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On Wednesday, June 6, 2018, the Michigan Legislature repealed the State’s Prevailing Wage Law. Enacted in 1965, Michigan’s Prevailing Wage Law required that any construction firm securing state-funded projects pay laborers union-scale wages and benefits.
Proponents of the Prevailing Wage Law repeal claim that the Prevailing Wage Law inflated the bill on taxpayer-funded projects. Essentially, proponents argue that State and local governments stand to save millions of dollars by avoiding the payment of artificially inflated, above-market wages. These same proponents believe that the money likely to be saved by repealing the Prevailing Wage Law could be used to fund more projects for more workers.
However, in reality, the repeal of the Prevailing Wage Law will likely lead to lower quality work in the State because unions are currently providing training and apprenticeships for skilled trade workers and may not have the means to do so in the future without the Prevailing Wage. Consequently, the crucial shortage of skilled trade workers in Michigan will only grow with the repeal.
Before its repeal, the State’s Prevailing Wage Law assured that laborers were paid fairly for the work performed. Specifically, the Prevailing Wage Law covered all government construction projects, which included:
“new construction, alteration, repair, installation, painting, decorating, completion, demolition, conditioning, reconditioning, or improvement of public buildings, schools, works, bridges, highways, or roads” that was “sponsored or financed in whole or in part by the state (of Michigan).”
Michigan’s Prevailing Wage Law required the Department of Labor (“DOL”) to set the “prevailing wage and fringe benefits” rate for laborers by reviewing the “rate that prevail[ed] on projects of a similar character in the locality under collective agreements or understandings between bona fide organizations of construction mechanics and their employers.”
The prevailing wage likely became whatever the local unions had negotiated for their members, regardless of whether the contractor who performed the work was a union employer.
The Michigan Legislature voted to repeal the Prevailing Wage law after a group of Michigan citizens affiliated with the Associated Builders and Contractors Organization sponsored an initiative to either get the Prevailing Wage law repeal on the November 6, 2018 general election ballot or to a vote by the Michigan Legislature.
In an effort to circumvent any veto by Governor Rick Snyder of the repeal by ballot initiative, the group amassed nearly 383,000 signatures. Michigan’s Board of Canvassers certified that 262,736 of the nearly 383,000 signatures collected were from valid registered voters—enough for a direct vote by the Michigan Legislature.
The repeal took effect on June 6, 2018. Since the repeal was generated in response to a petition initiative with sufficient valid signatures to place the matter on the ballot if the Legislature did not act, Governor Rick Snyder cannot veto the repeal bill and does not even need to sign it for it to take immediate effect. Consequently, the repeal took effect immediately following the affirmative vote by the Michigan Legislature.
Although the repeal took effect on June 6, 2018, it will not impact any contract for state-funded work entered into prior to June 6, 2018. The repeal will only impact new contracts for state-funded projects entered into on or after June 6, 2018.
The State’s repeal of its Prevailing Wage Law does not impact the Federal Davis-Bacon Act, which requires that contractors pay laborers a minimum amount based upon the local prevailing wage for all contracts involving federal projects in excess of $2,000 to which the government is a party.
The State Legislature’s repeal of the Prevailing Wage Law likewise does not impact the Fair Labor Standards Act, which establishes minimum wage, overtime pay, record-keeping, and youth employment standards affecting employees in the private and public sectors. In addition, states are still required to pay laborers the prevailing wage on certain contracts for which the state receives federal funding, such as contracts for highway construction.
Contracts entered into under any of the above three circumstances will not be affected by the State’s repeal of the Prevailing Wage Law.
Several municipal governments have enacted prevailing wage laws similar to that which was repealed by the Michigan Legislature. The repeal of Michigan’s Prevailing Wage Law will not impact the validity of local prevailing wage requirements.