Sponsored by 2018 Changes in Prevailing Wage St

Sponsored by 2018 Changes in Prevailing Wage St. Louis Council of Construction Employers St. Louis Construction Cooperative

Industry Defense of Prevailing Wage • Beginning in the early 2000 s, Conservative Republicans, public owners and some non-union contractors began to attack Missouri’s Prevailing Wage Law • Legislative bills designed to repeal Prevailing Wage have been introduced every legislative session since 2002 • Concerned unions and associations jointly funded research through the University of Missouri-Kansas City, which resulted in studies titled “The Adverse Economic Impact from Repeal of the Prevailing Wage Law in Missouri” • Consistently demonstrated that Missouri’s Prevailing Wage Law generates substantial economic benefit for our state. • UMKC research has been updated twice, most recently in 2016; the study has repeatedly verified that construction costs for public work performed in Missouri are competitive with states in our region without prevailing wage laws • University construction is $34. 35/sq. ft. lower in Missouri • All public construction averaged $46. 67/sq. ft. lower in Missouri • Starting Fall 2016, Republicans held a supermajority in MO House and Senate and the governor’s office, providing sufficient political power to eliminate Missouri’s prevailing wage

2017 -2018 Challenge to Prevailing Wage • Despite industry efforts to defend Prevailing Wage, the Missouri House of Representatives voted to repeal the law in 2017 • Threat of a filibuster by Democratic Senators prevented total repeal • In 2017, Missouri’s contractors forged a coalition, encompassing 16 associations statewide, representing more than 3, 500 contractors, employing nearly 100, 000 skilled Missouri construction workers • Open shop and union contractors were nearly equally represented in the coalition – demonstrating that the value of prevailing wage is understood throughout the industry

Two Legislative Challenges • (A) Total Repeal of Prevailing Wage – sponsored by Senator Brown, in the Senate • (B) Significant Reduction of Prevailing Wage - Alternative bill introduced by Senator Schatz to dramatically reform Prevailing Wage. Components of Senator Schatz’s legislation included: • Elimination of the Division of Labor Standards and all statistical calculations to determine Missouri’s Prevailing Wage. • Elimination of all Occupational Titles to establish a common construction minimum wage, which would replace Prevailing Wage in all jurisdictions. This new construction minimum wage would be 120% of the county average wage as published by the most recent Missouri Economic Research and Information Center (MERIC) survey. • A new project-size threshold of $500, 000 would be established for implementation of the new wage standard on any construction project

Legislative Resolution • Mid-session, the construction industry coalition managed to secure sponsorship from Senator Romine (Farmington) to offer an alternative to the dissolution of Prevailing Wage • The coalition appointed a Steering Committee comprised of: • • • Terry Briggs Tim Green Doug Martin Len Toenjes Tim Wies SITE Improvement Association Former Senator and Lobbyist St. Louis Chapter, NECA AGC of Missouri TJ Wies Contracting • One day before the end of the legislative session, the Missouri Senate, by a vote of 22 to 9, passed the industry compromise legislation we will review today. The next day, with only hours of the session remaining, the Missouri House of Representatives passed, by a vote of 97 to 50, the Prevailing Wage Reform Bill, which was subsequently signed by Governor Parson very recently. The new Prevailing Wage Law becomes effective August 28, 2018. • Most of us who worked to negotiate a compromise to preserve the essence of Missouri’s Prevailing Wage Law believe that without our industry’s coordinated effort to craft a reform compromise, the Prevailing Wage statute would have been repealed in its entirety. This compromise has provisions that none of us like, but it is vastly better than losing Prevailing Wage completely. • The best evidence of that prediction is that three Midwestern States recently repealed their Prevailing Wage Laws: • Indiana – 2015 • Wisconsin – 2017 • Michigan - 2018 • We believe the compromise legislation could not have been achieved without the hard work and cooperation of all the members of the coalition. The association and contractor efforts were supported and coordinated with our labor partners statewide throughout our 2 -year negotiations.

What’s Changed in Prevailing Wage? • HB 1729 introduced multiple changes to existing prevailing wage law: • Minimum Hours Per County • Now: 1000 hour threshold per occupational title • Was: No minimum • Calculation of Prevailing Wage (hours exceed minimum) • Now: Weighted average of all hours reported in a county • Was: The most common (mode) wage reported in a county • Calculation of Prevailing Wage (hours do not exceed minimum/no hours reported) • Now: Construction minimum wage - 120% average hourly wage in county (per MERIC), as low as ~$12/hr • Was: See flowchart on next page • Reduced Occupational Titles • Now: A total of 20 titles • Was: A total of 44 titles • Prevailing Wage Threshold • Now: $75, 000 threshold for all contracts • Contract modifications exceeding threshold • Was: No threshold - Prevailing Wage was applicable to every publicly funded construction project • Contractor Reporting • Now: Only contractors may report their wages/hours • Was: Union halls, associations, etc. , could report hours on behalf on contractors

Previous Prevailing Wage Flowchart Hours Submitted for county in current prevailing wage cycle Yes No Most important takeaway Previous process had many “catches” to maintain prevailing wage in the event of absent reporting Hours submitted in past 6 years No hours submitted in past 6 years Majority of hours collectively bargained Majority of hours not collectively bargained Majority of hours in adjacent counties not collectively bargained Prevailing wage is CBA rate Previous prevailing wage remains in effect Prevailing wage is CBA rate Prevailing wage from adjacent counties becomes the county prevailing wage Prevailing wage is the most commonly reported wage

New Occupational Title Grouping

Why Is This Important? - An Example • Assume a county with 1000 hours worked in 2018 (for one occupational title) • Case 1 • Contractor A: 750 hrs @ $20/hr • Contractor B: 250 hrs @ $30/hr • “Prevailing” wage = ((750 hrs x $20/hr) + (250 hrs x $30/hr)) / 1000 hrs = $22. 50/hr • Case 2 • Contractor A: 500 hrs @ $20/hr • Contractor B: 500 hrs @ $30/hr • “Prevailing” wage = ((500 hrs x $20/hr) + (500 hrs x $30/hr)) / 1000 hrs = $25/hr • Case 3 • Contractor A: 250 hrs @ $20/hr • Contractor B: 750 hrs @ $30/hr • “Prevailing” wage = ((250 hrs x $20/hr) + (750 hrs x $30/hr)) / 1000 hrs = $27. 50/hr • Assume a county with <1000 hours worked in 2018 • “Prevailing” wage = 120% average hourly wage in county (per MERIC), as low as ~$12/hr

Detailed Prevailing Wage Calculation - Now • Assume 2500 hours are submitted for an occupational title in a given county, per Figure 1 Hours Submitted Wages + Fringes 1500 $45. 00 300 $38. 00 200 $35. 00 200 $31. 00 200 (Apprentice) $24. 50 100 (OJT) $22. 50 Figure 1: Submitted Hours • Apprentice and OJT hours/wages are excluded from calculation, final reporting is per Figure 2 Hours Submitted Wages + Fringes Gross 1500 $45. 00 $67500 300 $38. 00 $11400 200 $35. 00 $7000 200 $31. 00 $6200 2200 $92100 Figure 2: Final Reporting • Prevailing wage is calculated by dividing total wages by total hours: $92100 / 2200 hours = $41. 86/hr

Detailed Prevailing Wage Calculation - Was • Assume 2500 hours are submitted for an occupational title in a given county, per Figure 1 Hours Submitted Wages + Fringes 1500 $45. 00 300 $38. 00 200 $35. 00 200 $31. 00 200 (Apprentice) $24. 50 100 (OJT) $22. 50 Figure 1: Submitted Hours • Apprentice and OJT hours/wages are excluded from calculation, final reporting is per Figure 2 Hours Submitted Wages + Fringes Gross 1500 $45. 00 $67500 300 $38. 00 $11400 200 $35. 00 $7000 200 $31. 00 $6200 2200 $92100 Figure 2: Final Reporting • Prevailing wage is the most commonly reported wage: $45. 00/hr

Construction Minimum Wage by County All data taken from 2016 MERIC database

Detailed Wage Comparison • St. Louis City – Highest Construction Minimum Wage 2018 Prevailing Wage Package Construction Minimum Wage (120% MERIC – 2016 Data) Wage Difference Carpenter $56. 16 $33. 37 $22. 79 Electrician $50. 31 $33. 37 $16. 94 Laborer $47. 64 $33. 37 $14. 27 Plumber $66. 43 $33. 37 $33. 06 • Ripley County – Lowest Construction Minimum Wage 2018 Prevailing Wage Package Construction Minimum Wage (120% MERIC – 2016 Data) Wage Difference Carpenter $44. 17 $11. 74 $32. 43 Electrician $50. 31 $11. 74 $38. 57 Laborer $36. 83 $11. 74 $25. 09 Plumber $66. 43 $11. 74 $54. 69

How Does the Threshold Apply? - Example • Assume three projects: • Case 1 – Total contract value: <$75, 000 • No prevailing wage must be paid • Case 2 – Total contract value: ≥$75, 000 • Prevailing wage must be paid for the entirety of the project • Case 3 – Total contract value: $50, 000; Contract modification after project start adds $50, 000 • Prevailing wage must be paid only for the portion of the project that exceeds the $75, 000 threshold ($25, 000) • Case 4 – Total contract value: $50, 000; Contract is modified to engineer’s estimate of $100, 000 • Prevailing wage must be paid for the entire project

Reporting • Contractors must report their own hours • Missouri Department of Labor has a fillable form (LS-04 -Al) • This form must be completed for each project (prevailing wage or not) • It is vital to correctly report the county – especially in low hour counties • Reporting schedule is based on the calendar year • 2018 hours must be submitted by January 31, 2019 • Contractor reports for subsequent years should report all hours for the Calendar Year by the end of January the following year. ( I. e. 2019 hours by January 31, 2020. ) The Division will then issue an initial determination by March 10 to become effective July 1 of each year.

Reporting (Form LS-04 -AI)

Q&A • Why was this legislation introduced? Did the associations do anything to protect contractors? • This adds time & cost to our business, what happens if we don’t report hours? • When do I need to submit my hours? • How do I report different job classifications (journeyman, apprentice, foreman, etc. )?