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California Assembly Bill 889: What to Know About the New Prevailing Wage Rules

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Introduction

Signed into law on October 11, 2025, and effective January 1, 2026, the published Assembly Bill 889 (AB 889) announced updates and standards for annualization, fringe benefit credit calculations, fringe benefit documentation, and what counts toward benefit contributions. Below is a breakdown of what the bill does, how contractors are impacted, and best practices to navigate these changes. 

Table of Contents

Annualization

Annualization is a calculation that converts an employer’s fringe benefit contribution into an hourly amount. The amount of employer payments must be divided by the total number of hours worked in a year on all projects, both public and private, not just the number of hours worked during that year on public works projects. 

Contractors aren’t required to provide benefits on prevailing wage projects. However, if they choose to offer fringe benefits on a prevailing wage job, they must calculate those benefits using proper annualization. 

This calculation must: 

  • Be done on a yearly basis 
  • Be completed separately for each individual employee because of varying benefits offered and hours worked

Calculation formulas can vary depending on the frequency that benefit payments are issued. Per standard, 2,080 annual hours are used to calculate hourly amounts (40 hours weekly x 52 weeks). 

How Annualization Appears on Both Public and Private Projects

Annualization is required for employers that claim a higher fringe contribution rate on public works than on their private projects unless one of the following exceptions applies: 

  • The employer is contractually required to pay the higher rate on future private jobs. 
  • The higher rate is required by a Project Labor Agreement (PLA).
  • The payments are made to the California Apprenticeship Council (CAC).
  • The Director of the Department of Industrial Relations determines that annualization would not serve the purpose of the law. 

Any exemptions to the annualization requirements above issued by the director prior to January 1, 2026, are revoked. 

Annualization applies to all employer-paid fringe benefits not paid directly to the worker, whether or not the employer provides those benefits on private jobs. 

  • Exception: Defined‑contribution pension plans with immediate participation and immediate vesting do not need to be annualized. Employers may take full credit for contributions to these plans on public works even if they contribute less, or nothing, on private work. 

Employer Documentation Requirements

The employer is responsible for proving that its annualization calculation is correct. If the Labor Commissioner requests it, the employer must provide: 

  • Records of employee hours on private construction
  • Records of employer payments on private construction 

If the employer cannot produce these records, the Labor Commissioner may deny the fringe credit. 

Which Payments Count as Fringe Benefits

AB 889 amends Labor Code Section 1773.1 to define which per diem employer payments count toward fringe benefits, which include: 

  • Health and Welfare 
  • Pension 
  • Vacation 
  • Travel 
  • Subsistence 
  • Apprenticeship or other training programs authorized by Section 3093, to the extent that the cost of training is reasonably related to the amount of the contributions. 
  • Worker protection and assistance programs or committees established under the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a), to the extent that the activities of the programs or committees are directed to the monitoring and enforcement of laws related to public works. 
  • Industry advancement and collective bargaining agreements administrative fees, provided that these payments are made pursuant to a collective bargaining agreement to which the employer is obligated. 
  • Other purposes similar to those above if the payments are made pursuant to a collective bargaining agreement to which the employer is obligated. 

Employer payments (which can be credited toward the prevailing wage fringe requirement) include: 

  • Irrevocable contributions the employer makes to a trustee or third party under a benefit plan.
  • Reasonably anticipated costs of providing benefits under a written, financially responsible plan. 
  • Required payments to the California Apprenticeship Council. 

These payments can count as a credit toward the prevailing wage, but no credit is allowed for: 

  • Benefits already required by other state or federal laws 
  • Payments for monitoring or enforcing public‑works laws unless made to a qualifying Labor‑Management Cooperation program 
  • Industry advancement or CBA administrative fees unless required by a binding collective bargaining agreement 

Credits cannot reduce the required straight‑time or overtime wage. However, a contractor may increase fringe contributions and lower the base hourly rate without violating prevailing wage, if: 

  • The increased contribution follows the terms of a collective bargaining agreement 
  • The combined base rate and fringe still meet or exceed the prevailing wage (including overtime and holiday rates) 
  • The contribution is irrevocable (unless corrected due to error) 

Employers may take credit for these payments even if they are not made in the same pay period, as long as contributions or costs are paid regularly (at least quarterly). 

Collective Bargaining Agreement (CBA) Filing Requirements (Simplified)

  • Unions or worker representatives must file fully executed CBAs with the Department of Industrial Relations (DIR) for each craft or classification used on public works projects. 
  • CBAs must be filed after they are signed and must be on file at least 30 days before the bid call to be considered in prevailing wage determinations.
  • If the CBA isn’t finalized yet, a typeset final draft may be filed temporarily, along with a sworn statement confirming its effective date. 
  • If a CBA has already been filed, the representative must also file all signed modifications or extensions that affect wages or holidays. 
  • Failing to file a CBA or its updates does not invalidate a prevailing wage determination, as long as the information used to set the wage was accurate. 

Conclusion

AB 889 brings significant updates to California’s prevailing wage rules, reshaping how contractors calculate fringe credits, apply annualization, and maintain documentation. These changes raise the standard for accuracy and compliance on public works projects, making it essential for contractors to review their current practices and prepare for stricter oversight. Those who understand the new requirements and adjust early will be better positioned to stay compliant, avoid costly findings, and remain competitive in California’s public construction market. 

If your team needs assistance reviewing fringe benefit plans, updating annualization methods, or preparing for AB 889 compliance, our consultants are ready to support you. Reach out today to verify that your company is fully prepared for the new requirements.

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California AB 2143 Overview

The contents of this blog post have been transcribed from our YouTube video, “California’s New Solar Regulation and Requirements: AB2143”  

Renewable energy is taking the construction space by storm and keeping up with regulations can be a tough feat, but we’re here to help. We’ll be discussing changes made to California’s net energy metering program that came into effect January 1st, 2024 in this overview of Assembly Bill 2143, also known as AB 2143. 

Table of Contents

Net Energy Metering Explained

Net energy metering is a tool that allows customers with renewable energy  systems, namely solar panels, to gain credit for solar projects exceeding 15 kW of energy generated that is fed back into the grid. So, extra energy gathered from a renewable energy source can be sold for credit. 

Applicability and Requirements

AB2143 is applicable to contractors entering into a contract to perform work on a renewable electrical generation facility or associated battery storage.  

The requirements include:  

• Paying Prevailing Wages  

• Maintaining and Verifying Payroll Records 

• Submitting digital copies of payroll records biannually  

Paying Prevailing Wages

Prevailing wages are the minimum rate required to be paid out to workers in a specific occupation, also known as a classification. California prevailing wage rates are issued by the Department of Industrial Relations, also known as the DIR. Not only are there required base rates assigned to each occupation type, but there are also fringe amounts and provisions that can differ per classification. For an in-depth review on prevailing wage, you can visit this video on our YouTube channel.

Maintaining and Verifying Payroll Records

The second requirement is the requirement to Maintain and Verify Payroll records. Payroll records must be accurate and display the following: 

• Employee name 

• Address 

• Social security number 

• Work classification 

• Straight time and overtime hours worked each day and week

• Actual wages paid 

They must also be signed under penalty of perjury, which is a legal statement by the signer verifying that all information on the payroll record is true.  

These payroll records must also be available for inspection or furnished upon  request to the awarding body and Division of Labor Standards Enforcement, also known as the DLSE. 

Biannual Payroll Submissions

Finally, each contract must submit digital copies of certified payroll records biannually. The dates for submission are July 1st and December 31st of each year.  The commission team that monitors Net Energy Metering projects will be retaining these records as public record for five years. 

So, to summarize the key points, prevailing wages must be paid at minimum to employees on renewable energy projects, payroll records of these wages must be kept and available upon inspection or request, and records must be submitted biannually. 

Penalties

While the requirements can be vast, violation of the requirements can pose major issues. AB 2143 is enforced through the following means: 

A civil wage and penalty assessment can be issued. So, if a contractor is found to be in violation, interest will accrue on all due and unpaid wages and the violator will be publicly listed by The Labor Commissioner. Construction workers cannot be underpaid and administrative complaints or civil action can be pursued for violation of the bill. 

Additionally, willful violation can result in revoked eligibility for the energy facility to receive service pursuant to AB 2143 Section 769.2(d).  

Exemptions

Please note, this bill is not applicable to the following (as derived from AB 2143 Section 769.2(f)):  

“  

• A residential renewable electrical generation facility that is eligible to receive service pursuant to the standard contract or tariff developed pursuant to Section 2827.1 and has a maximum generating capacity of 15 kilowatts or less of electricity. 

• A residential renewable electrical generation facility that is eligible to receive service pursuant to the standard contract or tariff developed pursuant to Section 2827.1 and that is installed on a single-family home. 

• A project that is a public work, as defined in Section 1720 of the Labor Code, and that is subject to Article 2 (commencing with Section 1770) of Chapter 1 of Part 7 of Division 2 of the Labor Code. 

• A renewable electrical generation facility that serves only a modular home, a modular home community, or multiunit housing that has two or fewer stories. 

“  

Conclusion

With everything discussed in mind, it’s important to be aware of and comply with the requirements of AB2143. Our team works closely with contractors through dozens of project types to assist in remaining compliant. If you would like in-depth assistance, please feel free to get in touch.