California AB 1198 Will Change When New Prevailing Wage Rates Reach Big Public Jobs

California Assembly Bill 1198 changes when a new prevailing wage rate reaches a public works contract. It was approved on September 27, 2026 and becomes operative on July 1, 2027. For a public works contract awarded, or with notice to bidders published, after that date, a new rate applies on its effective date if the awarded value of the prime contract is $35 million or more. Today, a new rate does not reach a contract once the notice to bidders has been published. The new section does not carry that sentence.

This is a wage and cost story about large public jobs. It is not a licensing story. Nothing in AB 1198 touches a contractor license. The last section covers the separate rules on who may bid public work in California. If your company's license is the open question, our California contractor license page is the place to start. The article gives no opinion on the law and no guess at what any wage or bid will cost.

At a glance

• What: AB 1198, Chapter 513 of the Statutes of 2026. It amends Labor Code section 1773.6 and adds section 1773.65.
• Approved: September 27, 2026.
• Operative: July 1, 2027.
• Covers: public works contracts awarded, or with notice to bidders published, after July 1, 2027, when the awarded value of the prime contract is $35 million or more.
• What changes: a new prevailing wage determination applies on its effective date to those contracts. Under the old rule it does not apply once the notice to bidders has been published.
• Also changes: the Director of Industrial Relations looks for rate changes in a "semiannual period" instead of a "quarterly period."
• Challenge window: 20 days after the new determination is published.
• Left out: certain housing projects where 100 percent of the units, not counting managers' units, are restricted or subsidized as affordable.

The old rule and the new one

The prevailing wage is the rate that must be paid to workers on a public works project. The Director of the Department of Industrial Relations (DIR) determines it by the type of work and the location of the project.

Today, Labor Code section 1773.6 says that when the director determines a prevailing rate has changed, the director makes the change available to the awarding body. Then it adds: "This determination by the Director of Industrial Relations shall not be effective as to any contract for which the notice to bidders has been published." The old section stops being operative on July 1, 2027.

The new section 1773.6 begins the same way, with "semiannual period" in place of "quarterly period." Its key sentence says a new determination "shall apply on its effective date to any contract under this chapter that is awarded or for which notice to bidders is published after July 1, 2027, if the awarded value of the prime contract is thirty-five million dollars ($35,000,000) or greater."

Seyfarth Shaw LLP, a law firm, wrote about it on October 28, 2026. Its reading: the wage rates contractors "are required to pay may change after they submit their bids," and updated rates "may apply during construction" on covered contracts. The firm also calls the law "relatively narrow in scope, but the projects it affects are not."

Which projects it covers

The test is the "awarded value of the prime contract," at $35 million or more. The statute's text states the threshold for the prime contract. It does not state a separate $35 million threshold for a subcontract.

Seyfarth reads that to mean a subcontractor can be affected even when its own subcontract is much smaller. Its example is a $2 million subcontract on a covered $100 million prime contract. That is the firm's reading of the text.

One question is open. If a contract is awarded below $35 million and grows past it through change orders, does the rule apply? Seyfarth says the statute does not expressly address that, and that contractors should be cautious about treating either reading as settled. It says DIR guidance, legislative clarification, administrative interpretation or court decisions may be needed.

This article does not say what happens on contracts below $35 million. The awarding agency or a construction attorney can answer that.

How a new rate can be challenged

A contractor, an awarding body, or a representative of an affected craft, classification or type of work can file a verified petition with the director within 20 days after the new determination is published. The ground the statute names is that the rate "has not been determined in accordance with Section 1773." A copy goes to the awarding body within two days.

The director investigates or holds a hearing. Within 20 days of the filing, or a longer period the director, the awarding body and all interested parties agree to, the director makes a written determination. "This determination shall be final." A determination is effective 10 days after it is issued and stays in effect until the director modifies, rescinds or supersedes it.

Seyfarth adds that the petition is not a way to challenge a rate just because it raises costs or was not anticipated in the bid. The ground is how the rate was determined.

Housing projects

New section 1773.6 does not apply to contracts for a housing development project when 100 percent of the units, excluding managers' units, are restricted as affordable for people of low or moderate income. It also does not apply when those units are covered by an agreement that provides housing subsidies for them. For those projects, new section 1773.65 says a determination "shall not be effective as to any contract for which notice to bidders has been published or as to any contract that has been awarded."

What lawyers are telling contractors

This part is Seyfarth's advice, as the firm published it, and not ours. For a covered project, it suggests thinking about:

• when each craft will do its work
• what wage escalation to assume
• how the prime contract handles wage increases after award
• how subcontract prices are set
• what schedule delay would mean
• who will watch for new DIR determinations

Its update says it should not be acted on without specific legal advice.

DIR's prevailing wage FAQ, which is dated October 2020, says "All bidders are required to use the same wage rates when bidding on a public works project." That page is from before AB 1198. We found no DIR notice or guidance on AB 1198 yet.

If you bid public work in California, the licensing side is separate

AB 1198 does not mention licensing, DIR contractor registration or license classifications. Other sources cover them, and none of those sources mentions AB 1198.

• DIR registration. DIR's contractors page says: "If you work or bid on a public works project, then you are considered a public works contractor. The term 'public works contractor' includes subcontractors." It lists registering as a public works contractor as the first of four responsibilities. DIR's registration page lists among the requirements to register: "Have Contractors State License Board license if applicable to trade." It also lists consequences for bidding on, being awarded or working on a public works project while unregistered.
• The classification. CSLB's June 12, 2026 bulletin says that for public works contracts the awarding authority determines the license classification needed to bid and perform the project. It also says: "Contractors are responsible for ensuring they hold the appropriate license classification at the time of bid and use properly licensed subcontractors for work outside their classification." Which classification a job needs is the awarding agency's call, so check the bid documents.
• The bid itself. Business and Professions Code section 7028.15(e) says a bid to a public agency from a contractor who is not licensed under the contractor law "shall be considered nonresponsive and shall be rejected by the public agency," unless an exception applies. The exceptions include a person particularly exempted from the contractor law and certain state and local agency projects governed by Public Contract Code sections 10164 and 20103.5.

Our California page explains that CSLB licenses the business entity and that a Responsible Managing Officer, Employee, Member or Manager qualifies it. It also lays out the classes, including Class A General Engineering for infrastructure and civil work, Class B General Building, Class B-2 Residential Remodeling and the Class C specialty classifications. Not a promise, the board decides.

An owner with the experience can qualify the company personally. A company whose owner does not yet have the experience or the exams can be qualified by a licensed qualifying agent who is a real employee of the company. If your company is looking at California public work and the license side is not sorted out, contractor qualifier services explains how The Licensing Company helps. The California contractor license page has the requirements.

Frequently asked questions

When does AB 1198 start? Its new sections become operative on July 1, 2027. It was approved on September 27, 2026.

Which contracts does it cover? Public works contracts awarded, or with notice to bidders published, after July 1, 2027, when the awarded value of the prime contract is $35 million or more. Certain affordable housing developments are left out.

What changes? Under the old section 1773.6, a new prevailing wage determination does not apply to a contract once the notice to bidders has been published. The new section says a new determination applies on its effective date to a covered contract.

Does it say what wages or bids will cost? No. It sets when a new determination applies. It does not set or predict a rate.

Does it apply to a subcontractor? The threshold in the text is the prime contract's awarded value. Seyfarth reads that to mean a subcontractor on a covered prime contract can be affected even if its own subcontract is smaller. The prime contract's terms and a construction attorney can say how that plays out.

How long does a contractor have to challenge a new rate? A verified petition goes to the director within 20 days after the new determination is published, with a copy to the awarding body within two days of filing.

Has DIR published guidance on AB 1198? We found none yet. We checked DIR's public works and prevailing wage pages on November 2, 2026.

Is this a contractor licensing change? No. AB 1198 is about when a new prevailing wage determination applies. It does not change who may be licensed or who may bid.

This article is general information about a California law, not legal advice. A construction attorney or the awarding agency can say how it applies to a specific contract.

Marshall Schofield, one of the nation's leading contractor exam prep instructors, has helped thousands upon thousands of contractors get licensed. Jeremiah Jaskulski is a licensed contractor who has lived the licensing process across multiple states. Together they founded The Licensing Company, and they help contractors get licensed the right way nationwide. Sources: AB 1198, chaptered text, California Legislature, AB 1198 bill status, Seyfarth Shaw LLP, October 28, 2026, DIR public works contractors, DIR contractor registration, DIR prevailing wage FAQ, CSLB industry bulletin 26-02, June 12, 2026, and Business and Professions Code section 7028.15.