Illinois Prevailing Wage Act Part 3 - Contractors Are At Risk

This is the third in a series of posts about the Illinois Prevailing Wage Act, 820 ILCS 130/0.01, et. seq.  First we introduced the Act, then we addressed concerns from the public entity's perspective.  Up next - contractors and other private entities awarded contracts for "public works" projects.    The Act requires that "prevailing wage" be paid to laborers, mechanics and other workers for "public works" projects.  A public works project includes essentially any construction, maintenance, and equipment installation for any "public body" or for any project receiving certain public funding.


Right out of the gate, contractors need to know this: IT IS THE CONTRACTOR'S RESPONSIBILITY TO PAY PREVAILING WAGE FOR ANY PUBLIC WORKS PROJECT, EVEN IF THE PUBLIC BODY DOES NOT TELL YOU TO DO IT!  Yes, the public entity is required to notice contractors that prevailing wages must be paid for a project, and the public entity can incur liability for failing to do so.  But at the end of the day, even if no one told the contractor (or subcontractor) it was required, when a complaint is filed the contractor WILL be required to pay prevailing wage for the work, including back wages.  


Contractors, this means you need to understand this law and be proactive in confirming whether a given project falls within the scope of the Act before you bid on it.  It would also be advisable to include in the contract a provision explicitly stating whether prevailing wage is to be paid for this project, and if so defining prevailing wage.  If prevailing wage is not to be paid for the project, it is reasonable to require the "owner" (or the general contractor, if you are a subcontractor) to indemnify you against a later determination that prevailing wage should have been required after all.  Of course, all this assumes that you have a written contract.  If the job does require prevailing wage and you retain subcontractors, you are required to notify in writing each subcontractor (in the contract, specifications, or if neither by a separate written notice) and require the subcontractors to do the same for each lower tiered subcontract.  If bonds are required for the project, the Act says that the public body "or other entity" shall require that the contractor and subcontractor bonds include a provision guaranteeing payment of prevailing wages.  The contractor or construction manager to whom the contract is awarded is required to post at the job site or provide a written notice to each worker of the prevailing wage rates applicable for each type of worker on the job.  


The public body is required to tell you what prevailing rates are for the project location; unless the public body does its own determination and has it approved by the Department of Labor (DOL), the DOL publishes rates for use.  Since the Act places the responsibility to pay prevailing wage on the contractor regardless of whether the public body properly determined the correct rates and notified the contractor, prudent contractors would do well to double check the rates provided by the public body against the DOL rates.  If there is a discrepancy, it is better to confirm in advance whether the public body has a legitimate reason for the difference or if it was a simple mistake.  


Contractors and each subcontractor are also required to maintain certified payroll records, submit them monthly to the public body, and maintain their own copy of the records to be available for inspection by the public body or the DOL upon seven business days' notice.  


Penalties for Noncompliance


In addition to paying "back wages," if the contractor was properly notified of the prevailing wage requirement but failed to comply, additional interest, penalties, and fines, can be assessed by the DOL.  Any contractor who "neglects to keep" accurate certified payroll records or who refuses to allow the inspection as required is guilty of a Class A misdemeanor.  Any laborer paid less than the required prevailing wage, or the DOL itself in such a case, has a right to sue for the difference between what was paid and what should have been paid, plus reasonable attorney's fees, costs, and punitive damages of 2% of the underpayment to the plaintiff and 20% of the underpayment to the DOL.  On a second or subsequent offense or action against the same contractor, the punitive damages increase to 5% to the plaintiff and 50% to the DOL.  In addition, the DOL is required to publish quarterly a list of contractors (and subcontractors) who have violated the Act.  The DOL sends a written notice to contractors who allegedly violated the Act on two separate occasions within the past five years.  These contractors then have 10 "working days" to request a hearing on the alleged violations, as to why they should not be included in the list.  Once published, the Act provides that no public works contract is to be awarded to anyone on the list, or to any "firm, corporation, partnership, or association in which [a listed contractor] has an interest until 4 years have passed from the date of publication of the list."  The Act also provides additional penalties for retaliation against any "whistle blowers."  


This is merely a summary of issues in the Act of interest to contractors; it is not comprehensive.  For more information, consult the DOL's website (their Frequently Asked Questions page is particularly helpful), or consult a licensed Illinois attorney.  If you are a member of a trade association, the association is also a great resource for you to obtain more information and answers to questions you might have.

Nate Hinch is an attorney and partner at the law firm of Mueller, Reece & Hinch, LLC.  He has offices at 404 N. Hershey Road, Suite C, Bloomington, IL 61704, and 809 Detweiller Drive, Peoria, IL 61615, and can be reached by phone at (309) 827-4055 and email at nhinch@mrh-law.com.