Engineering firms that do soil and land inspection for public works projects have seen their labor costs spike since the state on Jan. 1 began mandating as much as a 100% wage increase for soil technicians and building inspectors on all state and federally funded projects.
“From a business standpoint those wages are going to be twice what we normally pay,” said Dan Martinez, president of Pacific World Corp., a Cypress-based geotechnical firm with 100 employees. “It makes every public project we work on more costly.”
California’s prevailing-wage law has been on the books since 1937, and has been amended several times, especially over the past few decades. This year is the first time that the law has been applied to the previously exempt geotechnical sector.
“I am definitely concerned about it, but I don’t think the building industry itself has begun to understand the implications,” Martinez said. “Keep in mind, if I get a prevailing-wage contract I’m still going to do it.”
The law doesn’t affect purely private sector work, and it won’t affect government workers, either.
“Staff employed directly by government are not subject to changes in prevailing wage since those employees are part of public works contract law,” said Ken Smith, Orange County’s deputy chief engineer.
The new regulations only directly affect private companies engaged in work that has at least some state or federal funding. This will affect things like road construction, and technicians, where average wage will be $28 to $35 per hour compared with the industry average of $15 to $20 per hour.
For prevailing-wage jobs, California uses a “modal” wage scale under which the highest-paid workers in a category determines what everyone else in that category earns, regardless of experience, said Van Goodwin, a partner with the San Diego office of San Francisco-based law firm Littler Mendelson.
Goodwin’s office is providing consulting to about 30 California geotechnical engineering companies to get them up to speed with the new rules.
Creating Confusion
The law has created confusion among officials at geotechnical firms.
“It’s affecting our bottom line,” said Dina Gartland, senior manager of business development with Irvine-based geotechnical consultants Leighton & Associates. “We’re finding it difficult to fit our firm into prevailing wage rules,we’re still unclear as to which projects or which types of work fit into the wage law.”
When geotechnical engineering companies do work for a public agency the onus is on the firms to determine whether it’s a prevailing wage project and, if it is, that the company pays workers prevailing wage.
“When we do work for a public agency and we ask them whether they know whether it’s prevailing wage they simply don’t know,” Gartland said. “And with the toll roads, for example, in some senses that’s a private project and in some senses it’s a public project,the law is still relatively untested.”
Leighton has hired the San Diego office of Littler Mendelson to help interpret the new prevailing wage requirements.
“Most entities don’t realize the prevailing wage now applies to geotech work,” Littler Mendelson’s Van Goodwin said. “In California many of the public agencies have no idea this law is applicable to their geotechnical work.”
The county’s Transportation Corridor Agencies, which is responsible for contracting out work on South County’s toll roads, “doesn’t anticipate there will be any negative impact on contracts with geotechnical firms,” said an agency official.
Retroactive Payments, Fines
Goodwin said he has seen companies putting in bids based on the non-prevailing wage rate, and then several months later those companies are being ordered to pay the prevailing wage law retroactively after the work has been done.
Also those companies, if they are found to be non-compliant with the new prevailing wage requirements, must pay $50 per worker per day of non-compliance and can be legally barred from government projects from one to three years.
Goodwin said he is expecting a lot of litigation to result from the new requirements.
“I have one client in Orange County that already has three lawsuits pending against it,” he said. “I have other clients that currently are subject to government administrative investigations, and I get two or three inquiries a week from clients getting complaints registered against them or requests for payroll info by the operating engineers.”
Pacific Soil’s Martinez said that he has one employee that has worked on both the private residential and public street side of a single housing project.
“For work he does on the residential side, I, for example pay him $16 per hour, and for the street side work he does I pay him $36,” he said.
Leighton’s Dina Gartland said she also is concerned that compensating technicians at rates approaching what well-educated engineering professionals on the same projects make could create tension.
Fees Raised
Martinez said that under prevailing wage, he has had to look in some cases at charging a project fee of $1,800 per lot compared to $1,000 before the prevailing wage took effect at the beginning of the year.
“The may not sound like a lot but with houses now there are so many little developer fees piling up including things like schools and parks and that has a compound effect,” Martinez said. “Most of what you pay for a house is not in the wood or in the concrete.”
Geotechnical firms make sure buildings and roads don’t run the risk of sinking or sliding. They test soil, looking at its capacity and how much load it can take and whether there is a risk of landslides in the area.
The companies do lab analysis of collected soil to determine what type of soil it is. Engineers then calculate how much weight the soil can withstand and develop a solution to prevent landslides that can include mixing or compacting the soil. Next, structural engineers will make necessary adjustments to the design of the foundation of the building.
The new prevailing wage laws also mandate that geotech firms take on apprentices, but California as yet has no apprenticeship or journeyman’s programs established for these types of jobs. n
