Contractors working on government-funded or "public" projects must be aware of the legal implications of not following the wage requirements of applicable federal and state law. The purpose of such laws is to ensure that local contractors are protected from "foreign" contractors traveling to their geographic area and undercutting the local wage levels on public work contracts.
The federal Davis-Bacon Act, enacted in 1931, requires that, on any government project in excess of $2,000 for construction, alteration or repair (including painting and decorating) of public buildings or public works, laborers and mechanics be paid the local prevailing wage and fringe benefits. Federal prevailing wage law, most commonly referred to as the Davis-Bacon Act and its related federal laws, covers a variety of federally funded construction projects and services such as work on military bases and on the premises of U.S. Postal Service offices. This can include instances in which federal agencies assist construction projects with grants, loans, loan guarantees and insurance. State law counterparts to the federal prevailing wage scheme, including those in New Jersey, may be implicated as well on projects that are not federally funded.
The New Jersey Prevailing Wage Act covers projects to which the state or its political subdivisions is a party, or where the state pays for any project including those with governmental funding or for any participation where the work is done on "public lands." Not only are covered parties obligated to pay for covered work at rates set by the government (which are usually very high and include benefits provided under union trade collective bargaining agreements), but penalties for noncompliance with the Act can be substantial.
The New Jersey Prevailing Wage Act (Act) is applicable in all situations in which there is an agreement between a public body and a contractor to perform "public work," which includes projects paid for in whole or part out of public funds and work done on any property that is, at the time the contract is awarded, owned or leased to a public body (whether or not the work is paid for with public funds and whether or not the public body is a signatory to the contract). For lease arrangements, the public body must lease at least 55% of the property in question, or where there is an agreement for the property to be leased to a public body and, the portion of the property leased must measure more than 20,000 square feet. However, not all public work contracts require the payment of prevailing wage. Threshold amounts set by the statute dictate that for prevailing wage to be applicable, the total value of the project must exceed $15,444 for contracts awarded directly by municipal government or $2,000 for work done for or on the premises of any other public entity, including boards of education and municipal utility organizations.
Registration as an authorized public contractor is required for both contractors and subcontractors of all public work before engaging in the bidding process. A subcontractor may not be listed in a bid proposal unless at the time the bid is made the subcontractor is registered. Registration can be done annually, or biennially if a contractor (or subcontractor) meets certain criteria. The registrant will receive a Certificate of Registration as confirmation of their registration and authorization to work under the Act. Additionally, between the time the bid is made and the contract is awarded, the contractor is responsible for submitting Certificates of Registration for all subcontractors listed on the bid to the public entity that issued the request for bids. General contractors are ultimately responsible for the failure of their subcontractors to be properly registered and to maintain compliance with the Act.
The Act requires that every contract subject to prevailing wage clearly state that workers performing work under such contract will not be paid less than the prevailing wage rate and provide what those rates are (as designated by the State). The public contract must also state that if it is discovered that a worker on such project has been paid wages less than the prevailing wage rate, the public body or whoever they are leasing to may terminate the contractor's/ subcontractor's right to proceed with the contract, or part thereof, and proceed with the project, shifting any excess costs incurred for completion of the project occasioned by the violation onto the contractor/subcontractor. The Commissioner of the New Jersey Department of Labor periodically determines the prevailing wage rate in all cases except in instances where funds provided for the project "...are the subject of direct or indirect federal assistance other than federal exemption..." —in such instances the prevailing wage rate is determined in accordance with the Davis-Bacon Act (as referenced above).
Should a contractor and/or subcontractor violate the Prevailing Wage Act, they are subject to debarment from contracting with federal and /or state government entities. This means that they could potentially be banned from performing any public work within the state for a period of three years. All such decisions are made at the discretion of the Commissioner. This penalty is imposed either in addition to, or in lieu of, any financial administrative penalty to be assessed by the Commissioner for failure to pay workers the prevailing wage rate.
Employers who wish to work as a public contractor in New Jersey must be aware of the sometimes confusing interplay of federal and state prevailing wage laws. Since the penalties for non-compliance can be substantial, employers should seek guidance from legal counsel to avoid liability under applicable law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.