Tag Archives: Employee benefit

Critical 2014 Illinois Prevailing Wage Change Impacting All Non-Union Contractors & Employees

Contributed by Jeffrey A. Risch

Effective January 1, 2014, the Illinois Prevailing Wage Act will define “general prevailing rate of hourly wages” to mean hourly cash wages plus ANNUALIZED fringe benefits.  Thanks to PA 98-482, the law will now read:  The terms “general prevailing rate of hourly wages”, “general prevailing rate of wages” or “prevailing rate of wages” when used in this Act mean the hourly cash wages plus annualized fringe benefits for training and apprenticeship programs approved by the U.S. Department of Labor, Bureau of Apprenticeship and Training, health and welfare, insurance, vacations and pensions paid generally, in the locality in which the work is being performed, to employees engaged in work of a similar character on public works.

Many non-union contractors have established bona fide defined contribution plans that provide for 100% immediate vesting of the prevailing wage fringe benefit; usually in the form of retirement savings.  The advantages for the worker are endless.  For example, the money is solely and exclusively in the control of the worker to do with it however they deem appropriate. In exchange for such a rich and rewarding benefit, some plans specifically limit the contribution to only those hours actually worked on “public works projects” (aka prevailing wage projects).

Big Labor went to the Illinois Legislature and successfully lobbied for the addition of the term “annualized”.  Therefore, effective for all worked performed on January 1, 2014 and thereafter, the Illinois Department of Labor will audit fringe benefit contributions made under a defined contribution plan and will calculate all contributions over all hours worked in a given period.

What does this mean???

The Illinois Prevailing Wage Act allows for certain fringe benefits (Health and Welfare, Pension/Annuity, US DOL Training, and Vacation in some localities) to be considered in determining the prevailing rate and be taken into account as part of the component by being an offset to the total in determining compliance with the prevailing rate. Contractors may choose to pay the entire prevailing wage determination in cash or they may choose to pay some in cash and some in allowable fringe benefits.  If a contractor does not pay any allowable fringe benefit or just a portion of it, then according to the Illinois Department of Labor the total prevailing wage hourly determination must now be made up in the base hourly wage rate in order to comply with Prevailing Wage Act (which will raise the hourly wage and therefore skew any overtime rates).

Also, to establish the proper hourly calculation for allowable fringe benefits, contractors will be expected to divide the total amount they contribute to a bona fide fringe benefit plan by the total of all hours worked.  According to the Illinois Department of Labor, a contractor cannot simply take the hours worked and contributions made on public works/prevailing wage jobs to make the hourly calculation.  An example used by the Illinois Department of Labor includes: If a contractor contributes $520 per month for single insurance coverage and the employee works 2080 hours (40 x 52 weeks) then the effective annual contribution rate is determined by dividing $6240 ($520 x 12) by 2080 which equals $3.00 per hour. If the health and welfare portion of the prevailing wage is $5.05 per hour, the contractor can take a credit of $3.00 per hour and must pay $2.05 ($5.05-$3.00) additional on the hourly base wage.  The same formula will be applied to Pension, Annuity, 401k plans, Training, and Vacation in some localities that are funded by the contractor.

Obviously, this is a critical change in the interpretation and administration of prevailing wage law in Illinois.  Contractors need to immediately review their accounting practices for Illinois prevailing wage purposes.

Fee Fi Fo Fum: CA Supreme Court Ruling Precludes Award of Attorneys’ Fees for Prevailing Party in Meal/Rest Break Claims

Contributed by Beverly Alfon

Last week, on the heels of the Brinker decision (which requires employers to make meal breaks available to their employees, without the burden of ensuring that employees take such breaks), the California Supreme Court ruled that a prevailing party cannot collect attorneys’ fees after winning a meal or break dispute under the California Labor Code. 

In Kirby v. Immoos Fire Protection, Inc., the defendant employer was the prevailing party on a claim for alleged violations of the Labor Code section 226.7, which governs employee rest breaks.  As the prevailing party, the employer sought to recover its attorneys’ fees under section  218.5 of the Labor Code, which provides for recovery of fees by “the prevailing party” in “any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions.”  The trial court awarded attorneys’ fees to the employer.  The appellate court upheld the award of attorneys’ fees to the employer on the rest break claim.  However, the California Supreme Court reversed.

The court considered two questions: (i) whether meal/rest break claims fall within section 1194 (fee shifting provision) and, if not, (ii) whether section 218.5 authorizes an award for meal/rest break claims.  

  • The court determined that section 1194 did not apply because neither the text nor the history of section 1194 indicated that the statute is meant to refer to anything other than “ordinary minimum wage and overtime obligations” – which does not include meal/rest break claims.  It also reasoned that code section 1194 is one-way shifting provision that only provides recovery of attorneys’ fees to employees who prevail under that section. 
  • The court acknowledged that section 218.5 is a two-way fee shifting provision that allows an award of attorneys’ fees to any prevailing party.  However, it reasoned that the provision only applies to actions “brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions” – not missed meal/rest breaks. 

Although the California Supreme Court’s ruling was negative for the employer in Kirby, the up-side is that this decision eliminates the potential for an award of attorneys’ fees under the Labor Code, which is often used as an incentive for plaintiffs’ attorneys with respect to meal and rest break claims.