One way Gov. Bruce Rauner has proposed cutting spending is to repeal the so-called “prevailing wage” law. So what is the prevailing wage and why is it on the books? Our experts debate the pros and cons of eliminating the prevailing wage the state pays for public construction projects. Joining us are David From, the state director of Americans for Prosperity, and Frank Manzo, policy director of the Illinois Economic Policy Institute.
Illinois’ Prevailing Wage Act went into effect in 1941, which was around the same time many other states adopted their prevailing wage laws. The law requires contractors and subcontractors to pay laborers, workers, and mechanics employed on public works construction projects or demolitions no less than the prevailing wage in the county where the work is performed.
In Illinois, the prevailing wage is set by county, with the Illinois Department of Labor determining the wage and benefits rate (the department ascertains the prevailing wage rate in June and posts effective rates July 1). In addition to the rate being dependent upon the county in which the work is performed, the prevailing wage rate is also dependent upon the classification in which the work falls.
Rates for prevailing wages are covered under two separate laws: The Prevailing Wage Act covers construction rates and the Illinois Procurement Code covers rates for janitorial cleaning services, window cleaning services, food services, security services, and printing.
The Act also requires specific record keeping requirements for a contractor or subcontractor. Those requirements must be kept for at least three years from the date of the last payment on a project and include:
- records of all laborers, mechanics and other workers employed by them on the project, which records must include each worker's name, address, telephone number when available, social security number,
- classification or classifications of such workers
- the workers gross and net wages
- the number of hours worked each day by the workers
- the worker’s starting and ending times of work each day
- the worker’s hourly wage rate
- the worker’s hourly overtime rate
- the worker’s hourly fringe benefits rate
- the name and address of each fringe benefit fund
- the plan sponsor of each fringe
- the plan administrator of each fringe benefit
Contractors or subcontractors who fail to maintain the required records and/or fail to produce records when requested by the Department of Labor are subject to a Notice of Violation. Two notices within five years can lead to debarment from working on public works projects.
If a contractor/subcontractor violates the Act, “the contractor/subcontractor is liable for the difference between what was paid to the employees and the prevailing wage for all hours worked and owes the Department of Labor a 20 percent penalty of the underpayment," according to the Illinois Department of Labor. In addition, workers are owed 2 percent of the amount of any such penalty for each month during which underpayments remain unpaid. For a second or subsequent violation the 20 percent penalty is increased to 50 percent and the 2 percent penalty is increased to 5 percent.