- NYS Prevailing Wage Law: Understanding the Compliance Requirements
- How to Guide for Completing the Certified Payroll Report on Prevailing Wage Jobs
The idea for prevailing wages began in the late 1880s as a way to protect the living standards of workers and employers. The very first prevailing wage law was passed in Kansas in 1891 as part of a legislative package that included the first law recognizing the eight-hour work day. New York State has codified the prevailing wage requirement in its State Constitution in Article 1, Section 17 by declaring that “[l]abor not a commodity” and providing for hours and wages in public work. The prevailing wage statutes establish a minimum basic hourly wage and benefit rate that must be paid to laborers, workers or mechanics employed on public works projects. It is determined by a majority of the workers in a type of work, trade or classification. The wage rate may also include prevailing practices regarding work rules or overtime rates. Although the prevailing wage statutes referenced in this article apply to public works, a bill is headed to Governor Cuomo’s desk concerning “wage theft” and would apply the same concepts to private contractors.
Although paying your workers seems simple, it is not.
The prevailing wage is comprised of two components: wage and supplemental benefits. Both components are defined in the prevailing and living wage laws, but are generally an established rate paid to a group of workers, laborers or mechanics in a specific trade or classification in a specified geographic area. Supplemental benefits include but are not limited to items like health, welfare, retirement, disability, sick leave, life insurance and apprenticeship training. In NY, the Labor Law Section 220 rate is determined by reference to collective bargaining agreements where a specified percentage of workers are determined to perform specific tasks. The rates are annually determined and are effective July 1st of each year. Adjustments may become effective at other times during the year and the contractor is responsible for knowing when they do and paying the correct amounts for all hours worked. The rates of wages and benefits can be found in schedules published by the fiscal officer. New York State schedules can be found here, https://apps.labor.ny.gov/wpp/publicViewPWChanges.do?method=showIt. Cities of one million people or more can establish its own prevailing wage. New York City is one of these locations and its schedules can be found here, https://comptroller.nyc.gov/services/for-the-public/nyc-wage-standards/wage-schedules/. Apprentices can only be paid the apprentice rate (usually substantially lower than the journey person rate) if they are properly registered in an approved apprenticeship training program.
A contractor is responsible to pay all workers performing work, labor or services upon the site of a public works project, the correct hourly rate. The rate is determined by reference to the tasks the person is performing. A contractor is responsible and liable for its subcontractor’s underpayments payments to its workers or its incorrect reporting. Therefore, when working on a public works project you need to identify:
- Whether the worker meets the statutory definition of worker, laborer or mechanic?;
- Whether the project is a public works project and which schedule is applicable;
- The proper rate of wages and benefits for the classification perform;
- The number of hours work at the public site and
- The correct locality.
You also need to monitor and confirm that your subcontractor is properly paying its workers.
Compliance risks are associated with a contractor’s, or subcontractor’s, failure to comply with the payment of prevailing wages or supplemental benefits, document retention requirements, proper completion of documentation (such as certified payroll reports), posting or other notice requirements or incorrect certification. Non-compliance with the statute may subject the contractor to civil and criminal penalties, including suspension and debarment from public works contracts. Many contractors and subcontractors have violated the laws because they did not take the time to understand their obligations. It is an area ripe for compliance investigations and the consequences can be devastating. Getting some advice or having a consultant familiar with all the requirements can avoid and minimize some of these risks.
Part 2 of this Primer will discuss certification, record keeping, completing the certified payroll reports and posting requirements. If you have any questions, reach out to me, Lorraine D’Angelo, LDA Compliance Consulting, Inc, lorraine at ldacomplianceconsulting.com or (914) 548-6369.
Lorraine is the president of LDA Compliance Consulting, which promotes principled contracting in the construction industry. LDACC provides consulting services focused on all aspects of contractor compliance, monitoring and reporting. Lorraine is a leading expert on small, women-owned, minority and DBE matters, programs and policy implementation. She also lectures and conducts training on implementing best practices for complying with those regulations.