Legislative Analysis
REQUIRE PREVAILING WAGE FOR STATE CONSTRUCTION Phone: (517) 373-8080
http://www.house.mi.gov/hfa
House Bill 4007 as enacted
Analysis available at
Public Act 10 of 2023 http://www.legislature.mi.gov
Sponsor: Rep. Brenda Carter
House Committee: Labor
Senate Committee: Labor
Complete to 2-13-24
SUMMARY:
House Bill 4007 creates a new act that requires a policy commonly known as “prevailing wage”
for state construction projects receiving public funding. The new act is similar to 1965 PA
166, which was repealed in 2018 (see Background, below). Under the new act, every contract
for such a project that requires the employment of construction mechanics must include a term
stating that the rates of wages and fringe benefits to be paid to each class of construction
mechanics must equal or exceed the wage and benefit rates that are standard in the locality
where the work is to be performed.
State construction project means any new construction, alteration, repair, installation,
painting, decorating, completion, demolition, conditioning, reconditioning, or
improvement of public buildings, schools, works, bridges, highways, or roads
authorized by a contracting agent. However, it does not include projects subject to the
jurisdiction of the Michigan Civil Service Commission.
Contracting agent means 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.
Construction mechanic means a mechanic, laborer, worker, helper, assistant, or
apprentice working on state projects. It does not include executive, administrative,
professional, office, or custodial employees.
If a contracting agent does not include such a term in the contract documents or bidding forms,
it is liable for any loss of wages and fringe benefits suffered by the construction mechanics on
that project. In addition to any other legally available remedies, those construction mechanics
are also eligible for injunctive relief, may bring a civil action for the violation, and may recover
damages with 10% interest per annum. 1
Contracts also must include a term providing that construction mechanics are the intended
beneficiaries of the contractual prevailing wage, fringe benefit, nonretaliation, and
nondiscrimination requirements provided by the act and a term providing that a construction
mechanic who is aggrieved by a failure to be paid prevailing wages or benefits or who faces
1
For civil actions brought under the act, a construction mechanic’s failure to exhaust all administrative remedies
before the Department of Labor and Economic Opportunity does not serve as a defense.
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 retaliation or discrimination as a result of the act can bring an action against a contractor or
subcontractor for damages or injunctive relief.
Prevailing wage determination
The Department of Labor and Economic Opportunity (LEO) must establish wages and benefits
at the rate that prevails on projects of a similar character in the relevant locality (the county,
city, village, township, or school district where the physical work on a state project is to be
performed) under collective bargaining agreements (CBAs) or understandings between labor
organizations of construction mechanics and their employers. If no such CBAs or
understandings exist, LEO must determine the prevailing wage for that locality by using the
rates and benefits that prevail in the same or most similar employment in the nearest and most
similar neighboring locality where a CBA agreement or understanding exists.
Before a contracting agent can advertise for bids on a state project, it must have LEO determine
the prevailing rates for wages and fringe benefits for all classes of construction mechanics
called for in the contract. A rate schedule must be included in the bidding forms. If a contract
is not awarded or construction has not begun within 90 days of the determination, LEO must
redetermine the prevailing wage and fringe benefit rates before the contract is awarded.
All determined wages and benefits must be filed with LEO and publicly accessible.
Compliance and recording requirements
Contractors and subcontractors must keep a copy of all prevailing wage and fringe benefit rates
included in the contract posted in a conspicuous area at the construction site. They also must
keep a record of the name and occupation of, and wages and benefits paid to, each construction
mechanic employed in connection with the contract. This record must be available for
inspection by the contracting agent and LEO. Contracting agents, contractors, and
subcontractors must maintain all certified payroll records and other records required by the act
for at least three years, and they must provide LEO or a department designee with any requested
records or other information necessary for LEO to ensure compliance.
Contractors and subcontractors must pay wages and provide benefits as outlined in the
contracts. If a lower rate than the prevailing wage or fringe benefit rate has been or will be
paid, a contracting agent may terminate the contractor’s right to proceed under that portion of
the contract after providing a written notice. The agent may then complete the contract through
a separate agreement with another contractor. The original contractor and any sureties are liable
for any excess costs resulting from the termination.
Nonretaliation and nondiscrimination
Contractors and subcontractors cannot discharge, discipline, or otherwise discriminate
against a construction mechanic, or threaten to take any of those actions, for reporting a
real or suspected violation of the act. An employee who believes they have been discharged
or disciplined or otherwise suffered harm to their employment status for filing a complaint,
participating in an investigation, or raising concerns about their wages and benefits as covered
by the act can file a complaint with LEO within 90 days of the alleged retaliatory act.
The act states that there is a rebuttable presumption of retaliation if an employee was removed
from the project or not provided similar overtime, hours, or other opportunities that were
available prior to the retaliatory action. If LEO determines that such a retaliation has occurred,
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 it can order the rehiring or reinstatement of the employee, or another equitable remedy such as
full back pay or lost earnings.
Complaints
If an employee believes that a violation of the act has occurred or if a third party has credible
information that a violation occurred, that individual can file a complaint with LEO, and LEO
can begin an investigation. An employee who files a complaint may request to keep their
identity confidential from their employer. LEO cannot accept or investigate complaints made
more than three years after the alleged violation or the last date a violation could have occurred,
whichever is later.
Enforcement and investigations
LEO or a department designee is responsible for administering the act and for enforcing the
payment of prevailing wages and benefits by investigating and ascertaining the wages paid by
an employer subject to the act. LEO or its designee can enter any project during normal
working hours to inspect payroll records, interview and conduct wage surveys of employees,
or take any other action reasonably related to enforcement of the act.
To investigate an alleged violation of the act or as part of a review proceeding under the act,
LEO or a designee can do any of the following:
• Administer oaths or affirmations.
• Privately interview employees, supervisors, and other individuals to determine
information relevant to enforcement.
• Subpoena and compel the attendance of witnesses.
• Gather evidence.
• Require the production of records or other documents that it considers relevant or
material to the inquiry.
Violations
If LEO determines that a violation occurred, it may order any responsible contracting agent,
contractor, or subcontractor to pay any employee the amount they are owed from the violation.
Unless an appeal is in process, LEO can generally enforce an order under the act in either a
court of competent jurisdiction or in Ingham County circuit court.
Each violation of the act is also punishable by a civil fine of up to $5,000 and an additional
10% penalty as determined by LEO. The attorney general or relevant county prosecutor
can bring an action to collect the fine.
Fines must be paid to LEO, made payable to the state of Michigan, and credited to the general
fund. If a fine is not appealed and is not paid within 15 working days, LEO must issue a letter
to the employer that demands the payment within 20 days of receiving the letter. If the penalty
is still unpaid, the Department of Treasury must collect the fine by first offsetting the amount
of the fine against any amount that the state may owe to the employer and then requesting that
the attorney general recover the remaining amount of the fine by instituting a civil action.
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 Review request and hearing
An employer or employee may request a review of LEO’s determination within 14 days of
receiving notification of the determination. Otherwise, unless the employer or employee
provides good cause for a late request, the determination is final.
If a review is appropriately requested, LEO must appoint a hearings officer, who must hold a
hearing and issue a determination to all involved parties (the employer, employee, and LEO)
that affirms, modifies, or rescinds LEO’s original order. The determination must be made
within 30 days of the hearing’s conclusion. All review proceedings must be conducted in
accordance with the Administrative Procedures Act.
A party may challenge the hearings officer’s determination in court, and the venue for an appeal
is in the circuit court for any of the following:
• Where the employee lives.
• Where the employment was located.
• Where the employer has a principal place of business.
Work project appropriation
The bill appropriate $75,000 to LEO from the general fund as a one-time work project
appropriation under section 451a of the Management and Budget Act. The purpose of the
work project is to implement and communicate information about the act, either by state
employees or by contract, with an estimated completion date of December 31, 2024.
(This appropriation has the effect of making the bill immune from referendum under
section 9 of Article II of the state constitution.)
Exempt contracts
Contracts with provisions requiring prevailing wage payments determined by the federal
government under the federal Davis-Bacon Act or with minimum wage schedules that are the
same as the prevailing wages in the relevant locality are exempt from the act. 2 The act does not
apply to any contracts entered or bids made before February 13, 2024 (the effective date of the
act) or to any contracts for state projects partially or wholly funded by revenue from millages
authorized under the Revised School Code before that date.
Finally, the act states that any portion of the act declared invalid or unenforceable is severable
from the remaining provisions of the act. All Michigan laws are always already severable under
section 5 of Chapter 1 of the Revised Statutes of 1846. 3
BACKGROUND:
Public Act 166 of 1965 required the use of prevailing wages for state-funded construction
projects until 2018, when the Michigan legislature adopted an initiative petition repealing the
act. 4 Supporters of the repeal argued that the 1965 law was outdated, and a repeal of prevailing
2
The Davis-Bacon Act requires contractors and subcontractors working on federally funded construction projects to
pay locally prevailing wages: https://www.dol.gov/agencies/whd/laws-and-regulations/laws/dbra.
3
http://legislature.mi.gov/doc.aspx?mcl-8-5
4
A summary of the petition can be found here.
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 wage would save taxpayer money on public works projects and increase competition for the
projects. In 2021, however, Governor Whitmer announced that the Department of Technology,
Management and Budget (DTMB) would resume the prevailing wage requirement for state
construction contracts for projects greater than $50,000 beginning in 2022. 5 The governor
argued that while the law requiring prevailing wage was no longer in place, DTMB still had
the authority to adopt such a policy in overseeing state contracts.
FISCAL IMPACT:
Impact on Department of Labor and Economic Opportunity
House Bill 4007 would likely result in increased costs for the Department of Labor and
Economic Opportunity, for the implementation and administration of prevailing wage laws.
LEO estimates that additional staff within the Wage and Hour Division would be required on
an ongoing basis to administer and enforce prevailing wage on public projects, including
specific projects conducted by school districts and local governments. Information technology
(IT) updates would also be necessary to implement and administer the bill. Preliminary
estimates from LEO indicate that costs in the first year could total approximately $500,000,
which would support the necessary staffing and IT modifications. The bill would appropriate
$75,000 GF/GP to LEO to implement and communicate information about the provisions of
the bill. The funds would be designated as a work project appropriation with an estimated
completion date of December 31, 2024.
Impact on State and Local Expenditures
House Bill 4007 would have an indeterminate fiscal impact on state and local expenditures for
construction projects (i.e., those by state departments, public and charter schools, community
colleges, and universities financially sponsored by the state). As of March 1, 2022, the state
has a prevailing wage requirement for any construction-based contracts issued by DTMB,
which would limit any current fiscal impact on projects subject to that procurement policy. The
provisions of the bill would broaden prevailing wage applicability to other state-funded
projects. However, any fiscal impact would be project-specific and difficult to determine.
The vast academic and policy literature pertaining to the economic effects and fiscal impacts
of prevailing wage laws, or lack thereof, is decidedly contested, lacking consensus on proper
research methods and appropriate sources of data, let alone findings and conclusions drawn
from such data via such methods. The House Fiscal Agency previously compiled a partial
bibliography of studies of the impacts of prevailing wages laws, which can be accessed online
at https://www.house.mi.gov/hfa/PDF/Alpha/Prevailing_Wage_Memo.pdf
Impact on Transportation
House Bill 4007 would likely have a minimal fiscal impact on Michigan Department of
Transportation (MDOT) construction contracts. Much of MDOT’s transportation program is
carried out by private construction contractors working under contract with MDOT. All of
MDOT’s state trunkline road and bridge capital construction, rehabilitation, and reconstruction
program is performed by private contractors. Most of MDOT’s Capital Preventive
Maintenance (CPM) program is also performed by private contractors. MDOT also administers
5
Information on this requirement can be found here, and wage rates for DTMB-funded construction projects for each
county can be found here.
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 many capital construction and reconstruction projects on behalf of local road agencies, airport
improvement projects on behalf of local airports, and capital rail projects.
Over the five fiscal years ending September 30, 2022, total MDOT construction contracts,
based on awarded bid totals, have averaged $2.15 billion—with a peak in FY 2021-22 at $2.91
billion. All of these construction contracts are awarded through open competitive selection,
and most of them were supported, at least in part, with federal funds.
Projects funded in any part with federal aid are subject to the prevailing wage requirements of
the federal Davis-Bacon Act (40 USC 3141 et seq.), which requires that all contractors and
subcontractors performing work on federal contracts or federally assisted contracts in excess
of $2,000 pay not less than the prevailing wage rates and fringe benefits listed i