Public School Construction and Prevailing Wage

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On June 6, 2018, the Michigan Legislature adopted Initiated Law 2 of 2018, which repealed Michigan Public Act 166 of 1965, commonly referred to as the Prevailing Wage Act. With the repeal of the Prevailing Wage Act, State-funded construction projects, which included many public school construction projects, no longer were required to ensure contractors and subcontractors on those projects were paid prevailing wages and fringe benefits.

Recently, Governor Whitmer announced on Oct. 7 the reinstatement of the prevailing wage requirements and indicated that the State of Michigan will require State contractors and subcontractors to pay prevailing wage for construction projects. This broad announcement caused concern for public school districts as many public school construction projects are funded with funds sponsored or financed, in whole or in part, by the State, including but not limited to, funds secured through bonds qualified by the State of Michigan. Under the former Prevailing Wage Act, these bond funds were deemed to be State-sponsored construction projects subject to the prevailing wage requirements.

Notwithstanding Governor Whitmer’s recent announcement regarding the reinstatement of prevailing wage requirements, Governor Whitmer has not issued an Executive Order or Executive Directive on prevailing wage, and no other legislative action has been taken to reinstate the former Prevailing Wage Act. Under the Management and Budget Act, therefore, these prevailing wage requirements are limited to internal administrative or procedural directives of the Department of Technology, Management and Budget (DTMB), affecting only construction contracts let by the DTMB, unless or until an Executive Order or Executive Director is issued by the Governor.

Accordingly, public school construction projects that utilize State and/or local funds continue to be exempt from any prevailing wage requirements. However, public school districts should be aware that if Federal funds are used to fund school construction projects, those construction projects may be subject to the Federal prevailing wage requirements under the Federal Davis-Bacon Act.

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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