Existing law requires workers employed on public works projects to be paid the prevailing wage determined by the Director of the Department of Industrial Relations (DIR Director), according to the type of work and location of the project. Existing law also permits employers to credit certain payments for fringe benefits against the obligation to pay the prevailing wage. Finally, existing law requires this credit to be computed on an annualized basis if the employer seeks credits for payments that are higher for public works projects than for private construction, except under certain circumstances, including if the DIR Director determines that annualization would not serve the purposes of the public works laws. AB 889 removes this exception for computing credits on an annualized basis. AB 889 further revokes any annualization exemptions that the DIR Director issued before January 1, 2026.
AB 889 also provides that an employer may take full credit for the hourly amounts contributed to defined contribution pension plans if the plans provide for both immediate participation and essentially immediate vesting, meaning that the benefits vest within the first 500 hours worked, even if the employer contributes at a lower rate or does not make contributions to private construction.
Finally, AB 889 provides that an employer has the burden of demonstrating it properly calculated credits on an annualized basis and must provide supporting records for the calculation to the Labor Commissioner upon request.
(AB 889 amends Section 1773.1 of the Labor Code.)