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Understanding prevailing wage laws is essential to success for many construction companies. Ensuring compliance with these important labor laws isn’t just about avoiding penalties; it’s about ensuring fairness, competitiveness, and the well-being of your workforce.
Prevailing wage laws set the standard for wage rates paid to workers on public construction projects. In Michigan, these laws aim to ensure workers are paid fairly for their skilled labor, preventing undercutting and promoting a level playing field for all construction businesses.
In this guide, we’ll explore everything Michigan construction businesses ought to know about prevailing wages, starting with the basics of the state’s prevailing wage laws.
We’ll also dive deeper into how prevailing wages are determined and enforced in Michigan, and we’ll examine the mechanisms that establish and maintain these wage standards.
Finally, we’ll offer practical advice and tips for compliance, ensuring your business complies with these laws and thrives by effectively navigating Michigan’s prevailing wage requirements.
Understanding Prevailing Wage Laws in Michigan
Understanding prevailing wage laws in Michigan involves grasping the basic definition, the legal framework, the purpose behind these laws, and the specifics of Michigan’s recent reforms that will come into effect in 2024.
Prevailing wage laws require workers on public construction projects to be paid wages and benefits comparable to what is typically paid in the region for similar work. This ensures fair compensation on projects funded by state or federal governments and promotes quality workmanship by ensuring skilled labor is compensated appropriately.
On March 24, 2023, Governor Whitmer enacted legislation to reinstate Michigan’s Prevailing Wage Act. Michigan’s new prevailing wage laws undo its previous Right-To-Work legislation, which allowed employees to decide whether or not to join a union.
This pivotal law – Public Act 10 of 2023 – became effective in March 2024. It mandates contractors and subcontractors pay the prevailing wage and benefit rates on most state-funded construction projects, and it represents a significant effort towards ensuring fair wages and benefits for construction workers engaged in public projects.
The video below offers a brief news-worthy overview of the new law:
Michigan’s new prevailing wage law includes specific mandates for posting wage rates at construction sites, maintaining accurate payroll records for a minimum of three years, and including specific language in contracts to ensure compliance with prevailing wage requirements. It also introduces mechanisms for complaints, investigations, and penalties to enforce compliance and protect workers’ rights.
The Michigan Department of Labor and Economic Opportunity, or DLEO, has the authority to administer, enforce, and conduct investigations into alleged violations of the Act.
Determining Prevailing Wages in Michigan
Since March 2022, Michigan has mandated all state contractors and subcontractors adhere to prevailing wage in Michigan standards for construction-related contracts overseen by the Department of Technology, Management & Budget.
In Michigan, prevailing wages are determined by DLEO for state-funded construction projects.
Rates are determined for each Michigan county by a detailed process that involves submitting and evaluating prevailing wages, benefits, and investments in training from legitimate employee and employer groups.
DLEO conducts comprehensive surveys and data analysis to ensure prevailing wages reflect current standards. This method ensures rates are set at the most granular level possible, sometimes extending to specific townships or cities.
Determinations are made before any state-funded construction projects are bid on and require all contractors to include a schedule of prevailing wage rates as part of their specifications for work. These rates must also be printed on bidding forms to ensure transparency and compliance.
To help give you a better idea of the average prevailing wage in Michigan, below are some prevailing wage ranges for some more common construction trades in Michigan:
Trade
Prevailing Wage Range
(Per Hour)
Carpenter
$32.44 to $74.87
Electrician
$45.69 to $71.28
Painter
$35.19 to $50.12
Boilermaker
$53.53 to $72.47
Bricklayer
$40.60 to $61.93
On top of this, certain fringe benefits can be applied toward payment of the prevailing wage rate under specific conditions.
These conditions include instances where fringe benefits are paid directly to a construction mechanic, or when contributions or payments for fringe benefits are made on behalf of a construction mechanic.
Fringe benefits provided per written contracts or policies – or those paid into a fund for a construction mechanic – also qualify here.
When a fringe benefit is not disbursed through an hourly rate, the corresponding hourly credit is determined by dividing the annual value of the fringe benefit by 2080 hours, or the equivalent of 52 weeks at 40 hours per week.
To help better illustrate this, the following table highlights the types of fringe benefits allowed and how hourly credits are calculated.
Fringe Benefit
Calculation Example
Hourly Credit
Vacation
40 hours x $14.00 per hour = $560 / 2080
$0.27
Dental Insurance
$31.07 monthly premium x 12 mos. = $372.84 / 2080
$0.18
Vision Insurance
$5.38 monthly premium x 12 mos. = $64.56 / 2080
$0.03
Health Insurance
$230.00 monthly premium x 12 mos. = $2760.00 / 2080
$1.33
Tuition
$500.00 annual cost / 2080
$0.24
Bonus
4 quarterly bonus/year x $250 = $1000.00 / 2080
$0.48
401k Employer Contribution
$2000.00 total annual contribution / 2080
$0.96
These benefits and their resulting hourly credits result in a total hourly credit of $3.65.
The range of fringe benefits that can be counted towards the prevailing wage rate includes other provisions such as sick pay, holiday pay, and insurance premiums for Accidental Death & Dismemberment.
Conversely, specific categories of payments and reimbursements do not qualify as contributions toward the state’s prevailing wage rate. This exclusion applies to legally mandated payments, including Unemployment Insurance, Workers’ Compensation Insurance, and FICA contributions encompassing Social Security and Medicare.
Reimbursable expenses, which cover a spectrum from clothing and uniform allowances to gas, travel time, meals, lodging, and per diem payments, are also not considered.
Any payments made to or on behalf of a construction mechanic that do not directly relate to wages or recognized fringe benefits — such as contributions to industry advancement funds or the provision of financial or material loans — are not credited towards the prevailing wage rate.
Compliance with Michigan Prevailing Wage Laws
Compliance with Michigan’s prevailing wage laws is a key thing for employers to keep in mind, especially those involved in state-funded construction projects.
Employer Responsibilities Under Prevailing Wage Laws
Employers in Michigan are required to adhere to several key responsibilities under the prevailing wage laws, including:
- Paying Prevailing Wages: Employers must pay workers the prevailing wage rates determined by DLEO for their specific trade in the geographic area of the construction project.
- Posting Wage Rates: Wage rates must be conspicuously posted at the job site for all workers to see.
- Maintaining Payroll Records: Employers must keep detailed and accurate payroll records for a minimum of three years, showing they’ve complied with prevailing wage rates. These records must be available for inspection by DLEO.
- Including Wage Clauses in Contracts: Future construction contracts must include specific language stating that wages and fringe benefits are not less than the established prevailing wage and fringe benefit rates.
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Penalties for Non-Compliance
Failure to comply with Michigan’s prevailing wage laws can result in severe penalties, including:
- Fines and Damages: Employers can be fined up to $5,000 for violations, with the possibility of additional penalties determined by DLEO. They may also be liable for the loss of wages and fringe benefits.
- Contract Termination and Liability: Employers could have their contracts terminated for failing to pay the prevailing wage and may be liable for damages resulting from their non-compliance.
- Anti-Retaliation Protections: Employers are prohibited from retaliating against employees who file complaints or participate in investigations regarding prevailing wage violations. Violations of this provision can lead to further penalties, including reinstatement or payment of back wages.
Resources and Tools for Compliance
DLEO provides several resources and tools to assist employers in complying with prevailing wage laws, including:
- Prevailing Wage Rate Determinations: DLEO publishes information about prevailing wages on its website, offering a clear guide for employers on the minimum wage rates for various trades across different regions.
- Compliance Assistance: DLEO offers guidance and assistance to employers to help them understand their obligations under the state’s current laws.
- Training and Seminars: Periodic training sessions and seminars educate employers and contractors about prevailing wage laws and compliance requirements.
- Online Resources: Websites like Michigan.gov and legislature.mi.gov provide access to the full text of prevailing wage legislation, detailed guidance on compliance procedures, and contact information for further assistance.
But compliance doesn’t just support legal requirements; it also contributes to maintaining high labor standards and protecting workers’ rights in the construction industry.
Navigating Prevailing Wage Requirements
Understanding your obligations and rights, whether as an employer or an employee, ensures fair compensation for workers and compliance for employers.
Understanding Your Rights As a Worker
- Know the Prevailing Wages: Familiarize yourself with the prevailing wage rates for your trade and the area where the project is located; DLEO provides this information.
- Monitor Your Pay: Ensure that your wages match or exceed the prevailing rates for your job classification on the project.
- Report Discrepancies: If you believe you are not being paid the correct prevailing wage, report the discrepancy to your employer or DLEO.
- Understand Anti-Retaliation Protections: Know that you are protected from retaliation for raising concerns about wage compliance, filing a complaint, or participating in an investigation regarding prevailing wage violations.
Maintaining Compliance As an Employer
- Stay Informed: Regularly check for updates on prevailing wage rates and ensure that your payroll reflects these rates for all applicable projects.
- Maintain Accurate Records: Keep detailed payroll records for at least three years, including hours worked, wages paid, and the classification of work performed, to demonstrate compliance.
- Post Wage Rates: Display the current prevailing wage rates prominently at the job site.
- Educate Your Team: Ensure your management and payroll staff know prevailing wage laws and compliance procedures.
The Role of Certified Payroll in Prevailing Wage Projects
In construction and other industries, certified payroll is essential in demonstrating compliance with prevailing wage requirements.
Certified payroll is a payroll record that must be submitted weekly for each contract working on a prevailing wage project. These records detail wages paid to each worker, their job classifications, hours worked, and any deductions or fringe benefits.
- Proof of Compliance: Certified payroll records serve as proof employers are paying the correct prevailing wages, and they must be signed to certify their accuracy.
- Submission and Review: Employers submit these records to the appropriate state agency, such as the DLEO, which reviews them to ensure compliance with prevailing wage laws.
- Public Record: Certified payroll records are considered public documents, which help protect workers' rights and ensure fair competition among contractors.
Employers can use software designed for certified payroll to streamline the process and ensure accuracy. Workers have the right to review certified payroll records to verify they’re being paid properly.
Navigating prevailing wage requirements successfully depends on employers’ diligence in maintaining compliance and workers’ awareness of their rights. Both parties contribute to a fair, competitive, and compliant construction industry in Michigan when they understand and properly fulfill their respective roles.
Challenges and Solutions
Michigan’s prevailing wage laws present unique challenges for employers and workers in the construction industry.
Common Challenges
For Employers
- Keeping Up with Regulations: Prevailing wage rates and regulations can change, making it difficult for employers to stay current.
- Administrative Burden: Compliance requires meticulous recordkeeping and payroll management, which can be burdensome for employers, especially small businesses.
- Understanding Classification of Work: Correctly classifying workers according to the type of work performed is vital, but can often be complex and confusing.
- Risk of Non-Compliance: Unintentional errors in wage calculation or recordkeeping can lead to penalties, fines, and damage to reputation.
For Workers
- Awareness of Rights: Workers may not be fully aware of their rights under prevailing wage laws, including specific wage rates they’re entitled to.
- Difficulty in Accessing Information: Finding accurate and up-to-date information on prevailing wage rates and classifications can be challenging.
- Fear of Retaliation: Workers may be hesitant to report violations due to fear of retaliation from employers.
Solutions and Best Practices
For Employers
- Regularly Review Regulations: Stay informed about changes in prevailing wage laws by subscribing to updates from relevant state departments or industry associations.
- Leverage Technology: Use software for certified payroll and compliance management to streamline recordkeeping and wage calculations.
- Educate Your Team: Ensure your staff, especially those involved in payroll and project management, are trained on prevailing wage laws and compliance requirements.
- Consult Experts: Consider consulting with legal experts or compliance specialists to review your practices and provide guidance.
For Workers
- Educate Yourself: Take advantage of resources provided by state departments, labor unions, or worker advocacy groups to understand your rights and the prevailing wage rates applicable to your work.
- Utilize Official Resources: Regularly check official state websites or contact the relevant state department for accurate and up-to-date information on prevailing wage rates.
- Report Violations Safely: Utilize channels provided by state agencies or worker advocacy groups to report violations confidentially and without fear of retaliation.
General Best Practices
- Open Communication: Employers should foster environments where workers feel comfortable raising concerns about wage compliance.
- Regular Audits: Conduct regular internal audits of payroll practices to ensure compliance with prevailing wage laws.
- Collaboration: Industry stakeholders, including employers, workers, state agencies, and advocacy groups, should collaborate to improve understanding and enforcement of the state’s prevailing wage laws.
Mastering Michigan’s Prevailing Wage Law
Key Takeaways
- Michigan's Prevailing Wage Act, reinstated in March 2024, mandates fair wage and benefit rates on most state-funded construction projects to ensure fair compensation and level the playing field among contractors.
- Prevailing wage determinations in Michigan are detailed processes involving the submission and evaluation of wages, benefits, and training investments by employee and employer groups, tailored to specific regions.
- Compliance with prevailing wage laws in Michigan requires employers to pay set wage rates, post these rates at job sites, maintain accurate payroll records for three years, and include specific language in contracts, with the Department of Labor and Economic Opportunity overseeing enforcement.
A natural next step for readers interested in a deeper understanding of prevailing wage projects would be to examine relevant case studies on prevailing wages in Michigan. These real-world examples provide practical perspectives on the challenges and solutions associated with prevailing wage compliance, actively highlighting best practices and lessons learned from other projects.
For even further reading or resources on compliance, we’ve published related articles on our blog, such as our guide to certified payroll, and other articles you can easily find in the navigation menu below this article.
Articles, guides, and resources from labor departments, employment law experts, and industry associations can offer comprehensive insights into Michigan’s prevailing wage laws and updates on legislation and enforcement practices.
Staying informed and proactive in compliance efforts is key to leveraging the full benefits of Michigan’s prevailing wage laws for all construction and field services industry stakeholders.
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