Illinois Prevailing Wage Act

Marc R. Poulos

Executive Director

What is the Indiana, Illinois, Iowa Foundation for Fair Contracting?

The III FFC is a Labor - Management organization whose goal is to promote bidding compliance and equity.

Its goals include: To be an employee and employer advocate in the

construction industry through education and action.

To assist Management and Labor in obtaining work through fair and equitable bidding practices, helping to provide a level playing field for all responsible contractors who competitively bid public works projects.

III FFC - Prevailing Wage Compliance Monitoring

• Monitors check jobsites, file complaint packages with various agencies

• Educate public bodies on importance of responsible bidding

• File lawsuits/amicus briefs regarding the scope of the IPWA

Prevailing wages are predetermined wages for workers engaged in the construction of a public work.

Why have prevailing wage rates?

Why Prevailing Wages“It seems to me that the federal government should not engage in construction work in any state and undermine the labor conditions and the labor wages paid in the state….The least the federal government can do is comply with the local standards of wages and labor prevailing in the locality where the building construction is to take place” (NY Representative Robert L. Bacon).

Little Davis-Bacon State prevailing wage laws, including the Illinois Prevailing

Wage Act enacted in 1941, are often referred to as little Davis-Bacon laws.

The same reasons offered by Senator Bacon when referring to the federal Davis-Bacon Act apply to state prevailing wage laws.

A Primer on the Illinois Prevailing Wage Act

Everyone should know the Act, especially public bodies

Contracting agency should want to ensure compliance with local wage rates and labor standards

Recent amendments to the Act make public bodies liable for some violations

What Projects are Covered? Sec. 2

1. Direct contract between a public body (State of Illinois or one of its political subdivisions) and a contractor.

2. Financing for the project comes from various funding mechanisms within the statute. For example: Build Illinois Bond Act or funds for school construction.

3. Non-governmental organization funded in whole or in-part by public funds/financing.

Projects Covered – Case LawOpp. Center of Southeastern Ill., Inc. v. Bernardi (5th Dist. 1990)

Not-for-profit was a “public body” for purposes of PWA because it received over ½ of its revenue from Dept. of Health and Developmental Disabilities and is publically supported by tax money

McKinley Foundation v. Illinois Dept. of Labor (4th Dist. 2010) Private foundation covered under PWA where

construction project financed in part with funds issued by the Illinois Finance Authority

Town of Normal v. Hafner (4th Dist. 2009) PWA does not apply to private developer constructing

private residences, where developer receives TIF incentive (despite multiple amendments, “public works” definition does not include “TIF”)

WHO IS COVERED? Sec.3 All workers directly employed by contractors and

subcontractors and engaged in actual construction on the site of construction, including workers engaged in the transportation of material and equipment to and from the site

Excludes transportation by sellers and suppliers

The transportation proviso is often misapplied by contractors (e.g. Drillers)

Sec. 3 Coverage Cont. This also includes any maintenance, repair, assembly, or

disassembly work performed on equipment whether owned, leased, or rented.

Demolition projects are covered regardless of whether in conjunction with subsequent public works projects.

P.A. 96-0186, eff. Jan. 1, 2010

Coverage Cont.In addition to the enumerated funding mechanisms (i.e. the Illinois Finance Authority in McKinley Foundation v. Illinois Dept. of Labor), the PWA covers:

All projects financed in whole or in part with bonds, grants, loans, or other funds made available by or through the State or any of its political subdivisions.

P.A. 96-58, eff. Jan. 1, 2010.

Coverage Cont. All work performed pursuant to a public private

agreement under the public private agreements for the Illiana Expressway Act (P.A. 96-913, eff. June 9, 2010)

All projects undertaken under a public-private agreement under the public-private partnerships for transportation Act (P.A. 97-502, eff. Aug. 23, 2011)

CONTRACT STIPULATIONS: Public Bodies, Sec. 4

Public Body must ascertain general prevailing wages.

Public bodies must insert a prevailing wage stipulation into the bid specifications and contract.

Public bodies must provide written notice to the to the contractor indicating prevailing wage applies (on contract, purchase order, or other separate document) (P.A. 96-0437, eff. Jan. 1, 2010)

VIOLATIONS: Public Bodies, Sec. 4

IDOL determines violations

If the public body/entity failed to provide written notice to contractor, it is responsible for interest, penalties, or fines. P.A. 96-437, eff. Jan. 1, 2010

Response to Brandt Construction Company v. Ludwig

Public Bodies are NOT responsible for back wages even if proper notice was not given. P.A. 96-437, eff. Jan. 1, 2010

CONTRACT STIPULATIONS: Contractors, Sec. 4

• Contractors must insert a written prevailing wage stipulation into each lower tier contract

• Contractors must have a prevailing wage stipulation in all bonds

• Contractors must provide subcontractors with a written statement indicating prevailing wage applies

• P.A. 96-437, eff. Jan 1, 2010

VIOLATIONS: Contractors, Sec. 4

IDOL determines violations

If no written notice to subcontractor, contractor responsible for interest, penalties, or fines

Contractors are NOT responsible for back wages when proper notice was not given. P.A. 96-0437, eff. Jan 1, 2010

Revised Rates Sec. 4, cont.

Revised rates apply throughout the term of the contract

The public body in charge of the project is responsible to notify contractors of the revision

Failure to notify contractors of revisions can result in criminal penalties under Sec.6. Class A Misdemeanor, P.A. 96-571, eff. Jan 1, 2012

Effective Jan. 1, 2013, A public body or other entity will meet it’s duty to notify contractors of revised rates if the contract document or other written instrument states that the prevailing rate of wages are revised by IDOL and available on the Department’s official website.

POSTING, Sec.4 As of June 1, 2004, Contractors must post prevailing wage

rates.

Where must rates be posted?

On the job site in a place that is easily accessible;

At a regularly visited office; or

Provide written notice

Failure to post may result in 1st Notice of violation

NEW CLASSIFICATIONS, Sec.4 Anyone affected by a classification may petition IDOL

objecting to the failure to include a classification. However, the new classification must involve work that is substantially different from any existing classification.

Material Tester Classification The Material Tester Classifications, effective January 1,

2007, affects the work of Material Testing for the following counties:

Boone, Carroll, Cook, DeKalb, DuPage, Grundy, Kane, Kankakee, Kendall, Lake, Lee, McHenry, Ogle, Will and Winnebago

Material Tester I Material Tester I: Hand coring and drilling for testing of

materials; field inspection of uncured (plastic) concrete and asphalt.

Material Tester II Material Tester II: Field inspection of welds, structural

steel, fireproofing, masonry, soil, façade, reinforcing steel, formwork, cured concrete, and concrete and asphalt batch plants; adjusting proportions of bituminous mixtures

RECORD KEEPING, Sec. 5 Contractors must keep accurate records for 5 years

from the last payment made in paper or electronic form

Contractors must annualize all fringe benefits

What must be kept? Name, address, telephone number, social security

number

Classification(s)

Hourly wages and O/T wages paid in each pay period, the hours worked each day for each worker performing work in a prevailing wage classification on the site of the construction project

The start and end times of work each day

RECORD KEEPING, Sec. 5 Gross and net wages

Hourly fringe benefit rate

Name and address of each fringe benefit fund

Plan sponsor of each fringe benefit fund

Plan administrator of each fringe benefit fund

However, if a contractor or subcontractor remits contributions to a jointly administered fringe fund (i.e. LMRA Fund), contractors and subcontractors only net gross and net wages above need to be reflected.

Certified Payroll, Sec. 5 In addition to the records retention, contractors must:

Submit monthly to the public body in charge of the project a certified payroll consisting of a complete copy of the records identified in the retention portion of Section 5 by the tenth of the month

Payroll must be accompanied by a statement signed by the contractor which avers that the records are true and accurate, appropriate prevailing wages were paid and the contractor is aware that filing false certified payroll is a Class A misdemeanor

Failure to file a certified payroll is a violation of the Act

Certified Payroll, Sec. 5 In addition, upon seven business days notice, the

contractor must make records available to the IDOL, public body in charge of the project, and federal, state, or local law enforcement agencies.

P.A. 96-571, eff. Jan. 1, 2012

Public Body Retention, Sec. 5 Public bodies are required to retain certified payrolls

for a period of five (5) years from the date of the last payment for work

In addition, the certified payrolls are considered public records, except an employee’s address, telephone number and social security number, and must be made available to the public in accordance with the Illinois Freedom of Information Act

VIOLATIONS, Sec.6 Public bodies and contractors are liable if they willfully

omit to comply or willfully violate the Act or contractors that willfully fail in their duty to create, maintain, keep or produce records or documents: Class A misdemeanor(P.A. 96-571, eff. Jan 1, 2012)

• Employees and agents can make the public body or contractor liable (P.A. 96-571, eff. Jan 1, 2012)

• Statute of limitations extended from 3 to 5 years

Enforcement IDOL has a statutory obligation to investigate all

complaints

Attorney General shall prosecute cases upon complaint from the IDOL or any interested person

Establishing rates, Sec.9 Every June the individual public bodies or the IDOL

investigate and ascertain the general prevailing wage rates for each county and each classification. The rates are posted on the IDOL web site.

Beware, wage rates generally only change in June whereas fringes can change throughout the year.

Any person affected by a wage determination may file objections with the IDOL within 30 days after the rates are posted on the web site in June.

Why do cheaters not object? One who has a proclivity to cheat does not object because the higher the prevailing rate, the more money the contractor puts in his pocket.

The RATE…RATE…RATE As mentioned, the prevailing rate is not a “Union”

rate. In fact, in 1997 and 1998 the IDOL conducted a statewide survey for each County. First, the IDOL ascertained projects by contacting 2,059 public bodies across the state. From that information, the IDOL contacted 5,067contractors and subcontractors to ascertain the wage classifications and rates paid on the projects. Then, the IDOL compiled collective bargaining agreements. From that information, the prevailing wages for each County were extrapolated.

Beary Landscaping v. Shannon(7th Cir. 2012)

IDOL collects prevailing wage rates by using those set in the private collective bargaining process

Not an unlawful delegation of regulatory power to private parties Object within 30 days of posting and obtain administrative

and judicial review

IDOL ENFORCEMENT The IDOL can and will interview workers

The IDOL can and will issue subpoenas

In the past, subpoenas resulted in delay/litigation as contractors refused to turn over records

Current policy is to issue a notice of violation re: record-keeping/failure to respond

AG will pursue criminal violations at direction of IDOL

DEBARING CONTRACTORS, Sec.11, 11a Section 11a is the only section where the IDOL has

rule making authority.

Specific hearing procedures at 56 Ill. Adm. Code 100

Contractor may be debarred for up to 4 years from the date its name is placed in the Illinois Register.

Contractors guilty of sec. 5 or 6 are automatically subject to debarment, no right to a hearing (P.A. 96-571, Jan 1, 2012)

ADMINISTRATIVE CODE56 Ill. Adm. Code 100

Factors IDOL considers on whether issue a notice of violation:

Severity - whether there has been more than one violation and whether the violation involves a non-technical substantive error, i.e. willful conduct;

Frequency and duration - whether a general inspection of the contractor’s history reveals other violations;

Amount in controversy - The difference between the amount actually paid and the prevailing wage rate, no set dollar amount triggers;

Accurate Records - whether the contractor has cause to be kept accurate records;

Access - Whether the contractor has cooperated with IDOL.

WORK STOPPAGE, Sec.11 No public works shall be instituted where the Act has not

been complied with (i.e. contract stipulations, wage rates, bonds)

The AG may enjoin the continuation of a project where the Act has not been complied with.

PRIVATE RIGHT OF ACTION Any employee who has been paid a sum less than the

stipulated prevailing wage has a private right of action against the contractor who failed to pay the proper wage.

Not required to exhaust administrative remedies

Attorney’s fees are available.

PENALTIES, Sec.11 In addition to the wages the contractor is also liable to the

IDOL for a 20% PENALTY. Second violation = 50%.

2% Punitive damages accrue each month if the contractor fails to pay the wages after a determination has been made. Second violation = 5%

IDOL also has a right of action on behalf of employees who choose not to exercise a private right of action.

Public body or contractor may be liable if no written notification

WHISTLEBLOWER PROTECTION, Sec.11b Employees who are retaliated against for filing, instituting

or causing to be filed any proceedings under the Act.

Must be within 30 days of the alleged retaliation apply to the IDOL for a review of the retaliation

Compliance The State of Illinois has regulated labor costs on pubic

works projects since 1941

Enforcing this Act ensures the protection of local prevailing rates for every worker engaged in public works

For more information contact:

National Alliance for Fair Contracting

Geoffrey Griffith/ NAFC Administrator

http://faircontracting.org

Marc Poulos / III FFC Executive

Director

http://www.iiiffc.org

Illinois Department of Laborhttp://www.state.il.us/agency/idol/