Prevailing Wage Requirement Returns for State Construction Projects

Spring is in the air! It is time to refresh, renew, and according to the Michigan Legislature, repeal and reinstate. Most notably, Public Act 10 of 2023 reinstates prevailing wage for state construction projects. PA 10 is expected to take effect in late March 2024, but is technically effective 91 days after the 2023 Legislature’s final adjournment in December. The actual date of adjournment is in the Legislature’s discretion.

PA 10 requires the payment of prevailing wage in a manner substantially similar to Public Act 166 of 1965, as amended, which was repealed in 2018. PA 10 governs “contracting agents,” which include school boards and other institutions authorized to enter into contracts for state projects. It also governs “construction mechanics,” which include skilled or unskilled mechanics, laborers, workers, helpers, assistants, and apprentices working on state projects. While broad, the definition of “construction mechanics” excludes executive, administrative, professional, office, and custodial employees.

PA 10 applies when a contract: (1) is executed pursuant to an advertisement and invitation to bid for a state project, (2) involves the employment of construction mechanics, and (3) is sponsored or financed, in whole or in part, by the state. Because these requirements apply only to “state projects,” school projects are only implicated if financed with state dollars (e.g., state aid revenue) or with bonds qualified through the Michigan School Bond Qualification and Loan Program. Additionally, projects that cost less than the state bidding threshold (currently $28,048) are not subject to prevailing wage requirements if they are not bid.

Also exempt from PA 10 are contracts that: (1) require payment of prevailing wages established by the U.S. Secretary of Labor (e.g., the Davis-Bacon Act) or (2) contain minimum wage schedules in local collective bargaining agreements or understandings between bona fide organizations of construction mechanics and their employers.

Contracts subject to PA 10 must contain an express term that “the rates of wages and fringe benefits to be paid to each class of mechanics by the bidder and all of its subcontractors, shall not be less than the wage and fringe benefit rates prevailing in the locality in which the work is to be performed.”

Before a school advertises for bids on a state project, it must have the Department of Labor and Economic Opportunity (LEO) determine the prevailing rates of wages and fringe benefits for all classes of construction mechanics involved in the relevant contracts. If the contract is not awarded or construction undertaken within 90 days after the date of this determination, then LEO must make a redetermination before the contract is awarded. A rates schedule must be included in the specifications and bidding forms.

All contracts must state that construction mechanics are PA 10’s intended beneficiaries, and a copy of all prevailing wage and fringe benefits rates prescribed in a contract must be posted by the contractor in a conspicuous place at the construction site. Contractors and subcontractors are also prohibited from discharging or discriminating against a construction mechanic who reports or intends to report a suspected violation of PA 10.

PA 10 provides an administrative process to file complaints for violations and authorizes LEO to investigate allegations and assess penalties. To defend against potential claims and comply with PA 10, it is especially important that schools, contractors, and subcontractors maintain their payroll and related records for a minimum of three years. If a contractor fails to pay prevailing wage and fringe benefits, a school may terminate the contractor’s right to proceed with that part of the contract and instead complete the contract with another contractor. Contractors and subcontractors that fail to pay prevailing wages may be required to pay any excess costs incurred by the school for contracting with a new contractor and could be fined up to $5,000. Contractors and their sub-contractors are jointly and severally liable for costs associated with a violation.

If a school fails to include the applicable prevailing wage language (including the rates schedules) in its contract documents, bidding forms, or specifications, the school may be liable for any loss of wages and fringe benefits suffered by construction mechanics, including actual damages, interest assessed up to 10% per year, costs, and attorney fees.

PA 10 does not take effect immediately and likely will not apply before March 2024. The requirements do not apply to contracts entered into or bids made before the Act’s effective date. PA 10 also does not apply if the project was paid for, in whole or in part, from revenue from a millage authorized under the Revised School Code and approved by voters before the Act’s effective date.