For the past several weeks, the construction industry has been buzzing with opinions regarding Assembly Bill 199 (“AB 199”).  AB 199, which was introduced by Assemblyman Kansen Chu, D-San Jose, and authored in part by the Construction Trade Council, requires that workers be paid “prevailing wage” on residential projects that have any agreement with the state or a political subdivision.

The last portion of that phrase (“…any agreement with the state or political subdivision”) is the primary point of contention with AB 199.  Critics of AB 199, which include the California Chamber of Commerce, the California Building Industry Association, the California Business Roundtable, the California Manufacturers, and many other associations, argue that this phrase is ambiguous and that it could apply to the mere pulling of permits for a housing project.  If opponents are correct on this assumption, AB 199 would impact virtually every residential housing project in the state, with builders estimating it would raise home construction costs up to 45% and increase housing prices by approximately $90,000.

For his part, Chu denies that this provision applies to the simple pulling of permits.  However, if AB 199 passes the Assembly and Senate and Governor Jerry Brown signs it into law, it will undoubtedly wind up in the courts for judges to interpret its meaning.  With so much at stake, one would hope for clearer guidance from the drafters of the legislation.  The first hearing on AB 199 was March 15th and drew a large opposition crowd.  It will certainly be interesting to see how the battle over AB 199 unfolds, and as always, Navigato & Battin, will keep you apprised of any new developments.