Category Archives: Prevailing Wage

Illinois’ Prevailing Wage Law: Beware… That First Notice of Violation Can Come Back to Haunt You!

A Growing Trend: Using a 1st Notice of Prevailing Wage Violation Against a Contractor—The Shame of It All and What Contractors Can Do to “Right the Ship”

 Contributed by Jeffrey A. Risch

Having handled hundreds of prevailing wage disputes, the IDOL is the only entity that can lawfully determine whether a contractor is in violation of the IPWA. 820 ILCS 130/11(a) et. seq. Under the IPWA, only the Director for the Illinois Department of Labor is authorized to issue a “Notice of First Violation” of the Prevailing Wage Act to a contractor. 820 ILCS 130/11a. This Notice of First Violation should encompass any and all events that occurred prior to the time of issuance. 56 Ill. Adm. Code 100.24. Per the IPWA, a contractor has no ability to respond, dispute or defend against a Notice of First Violation. 56 III. Adm. Code 100.5, 100.24, 100.26. It is not until the Director for the IDOL issues a “Notice of Second Violation” that a contractor may request a hearing at the department, in order to respond to the charges and defend itself against any claim of violations of the Prevailing Wage Act. 820 ILCS 130/11a; 56 III. Adm. Code 100.5, 100.26.

Only after a Notice of Second Violation is sent to a contractor and a hearing is held, if necessary, can the IDOL make a determination that a contractor is debarred or prevented from participating in a public contract because of violations of the Prevailing Wage Act. 820 ILCS 130/11a; 56 III. Adm. Code 100.5, 100.24, 100.26.

In deciding that the act has been violated and that the issuance of a formal notice of violation is required, the Director of Labor shall base the decision on one or any combination of the following reasons (as per the Illinois Administrative Labor Code):

 – The severity of the violations. The Director will consider the following:

  • The amount of wages that are determined to be underpaid pursuant to the act.
  • The activity or conduct complained of violates the requirements of the statute and was not merely a technical, non-substantive error. Examples of a technical error include, but are not limited to, mathematical error, bookkeeping error, transposition of numbers, or computer or programming error.

 – The nature and duration of the present violations as well as prior history of the contractor or the subcontractor related to the act. The prior history considered cannot exceed seven years before the date of the second notice of violation.

 – Whether the contractor or subcontractor filed certified payroll records with the public body in charge of the project; whether the contractor or subcontractor has kept the payroll records and accurate records for 5 years; whether the contractor or subcontractor produced certified payroll records in accordance with Section 5 of the act.

 – Whether the contractor or subcontractor has violated any other provision of the act.

Despite this authority, many local public bodies throughout Illinois are being influenced by certain third parties. These public bodies are being told that that they must reject bids or terminate contracts with any contractor who has any prevailing wage discrepancies, even when the contractor is the “lowest responsible bidder.” These public bodies are using “bad information” — “misleading information” — “outdated information” against contractors who have every legal right to bid and perform public works projects. By rejecting bids or terminating contracts with non-debarred contractors, public bodies throughout Illinois are ignoring their obligations under applicable “lowest responsible bidder” statutes, making arbitrary decision beyond their statutory authority, and depriving contractors of fair due process under the law.

Conclusion

Contractors must know their rights! Although public bodies have an enormous amount of discretion in ascertaining the “lowest responsible bidder,” they cannot make arbitrary decisions in contradiction to applicable law. Contractors should never be discouraged from submitting bids despite what certain public bodies are saying. From experience and observation, contractors should push back. This push back can be in many forms. Although the filing of a lawsuit or motion seeking injunctive or declaratory relief is sometimes necessary, often the public body simply needs clarity concerning the misinformation it had received. This clarity can usually be achieved through simple letter writing or other more informal channels.

Unions Continue to Reshape Illinois Prevailing Wage Law: New Radical Changes for 2013/2014

Contributed by Jeffrey Risch

Since 2002, Illinois’ prevailing wage law has been the target for labor unions in seeking to expand the law’s scope and application.  As a management-side labor and employment attorney dedicated to a broad spectrum of workplace laws and regulation for both union and non-union employers, I can’t think of any law that has been modified and amended more often.  Nearly every legislative session in Springfield results in some sort of revision to the Illinois Prevailing Wage Act (IPWA).  Even without legislative changes, absent a court order or thoughtful strategic push back, the Illinois Department of Labor (IDOL) has and continues to come up with new administrative interpretations while enforcing the law at an all-time high (good, bad or indifferent).  Such changes and developments have caused a great deal of confusion, uncertainty and turmoil amongst responsible contractors and public representatives. 

The latest developments involve HB 922 and HB3223

HB 922, sponsored by Rep. Frances Hurley (D-Chicago) and Sen. Linda Holmes (D-Aurora), requires construction contractors to retain records under the Illinois Prevailing Wage Act for five years from the date of the last payment received under the contract (instead of the current three years) and extends the right to bring legal action to a clear period of no less than five years.

HB 3223, sponsored by Rep. Dan Beiser (D-Alton) and Sen. Mike Frerichs (D-Champaign), expands various Illinois Prevailing Wage reporting requirements, particularly against non-union contractors. Non-union contractors will now be forced to disclose fringe benefit plan documents and information under more government control and scrutiny. Also, applicable to both union and non-union contractors is a new provision requiring contractors to report net pay which means the potential public disclosure of a worker’s personal payroll deductions.  Both bills passed both chambers and await the Governor’s signature.

Unfortunately, these legislative changes will undoubtedly lead to unprecedented regulation, decreased competition in the public bidding process and increased taxpayer costs in maintaining, constructing and repairing our roads, schools, bridges and general public infrastructure.

Illinois Prevailing Wage Updates…Yet More Changes That Hurt Contractors & Cost Taxpayers

Contributed by Jeff Risch

Once again, more changes to Illinois’ Prevailing Wage Act are underway, including…

In House Bill 5212, a public body or any other entity (i.e. an upper tier contractor) can fulfill its obligations to provide notice to contractors and subcontractors of any revisions to prevailing wage rates by including in the contract that the prevailing rate is established by the Department of Labor and available on the IDOL website. Unlike federal prevailing wage law, Illinois’ prevailing wage law allows for the wage to actually increase during a given project.  This bill essentially places all financial obligations and liabilities on the shoulders of the contractors and subcontractors. It passed in both Houses and awaits action by the Governor 

Senate Bill 2643 requires local government units to apply the “responsible bidder” requirements of the Illinois Procurement Code. This could very well be in contradiction to federal ERISA law, but that appears not to be stopping Big Labor from trying to push this amendment through.  The most troublesome requirement is that contractors must participate in a U.S. DOL approved apprentice and training program — without any clear definition of what “participation” means and excluding contractors who offer “on the job learning” or rely on the multitude of meaningful apprenticeship and training programs not approved by the U.S. DOL.   Also troubling is that this legislation requires bids to include the total number of straight-time hours to be performed on the job, identified as either “journeyperson” or “apprentice,” for each craft or type of worker or mechanic needed to execute the contract. This bill was not called for a vote in the House, but it is expected to be revisited during the veto session.  Make no mistake – this bill was created by Big Labor designed to “cut out” the non-union contractor.  

Senate Bill 3695 requires contractors to include in record keeping the gross and net wage, hourly overtime rate, fringe benefit rates, and non-union contractors to identify the sponsor and administrator of fringe benefit plans.  This bill will undoubtedly be used against contractors in the audit and investigation process.  Although the bill passed the Senate on a 30-27 vote, it was too late for the House to take it up, but it is expected to be voted in the House during the veto session.

Wake Up Public Bodies and Contractors! Do Not Fall for this Illinois Prevailing Wage Act Trap

Contributed by Jeff Risch

Having handled hundreds of prevailing wage matters and controversies over the years, here’s something I will never understand… Why on earth would a unit of local or state government (aka a “public body”) contractually require compliance with Illinois’ prevailing wage law in circumstances where the Illinois Prevailing Wage Act (IPWA) would not apply?  Quite candidly, it’s an entire waste of resources while breeding unnecessary conflict. 

To appreciate the message delivered here, one must recognize the simple truth that there are exemptions from obligations arising under the IPWA — even when such work is performed on a “public works” construction project. One can look no further than the plain language of the IPWA itself to find expressed exemptions. Specifically, under 820 ILCS 130/3, the IPWA expressly exempts the transportation by the sellers and suppliers of materials or equipment or the manufacture or processing of said materials or equipment in the execution of any public works construction contract. There are also certain exemptions that may apply for work of a purely administrative or supervisory nature. Additionally, there are some exemptions applicable to a bona fide owner/operator, bona fide business owner and bona fide sole proprietor that may apply to a particular set of circumstances. The specifics as to available exemptions are so incredibly nuanced that I cannot possibly provide an ironclad list (nor would I want to through this public forum). However, the undeniable truth is that a “one-size fits all” contract notice used by more and more public bodies throughout Illinois does not recognize exemptions from the IPWA requirements. To be more precise, the Illinois Department of Labor (IDOL) has published its own MODEL CONTRACT LANGUAGE that it recommends as an example of a written statement/notification that public bodies may wish to include in their contracts, purchase orders or advertisement for bids in order to provide required notice under the IPWA.  More and more public bodies are adopting this language and in doing so are unnecessarily applying the IPWA to work otherwise exempt. The IDOL’s “model notice” is as follows:

This contract calls for the construction of a “public work,” within the meaning of the Illinois Prevailing Wage Act, 820 ILCS 130/.01 et seq. (“the Act”). The Act requires contractors and subcontractors to pay laborers, workers and mechanics performing services on public works projects no less than the “prevailing rate of wages” (hourly cash wages plus fringe benefits) in the county where the work is performed. For information regarding current prevailing wage rates, please refer to the Illinois Department of Labor’s website at: http://www.state.il.us/agency/idol/rates/rates.HTM. All contractors and subcontractors rendering services under this contract must comply with all requirements of the Act, including but not limited to, all wage, notice and record keeping duties.

In light of recent amendments to the law, all public bodies and upper tier contractors should be sensitive to the requirement that they must notify all contractors and lower tiered contractors of obligations under the IPWA. However, and this is my point, there are critically important words not included in the above mentioned “model notice” — these words may include:  AS APPLICABLE and/or UNLESS OTHERWISE EXEMPT and/or ONLY TO THE EXTENT AS REQUIRED BY LAW. 

Since some work performed on “public works” construction projects is exempt from the requirements under the IPWA, it is only logical to premise any notification of prevailing wage obligations with some expressed limitations. By routinely inserting the IDOL’s “model notice” into “public works” contracts, the IDOL’s prevailing wage enforcement agents will inevitably use (and have used) the written contract as a vehicle to apply the IPWA to otherwise exempt work.

DOL Publishes Summary of Prevailing Wage Laws Throughout the U.S.

Contributed by Jeff Risch

Although some states do not have prevailing wage laws, most do.  Additionally, many contractors throughout the United States have come across the federal prevailing law by way of Davis-Bacon and its related laws (aka Davis-Bacon and Related Acts – DBRAs). DBRAs apply to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works. Davis-Bacon applies to contractors and subcontractors performing work on federal or District of Columbia contracts. Davis-Bacon prevailing wage provisions apply to the “Related Acts,” under which federal agencies assist construction projects through grants, loans, loan guarantees and insurance (i.e. HUD). Davis-Bacon contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. Davis-Bacon directs the U.S. Department of Labor to determine such locally prevailing wage rates. Under state law, prevailing wage requirements (including the administration and enforcement of such requirements) are specific and unique to each state.

In December 2011, the U.S. Department of Labor (DOL) revised and updated a concise summary of the general applicability and thresholds for state prevailing wage law purposes in all jurisdictions that continue to have such laws on the books (see link: http://www.dol.gov/whd/state/dollar.htm).  For any employer performing prevailing wage work on a state or federal level, intimate knowledge and familiarity with applicable prevailing wage laws is critical.

Private Entities Beware: Accepting State Issued Bonds Triggers Application of the Illinois Prevailing Wage Act

Contributed by Jonathon Hoag

The Illinois Prevailing Wage Act plainly states that it applies to fixed works constructed by a public body. The act goes on to define “public body” as the state, local governments, or any institution supported in whole or in part by public funds. At first glance, the act seems to make it clear that the prevailing wage rate is not required on construction projects initiated by private entities that are not supported by public funds. This is not the case, according to a recent Illinois appellate court ruling.

In McKinley Foundation v. Illinois Department of Labor, the court decided that a private entity becomes a “public body” under the act when it accepts certain state issued bonds. The case involved a not-for-profit Presbyterian ministry for college students that contracted to construct student housing and parking on its property. The McKinley Foundation is funded entirely through private donations. However, for purposes of the housing project, part of the funding stemmed from tax-free bonds issued through the Illinois Finance Authority.

The Illinois Department of Labor audited the project, asserting that it was governed by the Prevailing Wage Act. McKinley argued that it was not a “public body” as defined by the act because it was not supported in whole or in part by public funds. The court acknowledged that McKinley was not supported by public funds, but pointed out that it had accepted funding through one of the statutes (The Illinois Finance Authority Act) that was specifically enumerated in the act, which arguably triggers application of the Prevailing Wage Act.

The court relied on the legislative debates that occurred when the act was amended to incorporate specific funding sources that would prompt application of the act. According to the court, the legislative debates made it clear that the intent was to expand coverage of the act to projects constructed by entities benefitting from financing under an enumerated public-financing mechanism, even if the entity itself was not a traditional public body.

As a result of the court’s ruling, contractors and subcontractors must proactively seek out the funding source of construction projects. If public funding can be ruled out, the contractor or subcontractor should confirm in writing that the project is not covered by the Prevailing Wage Act. Lastly, if financing through a state-issued bond or statute is necessary or otherwise unavoidable, the parties should identify the scope of the project being constructed with the financing and narrow the project to the extent possible. The court’s ruling states that a private entity is only considered a “public body” for purposes of the project that is financed by the enumerated public-financing mechanism.