Practice Areas

Understanding the Illinois Prevailing Wage Act

March 2014

By: Ryan L. Young, Esq.

This is Part I of a four-part series about the Illinois Prevailing Wage Act. The Illinois Prevailing Wage Act requires employers to pay the prevailing wage rate to employees employed in any public works. Employers have experienced a dramatic increase in the Illinois Department of Labor's investigations under the Act. For employers engaged in public works, proactive compliance is prudent.

In the first part of a multi-part series, I will discuss the coverage and rate determination portion of the Act that will give you a solid foundation for compliance.

Coverage Under the Act

The Prevailing Wage Act applies to laborers, mechanics, and other workers employed in any "public works" by any public body and to anyone under contracts for "public works". "Public works" includes all fixed works constructed or demolished by any public body, or paid for wholly or in part out of public funds.

The definition of public works provides two separate ways a construction or demolition project can fall under the Act's coverage. First, a public body (the State, State agencies, counties, cities, towns, villages, school districts, municipalities, institutions supported in whole or part with State funds, etc.) can solicit companies to perform a construction/demolition project. Second, if the project is paid for, in whole or part, with public funds (i.e. State money) then it is covered under the Act even though the work is not solicited by a public body.

Again, the Prevailing Wage Act applies to laborers, mechanics, and other workers employed in all fixed works constructed or demolished for any public body or paid for with public funds. Under the Act, this work includes any maintenance, repair, assembly, or disassembly work performed on equipment. The Act's definition of "construction" as "all work on public works involving laborers, workers or mechanics...(including) any maintenance, repair, assembly, or disassembly work performed on equipment..." demonstrates the broad nature of the work covered.

Determining the Appropriate Prevailing Wage Rate

If a project is covered by the Act, the employer must determine the appropriate prevailing wage rate for its employees working on the project. Since the Department determines the prevailing wage rates by county each month, the first step in determining the appropriate prevailing wage rate for the work performed on a covered project is establishing which county the work will be performed in.

Once the county is identified, the employer can then go to the Department's website and download the prevailing wage rates for that county for the given month. ( See http://www.state.il.us/agency/idol/rates/rates.HTM)

With the rates in hand, the next step is to determine which classification(s) the employees working on the public works project fall under. Some classification determinations will be fairly obvious (e.g. a worker performing electrician work will be classified as an electrician) but other determinations may not be. If the employer has questions regarding the proper classification for its employees, it can either call or write to the Department and request the Department provide clarification given the work that will be performed by the employees.

Finally, after the proper classification is determined, the employer must determine what the proper prevailing wage rate is. Here, it is important to note that the prevailing wage rate has multiple components which include the base rate and various fringe benefit rates. For each classification, the employer must add the base rate and applicable fringe benefit rates to get the appropriate prevailing wage rate. It is important to note that an employer that provides fringe benefits to its employees (e.g. provides or pays a portion of employees' health insurance premiums, pays into employees' 401(k) plans, pays for employees' training) can credit its payments for the fringe benefits against the fringe benefits rates when calculating the prevailing wage rate.

Determining that your project is covered under the Act and the appropriate prevailing wage rate for the employees working on the project is a great start to total compliance. Next month, we will cover the notice, posting, and reporting requirements of the Prevailing Wage Act.

If you have any questions or concerns about this topic, please call Ryan Young of Wessels Sherman's Chicago, Illinois office at (312) 629-9300 or via email at ryyoung@wesselssherman.com.