SB 400

SB400:v91#DOCUMENT

Bill Start

Senate Bill No. 400

CHAPTER 220

An act to add and repeal Article 4 (commencing with Section 280) of Chapter 1 of Part 1 of Division 2 of the Labor Code, relating to labor, and declaring the urgency thereof, to take effect immediately.

[ Approved by Governor October 01, 2025. Filed with Secretary of State October 01, 2025. ]

LEGISLATIVE COUNSEL'S DIGEST

SB 400, Cortese. Labor: elective compensation under the Inflation Reduction Act of 2022.

Existing law, with certain exceptions, establishes 8 hours as a day’s work and a 40-hour workweek, and requires payment of prescribed overtime compensation for additional hours worked. Existing law requires a person who unlawfully withholds wages due an employee, as provided, to be subject to specified civil penalties. Existing law charges the Labor Commissioner with enforcement of these provisions.

Existing law makes every person who fails to pay the wages of each employee subject to a specified penalty. Existing law requires the penalty to either be recovered by an employee as a statutory penalty or by the Labor Commissioner as a civil penalty, as prescribed.

Existing law defines “public works,” for purposes of regulating public works contracts, as, among other things, construction, alteration, demolition, installation, or repair work done under contract and paid for, in whole or in part, out of public funds. Existing law further requires that, except as specified, not less than the general prevailing rate of per diem wages be paid to workers employed on public works and imposes misdemeanor penalties for a violation of this requirement. Existing law provides that for the purposes of provisions of law relating to the payment of prevailing wages, “public works” includes specified types of construction, alteration, demolition, installation, and repair work.

Existing law, the Labor Code Private Attorneys General Act of 2004, authorizes an aggrieved employee to recover through a civil action a civil penalty that may be assessed and collected by the Labor and Workforce Development Agency, as specified.

This bill would, until January 1, 2029, authorize a taxpayer, employer, contractor, or subcontractor to make an elective retroactive wage payment, as defined, to workers who performed work on a qualified renewable clean energy facility pursuant to the Inflation Reduction Act of 2022 (Public Law 117-169) if certain requirements are met, including, among others, that the facility is not a public works project, as defined, and would not otherwise be subject to the Davis-Bacon Act, as specified. The bill would specify that those provisions do not apply to, among others, violations of any other provision of law unrelated to the payment of retroactive prevailing wage correction payments in connection with the application for federal tax benefits pursuant to the Inflation Reduction Act of 2022. The bill would limit that authorization to renewable energy facility construction or repairs commenced on or after January 1, 2023, that were completed on or before December 31, 2024.

The bill would make related findings and declarations.

This bill would declare that it is to take effect immediately as an urgency statute.

Digest Key

Vote: 2/3 Appropriation: NO Fiscal Committee: YES Local Program: NO

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

Article 4 (commencing with Section 280) is added to Chapter 1 of Part 1 of Division 2 of the Labor Code, to read:

Article 4. Elective Compensation Under The Inflation Reduction Act

280.

It is the intent of the Legislature to do all of the following:

(a) Facilitate the construction, rebuild, repowering, and repair of facilities that advance the state’s goals for the use of renewable energy in retail electricity sales including the use of tax incentives available to qualified projects and facilities pursuant to the Inflation Reduction Act of 2022 (Public Law 117-169).

(b) Support Inflation Reduction Act of 2022 (Public Law 117-169) provisions that promote the creation of high-paying clean energy jobs by authorizing larger tax incentives for taxpayers who voluntarily pay qualified clean energy project workers wages that are on par with regional prevailing wages. In furtherance of this goal, the act allows taxpayers to qualify for larger tax incentives by retroactively paying workers the difference between actual wages paid and the prevailing wage for the locality where the qualified project is located, plus interest and other penalties.

(c) Support taxpayers and employers who voluntarily pay higher wages to clean energy workers in order to qualify for the larger tax incentives provided by the Inflation Reduction Act of 2022 (Public Law 117-169) to shield those taxpayers and employers from penalties or litigation for so doing.

281.

(a) (1) Notwithstanding any other provision of law, a taxpayer, employer, contractor, or subcontractor may voluntarily make an elective or retroactive wage payment to workers who performed work on a qualified renewable clean energy facility pursuant to the Inflation Reduction Act of (Public Law 117-169).

(2) An elective retroactive wage payment made pursuant to paragraph (1) does not, by itself, constitute a violation of Sections 200 to 244, inclusive, Sections 500 to 558.1, inclusive, Sections 1171 to 1207, inclusive, or Sections 2698 to 2699.8, inclusive.

(b) For purposes of this article, “elective retroactive wage payment” means a payment to workers who performed work on a qualified renewable clean energy facility pursuant to provisions of the Inflation Reduction Act of 2022 (Public Law 117-169) that meets all of the following conditions:

(1) The renewable clean energy facility qualified for tax incentives pursuant to the Inflation Reduction Act of 2022 (Public Law 117-169).

(2) The elective retroactive wage payment is voluntarily paid to workers for work they performed installing, modifying, repairing, or replacing solar panels, inverters, battery energy storage systems, transformers, and any associated components at a facility that is eligible for federal tax incentives under the Inflation Reduction Act of 2022 (Public Law 117-169), or regulations issued by the Internal Revenue Service and the United States Department of the Treasury.

(3) The facility is not a public works project, as defined in Section 1720, and would not otherwise be subject to the requirements of the Davis-Bacon Act if the facility owner, employer, contractor, or subcontractor does not apply for the federal tax incentives available pursuant to the Inflation Reduction Act of 2022 (Public Law 117-169), or pursuant to regulations issued by the Internal Revenue Service and the United States Department of the Treasury.

(4) The elective retroactive wage payment is made voluntarily by the taxpayer, contractor, subcontractor, or employer pursuant to the Inflation Reduction Act of 2022 (Public Law 117-169) or regulations issued by the United States Department of the Treasury and Internal Revenue Service regarding wage requirements related to renewable electricity production tax incentives.

(5) The taxpayer, employer, contractor, or subcontractor’s elective retroactive wage payment to any worker for work performed on the renewable energy facility is solely for the purpose of the application of a taxpayer, employer, contractor, or subcontractor for federal tax incentives pursuant to the Inflation Reduction Act of 2022 (Public Law 117-169), and is in addition to wages otherwise paid pursuant to applicable law.

(6) The taxpayer, employer, contractor, or subcontractor is in compliance with the applicable provisions of the Inflation Reduction Act of 2022 (Public Law 117-169), and the applicable Internal Revenue Service or United States Department of the Treasury guidance and regulations related to renewable electricity production tax incentives.

(c) This section does not apply to the following:

(1) Claims of retaliation, discrimination, or harassment.

(2) Claims for the willful classification or misclassification of employees as independent contractors.

(3) Violations of any other provision of law unrelated to the payment of retroactive prevailing wage payments in connection with the application for federal tax benefits pursuant to the Inflation Reduction Act of 2022 (Public Law 117-169).

(4) A taxpayer, employer, contractor, or subcontractor that has failed to pay, in full, wages otherwise due pursuant to applicable law, and has failed to cure any such violation.

(d) This section applies only to renewable energy facility construction or repairs commenced on or after January 1, 2023, that were completed on or before December 31, 2024.

(e) This section does not limit the authority of the Labor Commissioner to investigate or enforce this section or any other violations of this code.

(f) This article shall remain in effect only until January 1, 2029, and as of that date is repealed.

SEC. 2.

This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:

To minimize the effect of recent changes to clean energy programs in the federal Inflation Reduction Act of 2022 (Public Law 117-169) and ensure access to currently available Inflation Reduction Act credits, it is necessary that this act take effect immediately.