Recent changes to the Illinois Prevailing Wage Act: What you need to know when bidding and contracting public projects

Contractors beware: the legislature and courts have widened the mouth and sharpened the teeth of the Illinois Prevailing Wage Act (the “IPWA”) in recent years. The range of projects falling under IPWA has expanded, and the penalties for noncompliance have increased.

The IPWA

The IPWA requires that contractors and subcontractors pay no less than the “prevailing wage” to laborers, mechanics and other workers on public works projects. Prevailing wages include hourly pay and fringe benefits and are determined based on the locality for similar work performed.

Recent Developments

Public Body/Public Works

Recent case law suggests that even private entities can be “public bodies” covered under the IPWA. These decisions cited the IPWA language in defining a public body as “any institution supported in whole or in part by public funds.”[1] In these cases, the developers were private entities which are at least partially financed through public funds (loans, bonds, etc.). As such, you cannot assume that a privately developed project is not covered by the IPWA. Contractors should take care to determine all project financing sources to determine whether the IPWA is triggered.

Likewise, the IPWA was expanded in 2010 to include in the term “public works” any project (construction or demolition) paid for wholly or in part by public funds or with the assistance of public funds such as bonds or grants. Again, contractors must be keenly aware of a project’s financing. Even a small percentage of public fund assistance would trigger IPWA coverage.

Notice Requirements

Public bodies are required to provide written notice to contractors that a project is subject to the IPWA. If a public body fails to do so, it would be liable for any interest, penalties and fines resulting from the contractor’s failure to pay the prevailing wage. However, the contractor would remain responsible for any back wages short of the prevailing wage. Likewise, contractors are required to provide the same written notice to subcontractors. Failure to do so would make the contractor liable for any interest, penalties or fines. However, back wages and prevailing wages would remain the responsibility of the subcontractor.   

The Illinois Department of Labor suggests the following language for notice pursuant to the IPWA:

This contract calls for the construction of a “public work,” within the meaning of the Illinois Prevailing Wage Act, 820 ILCS 130/.01 et seq. (“the Act”). The Act requires contractors and subcontractors to pay laborers, workers and mechanics performing services on public works projects no less than the current “prevailing rate of wages” (hourly cash wages plus amount for fringe benefits) in the county where the work is performed. The Department publishes the prevailing wage rates on its website at http://www.state.il.us/agency/idol/rates/rates.HTM. The Department revises the prevailing wage rates and the contractor/subcontractor has an obligation to check the Department’s web site for revisions to prevailing wage rates. For information regarding current prevailing wage rates, please refer to the Illinois Department of Labor’s website. All contractors and subcontractors rendering services under this contract must comply with all requirements of the Act, including but not limited to, all wage requirements and notice and record keeping duties.

Increased Penalties

Recent changes to the IPWA enacted in 2012 now impose criminal penalties on contractors and public bodies for IPWA violations, such as filing false certified payrolls. In addition, willful failure to create, keep, maintain or produce required IPWA documents to law enforcement authorities is a misdemeanor, as is a willful failure to comply with any provisions of the IPWA.    In addition to potential criminal liability, contractors can be automatically and immediately debarred from participating in public works projects for four years. These changes make accurate record keeping and overall compliance all the more important for contractors. Staff responsible for payroll and record keeping should be made aware of the IPWA’s requirements for record keeping and disclosure.   

Conclusion

Whether public works projects are the lifeblood of your business or just a small portion of your overall revenue, knowledge and understanding of the IPWA is paramount. Recent changes in the law indicate that more projects will fall under the IPWA, and violations, whether willful or not, could cause widespread damage to your business.   

For over 25 years, Chuhak & Tecson has advised companies, from multi-national corporations to closely held corporations, on business and compliance matters. We would be happy to discuss any IPWA compliance concerns your company may have or any other issue your business may encounter.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client Alert authored by: Francisco E. Connell