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Senate committee advances bill to standardize annualization of fringe benefits on public works
Summary
The Senate Labor Committee voted to pass AB 889 to the appropriations committee after testimony from construction unions and limited opposition, aiming to align California law with federal annualization rules and tighten enforcement against benefit underreporting on public works projects.
The California Senate Committee on Labor, Public Employment and Retirement on Monday voted to pass AB 889 to the Committee on Appropriations, a bill that would require employers to annualize non-hourly fringe benefit payments for workers on public works projects and strengthen enforcement tools for the labor commissioner.
AB 889, introduced to the committee by an Assembly member presenting the bill, would conform state law to federal Department of Labor rules by specifying that payments an employer makes that are not paid directly to a worker — for example, monthly health plan premiums or quarterly contributions to retirement plans — must be converted into an hourly rate (annualization) when used to satisfy prevailing wage obligations on public works.
Why it matters: Supporters said the change would prevent contractors from exploiting loopholes and underbidding responsible employers by failing to distribute the full value of benefits over workers’ hours. Opponents urged clarification on how certain training contributions should be treated.
Matt Cremins, representing the California Nevada Conference of Operating Engineers, described the bill as “statutory clarity” and told the committee it would prevent “prevailing wage fringe benefit fraud” by ensuring lump-sum benefit payments are converted to hourly amounts for public works prevailing-wage calculations. Keith Dunn of the District Council of Ironworkers said the bill would protect taxpayers and responsible employers by “normaliz[ing] and be[ing] consistent with federal law and 49 other states.”
Opposition testimony focused narrowly on apprenticeship and training-contribution treatment for journey-level workers. Richard Markerson of the Western Electrical Contractors Association and others asked for amendments clarifying whether journey-worker training contributions — which fund apprenticeship programs rather than directly benefitting the contributing journey worker — must be annualized. They said existing Department of Industrial Relations (DIR) determinations have treated those contributions differently and asked for language preserving contractors’ ability to direct contributions to apprenticeship programs.
The committee recorded a motion to pass AB 889 to appropriations. The roll call recorded senators Smallwood Cuevas, Strickland, Cortese and Laird voting in favor; the committee report showed the measure advancing to Appropriations.
