What is “Prevailing Wage Law”?

Kentucky’s prevailing wage law currently requires that contractors on public works projects estimated to cost more than $250,000 pay wages equal to or greater than the wages of similar workers in the locality where the project is being built. Effectively, the law forces contractors, union and non-union alike, to pay wages at the local union scale.

The Kentucky Labor Cabinet (“Cabinet”) establishes prevailing wage rates and enforces the state’s prevailing wage law. The Cabinet sets the prevailing wage for each classification of construction workers after a hearing regarding the wage data of that locality. The wage is determined based on the basic hourly rate of that type of worker in the locality, plus an hourly amount based on fringe benefits that employers of that type of worker provide. The Cabinet also considers the rates of wages on previous public works projects, previous private projects, and collective bargaining agreements relating to the locality. Alternatively, the Cabinet may simply adopt the prevailing wage rates established by the U.S. Department of Labor for that locality under the Davis-Bacon Act.

If an employee files a complaint with the Cabinet alleging a violation of the prevailing wage laws, the Cabinet must investigate the claim and may bring a civil legal action to help the worker receive back pay. Violations will prevent the contractor or subcontractor from bidding on future public works until the Cabinet finds that the contractor or subcontractor is in substantial compliance.

Recent Developments

Legislation repealing the prevailing wage laws in their entirety and declaring an emergency – meaning that it will become effective immediately upon the Governor’s signature – was introduced during the first day of the 2017 session which began on January 3. Given that Republicans now control both Houses for the first time in the State’s history, and with a receptive Governor, this legislation will almost certainly become law. This legislation has been high on the agenda for business groups for some time, but goes much further than Republican-led proposals in the 2015 and 2016 sessions, which passed the Senate only to die in House committee without a floor vote. Those bills would have only amended the prevailing wage statutes to exempt construction of educational buildings and facilities. The current bill is similar in scope to a 2013 bill which would have entirely repealed the prevailing wage laws. Now that the repeal legislation has been introduced, we will keep you apprised as it quickly proceeds through the legislature.

Even after the legislation becomes law, employers should be aware that federal prevailing wage legislation remains unchanged, and will still govern wages and benefits for construction projects receiving federal funds.

If you have any further questions about the impact prevailing wage legislation may have on your business, please do not hesitate to contact us.

What are “Right to Work” laws?

The National Labor Relations Act (“NLRA”) is a federal law that regulates working relationships between employers and their employees, including unions representing those employees. Under the NLRA, employers and unions can agree to require employees to join or pay dues to the union. These are called “union security agreements.” The NLRA also allows “State or Territorial” laws to prohibit these union security agreements; laws prohibiting them are called “right-to-work laws.” If a state has enacted a “right-to-work” law, then the employer and the union cannot force an employee to join a union or pay union dues.

Recent Developments

On November 18, 2016, the U.S. Court of Appeals for the Sixth Circuit ruled that Kentucky counties may enact “local right-to-work” ordinances under the NLRA. Hardin County, Kentucky, had adopted a county ordinance in 2015 that prohibited union-security agreements. Labor organizations challenged this move, arguing that under the U.S Constitution’s Supremacy Clause the NLRA preempts right-to-work laws not specifically authorized in the Act. They argued that only state or territory governments may prohibit union security agreements, and that counties did not have this authority. The Sixth Circuit found that the use of the word “State” included political subdivisions, like counties. This decision has not been appealed to the Supreme Court (although the labor organizations still have until mid-February to do so). For now, Kentucky does not have a statewide right-to-work law, but individual counties may enact right-to-work ordinances.

Dating back to at least 2003, right-to-work legislation has been introduced in one or both houses of the Kentucky legislature. These efforts have not been successful to date, although a version of the “Kentucky Right to Work Act” was approved by the state Senate in 2015. In 2016, nearly identical right-to-work legislation was again introduced in the Kentucky Senate, but it failed to even come to a vote. Governor Bevin has promised to encourage passage of right-to-work legislation and, with Republicans now controlling both Houses for the first time in the State’s history, it will almost certainly become law.

Indeed, comprehensive right to work legislation and declaring an emergency – meaning that it will become effective immediately upon the Governor’s signature – was introduced during the first day of the 2017 session which began on January 3. This legislation goes much further than previous right to work proposals, barring public employee strikes, and including public safety employees (which were exempted from the right to work legislation introduced in the last two legislative sessions). It also explicitly preempts local regulation on the subject, meaning that local government employees will also possess the right to decline union membership as a condition of employment. Finally, the legislation also includes a so-called dues checkoff provision, meaning that employees will have to affirmatively opt-in to dues payments before they may be deducted from their paychecks.

We will keep you apprised of further developments as the legislation proceeds through the legislature.

Impact on My Business

When states enact right-to-work laws, employers may legally refuse inclusion of union security provisions in collective bargaining agreements. Broadly, right-to-work laws tend to weaken union power by making it more difficult for unions to collect compulsory dues. On the other hand, business groups have long sought passage of right to work legislation, contending that it would attract business to the state. Ultimately, the impact of right-to-work laws has to be evaluated in conjunction with the many other policies - including taxes, education, infrastructure, regulation, and workforce development - that impact the state’s overall business climate.