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S.D. begins enforcing new contractor transparency rules aiming to fight wage theft, help even playing field

Construction crews work on an affordable-housing project in San Diego in 2020.
(Eduardo Contreras / The San Diego Union-Tribune)

Labor unions praise the more rigorous disclosure requirements, but contractors express concerns that they will slow projects.

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A new San Diego law that took effect New Year’s Day requires companies serving as contractors or subcontractors on city projects to comply with more rigorous transparency and accountability measures.

San Diego officials say the goal of the new rules, which the City Council approved in August, is to help prevent wage theft and create a more even playing field among contractors by preventing any of them from skirting city rules.

Labor unions hail changes, construction industry calls them overly aggressive

The new rules essentially require disclosure of more information about licensing and previous labor law violations.

The disclosures will be required for residential and mixed-use projects of 20 or more units and commercial or industrial projects of at least 20,000 square feet.

The new law has been enthusiastically supported by labor unions but opposed by many contractors.

“Wage theft, labor trafficking and other illegal practices are rife in the industry, which is one of the reasons a policy like this is even necessary,” said Carol Kim, leader of the San Diego Building & Construction Trades Council. “Ensuring that businesses are complying with basic local, state and federal laws is a very good thing for both workers and consumers alike.”

However, the local chapter of the Associated General Contractors of America called the new rules “duplicative and onerous” for many contractors.

“We remain concerned that the new rules will result in fewer projects, which runs counter to the city’s stated priorities of increasing housing supply and lowering housing costs,” said Dustin Steiner, the organization’s vice president of general affairs.

“At the end of the day, AGC members will comply with the new city ordinance.”

City officials said they’re optimistic that their plans for handling the new law will be well-received by contractors.

“This program is designed around education — we’re not moving straight into enforcement,” said Leslie Gallagher, deputy director of the city’s Development Services Department. “They will get an ample opportunity to correct these issues before any sort of enforcement that might affect their projects.”

The new law requires contractors applying for building permits to disclose several new pieces of information before work on a project can begin. The information includes workers’ compensation policy numbers, state contractor licenses, city business licenses and any labor enforcement actions against the contractor, either pending or prior to the application.

Those details must be provided for every contractor and subcontractor on a project. All but the information about labor enforcement actions was already required of prime city contractors, but none of it had been required of subcontractors.

The new law also requires contractors and subcontractors doing work on public land, called “right of way,” to submit to the city proof of specialized accreditation and training they need to do such work.

Some contractors have expressed concern that submitting the information to the city will be cumbersome and time-consuming, but San Diego officials said city software has been connected to the state’s contractor licensing board database to streamline the process.

Gallagher said the goal is a more fair system.

“Unlicensed contractors are unfair competition for those who are playing by the rules,” she said.

The city could seek stop-work orders for projects not in compliance with the new law, but officials said they would be more likely to choose less-complicated methods that don’t require the courts. Those include fines for code violations and delaying city inspections so work on a project can’t continue.

The city has scheduled on online seminar for noon Friday, Jan. 6, to educate contractors about the new rules. Visit sandiego.gov/dsd for details. ◆