Labor-related liabilities: direct contractor and subcontractor.

Senator Cortese’s measure ties a broadened direct-contractor liability regime for wage-related indebtedness on private construction projects to a far-reaching use-by-right framework for housing on land owned by religious institutions and independent colleges, weaving labor accountability with a streamlined path to increased housing supply. The bill also adds new mechanisms for tribal consultation and public oversight within the streamlined approval process, and it preserves a broader set of affordable-housing provisions tied to major housing developments.

On the direct-contractor front, the bill would extend and, in some cases, recalibrate who bears responsibility for unpaid wages, fringe benefits, and related payments. The measure expands the definition of “direct contractor” to include parties contracting with owners or other entities acting for the owner, and it creates a liability model that, for contracts entered into after a specified date, makes the direct contractor liable for wage-related indebtedness incurred by subcontractors at any tier. Penalties and liquidated damages would apply under defined conditions: a direct contractor would be liable for such penalties only if it had knowledge of nonpayment or failed to take specified actions, including monitoring payroll records, timely remedial steps, and obtaining an affidavit before final payment. The bill also allows direct contractors to satisfy certain fringe-benefit obligations through joint checks under specified arrangements, in which case they would not be liable for those fringe or benefit contributions. Enforcement channels include the Labor Commissioner, civil actions by workers or third parties, and joint labor-management committees, with penalties deposited into state funds and a presumption of public-record reporting for related compliance.

The changes also create a staged approach to liability for labor indebtedness, with new tools for accountability and public-oversight. A new provision grants joint labor-management committees standing to sue construction contractors for health-care expenditures and wage-related obligations, consistent with existing enforcement mechanisms. The bill codifies reporting requirements, mandating monthly compliance reports on health care expenditures and apprenticeship participation, with penalties for failure to report and for noncompliance by contractors or subcontractors. Payroll records, including fringe-benefit information, must be maintained, verified, and partially disclosed upon request, and compliance reports are treated as public records. The framework also contemplates penalties for late or incomplete reporting, and it aligns with existing wage-and-penalty assessment procedures for enforcement actions.

In the housing arena, the measure creates a use-by-right option for housing developments located on land owned as of 2024 by religious institutes or independent institutions of higher education. To qualify, a parcel must meet a set of location and zoning criteria, including adherence to objective standards and covenants designed to preserve affordability. The use-by-right option imposes long-term affordability covenants—generally 55 years for rental units and 45 years for owner-occupied units—with a defined share of units designated for lower or moderate-income households and, in some configurations, for households at certain income thresholds in specific regions such as the San Francisco Bay Area. The program sets density and residential-use thresholds, requiring a majority of development square footage to be residential and placing conditions on total unit counts, density bonuses, and parking. It also establishes strict environmental and land-use constraints (e.g., prohibitions near sensitive habitats, wetlands, prime farmland, fire hazards, flood zones) and provides for an array of ancillary ground-floor uses, including childcare and certain approved commercial activities, subject to local standards. The bill includes a coastal-permitting pathway, allows for exemptions from CEQA in the scoping and certain processes, and sunsets the framework at a specified date, while also enabling local governments to pursue related general-plan updates.

Beyond the housing use-by-right provisions, the bill broadens the streamlined ministerial process itself by enhancing tribal consultation requirements and clarifying conditions under which projects may be deemed consistent with objective planning standards. It requires a preliminary notice of intent and a formal scoping consultation with California Native American tribes affiliated with the project area, with confidentiality protections and explicit conditions for continued eligibility based on the outcome of these consultations. The legislation also allows for additional discretionary paths if tribal resources could be affected, and it provides explicit timelines and documentation requirements to guide staff determinations on consistency with objective standards. Finally, the measure preserves certain existing protections and aligns new provisions with current housing, labor, and environmental regimes, including sunset clauses and coastal considerations, to govern implementation and oversight.