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A Recent Change to the Prevailing
Wage Act
Worth Noting: Update for Clients
Working With
the Public Sector
by Ryan P. Kennedy
New Jersey has a long-standing
policy of protecting the
compensation of workers and trades
people who perform construction and
other “public work” on behalf of the
State. Under the Prevailing Wage Act,
contractors are required to pay the
“prevailing wage” for public work
contracts. The amount of the
prevailing wage for each craft or trade
is established by the Commissioner of
Labor and Workforce Development
based on the wage paid to a majority
of workers under collective bargaining
agreements in the locality where the
work is to be done. According to the
public policy statement codified in the
Act, the Legislature intended “to
safeguard [worker’s] efficiency and
general well being and to protect them
as well as their employers from the
effects of serious and unfair competition
resulting from wage levels detrimental
to efficiency and well-being.”
Certainly, contractors who perform
public construction work on behalf of
the State, and its subdivisions and
authorities should be quite familiar
with the Act’s requirements. For a
contractor or employer performing
“public work” those requirements
include ascertaining the wage rate
from the Commissioner for each trade
or craft employed, filing written
certifications to the public body
detailing the wages paid and owing,
and paying no less than the established
prevailing wage. Contractors must
post the prevailing wage rates at the
work site, and are subject to audit and
inspection by the Commissioner.
Failure to comply with the Act and
pay the prevailing wage can lead to the
public body terminating the right of
the contractor to continue working on
the project and impose administrative
and even criminal penalties. Additionally,
the contractor and its sureties are
liable to the public
body for any excess
costs related to the
failure to comply
with the Act, and
contractors who fail
to pay the prevailing
wage for public work
are subject to being
placed on the
debarment list for
three years.
Historically, “public
work” only included
construction and
certain other work
done under contract
with a public body
and paid for out of
the funds of a public
body, or in certain
limited circumstances where a public
body was leasing or would be leasing
property. However, a recent
amendment to the Act expands its
applicability to a whole new set of
“work” not previously considered
“public” and requires a fresh look by
everyone working with the public
sector to evaluate their compliance.
Recent Change in Law
On April 26, 2007, Acting
Governor Richard Codey signed
Assembly Bill 3890 into law,
significantly amending and expanding
the Prevailing Wage Act. The newly
adopted amendment requires the
payment of prevailing wages for most
construction or repair work to be
conducted on land owned by a
public body, without regard to
whether public funds are expended
or a public body plans on leasing or
utilizing the property. Put another
way, even if the State is not paying for
the construction work, the Prevailing
Wage Act will now apply if the State
or one of its subdivisions merely owns
the premises where construction work
occurs. Based on the new language
expanding the definition of “public
work” lessees and other entities
conducting construction work on
public property will now have to
comply with prevailing wage
requirements or potentially face the
penalties provided both in the Act
itself and under the criminal false
claims statute. As Acting Governor Codey
stated in the press release
accompanying the revision:
construction work on publicly-
owned property is now subject to
the Prevailing Wage law, even
when the property is leased to
a private business and the private
business contracts for the construction
work. (Press Release
dated April 26, 2007)
Maintenance Not Covered
Unless Public Funds Used
Under the revised Act, all construction,
reconstruction, demolition,
alteration, custom fabrication or repair
work, done on any property owned by a
public body is now considered “public
work” requiring payment of prevailing
wages, whether or not the work is paid
for by public funds. “Maintenance
work”, which is defined in the Act to
mean the repair of existing facilities
when the size, type or extent of the
facilities is not changed or increased, is
not affected by the revisions. As was the
case before the amendment, maintenance
work is only considered “public work”
when a public body is actually contracting
for and paying for the maintenance.
The implications of the revised Act
are significant. Tenants occupying space
in public buildings when they fit-out
their space or cause construction or
repair work to be conducted on the
premises may now have to comply with
the Act as such work can become “public
work” by virtue of it being done on
public property. Likewise, any lessee of
public property or state-owned infrastructure
who performs construction or
repair work on the property will be
affected by the revised law, and will need
to pay the wage rate determined by the
Commissioner for each trade, or be
subject to administrative and criminal
penalties. In short, in New Jersey a
whole new set of work just became
“public work” as far as the Prevailing
Wage Act is concerned.
Now is the Time to Evaluate
Compliance
Individuals and businesses who
conduct their business on public
property in New Jersey should take the
time now to evaluate their compliance
with the revised Prevailing Wage Act.
Considering the possible administrative
sanctions, potential debarment and the
risk of criminal penalties under New
Jersey’s False Claims Act, there is no
time like the present for a full check-up
for all entities involved with the public
sector.
Ryan P. Kennedy is
an associate in the firm’s
Commercial Real Estate Practice
Group. He concentrates his
practice in all aspects of
commercial real estate acquisition
and development, with particular
emphasis on complex negotiations,
urban development and transit
oriented development.
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