California SB 35: What Contractors Need to Know About Prevailing Wage & Compliance

California Senate Bill 35 (SB 35) reshaped the approval process for multifamily housing developments by introducing a streamlined, ministerial approval pathway for qualifying projects. While the bill is primarily viewed through a housing development lens, it carries significant compliance implications for contractors, especially those operating in the prevailing wage space.

Below is a practical guide to SB 35 focused on what contractors, subcontractors, and compliance teams need to know to stay compliant and audit ready.

Important Update: SB 35 Was Extended and Amended by SB 423

Before diving into compliance details, it’s worth flagging a development that changes how this law should be understood today: SB 35 is no longer a standalone statute operating on its original 2017 terms.

In October 2023, Governor Newsom signed SB 423 (Wiener), which took effect January 1, 2024, and substantially amended the streamlined ministerial approval process originally created by SB 35 (codified at Government Code § 65913.4). Some jurisdictions and planning departments now refer to the process as “SB 423 (formerly known as SB-35).”

Key changes contractors should know about:

• The sunset date was extended a decade. SB 35 was originally set to expire on January 1, 2026. SB 423 pushed that expiration to January 1, 2036.
• The old blanket labor standard was replaced with a tiered structure. Previously, SB 35 applied a single objective standard requiring prevailing wage and use of a skilled and trained workforce across covered projects. SB 423 restructured this into size- and height-based tiers (detailed in the Skilled and Trained Workforce section below), rather than a one-size-fits-all requirement.
• A small-project exemption was added. Projects of 10 units or fewer that are not otherwise a public work are exempt from the prevailing wage, apprenticeship, and healthcare expenditure requirements entirely.
• The coastal zone exclusion was removed, expanding the geographic reach of projects eligible for streamlined approval.

For contractors and compliance teams, the practical takeaway is this: prevailing wage still applies broadly, but which additional labor standards apply (skilled and trained workforce, apprenticeship utilization, healthcare expenditures) now depends on specific project size and building height thresholds rather than a blanket rule. The sections below reflect the current SB 423-amended framework.

What Is SB 35?

SB 35 allows qualifying multifamily housing projects to bypass discretionary approvals and move through a streamlined, by-right approval process if they meet objective zoning and affordability requirements.

Key features include:

• Ministerial (non-discretionary) approvals
• Strict timelines for local agency review (60–90 days depending on project size)
• Requirements tied to affordability thresholds and housing production goals
• Applicability to jurisdictions that fall behind on regional housing needs (RHNA)

Prevailing Wage Requirements Under SB 35

SB 35 explicitly ties streamlined approval eligibility to prevailing wage compliance.

When Prevailing Wage Applies

Under SB 35, developers must certify one of the following:

• The project is a public work, OR
• All construction workers will be paid at least the general prevailing wage for the applicable trade and location

This applies even when the project is privately funded.

Contractor Responsibilities

For contractors and subcontractors, this means:

• Paying DIR-determined prevailing wage rates
• Ensuring apprentices are paid the correct apprentice wage rates
• Flowing prevailing wage requirements down to all subcontractor tiers
• Including prevailing wage clauses in all contracts
• Skilled and Trained Workforce requirements (if applicable)

Failure to comply can lead to:

• Civil wage and penalty assessments
• Liquidated damages
• Enforcement actions by the California Labor Commissioner

Certified Payroll & Recordkeeping Requirements

SB 35 reinforces standard California Labor Code §1776 recordkeeping requirements.

Contractors must maintain and verify certified payroll records, make records available for inspection upon request, and retain documentation sufficient to support reported wages and classifications.

Best Practice: Go Beyond CPRs

As seen in similar compliance frameworks, certified payroll alone is not sufficient for audit protection. Contractors should also maintain:

• Timecards and daily job logs
• Worker classification documentation
• Fringe benefit contribution records
• Fringe benefit annualization calculations
• Apprenticeship agreements and ratios
• Subcontractor compliance documentation

Without these, contractors risk exposure during Labor Commissioner investigations, worker complaints, and potential audits.

Skilled and Trained Workforce (STW) Requirements

Under the pre-2024 version of SB 35, a single objective standard applied broadly across covered projects. SB 423 replaced that with a tiered labor standard based on project size and building height:

• Projects of 50 or more housing units must meet apprenticeship-utilization and healthcare expenditure requirements for construction craft employees, either directly, or by being signatory to a collective bargaining agreement that already requires both. Each construction contractor must also maintain and verify payroll records pursuant to Section 1776 of the Labor Code, and 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.
• Buildings taller than 85 feet must utilize a skilled and trained workforce and hit certain percentage goals, or face penalties for non-compliance.
• Projects of 10 units or fewer where the project is not otherwise a public work are exempt from the prevailing wage, apprenticeship, and healthcare expenditure requirements entirely.

What This Means

Rather than assuming a flat STW threshold applies, contractors need to check a given project against its unit count and building height to determine which labor standards apply. A 12-unit, 3-story project and a 200-unit high-rise can trigger very different obligations under the same law. All subcontractors on a covered project are still required to comply with whichever standards apply.

Reporting Obligations

Developers (and often contractors supporting them) must submit monthly compliance reports to the local jurisdiction and demonstrate adherence to STW requirements.

Failure to comply may result in:

• $10,000/month penalties for missing reports
• $200/day per non-compliant worker penalties

Subcontractor Compliance: Flow-Down Liability

As with other public works frameworks, SB 35 places responsibility on prime contractors to enforce compliance across all tiers. This includes collecting certified payroll from subcontractors, verifying wage rates and classifications, and ensuring proper contract language is in place.

If a subcontractor fails to comply, liability may flow upstream, particularly where oversight procedures are lacking.

Apprenticeship Requirements

SB 35 aligns with broader California apprenticeship requirements:

• Proper apprentice-to-journeyman ratios must be maintained
• Apprentices must be registered in approved programs
• Wage rates must match applicable prevailing apprentice rates
• Payment of training amount to applicable program or CAC

Noncompliance in this area is a frequent audit trigger and often overlaps with STW requirements.

Interaction with Other Regulations

SB 35 projects may also intersect with:

California Prevailing Wage (DIR)

Core requirement for all covered work. Includes:

• Use of wage determinations
• Public works enforcement framework
• CPR and recordkeeping obligations

Davis-Bacon (Federally Funded Projects)

If federal funding is involved:

• Federal prevailing wage requirements may apply concurrently
• Dual compliance (state + federal) may be required

Section 3 (HUD-Funded Projects)

If HUD funding is used:

• Hiring and contracting goals for low-income workers
• Additional reporting and documentation requirements

Project Labor Agreements (PLAs)

If a PLA is in place, some enforcement mechanisms (e.g., payroll record provisions) shift to arbitration frameworks instead of statutory enforcement.

Audit & Enforcement Risk

Scrutiny under SB 35 enforcement can come through the following forms:

• Public reporting requirements
• Streamlined approvals tied to compliance certifications
• Monthly workforce reporting (STW)

Common audit triggers include:

• Payroll discrepancies
• Worker complaints
• Missing documentation
• Misclassification issues

Penalties can include:

• Back wages
• Interest and fines
• Debarment from future public works

Key Takeaways for Contractors

Contractors should approach these projects with a compliance-first strategy:

1. Treat all SB 35 projects as high-compliance work. Even if privately funded, prevailing wage can apply.
2. Strengthen recordkeeping systems. Certified payroll is not enough. Maintain full supporting documentation.
3. Audit subcontractors proactively. Do not assume compliance. Verify it through every party.
4. Prepare for Skilled & Trained Workforce tracking. Ensure workforce eligibility and reporting systems are in place.
5. Align contracts with compliance requirements. Include all mandated language and obligations upfront.

Final Thoughts

Compliance under SB 35 requirements layers prevailing wage, workforce requirements, and reporting obligations. Contractors who succeed under SB 35 will be those who build compliance into project workflows early, maintain a well-documented paper trail of proof of compliance, and actively manage subcontractor risk.

As enforcement continues to evolve, partnering with experienced prevailing wage consultants can help ensure your projects stay compliant from bid to closeout. Connect with us to learn how you can get assistance in the compliance process.