Prevailing-wage changes: Increased penalties, greater enforcement, certified payrolls, cut fees, expanded coverage

The Legislature just passed several measures impacting the state’s prevailing-wage program.  AGC members are encouraged to become familiar with this information -- particularly the increased penalties and enforcement! 

Increased penalties  Bill ESSB 5035 dramatically increases the civil penalty for the nonpayment of prevailing wages from $1,000 to $5,000 or an amount equal to 50 percent of the total prevailing-wage violation found on the contract, whichever is greater, and interest at 1 percent per month. Plus, the period to file a complaint concerning nonpayment of prevailing wage is changed from 30 days to 60 days from the acceptance date of the project. Failure to timely file a complaint does not prohibit L&I from investigating the matter in pursuit of recovering unpaid wages for a worker or workers. However, L&I may only recover wages owed and cannot charge a contractor with a violation of failing to pay prevailing wage. L&I may not investigate or recover unpaid prevailing wages if the complaint is filed after two years.

Initially, this bill removed L&I’s discretion to waive penalties if an error was inadvertent. AGC worked to ensure that L&I retains that discretion, and the final bill makes clear that the director of L&I may waive or reduce a penalty or additional sanction but may not waive or reduce interest. 

Finally, the bill requires contractors to file a copy of their certified payroll records using L&I’s online system or directly with L&I.

The bill contains other changes to prevailing wage and contractors are strongly encouraged to become familiar with them.  See the bill here.

Greater enforcement  Within the last year, L&I has implemented an “escalation strategy” which has resulted in an increasing number of citations for prevailing-wage violations. L&I received additional funding in the state’s 2019-2021 operating budget to hire new enforcement staff. With those steps, combined with passage of ESSB 5035, contractors should expect greater scrutiny for potential wage violations, with more penalties imposed.

Greater scope  There were multiple efforts in the Legislature this year to expand prevailing-wage requirements onto private projects that receive any sort of government support (e.g., a tax break, a grant, etc.). One of these efforts was successful. Bill E2SSB 5116, known as the 100% clean-energy bill, requires that, by January 1, 2045, each electric utility must meet 100 percent of its retail electric load to Washington customers using non-emitting electric generation and electricity from renewable resources. In making the transition, the bill provides a sales-tax exemption for alternative-energy machinery and equipment.  But to receive the tax incentive, the project must pay workers prevailing wages (and have a PLA).

AGC opposed this bill because of the prevailing-wage and PLA requirements. Although it passed, other measures to expand prevailing wages to refinery work and construction of data centers did not.

Reduced fees  In a bit of good news, legislation (SB 5566) passed that lowers the fees -- charged to submit intents and affidavits -- from $40 to $20 for the 2019-2021 biennium. AGC worked with L&I to create the legislation, arguing that the prevailing-wage assistance account, which receives the funding from the fees, had grown well beyond what is needed to administer the program; thus, a fee reduction was in order.