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Prevailing Wage Act It’s That Time of Year Again! Fringe and Overtime

Peter M. Follenweider

As another bleak, cold and snowy Chicago winter melts into an all too brief Spring, it is time to get outside and start those “Public Works Projects” again. Therefore, a brief refresher regarding the applications of the Illinois Prevailing Wage Act (“Act”) seems particularly appropriate. This article will focus on paying of wages, fringe and overtime.

Before discussing the wages, fringe benefits and overtime required by the Act, it is important to understand which projects are covered under the Act. The Act applies only to “Public Works Projects” that improve, build, demolish or alter property or equipment owned or operated by the government. In other words, any contract for public works that involves work for the State of Illinois or any governmental subdivision such as the Illinois Depart of Transportation, municipalities or school districts is covered under the Act. The Act does not cover employers who are engaged in private sector work or even that work performed for the federal government.

Wages and Fringe

After determining whether your current project is a Public Works job, the next step is to determine what wages the Act requires. The current Prevailing Wage Act rates can be found at http://www.illinois.gov/idol/Laws-Rules/CONMED/Rates). It is important to note that each county has a separate wage scale. The Act requires employers to pay all covered employees the statutorily required wages and the associated fringe benefits regardless whether the employees are members of a particular union. Perhaps the most common mistake non-union contractors make is that they pay the base rate but do not add the fringe to the hourly rate normally paid by union contractors to union trust funds as required by the respective CBAs. The Act requires that both union and non-union contractors make contributions to Health and Welfare, Insurance, Pension, Vacation and Training that are either paid to employees through employer-offered benefits, or paid directly to the employees as hourly wages. For example, if Employee A is a Laborer working in Cook County and not covered under a CBA and does not receive benefits from his or her employer, Employee A is to be paid $62.40 per hour for all straight time hours worked covered under the Act ($38.00 for straight time wages plus $24.40 for fringe).

Overtime

Another common mistake employers make relates to the payment of overtime. The Act requires the payment of overtime, time-and-a-half or double time under three distinct circumstances:

  1. When an employee works more than 8 hours on a given day. The mistake many employers make is that they believe overtime is based on the number of hours an employee works during a week. That is incorrect. Overtime is applied on a daily basis. http://www.illinois.gov/For example, if Employee A works 9 hours on Monday, 8 hours on Tuesday, does not work Wednesday or Thursday and works 10 hours on Friday, Employee A is owed 3 hours of overtime. One for Monday and two for Friday even though s/he did not work on Wednesday or Thursday.
    ***Please note that while the majority of the labor classifications defined by the Act require time and a half for daily overtime, a significant number require double time for daily overtime. Please consult the prevailing wage scale for your county to determine the proper overtime scale.
  2. When the employee works on a Saturday. If an employee works on a Saturday, even if s/he has not worked a full 40 hour week, overtime must be paid, either time-and-a-half or double time (depending on the labor classification). Taking the example from Paragraph A, if Employee A also worked 8 hours on Saturday, Employee A’s employer is required to pay for 8 hours of overtime (time-and-a-half) even though Employee A worked only 27 hours Monday through Friday.
  3. When an employee works on a Sunday or Holiday (or the Monday following a Sunday holiday). All labor classifications, except for painters and painters of signs, require double time for Holiday or Sunday work. Once again, how many hours an employee worked in the days leading up to the Holiday or Sunday has no impact on whether overtime is paid. Using our example from Paragraph A, Employee A works the same hours as detailed above plus 8 hours on Saturday and 5 hours on Sunday, that employee is to be paid 11 hours of time-and-a-half (3 hours of daily overtime and 8 Saturday hours) plus 5 hours of double time for Sunday.
    Note: If Employee A works on the Monday following a recognized Holiday that falls on a Sunday, such as Christmas, Employee A would be entitled to double time for the hours worked.

Penalties

It is extremely important that employers do their absolute best to ensure compliance with the Act because the penalties for a violation are severe. First, employers who violate the Act are required to pay back wages to affected employees for the difference between the wages paid and the wages earned under the Act plus the applicable fringe benefits. Second, the Act allows for a 20% penalty to be paid by the employer to the Illinois Department of Labor of all wages, including fringe and overtime, owed to employees, plus an additional 2% payment of that 20% penalty is paid to the employees in addition to the back wages owed. Third, and perhaps of greater importance, contractors who incur two violations within a five-year period can be barred from performing any Public Works Projects in Illinois for a period of four years. For employers who rely on work in the public sector, this ban could sound a death knell for their businesses.

If you receive a notice of investigation from the Illinois Department of Labor, feel free to contact Paul A. Greco or Peter M. Follenweider of Di Monte & Lizak (847-698-9600).

A second, and much less obvious, potential violation occurs during the hauling of material and debris, including rocks, concrete and blacktop, either to or from a jobsite. It is important to note that not all drivers who deliver materials to a job site are covered under the Act. The Act carves out an exemption for material sellers and suppliers. If a contractor or subcontractor has its own employees deliver materials to a jobsite and engage in actual construction, those employees are covered under the Act. An additional and often overlooked aspect of the Act is the hauling of material and debris, including rocks and blacktop, to and from jobsites. If contractors or subcontractors contract to have debris brought to or taken away from jobsites, the Act applies. If sellers of materials direct their own employees or hire a third party to bring materials to the jobsite, the Act will not apply. If contractors or subcontractors hire third parties to remove debris from jobsites, the Act applies and the drivers must be paid according to mandates of the Act. It is important to remember that the courts narrowly construe the extremely limited delivery and hauling exemptions to the Act. In most cases, it is more likely than not the Act will apply to material delivery to the jobsite and debris hauling from the jobsite.

The important factor in determining if the Act applies to hauling debris from a jobsite is not whether the debris will be recycled or who now owns the debris. The important factor is who is doing the hauling and with whom the hauler contracted to haul the debris. If you have any questions as to whether the Act applies, please contact Paul Greco or Peter Follenweider at Di Monte and Lizak, LLC before creating a potential Act violation. This is truly a case in which an ounce of prevention is not worth the pound of cure which will most definitely be dispensed by the Illinois Department of Labor.

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