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What's the Illinois Prevailing Wage Act?

By the middle of the 1920s, the United States government was greatly involved in heavy construction projects ranging from dam building to expanding the housing of government institutions. In 1931, the Davis-Bacon Act was enacted by the Federal government and became recognized by workers as an important milestone for organized labor. Essentially, Davis-Bacon now requires that each contract over $2,000 to which the United States or the District of Columbia is a party for the construction, alteration, or repair of public buildings or public works shall contain a clause setting forth the minimum wages and fringe benefits to be paid to various classes of laborers and mechanics employed under the contract.

In the 1940s, the Illinois Legislature approved a law similar to Davis-Bacon on the Illinois state level. Generally speaking, the Illinois Prevailing Wage Act (820 ILCS 130/0.01 et. seq.) (the "Act") requires contractors and subcontractors to pay laborers, workers and mechanics employed on "public works" projects in Illinois no less than the general prevailing rate of wages (consisting of hourly cash wages plus fringe benefits) for work of similar character in the locality (locality usually means the county) where the work is performed.

Perhaps the KEY definition under the Act is that of "public works." Public works means all fixed works constructed by any public body, other than work done directly by any public utility company, whether or not done under public supervision or direction, or paid for wholly or in part out of public funds. "Public works" as defined herein includes all projects financed in whole or in part with bonds issued under the Industrial Project Revenue Bond Act (Article 11, Division 74 of the Illinois Municipal Code), the Industrial Building Revenue Bond Act, the Illinois Finance Authority Act, the Illinois Sports Facilities Authority Act, or the Build Illinois Bond Act, and all projects financed in whole or in part with loans or other funds made available pursuant to the Build Illinois Act. "Public works" also includes all projects financed in whole or in part with funds from the Fund for Illinois' Future under Section 6z‑47 of the State Finance Act, funds for school construction under Section 5 of the General Obligation Bond Act, funds authorized under Section 3 of the School Construction Bond Act, funds for school infrastructure under Section 6z‑45 of the State Finance Act, and funds for transportation purposes under Section 4 of the General Obligation Bond Act. "Public works" also includes all projects financed in whole or in part with funds from the Department of Commerce and Economic Opportunity under the Illinois Renewable Fuels Development Program Act for which there is no project labor agreement. "Public works" also includes all projects at leased facility property used for airport purposes under Section 35 of the Local Government Facility Lease Act. In short, under the law, it has been interpreted over the years that ANY work done on "state" property or with "state" funds must be done in compliance with the Illinois Prevailing Wage Act.

The Bottom Line… is that the Act requires that all laborers, workers and mechanics employed by contractors or subcontractors in actual "construction work" on the site of the building or construction job, must be paid the prevailing wage (hourly plus fringes). Construction work means all work on public works involving laborers, workers and/or mechanics, including those individuals who simply transport materials and equipment to or from a job site. The only exception to the definition of covered "construction work" is limited to the transportation by the actual sellers and suppliers of materials or equipment or the manufacture or processing of materials or equipment. This exception, however, is extremely narrow and has been applied on a very limited basis by the Illinois Department of Labor.

Additionally, recent amendments to the Act now require employers to pay prevailing wage for simple "maintenance" or "repair" work performed on any public building. The Act now reads that the wage for a tradesman performing "maintenance" is equivalent to that of a tradesman engaged in "construction." For example, when the electrician is called out to change a light-bulb, this 1-minute service call must be paid at the appropriate prevailing wage.

Who Enforces The Act?

It is the Illinois Department of Labor ("IDOL") that is empowered to enforce and administer the Act. The IDOL is currently headed by Mr. Arthur Ludwig. The IDOL has a "division" that it refers to fittingly as the PREVAILING WAGE DIVISION. Within this division, one will find investigators, mediators and conciliators assigned to primarily administer and enforce the Illinois Prevailing Wage Act. Most often the IDOL's Prevailing Wage Division will send out a "records request" to a contractor that it believes may be in violation of the Act. Typically when records are not provided, a subpoena usually follows. Failure to respond to a valid subpoena could result in a violation, as well as, contempt findings. Although the IDOL has its own group of attorneys, the Illinois Attorney General's office will usually represent the IDOL in actual litigation.

For more information about the IDOL, as well as the prevailing wage law, please visit its website at http://www.state.il.us/agency/idol/.

What Are My Obligations Under The Law?

Assuming that the law applies (and it's the sole responsibility of the contractor or subcontractor to know whether or not the law applies regardless of notice from anyone), any employer who has workers engaged in a particular project must not only pay the prevailing hourly rate, but must also be sure to pay each worker the prevailing set of fringe benefits. The prevailing hourly rate and prevailing fringe benefits are based on the type of work being performed (oil & chip trucking vs. anything but oil & chip trucking; laborer vs. fence erector) as well as the particular county where the work is being performed.

Also, the contractor or construction manager to whom a contract for public works is awarded must now post, at a location on the project site of the public works that is easily accessible to the workers engaged on the project, the prevailing wage rates for each craft or type of work or mechanic needed to execute the contract or project or work to be performed. It's "ok" to post the prevailing wage rates in a binder or booklet and give it to the workers --- especially in light of potential "sabotage" from certain third parties (who shall remain nameless).

Contractors are also under an obligation to inform and serve written notice upon any sub-contractor that a particular project is covered under the Act. Failure to provide such notice also subjects the contractor to liability under the Act.

There are new prevailing wage reporting requirements under the Act as well. The Act now requires any contractor or subcontractor working on a prevailing wage project to submit a certified payroll to the public body in charge of the project on a monthly basis. The certified payroll records must include for every worker employed on the public works project the name, address, telephone number, social security number, job classification, hourly wages paid in each pay period, and the number of prevailing wage hours worked each day. Such payroll records are public records for at least 3 years, and are subject to disclosure under the Freedom of Information Act. On a related note, all records concerning prevailing wage projects should be kept for 3 years by the contractor or subcontractor, and must be open for reasonable inspection to the IDOL.

What's The Big Deal If I Am Not In Compliance?

First off, a violation occurs when: (1) records are not kept, (2) records are not provided or access is denied; (3) proper notice is not made; (4) proper postings are not established or (5) less than the prevailing wages are paid.

With regard to the failure to pay prevailing wages, FIRST TIME VIOLATORS must pay workers the difference between the actual wage paid and the prevailing wage, and are subject to 20% penalties and punitive damages in the amount of 2% of the amount of any such penalty to the IDOL for underpayments for each month following the date which such underpayments remain unpaid. Additionally, new amendments to the Act dramatically increase the penalties for a SECOND AND SUBSEQUENT VIOLATION of the law. In addition to back pay for any underpayment, a second and subsequent violation of the law will result in a contractor or subcontractor to be liable to the IDOL for an amount equal to 50% of the underpayment (rather than 20%) and also liable to the worker for punitive damages in the amount of 5% (rather than 2%) of the amount of the penalty to the IDOL for each month following the date in which the underpayment remains unpaid.

A contractor or subcontractor found to have violated the Act on two occasions in any five (5) year period may now be barred from public works projects for four (4) years. Only when one is facing possible debarment does the law allow for a formal hearing to allow the contractor or subcontractor to state its case as to why debarment should not occur (i.e. negligent minor violations --- paid prevailing wages but miscalculated fringes).

Any contractor or subcontractor who fails to submit a certified payroll or knowingly files a false certified payroll is guilty of a Class B misdemeanor.

A contractor violating provisions protecting whistle-blowers will be liable to the IDOL for a penalty of $5,000 for each violation.

Finally, one of the more strong-armed tactics that the IDOL has at its disposal is to enforce the Act not only against the involved company, but also go after individual officers, directors and owners of the company since individual liability is allowed regardless of how the company is organized (in other words, being incorporated does not shield individual owners or officers from liability under the Act).

What Should I Do Now?

It is no secret that the IDOL under the Blagojevich administration has seen fit to not only make enforcing the Act its #1 priority, but has made certain that the law be interpreted and amended in ways to make it more difficult and onerous than ever for employers to comply with it. As such, it is critical that each and every contractor doing business on any "public works" "construction project" clearly understands the Act --- and if applicable, COMPLYCOMPLY - COMPLY!!!. With this in mind, Wessels Sherman Joerg Liszka Laverty Seneczko P.C. has developed a Prevailing Wage Task Force designed to help employers of all shapes and sizes to comply with the Act in the least burdensome way possible. Wessels Sherman has also recorded a 60 minute cd/audio tape on how employers can not only deal with their prevailing wage obligations, but also successfully respond to a violation notice.

DISCLAIMER: The above summary is just that… a mere summary of the Illinois Prevailing Wage Act designed to simply provide a general summation of the law. It is not intended to be a substitute for legal advice based on an unusual set of facts and circumstances. The Illinois Prevailing Wage Act is constantly evolving.