Another Unwarranted Expansion Of The Reach Of Prevailing Wage Laws—Construction Employers Must Take Heed!

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I have blogged many times on prevailing wage issues and, of late, have commented on the unwarranted expansion of these laws. Well, here’s another one. The State of New York enacted an enhancement of its prevailing wage law, effective January 1, 2022, which will amazingly (or sadly) make more construction projects come under the umbrella of this law.

This law, denominated as Budget Bill, S.7508-B A.9508-B, was signed into law on April 3, 2020. It specifies that prevailing wages must be paid on “covered projects.” Such projects are those where “construction work done under contract which is paid for in whole or in part out of public funds where the amount of all such public funds, when aggregated, is at least thirty percent of the total construction project costs” and “where such project costs are over five million.” Until now, a project was deemed a prevailing wage job when a public entity was a signatory to a construction project; the second necessary factor was that the project had to “benefit the public.”

For starters, the law expands the definition of “public funds.” It used to be money spent by a public body but now it may include, for example, payment of money, whether directly or indirectly, by a public entity on behalf of a contractor or subcontractor or developer that is not subject to repayment. It can also include savings of all kinds, such as securing rents, interest rates or insurance costs lower that the market rates. It could also mean tax abatements and exemptions that are now also subsumed under the “funding” umbrella. If certain costs are waived or forgiven, that is also now considered a source of public money.

The law also expands the definition of a “public entity.” Now, a number of entities are added to this definition, such as the “State,” or a “local development,” “corporation,” or a “municipal corporation,” or an “industrial development agency,” or “state, local or interstate or international authorities” and, lastly, “any trust created by any such entities.’ This is an incredible (and I use that word deliberately) augmenting of this definition, showing a focused intent to make the prevailing wage laws applicable in a more sweeping fashion.

The Takeaway

Many of these provisions are vague and capable of different interpretations. For example, the statute mandates prevailing wages be paid when the “total project costs” are more than $5,000,000. The law, however, does not define “total project costs” or “construction project costs.” Thus, employers and developers are left to guess whether certain line items or costs are includible in gauging whether the threshold has been met.

I know this much—the New York Department of Labor and, I daresay, the New York courts, will interpret this law in a very liberal (i.e. pro-employee) manner, with the goal of increasing prevailing wage coverage, thereby raising wages for workers. The interpretation of a prevailing wage statute is often within the peculiar province of a DOL so such (expansive) interpretation will likely be given weight by the courts. On these issues, I suggest (and I have often done it) seeking informal advice from the DOL prior to a project commencing, so the contractor has some heads-up on these difficult issues of statutory interpretation.

Get out in front of it…

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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