Understanding Illinois State vs. Federal Prevailing Wage Laws

Federal and Illinois’ prevailing wage laws share many fundamental characteristics, but sifting through the details and requirements of each new, existing, or amended law can be a challenging and time-consuming process. To support Illinois employers with this task, we’ve compiled all of the essential information and tools your business needs to understand and address federal and Illinois’ Prevailing Wage Laws. With these insights and resources in hand, your company can ensure full compliance with all of the applicable labor law requirements in your area.

Federal Prevailing Wage Laws

The 1931 Davis-Bacon Act is the chief and seminal piece of legislation dictating prevailing wage protocols on a federal level. Although the act was originally designed to fairly compensate laborers and mechanics working on federally supported projects exceeding $2,000, more recent legislation, including but not limited to the McNamara-Ohara Service Contract Act, extends these protections to contracts where goods and services are provided.

Among these federally-supported (funded or assisted) projects, prevailing wages are determined by U.S. Department of Labor surveys, which solicit information and feedback from union and nonunion workers to determine prevailing wages in a particular trade and within a local economy.

In addition to these processes and parameters for determining federal prevailing wages, many states have created prevailing wage laws to safeguard against misconduct with state-funded public projects. We’ll explore all specific requirements within the state of Illinois below.

Prevailing Wage Obligations in Illinois

Like many other states, Illinois has developed its own distinct legislation to address prevailing wage requirements for state-funded, public works projects.

The Prevailing Wage Act mandates that contractors and subcontractors compensate workers, mechanics, and laborers at a rate that meets or exceeds the prevailing wage rate for work of a similar nature within a particular locality. Compensation includes hourly cash wages, as well as fringe benefits. In addition to meeting these terms of compensation, contractors are obligated to post prevailing wage rates at job sites where they are clearly visible to workers. They are also required to state within each subcontract that workers will not be paid less than the area’s/industry’s prevailing wage rate.

Employers should bear in mind that there is not a single, uniform state rate in Illinois. Rates are determined by the county or locality where work is being completed and by the type of work that is being completed. Although the public body within a particular area bears primary legal responsibility for notifying contractors of revised prevailing wage rates, contractors/employers will still be required to pay the difference in wages once rates have increased, including for projects already underway. 

In terms of recordkeeping, contractors and subcontractors in Illinois must keep a wide range of records for at least three years after the last payment issued within a project. This includes all of the following:

• Wages & Wage rates
• Overtime reported
• Fringe benefits 
• All workers employed (and related contact information)
• All monthly certified payroll records (submitted to the public in charge of the project)

In a later section, we’ll detail the consequences and penalties for failing to meet these state requirements. We’ll also outline how we can help you manage and streamline this process.

Project Types and Exceptions

In Illinois, any fixed works that are funded partially or wholly by public funds provided by the State are subject to Illinois’ Prevailing Wage laws. This includes fixed works constructed by any public body in Illinois as well as those projects pursued in collaboration with any institution partially or wholly supported by public funds.

Public entities must accurately categorize prevailing wage rates based on locality and work classification when soliciting bids and must articulate in all contracts that workers will be paid in accordance with local and industry-specific prevailing wage rates.

In Illinois, state-funded modifications to real estate or landscapes are subject to prevailing wage laws and classified as a fixed work even if a project is not for public use.

Regarding exceptions to Illinois’ prevailing wage laws, in the vast majority of cases, projects funded by Tax Increment Financing or a Sales Tax Rebate do not qualify as public works subject to the Prevailing Wage Act.  

Noncompliance Penalties and Repercussions

In addition to paying the unpaid balance in wages to a worker or workers, contractors who violate Illinois’ prevailing wage laws will also be required to send 20% of their salary to the Illinois Department of Labor as a penalty for noncompliance. This penalty is increased to 50% in the event of a second violation. Under certain circumstances, if a contractor or subcontractor has violated the requirements of the Prevailing Wage Act two or more times within a given period, they can be disbarred for up to four years from all public work projects.

Streamlining Payroll and Labor Law Compliance 

For businesses, contractors, and subcontractors involved in federally- or state-funded projects, compliance with prevailing wage laws is imperative to keep business on track and free of financial or legal challenges. Nevertheless, the ever-shifting process of understanding and adhering to applicable laws can be an extra burden on businesses aiming to focus on day-to-day operations and ongoing projects.

That’s why we offer a complete Payroll Solution to ensure that your prevailing wage process is organized, sustainable, and compliant with all Illinois and federal laws. Our payroll services are provided by experts in state and federal policies, who can assist with yearly filings, application of tax credits, time, attendance, and more. We invite you to explore our software and services and request a quote for our HCM solutions. 

Find out more about our services today to start our collaboration and ensure sustained labor law compliance, payroll services, and HR outsourcing for your Illinois business.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.