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Can Prevailing Wages Prevail in Light of State Law Prohibitions?

Jun 5 | 2019  by

By Beth Florkowski of Fausone Bohn, LLP posted in Employment Law on Wednesday, June 5, 2019.

Brandon Grysko, Esq.

Effective June 2018, Michigan no longer requires prevailing wages in government contracts. Public Act 171 of 2018 repealed Michigan’s Prevailing Wage Act (the “Act”). Under the now-repealed Act, many government contracts had to include provisions that workers would be paid fringe benefits and wages in line with workers in the locality where the contract work was to be performed. See 166 PA 1965, ยง2.

However, in 2018, a voter-initiated petition repealed the Prevailing Wage Act. Put simply, there is no longer a state mandate requiring prevailing wages. Many local governments, though, had their own prevailing wage ordinances, which were unaffected by the repeal. But are local, prevailing-wage policies legal?

In order to understand the issue, it is best to review it chronologically. In 1965, Michigan passed the Prevailing Wage Act, which applied to projects using state funds. Since that time, many cities and other local governments mirrored state law and required prevailing wages for local projects, even ones not using state funds. In 2012, the Associated Builders and Contractors sued the City of Lansing for its prevailing wage ordinance. The Association felt that the City did not have the authority to require prevailing wages on local projects. This case was a battle that went all the way to the Michigan Supreme Court-but not until 2016.

Meanwhile, before the Supreme Court had its say, the Michigan legislature passed Public Act 105 of 2015, the Local Government Labor Regulatory Limitation Act, MCL 123.1381 et seq. This law expressly prohibits local governments from passing or enforcing prevailing wage ordinances or policies. MCL 123.1386. Ironically, the legislature saw fit to include the following introductory phrase: “This act is not intended to be construed to impact the reasoning or outcome of pending litigation in any way, for or against any particular legal position.”

The legislature’s disclaimer must have had the intended effect, because the Supreme Court, in 2016, upheld Lansing’s authority to enforce its prevailing-wage ordinance. Associated Builders & Contrs v City of Lansing, 499 Mich 177, 189 (2016). The Court reasoned that municipalities have broad powers to regulate matters of “municipal concern” under the State Constitution. Id. at 188 n.26, 191. Thus, in the absence of any law to the contrary, Lansing was well within its power to enforce a prevailing wage ordinance.

But remember, the Court relied on the state of the law at the time the case arose in 2012-before PA 105 was enacted, at which time, there was no state law prohibiting prevailing-wage ordinances. In other words, the 2016 court ruling was only relevant to contracts entered into before PA 105 was enacted.

Despite the clear state law to the contrary, some local governments have not updated their contracting policies. These entities are at increased risk for litigation. For example, this situation recently arose in Muskegon County, where Requests for Proposals (RFPs) still require that workers be paid prevailing wages and fringe benefits. The County failed to remove the prevailing-wage requirement and will soon be embroiled in litigation with the Associated Builders and Contractors, who claim that it is illegal for a local governmental entity to interfere with a company’s private employment relationships.

Despite the roundabout history, it is quite clear that local prevailing wage ordinances are prohibited by state law. Cities that do not update their ordinances, policies, and requests for proposals will continue to face increased risk of litigation -all on the taxpayers’ dime.