California Code of Regulations
Title 8 - Industrial Relations
Division 1 - Department of Industrial Relations
Chapter 8 - Office of the Director
Subchapter 4.5 - Compliance Monitoring and Enforcement by Department of Industrial Relations
Article 2 - Compliance Monitoring by Labor Commissioner
Section 16463 - Withholding of Contract Payments when Payroll Records Are Delinquent or Inadequate

Universal Citation: 8 CA Code of Regs 16463

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) "Withhold" means to cease payments by the Awarding Body, or others who pay on its behalf, or agents, to the general contractor. Where the violation is by a subcontractor, the general contractor shall be notified of the nature of the violation and reference made to its rights under Labor Code Section 1729.

(b) "Contracts." Except as otherwise provided by agreement, only contracts under a single master contract, including a Design-Build contract, or contracts entered into as stages of a single project, may be the subject of withholding.

(d) "Inadequate payroll records" are any one of the following:

(1) A record lacking any of the information required by Labor Code Section 1776;

(2) A record which contains all of the required information but is not certified, or is certified by someone who is not an agent of the contractor or subcontractor;

(3) A record remaining uncorrected for one payroll period after the Labor Commissioner has given the contractor or subcontractor notice of inaccuracies detected by audit or record review. However, prompt correction will stop any duty to withhold if such inaccuracies do not amount to one (1) percent of the entire Certified Weekly Payroll in dollar value and do not affect more than half the persons listed as workers employed on that Certified Weekly Payroll, as defined in Labor Code Section 1776 and section of Title 816401 of Title 8 of the California Code of Regulations.

(e) The Labor Commissioner may require the Awarding Body to withhold contract payments when payroll records are delinquent or inadequate. The amount withheld shall be limited to those payments due or estimated to be due to the contractor or subcontractor whose payroll records are delinquent or inadequate, plus any additional amount that the Labor Commissioner has reasonable cause to believe may be needed to cover a back wage and penalty assessment against the contractor or subcontractor whose payroll records are delinquent or inadequate; provided that a contractor shall be required in turn to cease all payments to a subcontractor whose payroll records are delinquent or inadequate until the Labor Commissioner provides notice that the subcontractor has cured the delinquency or deficiency.

(f) When contract payments are withheld under this section, the Labor Commissioner shall provide the contractor and subcontractor, if applicable, with immediate written notice that includes all of the following:

(1) a statement that payments are being withheld due to delinquent or inadequate payroll records, and that identifies what records are missing or states why records that have been submitted are deemed inadequate;

(2) specifies what amounts the Awarding Body has been directed to withhold; and

(3) informs the contractor or subcontractor of the right to request an expedited hearing to review the withholding of contract payments under Labor Code Section 1742, limited to the issue of whether the records are delinquent or inadequate or the Labor Commissioner has exceeded his or her authority under this section.

(g) No contract payments shall be withheld solely on the basis of delinquent or inadequate payroll records after the required records have been produced.

(h) In addition to withholding contract payments based on delinquent or inadequate payroll records, penalties may be assessed under Labor Code Section 1776(g) for failure to timely comply with a written request for certified payroll records.

(i) This section does not apply to the withholding of contract payments based upon the issuance of a civil wage and penalty assessment which finds a contractor liable for unpaid wages or penalties under Sections 1775, 1776(g), or 1813 of the Labor Code.

1. New section filed 6-29-2010; operative 8-1-2010 pursuant to Government Code section 11343.4(b) (Register 2010, No. 27).
2. Repealer filed 11-4-2010 as an emergency; operative 11-4-2010 (Register 2010, No. 45). A Certificate of Compliance must be transmitted to OAL by 5-3-2011 or emergency language will be repealed by operation of law on the following day.
3. Repealer refiled 5-2-2011 as an emergency; operative 5-2-2011 (Register 2011, No. 18). A Certificate of Compliance must be transmitted to OAL by 8-1-2011 or emergency language will be repealed by operation of law on the following day.
4. Repealer refiled 8-1-2011 as an emergency; operative 8-1-2011. A Certificate of Compliance must be transmitted to OAL by 10-31-2011 or emergency language will be repealed by operation of law on the following day (Register 2011, No. 31).
5. Reinstatement of section as it existed prior to 11-4-2010 emergency repeal by operation of Government Code section 11346.1(f) (Register 2011, No. 49).

Note: Authority cited: Sections 1771.55 and 1773.5, Labor Code. Reference: Sections 1729, 1771.5, 1771.55, 1742, 1775, 1776 and 1813, Labor Code.

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