California SB 854: Registration, Certified Payroll, and Penalties

California Senate Bill 854 is the 2014 law that governs how contractors work on publicly funded construction in the state. If you bid on or perform public works in California, SB 854 requires you to register annually with the Department of Industrial Relations (DIR), pay prevailing wages, submit certified payroll records electronically, and meet apprenticeship rules, with stacking penalties and possible debarment for failures.¹

When the Law Applies to Your Project

Labor Code Section 1720 defines public works as construction, alteration, demolition, installation, or repair performed under contract and paid for in whole or in part with public funds.² The scope is wider than contractors often expect. Preconstruction work like land surveying and site assessments counts even when no building ever goes up. Postconstruction cleanup counts. Assembling and disassembling modular office systems counts as “installation.”

The trigger is the funding source. If any public money pays for any portion of the contract, SB 854 generally applies, and it reaches every tier of subcontractor, not just the prime.

Small Project Exemption

Contractors working exclusively on small projects are exempt from DIR registration and electronic certified payroll reporting when the project falls below these thresholds:³

New construction, alteration, demolition, installation, or repair: $25,000 or less in total contract value.
Maintenance work: $15,000 or less in total contract value.

The exemption spares you from registering and from submitting payroll through DIR’s online system. It does not spare you from paying prevailing wages or keeping certified payroll records, which you still have to produce if the Labor Commissioner asks.⁴

Registering With DIR

Every contractor and subcontractor that wants to bid on, be listed in a bid proposal for, or perform work on a covered project must be registered with DIR.⁵ An awarding body cannot accept a bid from or enter a contract with an unregistered contractor.¹

To qualify, you must have:⁵

Workers’ compensation coverage for every employee who will perform prevailing-wage work, documented by a current certificate or self-insurance certification.
A current, active Contractors State License Board license for the trade, if licensing applies.
No outstanding back wages, penalties, fines, or related damages owed to an employee or the state under a final judgment or order. Amounts under appeal with a securing bond do not disqualify you.
No current debarment from public works under state or federal law.

The initial fee is $400 and is nonrefundable. You can register or renew for one, two, or three fiscal years at $400, $800, or $1,200. The fiscal year runs July 1 through June 30, and registration is handled online through DIR’s Public Works website.⁶ If you miss the renewal, you are immediately prohibited from bidding or working on public works until you re-register. A contractor who inadvertently lets registration lapse can renew retroactively within 90 days by paying an additional penalty renewal fee equal to the regular renewal amount.⁵

Paying Prevailing Wages

Registering does not get you to compliance by itself. On every covered project, every worker must be paid no less than the prevailing wage rate for their craft and location. The Director of Industrial Relations publishes rates by craft, classification, and county, and they are updated periodically.⁷ Look up the current journeyman and apprentice rates on DIR’s site before you bid. Underpayment is where most enforcement problems start and leads to back-wage liability, penalties, and potential debarment.

Submitting Certified Payroll Records

Contractors and subcontractors on covered projects must submit certified payroll records to the Labor Commissioner electronically through DIR’s online system.⁸ Each submission covers every worker on the project and includes classification, hours worked, wages paid, and deductions.

Submissions are due at least once every 30 days while work is being performed, and within 30 days after the final day of work. Your contract may require more frequent reporting. Owner-operators and sole proprietors still report their labor hours and a reasonable estimate of their compensation.

Keep complete physical payroll records at your principal office and make them available for inspection on request. Unregistered contractors working on exempt small projects must retain payroll records for at least three years after the work ends. Registered contractors on larger jobs should do the same as a practical matter, because audits can reach back several years.

Dual-Funded Federal Projects

If a project is funded with both state and federal dollars, you have two reporting tracks running in parallel. Federal Davis-Bacon rules require weekly certified payroll, generally sent to the contracting federal agency or the entity that received the federal funding.⁹ California’s monthly electronic submissions to DIR are separate and still required. Form WH-347 is an optional format for the federal filing; the weekly cadence is not optional.

Apprentices and Training Contributions

Labor Code Section 1777.5 requires contractors employing workers in an apprenticeable trade on a public works project to employ apprentices at a ratio of at least one hour of apprentice work for every five hours of journeyman work in each craft.¹⁰ If you don’t already employ enough apprentices, request dispatch from an apprenticeship program for the trade, giving at least 72 hours’ written notice before apprentices are needed. If the first program can’t supply enough, contact all other apprenticeship committees in the project area. Apprentices must be paid the prevailing apprentice rate and may only perform work in the craft they’re registered for.¹¹

Training fund contributions are due by the 15th of each month, submitted through DIR’s Training Fund Contributions Form (CAC2). You don’t file for months with no work.¹²

Your Exposure for Subcontractor Failures

Prime contractors should pay close attention here. Under Labor Code Section 1743, a prime contractor and its subcontractors are jointly and severally liable for all amounts due under a final wage or penalty order.¹³ The Labor Commissioner will try to collect from the subcontractor first, but if the sub can’t pay or has dissolved, the general is on the hook for unpaid wages, benefits, and penalties. Vetting your subs’ registration and payroll practices is part of protecting yourself.

Penalties for Non-Compliance

Working Without Registration

A contractor who bids on, is listed in a bid proposal for, or performs public works without being registered faces a $2,000 penalty on top of the $400 registration fee when they first register after the violation.⁵ This applies to any bid or work on a public works project in the preceding 12 months without proper registration. The penalty can be waived only on a first violation and only if the contractor pays the additional $2,000 fee.

Failure to Submit Electronic Certified Payroll

Contractors who fail to furnish electronic certified payroll records to DIR face $100 per day the violation continues, capped at $5,000 per project.⁸ The penalty starts accruing 14 days after the submission was due. It applies only to the contractor or subcontractor that failed to submit.

Failure to Produce Records on Request

A separate and often larger penalty applies when a contractor fails to hand over payroll records after a written request. Under Labor Code Section 1776, you have 10 days to comply. After that, the penalty is $100 per calendar day, per worker, until the records are produced.¹⁴ There is no stated cap, and the penalty multiplies by the number of workers whose records are missing. On a 30-worker project, a two-week delay runs roughly $42,000. A prime contractor is not penalized under this section for a subcontractor’s failure to produce records.

Debarment

For the most serious violations, the Labor Commissioner can bar a contractor from all public works for up to three years. Debarment applies in several scenarios:¹⁵

A violation committed with intent to defraud: one to three years.
Two or more separate willful violations within a three-year period: up to three years.
Failure to produce certified payroll records within 30 days of a written notice from the Labor Commissioner: one to three years, unless the failure was caused by circumstances outside the contractor’s control.
Knowingly committing a serious apprenticeship violation: up to one year for a first offense, up to three years for subsequent offenses.

Debarment reaches beyond the individual contractor and extends to any firm, corporation, partnership, or association in which the debarred contractor has an interest. Reincorporating under a new name does not get around it.

The Awarding Body’s Role

Public agencies have their own filing to make, and your ability to submit payroll depends on it. For every covered project, the awarding body must electronically submit a Public Works Contract Award Information form (PWC-100) to DIR within five days of the contract award.¹⁶ The requirement comes from Labor Code Section 1773.3 and, as expanded by SB 854, covers public works projects over $1,000. The PWC-100 creates the project record you file your certified payroll against. If the awarding body hasn’t submitted it, your electronic submissions have nowhere to land, so follow up with the agency early if the project isn’t showing up in the system.

1
Department of Industrial Relations. Public Works Reforms SB 854
2
California Legislative Information. California Code LAB 1720 – Scope and Operation
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Department of Industrial Relations. Frequently Asked Questions on Certified Payroll Reporting
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Department of Industrial Relations. Public Works Contractor Registration Fee Increased, Small Project Exemption Established Effective July 1
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California Legislative Information. California Code Labor Code LAB 1725.5
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Department of Industrial Relations. Contractor Registration
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Department of Industrial Relations. Directors General Prevailing Wage Determinations
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California Legislative Information. California Code LAB 1771.4
9
U.S. Department of Labor. Instructions For Completing Davis-Bacon and Related Acts Weekly Certified Payroll Form, WH-347
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Department of Industrial Relations. Apprentices on Public Work Projects Summary of Requirements
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California Legislative Information. California Code LAB 1777.5
12
Department of Industrial Relations. CAC – Training Fund Contributions
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California Legislative Information. California Code Labor Code LAB 1743
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California Legislative Information. California Code LAB 1776
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California Legislative Information. California Code Labor Code LAB 1777.1
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Department of Industrial Relations. Notice to Awarding Bodies and Contractors Regarding DIRs eCPR System