Local Government Law Bulletin October 23, 2015

“Prevailing Wage” in Peril

Prevailing wage laws require contractors on public construction projects to pay their labor no less than the prevailing wage and fringe benefits in the area. The “prevailing wage” is typically determined by reference to collective bargaining agreements for each construction labor classification. On June 30, 2015, Governor Snyder approved the Local Government Labor Regulatory Limitation Act (“the Act”). The Act took immediate effect. By its terms, the Act precludes the adoption of any new (after 12/31/2014) local (city, village, township, county, education institution, etc.), prevailing wage law.

The Act does not address whether local prevailing wage ordinances adopted prior to January 1, 2015, were valid exercises of municipal authority. That issue, however, is squarely before the Michigan Supreme Court in Associated Builders & Contractors v City of Lansing. On May 27, 2014, a panel of the Michigan Court of Appeals concluded that the enactment of a prevailing wage ordinance was a valid exercise of a city’s police power. The Michigan Supreme Court has agreed to consider an appeal of that decision to resolve whether or not a municipality has the authority to enact a prevailing wage ordinance. The case has been fully briefed and is awaiting argument. If the Michigan Supreme Court overturns the Court of Appeals’ decision, local prevailing wage laws adopted before December 31, 2014, will no longer be enforceable either.

Even if the Michigan Supreme Court determines that municipalities never had the authority to adopt prevailing wage ordinances, there is no question that the state government and the federal government have that authority. Both have exercised it. Congress passed the federal prevailing wage law, the Davis-Bacon Act, in 1931. The Michigan Legislature passed the Michigan Prevailing Wage Act in 1965. However, after fifty years of state public contracting under the Michigan Prevailing Wage Act, a repeal effort is nearing climax.

In May, Michigan Senate Bill 3, a one sentence repeal of the prevailing wage law, passed the Senate. Governor Snyder suggested he would not approve the repeal because he believes it would hamper his efforts to increase the number of skilled tradesmen in Michigan. The issue may be taken out of his hands. Senate Bill 3 stalled in the Committee on Commerce and Trade in the House while the group “Protecting Michigan Taxpayers” led a citizen-initiated legislative petition drive. In September, they submitted nearly 400,000 signatures for the petition. The Secretary of State is expected to finish reviewing the signatures soon. If sufficient valid signatures were obtained and a Board of Canvassers approves the petition, the Michigan Legislature has 40 session days to pass an act, which would avoid the petition going on the ballot. The governor would not have the opportunity to veto it. Otherwise, the petition would go on the November, 2016 ballot. Being attacked on so many fronts at the same time, it appears likely that “prevailing wage” is in peril in Michigan.

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