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    • January 1, 1900

      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.