Wage Boundaries

Nick Dmitrovich October 7, 2019

There’s a bit of a convoluted situation regarding prevailing wages across our state’s western border. Changes in Illinois’s prevailing wage laws seem to indicate a forthcoming increase in enforcement of payment rules, which could be a problem for unaware companies that perform work in both states. Any type of company involved in a public project could be affected, including contractors, developers, owners, architects, and more. This makes it important for companies to double check to make sure they’re in full compliance.

Picture a scenario where an Indiana-based contractor is working on a locally funded county road that begins in Indiana and terminates several miles away across the boarder in Illinois. For some contractors, prevailing wage laws could mean they will be required to pay their workers a different rate as soon as they hit the border. Whether or not this will create major discrepancies for many companies isn’t exactly clear. At the very least, it merits review with labor council.

The Indiana Side

Indiana doesn’t have a prevailing wage currently. Back in July of 2015 state legislators repealed what was then called the common construction wage law. The intent of the repeal was to provide financial relief for taxpayer-funded projects by reducing costs associated with construction wages.

In the last few years, there’s been a lot of criticism about whether or not the repeal actually worked. One report from the Midwest Economic Policy Institute (MEPI) found the only real impact of the repeal was on workers in the form of lost wages. An 8.5 percent loss, to be exact. On top of that, there has been no observable reduction in the cost of taxpayer-funded construction projects resulting from the repeal.

So, with no state prevailing wage to go by, many builders in Indiana adhere to market rates or industry standards for local/state-funded projects. Legally, they could pay minimum wage, but that’s ill-advised if they’re hoping to retain quality workers.

Federally funded or assisted projects are different – they have specific federal prevailing wage rates to go by under the Davis-Bacon act. So, a federal project in Indiana would have a prevailing wage but a local project in Indiana would not.

The Illinois Side

Illinois does have a prevailing wage law that was recently amended. Governor Pritzker signed Public Act 100-1177 earlier this year and it went into effect at the start of June 2019. This amendment changes the way prevailing wage rates are determined and also changed which entities are going to have authority over enforcement.

Now, under the new amendment, the Illinois Department of labor (IDOL) is the only government body that will be deciding wage rates – no other public bodies are involved, as was formerly the case. IDOL will also be responsible for reviewing wage claims. Additional changes in the amendment now require the IDOL to collect demographic data about workers on public projects.

Double Check Your Compliance

Indiana contractors that perform work in Illinois should know the new changes made to the state’s prevailing wage laws are expected to produce an uptick in enforcement of these rules. Illinois-based legal experts have commented that while the amendment won’t actively increase litigation on its own, the state’s administration is taking on the issue of prevailing wage compliance more aggressively than previous administrations. It’s become a bigger priority, evidently.

In this regard, it would be advisable for contractors to make an appointment to discuss this topic with their legal representation about how the issue will affect them as they conduct work in either state. Additionally, due to confusions that surround the issue, further input should be gathered from multiple sources, particularly regulatory officials. Being on the wrong side of a wage dispute across state lines sounds like an event best avoided, for everyone’s sake.

A Hypothetical Look at the Confusion

Imagine a locally funded road project that crosses the Indiana/Illinois border.

Scenario 1: Working westbound. An Indiana contractor may (or may not) have to pay their employees more after they cross the border into Illinois.
- A class 1 highway operating engineer under Illinois prevailing wage would be paid $49.30 for work performed in Cook County. (IDOL 3/8/2019)
- In Indiana, the median hourly wage for an operating engineer is $25.50. Individuals in the 90^th percentile of this occupation can make up to $40.46. (BLS, 2018)
Scenario 2: Working eastbound. An employer could legally drop their pay rates to the minimum wage as they crossed from Illinois to Indiana, but that’s bad business if they hope to retain workers. Instead, most continue to use the Illinois wage they began the project with.
Scenario 3: If the project was federally funded or assisted and crossed state lines, there is no confusion. Wages would follow federal Davis-Bacon wage rates.