OR Bill Analysis

sSB 181

AN ACT REQUIRING THE STANDARD AND PREVAILING WAGE BE PAID TO CERTAIN EMPLOYEES OF EMPLOYERS WHO RECEIVED FINANCIAL ASSISTANCE FROM STATE ECONOMIC DEVELOPMENT ENTITIES.

SUMMARY:

This bill imposes standard wage and prevailing wage requirements on business organizations that receive $ 1 million or more in state financial assistance. It defines financial assistance as including, but not limited to, loans, grants, guarantees, and tax abatements from the state or any state agency, including the Department of Economic and Community Development (DECD), the Connecticut Development Authority (CDA), and Connecticut Innovations, Inc. (CII).

Under the standard wage law, which currently applies to private contractors operating in state buildings, a contractor providing food, building, property, or equipment services must agree to pay workers providing those services a standard wage that the labor commissioner determines, including an added amount to cover the cost of any health, welfare, or retirement plans.

The bill applies the prevailing wage law for construction wages to any construction, remodeling, refinishing, refurbishing, rehabilitation, alteration, or repair of any property owned by the business organization receiving the assistance of $ 1 million or more. Thus the business organization must require the construction contractor to pay prevailing wage rates, as set by the federal government, to any mechanic, laborer, or worker.

Business organizations that violate either the standard wage or prevailing wage portions of the bill must repay the assistance and pay a penalty of 5% of the assistance to the state agency.

EFFECTIVE DATE: January 1, 2013; the standard wage requirement is applicable to any agreement for financial assistance entered into on or after that date, and the prevailing wage requirement is applicable to any construction or remodeling contract entered into on or after that date.

STANDARD WAGE

The bill applies the standard wage requirement whenever the state or any state agency, including DECD, CDA or CII, provides financial assistance of $ 1 million or more to any business organization. It does this by imposing the standard wage requirement for service workers employed by (1) the business entity receiving the state assistance and (2) any vendor the business organization contracts with to provide food service, building maintenance, and property or equipment services. The wage provision must be included in the agreement between the contractor and the business organization.

The bill appears to apply this requirement to each employee who performs these services for the business entity and any contract the business enters into to provide these services. It does not limit the requirement to employees and contracts related to an economic development project supported by the state assistance.

The requirement lasts for five years from the date the business receives the assistance.

By law, the labor commissioner establishes the standard wage rate for each job classification for all hourly employees by adopting the minimum hourly wages set in the federal “Register of Wage Determinations under the Service Contract Act,” plus a 30% surcharge to cover the cost of any health, welfare, or retirement plans. The employer either puts an amount equal to the surcharge in a benefit plan or pays it directly to the employee in additional wages. Due to a change in the law, employees hired after July 1, 2009 in certain janitorial job classifications are paid a rate equal to that in the Hartford-area union contract (CGS 31-57f).

PREVAILING WAGE

The bill applies the prevailing wage law for construction wages to any construction, remodeling, refinishing, refurbishing, rehabilitation, alteration, or repair of any property owned by the business organization receiving the assistance of $ 1 million or more. It accomplishes this by mandating a prevailing wage provision be included in the agreement between the contractor and the business organization.

By law, the prevailing wage applies to each contract for the construction, remodeling, refinishing, refurbishing, rehabilitation, alteration, or repair of any public works project by the state, its towns, or other political subdivision of the state (CGS 31-53). The project thresholds for prevailing wage are $ 100,000 for renovation and $ 400,000 for new construction. The prevailing wage is established by the U. S. Department of Labor through a wage survey.

The bill's prevailing wage requirement is applicable to any construction or remodeling contract entered into by the private business organization and the construction contractor on or after the January 1, 2013 effective date. This could affect projects where the state awarded the assistance before the effective date, but the contract to perform the construction work is signed after the effective date. There is often considerable time between the time the state awards the money and the time the construction contract is signed.

PENALTIES

While the existing standard wage and prevailing wage law each have their own penalties, the bill instead establishes its own penalties for assistance to business organizations. Business organizations that violate either the standard wage or prevailing wage portions of the bill must repay the assistance and pay a penalty of 5% of the assistance to the state agency. Presumably, the labor department enforces the bill's provisions, but the bill does not specify what agency is responsible for enforcement.

COMMITTEE ACTION

Labor and Public Employees Committee

Joint Favorable Substitute

Yea

8

Nay

3

(03/15/2012)