SB 975: Is it Bad News for California Real Estate Development?

In 2001, then California Governor Gray Davis signed SB 975 into law. The bill's aim was to require public works projects funded under the California Industrial Development Financing Act. to pay prevailing wages. The bill redefined public works to include works that were paid in whole or in part with public funds. Further, public funds were defined to include payments, transfers, credits, reductions, waivers: basically any type kind of public subsidy, even including a waiver of fees. The broadening of these terms, can mean that a "private project," suddenly is considered a "public works," simply by accepting government incentives to build the project.

The implications of law are significant because once a project is considered a "public work," it is subject to certain laws that require payment of prevailing wages. The paying of prevailing wages is likely to increase the average cost of a development project. This article discusses the prevailing wage law both before and after , and analyzes possible exemptions both within and outside of the statute. It also surveys current legislative and constituent responses to SB 975 and presents potential strategies for coping with the law, from a Developer's perspective.

Background for SB 975 -- Preexisting Statutory Scheme and Case Law

Prior to SB 975, California Labor Code §1720 provided that construction, alteration, demolition, or repair work were subject to prevailing wages if performed under contract and if "paid for in whole or in part out of public funds." However, §1720 (all unlabeled statutory citations are to the California Labor Code) did not define "paid for . . . out of public funds," which resulted in numerous Department of Industrial Relations administrative decisions and court cases interpreting the meaning of that phrase.

The seminal case on when prevailing wages applied to a project was McIntosh v Aubry (1993) 14 Cal.App. 4th 1576. The court found that prevailing wages applied when there is a payment by a public entity, which includes a state or political subdivision, and any city or county agency or a redevelopment agency. But prevailing wages did not apply under McIntosh when a public entity forgoes income or payments (i.e., a forbearance). In McIntosh, Riverside County agreed to place and pay for minors in a residential care facility on its completion, to sublease to the contractor for no rent the land on which the facility would be constructed, to absorb inspection costs and project management costs normally charged by the county, and to lend the contractor funds for payment of bond premiums. 14 Cal.App.4th at 1582. By requiring prevailing wages when a public entity forgoes income or payments, SB 975 overturned this case.

Preexisting Determination Letters and Appeals

Beginning in fall 2000, the Department of Industrial Relations (DIR), through a series of administrative decisions, began redefining the public funding standard to chip away at the pro-developer or pro-contractor payment/forbearance distinction that was made in McIntosh. See, e.g., Decision on Admin. Appeal of Pub. Works Case No. 2000-006, SPCA-LA Companion Animal Village & Educ. Ctr. (Aug. 24, 2001); Public Works Case No. 2000-011, Town Square Project, City of King (Dec. 11, 2000); Decision on Admin. Appeal of Pub. Works Case No. 2000-015, Downtown Redev. Plan Projects City of Vacaville (Mar. 22, 2001); Public Works Case No. 2000-043, 13th & F Street Townhouse Dev., City of Sacramento (Jan. 23, 2001). These decisions greatly expanded the definition of public funding under McIntosh and applied prevailing wages to private projects interrelated with public infrastructure projects, and private projects receiving the equivalent of any public funds. SB 975 codified these DIR decisions, largely through the lobbying efforts of the State Building and Construction Trades Council (Council), with the support of various unions and councils.

COMMENT: The DIR issues its decisions in the form of determination letters and appeals of determination letters that interpret prevailing wage laws and decide whether a project is a public work. Labor Code §90.5. See also Lusardi Constr. Co. v Aubry (1992) 1 Cal. 4th 976, 988. They may be obtained from the Department of Industrial Relations. Public Works Case decisions used to be precedential, but Governor Schwarzenegger's Executive Order S-2-03 stopped that practice. The determinitations should be considered advice letters to specific individuals or entities about particular projects. Public Work Case determinations should be considered advisory only.

New Definition of Public Funding: Beware of Public Entities Bearing Gifts

By defining "paid for in whole or in part out of public funds," SB 975 greatly expanded the law of prevailing wages, making virtually any tangible benefit emanating from a public entity in favor of a Developer a payment of public funds. The following types of "payments" will trigger payment of prevailing wages under SB 975.

Payments by Public Entity Directly to or on Behalf of Public Works Developer

Under McIntosh, this type of payment, which may be of money or its equivalent, includes cash and negotiable paper, and property of value that may be converted into cash. See 14 Cal.App.4th at 1588.

Performance of Construction Work by Public Entity in Execution of Project

This applies when the public entity performs some of the work for the contractor or pays for "activities integrally connected to the construction of the project." For example, in Town Square Project, supra, the City incurred approximately $300,000 in "site assembly costs," including business relocation expenses, legal fees and appraisers' fees, and engineering and relocation costs to acquire and prepare the project site for the project.

Transfers of Assets of Value for Less than Fair Market Price

This occurs when a Developer receives discounted land sales or exchanges any other asset at a reduced rate. For example, in Town Square, supra, to induce business development, the City rewarded qualified investors with the equivalent of "free land" to accommodate their business. The DIR determined that the giveaway was a payment of public funds for construction. Land sales for fair reuse value (see Health & S C §33433), where restrictions and conditions imposed by the public entity result in a decreased value of the property and hence a reduced price, are risky, however, but may avoid triggering prevailing wages. (This focus on fair market value in asset transfers will increase transaction costs, because more appraisals will be necessary, not to mention the increase in costs if prevailing wages are required.)

Developer's Contractual Obligations that Public Entity Pays, Reduces, Waives, or Forgives

Fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations normally required of the Developer in the execution of a contract, which are paid, reduced, charged at less than fair market value, waived, or forgiven. This includes relief or benefit waived by the public entity or paid by one public entity on behalf of the Developer to another public entity (e.g., payment by a redevelopment agency of applicable county fees on behalf of a developer). The DIR ruled that a redevelopment agency's payments of plan check fees, costs normally borne by the developer, subsidized the project's construction and constituted a payment out of public funds. See Vacaville, supra. Similarly, takeout loans by public entities secured by private projects may not be deemed public works, but are risky because the DIR or a court could find that the promise of the loan was integral to the construction of the project.

Money to be Repaid on Contingent Basis

The discounting or forgiveness of a loan offered to the developer by the public entity will trigger the prevailing wage law. See Sacramento, supra.

Credits Applied Against Repayment Obligations

In Town Square, supra, the redevelopment agency provided a credit in the amount of $1,072,500 (the exact amount of the promissory note made by the developer to the agency), and the DIR ruled that these credits were payments of public funds for construction.

Expanded Definition of Public Works

In addition to expanding the definition of public funding, SB 975 also expanded the definition of work subject to prevailing wages to include "installation" (Labor Code §1720(a)(1)), codifying an earlier DIR determination (Public Works Case No. 99050, Installation of Gym Lockers, Bleachers, Basketball and Volleyball Equip., Dennis J. Amoroso Constr. Co., SW Interiors, Inc./Windsor Unified High Sch. Dist. (Nov. 10, 1999)) so that otherwise qualifying installment projects would be subject to prevailing wages.

Exemptions From Public Works

SB 975 created certain carve-outs from the definition of public works that generally favor residential (particularly low-income housing) projects over commercial projects. These carve-outs and the types of projects they affect do not trigger the prevailing wage law requirements.

Private Residential Projects Built on Private Property, if not Built Pursuant to Agreement with Public Entity

This exemption applies to private residential projects on private property that are not built pursuant to an agreement with a state agency, redevelopment agency, or local public housing authority. It does not apply to private commercial projects on private property. Moreover, the exemption may be narrower than it appears since, given past DIR decisions, it may apply to certain agreements between private parties when a public entity contributes to the project, even though it is not a party to the agreement. See SPCA-LA, supra.

Public Infrastructure Without Proprietary Interest

This exemption allows public entities to require a private developer to perform certain public work improvements without triggering prevailing wages, provided the public entity contributes no more money, or its equivalent, than the cost of the improvement and maintains no interest in the overall project. Accordingly, private projects that are required to construct public infrastructure (for example, roads, sidewalks, or sewers) can accept development incentives from local agencies up to the full cost of the infrastructure without triggering prevailing wages on the entire project. Prevailing wages will, however, be required on the public infrastructure portion of the project.

CAVEAT: The statute does not define "proprietary interest," but it appears to apply in situations where a public entity receives income from the Developer or project. Specifically, it seems to refer to "work [that] is supervised, owned, utilized or managed by an awarding body." Public Works Case No. 99074, Silverado Creek Apartments, Napa Community Redev. Agency (Sept. 27, 2000).

Until the DIR and the courts provide some guidance and define what constitutes a "proprietary interest," Developers should be wary of using this exemption. In particular, they should avoid situations in which (1) the public entity receives future payment or income from the developer or infrastructure; or (2) the public infrastructure constructed generates revenue to the public entity. Additionally, Developers should be careful using sales tax from a project to pay the project's development fees. Such an arrangement often requires a guarantee by the Developer that the project will generate a specific amount of sales tax revenue to the applicable public entity.

If the project fails to generate the required sales tax revenue, Developers often are required to pay the city to make up the shortfall, or the city will place a lien on the project. The DIR or a court could find that, in these circumstances, a city has a "proprietary interest" in the project, thus subjecting the entire project to prevailing wage requirements.

Reimbursement for Costs Normally Borne by Public

This exemption applies when a public entity reimburses a Developer for its costs in constructing public infrastructure planned for by the public entity (e.g., for anticipated future development) and not required as part of the Developer's project. Again, until the DIR or courts define this exception, Developers should take a conservative approach when relying on it.

De Minimis Public Subsidies

This exemption applies to public subsidies that are de minimis in the context of the project. One of the attorneys at DIR guessed that this exemption would be a small percentage, perhaps no more than 1 percent of benefit relative to overall project costs. This exemption may overrule SPCA-LA, supra, in which the DIR refused to find a de minimis exception to paying prevailing wages where the project subsidy was $14,500 and overall project costs were $1,500,000. Further definition is needed from the legislature, DIR, or judiciary before Developers can rely on this exemption.

Low-Income Housing and Other Specific Exemptions

In addition to the less specific exemptions described above, existing law (Labor Code §1720) exempts from prevailing wage requirements specified low- and moderate-income housing projects (§1720(c)(3)), as well as projects involving properties that generate tax credits due to their relation to specified high-technology industries, including manufacturing, processing, refining, fabricating, recycling, pollution control, computers, biotechnology, biopharmaceutical, space vehicles and satellites, and telecommunications. Labor Code §1720(c)(4). It also exempts certain low-income housing projects supported by tax credits or public financing if they satisfy certain criteria. See §1720(d)(e).

Preapproved Nonprofit Community Organization Facilities

An additional exemption from "public works" that existed prior to passage of SB 975 is for otherwise qualifying volunteer labor on a public work of improvement involving facilities used primarily by nonprofit community organizations, if the improvement will not adversely impact employment and is approved by the DIR. Labor Code §1720.4.

Nonretroactive Application of SB 975

The DIR has announced that it will not enforce SB 975 retroactively. Specifically, DIR stated that it would not enforce SB 975 with respect to projects that were first advertised for bids before January 1, 2002, or which were the subject of a contract (e.g., a Disposition and Development Agreement) entered into before that date. See DIR, Important Notice to Awarding Bodies and Other Interested Parties Concerning the New Amendments to Labor Code Section 1720(a) (Nov. 5, 2001); Holton, supra

Enforcement of SB 975; Defenses

The DIR has 180 days to bring a prevailing wage claim after the later of either (1) the filing of a valid notice of completion, or (2) acceptance of the public work, to serve an assessment describing the nature of the prevailing wage law violation and the amount of wages, penalties, and forfeitures due. Labor Code §1741. The assessment is valid for an additional 180 days, however, to the extent the "Awarding Body" (that is, the "department, board, authority, officer or agent awarding a contract for public work" (Labor Code §1720)) has not made full payment to the charged contractor. Labor Code §1741. To the extent the prevailing wage law is violated, an Awarding Body can (and shall, if required by the DIR) withhold funds from its contractor, and likewise a contractor can or shall withhold funds from its subcontractor, and in either instance the withholding party is entitled to retain any penalties or forfeitures obtained from the violating party. Labor Code §§1726-1729.

A contractor is not liable for a subcontractor's failure to comply with prevailing wage laws if the contractor either

1. had no knowledge of such failure, or
2. did one of the following:
3. 1. included specified prevailing wage language in its contract with the subcontractor,
   2. monitored the payment of prevailing wages,
   3. upon becoming aware of the violation took corrective action, including withholding funds from the subcontractor, and
   4. upon completion of the project obtained an affidavit from the subcontractor that it paid prevailing wages to its workers. Labor Code §1775(b).

Avoiding Application of Prevailing Wage Law

This section of the article reviews potential ways, besides qualifying for an exemption, to avoid paying prevailing wages.

Constitutional Exemptions From Labor Code §1720

Charter city's municipal affairs

Under Cal Const article XI, §5, if the awarding body under a contract for a public work is a charter city that "has availed itself of the power to make and enforce all laws and regulations with respect to municipal affairs," and if the project is a municipal affair and not a matter of statewide concern, the Developer will not be required to pay prevailing wages on the project. The following factors govern "whether a project is a municipal affair:

1. the extent of nonmunicipal control over the project;
2. the source and control of the funds used to finance the project;
3. the nature and purpose, including the geographic scope of the project; and
4. the extraterritorial scope of the project." SPCA-LA, supra.

Several DIR decisions have dealt with this subject, at least two of which found the project activity to be a municipal affair. See, e.g., Public Works Case No. 2000-074, Lopez Ridge Neighborhood Park Project (May 16, 2001); Public Works Case No. 2000-064, City of Porterville Road Repair Project/Tulare County Rd. Annexation (May 16, 2001).

Perhaps most illustrative of the inapplicability of the municipal affairs exemption was a Modesto sewer system improvements project. Decision on Administrative Appeal, In re: Public Works Case Nos. 97018 and 97019, Primary Plant Headworks & Cannery Segregation Project, City of Modesto (Mar. 17, 2000). The exemption did not apply because (1) although Modesto controlled the project, (2) some of its funding sources were outside the city, (3) the project served a region greater than the City, and (4) a substantial portion of the project took place outside City limits.

The DIR explained that the fact that a project is outside the City limits would not by itself render it subject to state general law if the project were "merely incidental to the furtherance of the municipal enterprise." The DIR determined that in the Modesto case, however, the extraterritoriality of the project was not incidental but fundamental. Thus, when dealing with a city, a Developer should always ascertain whether it is a charter city and whether it has generally availed itself of the right to govern its municipal affairs. A charter city need not specifically refer to prevailing wages in its charter in order to avail itself of the municipal affairs exemption. 61 Ops Cal Atty Gen 512, 519 (1978).

Charter county's municipal affairs

Charter counties have narrower powers than charter cities in determining what constitutes a statewide concern as opposed to a municipal affair, and a county's charter trumps a state statute only with respect to subject matters constitutionally authorized to be included in county charters. 61 Ops Cal Atty Gen 31, 33 (1978). Thus, it would be prudent for parties interested in avoiding paying prevailing wages on charter county projects to structure the project so that any extra-county concerns are nonexistent or at most very tangential to the project. It would also help, and may be necessary, for the county to specify in its charter that prevailing wages are municipal affairs. Developers should proceed cautiously, because it is not clear that a county charter can be used to circumvent prevailing wage laws.

University's internal affairs

A third constitutional exemption involves the University of California (UC), when the project involves internal UC policy and is not of statewide concern. In Regents v Aubry (1996) 42 Cal.App.4th 579, the court found that UCLA could build housing for faculty and students, and sell some excess housing to the public, without paying prevailing wages. First, ensuring access to qualified students and securing the services of outstanding faculty was deemed to be at the heart of UC's educational function. 42 Cal.App.4th at 590. Second, since prevailing wages are not intrinsically a matter of statewide concern and no state funds were used to provide the housing, the housing was deemed by the court not to be a matter of statewide concern. 42 Cal.App.4th at 583. In general, if the project involves the UC system and is properly structured, the Developer may be able to avoid paying prevailing wages.

Distinguishing Private Projects From Public Works

If classification of a project as a public work cannot be completely avoided, it may nevertheless be beneficial to divide the project into separate component projects. If any portion of a project involves the payment of public funds, prevailing wages will apply to the entire project, but if there are multiple projects, prevailing wages may apply to one project but not another. See Determination Letter re Public Works Case No. 2000-016, Vineyard Creek Hotel and Conference Ctr., Redev. Agency, City of Santa Rosa (Oct. 16, 2000). Parties, however, must be careful when dividing up projects to avoid a claim of "piecemealing" under the California Environmental Quality Act (CEQA) and potential challenges to any environmental review conducted. Under CEQA, the term "project" refers to the entire project. See 14 Cal Code Regs §15378. A project proponent cannot divide a project into smaller parts to avoid considering the environmental impacts of the entire project. See Curtin, Curtin's California Land Use and Planning Law, p 125, Solano Press Books (22d ed 2002); see also 14 Cal Code Regs §15156.

Under Santa Rosa, supra, the following factors guide whether prevailing wages will apply to an entire project, or to parts of a project:

1. the manner in which the construction is organized in view of, for example, bids, construction contracts and workforce;
2. the physical layout of the project;
3. the oversight, direction and supervision of the work;
4. the financing and administration of the construction funds; and
5. the general interrelationship of the various aspects of the construction.

In Santa Rosa, the developer and redevelopment agency sought a determination that the private hotel portion of the project was not subject to prevailing wages, while the public conference center admittedly was subject to them. The DIR denied the developer's and redevelopment agency's request to sever the conference center from the hotel part of the project, and prevailing wages had to be paid with respect to the single, integrated project.

Obtaining a determination that a significant part of a project involving public works is private is, like other DIR determinations, fact-intensive and not easily obtained. Nevertheless, the right project, if well-structured, may yield partial relief from payment of prevailing wages.

Estoppel

Although a Developer cannot avoid the requirement to pay prevailing wages if the DIR or a court finds the project is a public work, the Developer might avoid paying the penalty-up to $50 per day, per person-for underpaying a worker entitled to prevailing wages. See, e.g., Waters v Division of Labor Stds. Enforcement (1987) 192 CA3d 635, 639, 237 CR 546 (citing O.G. Sansone Co. v Department of Transp. (1976) 55 CA3d 434, 455, 127 CR 799); Labor Code §1775(a). In Lusardi Constr. Co. v Aubry (1992) 1 C4th 976, 4 CR2d 837, the contractor's equitable estoppel claim relieved him of the requirement to pay the penalty imposed, because he had reasonably and in good faith attempted to comply with the requirements of the prevailing wage law.

Of course, every Developer should document its good faith effort to ascertain whether prevailing wage laws apply and to comply with them if they do apply.

Indemnification

In Lusardi Constr. Co. v Aubry, supra, the court suggested in dicta that the contractor might have remedies against the district it had contracted with, because the district had expressly represented to him that the project was not subject to prevailing wages, and he had relied on that representation in good faith. 1 Cal.4th at 997. A prudent developer will ask the public entity it deals with (and a prudent contractor will ask the developer, and a prudent subcontractor will ask the contractor) (1) whether the project is subject to prevailing wages requirements, and (2) if not, whether the other party will indemnify it for any losses it incurs for relying on such representation. Of course, each Developer should attempt to ascertain on its own whether or not the project is subject to prevailing wage laws.

Consequential Damages

The Lusardi court also added in dicta that, if the district made material misrepresentations to Lusardi, it may be entitled to consequential damages in addition to indemnification for amounts due it under the prevailing wage law (citing Civil Code §3333).

Survey of Affected Parties

Naturally, the affected parties all view SB 975 rather differently.

Unions are pleased with the enactment of SB 975, which codifies favorable DIR determinations and closes loopholes they believed public entities were using to circumvent payment of prevailing wages. They are recommending that, given the requirements, businesses and compliance officers vigilantly look for new opportunities and check on compliance with the statute. State Bldg & Constr Trades Council of Cal, SB 975: What It Does for Unions . . . (Apr. 3, 2002).

The trades, including the California Building Industry Association, are concerned about, and will monitor, the law's effect on infill and redevelopment projects, housing affordability, and the secondary impacts on consumers. In addition, the trades are concerned that, because SB 975 does not explicitly define "benefit," many homebuilders, developers, and contractors do not understand when the law applies. New Law Affects Housing Affordability-Negatively, BIASC (Apr. 2002).

Cities are facing pressure from Developers to provide increased economic incentives for projects and/or fund all the necessary public improvements. The increased incentives tend to approximate the increased labor costs that result from having to pay prevailing wages. Given that cities have very tight budgets and may not be able to provide increased economic incentives, the impact on cities' future revenue streams (e.g., property taxes and sales taxes) and the effect on development in general in California may be significant. If SB 975 discourages development, the anticipated benefits to labor may be outweighed by a decline in the number of new projects that will be undertaken or by a reduction in their scope even if they do go forward.

Many developers are concerned that SB 975 will discourage infill development, affecting many urban parts of California and in particular the Bay Area, where the only remaining developable areas tend to be within urban boundaries. The development areas of urban centers are typically redevelopment areas, which require economic incentives from the cities to make any development feasible. McCarthy, New wage law could chill infill: Construction costs to rise sharply, Sac Bus J (Feb. 8, 2002). These economic incentives, however, will almost always trigger prevailing wages, which will make many projects economically infeasible, particularly smaller or mid-sized projects.

Living With SB 975

The definition of public funding has been expanded, generally leaving Developers with the difficult choice of accepting public subsidies and paying prevailing wages, or attempting to refuse such benefits in order to save on wages and related costs. Possible exemptions, carve-outs, and mitigations were discussed above, and we have described the reactions of some representative members of affected parties. Below are some additional ways for interested parties to respond to this amendment.

Obtain Advance Rulings From DIR

The DIR is eager to begin issuing determinations covering projects affected by the SB 975 law and recommends that interested parties seek a determination before beginning a project or accepting public subsidies. The DIR has agreed to provide anonymous determinations over the telephone, and more formal determinations are possible by written request. A few written determinations on the applicability of SB 975 have been requested but no determinations have been issued and given precedential effect. A favorable DIR determination, while difficult to obtain, is about as bulletproof a protection as a Developer can hope for, especially given the current lack of law interpreting SB 975.

Legal Attack

There have been several attempts to override prevailing wage requirements by legal attack, including claims of unconstitutionality or preemption pursuant to e.g., the National Labor Relations Act and the Commerce Clause (People v Hwang (1994) 25 Cal.App. 4th 1168, 1179, 31 CR2d 61); the Employee Retirement Income Security Act of 1974 (ERISA) (California Div. of Labor Standard v Dillingham Constr., N.A., Inc. (1997) 519 US 316, 324, 136 L Ed 2d 791, 117 S Ct 832); the Davis-Bacon Act (Southern Cal. Labor Mgmt. Operating Eng'rs Contract Compliance Comm. v Aubry (1997) 54 Cal.App. 4th 873, 882, 63 CR2d 106); and the Due Process and Equal Protection clauses (O.G. Sansone Co. v Department of Transp. (1976) 55 CA3d 434, 127 CR 799). But SB 975 does not lend any additional ammunition to any of these arguments, and it is unlikely there will be any inroads made against prevailing wage laws by use of preemption or constitutional arguments.

SB 975 Checklist

There are few secure ways to avoid paying prevailing wages. A positive response to one or more of the questions below, however, indicates a possibility that the project can be structured in a way to avoid paying prevailing wages:

• Does the project exclude all payments, prior construction, asset transfers, reductions, waivers, forbearances, loans, credits, or other subsidies or incentives from a public entity? If there is a subsidy or incentive, is it relatively small?
• Can the Developer do the project without a formal or informal agreement or understanding with a public entity?
• If there is an agreement with a public entity, is it limited to a provision for a reimbursement that is less than or equal to the cost of constructing the public portion of the project, or is it for a project cost normally borne by the public?
• Is any private portion of the project separable from the public portion?
• Will the project house low-income persons, veterans, educators, or high technology?
• Was the bid for the project out by January 1, 2002, or was the controlling agreement entered into by then?
• Is there a charter city or county involved, or the University of California?
• Have you obtained a representation that the project is not subject to prevailing wages and been indemnified from and against any loss if it is subject to them?
• Have you independently determined in good faith that the project is not subject to prevailing wage laws?
• Does the project involve volunteer work on facilities used primarily by nonprofit community organizations? Will employment not be adversely affected, and has the project been approved by the DIR?

Conclusion

Because SB 975's actual scope and applicability is continuing to be developed, Developers must:

1. decide to pay prevailing wages,
2. wait for purely private projects to come along, or
3. proceed with carefully tailored project plans designed to avoid prevailing wage requirements, calculating in the risk of being subject to an adverse determination.

The statute does include some narrowly defined safe harbors and there are some reasonably developed precedents that in very specific circumstances avoid the burden of paying prevailing wages. If Developers receive an adverse determination, they can potentially mitigate or recover losses if they have made a good faith attempt to comply with prevailing wage laws.

To avoid the possibility of a post-project adverse determination, a Developer can seek a pre-project determination from the DIR, but it should remember that the DIR is charged with protecting workers, not employers, so receiving a favorable determination is difficult. Preemption and constitutional attacks on prevailing wages have generally failed. A battle over the prevailing wage law is being fought in the California legislature; however, that battle is not, at this time, about weakening SB 975 but rather is about trying to avoid further expansion of its requirements. Perhaps the political tide will change and provide an opportunity for a legislative fix to the prevailing wage law requirements.