Prevailing Wage 101: A Five Minute Refresher

Summer construction season is almost upon us, and as our public sector clients ready their construction projects for commencement, we offer a quick refresher on an important statute, The Prevailing Wage Act: 

What is the Prevailing Wage Act?

The Prevailing Wage Act (the “PWA”) establishes prevailing hourly wage rates required to be paid to all laborers, workers, and mechanics engaged in public works projects.  Under the PWA, “public works” means “all fixed works constructed or demolished by any public body, or paid for wholly or in part out of public funds.”  This includes “any maintenance, repair, assembly, or disassembly work performed on equipment whether owned, leased or rented.”  This reference to “equipment” means fixtures and systems attached to and integrated into a building, such as elevators, HVAC units, mechanical systems, etc.  “Equipment” does not include vehicles, lawn care machines, hand tools, most computers, freestanding furniture, or other personal property. 

Who Is Required to Follow the Prevailing Wage Act?

The PWA imposes obligations on public bodies engaged in public works, and on the contractors and subcontractors involved in the work.  The PWA defines a “public body,” as the State, or any officer, board or commission of the State or any political subdivision or department thereof, or any institution supported in whole or in part by public funds.  This includes every county, city, town, village, township, school district, irrigation, utility, reclamation improvement and other district, and every other political subdivision, district, and municipality of the state. 

On the contractor’s side of the transaction, the PWA only applies to such laborers, workers and mechanics as are directly employed by contractors or subcontractors in actual construction work on the project site, and those laborers, workers and mechanics engaged in the transportation of materials and equipment to and from the site.  The PWA does not apply to personnel of companies selling or supplying materials or equipment who are involved in the processing, manufacturing, or transportation of materials or equipment to the site. 

Basic Requirements of the Prevailing Wage Act

1. The public body must pass and file a PWA resolution or ordinance. Under the PWA, each public body must, during the month of June, investigate and ascertain the prevailing rate of wages and publicly post or make available for inspection its determination of the prevailing rate of wages. This action must be taken by ordinance or resolution.  By July 15, each public body must file a certified copy of its determination of the prevailing rate of wages with the Department of Labor (“DOL”).

If a public body does not investigate and ascertain the prevailing rate of wages as required under the Act, then the prevailing rate of wages shall be the rates determined by the DOL for the county in which the public body is located.  Essentially, if a public body decides not to determine its own prevailing rates of wages, the DOL’s established rates will apply.[1]

As permitted by the PWA, many public bodies rely on the Department of Labor (“DOL”) to ascertain and certify the applicable prevailing rates of wages. The PWA requires the DOL to investigate and ascertain prevailing wages for each county in June, and post its findings on its website by August 15.  If the DOL’s investigation and ascertainment is not completed by June, the public body’s resolution or ordinance may reference the county’s current prevailing wage rates as last determined by the DOL, even if made in a prior year. 

2. The public body must determine if the PWA applies to a project, and include a PWA notice in the contract documents. Under the PWA, it is the public body’s obligation to determine whether or not the PWA applies to a particular project or contract.  If it does apply, the public body should include a PWA clause in the bid notice, bid package, project specifications, contract, purchase order (if any), and in the bonds furnished by the contractor and subcontractors.  The public body should avoid any conditional language that attempts to require the contractor to determine if the PWA applies; this duty should not be delegated by the public body.  Upon notice that the PWA applies, the contractor and each lower tiered subcontractor is then obligated to include a PWA clause in each subcontract. 
3. The public body must receive and keep certified payroll records. Under the PWA, every contractor must submit certified payroll records to the public body, no later than the 15th day of each calendar month during the construction phase of the project. Section 5 of the PWA specifies the information and certifications required to be included in certified payroll records.  The public body in charge of the project must keep the certified payroll records submitted for a period of 5 years from the date of the last payment made in connection with the project.

Penalties for Non-Compliance

The Prevailing Wage Act contains various civil liabilities and criminal penalties for non-compliance.  As with most other facets of public construction, attention to the requirements of the Prevailing Wage Act at the ‘front-end’ of the project will pay dividends throughout the construction phase of the project and after completion.

[1] The Department of Labor’s prevailing wage rates can be found here: https://www.illinois.gov/idol/Laws-Rules/CONMED/Pages/2017-Rates.aspx