AB 2231 – Defines “De Minimis” For The Purposes Of Determining When A Public Subsidy Provides To A Private Development Projects Is So “De Minimis” As To Not Subject The Development To Prevailing Wage Requirements

CATEGORY: Client Update for Public Agencies, Fire Watch, Law Enforcement Briefing Room, Public Education Matters
CLIENT TYPE: Public Education, Public Employers, Public Safety
DATE: Oct 26, 2020

Current law requires that not less than the general prevailing rate of per diem wages be paid to all workers employed on a “public works” projects. The prevailing wage is higher than the minimum wage and varies by region and craft. Current law also includes various exceptions to the prevailing rate requirement, including when the state or a political subdivision reimburses a private developer or subsidizes the costs of private development, so long as the reimbursement or subsidy is “de minimis in the context of the project.” (Labor Code §1720) Current law, however, does not include a definition for “de minimis,” though the Department of Industrial Relations has a policy of designating any subsidy or reimbursement in excess of 2% of the total project costs more than de minimis, making the project a public works subject to the prevailing wage requirements.

AB 2231 fills this gap in the law by providing a definition for “de minimis.” AB 2231 states that a “public subsidy is de minimis if it is both less than six hundred thousand dollars ($600,000) and less than 2 percent of the total project cost.” A public subsidy is also de minimis if the project “consists entirely of single-family dwellings” and the subsidy “is less than 2 percent of the total project cost.”

AB 2231’s new definition does not apply to a project that was advertised for bid, or a contract that is awarded, before July 1, 2021.

(AB 2231 amends Section 1720 of the Labor Code.)