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Home My WebLink About1994-11-22 - AGENDA REPORTS - REMOVAL EARTHQUAKE DEBRIS (2)AGENDA REPORT City Manager Apprc Item to be presented CONSENT CALENDAR DATE: November 22, 1994 SUBJECT: REMOVAL AND RECOVERY OF EARTHQUAKE DEBRIS - CORNERSTONE RECYCLING DEPARTMENT: PUBLIC WORKS BACKGROUND On March 22, '1994, City Council awarded the contract for the subject project to the low bidder, The Cornerstone Recycling Company; El Centro, California, for the removal and recovery of earthquake debris to be reimbursable from FEMA monies.; The debris delivered to the site for processing exceeded the original estimated tonnages in the amount of $640,000 budgeted in Account No. 90-19935-227. As a result, this project was not completed within the time frame designated in the contract documents and the Public Works Department extended the project completion date while the debris processing program was in progress. The contractor was required to perform additional work for a cost of $107,746 to separate and dispose of non -recyclable debris. In accordance with the Standard Specifications for Public Works Construction, Cornerstone has satisfactorily completed all aspects of the work. This project was completed to the satisfaction of the Director of Public Works on July 22, 1994. On August 10, 1994, the State Labor Commissioner directed the City to withhold and retain from any payments due to The Cornerstone Company a total amount of $3,218.64 for noncompliance with prevailing wage laws. The City Attorney has carefully evaluated this issue (see attachment A) and has advised the City that The Cornerstone Company is entitled to their payments. Agenda Item: RECOMMENDATION Approve an increase to Estimated Revenue Account 90-3597 in the amount of $107,746.00 and appropriate an additional expenditure amount of $107,746.00 in Recycling Debris Account No. 90-19935-227 for additional work relating to separating and disposing of non -recyclable debris. 2. Accept the work performed by The Cornerstone Company. Direct staff to release the ten percent (10%) retention totaling $77,596.56. ATTACHMENT City Attorney Analysis and Recommendation VENTURA COUNTY OFFICE 2310 PONOEROSA DRIVE SUITE 1 CAMARILLO, CALIFORNIA 13010 15061 6$7-3465 ORANGE COUNTY OFFICE 3200 PARK CENTER DROVE SUITE 760 COSTA MESA, CALIFORNIA 12626 17 141646-156150 ATTACi1 VNT A LAW OFFICES BURICE, WILLIAMS & SORENSEN 611 WEST SIXTH STREET, SUITE 26W LOS ANGELES, CALIFORNIA 90017 1213) 238-0600 TE LECOPIER: 12131 236-2700 September 26, 1994 Hazel Joanes Associate Civil Engineer.. City of Santa Clarita 23920 Valencia Boulevard, Suite 300 Santa Clarita, California 91355-2196 Re: Cornerstone/Prevailing Wages Dear Hazel: FRESNO OFFICE 7101 NORTH FRESNO STREET SUITE 401 FRESNO, CALIFORNIA SJ720-2938 42001261-0163 SLAKE, WILUAMS, SORENSEN • GAM LIGHTON PLAZA 7300 COLLEGE 9OULEVAR0 SUITE 220 OVERLAND PARK; KANSAS 56210 1913) 336-5200 WRITER'S OIRECT DIAL: 213.230.2644 OUR FILE NO. 02012-604 You have asked for guidance on the issue of whether the City should withhold payment from Cornerstone as directed by a Notice to Withhold received by the City from the Division of Labor Standards Enforcement of the State of California ("DLSEII). The DLSE issued this Notice to Withhold because it determined after an investigation that Cornerstone was violating prevailing wage laws. CONCLUSION In this matter, it does not appear that prevailing wage laws were required to be paid because the Cornerstone project does not appear to be a "public works project" as defined by section 1720 of the Labor Code. Therefore, this office advises the City not to withhold payment from Cornerstone. This course of action, however, is merely the lesser of two evils. The City will be subjecting itself to the potential of suit either by withholding or not withholding payment. This office believes that it can more easily defend a suit brought: because it did not withhold payment. FACTS Our office understands the facts in this matter to be as follows. The City received a Notice to Withhold from the California Department of Industrial Relations (11DLSEII) for the amount of $3,218.64. This Notice to Withhold was apparently lAx2:1o8327.1 Hazel Joanes Associate Civil Engineer September 26, 1994 Page 2 issued because DLSE determined that Cornerstone and/or its subcontractor, Bedrock, had violated prevailing wage laws. The Notice to Withhold was issued both for owed wages and penalties. The Cornerstone project involved the removal and recovery of disaster -related debris that had been stockpiled at a site within the City. The notice inviting bids provided that "all persons performing work on this project shall be paid not less than the general prevailing rate of per diem wages as determined by" the DLSE. In addition, the contract agreement stated in Article 5 that "contractor further acknowledges the provisions of the State Labor Code requiring every employer to pay at least the minimum prevailing rate of per diem wages for each classification or type of work needed to execute this contract as determined by the Director of Labor Relations of the State of California." No other references to prevailing wages were found in the Cornerstone contract documents. This office received a letter from Cornerstone dated August 22, 1994 contending that the Cornerstone project was subject to federal requirements on prevailing wages and not state requirements. DISCUSSION It does not appear that prevailing wage laws were applicable in this matter because the Cornerstone project does not appear to be a "public works project" as defined by section 1720 of the Labor Code. Labor Code section 1720 states that "public works" means: construction, alteration, demolition or repair work done under contract and paid for in whole or in part out of public funds. The service required by the Cornerstone contract was to remove and recover all stock -piled disaster related debris, so it does not appear to fall into the definition of a public works project. Therefore, it is likely that the prevailing wage requirements would not be applicable in this instance. Further, from a review of the contract documents it does not appear that all of the information was included which would have been required by the Labor Code in order to inform Cornerstone of [.X2:109527.1 Hazel Joanes Associate Civil Engineer September 26, 1994 Page 3 the prevailing wages. For example, Labor Code section 1773.2y requires that the City EITHER include in the call for bids, in the bid specifications, and in the contract the general rate of per diem wages for each craft, classification or type of worker OR in those same documents include a statement that the copies of prevailing rates of per diem wages are on file at City Hall and shall be made available on request. The City is also required to cause a copy of the prevailing per diem wages to be posted at each job site. Finally, the City is required to include in the contract, stipulations that, in the event that the contractor fails to pay the 'prevailing wages, the contractor is liable for penalties and for the shortfall in wages. (Labor Code section 1775.) 1i-� From a review of the contract documents, it appears that the fCity did not include the information which would have been required by the above statutes if the Cornerstone project was a public works project. The lack of this information does not orgive Cornerstone from complying with prevailing wages if a court finds that the wages are owed, but it does support Cornerstone in a claim for indemnity against the City if DLSE wins a lawsuit against Cornerstone for unpaid wages and penalties. (Lusardi Construction Co v Aubrey (1992) 1 Cal.4th 976.) Cornerstone would also be supported in such a claim if, as it claims in its letter of August 22, 1994, that Cornerstone obtained assurances from the City that it was not subject to the state's prevailin The City does not appear to be bound by the Notice to Withhold if it disagrees with the DLSE's conclusion. (See Aubre b. Tri-CityIliosnItal Dist_ (1992) 2 Cal.4th 962, 991-993 (the court likened the DLSE to the Attorney General in that it has the authority to bring a suit to enforce its determinations, but does not have the authority to compel action by itself).) VLabor Code section 1773.2 was recently added to the Labor Code and became effective in 1993. It may be that the City's standard public works contracting procedures does not currently comply' with this code section. Therefore, the City may want to review this issue. cnxi:ioasn.i r•� Hazel Joanes Associate Civil Engineer September 26, 1994 Page 4 If the City withholds payment as directed by DLSE, it will be subject to suit by Cornerstone to obtain such withheld payments. However, by not withholding payment, the City will subject itself to possible suit by the State seeking a writ of mandate enforcing the City to withhold payment. In addit Dji,-if the City does not w' and a court determines that e was required to pay prevailin en the City may a subject to a sui or indemnity from the contractor. Given that the City faces the potential of suit from either side in this dispute, the City should act in the manner which is most defensible in court. For the reasons stated above Cornerstone appears to be entitled to these payments, so the most advisable course appears to be to not withhold the payments from Cornerstone. If I can be of further assistance, please call me. Sincerely, ELIZABETH M. CALCIANO for BARKE, WILLIAMS & SORENSEN cc: George Caravalho, City Manager Jeff Kolin, Dpty. City Mgr. - Dir. P.W.,/ Carl K. Newtcn, City Attorney LAX2:108577.1