Minneapolis Amends Prevailing Wage Ordinace

On June 17, 2016, the Minneapolis City Council significantly amended its Prevailing Wage Ordinance. The revised ordinance will go into effect following publication (generally 8 days after the approval of the revisions). Accordingly, the revisions will likely be finalized before July 1, 2016. The revisions: provide individuals with a private right of action for violations (they can sue their employer); add certification requirements; require certified payrolls be provided to the City; and add penalties, among other things. Following are the key changes to the ordinance:

• Clarification of the City's current practice to enforce contracts of at least $50,000. Contracts less than $50,000 will be reviewed on a complaint-made basis only, unless subject to the Davis-Bacon Act.

• All contracts requiring prevailing wages to be paid must contain a provision stating that the contractor must comply with the City of Minneapolis Prevailing Wage Ordinance. This onus is on the City - though certainly if they forget to put it in a contract, the contractors will still have to comply with the ordinance as the city will argue it was clear in pre-bid meetings.

• Any laborer, mechanic, or employee employed by a contractor (or sub) is now an intended third-party beneficiary to a covered contract. Currently, contractors are able to argue that third-parties (such as employees) are not beneficiaries of a contract between the city and a contractor, and thus, the lawsuit is improper. Accordingly, when a contractor allegedly breaches the contract by failing to pay prevailing wages, the employee has no private right of action to sue the employer because the employee was not a party to the supposedly breached contract. This change will allow anyone to sue the contractor for breaching the agreement with the City. This will bring the ordinance in line with the Minnesota Prevailing Wage Act. The Federal Davis-Bacon Act does not allow a private right of action.

• Certification requirements have been added after bid opening and prior to the contract award. Contractors will now have to submit to the Minneapolis Director of Civil Rights a wage compliance certificate guarantying payment of prevailing wages; a confirmation of the identity of subs and suppliers and their benefits agents; a list of the job classifications that will be used (including each sub); the anticipated number of hours to be worked in each class of labor; the prevailing wages and benefits for each class; and proof that all subs are independent contractors.

• All laborers and mechanics working on a covered project must be paid at least every two weeks (bi-weekly). Minnesota law mandates that wages must be paid at least monthly, so this will reduce that by half. However, rarely are contractors paying monthly, so this is likely to be a non-issue.

• Contractors must provide the Minneapolis Director of Civil Rights a bi-weekly certified payroll. Failure to do so may result in withholding of payments and audit of books and records. Certified payrolls must be retained for one year after completion of the work.

• The Civil Rights Department will monitor compliance, including review of certified payrolls and job site visits. The Department must participate in the pre-award conference and the review of the certified payroll reports.

• Penalties have been added for failing to comply with the ordinance. Such penalties may include withholding payment for that project or other projects with the City, a 5% penalty on contract price as liquidated damages, and suspension or debarment. The rules for this exact process will have to be created (to ensure due process).

• Subcontractors and independent contractors must provide the Department of Civil Rights with certain proof regarding their status. Specifically, they must prove that they are a “bona fide” independent contractor, including business filing with the Secretary of State, proof of workers’ compensation, and proof of unemployment insurance.

Expect these changes to roll out in pre-bid documents starting in July. Contractors bidding prevailing wage jobs in Minneapolis should be familiar with the revised ordinance, and be prepare to follow the new requirements, lest you find yourself in a sticky situation with the Department.

If you have questions about anything in this article, please contact Corie Tarara at 952-921-4615 or ctarara@seatonlaw.com, or any of the other Peters, Revnew, Kappenman & Anderson, P.A. attorneys.