Monday, August 18, 2008

What's the "Prevailing Rate"?

I have received several recent inquiries from contractors as to the definition of "prevailing rate" in New York. Many of them don't understand the methodology as to how it's determined. So, here we go again, folks.

Prevailing rates in a locality are determined by virtue of collective bargaining agreements made between bona fide labor organizations and employers of the private sector, provided that those employers employ at least 30% of workers in the same trade or occupation in the locality where the work is being performed. Translation: the prevailing rate is typically the union rate for the work classification involved.

In determining which union is the appropriate labor organization for purposes of setting prevailing rates in the locality, the Department of Labor utilizes the collective bargaining agreements that were used in the previous year’s annual determination of prevailing rates, unless competent evidence is provided that the negotiated agreement does not cover 30% of workers in the same trade or occupation.

In somewhat of an ironic twist, the prevailing rate as determined by the Department of Labor may not be the actual, true prevailing rate in the locality where the work is being performed. If more than 50% of the contractors in a locality are paying "x" dollars per hour for a particular trade, then that should be the true prevailing rate for that classification instead of the "y" dollars per hour imposed by the union (which is typically a higher rate). Majority rules, right? Wrong! The Department of Labor does not see it that way. Granted, an employer may contest a prevailing rate determination by proving (via competent evidence) that the actual percentage of workers covered by a collective bargaining agreement in the locality is below the required 30% in the particular classification. Good luck with that!

Sound confusing? You bet! Is it fair? Probably not. Should contractors attempt to deal with the Department of Labor directly on prevailing rate matters without an attorney? It can be done, but I wouldn't recommend it. Translation: This is potentially dangerous stuff ... don't try this at home, kids.

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