Gary Frueh: Need for prevailing wage

Posted by National Alliance for Fair Contracting on

POSTED ON JULY 1, 2018
Gary Frueh – Guest Columnist

There is a lot of discussion lately on prevailing wage. It is important to understand more about prevailing wage. Wages are set for areas according to living standards. You wouldn’t want to pay construction wages based on New York City or Los Angeles in Lima, Ohio. Many different entities do this, including health care providers. It just sets wages prevalent to an area.

Does prevailing wage, tend to raise wages some? It sets standards for an area. Training programs that assure work being done is both accurate and efficient under prevailing wage. Otherwise, it becomes an item to undercut the bidding process.

Let’s get to the heart of the issue. To say work done is better or worse under prevailing wage needs background.

A past study out of the University of Utah prepared for the Kansas State Senate Labor and Industries Committee stated these facts when prevailing wage was removed in Kansas:

* Wage incomes in Kansas construction fell 10%. Employer pension and health insurance contributions fell 17%

* Construction workers covered by collective bargaining in Kansas received health insurance and employer contributions, only 10% of workers in open shop received pension and only 4% received health insurance from their employer.

* Apprenticeship training in Kansas construction fell 38% after repel. Minority apprenticeships fell by 54%.

* Serious injury rates in Kansas construction rose by 21%

* The projected gain from repel a 6% to 17 % savings on state construction costs failed to materialize.

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Why does prevailing wage make sense. It establishes a wage scale that is harder to manipulate and consistent with living costs of an area. Think of it this way. All our State Legislators are paid a specific wage. While the cost of living in Cleveland is much higher than Lima the legislator is paid the same. The taxpayer is bearing the burden of paying one too much or one not enough. In any case a prevailing wage scenario might fit their circumstance very well.

There are good reasons to keep prevailing wage laws in protecting the consumer, taxpayers and the communities from bearing the burden of increasing taxes on its residents to make up for losses incurred as past factual studies on prevailing wage have shown.

(Read More)

Opinion: Michigan’s prevailing wage repeal will hurt workers

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Sean McGarvey and Doug Maibach
June 30, 2018

Michigan’s Mackinac Center for Public Policy keeps promoting the Michigan Legislature’s repeal of prevailing wage protections without considering the latest facts. One of Mackinac’s recent articles calls on the federal government to take a cue from Michigan and advance an effort to repeal federal prevailing wage protections.

Prioritizing ideology over evidence, it doesn’t cite the most advanced economic research on prevailing wage laws, fails to include industry experts, and, even worse, ignores the accounts of construction workers, the building trades unions and high-road contractors who readily pay prevailing wages – the people most impacted by the Legislature’s decision.
If Mackinac had done its research, it would find that there is no statistical relationship between prevailing wage laws and contract costs. In any industry, an employer can reduce labor costs by reducing turnover and using competitive, fair wages to attract and retain the industry’s most productive workers.

Mackinac claims that cutting “inflated wages” for blue-collar construction workers saves taxpayer dollars or lowers costs on a given project, but this obscures the fact that the money will simply be absorbed by other white-collar participants in that same construction project – whether it be the architect, engineer, Wall Street financiers, insurance carriers or project suppliers. Interestingly, these other participants’ wages are never accused of being unfair or inflated.

Construction labor accounts for about 20 percent of a typical project’s overall cost, and Mackinac says the repeal will cut project costs by 15-20 percent. So, following Mackinac’s logic, the construction workforce would work for nothing.

Without prevailing wage protections, responsible contractors must increasingly compete against “low road” contractors who frequently fail to invest in meaningful training and do not offer health and retirement benefits for their workers. The reckless market this creates diminishes incentive, in the form of investments in wages, benefits and training, for both the building of human capital in the construction industry and the retention of human capital over the long run.

Ultimately, this leads to the erosion of community wage and benefit standards, shoddy work and unsafe work sites, and less young people, women, communities of color and veterans joining the skilled trades.

(Read More)

GOV. HICKENLOOPER SIGNS EXECUTIVE ORDER TO IMPROVE PAYROLL AND WORKER CLASSIFICATION IN CO CONSTRUCTION INDUSTRY (CO)

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Office of the Governor
June 5, 2018

DENVER – Wednesday, June 6, 2018 – Gov. John Hickenlooper has signed an executive order creating a joint task force including employer and employee groups to better address payroll and worker misclassification in Colorado’s construction industry.

Misclassification of employees as independent contractors and other labor law violations disadvantage both law-abiding construction contractors and construction workers in Colorado. Some labor brokers within Colorado’s construction industry have been found to have purposefully misclassified workers to avoid paying unemployment premiums and payroll taxes.

“Law-abiding companies and workers are being undercut by those who skirt the law in Colorado,” said Governor John Hickenlooper. “This task force will bring all parties together to find the right solutions to root out any illegal labor activity in our state.”

“Payroll fraud in the construction industry hurts workers and honest businesses,” said Randy Thornhill, Executive Secretary-Treasurer, Southwest Regional Council of Carpenters. “The first step in tackling this issue is evaluating current enforcement practices. With this executive order, the governor’s commitment to building a better economy is clear. His leadership on these issues will lead to a cleaner industry and safer workplaces.”

The Joint Enforcement Task Force on Payroll Fraud and Employee Misclassification in the Construction Industry will coordinate with relevant state agencies to share information and streamline investigations around alleged misclassification of workers. The task force also will coordinate with business, labor and community groups.

“We are going to hit the ground running to convene key stakeholders in order to ensure across the board compliance with Colorado’s labor and employment laws, particularly in the commercial construction industry,” said Sam Walker, executive director of the Colorado Department of Employment and Labor. “Consistent and effective enforcement of our laws and regulations is a win-win for law-abiding companies and their workers. By collaborating with the other state agencies on this task force, as well as with workers and contractors within the industry, I know we’ll be able to identify areas for improvement so that our State’s labor and employment protections work as they should throughout Colorado’s booming construction sector.”

(Read More)

New Jersey Passes Laws on Sick Leave and Pay Equity; Will Tackle Worker Misclassification (NJ)

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The National Law Review
Wednesday, May 9, 2018

A little more than 100 days into his tenure, New Jersey Governor Phil Murphy has made it clear that employment is one of his top priorities. In the past two weeks, Gov. Murphy has signed a Paid Sick Leave and an Equal Pay bill into law and established a Task Force on Employee Misclassification.

Paid Sick Leave

The New Jersey Paid Sick Leave Act was signed into law on May 2, 2018, and takes effect on October 29, 2018. It will require New Jersey employers of all sizes to offer their employees one hour of sick leave for every 30 hours worked.

…

Task Force on Employee Misclassification

On May 3, 2018, Gov. Murphy signed an executive order establishing a Task Force on Employee Misclassification. Misclassification is when workers are incorrectly labeled as independent contractors rather than employees. Workers who are incorrectly classified frequently are not provided benefits and other protections available to employees, such as minimum wage, overtime compensation, family and medical leave, unemployment insurance, and workers’ compensation.

The New Jersey Task Force will be charged with a number of responsibilities to combat employee misclassification, including:

  • Examining and evaluating existing misclassification enforcement by executive departments and agencies
  • Developing best practices by departments and agencies to increase coordination of information and efficient enforcement
  • Developing recommendations to foster compliance with the law, including by educating employers, workers, and the public about misclassification
  • Conducting a review of existing law and applicable procedures related to misclassification

(Read More)

Delaware legislature strikes down county-by-county Right to Work efforts (DE)

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Delaware House passes bill stalling the state’s anti-labor movement

(PR NewsChannel) / June 26, 2018 / DOVER, Del.

Last week, Delaware legislators passed a pivotal bill stopping the state GOP’s Right to Work movement in its tracks.

Approved by a vote of 25-13 along party lines, the Delaware House voted to guarantee the right of private employers to enter into labor deals that require their employees to join a union. The bill effectively blocks the GOP effort to pass the controversial legislation on a county-by-county or town-by-town basis.

“The Governor strongly believes that one of the best ways to stand up for Delaware’s workers is to protect their right to organize, earn a good living and support their families,” said Jon Starkey, spokesman for Gov. John Carney.

Labor supporters agree, citing the number of states suffering under Right to Work as reason why legislators in Delaware made the right decision.

“Implementing Right to Work is attempting to put out a fire with gasoline,” said Richard Dalton, business manager for the International Union of Operating Engineers (IUOE) Local 18 in Ohio. “Business owners will prosper while workers remain unchanged, possibly even worse off than before.”

Studies conducted over the last decade have repeatedly shown Right to Work to have little impact on a state’s economy.

In 2011, the Economic Policy Institute (EPI) conducted a multi-part study. Their first major finding was that, on average, full-time workers in Right to Work states earned 3.1% less than those in unionized states. That same year, New Hampshire and Indiana’s legislature considered implementing a new law. Indiana passed Right to Work while New Hampshire didn’t receive enough support. Although New Hampshire’s economy was stronger from the start, Right to Work did nothing to close the performance gap with Indiana.

A study in 2017 expanded upon EPI’s research to find that Right to Work harms job growth and union performance as well.

(Read More)

Will ending union wages on Michigan public projects save money, or just lower pay? (MI)

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Lindsay VanHulle
June 12, 2018

Michigan Republicans last week narrowly repealed a 53-year-old state law that required contractors on public construction projects to pay union-rate wages and benefits.

…

To Democrats and union members in the building trades, who erupted in anger after the vote tally was read, repealing the prevailing-wage law was yet another GOP-sponsored attack on working people – at a time when many Michiganders still feel like a decade-long recovery hasn’t helped them.

…

The argument that repealing the law would make it harder to recruit people into the trades is one of a litany of criticisms offered by repeal opponents, who predict lower wages and no savings on state construction costs.

Will any of that happen in Michigan without prevailing wage?

Bridge asked two researchers, whose studies have been cited as evidence on both sides of the prevailing wage debate, to project what may happen in Michigan in the years ahead.

Frank Manzo IV is the policy director for the nonprofit Midwest Economic Policy Institute, an associate of the Illinois Economic Policy Institute. He has studied the effect of repealing prevailing wage, mostly recently in Indiana, and found it did not save money on construction projects and lowered worker wages. The group’s board of directors includes people who work primarily in the construction industry, including contractors and labor representatives.

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From your research, as a result of last week’s vote, what do you predict Michigan will look like five years from now?

Manzo: He said his group’s January study from Indiana found that repeal of that state’s “common construction law” in 2015 led to less-skilled workers in the field, more worker turnover, less productivity and lower wages.

Expect similar results in Michigan, he said.

“Any purported savings don’t materialize because productivity declines,” Matzo told Bridge.

…

(Read More)

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Seventh Circuit Revisits Contractor Misclassification

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Thursday, June 28, 2018
Hannesson Murphy

Courts in the U.S. have been grappling with the misclassification of independent contractors for more than 20 years. As our readers well know, there is no standardized test to determine whether a worker is a contractor. Various courts and government agencies all have adopted their own criteria. Fortunately, most of them overlap, but there can be critical differences in the factors and how they are applied.

In 2015, the Wage and Hour Division of the U.S. Department of Labor (DOL) firmly supported the “economic realities” test as part of a government sponsored misclassification initiative. While not breaking new ground by adopting the test, the DOL’s pronouncement did create somewhat of a splash at the time because it deliberately downplayed the relative importance of control over a worker – which previously had been viewed as the most important aspect of the contracting relationship. See Administrator’s Interpretation No. 2015-1 (July 15, 2015). In the years since its issuance, the DOL’s advisory opinion largely has been sidestepped by several tribunals charged with examining the issue in favor of their own well-worn standards.

A decision by the Seventh Circuit last week, Simpkins v. DuPage Housing Authority, appears to be the latest in that trend. In the case, Anthony Simpkins dutifully signed “independent contractor agreements” with the DuPage Housing Authority, in 2009 and again in 2012, to perform general labor, such as carpentry, maintenance, demolition and remodeling, on some vacant properties to get them ready for new occupants. This was a full time job, but provided no benefits and Simpkins was responsible for his own taxes. While the housing authority claimed he had the discretion on how to perform the job as he saw fit, the housing authority directed him on which jobs to perform and prioritized the order in which he would need to complete them. Simpkins objected to his status and repeatedly asked to be reclassified as an employee so he could get benefits, but his efforts were rebuffed.

After Simpkins was injured in a car accident, he filed suit to recover unpaid overtime and disability benefits under the FLSA, as well as under Illinois state law. The district court agreed with the housing authority that Simpkins was a contractor and granted summary judgment. On appeal, however, the Seventh Circuit reversed.

(Read More)

Simpkins v. DuPage Housing Authority, No. 17-2685 (7th Cir. 2018)

Register Now – 20th Annual NAFC Conference, August 19-22, 2018 – San Diego, CA

Posted by National Alliance for Fair Contracting on

June 2018

It’s our 20th Anniversary! Save the date and join NAFC at our next Annual Conference in sunny San Diego, CA. The Conference will be held at the Hilton San Diego Bayfront Hotel, in downtown San Diego. This year’s Conference will be jointly sponsored by the Center for Contract Compliance and will have a national as well as a California specific focus. The NAFC National Conference is attended by participants from across the nation, including representatives from labor organizations, responsible contractors, fair contracting compliance organizations as well as researchers, academics, attorneys and officials from federal, state and local governments.

Stay tuned for further information.

(Visit NAFC’s Conference Page)

(Download Joint Conference Registration Form)

Smart Cities Prevail Launches Multi-State Campaign On Prevailing Wage Laws

Posted by National Alliance for Fair Contracting on
TV and online effort will reach California and New Mexico

Source: Smart Cities Prevail
Wed, 23 May 2018, 16:21:14 EDT

SACRAMENTO, Calif., May 23, 2018 (SEND2PRESS NEWSWIRE) – Smart Cities Prevail today released a series of new TV advertisements on prevailing wage laws, part of a multi-state public information campaign launching in California and New Mexico.

“HT Tran” tells the story of an Iraq War veteran who came home after being wounded in combat to found the award winning general engineering firm Anvil Builders.

“I wouldn’t be alive today if all the guys I served with took shortcuts,” Tran says. “Taking care of workers doing dangerous and difficult jobs here at home is no different than taking care of soldiers in the army. Prevailing wage is an investment in well-trained local professionals who know how to get the job done right the first time.”

Research has shown that prevailing wage laws disproportionately impact veterans, because they work in construction at higher rates than non-veterans.

“Rebuilding America” highlights the important role that prevailing wage laws play in promoting local hiring and higher quality workmanship on schools, roads and other public projects. Research consistently shows that prevailing wage laws improve the economy and help generate more local middle-class jobs without increasing overall project costs.

“While the well documented economic and community benefits of prevailing wage have been long-validated by respected economists and earned these laws broad bi-partisan support, they are often not well understood by the public at large,” said Smart Cities Prevail spokesman Todd Stenhouse. “This campaign isn’t just about facts and figures – it’s about telling the story of what is at stake and who is really impacted by these laws. More often than not, it’s you or someone you know.”

Established in the 1930’s, prevailing wage laws establish the local market minimum wage on different types of skilled construction work. Typically, the wage includes a base wage, benefits and training contributions – based on surveys of workers performing similar jobs in the community.

(Read More)

NEW STUDY: Responsible Bidder Ordinances Promote Quality, Control Costs, and Provide Best Value for Taxpayers

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Date: May 22, 2018
Author: Jill Manzo

Responsible bidder ordinances (RBOs), which establish local construction standards on municipally funded public works, raise wages and reduce employee turnover according to a new study by the Midwest Economic Policy Institute(MEPI). As of May 2018, 40 Indiana counties, townships, cities, towns, school districts, and hospital districts have passed RBOs.

Nearly all governments award construction contracts to the lowest bidder, which can put pressure on contractors to cut corners on quality, wages, and safety. RBOs guarantee that contractors and subcontractors building public projects have proven track records of performance and legal compliance, adhere to local quality standards, and participate in USDOL-approved apprenticeship training programs.

Utilizing publicly-available data from the U.S. Census Bureau, the study examined county-level economic data on “heavy and civil engineering construction,” which includes the construction of public infrastructure such as highways, bridges, and parks. Overall, the researchers found that construction workers in 9 counties with RBOs are 1.6% less likely to leave or quit their jobs and construction workers earn about $500 more per month (or 8.3%) than their counterparts in jurisdictions without RBOs.

“By helping to raise incomes, reduce turnover, and boost productivity through apprenticeship training, RBOs help attract and retain the skilled construction workers that Indiana needs to build a 21st Century infrastructure,” said study co-author Jill Manzo. “RBOs can be a local solution to ensure that these vital projects are completed safely, on time, and on budget.”

MEPI’s analysis notes that RBO’s emphasis on quality and employment of higher-skilled workers provides additional safeguards for taxpayers, reducing the risk of design problems, cost overruns, change orders, and added safety risks.

(Read More)

(Executive Summary)

(Read Full PDF of Report Here)