Michigan Legislature Repeals Prevailing Wage Act

On Wednesday, June 6, 2018, the Michigan Legislature repealed the State’s Prevailing Wage Act, which required the State to pay workers union-level wages under state construction contracts. The Legislature chose to repeal the Prevailing Wage Act after Michigan residents sponsored an initiative and amassed nearly 383,000 signatures, more than enough to place the measure on the November ballot.

Supporters of the law claim that its protections are necessary to assure those construction workers are paid fairly for the work that they do and fear that its repeal will cause many of those workers to suffer or leave the State to seek higher-paying jobs elsewhere. Proponents of the repeal claim that the State and local governments will now save millions of dollars by avoiding the payment of artificially inflated, above-market wages – and the money saved through those efforts can be used to fund more projects for more workers.

Because of the substantial impact of this repeal, we offer the following answers to some frequently asked questions about the repeal:

What did the Prevailing Wage Act require?

The Prevailing Wage Act required the State to pay (with rare exceptions) construction laborers the “prevailing wage and fringe benefits” for work done on State-funded construction projects. The law required the Department of Labor to set the “prevailing wage and fringe benefits” rate by reviewing the “rate that prevails on projects of a similar character in the locality under collective agreements or understandings between bona fide organizations of construction mechanics and their employers.” In other words, the “prevailing wage” was whatever the local unions had negotiated for their members, regardless of whether the contractor who performed the work was a union employer.

In addition to paying the prevailing wage and benefits, employers were obligated by law to post, “in a conspicuous place, a copy of all prevailing wage and fringe benefit rates” applicable to that project. Failure to comply with the Prevailing Wage Act was a misdemeanor and subjected the employer to significant civil liability: potential double damages and an award of all attorney fees incurred in enforcing the Prevailing Wage Act.

What work was covered by the Prevailing Wage Act?

The Prevailing Wage Act covered all government construction projects, defined to include “new construction, alteration, repair, installation, painting, decorating, completion, demolition, conditioning, reconditioning, or improvement of public buildings, schools, works, bridges, highways, or roads” that was “sponsored or financed in whole or in part by the state.”

When does the repeal take effect?

The Legislature gave the repeal immediate effect. Thus, the repeal took effect on June 6. Furthermore, because the repeal was generated in response to a petition initiative with sufficient valid signatures to place the matter on the ballot if the Legislature did not act, Governor Rick Snyder cannot veto the bill and does not even need to sign it for it to take effect.

What is the impact of the repeal on contracts entered into before the Prevailing Wage Act was repealed?

Although the repeal will take effect immediately, it will not impact existing contracts. The repeal will only impact contracts made after the date of repeal.

What is the impact of the repeal on other laws and ordinances requiring the government to pay laborers the prevailing wage?

The State’s repeal of its prevailing wage law does not impact the United States’ Federal Davis-Bacon Act (which requires the contractor, on all projects in excess of $2,000, to pay laborers a minimum amount based upon the local prevailing wage for contracts to which the government is a party) or the Fair Labor Standards Act (which establishes minimum wage, overtime pay, record-keeping, and youth employment standards affecting employees in the private and public sectors). Additionally, states must pay workers the prevailing wage on certain contracts for which the state receives federal funding, such as contracts for highway construction. Contracts entered into under any of these circumstances will not be affected by the repeal.

Contractors and laborers should also be aware that several local municipal governments have enacted prevailing wage laws similar to that which was repealed. Repealing the state law does not impact the validity of local prevailing wage requirements.

This alert was provided by Construction Practice Group Chair Bruce Courtade and Adam Baginski, 2nd year Summer Associate from Notre Dame Law School.