Compliance or confusion? Six important lessons have been learned about the implementation of Labor Compliance Programs since the passage of AB 1506, which introduced districts to new state requirements and more state agency oversight of school facilities projects

Leadership, May-June, 2004 by Ernest Silva, Roland P. Williams

About a year ago, AB 1506 (Chapter 868, Statutes of 2002) initiated a hailstorm of speculation about increased school facility costs and impediments to funding approval. There was a perception that school construction would grind to a stop. AB 1506 introduced school districts to new state requirements and more state agency oversight. Labor Compliance Programs must now be approved by the Department of Industrial Relations.

AB 1506 requires districts using funds from Proposition 47 and this year's Proposition 55 to initiate and enforce, or contract with a third party to initiate and enforce, a Labor Compliance Program for school facility projects.

A year into the program we realized that the sky did not fall, and AB 1506 is becoming part of the school administrators' nomenclature. How did the apprehension of 2003 evolve into the reality of 2004? The simple answer is education. For a while it seemed that you could not attend a professional association meeting without receiving a briefing on labor compliance and prevailing wage. School administrators learned that the labor compliance mandate was not as onerous as expected. This article addresses six LCP implementation lessons learned over the past year.

Lesson 1: Construction trades have discovered school facilities

School facility projects, like other public works, have long been required to pay prevailing wages to trades workers. In essence, prevailing wage is a statutory requirement that all workers on a public work be paid the wage rate that the greatest number of similar trades workers earn.

Prior to recent legislative action, complaints and investigation of failure to pay construction workers the appropriate rate on a school project were the responsibility of the Department of Industrial Relations. Some labor advocates argued that DIR was inadequately staffed to perform sufficient reviews and investigations, particularly as the $25 billion school facilities bonds were being considered in the Legislature. Requiring an LCP for school projects shifts the burden for monitoring pay rates from the state DIR to the local school district.

In 2001, AB 1402 (Chapter 421, Statutes of 2001) required a Labor Compliance Program for districts wishing to use the new "design-build" construction delivery method. As the AB 16 (Chapter 33, Statutes of 2002) school facilities bond deal came together in 2002, the construction trades focused on school facilities.

During the negotiations, two important changes were made to the school facilities program. First, the requirement of a Labor Compliance Program for school facilities was added by amendments to AB 1506. Second, the membership of the State Allocation Board was expanded to include a person appointed by the governor, and Gov. Gray Davis appointed a regional director from the State Building and Construction Trades Council of California. In addition, the SAB's Implementation Committee now also includes a representative from the State Building and Construction Trades Council.

One important amendment to AB 1506 at the end of the 2002 legislative year created an alliance between school districts and the Construction Trades Council. On Aug. 29, AB 1506 was amended to require the State Allocation Board to increase the per-pupil student grant amounts to accommodate the state share of Labor Compliance Agreements by July 1, 2003.

However, law and politics do not always converge. While the implementation committee and the State Allocation Board drafted regulations to implement this provision, the recall intervened. Those proposed regulations were suspended for six months on Nov. 17, 2003 by Gov. Schwarzencgger's Executive Order S-2-03.

The Office of Public School Construction immediately requested an exception as provided for in the Executive Order, but the exception was denied. As a result, the statutory requirement to adopt and implement Labor Compliance Programs remains in place, but state funding does not.

The lesson is that while school administrators have gained an important ally in the building trades, facility funding issues remain contentious.

Lesson 2: Understand a third party provider's interests before signing a contract

The Legislature may not have been aware that it was creating a cottage industry when it approved AB 1506. The use of a third party administrator eased the burden on districts without sufficient staff.

There are a number of options that have emerged for school districts and county offices to implement Labor Compliance Programs. All of these options are viable and driven by specific local needs. Whatever option is selected, administrators should be cognizant of the interests of the provider beyond their own. Many of those approved by the DIR to date are affiliated with construction trade unions. Others are individuals with experience in some aspect of school finance. Some are construction firms including general contractors.

Districts should also be cautious in hiring firms with LCP experience in cities and counties, but no experience in working with school budgets and Office of Public School Construction audits. The complexity of school finance and special rules for facility construction accounting and auditing should caution school districts against paying to be used as guinea pigs.