Last week, Michigan Governor Gretchen Whitmer signed an expansion of the State’s prevailing wage law to include construction for solar and wind energy projects. Senate Bill 571 extends prevailing wage requirements to clean energy facility construction, which includes solar, wind, and energy storage plants.
The bill mandates contractors bidding on these projects to register with the Department of Labor and Economic Opportunity and submit payroll and benefits information for workers. Supporters believe this will ensure better pay and support Michigan’s transition to clean energy, aligned to achieve 100% carbon emission-free energy by 2040. Opponents argue that it increases project costs and burdens nonunion laborers.
The bill passed along party lines in both legislative houses. Last year, Whitmer signed legislation reinstating Michigan’s prevailing wage law for state-funded construction projects, which had been repealed in 2018.
On July 1, 2024, the U.S. Department of Labor (DOL) implemented an increase in the minimum salary threshold for the Fair Labor Standards Act’s (FLSA) white-collar exemption, raising it from $35,568 to $43,888 annually. This threshold is set to increase further to $58,656 on January 1, 2025. Since the new rule became active, it has elicited mixed reactions and has faced legal challenges.
The impact of the increase in the salary threshold is not limited to non-government contracts. FLSA overtime requirements can apply to contracts covered by the Davis-Bacon Act and Service Contract Act and work in conjunction with the Contract Work Hours and Safety Standards Act.
In particular, the state of Texas recently filed for a preliminary injunction against the new rule, arguing that it would significantly raise payroll costs and strain budgets. In response, on June 28, 2024, a federal judge in Texas granted a preliminary injunction, suspending the DOL’s ability to enforce the new rule against Texas as an employer. Despite this injunction, private sector employers and other states must comply with the updated threshold.
While Texas state employers are temporarily exempt from the new salary threshold, employers in other states must comply and adjust their payroll practices. Further legal developments could influence the enforcement of the rule in the future.
On July 16, 2024, the U.S. Department of Labor (DOL) issued All Agency Memorandum 246 (AAM 246), updating the 2024 Service Contract Act (SCA) Health and Welfare fringe rate. This annual update, which accounts for current economic conditions and inflation, is vital for employers and government-contracting employees.
All invitations for bids opened and service contracts awarded on or after July 2, 2024, must include the updated SCA Wage Determination (WD) that reflects the new fringe benefit rates. The fringe rate for non-EO 13706 contracts has increased to $5.36 per hour, up from $4.98. For contracts under Executive Order (EO) 13706, which established paid sick leave for federal contractor employees, the rate has risen to $4.93 per hour from $4.57. Additionally, employees covered by the Hawaii Prepaid Healthcare Act (HPHCA) will see an increase to $2.36 per hour and $1.93 per hour for those performing EO 13706 contracts.
Revised WDs with the updated rates will be available on SAM.gov and the DOL’s Wage and Hour Division website. For existing contracts with option years, the new rates will generally take effect on the contract anniversary date and require a contract modification. Employers should contact their contracting officer to implement these changes.
On June 24, 2024, the U.S. District Court for the Northern District of Texas issued a preliminary injunction against key sections of the U.S. Department of Labor (DOL) amendments to the Davis-Bacon Act (DBA) regulations that apply nationwide. This ruling temporarily halts the enforcement of specific provisions within the DOL final rule, “Updating the Davis-Bacon and Related Acts Regulations,” which became effective on October 23, 2023.
The Court found several final rule provisions violate the DBA’s statutory language, congressional intent, and the Regulatory Flexibility Act (RFA). The blocked provisions include those within 29 CFR 5.2, which codify distinctions between material suppliers and contractors/subcontractors and require contractors to pay prevailing wages to delivery truck drivers for onsite work exceeding a significant minimal amount. Additionally, the provision within 29 CFR 5.5(e), which imposes DBA requirements by operation of law even if omitted from covered contracts, was also blocked.
The Court found that the DOL overstepped its authority by including an operation-of-law provision contradicting the DBA’s express statutory language. This provision would mandate that DBA labor standards and wage determinations apply even if erroneously omitted from contracts, which the Court found inconsistent with the principles of due process and basic contract law. The DBA explicitly requires federal contracts to outline minimum wages for “laborers and mechanics employed directly on the site of the work.” The Court emphasized that the DBA is not self-implementing. Thus, DOL lacks the authority to enforce this provision.
Furthermore, the Court determined that DOL improperly expanded DBA coverage to workers beyond mechanics and laborers and included work not performed directly onsite. The DBA’s language limits its application to construction, alteration, or repair, which does not encompass activities like trucking or material supply.
The Court also highlighted DOL’s failure to comply with the RFA. The DOL did not adequately assess the economic impact on small businesses, including costs associated with compliance, such as producing certified wage reports and bearing interest costs on restitution wages. This oversight led the Court to conclude that the final rule violates the RFA.
This preliminary injunction will remain active indefinitely as the litigation progresses, and the Court will later determine whether to make the injunction permanent. The developments in this case will continue to be monitored closely.
On June 18, the U.S. Department of the Treasury and the Internal Revenue Service issued final regulations on the prevailing wage and apprenticeship (PWA) requirements for increased credits or deductions under the Inflation Reduction Act (IRA), which pertain to clean energy incentives. The IRA offers increased credit or deduction amounts for taxpayers who meet specific PWA requirements for clean energy projects, potentially increasing the base amount by five times.
To qualify for the increased credits or deductions, taxpayers must pay laborers and mechanics at prevailing wage rates during construction, alteration, or repair of clean energy facilities, employ apprentices from registered apprenticeship programs, and adhere to specific recordkeeping and reporting standards. Taxpayers are responsible for ensuring that all contractors and subcontractors meet these requirements.
The IRS underscores the importance of compliance with PWA requirements, dedicating resources to enforce these regulations through taxpayer education and outreach supported by IRA funding. Efforts include updated publications and FAQs to help taxpayers understand PWA requirements and report suspected violations, which the IRS may use in audits. IRS Commissioner Danny Werfel highlighted that these incentives benefit both workers and employers, emphasizing the IRS’s commitment to ensuring compliance with PWA requirements through enhanced taxpayer service and enforcement resources.
Significant penalties are imposed for non-compliance with PWA requirements, emphasizing the necessity of real-time adherence to these standards. To ensure compliance, taxpayers should conduct regular payroll reviews, mandate PWA adherence in contracts, post prevailing wage rates visibly, establish procedures for reporting non-compliance without retaliation, and consult the Department of Labor (DOL) for apprenticeship program assistance.
The DOL, responsible for setting prevailing wage rates, will collaborate with the IRS through a Memorandum of Understanding (MOU) to enhance compliance efforts, including shared training and information exchange.
More information can be found on the Inflation Reduction Act of 2022 page on IRS.gov.
On April 30, 2024, the Chicago Department of Business Affairs and Consumer Protection (BACP) published the final rule implementing the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance. This ordinance, passed by the Chicago City Council on November 9, 2023, with amendments on December 13, 2023, is set to take effect on July 1, 2024.
The new ordinance says that employees are entitled to up to 40 hours of paid leave and 40 hours of paid sick leave annually, accruing at a rate of one hour for every 35 hours worked. Employers can define the benefit year based on an employee’s anniversary date, or synchronize it for all employees based on a calendar or fiscal year. Paid unused sick leave can be carried over into the following year, up to 80 hours, while up to 16 hours of paid leave can be carried over unless it is front-loaded.
Employees can use paid sick leave for illness, medical appointments, or caring for a family member. Employers must notify employees of their leave balances each pay period and maintain records for at least five years. Notices must be posted in workplaces, and policies must be communicated annually upon hiring.
In addition, employers can deny leave based on a pre-established policy rationale, but must do so in writing. They can also require reasonable pre-approval for leave to ensure business continuity. These measures are part of a broader effort by the City of Chicago to enhance worker protections and ensure fair labor practices. The BACP, through its Office of Labor Standards, will oversee the ordinance’s implementation.
The U.S. Small Business Administration (SBA) has issued a direct final rule to eliminate self-certification for Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). Effective August 5, 2024, this rule requires SDVOSBs seeking federal contracts or subcontracts that count towards agency or subcontracting goals to be certified through the SBA’s Veteran Small Business Certification (VetCert) Program.
Key points of the rule include:
The SBA estimates that around 20,408 currently self-certified firms might need to apply for certification. This rule shifts the responsibility of verifying SDVOSB eligibility from contracting officers to the SBA. This rule was expedited due to statutory requirements, eliminating the need for prior public comment to implement the changes swiftly.
The Minnesota Legislature enacted several significant labor laws targeting employee misclassification and prevailing wage requirements.
A legislative change in the new law addresses employee misclassification. Employers now face stricter penalties, up to $10,000 per violation, for wrongly classifying employees as independent contractors to avoid paying minimum wages, overtime, unemployment insurance, and workers’ compensation. This legislation (HF5247) allows all workers, not just those in construction, to sue employers for misclassification.
Minnesota is also the first state to mandate prevailing wage requirements on affordable housing projects funded by Low-Income Housing Tax Credits. This ensures that developers pay wages at union rates, typically required for publicly funded construction projects. The law introduces new transparency requirements for developers, necessitating disclosing past labor violations and creating wage theft prevention plans for contractors with a history of non-compliance.
These legislative changes are expected to enhance worker protections through stricter penalties for misclassification and establishing prevailing wage requirements on affordable housing projects. Increased transparency and accountability for developers and legal recourse for workers facing misclassification strengthen worker rights.
However, these changes may increase costs for employers, particularly in the construction sector, potentially raising project expenses and slowing affordable housing development. The new laws might also face legal challenges and impose additional administrative burdens on businesses, especially smaller ones. Additionally, higher costs associated with prevailing wage requirements might reduce the number of affordable housing units built, potentially worsening the housing shortage in the state.
The landscape of investment advice fiduciary status has undergone significant changes with the Department of Labor’s (DOL) recent amendments to regulations under the Employee Retirement Income Security Act of 1974 (ERISA).1 These changes, finalized in April 2024, represent the latest effort to redefine who qualifies as an investment advice fiduciary and to update related prohibited transaction exemptions. 1
Brokers and financial professionals operating in this space must understand these changes and adapt their practices to remain compliant and serve the best interests of their retirement clients. Even though The Contractors Retirement Plan’s bundled offer includes the services of a 3(38) investment fiduciary, brokers need to understand the highlights of the new Rule, review their practices, and approach to determine if any of their actions would apply to the updated rule.
Significant Changes from the 2023 Proposed Rule:
New Test for Investment Advice Fiduciary Status:
Prohibited Transaction Class Exemptions:
Amendments to prohibited transaction exemptions necessitate compliance with PTE 2020-02 to receive any benefits. 3
Expansion of exemptions broadens the scope to cover various types of investment products and services.
The introduction of streamlined requirements simplifies compliance for certain types of transactions, such as those related to discretionary investment management services.
Next Steps for Retirement Brokers:
The DOL’s amendments to investment advice fiduciary regulations signify a significant shift in how fiduciary status is defined and regulated. Brokers and financial professionals must adapt to these changes by understanding the new test for fiduciary status, reviewing compliance procedures, and staying informed about ongoing developments. By doing so, they can navigate the evolving regulatory landscape and continue to serve the best interests of retirement clients.
For more information on the new Fiduciary rule and how you can prepare, review the useful articles below.
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For over 40 years, The Contractors Plan has been helping contractors submit leaner bids to win more jobs. We provide our clients with quarterly updates on issues and trends that may affect business. We monitor developments on the state level as well as the Federal. When you choose The Contractors Plan, you can rest easy knowing that we’ll keep you informed and alert you to any changes that may be on the horizon. We will continue to monitor and communicate Fiduciary Rule changes and updates.
The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) have issued a final rule to amend the Federal Acquisition Regulation (FAR) to prioritize environmental and sustainability considerations. Effective May 22, 2024, this rule mandates federal agencies procure sustainable products and services to the greatest extent practicable.
Important aspects of the rule include emphasizing energy savings performance contracts, consolidating hazardous material requirements, and updating pollution prevention guidelines. Prime contractors must ensure subcontractors comply with sustainability requirements, and life-cycle costs should be considered in price assessments. Agencies are required to specify in contracts which sustainable products and services are applicable.
Additionally, the rule introduces a new omnibus contract clause requiring federal contractors to deliver specified sustainable products and services, with exceptions for contracts outside the U.S., weapons systems, and certain military equipment. It defines “sustainable products and services” in FAR 2.101, updates environmental purchasing requirements in FAR subpart 23.1, and aligns construction and architect-engineer contracts with the Council on Environmental Quality’s principles.
The rule broadly applies to commercial and small purchases, except if sustainable products are not competitively available, are too costly, or fail to meet performance standards. The goal is to leverage the federal government’s purchasing power to support American manufacturing and establish sustainable supply chains, which presents challenges and opportunities for contractors.
Challenges include potential cost increases, administrative burdens for small businesses, and possible supply chain disruptions. However, the rule also opens new business opportunities for sustainable products and services in the expanding market, with potential long-term cost savings from more energy-efficient products.