Prevailing wages are the wages required to be paid on state-funded construction projects. Wage rates are certified once a year in both highway/heavy and commercial-type construction.
Minnesota's prevailing wage law (Minnesota Statutes 177.41 through 177.44) requires employees working on state-funded construction projects covered by law be paid wage-rates comparable to wages paid for similar work in the area where the project is located.
Who is covered by Minnesota prevailing-wage laws?
Any contractor or subcontractor performing work by contract in which state funds in whole or in part are involved must adhere to Minnesota prevailing-wage laws. Highway projects are enforced by the Minnesota Department of Transportation (Mn/DOT) and commercial projects are enforced by the Department of Labor and Industry (DLI). The certification in effect at the time the project is advertised (bids are asked for) applies for the duration of the project.
Prevailing wage must be paid and records must be kept to and for all laborers, workers and mechanics performing work on state-funded projects. This includes owners, supervisors, unskilled workers and trainees not in bona fide registered apprenticeship programs.
Why is it required?
A little history: The first prevailing-wage law governing minimum payments to laborers and mechanics on construction projects was passed in Kansas in 1891. Debate on the federal level began in 1898 and continued in 1927, 1928 and 1930. Rep. Robert Bacon, R-N.Y., introduced a prevailing-wage bill in 1927, but it did not pass until 1931. The U.S. Senate author was newly elected Sen. James Davis, R-PA., who had previously served as Secretary of Labor for nearly a decade.
How does prevailing wage work?
The original Minnesota prevailing-wage law required all state agencies to establish prevailing-wage rates for their building projects. The Department of Labor and Industry (DLI) was given the power to investigate complaints, collect survey data, define classes of labor for highway construction and determine state prevailing-wage rates. An amendment was passed in 1975, authorizing DLI to set the rates for all building and road construction and increased the penalties for noncompliance.
Wage rates paid for comparable work are certified by DLI as the prevailing-wage rates after the department conducts a survey of contractors, labor organizations and interested parties statewide. This information is furnished to entities covered by prevailing-wage laws that are letting contracts for inclusion in their bid specifications. A notice is also published in the State Register annually, indicating where copies of the certified rates may be obtained.
Wage rates are established for three types of construction:
highway/heavy -- construction and maintenance of highways, streets, airport runways, bridges, power plants, dams, wastewater treatment plants, water towers, high-voltage power lines and utilities;
commercial construction -- building projects exclusive of residential construction (separate wage certifications are issued for each area); and
residential construction -- all construction remodeling or repairing of single- or two-family homes and structures appurtenant thereto.
How are rates set?
State law requires each wage rate be based on the actual wage rates paid to the largest number of workers within each labor classification reported in the statewide survey.
An administrative law judge agreed that the calculation to be used is the mode or most frequently occurring wage rate. For example, if the survey data shows two bricklayers in a county earned $19.40 an hour, another earned $17.25 and another earned $22.67, the prevailing hourly wage rate would be $19.40.
If there is an equal number of workers with differing hourly wage rates, the rules state the highest rate paid becomes the prevailing-wage rate. For example, if one worker receives $14.90 an hour, another is paid $16.75 and another gets $15.35, the prevailing wage is $16.75 an hour.
To obtain the necessary database, the Department of Labor and Industry (DLI) mails surveys to all segments of the construction industry. The department recognizes 209 job classes common to the construction industry. These classifications are divided into six categories: laborers, special equipment, truck drivers, heavy-type equipment operators, commercial-type-equipment operators and skilled crafts.
In 2010, more than 20,000 requests for wage rates were mailed to public and private employers throughout the state.
The prevailing wage, as certified by the Department of Labor and Industry, is required by law to be posted in a conspicuous place by each contractor working on a state construction site.
How is prevailing wage enforced?
Authority to investigate complaints of prevailing-wage violations has been assigned to two state agencies. The Minnesota Department of Transportation (Mn/DOT) is the primary enforcing agency for all projects let out to bid for highway-related construction. All other investigations are conducted by the Minnesota Department of Labor and Industry (DLI) or individual contract officers representing project owners.
DLI is authorized to review payroll documents to determine compliance with prevailing-wage rate provisions for all state construction projects, including highway construction.
DLI administers prevailing-wage laws through the investigation of noncompliance complaints and on-site inspections of state-funded projects.
Contracting agencies are authorized and required to request and examine copies of payroll forms from contractors and subcontractors every 14 days. The penalty for nonpayment by contractors and subcontractors is a misdemeanor punishable by a fine of not more than $300, imprisonment of not more than 90 days or both. Each day a violation continues is a separate offense.
Contract officers who administer contracts without prevailing-wage compliance and contractors, subcontractors or agents who knowingly pay workers below prevailing wage, are subject to misdemeanor penalties. Repetitive violations are considered a separate offense, punishable by a maximum fine of $700, imprisonment for no more than 90 days or both. If a contract agency fails to incorporate the correct wage determination, the contracting authority shall be liable for making whole the contractor or subcontractor for any increases in the wages paid, including employment taxes and reasonable administrative costs based on the appropriate prevailing wage due to the laborers or mechanics working on the project.
Both state agencies have developed processes within their statutory authority to maximize compliance by all involved parties. While most contractors comply with agency orders to pay back-wages, project funds may be withheld by the contracting agency until compliance is achieved. If resolution cannot be made through the voluntary processes, an Order to Comply from DLI will result in the doubling of back-wages owed to the employees of the contractor. Contractors that have been found to repeat violations of the Prevailing Wage Act within a two-year time frame will find the amount of back-wages owed automatically doubled.
Minnesota Statutes 177.44 also states that anyone who forces an employee, by any kind of threat, to accept lower wages may be fined up to $1,000 and be imprisoned for up to one year. It further provides that any employee who knowingly allows the contractor or subcontractor to pay less than the prevailing wage or who gives up any pay due may be fined up to $40, jailed not more than 30 days or both. Each day a violation continues is a separate offense.
How can I file a complaint?
The Minnesota Department of Labor and Industry's (DLI's) Prevailing Wage Section accepts complaints involving nonpayment of prevailing wages for work performed under a contract funded in whole or in part with state funds. If any employee suspects he or she has not been compensated appropriately, the employee can complete the complaint form below and submit it to DLI's St. Paul office.
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