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Prevailing Wage Basics

What is prevailing wage?

Prevailing wage, established in Minnesota in 1973, is a system under which contractors and subcontractors doing work on construction projects that are partly or entirely paid for with state funds are required to pay their employees no less than a particular amount determined by the Department of Labor and Industry to be the "prevailing wage" for that particular employee’s job and for the location where the work is being done.

The system contains both a minimum hourly wage requirement and requirements for overtime pay after the employee works the "prevailing hours" for the day or week, which can be a maximum of eight hours per day or forty hours a week. This differs from the regular state overtime requirements, which require overtime only after 48 hours in a week and contain no daily overtime provision. The state's prevailing wage laws are contained in Minnesota Statues, sections 177.41 to 177.44.

What projects are covered by prevailing wage requirements?

Generally, the prevailing wage requirements apply to state "projects." A project is defined as "erection, construction, remodeling, or repairing of a public building or other public work financed in whole or part by state funds." Prevailing wage provisions do not apply to a contract in which the total cost of the project is expected to be under $2,500 and only one trade or occupation is required to complete the project, or to a contract in which the total cost of the project is expected to be under $25,000 and more than one trade or occupation is required to complete it. Highway contracts are also subject to prevailing wage requirements under Minnesota Statues, section 177.44.

How is the prevailing wage calculated?

The Department of Labor and Industry is responsible for conducting surveys in which it gathers information from contractors, labor organizations, and other interested parties about what wages are being paid to employees who do particular jobs in particular geographical areas. The department has established rules that explain how it conducts the survey. When the information has been collected, the department determines which single wage is being paid to the largest number of employees, and that wage becomes the prevailing wage for that job in that place. This number is not an average, but is instead the mode of all wages paid in the area, which can be higher or lower than the average.

Does the federal government have a prevailing wage requirement for federal projects?

There is a federal prevailing wage law that applies to federal construction projects. That law enacted in 1931, known as the Davis-Bacon Act, is similar to Minnesota’s law (which is sometimes called "Little Davis-Bacon"), although the federal system for calculating the prevailing wage is somewhat different. Where Minnesota uses a mode for calculating the prevailing wage, the federal government uses one of two systems. If more than half of the workers in the survey are paid the same wage, then that wage is used. If no majority emerges, then an average is used.

Who enforces Minnesota's prevailing wage laws?

These laws are enforced by the Department of Labor and Industry, except with respect to highway construction, in which case enforcement is the responsibility of the Department of Transportation.

August 2014