Indiana Repeals Common Construction Wage Act | Practical Law

Indiana Repeals Common Construction Wage Act | Practical Law

Governor Mike Pence recently repealed Indiana's Common Construction Wage Act (CCWA), which governed the determination of wages for most publicly financed construction projects. Indiana's repeal highlights the  current debate in several states about the efficacy of prevailing wage laws.

Indiana Repeals Common Construction Wage Act

Practical Law Legal Update 5-613-5585 (Approx. 3 pages)

Indiana Repeals Common Construction Wage Act

by Practical Law Real Estate
Published on 21 May 2015 • Indiana
Governor Mike Pence recently repealed Indiana's Common Construction Wage Act (CCWA), which governed the determination of wages for most publicly financed construction projects. Indiana's repeal highlights the current debate in several states about the efficacy of prevailing wage laws.
On May 6th, 2015, Governor Mike Pence signed into law House Enrolled Act 1019, which repeals Indiana's Common Construction Wage Act (H.B. 1019, 119th Gen. Assemb., Reg. Sess. (Ind. 2015)). Indiana's decision highlights the debate in several states about the efficacy of prevailing wage laws for public construction projects. The repeal becomes effective July 1, 2015.

Prevailing Wage Laws

A prevailing wage law allows a board or agency to determine the hourly rate paid to construction workers for public construction projects based on what is typically paid for that particular type of work in a given location. The prevailing wage requirements take effect when the cost of the project exceeds a certain threshold. Workers on public projects in states that have prevailing wage laws are paid according to higher union scales.
Supporters of repeal of prevailing wage laws emphasize that paying workers according to a union scale artificially increases wages, which augments the cost to taxpayers. Proponents of repeal also cite the potential cost savings by letting the free market determine pay scales with competitive bidding.
Opponents argue that repeal of prevailing wage laws may lead to:
  • Jobs being filled by low paid, out-of-state workers.
  • The use of unskilled workers, which may increase risks at dangerous job sites.
  • Low quality or defective work.

Repeal of the Common Construction Wage Act

The repeal of Indiana's Common Construction Wage Act (CCWA) prohibits public agencies from establishing a wage scale or wage schedule for public works projects awarded after July 1, 2015, unless required under state or federal law. The repeal does not affect construction projects receiving federal funds, which must pay a prevailing wage under the Davis-Bacon Act (40 U.S.C. § 3141).
The bill adds several new requirements for public works construction contractors, including that contractors:
  • Contribute at least 15% of the contract price in any combination of work, materials or services (down from 20% under the CCWA).
  • Cannot pay employees in cash.
  • E-verify each employee on a project.
  • Certify their compliance with the Fair Labor Standards Act and the Indiana Minimum Wage Law.
  • May have to implement a drug testing program.
  • Maintain required levels of general liability insurance.
The bill also raises the monetary threshold for compliance with the public works requirements to $300,000 from $150,000 under the CCWA, exempting many small scale projects from compliance.

Prevailing Wage Laws in Other States

The following states have recent legislative action regarding their prevailing wage laws:
  • Michigan. On May 14, 2015, the Michigan Senate passed three bills that would repeal its prevailing wage laws. However, Governor Rick Snyder has indicated that he will veto the bills.
  • Wisconsin. On May 7, 2015, a bill introduced to repeal Wisconsin's prevailing wage law failed to gain sufficient votes to survive review by the Senate Committee on Labor and Government Reform.
  • Nevada. On March 6, 2015, Governor Sandoval signed Senate Bill 119 into law, which exempted construction projects for school districts, charter schools and the Nevada System of Higher Education from Nevada's prevailing wage requirements (S.B. 119, 78th Reg. Sess. (Nev. 2015)).
  • West Virginia. On March 12, 2015, Governor Tomblin signed Senate Bill 361 into law, which adjusts how the prevailing wage is calculated and allows input from economists at local universities (S.B. 361, 2015 Reg. Sess. (W. Va. 2015)).
  • Ohio. In 1997, the Ohio state legislature provided an exemption from its prevailing wage law for school district construction. It also commenced a study during the exemption period that found that construction projects saved nearly 10.7% with no apparent decrease in construction quality. These findings are often cited by proponents of repeal.
Currently, 18 states do not have prevailing wage laws. Those states are Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Utah and Virginia.

Impact

Construction attorneys in Indiana should be aware of the July 1st effective date and ensure that clients are following the requirements of the newly enacted bill.
Construction counsel should continue to monitor the trend of repealing, or exempting certain public works from, prevailing wage laws.