SB597 - Labor-related liabilities: direct contractor and subcontractor.

Senate Bill No. 597 CHAPTER 774 An act to amend Sections 65912.131, 65913.4, and 65913.16 of the Government Code, and to amend Section 218.8 of, and to add Section 218.9 to, the Labor Code, relating to employment. [ Approved by Governor October 13, 2025. Filed with Secretary of State October 13, 2025. ] LEGISLATIVE COUNSEL'S DIGEST SB 597, Cortese. Labor-related liabilities: direct contractor and subcontractor. Existing law requires, for contracts entered into on or after January 1, 2022, a direct contractor making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other private work, to assume, and be liable for, any debt owed to a wage claimant or third party on the wage claimant’s behalf, incurred by a subcontractor at any tier acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the contract between the direct contractor and the owner. Existing law defines “direct contractor” for this purpose to mean a contractor that has a direct contractual relationship with an owner. This bill would apply the above-described provision to contracts entered into on or after January 1, 2022, and before January 1, 2026. The bill would instead require, for contracts entered into on or after January 1, 2026, a direct contractor making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other private work, to assume, and be liable for, any indebtedness for the performance of labor, as specified. The bill would prohibit a direct contractor from being held liable for the indebtedness with respect to fringe or other benefit contributions if they make contribution payments by joint check, as specified. The bill would define “direct contractor” for this purpose to mean a contractor that has a direct contractual relationship with an owner or any other person or entity engaging contractors or subcontractors, as specified, on behalf of the owner. Existing law provides for a streamlined, ministerial approval process or use by right for certain housing developments that meet specified requirements. Existing law requires these developments to meet specified labor standards, including, among other things, making health care expenditures for each employee, as specified. Existing law grants a joint labor-management cooperation committee standing to sue a construction contractor pursuant to the above-described liability provision for failure to make those health care expenditures. This bill would additionally grant a joint labor-management cooperation committee standing to sue pursuant to the liability provision added by this bill. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 65912.131 of the Government Code is amended to read: 65912.131. In addition to the requirements of Section 65912.130, a development of 50 or more housing units approved by a local government pursuant to Article 2 (commencing with Section 65912.110) or Article 3 (commencing with Section 65912.120) shall meet all of the following labor standards: (a) The development proponent shall require in contracts with construction contractors and shall certify to the local government that each contractor of any tier who will employ construction craft employees or will let subcontracts for at least 1,000 hours shall satisfy the requirements in subdivisions (b) and (c). A construction contractor is deemed in compliance with subdivisions (b) and (c) if it is signatory to a valid collective bargaining agreement that requires utilization of registered apprentices and expenditures on health care for employees and dependents. (b) A contractor with construction craft employees shall either participate in an apprenticeship program approved by the Division of Apprenticeship Standards pursuant to Section 3075 of the Labor Code, or request the dispatch of apprentices from a state-approved apprenticeship program under the terms and conditions set forth in Section 1777.5 of the Labor Code. A contractor without construction craft employees shall show a contractual obligation that its subcontractors comply with this subdivision. (c) Each contractor with construction craft employees shall make health care expenditures for each employee in an amount per hour worked on the development equivalent to at least the hourly pro rata cost of a Covered California Platinum level plan for two 40-year-old adults and two dependents 0 to 14 years of age for the Covered California rating area in which the development is located. A contractor without construction craft employees shall show a contractual obligation that its subcontractors comply with this subdivision. Qualifying expenditures shall be credited toward compliance with prevailing wage payment requirements set forth in Section 65912.130. (d) (1) The development proponent shall provide to the local government, on a monthly basis while its construction contracts on the development are being performed, a report demonstrating compliance with subdivisions (b) and (c). The reports shall be considered public records under the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1), and shall be open to public inspection. (2) A development proponent that fails to provide the monthly report shall be subject to a civil penalty for each month for which the report has not been provided, in the amount of 10 percent of the dollar value of construction work performed by that contractor on the development in the month in question, up to a maximum of ten thousand dollars ($10,000). Any contractor or subcontractor that fails to comply with subdivision (b) or (c) shall be subject to a civil penalty of two hundred dollars ($200) per day for each worker employed in contravention of subdivision (b) or (c). (3) Penalties may be assessed by the Labor Commissioner within 18 months of completion of the development using the procedures for issuance of civil wage and penalty assessments specified in Section 1741 of the Labor Code, and may be reviewed pursuant to Section 1742 of the Labor Code. Penalties shall be deposited in the State Public Works Enforcement Fund established pursuant to Section 1771.3 of the Labor Code. (e) Each construction contractor shall maintain and verify payroll records pursuant to Section 1776 of the Labor Code. Each construction contractor shall submit payroll records directly to the Labor Commissioner at least monthly in a format prescribed by the Labor Commissioner in accordance with subparagraph (A) of paragraph (3) of subdivision (a) of Section 1771.4 of the Labor Code. The records shall include a statement of fringe benefits. Upon request by a joint labor-management cooperation committee established pursuant to the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a), the records shall be provided pursuant to subdivision (e) of Section 1776 of the Labor Code. (f) All construction contractors shall report any change in apprenticeship program participation or health care expenditures to the local government within 10 business days, and shall reflect those changes on the monthly report. The reports shall be considered public records pursuant to the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1) and shall be open to public inspection. (g) A joint labor-management cooperation committee established pursuant to the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a) shall have standing to sue a construction contractor for failure to make health care expenditures pursuant to subdivision (c) in accordance with Section 218.7, 218.8, or 218.9 of the Labor Code. SEC. 2. Section 65913.4 of the Government Code is amended to read: 65913.4. (a) Except as provided in subdivision (r), a development proponent may submit an application for a development that is subject to the streamlined, ministerial approval process provided by subdivision (c) and is not subject to a conditional use permit or any other nonlegislative discretionary approval if the development complies with subdivision (b) and satisfies all of the following objective planning standards: (1) The development is a multifamily housing development that contains two or more residential units. (2) The development and the site on which it is located satisfy all of the following: (A) It is a legal parcel or parcels located in a city if, and only if, the city boundaries include some portion of either an urbanized area or urban cluster, as designated by the United States Census Bureau, or, for unincorporated areas, a legal parcel or parcels wholly within the boundaries of an urbanized area or urban cluster, as designated by the United States Census Bureau. (B) At least 75 percent of the perimeter of the site adjoins parcels that are developed with urban uses. For the purposes of this section, parcels that are only separated by a street or highway shall be considered to be adjoined. (C) (i) A site that meets the requirements of clause (ii) and satisfies any of the following: (I) The site is zoned for residential use or residential mixed-use development. (II) The site has a general plan designation that allows residential use or a mix of residential and nonresidential uses. (III) The site meets the requirements of Section 65852.24. (ii) At least two-thirds of the square footage of the development is designated for residential use. Additional density, floor area, and units, and any other concession, incentive, or waiver of development standards granted pursuant to the Density Bonus Law in Section 65915 shall be included in the square footage calculation. The square footage of the development shall not include underground space, such as basements or underground parking garages. (3) (A) The development proponent has committed to record, prior to the issuance of the first building permit, a land use restriction or covenant providing that any lower or moderate-income housing units required pursuant to subparagraph (B) of paragraph (4) shall remain available at affordable housing costs or rent to persons and families of lower or moderate income for no less than the following periods of time: (i) Fifty-five years for units that are rented. (ii) Forty-five years for units that are owned. (B) The city or county shall require the recording of covenants or restrictions implementing this paragraph for each parcel or unit of real property included in the development. (4) The development satisfies clause (i) or (ii) of subparagraph (A) and satisfies subparagraph (B) below: (A) (i) For a development located in a locality that is in its sixth or earlier housing element cycle, the development is located in either of the following: (I) In a locality that the department has determined is subject to this clause on the basis that the number of units that have been issued building permits, as shown on the most recent production report received by the department, is less than the locality’s share of the regional housing needs, by income category, for that reporting period. A locality shall remain eligible under this subclause until the department’s determination for the next reporting period. (II) In a locality that the department has determined is subject to this clause on the basis that the locality did not adopt a housing element that has been found in substantial compliance with housing element law (Article 10.6 (commencing with Section 65580) of Chapter 3) by the department. A locality shall remain eligible under this subclause until such time as the locality adopts a housing element that has been found in substantial compliance with housing element law (Article 10.6 (commencing with Section 65580) of Chapter 3) by the department. (ii) For a development located in a locality that is in its seventh or later housing element cycle, is located in a locality that the department has determined is subject to this clause on the basis that the locality did not adopt a housing element that has been found in substantial compliance with housing element law (Article 10.6 (commencing with Section 65580) of Chapter 3) by the department by the statutory deadline, or that the number of units that have been issued building permits, as shown on the most recent production report received by the department, is less than the locality’s share of the regional housing needs, by income category, for that reporting period. A locality shall remain eligible under this subparagraph until the department’s determination for the next reporting period. (B) The development is subject to a requirement mandating a minimum percentage of below market rate housing based on one of the following: (i) The locality did not adopt a housing element pursuant to Section 65588 that has been found in substantial compliance with the housing element law (Article 10.6 (commencing with Section 65580) of Chapter 3) by the department, did not submit its latest production report to the department by the time period required by Section 65400, or that production report submitted to the department reflects that there were fewer units of above moderate-income housing issued building permits than were required for the regional housing needs assessment cycle for that reporting period. In addition, if the project contains more than 10 units of housing, the project does one of the following: (I) For for-rent projects, the project dedicates a minimum of 10 percent of the total number of units, before calculating any density bonus, to housing affordable to households making at or below 50 percent of the area median income. However, if the locality has adopted a local ordinance that requires that greater than 10 percent of the units be dedicated to housing affordable to households making below 50 percent of the area median income, that local ordinance applies. (II) For for-sale projects, the project dedicates a minimum of 10 percent of the total number of units, before calculating any density bonus, to housing affordable to households making at or below 80 percent of the area median income. However, if the locality has adopted a local ordinance that requires that greater than 10 percent of the units be dedicated to housing affordable to households making below 80 percent of the area median income, that local ordinance applies. (III) (ia) If the project is located within the San Francisco Bay area, the project, in lieu of complying with subclause (I) or (II), may opt to abide by this subclause. Projects utilizing this subclause shall dedicate 20 percent of the total number of units, before calculating any density bonus, to housing affordable to households making below 100 percent of the area median income with the average income of the units at or below 80 percent of the are [Text truncated for display. Full text available on Congress.gov.]