Certain Private Projects Now Fall Under Prevailing Wage Laws. Is Yours One of Them?
For the last few years, New York State Labor Law has required that all contractors overseeing public development projects pay their workers the prevailing wage rate, which includes a regulated hourly rate for wage and benefits. Fast forward to 2022, the requirements of Section 224-A are extending to private projects costing more than $5 million where 30% or more of the financing for the construction costs was obtained from public sources like state or local funding.
There are a number of forms of financing that qualify as public funding, and its important for developers to understand exactly how these are defined under the new law. Public funding includes any indirect or direct payment from government authorities, savings from fees, tax credits or payments in lieu of taxes, loans from public entities and more.
In order to provide further clarity, the law also clearly defined certain project exemptions to the new rule. First, affordable housing projects will not be affected, along with historic rehabilitation projects or small renewable energy projects. Also, projects for established non-profit companies receive an exemption as long as the company reports gross annual revenues less than $5 million. Other exemptions include projects for schools under 60,000 square feet and those funded by the Urban Development Corporation’s Restore New York's Communities Initiative.
Beyond certifying as a covered project and abiding by the new wage laws, the regulations also require that developers and the entities funding these projects perform the following actions before, during and after the completion of their projects.
Payroll and Apprenticeship Record Retention
For developers that work on projects covered by the new law, it is imperative that they retain payroll records for at least six years after project completion. While this is a responsibility that can be transferred to a contractor, oversight is critical as owners and developers are equally liable if this provision is violated.
This requirement also extends to non-paid employees completing an apprenticeship. Developers that work with apprentices must report annually to the labor commissioner on data such as how many apprentices they hired, their demographics, their rate of graduation and their rate of job placement.
Formalized Funding Documents
If a construction project is benefitting from public funding, the participating governmental entity on a local, state or federal level is required under the new law to document for the developers and/or owners of the project the amount of capital they will be contributing and the intended use of these funds. They are also required to alert developers if they believe that their involvement in the project will subject them to prevailing wages so that developers can begin the certification process in a timely manner.
Understanding of Consequences
Failure to properly report or enforce the requirements of prevailing wages under the new labor law can have serious and costly consequences on a construction project. The Department of Labor can now issue “stop work orders” in the form of a notice that requires all covered private and public projects halt construction immediately while they begin the process of a formal hearing and final determination regarding the violation.
To remain compliant, owners and developers must understand their requirements under the new regulations and report accordingly within five days of commencement of construction if they believe they are subject to issuing prevailing wages. They must also continue to comply with the objectives of minority and women-owned business enterprises and service-disabled veteran-owned businesses.
With laws and regulations in the world of private construction constantly changing, having a consultant on your side who understands the complexities of these requirements can significantly reduce the risk of noncompliance and ensure your project is completed properly. Working with an accounting firm that has a specialty in construction and real estate can make all the difference.
Nancy Cox is a partner at The Bonadio Group, specializing in financial statement auditing and consulting related to real estate and employee benefit plans. She serves as co-leader of both the employee benefit plan and real estate industry firm-wide teams. She is passionate about working with businesses and connecting individuals within the community to help them grow and achieve their goals.