Illinois Supreme Court Issues Important Prevailing Wage Act Decision
In a recent decision, the Illinois Supreme Court reviewed commonly used contract language regarding the Prevailing Wage Act. This decision should put public bodies on notice to carefully review bid, purchase order, and other contract documents related to projects involving public works that implicate the Prevailing Wage Act.
In Valerio et al. v. Moore Landscapes, LLC, landscaping workers performing work under a contract between the Chicago Park District and a contractor claimed they were not paid the prevailing wage. The Act states that “laborers, workers, and mechanics employed by or on behalf of public bodies engaged in public works” shall be paid “a wage of no less than the general prevailing hourly rate as paid for work of a similar character in the locality in which the work is performed.” Public bodies are required to insert a stipulation in contracts requiring contractors to pay no less than the prevailing wage rate to all laborers, workers, and mechanics when the Act applies to the work. Under the Act, any laborer that is entitled to the prevailing wage and paid less than the stipulated rate may file an action to recover the difference in pay as well as punitive damages and attorneys’ fees.
In this case, the landscapers only filed claims against their employer and not the Park District. They alleged that the contracts between the Park District and their employer for landscaping work required their employer to pay employees the prevailing wage rate “where applicable.” In response, the defendant employer filed a motion to dismiss, alleging the work was not covered by the Act and that the contract did not include a clear stipulation to pay the prevailing wage rate. The circuit court granted the employer’s motion to dismiss, which was later reversed by the Illinois Appellate Court. The employer appealed the decision to the Illinois Supreme Court.
The Illinois Supreme Court held that the “where applicable” clause did not clearly stipulate that the defendant was required to pay the prevailing wage rate. The Court reasoned that the “where applicable” language in the contracts was not sufficient to trigger the landscapers’ right to damages from the employer under the Act. Instead, there must be clear stipulation to pay the prevailing wage rate. Therefore, due to the vague contract language, the employees had no recourse under the Act against their employer.
The Court went on to suggest that where a public body fails to notify a contractor of their obligation to pay prevailing wages, the liability for punitive damages, penalties, and fines shifts to the public body itself. Here, however, the plaintiffs did not name the Park District as a defendant. The Court’s decision was only based on the sufficiency of the complaint and did not ultimately decide whether the nature of the landscaping work was subject to the Act. As the Act only applies to “fixed works,” whether it even applied to the landscaping work here is an open question that was not answered.
This case provides caution to public bodies when drafting contracts for public works. Public bodies should take this opportunity to review bid solicitation documents, purchase orders, and other contract documents to ensure the documents comply with this decision. The issue that is likely to arise, however, is that the applicability of the Act to certain projects, for example landscaping projects like the work in this case, is not always clear; hence the temptation of utilizing vague language that now appears to be problematic. The case appears to require public bodies, and not employers, to make the determination if the Act applies to the work subject to a contract. Public bodies should work closely with their attorneys to craft appropriate contract language.
If you have questions about the Prevailing Wage Act, you can contact one of the authors of this past or any Franczek attorney.