If you perform much work in California, you’ve probably heard of Skilled & Trained Workforce requirements. And if you’re like most people we know… you’re probably wondering what does it really entail?
Today, we’re going to unpack the nuance and complexities behind Skilled & Trained Workforce requirements to make it easy for every commercial contracting business to understand and proactively address.
Put simply, Skilled & Trained Workforce requirements is legislation that requires subcontractors to abide by certain standards when using apprenticeable crafts for certain projects.
For reference, a ‘skilled journeyperson’ is a worker who graduated from an applicable apprenticeship program OR has at least as many hours of on-the-job experience as an apprentice graduate in that trade – this is a key detail.
Therefore, a ‘Skilled and Trained Workforce’ includes journeypersons that are graduates from a recognized and registered apprentice program, journeypersons with the equivalent hours of on-the-job experience as required by an apprenticeship program, and registered apprentices.
Below, the team at Miter drafted a detailed explanation of each of these requirements:
What are these Skilled & Trained Workforce requirements?
While the Skilled & Trained Workforce requirements have quite a bit of fine print, we distilled the top 5 takeaways.
Takeaway #1: Stay proactive to avoid fines.
The Division of Labor Standards Enforcement (DLSE) will begin assessing $5,000 civil penalties per non-compliant month of work performed indicating failure to meet the skilled and trained workforce percentages. Subsequent violations within three years will result in $10,000 fines per non-compliant month of work performed.
Takeaway #2: Capture clear documentation at every step.
Public agencies or other awarding bodies must forward a copy of non-compliant monthly reports to the Labor Commissioner for issuance of civil wage and penalty assessments; a copy of ‘the plan to achieve substantial compliance with Skilled & Trained Workforce requirements’ must be forwarded too, if one has been created.
Takeaway #3: Unblock your payments with clear reports.
If a contractor, bidder, or other entity submits to the public agency or awarding body a plan to achieve substantial compliance with this chapter, the public agency or awarding body shall immediately resume making payments to the contractor, bidder, or other entity, including all previously withheld payments unless, within a reasonable time, the public agency or awarding body rejects the plan as insufficient and explains their reasoning.
Takeaway #4: Plan for withholdings if you’re out of compliance.
Public agencies or other awarding bodies must withhold 150% of the monthly (sub)contractor billing value if the prime or subcontractor does not provide timely reports or has not demonstrated compliance. The prime would also be allowed to withhold 150% of the "amount due" from non-compliant subcontractors. This withholding continues until a compliance plan has been put in place.
Takeaway #5: Get documents signed to expedite the process.
Prime contractors must obtain a declaration signed under penalty of perjury from their subcontractors, validating that the subcontractors have met the Skilled & Trained Workforce requirements before making the final payments.
Who do these Skilled & Trained Workforce requirements apply to?
When using the following trades, 30% of the skilled and trained journeymen in your workforce must have graduated from an applicable apprenticeship program:
- Acoustical Installer
- Cement Mason
- Drywall Installer or Lather
- Marble Mason, Finisher or Setter Modular Furniture or Systems Installer
- Operating Engineer
- Pile Driver
- Plasterer, Roofer, or Waterproofer Stone Mason
- Terrazzo Worker or Finisher
- Tile Layer, Setter, or Finisher
All other apprenticeable trades not listed above require a minimum of 60% of the skilled and trained journeyman on the job to be apprenticeship program graduates.
Apprentices-in-training do not count towards this ratio. Journeymen with equivalent hours of on-the-job experience do not count towards this ratio.
Contract amounts from each subcontractor and all tiered contractors determine if these requirements apply to each contractor on the project due to the following exemption:
In reference to SEC. 4. 2601. (6) “A subcontractor need not meet the apprenticeship graduation requirements of paragraph (2) if both of the following requirements are met:
- The subcontractor was not a listed subcontractor under Section 4104 or a substitute for a listed subcontractor
- The subcontract does not exceed one-half of 1 percent of the price of the prime contract.”
The approximate amount of one half of 1% of the prime contract for this project will be determined. If a contract corresponds to both of the conditions above, it’s exempt from the requirement to employ the minimum percentage of apprenticeship graduate journeymen established for the trade.
However, contractors who fall under this exemption are still required to employ a 100% skilled and trained workforce, though not subject to the apprentice graduate percentage minimums.
Are these Skilled & Trained Workforce requirements going away anytime soon?
Nope. Skilled & Trained Workforce Requirements are not going away anytime soon.
On January 1, 2019, AB3018 went into effect. AB3018 is an extension and revision of the existing Skilled & Trained Workforce provisions (Public Contract Code 2600-2603).
What are the common pitfalls of Skilled & Trained Workforce requirements?
Folks often don’t realize that a project is subject to Skilled & Trained Workforce requirements. Perhaps they don't even know what that is. People often get into a new contract and all of a sudden are working on a project. When the body auditing and monitoring the project requests their Skilled & Trained monthly report the contractor is shocked and wonders what the report even is.
Monthly reports certifying the Skilled & Trained Workforce requirements will be collected for projects.
Penalties for non-compliance with the minimum percentages may apply, so compliance with these set minimums is encouraged.
Compliance is per month and not an aggregate of all months on site. Think about how your team will handle these requirements and ensure that Skilled Journeypersons who have graduated from apprenticeship programs are prioritized to work on applicable projects.
For contractors or subcontractors who realize that they don’t meet the Skilled & Trained Workforce requirements, one of two things must happen.
The first option is they either must make a plan and submit it to a prime contractor or an awarding body for approval, explaining how they will correct the mistake and meet that requirement. This essentially puts them on notice.
The second path occurs if they don't meet the requirements within a month of issuing that plan. Then, there are two options:
- The awarding body must file a complaint and turn it in to the DLSE, the labor commissioner's enforcement division.
- The contractor must be replaced – the contractor loses out on the job, and the prime contractor is faced with the difficult task of finding a replacement on short notice.
What are the stakes if you screw it up?
Failure to provide the monthly report or submitting an incomplete one requires the public agency to withhold further payments until a complete report is provided. The withholdings are 150% of the monthly billing value for the non-compliant subcontractor.
Once a complete report is submitted, the awarding body is required to immediately resume making payments to the contractor (including all previously withheld payments). If a subcontractor fails to provide a complete report, it must be replaced with one that has an enforceable commitment to using an STWF to finish the job. Critically, the awarding body must forward all non-compliant monthly STWF reports to the Labor Commissioner.
Contractors deemed to be willfully defrauding this program will be ineligible to bid on, be awarded, or perform work on any contract for a public works project for 1-3 years. The Labor Commissioner publishes a list of ineligible contractors.
The stakes are very high for failure to meet the Skilled & Trained Workforce requirements.
For a first-time offender, the penalty is up to $5,000 per month of non-compliance. This quickly adds up if you find out in month nine that this is a skilled and trained workforce project, and you haven't met those requirements – all of a sudden, that’s $45,000 in fines.
For a second-time offender, the penalty is up to $10,000 per month.
The Labor Commissioner will look at everything if you get a DLSE investigation notice or complaint filed. They won’t ask, "Did skilled & trained workforce penalize just for that?" They'll look at, "Did you miss an increase? Did you meet your apprenticeship requirements?"
In short: the penalties can quickly rack up. If you're on, let's say, a 10-month job, you didn't meet your Skilled & Trained Workforce requirements, you didn't meet your 20% apprentice ratio, and you missed an increase, you're looking at $150,000 of penalties minimum.
How can better software make compliance easier?
Skilled & Trained Workforce requirements are not all doom and gloom.
With better software solutions, contractors can easily ensure compliance in several ways:
1. Have excellent guardrails in the employee onboarding process
In the Miter system, for example, you can run reports on how long the worker has demonstratively worked on-site in a particular craft at the company. The Miter software allows you to easily demonstrate the length of service and how many hours you have in a particular craft, proving your eligibility.
The software stores apprenticeship certifications, eligibility documents, graduation certificates, or screenshots of program completion for apprenticeship graduation requirements.
Once the information is in the system, it’s easy to send reports like, "Yes, my workers have met the Skilled & Trained Workforce requirements, here's the report that shows that."
2. Have clean documentation across all job work performed
Many contractors don't realize that they can't just use their own workforce unless they are a traditionally union-focused company with all practice graduates. So, non-union contractors need to be able to prove on-the-job experience. That's difficult to do.
With Miter, which records and documents experience, contractors can easily run reports to see who qualifies and who doesn't. Then they can store that info as a backup to prove compliance.
When a contractor submits a report, they certify it as a true and accurate reflection of the actual workforce that was performing work. The regulatory bodies will ask for backup proof of apprenticeship graduation for those particular workers, proof of use of apprentices if they're trying to qualify, and proof of on-the-job hours experience. If you don't have that capability in your company's system, it will be really hard to have the right information.
Imagine going back and counting out 5,000 hours to see how many hours used for that trade!
Some people have been contractors for 40 years and still can’t prove that they have 5,000 hours of classification or trade experience. How could they? If you don't separate your work by classification, most workers are just paid lump-sum at the end of the week.
This is exactly where Miter can help!
Today, Miter is the only system that can store and filter by the worker's name and classification as well as the total hours utilized with that classification.