Are Prevailing Wages Effective Despite State Law Prohibitions?
Repealing Michigan’s Prevailing Wages Act
Effective June 2018, Michigan no longer requires prevailing wages in government contracts. Public Act 171 of 2018 repealed Michigan’s Prevailing Wage Act. Under the now-repealed Act, many government contracts had to include provisions that workers would be paid fringe benefits and wages in line with workers in the locality where the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, §2.
However, in 2018, a voter-initiated petition repealed the Prevailing Wage Act.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?
Michigan Prevailing Wages Act (1965)
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 the Local Government Labor Regulatory Limitation Act (Public Act 105 of 2015). 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.”
Associated Builders & Contractors v City of Lansing
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 & Contractors v City of Lansing. 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.
However, it’s important to note that the Court based its decision on the state of the law in 20212 when the case arose. At that time, there was no state law in place that prohibited ordinances on prevailing wages. In other words, PA 105’s enactment rendered the 2016 court ruling relevant solely to contracts entered into before.
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, Muskegon County still requires workers to receive prevailing wages and fringe benefits when submitting Requests for Proposals. The County failed to remove the prevailing-wage requirement. As a result, they will face litigation from the Associated Builders and Contractors. The latter argues that it’s illegal for a governmental entity to interfere with a company’s private employment relationships.
State law clearly prohibits local prevailing wage ordinances, regardless of their history. Cities that do not update their ordinances, policies, and requests for proposals will continue to face an increased risk of litigation – all on the taxpayers’ dime.