What is the difference between Prevailing Wage Act and Davis-Bacon Act?
Prevailing Wage requires employers working on Michigan state-funded projects to pay employees on those projects wages and fringe benefits similar to union-level wages and benefits. This applies to both contractors and subcontractors. With the exception of lease build-outs, if a project greater than $50,000 involves employing construction mechanics (e.g., asbestos, hazardous material handling, boilermaker, carpenter, cement mason, electrician, office reconstruction and installation, laborer including cleaning debris, scraping floors, or sweeping floors in construction areas, etc.) and is sponsored or financed in whole or in part by State funds, state contractors must pay prevailing wage.
Here are some helpful links:
The Michigan Department of Technology, Management, and Budget Frequently Asked Questions link (Please note the reference to year 2022 is the latest on this site)
Michigan Labor and Economic Opportunity - Bureau of Employment Relations - Wage and Hour Division website has additional information on prevailing wage requirements
The Davis-Bacon Act requires the payment of prevailing wage rates, which are determined by the US Department of Labor (DOL), to all laborers and mechanics on federal government construction projects in excess of $2,000. Generally, Michigan’s minimum wage rates exceed the DOL wage rates. Here is a link to the Davis-Bacon Act and Frequently Asked Questions.
The Prevailing Wage Act is ENROLLED HOUSE BILL No. 4007 now known as Act No. 10 Public Acts of 2023.
It requires prevailing wages and fringe benefits on state projects; to establish the requirements and responsibilities of contracting agents and bidders; to make appropriations for the implementation of this act; and to prescribe penalties.
Sec. 2. (1) Every contract executed between a contracting agent and a successful bidder as contractor and entered into pursuant to advertisement and invitation to bid for a state project which requires or involves the employment of construction mechanics, other than those subject to the jurisdiction of the state civil service commission, and which is sponsored or financed in whole or in part by the state shall contain an express term that the rates of wages and fringe benefits to be paid to each class of mechanics by the bidder and all of its subcontractors, shall be not less than the wage and fringe benefit rates prevailing in the locality in which the work is to be performed. Contracts on state projects which contain provisions requiring the payment of prevailing wages as determined by the United States Secretary of Labor pursuant to 40 USC 3141 to 3148 or which contain minimum wage schedules which are the same as prevailing wages in the locality as determined by collective bargaining agreements or understandings between bona fide organizations of construction mechanics and their employers are exempt from the provisions of this act.
(2) A contractor or subcontractor shall pay to its construction mechanics wages and fringe benefits at the rates required under an applicable contract for a state project.
What does the Prevailing Wage law mean?
a. Michigan has reinstated its prevailing wage law, which requires the payment of wages to employees working on state-funded projects at the “prevailing wage in the locality.” This requirement was previously in place from 1965 to 2018.
b. The “prevailing wage” is a level set by the state that is similar to the union-level wages and fringe benefits that all employers performing state-funded projects in the locality are required to pay to employees. State-funded projects include the construction, alteration, repair, installation, demolition, or improvement of public buildings, schools, works, bridges, highways, or roads.
c. The prevailing wage requirement will apply to contracts entered into or bids made after the law goes into effect (90 days after the end of the current legislative session, which is expected to be mid to late March 2024). Contracts that require payment of prevailing wages established by the U.S. Secretary of Labor or which contain minimum wage schedules as set forth in local collective bargaining agreements or understandings between bona fide organizations of construction mechanics and their employers are exempt from the provisions of this act.
d. After the law is in effect, the Commissioner of the Michigan Department of Labor and Economic Opportunity will be responsible for establishing the prevailing wage rates for all classes of employees required to perform a state-funded construction project prior to accepting bids from contractors.
e. Contractors awarded a project will be required to post the prevailing wages at the construction site and maintain accurate records of the actual wages and benefits paid to employees.
f. Contractors that fail to pay prevailing wages may have their contract terminated, be required to pay any excess costs incurred by the state for contracting with a new employer, and be fined up to $5,000.
g. Contractors and their subcontractors are jointly and severally liable for costs associated with a violation.
h. Contractors are also prohibited from discharging or discriminating against a skilled or unskilled mechanic, laborer, worker, helper, assistant, or apprentice working on a state project who reports or was about to report a violation or suspected violation.
What is the Davis-Bacon Act?
a. The Davis-Bacon Act requires the payment of prevailing wage rates, which are determined by the US Department of Labor (DOL), to all laborers and mechanics on federal government construction projects in excess of $2,000.
b. The act is named after its sponsors, James J. Davis, a Senator from Pennsylvania and a former Secretary of Labor under three presidents, and Representative Robert L. Bacon of Long Island, New York. The Davis-Bacon act was passed by Congress and signed into law by President Herbert Hoover on March 3, 1931.
c. In Michigan as of January 2022, a contractor must pay all covered workers at least $11.25 per hour (or the applicable wage rate, if it is higher) for all hours spent performing on a federal government construction contract.
If you have further questions please contact your advisor at FMD.