CONTRACTING AGENT; FRINGE BENEFITS                                         H.B. 4007:

                                                                  SUMMARY OF HOUSE-PASSED BILL

                                                                                              IN COMMITTEE

 

 

 

 

 

 

House Bill 4007 (as passed by the House)

Sponsor:  Representative Brenda Carter

House Committee: Labor

Senate Committee: Labor

 

Date Completed:  3-13-23

 


CONTENT

 

The bill would enact a new law to do the following:

 

 --   Require prevailing wages and fringe benefits on State projects.

 --   Prescribe the process by which the Department of Labor and Economic Opportunity (LEO) would have to establish prevailing wages and fringe benefits.

 --   Prescribe a penalty for a violation of the bill's provisions.

 

State Project Bids

 

Under the bill, every contract executed between a contracting agent and a successful bidder  as contractor and entered into pursuant to advertisement and invitation to bid for a State  project that required or involved the employment of construction mechanics, other than those subject to the jurisdiction of the State Civil Service Commission, and that was sponsored or financed in whole or in part by the State, would have to contain an express term that the rates of wages and fringe benefits to be paid to each class of mechanics by the bidder and all of its subcontractors could not be less than the wage and fringe benefit rates prevailing in the locality in which the work was to be performed.

 

Contracts on State projects that contained provisions requiring the payment of prevailing wages as determined by the United States Secretary of Labor under the Davis-Bacon Act, or that contained minimum wage schedules that were the same as prevailing wages in the locality as determined by collective bargaining agreements or understandings between bona fide organizations of construction mechanics and their employers, would be exempt under the bill. (Generally, the Davis-Bacon Act governs public buildings, properties, and works. The Davis-Bacon prevailing wage is a combination of the basic hourly wage rate and any fringe benefit rate listed for a specific classification of worker.) 

 

"Contracting agent" would mean any officer, school board, board or commission of the State, or a State institution supported in whole or in part by State funds, authorized to enter into a contract for a State project or to perform a State project by the direct employment of labor. "State project" would mean new construction, alteration, repair, installation, painting, decorating, completion, demolition, conditioning, reconditioning, or improvement of public buildings, schools, works, bridges, highways, or roads authorized by a contracting agent.

 

"Locality" would mean the county, city, village, township, or school district in which the physical work on a state project is to be performed.

 

"Construction mechanic" would mean a skilled or unskilled mechanic, laborer, worker, helper, assistant, or apprentice working on a State project but would not include executive, administrative professional, office, or custodial employees.

Prevailing Wages and Fringe Benefits

 

Under the bill, a contracting agent, before advertising for bids on a State project, would have to have LEO determine the prevailing rates of wages and fringe benefits for all classes of construction mechanics called for in the contract. A schedule of these rates would have to be made a part of the specifications for the work to be performed and would have to be printed on the bidding forms where the work was to be done by contract. If a contract were not awarded or construction undertaken within 90 days after the date of LEO's determination of prevailing rates of wages and fringe benefits, LEO would have to make a redetermination before the contract is awarded.

 

The Department would have to establish prevailing wages and fringe benefits at the same rate that prevailed on projects of a similar character in the locality under collective agreements or understandings between bona fide organizations of construction mechanics and their employers. These agreements and understandings could not be controlled in any way by either an employee or employer organization. If the prevailing rates of wages and fringe benefits could not reasonably and fairly be applied in any locality because no such agreements or understandings existed, LEO would have to determine the rates and fringe benefits for the same or most similar employment in the nearest and most similar neighboring locality in which agreements or understandings did exist. The Department could hold public hearings in the locality in which the work was to be performed to determine the prevailing wage and fringe benefit rates. All prevailing wage and fringe benefit rates determined would have to be filed with LEO and made available to the public.

 

Every contractor and subcontractor would have to keep posted on the construction site, in a conspicuous place, a copy of all prevailing wage and fringe benefit rates prescribed in a contract and would have to keep an accurate record showing the name and occupation of and the actual wages and benefits paid to each construction mechanic employed by it in connection with the contract. This record would have to be available for reasonable inspection by the contracting agent or LEO.

 

Under the bill, the contracting agent, by written notice to the contractor and the sureties of the contractor known to the contracting agent, could terminate the contractor's right to proceed with that part of the contract, for which less than the prevailing rates of wages and fringe benefits had been or would be paid, and could proceed to complete the contract by separate agreement with another contractor or otherwise, and the original contractor and its sureties would be liable to the contracting agent for any excess costs occasioned by the termination.

 

Any person, firm, or corporation or combination of these, including the officers of any contracting agent, who violated the bill's provisions would be guilty of a misdemeanor.

 

Under the bill, the provisions above would not apply to contracts entered into, or the bids made, before the bill's effective date.

 

PREVIOUS LEGISLATION

(Please note: The information in this summary provides a cursory overview of previous legislation and its progress. It does not provide a comprehensive account of all previous legislative efforts on the relevant subject matter.)

 

The bill would reenact a prevailing wage law that was repealed by an initiative petition adopted by the Michigan Legislature in 2018.

 

                                                                Legislative Analyst:  Tyler VanHuyse

 


FISCAL IMPACT

 

The bill would eliminate the misdemeanor penalty for violation of certain provisions in the Act. A violation of a misdemeanor when no penalty is specifically provided carries a sentence of up to 90 days' imprisonment, a maximum fine of $500, or both. The misdemeanor that the bill would eliminate does not specify a penalty; thus, the State could save on the cost of imprisonment but could lose revenue from fines. Fine revenue goes to fund local libraries.

 

Prison sentences of a year or less generally are served in a local jail. The local jail is reimbursed by the State on a per diem rate that ranges from $40 to $65 per day, depending on the custody level required. The elimination of the misdemeanor could result in a savings for the State of the aforementioned $40 to $65 per day of incarceration, per prisoner.

 

The loss in revenue for local libraries and potential savings for the State are indeterminate and would depend on the number of violations that would be averted under the bill.

 

                                                                       Fiscal Analyst: Joe Carrasco, Jr.

                                                                                           Cory Savino, PhD

                                                                                            Michael Siracuse

 

 

This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.