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Clarification on Labor Compliance Programs

State Compliance Monitoring Unit Requirements Effective Jan. 1

December 16, 2011

City officials grappling with the labor reporting requirements of SB X2 9 (2009) may be confused by recent emails sent to some public works directors stating that cities will be required to pay a one-quarter percent fee of the city's construction budget to the state for the state Labor Compliance Program (LCP). Cities are not required to pay this fee to the state on all public works projects.


The one-quarter percent fee only applies in certain circumstances where public works projects are paid for, in whole or in part, out of public funds that are derived from bonds issued by the state, except Proposition 84 (2006 water project bond initiative). The Department of Industrial Relations (DIR) drafted a list of statutes requiring cities to use the state-run program or an approved LCP.

The issue came to the forefront when DIR put implementation of SB X2 9 on hold after legal issues in 2010. DIR could not move forward until another legislative fix was in place. With the passage of AB 436 this year, DIR was able to implement regulations to begin a new state operated program.


In early 2009, the Legislature adopted SB X2 9 to shift responsibility for compliance monitoring and enforcement on state bond-funded and other types of public works projects from LCPs to DIR. Regulations to implement this statute and create a new Compliance Monitoring Unit (CMU) were adopted in 2010. However, due to legal concerns that jeopardized the issuance of state public works bonds, DIR took emergency action to temporarily repeal these regulations and suspend operation of the CMU.

On Sept. 9, the Legislature passed AB 436 (Solorio) to address the legal concerns that were raised about SB X2 9 and make other related changes. Gov. Jerry Brown signed the legislation on Sept. 30 and it will become effective Jan. 1, 2012. Additional information about AB 436 is available online.

DIR has also revised its SB X2 9/CMU regulations to conform to AB 436. These regulations also go into effect on Jan. 1, 2012, which is the new start-up date for the CMU. The CMU website has text and information about the regulatory amendments.

Additional information, including scheduled training classes, is available on the CMU website.

Only projects for which the public works contract is awarded on or after Jan. 1, 2012 are subject to the CMU requirements . Contracts awardedprior to Jan. 1, 2012 will be subject to the prior monitoring and enforcement rules (LCP for some bond-funded or design-build projects or no specific monitoring requirement) for the life of those projects.

CMU requirements apply to:

  • Any public works project paid for in whole or part out of public funds that are derived from bonds issued by the state, except Prop. 84 (2006 water project bond initiative);
  • Public entities that utilize design - build contracts as a project delivery method that have a CMU requirement within the authorizing statute; and
  • Projects undertaken by an awarding body that elects to use the CMU on all of its projects.

Exceptions, or projects not covered by CMU are:

  • Construction projects under the control of an awarding body that has been previously approved by DIR to operate its own in-house LCP for all projects. A list of approved in-house LCP programs is available on DIR's website.
  • Neither CMU or LCP are required on projects covered by qualified project labor agreements (i.e. collective bargaining agreements that bind all contractors on the project and contain mechanisms for resolving wage disputes).
    Prop. 84-funded projects require LCP (no alternatives or exceptions).
  • Any project that does not fall within the CMU requirements or one of the three exception categories listed above are not covered by CMU requirements. Such a project may include:
    • A locally or federally funded project that does not receive any state bond funding; or
    • Design-build projects that do not have a CMU requirement within the authorizing statute (including CSU design-build projects).

Register Now to Attend a Public Meeting or Webinar on New CMU 

CMU is holding a public meeting on Wednesday, Jan. 4 from 10 a.m. - 12 p.m. at the Elihu Harris State Building in Oakland. Register online.

CMU is also hosting several webinars in January 2012 as follows:

More information is available on DIR's website.

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