Construction sector split over work permit salary exemption rules

(CALIFORNIA) California’s union construction employers won a longer shield from PAGA lawsuits, but the industry stays split over who benefits and how pay rules apply. As of August 2025, the debate centers on Assembly Bill 1034 (AB 1034), wage thresholds, and collective bargaining agreements (CBAs).

What AB 1034 changed

Assembly Bill 1034 (AB 1034), signed in late 2024, extends the construction-sector PAGA exemption from January 1, 2028 to January 1, 2038. The PAGA exemption protects qualifying unionized construction employers from Private Attorneys General Act lawsuits, which can carry steep penalties for labor code violations.

To qualify, an employer must:
– Work under collective bargaining agreements (CBAs) in effect before January 1, 2025.
– Pay at least 30% more than the California minimum wage.
– Provide premium overtime.
– Include grievance and binding arbitration procedures.
– Address wages, hours, and working conditions clearly in the CBA.

Supporters say this structure keeps disputes inside the union contract, trims costly litigation, and rewards employers who pay more and follow CBA standards. Critics argue it excludes non-union workers and may reduce court oversight of labor violations within exempt workplaces.

Wage rules now in force

The California minimum wage rose to $16.50 per hour on January 1, 2025. That increase lifted the minimum salary for most exempt employees in the state (the “twice minimum wage” rule) to $68,640 per year for full-time work.

For unionized construction employers seeking the PAGA exemption, AB 1034 requires pay at least 30% above the state minimum wage. That translates to an hourly floor of about $21.45 or higher for eligible workers.

Federal rules also matter for salaried roles:
– Under the U.S. Fair Labor Standards Act (FLSA), the weekly pay threshold for the executive, administrative, and professional categories increased to $1,128 per week as of January 1, 2025.
– Construction firms often need to test both sets of thresholds—state and federal—when classifying supervisors and managers.

Where the split stands

• Supporters (many union contractors) say the extension to 2038 gives stability and reduces lawsuit risk. They argue that strong CBAs, premium pay, and arbitration provide fair remedies without PAGA suits.
• Opponents (some non-union firms and worker advocates) say the carveout creates two systems. They worry about unequal access to courts and ask whether the 30% wage premium is enough during inflation and rising living costs.

The salary changes add fuel to the debate. As wages climb, some employers see higher compliance costs, while others see a path to retain skilled workers and meet AB 1034 standards.

Practical steps for employers

Unionized construction employers who want to keep the PAGA exemption through 2038 should:

1. Audit current collective bargaining agreements (CBAs) to confirm they were in force before January 1, 2025 and include grievance and arbitration.
2. Verify the pay floor is at least 30% above the current California minimum wage.
3. Confirm premium overtime terms are in the CBA.
4. Align exempt-salary roles with both California’s salary test ($68,640) and the federal $1,128 per week threshold.
5. Train payroll, HR, and field supervisors on timekeeping, rest breaks, and travel time rules to prevent wage claims.

Employers outside the exemption need a tight compliance program. PAGA lawsuits remain a serious risk, so maintain:
– Clean payroll records
– Accurate classifications
– Fast fixes to errors

What workers should watch

Union workers in exempt shops should track:
– Whether their pay meets the 30% premium mark.
– Whether the CBA includes clear grievance and binding arbitration steps.
– How overtime is calculated and paid.

If an employer slips below the wage premium or lacks required CBA terms, the PAGA exemption may not apply. Non-union workers remain covered by PAGA and can seek help if they face wage theft or rest break violations.

For official guidance on PAGA basics and FAQs, visit the California Department of Industrial Relations PAGA page: https://www.dir.ca.gov/dlse/Private-Attorneys-General-Act-PAGA.html.
The Labor Commissioner’s helpline is 833-LCO-INFO (833-526-4636), with help in English and Spanish.

Background and context

California created PAGA in 2004 to let workers bring civil lawsuits over labor code breaches. Construction has long held a conditional carveout tied to union contracts due to job-site complexity, project cycles, and long-standing bargaining structures.

The earlier exemption would have ended in 2028; AB 1034 pushes it to 2038, aiming for long-term predictability for unionized employers while setting clear labor standards inside CBAs.

Why this matters for immigrants and visa holders

Construction draws many immigrant workers. Pay floors and dispute systems in CBAs can be a safety net for those who worry about job loss or retaliation.

While PAGA is a state labor tool, its shield or exposure can shape workplace culture for crews that include green card holders and workers with federal permits. According to VisaVerge.com, employers and visa holders closely track state wage floors and classification rules when planning job moves or promotions, especially in industries with frequent overtime.

Real-world scenarios

• Example 1: A union drywall contractor with a CBA dated June 2024 reviews its pay tables. Base rates already sit above $21.45/hour. The CBA has grievance and binding arbitration clauses and sets premium overtime. The contractor documents compliance, educates foremen on meal periods, and confirms salary bands for superintendents meet both the state $68,640 and federal $1,128/week tests. Result: the firm keeps the PAGA exemption and reduces litigation risk.

• Example 2: A non-union concrete company pays $20/hour and classifies some leads as salaried without meeting state or federal salary thresholds. The firm faces exposure: PAGA claims for missed breaks and misclassification could land in court. The company decides to:
  • Shift leads back to hourly with overtime,
  • Raise base pay to meet thresholds where possible,
  • Invest in timekeeping tools.

Points of tension to watch

• The 30% premium: Workers and some contractors say it may not keep pace with housing and fuel costs. Others argue it is a clear and workable standard.
• Arbitration fairness: Supporters view grievance and binding arbitration as faster and cheaper. Critics fear it limits access to court remedies.
• Non-union impact: Because the PAGA exemption only applies to qualifying unionized employers, non-union crews may see more lawsuits if problems persist.

Key ongoing concern: as wage floors shift, classification, payroll, and CBA language must be monitored closely to avoid losing the exemption or facing PAGA claims.

What’s next

The exemption stands through 2038, but lawmakers and agencies will keep an eye on wage theft trends, settlement amounts, and worker outcomes. Employers should expect regular updates to wage floors and salary tests in California and at the federal level. Staying current reduces risk.

Key takeaways

• AB 1034 extends the construction PAGA exemption to January 1, 2038 for union employers meeting strict CBA and pay rules.
• To qualify, pay must be at least 30% above the state minimum wage; with the 2025 minimum at $16.50, that’s about $21.45/hour.
• Exempt-salary roles need at least $68,640 under California’s rule and $1,128/week under federal FLSA.
• Non-union employers remain fully subject to PAGA and face higher litigation risk if compliance lapses.
• Workers should check pay rates, overtime, and CBA grievance steps. For help, call 833-LCO-INFO (833-526-4636).

According to analysis by VisaVerge.com, clear pay policies and strong CBAs help bring stability for mixed-status crews, especially where overtime is common.