Bill on Governor Brown’s Desk Would Expand the Underground Economy

John Loudon
Executive Director, California Construction Compliance Group

Several weeks ago, the California Labor Commissioner reported that 70 workers would receive over $200,000 in wages cheated from them by their employers. That same day, the California Senate sent a bill to the Assembly to defund the very same group that uncovered the wage theft. Partisans in the Assembly have now sent the bill to Governor Brown who should swiftly veto it.

Why would California politicians defund a watchdog organization that recovers wages stolen from workers? Are Californian’s asking for this? Is the group accused of wrongdoing?

The answer is: No and No. The bill is sponsored by California labor unions and they are doing it under the guise they are looking out for the interests of nonunion workers.

SB 776 is authored by the Senate Democrat Majority Leader, Ellen Corbett (D-San Leandro) and sponsored by the State Building and Construction Trades Council.

In 2003, the same California labor unions pushed a provision to expand prevailing wage law to make taxpayers pay money into their labor management cooperation committees (LMCCs). Those are costs union contractors bear that non-union contractors do not on private projects. As these payments are now part of the California prevailing wage, taxpayers bear the cost on all public prevailing wage projects.

The public goal was to make both union and non-union contractors pay the same costs. Union bill sponsors publicly testified that they wanted to have those funds paid by non-union contractors to be used to “monitor and enforce the prevailing wage”. The one non-union group created to do exactly that is the one targeted for elimination by California unions.

Senator Corbett and the unions now say they want to eliminate those payments. They profess that they are just looking out for the paychecks of non-union workers–which would be refreshing—but failed to produce even one non-union worker who had complained or any data to prop up their claim such a bill would serve any public good.

Barring non-union contractors from contributing funds to fight the underground economy only means that fewer audits will be conducted and more workers will be cheated out of wages. Even scarier, SB 776 opens the chilling possibility that no one will look at union contractors at all.  How is that good for workers or law-abiding contractors?

Lower payroll means lower payroll taxes, lower insurance costs and lost revenue for the community. Honest contractors are perpetually losing business to contractors who use tricks to cheat their workers. The good companies and their workers benefit from the fight against the underground economy because it means fewer contracts lost to below market bidders. That preserves a healthy economy for all business.

While for most decent Californians, the battle lines are honest contractors united against dishonest contractors some in power still want the fight to be union versus non-union. A few vocal labor unions and California Assembly leaders have decided that fighting the underground economy by rooting out corruption and helping workers recover wages is less important than their partisan political interests. Governor Brown has an opportunity to show true statesmanship by vetoing a bill designed to benefit cheating contractors.

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