Economic Development,
Placemaking and
Branding/Marketing Committee
TO: ECONOMIC DEVELOPMENT, DATE: JUNE 22, 2023
PLACEMAKING AND BRANDING/MARKETING
COMMITTEE MEMBERS
FROM: CHAIR RONALDO FI ERRO WARDS: ALL
SUBJECT: SUBCONTRACTOR AND CO NTRACTOR TRANSPARENCY ORDINANCE
ISSUE: Consideration of updating, formalizing and st rengthening verification requirements for subcontractors and contractors for certain projects within city limits to ensure fair labor standards are upheld.
RECOMMENDATIONS:
That the Economic Development, Placemaking and Branding/Marketing Committee:
1. Review the City’s current subcontractor verification process and consider updating and formalizing the policy through the adoption of an ordinance codifying changes to the time of reporting, the reporting threshold, repor ting of labor violati ons, requirements for incomplete reporting and vi olations for the lack of reportin g as set forth in the attached ordinance.
2. Recommend that the City Council adopt t he attached ordinance strengthening and updating the City’s subcontractor verification process.
BACKGROUND:
Wage theft is a widespread problem in the construction industry. However, according to California Center on Policy Initiatives, official complaints are rare and in a majority of cases are filed only in the case of the most egregious of wage theft violations: no payment for all time worked.
Workers less often complain of other, more frequent violations such as employers failing to pay overtime rates or requiring work during rest and meal breaks. Workers seldom claim lost wages while still on the job, and many report enduring vi olations for months or years before coming forward. The most common obstacles to filing wage claims are fear of retaliation and lack of information. Pursuing wage theft claims is an often confusing and frus trating process, and usually takes longer than the legal time limit, which is particularly difficult for low-paid workers.
According to a study conducted by the University of California, Berkeley Labor Center, 39% of families of construction workers are enrolled in one or more safe ty net programs with a cost of Wage Theft Ordinance page 2
almost $28 billion per year. Three times as many construction workers lack health insurance compared to all workers.
Even more significant than the issue of misclassification in construction is the practice of paying workers completely off the books. A 2019 report conducted by the Alliance for Construction Excellence found that there are fully four times as many construction workers being paid off the books as the number being misclassified as independent contractors (1.2 million to 300,000).
The cash-only nature of under-the-table work leav es workers particularly vulnerable to wage theft, though misclassified workers and even legally employed workers can be subject to this as well. A study of construction workers in Californ ia found that workers paid under the table earn just 52 cents for every dollar earned by workers with employee status.
DISCUSSION:
The City of Riverside can take a more active role in combating wage theft and upholding labor standards in Riverside by updating our verifi cation requirements for contractors and subcontractors of large projec ts in the City and keeping reco rd of all contractors and subcontractors throughout the duration of the project.
Currently, the City of Riverside requires applicants submit a c ontractor verification form (attached) that requires subcontractors to be validated through t he Business-Tax Division prior to final approvals and certificate of occupancy.
While a meaningful first step, this policy c an be strengthened to better identify potential bad actors and ensure a transparent process through upd ating the time of reporting, identifying a reporting threshold, requiring reporting of past labor violatio ns, codifying requirements for incomplete reporting and violations for not reporting information.
Time of reporting: The City’s process currently require s subcontractor information to be reported before issuing a certif icate of occupancy. Many other cities have adopted similar policies, including Irvine, S anta Ana and San Diego, required reporting is submitted and validated prior to the issuance of work permits.
Reporting Threshold: Many cities that have adopted similar policies utilize a reporting threshold to ensure that smaller projects can be exem pted. This proposed ordinance would apply to residential and mixed-use developments consisting of or involving 20 or more dwelling units, including single dwelling unit subdivisions and commercial or industrial development that proposes 20,000 square feet or more of tenant improvements or 20,000 square feet of additional gross floor area.
Reporting of Past Labor Violations: This proposed ordinance woul d expand reporting to include whether the c ontractor or subcontra ctor has any pending and/ or prior enforcement actions for any state or federal labor violatio ns or paid any penalties to a government agency related to the provisions of the California Labor Code.
Requirements for incomplete reporting: This proposed ordinance can clarify what happens when incomplete reporting is submitted. The pr oposed ordinance would give contractors two business days to fill in incomplete information after the awarding of each permit.
Wage Theft Ordinance page 3
Violations for not reporting information: This ordinance can strengthen and clarify enforcement for violations for reporting information. This proposed ordinance would give multiple remedies to violations, including (1) a stop work order, (2) revocation of permit, and (3) payment of a penalty for default to the City in the amount equal to the original permit fee for each violation in order to defray city costs of enforcement.
This common sense measure will promote greater transparency and accountability and ensure that labor standards are upheld, while safeguarding workers from potential wage theft.
FISCAL IMPACT:
There is no fiscal impact associated with the reco mmendations in this re port. If new programs or policies are recommended and implemented, th e fiscal impact, if any, will be defined during City Council review and approval of this item.
Prepared by: Caleb Ragan, Office of Councilmember Ronaldo Fierro
Authored by:
_________________________________
RONALDO FIERRO
Councilmember, City of Riverside, Ward 3
Chair, Economic Development, Placemaking and Branding/Marketing Committee
Attachments:
1. Current Contractor Verification Form
2. Draft Ordinance Language
3. San Diego Ordinance
4. Santa Ana Ordinance
5. Irvine Ordinance