Michigan has been at the center of debates surrounding prevailing wage laws in recent years, particularly in the construction industry. Prevailing wage laws require contractors working on public projects to pay their workers a wage determined by the state to be the prevailing wage for that particular trade within a defined area. They are currently the result of politics that favor organized labor.
Michigan’s Prevailing Wage Law
Michigan has a long history of prevailing wage laws, dating back to 1965, however, in 2012, the state took a significant legislative step by becoming a “right to work” state, which guarantees employment without requiring an employee to join a labor union, and consequently struck down the prevailing wage law in 2018. This move was met with both support and opposition as arguments from across the political spectrum discussed its impact on the construction industry, workers, and the state’s economy.
On March 24, 2023, Governor Gretchen Whitmer signed the “Restoring Workers’ Rights” bill package into law which repeals the “right to work” status of Michigan. The law goes into effect March 2024 and signals a significant shift in the state’s approach to labor standards in public construction projects, resulting in the reinstatement of prevailing wage regulations.
Impact on Non-Union Construction Companies
The reinstatement of the prevailing wage law in Michigan will have notable effects on non-union construction companies bidding on public works projects, most notably:
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- Cost Implications
Non-union construction companies will be required to pay increased labor costs since they hire non-union workers who are paid according to union–negotiated wage scale. This directly impacts the company’s ability to remain competitive when bidding on public projects which, in turn, increases costs for taxpayers.
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- Compliance Challenges
Non-union companies bidding on public projects will need to navigate the labyrinth of prevailing wage compliance. Ensuring accurate record-keeping, wage reporting, and adherence to state regulations can be challenging and may require more administrative efforts.
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The reinstatement of the prevailing wage law in Michigan signifies a pivotal shift in the state’s approach to labor standards for the construction industry. The impact of prevailing wage laws on non-union construction companies will depend on various factors, including their ability to adapt to the new regulations, and accurately estimate project costs. As Michigan moves forward with these labor standards, it will be essential for non-union companies to assess their strategies and adjust their business practices accordingly to remain competitive in the evolving landscape of public works projects in the state.
How We Can Help
Direct Advisors, a division of HUB Retirement and Wealth Management, was established in 2001 and is located in the Albany, New York area. We provide bona fide benefit plan consulting and third-party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act and state prevailing wage regulations. Our clients are located throughout the United States.