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Understanding the Illinois Prevailing Wage Act Part IV: Prevailing Wage Act Traps

Last month we covered the penalty provisions under the Prevailing Wage Act. In the final part of our four-part series, we will discuss two common traps that employers fall into concerning the Act: the narrow hauling exception and the seemingly private project that is partially funded with public funds.

The Narrow Hauling Exception

Despite the broad nature of covered work, the Prevailing Wage Act includes a very narrow hauling exception. This exception creates a trap for many employers who are under the mistaken impression that all companies providing hauling services exempt under the Act. However, the reality (and key to understanding the exception) is thatthe exception only applies to transportation by sellers and suppliers. The Act states:

"Only such laborers, workers and mechanics as are directly employed by contractors or subcontractors in actual construction work on the site of the building or construction job, and laborers, workers and mechanics engaged in the transportation of materials and equipment to or from the site, but not including the transportation by the sellers and suppliers...shall be deemed to be employed in public works." (Emphasis added.)

The Illinois courts have interpreted this language in a very straightforward manner. The courts have emphatically concluded only those drivers employed/subcontracted by sellers or suppliers to haul materials to the jobsite are excluded from coverage. On the other hand, those drivers employed/subcontracted by contractors or subcontractors in construction work and/or transportation of materials to or from the job site must be paid the prevailing wage rate.

To simplify, if the contractor or subcontractor has its own employees haul or hires a hauling company to haul, the hauling will be covered by the Act. In contrast, if the seller or supplier hauls or hires a hauling company to haul, the hauling will not be covered. It is important to note, that the hauling exemption only applies to the hauling of materials to the project. Any hauling of demolished material from the job site will not fall within the exemption.

To avoid this trap, employers simply need to understand the distinction between hauling that stems from a contractor/subcontractor and hauling stemming from a seller/supplier. With this understanding, employers can easily determine which category they fall under and whether they must pay the prevailing wage rate.

Seemingly Private Projects Partially Funded with Public Funds

Another trap set by the Act concerns what projects are covered by the Act and derives from the definition of "public works". As you recall from the first part of our series, "Public works" is defined all fixed works constructed or demolished by any public body, or paid for wholly or in part out of public funds. Thus, 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.

Employers get caught in this coverage trap when the project appears to be funded entirely by private funds. Take for instance a scenario where a private business is planning to build a new store in one of the Chicago suburbs. Wheaton really wants the business to build its new store in its town so it offers to provide the private business with funds to build the new store. The business accepts the offer and uses its own funds and Wheaton funds to build its new store in Wheaton. Under this scenario, it would be easy for the employers doing work on the project to believe that the project was private and, therefore, not covered by the Act. This is especially true when employers working on the project do not receive notice that the prevailing wage must be paid for all project work. Naturally, the Illinois Department of Labor (IDOL) will still expect the employers to pay the prevailing wage for all work performed on the project even if the employers do not receive the proper notice (See Part III).

The only way for employers to avoid this trap is to learn where the money for the project is coming from. While this scenario is rare, employers would be wise to take this precaution.

Conclusion

Unfortunately, the Illinois Prevailing Wage Act is not going away, as the IDOL's increased investigations and aggressive enforcement of the Act demonstrate. While the Act can present all kinds of problems for employers, a solid understanding of the Act's requirements allows employers to take the proper compliance measures and alleviate the headache.

Questions? Contact Ryan L. Young in the Chicago office at ryyoung@wesselssherman.com or by phone at (312) 629-9300. 

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