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Repeal of Michigan's Prevailing Wage Act

By Dana L. Abrahams / Jun 07, 2018

Michigan’s long-standing Wages and Fringe Benefits on State Projects Act, MCL 408.551, et seq., commonly known as the Michigan “Prevailing Wage Act,” was repealed by the Michigan Legislature on June 6, 2018.  The Prevailing Wage Act, in essence, required union scale pay on public construction projects.

By way of background, since 1966, Section 2 of the Michigan Prevailing Wage Act, MCL 408.552, stated, in pertinent part, as follows:

“Every contract executed between a contracting agent and a successful bidder as contractor and entered into pursuant to advertisement and invitation to bid for a state project which requires or involves the employment of construction mechanics. . . and which is sponsored or financed in whole or in part by the state shall contain an express term that the rates of wages and fringe benefits to be paid to each class of mechanics by the bidder and all of his subcontractors, shall not be less than the wage and fringe benefit rates prevailing in the locality in which the work is to be performed (emphasis supplied).”

With this repeal, Michigan’s contracting agents, defined in the Michigan Prevailing Wage Act as “any officer, school board, board or commission of the state, or a state institution supported in whole or in part by state funds, authorized to enter into a contract for a state project or to perform a state project by the direct employment of labor” (MCL 408.551) (emphasis supplied), will no longer be required to pay prevailing wages to contractors.

On a practical level, what does this repeal mean for your school district?  Based upon our review of the legislative process surrounding this repeal, it is our understanding that it will take “immediate effect,” meaning it will become law once it is officially enrolled in the next few days.  Based on the foregoing understanding, we offer the following recommendations relating to the issues we believe most school districts will be facing in the short term:

1.  If you have already entered into a contract for construction which required the payment of prevailing wage rates, you will be required to honor that arrangement until completion of the project or termination or expiration of the contract.

2.   If you are in the process of competitively bidding a project which requires the payment of prevailing wage rates to contractors, and bids are not yet due, we recommend preparing an Amendment to the Request For Bids/Proposals to remove the requirement for complying with the Michigan Prevailing Wage Act.

3.   If you have already bid a prevailing wage project and bids have been received, but not yet awarded, we either recommend that you reject all bids and start the competitive bidding process over to remove the requirement for complying with the Michigan Prevailing Wage Act or send out a request to each person/entity that bid on your project, to invite them to submit a clarification to their respective bid/proposal, on or before a specified due date, to allow each bidder to provide a revised contract sum without requiring compliance with the Michigan Prevailing Wage Act. 1

If you have any questions about these or other issues in connection with the competitive bidding of current or future school projects, please contact Dana L. Abrahams at dabrahams@clarkhill.com | (248) 988-5840, or another member of Clark Hill’s Education Practice Group.

 

[1] We would note that the second option may raise an issue relative to contractors that did not bid on the initial project because the project was a prevailing wage project, and these contractors could claim this clarification provides an unfair advantage to other contractors.