California Public Works and Prevailing Wage 2026: What Counts and the De Minimis Test

What makes a project a public work

The threshold question on this topic is whether prevailing wage even applies, and that turns on the definition in Labor Code section 1720. Work is a public work when it is construction, alteration, demolition, installation or repair done under contract and paid for in whole or in part out of public funds. Two features of that definition catch contractors out. First, construction is defined to begin early: it includes preconstruction phases such as design, site assessment, feasibility study, inspection and land surveying, even if no further construction follows, under section 1720(a). It also reaches the other end, including postconstruction phases such as all cleanup work at the jobsite. Second, paid for out of public funds is broad. Under section 1720(b) it includes the transfer by a public entity of an asset of value for less than fair market price, money loaned by a public entity that is to be repaid only on a contingent basis, and fees, rents, insurance or bond premiums that are waived or forgiven by the public entity. A project can therefore be public even without a direct cash payment. Some work is a public work by special rule regardless of the general definition, such as work on the electric transmission system located in California under section 1720(e), and there is a narrow exception for work done directly by a public utility under a Public Utilities Commission order under section 1720(a)(1).

• A public entity transfers an asset of value for less than fair market price (Lab. Code § 1720(b)).
• A public entity loans money to be repaid only on a contingent basis (Lab. Code § 1720(b)).
• Fees, rents, insurance or bond premiums are waived or forgiven by the public entity (Lab. Code § 1720(b)).
• Work on the electric transmission system located in California, by special rule (Lab. Code § 1720(e)).

The de minimis subsidy test and other exclusions

Because public funds are defined so broadly, the law carves out a de minimis rule so that a tiny public contribution does not sweep an otherwise private project into prevailing wage. Under section 1720(c)(3), a public subsidy to an otherwise private project is de minimis, and the project stays private, only when the subsidy is both less than $600,000 and less than 2 percent of the total project cost. For a project consisting entirely of single-family dwellings, the test is simpler: a subsidy is de minimis when it is less than 2 percent of the total project cost, without the dollar cap, under section 1720(c)(3)(B)(ii). This de minimis subparagraph does not apply to a project advertised for bid, or a contract awarded, before July 1, 2021. Other exclusions round out the picture. A private residential project on private property becomes subject to the chapter only when built under an agreement with a state agency, a redevelopment agency or its successor, or a local public housing authority, under section 1720(c)(1). A self-help housing project is excluded when the home buyers themselves perform at least 500 hours of the construction work under section 1720(c)(5)(A), and rehabilitation or expansion of a not-for-profit transitional housing facility for homeless persons is excluded when the total project cost is less than $25,000 under section 1720(c)(5)(B).

Prevailing wage, DIR registration and certified payroll

Once a project is a public work, a package of duties follows. A contractor or subcontractor must be registered with the Department of Industrial Relations before bidding on or being engaged to perform public work, under section 1725.5, and only registered contractors may be listed on a public bid or awarded a public contract. On the job, covered workers must be paid at least the general prevailing rate of per diem wages for the trade and locality, under sections 1771 and 1774, and a contractor who pays less owes the difference plus statutory penalties for each underpaid worker under section 1775. Certified payroll is the paperwork backbone: under section 1776 the contractor and each subcontractor must keep accurate payroll records showing the work and wages for each worker, and must make certified copies available to the enforcing agency and, on request, to the public. Apprenticeship obligations under section 1777.5 require covered contractors to employ apprentices in a fixed ratio and to contribute to approved apprenticeship programs. The reach of these rules is broad, extending even to certain hauling of refuse from a public works site under section 1720.3, so the safe habit is to confirm public-work status first and then treat the whole prevailing-wage package as mandatory.