Labor Relations
AB 1198 (2026): Prevailing Wages Apply to $35M Public Works Contracts
Updated
Assembly Bill 1198, introduced by Assembly Member Haney, changes how the Director of Industrial Relations’ updated prevailing wage determinations apply to large public works contracts in California. The bill amends and later replaces Labor Code section 1773.6 and adds Labor Code section 1773.65. It takes effect January 1, 2027, but its key operative provisions do not apply until July 1, 2027.
Background
California law requires that workers on public works projects be paid at least the general prevailing rate of per diem wages set by the Director of Industrial Relations. The awarding body obtains those rates for each craft, classification, or type of worker needed to perform the contract.
Under existing Labor Code section 1773.6, if the director finds during any quarterly period that a locality’s prevailing rate has changed, that change is made available to the awarding body and the determination is final. That determination does not apply to contracts for which the notice to bidders has already been published.
What the Law Changes
Commencing July 1, 2027, the bill replaces the quarterly review with a semiannual one. A determination that a rate has changed applies on its effective date to any public works contract awarded, or for which notice to bidders is published, after July 1, 2027, if the awarded value of the prime contract is $35 million or greater.
The bill also creates a review process. A contractor, awarding body, or representative of an affected craft, classification, or type of work may, within 20 days after publication of a new determination, file a verified petition with the director to challenge the rate on the ground that it was not set in accordance with Labor Code section 1773. A copy must be filed with the awarding body within two days.
On receiving a petition, the director must give notice to interested parties, including recognized collective bargaining representatives, and initiate an investigation or hold a hearing. Within 20 days after the filing, unless the parties agree to a longer period, the director must make a final determination in writing. That determination takes effect 10 days after issuance and remains in effect until modified, rescinded, or superseded.
Beginning July 1, 2027, semiannual prevailing wage changes apply to public works contracts of $35 million or more awarded or noticed after that date, and affected parties gain a 20-day window to petition the Director of Industrial Relations for review of the rate.
Housing Exemptions and Phase-In
The new section 1773.6 does not apply to a housing development project if 100 percent of the units, excluding managers’ units, are deed-restricted or otherwise restricted as affordable housing for persons and families of low or moderate income, as defined in Health and Safety Code section 50093, or comparable federal statutes.
For those affordable housing projects, new Labor Code section 1773.65 applies the older rule: a semiannual change is final but does not affect a contract for which notice to bidders has been published or that has already been awarded. The prior version of section 1773.6 becomes inoperative on July 1, 2027, and is repealed as of January 1, 2028, and the new sections 1773.6 and 1773.65 become operative on July 1, 2027.
What This Means for You
Starting July 1, 2027, updated prevailing wage rates apply to large public works contracts of $35 million or more, and affected parties may petition the Director of Industrial Relations to review a new rate within 20 days. This affects wage disputes on public works projects, with separate treatment for qualifying affordable housing developments.
I write these summaries as general information about developments in California employment law. They are not legal advice and don’t create a mediator–client relationship. For guidance on a specific matter, consult a qualified attorney.