Are You Doing Business With A Public Body?
February 12, 2015
Are you currently doing business with a public body or are you considering doing business with a public body? Proposed legislation could substantially change the wage rate that a public body has to pay for projects of $20,000 or less by allowing for an exemption from the Illinois Prevailing Wage Act. In addition, pending legislation would allow municipalities the ability to reorganize debt under the federal bankruptcy code. While the ability to file for Chapter 9 may provide needed relief to the municipal budget and long-term financing obligations, it should be carefully considered by all companies doing business with municipalities.
On February 6, 2015, Representative Brian W. Stewart (R-Freeport) filed HB 1525 that would amend the Prevailing Wage Act by allowing a waiver of prevailing wage rates for projects of $20,000 or less. You can view the full text of HB 1525 here.
The proposed amendment provides an exemption for projects of $20,000 or less that are stand-alone projects (meaning there is no additional work in on that project in the following 24 months). The public body using the exemption must notify the Department of Labor for each project within 60 days of commencing the project. While there is a requirement that the Department of Labor be notified, it can be done after the project commences and does not require any type of approval from the Department. As part of the notification, the public body is required to provide a description of the project, the number of employees engaged in the project and the total cost of the project without and with the prevailing wage rate standards. A public body's ability to use the waiver is limited by federal law, in that the waiver could not be used to avoid prevailing wage under Davis-Bacon.
The bill also requires that the Department of Labor submit an annual report to the Governor and General Assembly detailing the number of projects using the waiver, the number of employees engaged in the projects and the cost of the project with and without the prevailing wage rate standards.
While the prevailing wage exemption allows all public entities the ability to pay less than the prevailing wage rate on certain projects, another bill attempts to give municipalities the ability to reorganize its outstanding debt. On January 26, 2015, Representative Ron Sandack (R-Downer's Grove) filed HB 298 that would amend the Illinois Municipal Code to allow a municipality to file a petition and exercise power pursuant to federal bankruptcy law. You can view the full text of HB 298 here. Notably, the bill would only apply to municipalities. As currently drafted, the bill would not allow counties, school districts, parks, libraries or townships to petition for bankruptcy.
Heyl Royster will continue to track and report on the status of these bills. We frequently counsel clients on the Prevailing Wage Act, prevailing wage requirements within the Illinois Procurement Code and both debtor's and creditor's rights under Chapter 9. If you are currently doing business with a public entity or have concerns about how the potential for municipal bankruptcy may impact your current contracts with various towns or cities, please contact any of the attorneys in our Business and Commercial Litigation Practice.
