PREVAILING WAGE LAWS Prevailing wage – general concept
Both the federal government and the State of Minnesota require payment of prevailing wages on certain publicly funded construction and public works projects. Prevailing wage is essentially a locally determined minimum wage plus fringe benefits that must be paid to covered laborers and mechanics on qualifying projects so that public spending does not undercut local wage standards. At the federal level, the Davis‑Bacon and Related Acts require contractors and subcontractors on federally funded or assisted construction projects over specified dollar thresholds to pay at least the locally prevailing wage and fringe benefits for each classification of laborers and mechanics. The federal Service Contract Act plays a similar role for many service contracts with the federal government. Minnesota prevailing wage for public works and economic development Minnesota’s prevailing wage law (Minn. Stat. § 177.41–.44 and related rules) applies to many state‑funded construction, installation, and repair projects, requiring contractors to pay at least the state‑determined prevailing wage for the county and work classification involved. “Prevailing wage” under Minnesota law consists of: • The hourly basic rate of pay , plus • The employer’s cost of certain economic benefits , such as health and welfare, vacation, pension, and similar benefits. “Area” is generally defined as the county or locality from which labor for the project is normally drawn. Minnesota has extended prevailing wage requirements to certain economic development projects receiving specified levels of state financial assistance. Under Minn. Stat. § 116J.871 and related guidance: • Prevailing wage applies when a covered economic development project receives state assistance in any of these forms: • Grants totaling $200,000 or more ; • Loans totaling $500,000 or more ; or • Certain tax incentives, tax abatements, or sales tax reductions provided for economic development purposes in specified areas. “Economic development” generally means state financial assistance provided directly to a business, or to a local government or nonprofit on a business’s behalf, for the manufacture or sale of goods or services. Certain housing rehabilitation and some new housing construction projects may be treated differently; Minnesota Housing now applies state prevailing wage to many new‑construction rental projects at the same $200,000 grant / $500,000 loan thresholds.
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