• Overtime Required for Prevailing Wage Cash Fringe Benefits Impacting All Non-Union Contractors & Employees
  • June 4, 2014
  • Law Firm: Heyl Royster Voelker Allen Professional Corporation - Peoria Office
  • A recent amendment to the Illinois Prevailing Wage Act ("IPWA") requires fringe benefits to now be annualized for purpose of taking a credit for fringe benefit payments. See 820 ILCS § 130 (West 2013).The Illinois Department of Labor ("IDOL") is responsible for administering that Act. The department recently updated its Frequently Asked Questions ("FAQs") to explain how the IDOL intends to interpret the new requirement. In the process of updating its guidance, the IDOL expanded on how fringe benefits might affect the prevailing base hourly rate that a contractor must pay.

    The IDOL tells us that any prevailing wage fringe benefits paid in cash must be added to the base hourly rate. Fringe benefits or the equivalent are a part of the total prevailing wage just like the basic hourly wage rate. The Act requires all contractors, regardless of the status of their relationship with a union, pay the components of the prevailing wage, base pay and fringe benefits. Therefore, the IDOL recognizes that the payment of base wages is a requirement separate and distinct from the requirement to pay fringe benefits.

    Although both components of the prevailing wage had to be paid to be in compliance with the IPWA, there was no requirement to add the hourly cash equivalent of fringes to the hourly base wage rate. This was consistent with federal prevailing wage law where the regulations make it clear that cash fringe benefit payments are not subject to overtime premiums. 29 C.F.R. § 5.32 (West 2013).

    IDOL's revised guidance now states that any prevailing wage fringe benefits paid as an hourly cash equivalent must be added to the base hourly wage rate. The obvious impact is that the hourly cash equivalent for fringe benefits would be subject to overtime premium calculations. As a result, those employers paying cash fringe benefits will pay more to employees working overtime, in excess of 40 hours, in any work week, employees working in excess of 8 hours a day on an IPWA job Monday through Friday, and employees for any and all time worked on Saturdays, Sundays or legal holidays.

    This is a fundamentally critical change in the interpretation and administration of prevailing wage law in Illinois. Contractors need to immediately review their accounting practices for Illinois prevailing wage purposes. See 2013 Ill. Legis. Serv. P.A. 98-482 (West).