fresno Office
rgarza@lozanosmith.com

Darren Kameya
Senior Counsel
Los Angeles Office
dkameya@lozanosmith.com

© 2011 Lozano Smith

TWO NEW LAWS MAY IMPACT SOLAR PROJECTS INSTALLED ON PUBLICLY OWNED SITES

October 2011
Number 64

Governor Brown has signed two bills relating to public agency renewable energy projects. Senate Bill (SB) 136 requires the payment of the prevailing wage to workers who construct renewable energy generation and energy efficiency improvement projects on public property, even when those projects are financed and owned by private entities. SB 226 adds the installation of solar energy systems on the roof of an existing building or in an existing parking lot to the types of projects that are categorically exempt from compliance with the procedures set forth in the California Environmental Quality Act (CEQA). Both bills signal that the Legislature is aware of some of the key issues – such as prevailing wages and CEQA compliance – that arise as public agencies increasingly consider undertaking renewable energy projects.

SB 136
The California Labor Code requires public entities to require contractors to pay prevailing wages on public works projects where more than $1,000 in public funds is used to fund the project in whole or in part. The prevailing wage rate of per diem wages is determined by the director of the Department of Industrial Relations (DIR) and is required in order to ensure that a contractor is not awarded such a contract based on paying lower wage rates to employees.

Until the enactment of SB 136, it has been unclear whether a private entity must pay prevailing wages when constructing renewable energy generation and energy efficiency improvement projects, including solar photovoltaic projects, on public property for the benefit of a public agency. In 2010, the DIR issued non-precedential enforcement decisions finding that work performed pursuant to a private power purchase agreement, under which a private entity constructs and owns a renewable energy project, is not subject to prevailing wage requirements.

SB 136 adds renewable energy generation and energy efficiency improvement projects to the list of projects that require payment of prevailing wages to workers. The bill also expands the definition of “public works” to include work done under private contract for the construction or maintenance of renewable energy generating capacity when more than 50 percent of the energy generated is purchased or will be purchased by the public entity, or for energy efficiency improvements when those improvements are primarily intended to reduce energy costs that would otherwise be incurred by the state or one of its political subdivisions.

SB 226
Effective January 1, 2012, SB 226 exempts solar projects from CEQA. CEQA requires that the environmental effects of a public project be evaluated and gives the public opportunity to voice their concerns. CEQA also contains categorical exemptions for certain types of projects, meaning that those projects are not subject to CEQA’s environmental assessment requirements. SB 226 now categorically exempts the installation of solar energy systems installed on the roof of an existing building or in an existing parking lot. The exemption does not apply if the project requires certain federal permits; the removal of a tree legally required to be planted, maintained, or protected unless that tree dies and there is no requirement to replace it; or the removal of a native tree over 25 years old.

Recent years have seen an explosive trend in public agencies undertaking renewable energy projects, either through power purchase agreements financed by private entities or with the agency’s own funds. These two bills will help shape such transactions in the future.

LOZANO SMITH has extensive experience evaluating, structuring and negotiating solar electricity and other energy conservation projects for public agencies. If you have questions about your agency’s options for such projects, or for more information about available incentives, please contact one of our eight offices located statewide, visit our website, or follow Lozano Smith on Facebook.

Written by:

Devon Lincoln
Senior Counsel
Monterey Office
dlincoln@lozanosmith.com

Rachel Gardunio
Associate
Walnut Creek Office
rgardunio@lozanosmith.com

© 2011 Lozano Smith

GOVERNOR SIGNS INTO LAW FOUR BILLS AFFECTING ELD STANDARDS, SOCIAL SCIENCE INSTRUCTION, SCHOOL LUNCH PROGRAMS, AND STUDENT TRANSPORTATION

October 2011
Number 63

Between October 4 and October 8, 2011, Governor Brown approved four bills that directly impact school districts throughout the state. Assembly Bill (AB) 124 establishes a process to update, revise and align the English Language Development standards to the common core state standards in English language arts.AB 199 encourages instruction in social sciences for grades 7 to 12 to include instruction regarding the role of Filipinos in World War II. AB 402 authorizes a school district or a county office of education to incorporate CalFresh program information in the School Lunch Program application. Finally, Senate Bill (SB) 929 requires children under eight years old to remain in booster seats, unless they are 4 feet, 9 inches tall, potentially impacting district transportation policies and practices.

AB 124: English Language Development Curriculum Standards
Current law requires the State Board of Education (SBE) to approve English Language Development (ELD) standards for students whose primary language is other than English that are comparable in rigor and specificity to the standards adopted for English language arts.

In 1999,Californiaadopted ELD standards for listening, speaking, reading and writing. On August 2, 2010, the SBE adopted common core state standards for English language arts. AB 124 amends Education Code section 60811 and adds Education Code section 60811.3 to require the State Superintendent of Public Instruction and the SBE to ensure that ELD standards are aligned with the English language arts common core state standards. AB 124 further requires the State Superintendent to convene a group of experts to assist in the process of updating and revising the ELD standards. The State Superintendent must present the updates and revisions to the SBE on or before August 31, 2012, and the SBE must adopt, reject or revise the standards by September 30, 2012. The provisions of AB 124 will be repealed as of July 1, 2013.

AB 199: World War II Social Science Instruction
Existing law requires the adopted course of study for grades 7 to 12 to include instruction on World War II and the American role in the war. AB 199 amends Education Code section 51221.3 and encourages social science instruction to include an accurate history of the contributions of the Filipino American veterans in the U.S. Army in World War II. In addition, AB 199 encourages this instruction to include a component drawn from personal testimony, particularly in the form of oral or video histories of Filipinos who were involved in World War II, as well as those who contributed to the war effort at home.

AB 402: CalFresh Program and School Lunch Program Application
Current law requires school districts to provide one nutritionally adequate free or reduced-price meal during each school day to kindergarten through twelfth grade students, and to make applications for free and reduced-price meals available to students. CalFresh is another food program for low-income individuals funded through the United States Department of Agriculture.

AB 402 amends Education Code section 49558, adds Education Code section 49577.3, and adds section 18901.55 to the Welfare and Institutions Code. The bill authorizes a school district to facilitate student enrollment in the CalFresh program by agreeing to share student information provided on the School Lunch Program application with the local agency that determines CalFresh program eligibility. AB 402 specifies that the School Lunch Program application is confidential and prohibits the information from being disclosed to any governmental agency, including the federal Immigration and Naturalization Service and the Social Security Administration, or for any purpose other than enrollment in the CalFresh program. AB 402 further requires districts to enroll children in the CalFresh program upon receipt of a signed application.

SB 929: Booster Seats
Existing laws governing transportation of children in vehicles require a child that is under six years of age and weighs less than sixty pounds to be secured in a rear seat in a child passenger restraint system, also known as a booster seat. SB 929 makes changes to these existing laws by requiring any child who is under eight years of age to be secured in a booster seat; however, children who are under eight years of age who are also at least four feet, nine inches tall may be restrained by a safety belt, rather than a booster seat. SB 929 may impact school districts’ policies and practices regarding private field trip transportation for students.

If you have any questions regarding this new legislation, please contact one of our eight offices located statewide or visit our website.

Written by:

Sloan Simmons
Shareholder and Student Practice Group Co-Chair
Sacramento Office
ssimmons@lozanosmith.com

Courtenay Bravmann
Associate
Walnut Creek Office
cbravmann@lozanosmith.com

© 2011 Lozano Smith

GOVERNOR SIGNS TWO BILLS ADDRESSING STUDENT BULLYING

October 2011
Number 62

On October 9, 2011, Governor Brown signed into law Assembly Bill (AB) 9 and AB 1156, two bills aimed at preventing student bullying in schools.

AB 9
TheSafe Placeto Learn Act, codified in Education Code section 234 et seq., requires school districts to adopt a policy that prohibits discrimination and harassment based upon disability, gender, nationality, race or ethnicity, religion, sexual orientation, or association with a person or group with one or more of these actual or perceived characteristics. School districts must also adopt a process for receiving and investigating such complaints of discrimination and harassment. The policies must be publicized to students, parents, district employees and members of the public, and must be posted in all schools and offices.

AB 9 amends theSafe Placeto Learn Act, requiring school district policies prohibiting discrimination and harassment to also prohibit intimidation and bullying based upon the same actual or perceived characteristics. The process for receiving and investigating such complaints now requires school personnel who witness discrimination, harassment, intimidation or bullying based upon the characteristics listed above to take immediate steps to intervene when safe to do so. The process must also include a timeline to investigate and resolve complaints, and an appeal process. The California Department of Education will develop a model handout. The amendments are operative on July 1, 2012.

AB 1156
AB 1156 addresses bullying in three different contexts. First, the bill amends Education Code sections 32261, 32282 and 32283 to add bullying to school safety and crisis response plan training.

Second, AB 1156 amends Education Code section 48900 and the definition of bullying for the purpose of student discipline. Under AB 1156, bullying means any severe or pervasive act, including written or electronic communications, including but not limited to sexual harassment, hate violence or harassment, threats or intimidation, that causes: a student to fear harm to his or her person or property; substantial harm to a student’s physical or mental health; substantial interference with a student’s academic performance; or substantial interference with a student’s ability to participate or benefit from school services, activities, or privileges.

Finally, AB 1156 amends Education Code section 46600 regarding agreements for interdistrict attendance. If a student has been a victim of an act of bullying by a student of the school district of residence, as determined by personnel of either the school district of residence or the school district of proposed enrollment, the student victim must be given priority for interdistrict attendance under any existing interdistrict attendance agreement, or in the absence of an agreement, must “be given additional consideration for the creation of an interdistrict attendance agreement.” AB 1156 is effective July 1, 2012.

If you have any questions regarding these new bills, or any other questions regarding bullying or interdistrict transfers in general, please contact one of our eight offices located statewide or visit our website.

Written by:

Sloan Simmons
Shareholder and Student Practice Group Co-Chair
Sacramento Office
ssimmons@lozanosmith.com

Kirsten Kuitu
Associate
Fresno Office
kkuitu@lozanosmith.com

© 2011 Lozano Smith

NEW LEGISLATION ADDRESSES LABOR ISSUES RELATED TO PUBLIC WORKS PROJECTS

October 2011
Number 61

Two bills signed by Governor Brown directly affect labor issues on public works projects. Assembly Bill (AB) 587 renews existing law exempting volunteer labor from prevailing wage requirements. Senate Bill (SB) 922 authorizes public agencies to enter into project labor agreements to avoid delays and interruptions on construction projects.

AB 587
Labor Code section 1720.4 permits public agencies to use volunteer labor without paying prevailing wages. A volunteer is “an individual who performs work for civic, chartable, or humanitarian reason for a public agency . . . without promise, expectation, or receipt of any compensation for work performed.” This provision of the Labor Code was going to sunset at the end of 2011. AB 587 extends this provision for another five years, until January 1, 2017.

SB 922
SB 922 authorizes public agencies to enter into, and to require contractors to enter into, project labor agreements prior to awarding a contract for construction of a public works project to avoid delays and interruptions to construction caused by strikes, lockouts or work stoppages. In recent years, public agencies have increasingly relied on project labor agreements with contractors and labor unions to gain certainty that public construction projects will not be interrupted by labor unrest. In turn, the project labor agreements reduce the chances of cost overruns or delays as a result of such interruptions.

Project labor agreements have been the subject of some controversy and litigation. SB 922 codifies the legality of such agreements, but also places certain restrictions and requirements as to the terms. Specifically, Public Contract Code section 2500 requires that any project labor agreement include five “taxpayer protection provisions”:

(1) The agreement prohibits discrimination based on race, national origin, religion, sex, sexual orientation, political affiliation, or membership in a labor organization in hiring and dispatching workers for the project;

(2) The agreement permits all qualified contractors and subcontractors to bid for and be awarded work on the project without regard to whether they are otherwise parties to collective bargaining agreements;

(3) The agreement contains an agreed-upon protocol concerning drug testing for workers who will be employed on the project;

(4) The agreement contains guarantees against work stoppages, strikes, lockouts, and similar disruptions of the project; and

(5) The agreement provides that disputes arising from the agreement shall be resolved by a neutral arbitrator.

In short, project labor agreements on public works projects are now expressly permitted underCalifornialaw, thus eliminating some of the uncertainty and controversy surrounding them.  However, a public agency must not forget to include the above required terms in any such agreement.

If you have any questions about this new legislation or construction issues generally, please contact one of our eight offices located statewide or visit our Construction Advice and Litigation page on our website.

Written by:

Megan Macy
Shareholder and Facilities and Business Practice Group Co-Chair
Sacramento Office
mmacy@lozanosmith.com

Arne Sandberg
Senior Counsel
Walnut Creek Office
asandberg@lozanosmith.com

© 2011 Lozano Smith