On March 24, 2023, House Bill 4007 (“the Act”) was signed into law, restoring prevailing wage requirements because the previous Prevailing Wage Act, MCL 408.551 et seq., was repealed by 2018 PA 171. Since March 1, 2022, prevailing-wage requirements have been permitted on some contracts issued by the Department of Technology, Management & Budget (DTMB) because the Court of Claims found the department had permissive authority to make all decisions regarding the award of state contracts. Once the Act is in effect, prevailing wage requirements will more broadly impact the payment of construction mechanics on all state projects bid out by contracting agents and sponsored or financed in whole or in part by the state. These changes do not change compliance with the Davis-Bacon Act, 40 USC 3141 et seq., prevailing wage rates, applying to federally funded or assisted projects exceeding $2,000.

With the early end of the legislative session, the Act becomes effective on Feb. 13, 2024, applying to projects with a bid acceptance date, on or after that date. Contracts entered before the effective date or with bid acceptance dates before the effective date are excluded under the Act. The Act contains a specific exclusion for public school projects funded by millage revenue authorized before the effective date of the Act.

Requirements under the Act

Under the Act, a “state project” is new construction, alteration, repair, installation, painting, decorating, completion, demolition, conditioning, reconditioning, or improvement of public buildings, schools, works, bridges, highways, or roads authorized by a contracting agent. A “contracting agent” is any officer, school board, state board or commission, or state institution supported wholly or in part by state funds, authorized to enter a contract for the state.  “Construction mechanics” are skilled or unskilled mechanics, laborers, workers, helpers, assistants, or apprentices. Examples of qualifying projects may include the Michigan Department of Transportation (MDOT) bidding out a state transportation project financed in whole or in part by the state, a certain school district construction project depending on the funding source for the project, or the DTMB bidding out a construction project.

Controlling rates on qualifying state projects will be established by the state, based on union-level wages and fringe benefits that employers performing state-funded projects in the same locality are required to pay each class of mechanics. If a project is not bid out within 90 days of the state establishing rates, new applicable rates need to be obtained. The Act does not apply to the payment of executives, administrative professionals, or custodial employees. It requires apprentices to be enrolled in a Department of Labor Approved Training Program to qualify as such. Contractors at qualifying projects are required to post the rates and to maintain payroll records of wages and benefits paid for a minimum of three years.

Additionally, the Act requires language in future construction contracts providing wages and fringe benefit rates are not to be less than the established rates. Contractors must include that mechanics on covered projects are the intended beneficiaries of the prevailing wages and benefits. Required contract terms also include nondiscrimination, nonretaliation, and a statement that any employee aggrieved by a failure to provide prevailing wages and benefits may bring an action against the contractors for damages or injunctive relief.

Complaints

The Michigan Department of Labor and Economic Opportunity (DLEO) has the authority to administer, enforce, and promulgate new rules under the Act, including the ability to investigate alleged violations. Workers or third parties with credible information may file confidential complaints for violations of the Act occurring after the effective date. Complaints must be made within three years of the alleged violation.

Investigations

The DLEO will investigate a complaint filed: by establishing whether the project was truly a state project bid out by a contracting agent; and then by determining whether there was a violation regarding the compensation of construction mechanics. During the investigation, the investigator may interview employees, supervisors, and others, regarding wages, benefits, classification, or other information relevant to the enforcement of the Act. 

Penalties

Failure to comply with the Act may result in a fine of $5,000, an additional 10% as determined by the DLEO, and termination from projects. Contractors and subcontractors will be held jointly and severally liable for damages resulting from their termination from a project, or for the loss of wages and fringe benefits resulting from a failure to post prevailing wages in the contract documents, bidding forms, or onsite. An employee retaliated against for filing a complaint or participating in an investigation may file another complaint within 90 days of the alleged retaliatory act for rehiring or other equitable remedies, including full back pay or lost earnings.

Proper guidance from a knowledgeable professional can help contractors reduce risks and potential penalties when dealing with Prevailing Wage Act issues.