This July, the Court in Castillo v. Toll Bros, Inc. (2011) 197 Cal.App.4th 1172 made an interesting ruling on Labor Code § 2810. Haven't heard about that relatively new code section? If you are a contractor, now is the time to find out how it applies to you!
Under Labor Code § 2810, any person or entity entering into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor MUST ensure that the contract price includes enough money to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided. Basically, the deal you strike to get the job done must include enough money to pay labor costs.
As we all know, “labor cost” means different things on different jobs, whether prevailing wage, union-driven or just plain old unskilled worker wages. In Castillo, Toll Bros., Inc., a home builder, was sued by employees of its subcontractors who used Labor Code § 2810 to hold the builder liable for the subs’ Labor Code violations. The subs argued that Toll Bros.’ subcontracts were actionable under the Labor Code because the subcontracts didn’t include enough money to pay subs prevailing wages for their trade. Toll Bros., Inc. argued that the prime contract was sufficient because it included enough money to pay the subs minimum wage.
Ultimately, however, the Court sided with Toll Bros., and ruled that under Labor Code § 2810, the appropriate wage standard is minimum wage, rather than the appropriate wage under the specifics of the contract or the prevailing wages for any particular trade.
This probably isn’t the end of the debate over “sufficiency” of the contract price to meet payroll. Watch this space for updates, and as always, if you have questions about how the Labor Code applies to your contracts and subcontracts, whether or not you are in the construction industry, give me a call.