Governor Signs Legislation Enacting Significant Amendments to SB 35, Increasing Opportunities for Development of Multi-Family Housing (Part II)

Authored by Senator Scott Wiener and signed into law on October 11 by Governor Newsom, Senate Bill (“SB”) 423 amends Senator Wiener’s 2017 landmark housing bill SB 35. In Part I of this Client Alert, we reported on SB 423’s revisions regarding the circumstances triggering SB 35 streamlining and the criteria for project eligibility. In this installment, we summarize SB 423’s revisions to SB 35’s labor requirements. Part III will provide a summary of SB 423’s more procedural and technical revisions.

• SB 423 Both Expands and Limits Labor Requirements
  • SB 423 imposes additional labor requirements for developments with 50 or more housing units, which are identical to Assembly Bill (“AB”) 2011 provisions adopted last year.
    • A contractor that employs construction craft employees or enters into subcontracts for at least 1,000 hours must either (i) participate in a state-approved apprenticeship program, or (ii) request the dispatch of apprentices from a state-approved apprenticeship program. This change will require contractors and subcontractors generally to notify applicable apprenticeship programs of the existence of the development, request dispatch of apprentices, and employ apprentices in apprenticeable occupations in a ratio of five journeypersons to every apprentice and at reduced apprenticeship wage rates (but does not require non-union contractors or subcontractors to enter into a collective bargaining agreement with a union).
    • Each contractor that employs construction craft employees must make specified health care expenditures for each employee tied to the hourly pro rata cost of a specific Covered California health care plan.
    • The development proponent must provide monthly reports to the local agency demonstrating compliance with the apprenticeship and health care requirements or be subject to substantial penalties.
    • Contractors must maintain and submit to the Labor Commissioner certified payroll records, regardless of whether the development is subject to a Project Labor Agreement (“PLA”) (so that developments with 50 or more housing units appear subject to a mandatory certified payroll record-keeping requirement).
  • SB 423 revises skilled and trained workforce requirements, mandating them only for developments over 85 feet, effectively removing them for many residential developments. Because the skilled and trained workforce statutes require a minimum percentage of all workers in an apprenticeable occupation to be graduates or apprentices of an approved program, and because a large majority of apprenticeship programs are union-affiliated, the skilled and trained workforce requirement generally means that contractors or subcontractors employing workers on the project will be signatory with the construction unions. The following essential definitions remain unchanged:
    • A “skilled and trained workforce” is one for which all workers performing work in an apprenticeable occupation in the building and construction trades are either skilled journeypersons or apprentices registered in a State or federally approved apprenticeship program.
    • A “skilled journeyperson” is one that has either graduated from an approved apprenticeship program or has at least as many hours of on-the-job experience as would be required to graduate from an apprenticeship program for the applicable occupation.
    • SB 423 establishes additional exceptions to the skilled and trained workforce requirements.
      • First, if a prime contractor fails to receive at least three bids in a scope of construction work from subcontractors that attest to satisfying the skilled and trained workforce requirements, then the prime contractor may accept new bids and need not require that a skilled and trained workforce be used by the subcontractor for that scope of work.
      • Second, skilled and trained workforce requirements do not apply if all contractors, subcontractors, and craft unions performing work on the development are subject to a multi-craft project labor agreement that requires the payment of prevailing wage and provides for enforcement of that obligation through an arbitration procedure.
      • Third, skilled and trained workforce requirements do not apply where 100 percent of the units, exclusive of a manager’s unit or units, are dedicated to lower income households.
    • Where skilled and trained workforce requirements apply, SB 423 requires developers to provide bidding information to labor organizations representing workers in the building and construction trades who may perform work necessary to complete the project and to employer associations representing contractors that may perform work necessary to complete the project and to provide certain contracting information upon request to joint labor-management cooperation committee established pursuant to the federal Labor Management Cooperation 8 Act of 1978.

While complicated, the revised labor requirements in SB 423 should generally be easier to satisfy than the existing labor requirements of SB 35, so that developers should find fewer obstacles to taking advantage of SB 35’s ministerial approval process.

Prior CCN Alerts on SB 35:

• Governor Signs Legislation Enacting Significant Amendments to SB 35, Increasing Opportunities for Development of Multi-Family Housing - Part I
• The Legislature Gives the SB 35 Streamlined and Ministerial Approval Process a Boost
• SB 35 Works, Increasing Affordable Housing Production