PUBLICATION OF ASSOCIATED BUILDERS AND CONTRACTORS OF MICHIGAN SPRING 2010
Prevailing wage inflates construction costs
Also: The pitfalls of prevailing wage 2010 Gubernatorial candidates address ABC members
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Inside
4 Executive Perspective wage inflates 5 Prevailing construction costs
Although the state could save millions by dropping the inflated wage rules, efforts now center on keeping it out of other market segments.
Gubernatorial candidates 10 2010 address ABC members
Republican candidates for governor Peter Hoekstra, Rick Snyder and Mike Bouchard asked ABC members for their support during the 2010 Legislative Conference in March. Other legislators gave updates on issues at state and federal levels.
Development: 12 Business The pitfalls of prevailing wage
Classifications and calculations can easily confound and confuse. By Kraig M. Schutter, J.D., L.L.M., the Masud Labor Law Group
19 Advertisers Index VOLUME IV, ISSUE I The prevailing wage law requires contractors to pay union-established wages which are far above market rates on state-funded projects, despite the fact that union workers account for only 20 percent of the construction workforce.
Legislative Update 16
www.abcmi.com
Spring 2010 3
ASSOCIATED BUILDERS and CONTRACTORS of MICHIGAN BOARD of DIRECTORS Rod Kloha – Chairman Circle “K” Service, Inc. - Saginaw Valley Chapter Jim Cripps - Vice-Chairman Cripps Fontaine Excavating - Western MI Chapter Dave Sheffield - Secretary/Treasurer Onslow-Sheffield, Inc. - Southeastern MI Chapter John Parish – Past Chairman Parish Corporation - Central MI Chapter Bill Buyak Capital Steel - Central MI Chapter Gary Hengesbach Westphalia Builders - Central MI Chapter Erick Forshee TIC, Inc. - Saginaw Valley Chapter Mike Laundra Alloy Construction - Saginaw Valley Chapter Rick Jackson Jackson Associates - Southeastern MI Chapter Bill Molnar Wm. Molnar Roofing Co. - Southeastern MI Chapter David Mollitor Jr. Consolidated Electrical - Western MI Chapter Michael Poggi Pinnacle Insurance Partners - Western MI Chapter Jack VandeGuchte Sobie Company, Inc. - Western MI Chapter Daniel Welch Welch Tile & Marble - Western MI Chapter Michigan Merit Contributors Publisher: Christopher Fisher Managing Editor: Mary Boardway, CAE Publication management: Lezotte Miller Public Relations, Inc. Advertising: Arion Media Printing: Bradford Printing Michigan Merit (ISSN# 1938-9051) is the official publication of Associated Builders and Contractors Inc. of Michigan (ABC of Michigan) and is published quarterly at 120 N. Washington Sq, Suite 805, Lansing, MI 48933, (517) 853-2545. Please direct all inquiries to the previous address. Articles written by outside authors do not necessarily reflect the views of Associated Builders and Contractors Inc. of Michigan. ABC of Michigan reserves the right to reject or edit all material submitted for publication. The appearance of an advertisement in Michigan Merit does not constitute endorsement of the advertiser, its products or services, nor do Michigan Merit or Associated Builders and Contractors Inc. of Michigan guarantee or warrant any claims or offers made by the advertisers.
Prevailing wage is an issue that constantly sparks debate in the halls of the Legislature and around the state. At a period where Michigan faces the worst economic climate in the nation, punctuated with the highest unemployment rate in all 50 states and more than 30 percent unemployment in the state construction industry, there is more interest in repealing prevailing wage laws as a way to prioritize tax expenditures and get more citizens back to work. This issue of Michigan Merit takes a closer look at the prevailing wage repeal effort, as well as ABC’s efforts to keep prevailing wage mandates from expanding into new areas.
As more contractors seek public work opportunities, compliance with prevailing wage becomes a bigger issue.
In the meantime, as prevailing wage remains the law of the land, we’re also taking a closer look at some of the ins and outs of doing prevailing wage work in Michigan. As more contractors seek public work opportunities, compliance with prevailing wage becomes a bigger issue. To help contractors learn the rules of the game, ABC chapters across the state will host prevailing wage seminars this year, while we also work to eliminate the mandate altogether. Yours for the Merit Shop,
Chris Fisher President
Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Michigan Merit, a publication of Associated Builders and Contractors Inc. of Michigan.”
4 Spring 2010
Michigan Merit
Prevailing wage inflates construction costs It’s a symbolic measure tied to a day rich in meaning. Legislation would repeal Michigan’s prevailing wage law effective on the Fourth of July this year. The bill, which is before the House Labor Committee, has little to no chance of passing, acknowledges its main sponsor, Rep. David Agema, R-Grandville. The goal is to make a larger point: Michigan’s troubled economy requires revolutionary measures to get back on track. “Just because you think a bill may not go somewhere is not a reason not to put it in,” says Agema, whose proposal garnered more than 20 co-sponsors but is unlikely even to come up for a vote in the Democratic-controlled House. Prevailing wage, Agema says, is an example of government meddling in the free market. The law requires contractors to pay union-established wages which are far above market rates on state-funded projects, despite the fact that union workers account for only 20 percent of the construction work force. www.abcmi.com
“Socialist micromanaging is what we’re getting, and we’re failing,” Agema says. “But if we could get rid of prevailing wage, we could save a lot of money on state projects.”
Entrenched law Current political realities are that the state’s Merit Shop contractors are unlikely to receive independence from Michigan’s prevailing wage law, enacted in 1965, anytime soon. As Kraig M. Schutter, a Saginaw attorney who specializes in labor and employment law notes, if the law wasn’t repealed when John Engler and his fellow Republicans in the House and Senate controlled state government throughout the 1990s, it’s not likely to occur when unionallied Democrats are in charge of two out of three branches of state government. “There’s too much Democratic influence in our state government to have that happen,” he says. The same holds true on the federal level, where the Davis-Bacon Act of
1931 governs wages paid on public works projects, Schutter adds. “The goal of ABC of Michigan and other business-advocacy organizations for now is to keep state prevailing wage mandates from creeping into other market segments,” says Chris Fisher, ABC of Michigan president. Three times in the past year, ABC has had to lobby against attempts to expand the law. The efforts to increase prevailing wage’s reach reflect misplaced priorities within the Capitol. “Prevailing wage is a special interest-driven wage monopoly that runs contrary to the best interests of Michigan citizens and communities,” he says. Fisher also notes that studies have shown that anywhere from $250 million to $275 million can be saved annually by repealing Michigan’s Prevailing Wage Act. The law’s elimination is among the top priorities for ABC of Michigan and a host of other major business and trade organizations that have teamed Spring 2010 5
up to push for state governmental reforms that include prevailing wage repeal. “Repealing the prevailing wage law in Michigan is a common-sense way to improve the state’s business climate and free up much-needed funding for vital priorities,” he says. Studies have consistently shown that prevailing wage mandates add 10 percent to the cost of construction, Fisher adds. “The added cost means that communities are deprived of funds to build more schools, one in 10 potholes cannot be filled, and budgets are unnecessarily inflated.”
Fighting expansion Despite the case that can be made for the repeal of prevailing wage, ABC of Michigan spends much time trying to convince legislators merely not to expand the law’s reach.
6 Spring 2010
“Hire Michigan First” plan, didn’t distinguish between flagrant violators and those that simply ran afoul of the law’s often-byzantine wage calculations, Fisher says.
Elections hold hope
In September, an ABC-opposed effort to expand the Prevailing Wage Act came perilously close to gaining approval from the GOP-controlled state Senate. The measure was defeated 19-17 in a mostly party-line vote, with Sen. Randy Richardville of Monroe the only Republican voting in favor of the bill. Had it passed, it would have expanded prevailing wage requirements to privately owned projects that receive grants through the Michigan Economic Growth Authority. Currently, the law extends only to public projects. There were also two separate and sofar-unsuccessful attempts to ban from state projects contractors deemed to be repeat violators of the Prevailing Wage Act, Fisher says. The proposals, one of which was part of the benignly named
The ongoing battle against expansion of prevailing wage highlights the need for ABC members to be politically active. The best hope for nipping possible expansion of the prevailing wage law — or even curtailing it — in the near future will come at the ballot box this fall, when wholesale changes among state officeholders are guaranteed. Term limits mean that 30 of 38 seats in the Senate will have new occupants, and about half of the House’s 110 seats will also be open. But it’s the governor’s race that holds the greatest potential for change on the prevailing wage front, Schutter says. Because the statute is relatively short, it is open to a high degree of administrative interpretation and its enforcement can be unilaterally altered by executive order of the governor. Jennifer Granholm promptly did just that when she took office in 2003. Her first official order of any kind called for blacklisting contractors who accumulated two violations within three years, although the order has never been enforced. Her administration also immediately opened the door for often frivolous third-party complaints of alleged violations of prevailing wage policies.
Third-party politics The option of filing third-party complaints added an important weapon to the PR arsenal of construction laborers’ unions — by far the most common filers of third-party complaints. Violators are placed on a public list maintained by the state’s Wage & Hour Division and published on the Internet. A violation effectively becomes a Michigan Merit
scarlet letter that union activists can use to try to shame contractors before school boards and other governmental bodies overseeing state-financed construction projects, Schutter says. The mandates of the law are not only artificial and convoluted, but they require a Merit Shop contractor to understand trade union practices, Schutter says. It is so difficult to comply with that some error is bound to occur on virtually every project, he says. “It’s like an IRS audit — they’re going to find something,” Schutter says. Indeed, much of what is found by state investigators is minor, says Jeff Merlo, director of member services for ABC’s West Michigan Chapter. “Typically, they’re groundless and just a way to harass the nonunion contractor,” he adds, noting that the complaints nonetheless cost time and money for employers to combat. Requiring those filing third-party complaints to pick up the state’s investigative tab is one way to stop abuse of the system, says Brent Brinks, vice president of ABC member Buist Electric Inc. of Byron Center. “That would shut down the frivolous complaints,” he says. “I think taxpayers would be appalled to see how much the state spends on investigating these complaints.” Brinks says he knows all too well how the system is ripe for abuse. Buist was the target of a protracted campaign by the International Brotherhood of Electrical Workers Local 445 sparked by Buist’s work on the Lakeview school district’s new high school starting in 2003. Among the union’s tactics: filing a third party prevailing wage complaint. The subsequent lengthy investigation by the state Department of Labor and Economic Growth determined that Buist mistakenly underpaid a single employee by $10.56 on the multimillion-dollar project while www.abcmi.com
Michigan Prevailing Wage Act The State of Michigan’s Prevailing Wage Law, Public Act 166 of 1965, became effective March 1966. The act requires that certain wage and fringe benefit rates be paid on state construction projects. It establishes requirements and responsibilities for contracting agents who award state construction contracts, and contractors who are awarded state construction projects. PREVAILING WAGE RATE SCHEDULES
Overview
*An Overview of the
What is a prevailing wage rate? A “prevailing wage rate” is the hourly rate of wages and fringe benefits to be paid to a construction mechanic employed in a specific trade classification on a state project. How does the Department of Energy, Labor & Economic Growth (DELEG) establish prevailing wage rates? The DELEG is required by law to survey road construction and building trades union with collective bargaining agreements to obtain the basic hourly and fringe benefit rates provided in their contracts. Which state construction projects are covered? The prevailing wage law covers new construction, alteration, repair, installation, painting, decorating, completion, demolition, conditioning, reconditioning, or improvement of public buildings, schools, works, bridges, highways, or roads authorized by a contracting agent. RESPONSIBILITIES The responsibility of the DELEG includes: l l
l
Conducting surveys to determine the prevailing wage rate schedules Establishing prevailing wage rates for use on state construction projects Issuing prevailing wage rates
Prevailing wage rate schedules may be obtained upon request by contacting the Wage & Hour Division at (517) 335-0400. The Department may: l
l
Inspect and audit payroll records of contractors to determine compliance Investigate complaints alleging non-compliance of the act
Who is covered? Any skilled or unskilled mechanic, laborer, worker, helper, assistant, or apprentice working on a state project is covered. A foreman, supervisor, executive, administrative, professional, office, or custodial employee is not covered. (continued on page 8)
Spring 2010 7
Overview
Prevailing Wage Act (continued from page 7)
The responsibility of the Contracting Agent includes: l
l
Requesting from the DELEG the prevailing wage rate schedule for all classifications that will work on a project Providing prevailing wage rate schedules for state funded construction when contracts are let out for bid
The Contracting Agent may: l
l
Inspect payroll records of contractors Terminate a construction project for non-payment of prevailing wages
The responsibility of the Contractor includes: l
l
l
l
Posting a prevailing wage rate schedule on the construction site Paying prevailing wages to construction workers Keeping a record of hours worked and wages and fringe benefits paid to construction workers Providing payroll records for inspection to the DELEG, or the contracting agent, upon request
RESULTS OF A VIOLATION A violation of Act 166 will result in the contractor’s name being added to the Prevailing Wage Act Violators List published on the division’s web site. *Adapted from Wage & Hour Division, Michigan Department of Energy, Labor & Economic Growth
www.michigan.gov/wagehour 8 Spring 2010
mistakenly overpaying another. “It was a complete abuse of the system, although it really worked to our favor by discrediting the IBEW local,” Brinks says.
Other reforms Merlo says Merit Shop advocates are hopeful the new governor will pursue a different course. “Hopefully, within a few months we’ll have someone in the governor’s office who will rescind Granholm’s actions,” he says. Beyond disallowing third-party complaints, a new governor could scrap the violators list; reduce the statute of limitations in which two violations can lead to possible debarment from three to one or two years; and ensure that no contractor is debarred from state projects for minor, innocent prevailing wage mixups, critics of the law say. A more substantive administrative change would be to make the mandated wages truly prevailing and not set solely by unions, Fisher says. “In Michigan, ‘prevailing wage’ does not mean a fair-market wage,” he says. “Rather, it’s one artificially inflated by 40 percent to 60 percent and arbitrarily determined by an evershrinking minority of the construction work force.” Brinks says the federal government’s approach of surveying both union and nonunion contractors and basing its prevailing wage on the blended average is more fair — and more accurately labeled. “Union labor is only 20 percent of the work force, so who’s prevailing? In my mind, the Merit Shop is prevailing,” Brinks says. “The prevailing wage should accurately reflect the majority. Then it would be truly prevailing.” Michigan is one of only eight states whose prevailing wage is set by unions, Fisher says. The 42 others either have no mandates or attempt to calculate prevailing wages based on an accurate sampling of all construction wages. Nibbling around the edges of Michigan’s law is about the best
ABC members can reasonably expect, regardless of who winds up in the governor’s office, Merlo says. Members of ABC met recently with three GOP candidates for governor. All the candidates vowed to sign any such bill that lands on their desk.
Broader goals In the meantime, the marketplace is finding a way to work around the law. Some school districts, particularly in West Michigan, have achieved such strong bond ratings that they don’t need to tap the state’s guaranteed bond fund to finance projects. Thus, the projects are not subject to prevailing wage. Although the overriding goal of the districts likely is to pay less interest, avoiding the added costs and regulatory burden of prevailing wage mandates is at least a considerable bonus, Merlo says. David L. Littmann, senior economist for the Mackinac Center, a free market educational and research institute in Midland, says “specialinterest type legislation,” such as prevailing wage, is undergoing greater scrutiny as the state seeks ways to end its economic skid. Littmann Although repeal of Michigan’s Prevailing Wage Act is a long way off, the fact that it is now being discussed is heartening, he says. “The special interests realize that forces are building against them,” Littmann says, stressing that the bigger goal would be to make Michigan a right-to-work state in which agreements between employers and unions requiring workers to join a bargaining unit or pay membership dues is prohibited. “The overarching imperative is a right-to-work state,” he says. “If you can get that, you start attracting entrepreneurs, and all the rest of these special-interest laws will mean nothing.”MM Michigan Merit
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2010 Gubernatorial candidates address ABC members Three Republican candidates for with government bureaucracy,” he more customer service-based model governor took the podium at the 2010 told the crowd of ABC members. designed to help businesses be ABC of Michigan “We need to shrink more successful, as well as improve Legislative government using common- the regulatory climate. Conference March sense business principles. Snyder pledged not to accept any 2 to explain why We need to provide the political action committee money each should leadership to make tough but said he would like to have ABC’s receive ABC’s decisions.” endorsement. He noted he is the endorsement. Hoekstra commented only candidate running who is not a U.S. Rep. Peter that Michigan’s prevailing “career politician.” Hoekstra, wage mandates don’t make Bouchard said he believes it would Ann Arbor sense, especially since they be unlikely that legislation to change businessman are currently higher than the prevailing wage law or prohibit Rick Snyder and federal wage rates. project labor agreements would Oakland County Snyder told the group cross the governor’s desk in the next Sheriff Mike he is still “doing his two years. If elected, Bouchard said Bouchard told homework” he would support U.S. Rep. Peter Hoekstra the gathering of regarding project anti-PLA legislation. more than 100 Michigan contractors labor agreements and “My short-term that it’s time for a Republican in the doesn’t recommend economic plan is governor’s office. pushing right to work to create a better State House GOP Leader Kevin because it won’t be business climate,” Elsenheimer and U.S. House enough to turn the state he stressed. candidate Tim Walberg also spoke, around and it’s such a “It’s important giving updates on legislative issues divisive issue. He says to support the at the state and federal levels, he is running for governor businesses that respectively. to create jobs and help we already have Hoekstra pointed out that he has a reinvent Michigan. here. I’m happy to 97 percent voting “The role of support the movie record on issues government is industry, but not ABC cares about, not to create at the expense of Oakland County Sheriff noting that he jobs,” he someone building Mike Bouchard agrees with ABC’s explained, “but a car or house position regarding to create an environment already in the state.” union-only project in which businesses can Bouchard said he would focus on labor agreements. flourish and create jobs. easing business taxes and regulatory He said he’s not There’s a fundamental lack processes. sure, however, that of leadership in Lansing.” “Currently, we are taxing now is the time to Snyder said he would businesses that are not making try to enact right get rid of the Michigan money,” he noted. “We need a to work legislation, Business Tax, which he timely regulatory process and to take which would allow called the dumbest tax away some of the hurdles.” employees to in the U.S., and replace it State Attorney General Mike Cox, Rick Snyder choose whether with a 6 percent flat tax. a fourth Republican candidate, was they want to join a union. He said he would also replace the invited to the conference but was not “I have the experience working current bureaucracy in Lansing with a able to attend. 10 Spring 2010
Michigan Merit
between Reporting on employees and issues at the employers,” he national level, said. “It does Walberg, a Tipton nothing for this Republican who great country, is looking to except hold regain the 7th it back. I am congressional delighted to fight district seat he this time around. lost in 2008 Your faces, your to Democrat issues came Mark Schauer to mind when of Battle Creek, I made the outlined his decision to run plans to continue again.” supporting job House GOP Leader Kevin Elsenheimer At the growth and state level, opposition of Elsenheimer of Kewadin outlined card check legislation if he is reelected. He said he plans to fight the plans to create right to work zones in the state. He also noted that Employee Free Choice Act (EFCA) prevailing wage has gotten out of and would vote to cut spending and hand and should be eliminated or at reduce the size of government. least lowered to match the federal “EFCA destroys relationships
level or that of other states. The conference, which was held in downtown Lansing at the Radisson Hotel, also featured a 2010 Election Overview by ABC President Chris Fisher, who stressed that the governor’s race, the two-thirds turnover in Senate seats and onethird turnover in House seats creates a year of opportunity for positive change.MM
U.S. House candidate Tim Walberg (right) talks with ABC member Scott Gillespie.
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The pitfalls of prevailing wage
By Kraig M. Schutter, J.D., LL.M The Masud Labor Law Group
Astute contractors need to exercise caution in order to avoid time-consuming audits, potential back pay obligations and damage to their business reputation
12 Spring 2010
Non-union contractors aiming to work on government funded construction projects must do more than generally acquaint themselves with state and federal prevailing wage laws. They must understand the pitfalls caused by the artificial rules of the administrative agencies assigned to enforce the statutes and must appreciate the counter-intuitive differences between the state and federal schemes. Anything less will subject the unwary contractor to time-consuming audits, potential back pay obligations and damage to their business reputation. The first thing a contractor must do is understand the basic nature of a prevailing wage law. The “granddaddy” of all prevailing wage laws is the federal Davis-Bacon Act. Essentially, wage and benefit surveys are obtained by the United States Department of Labor (USDOL) from contractors in certain localities (mostly unionized firms) and then fashioned into “prevailing rates” by the agency. In the majority of cases, union scale is adopted. The Michigan Prevailing Wage Act (MPWA) is even more unabashedly protectionist legislation for unions. The wage standards imposed under the state law come exclusively from union labor contracts. Indeed, the state agency charged with enforcing the law – the Department of Energy, Labor and Economic Growth (DELEG) – is expressly prohibited from using any other source for its rates. On a prevailing wage project, various job classifications are identified in the bid/contract documents along with corresponding wage and fringe benefit rates. While the rates are expressed in terms of wages and benefits, it is the total of the two that becomes the benchmark for compliance. It is up to the
contractor to determine the mix of wage and benefit in order to meet or exceed the overall rate. Although the process may seem simple, problems quickly arise. The first headache for the non-union contractor is to determine which of the numerous classifications are to apply to workers on a prevailing wage project. Some classifications are totally foreign to non-union contractors, such as “powder monkey” or “bucker-up.” Nearly all are subject to interpretation. For example, the bid/contract documents might include a classification for “carpenter” and “carpenter’s helper.” If the contractor is training a new worker by having him or her perform low level carpentry tasks and “gopher” work, is that trainee a “carpenter” or a “carpenter’s helper” on the project? The governmental entity letting the work has no authority to provide a legitimate answer. Even the USDOL and the DELEG can’t help. Invariably, it will be the applicable trade union’s classification practices which will control. Basically then, the non-union contractor is charged with understanding the classification practices of the unionized competitor and fitting his or her operation into that of the rival’s for the duration of the project. The bottom line is that a non-union contractor always runs the risk of improperly classifying employees on a prevailing wage project, with the wrong guess constituting a violation of law. The second headache comes in the form of fringe benefit calculation. Unfortunately, a detailed description of precisely how the USDOL and the DELEG expect a non-union contractor to calculate the hourly value of fringe benefits goes beyond the parameters of this article. Michigan Merit
Suffice to say, neither the federal nor the state agency offer a coherent method of calculation. Making matters worse, they recognize different rules. On Davis-Bacon projects, for example, the USDOL requires that fringe benefits paid on a monthly basis (such as health insurance) must be calculated based on the number of hours worked by each employee in the month. Thus, a worker who works only 10 hours in the month will have an extremely high hourly fringe benefit rate while a worker who works 200 hours in the month will have a very low one. Such is the case even though the contractor pays the same premium for each and even though the two employees enjoy exactly the same level of benefit. The DELEG calculates the credit
differently. It bases the credit on the contractor’s projected annual outlay of monthly premiums divided by 2,080 hours – the presumed “work year” for the employee – regardless of the number of hours the employee may actually work that year. A second example comes from the MPWA. DELEG allows a contractor to take an annualized hourly fringe benefit credit on a state project for workers’ paid vacation time so long as the contractor has a written description of the vacation policy. Interestingly, DELEG allows the credit even though the contractor may never provide the benefit. If a contractor hires an employee to work on a MPWA project in the spring and then terminates the worker’s employment before summer vacation time begins, the contractor will have
been able to take prevailing wage credit for vacation time even though the paid vacation wasn’t provided to the employee. Such problems may be the start of the migraine headache that often accompanies prevailing wage projects. Astute contractors need to exercise caution in order to avoid time-consuming audits, potential back pay obligations and damage to their business reputation.MM Passed in 1931 under the notion that the federal government should spend heavily to ward off economic depression, a special aim of Davis-Bacon was to protect the wage rates of white workers in the North against the relatively lower wage rates of black workers from the South. Over time, the law has morphed into protection for union contractors facing competition from non-union firms.
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ABC Builds & Protects Your Business ABC Annual Membership Directory and Resource Guide – find suppliers, subcontractors and contractors in every area of the state who support the Merit Shop Construction Industry l Legislative Advocacy – ABC is the only Merit Shop lobbying organization, working tirelessly to uphold the free enterprise system at both the state and national levels. ABC is your voice with our legislators. l Find A Contractor – a powerful search tool for the online member database to allow construction buyers and users to find your company easily l Safety Training Evaluation Process – Improves your company’s safety practices and can lower your workers’ compensation insurance rates. l Networking Events – connects you with contractors and leaders in the field on the local, regional and national levels. l Craft Training – accredited local craft training and apprenticeship programs to make your workers top-notch skilled professionals. l PLAWatchMichigan Web site and PLA Taskforce – working to stop the use of forced union agreements on construction projects. l
ABC Keeps You Informed Michigan Merit – Michigan’s premier magazine for the Merit Shop Construction Industry l Merit Minute – semi-monthly electronic newsletter to keep you on top of new developments in the industry and legislative news that affects your business. l Construction Executive – the national publication for the Merit Shop Construction Industry l State Legislative Conference – meet with your legislators in a casual format to discuss issues of importance to your business. l Construction Economic Update – Stay current on economic news that impacts your business. l Competitive Contractors Summit – provides updated regional and state legal and legislative information to assist you in broadening your scope of business within the state. l Legal Resources – for assistance with legal and labor issues. l Help with Labor Issues – Legal and Legislative resources to resolve your situation. l
Make the best business decision you’ve ever made –
You Can’t Afford Not to Belong to ABC! Visit www.abcmi.com or email info@abcmi.com to learn more today.
“The ABC workers’ compensation program is great. The credit I receive more than pays for my ABC dues every year. It’s so worth being an ABC member!” Renee M. Sandborn, President, Sandborn Construction
ABC Saves You Money Verizon Wireless – save up to 20% on cell phone plans l Chrysler, GM & Ford – save up to $1000 per vehicle plus other incentives l Super Fleet Fuel Card – save 5¢ per gallon of fuel at Speedway, Marathon & Rich Oil l ABC Self Insured Workers’ Comp Fund – average annual return on premium is 35%! l Bulk Fuel Discount – save 10% off margin for bulk fuel delivery anywhere in the state l FedEx – Save 29% on overnight delivery services l Long Term Care and Long Term Disability Insurance – Available at a discount for ABC Members l Supplemental Unemployment Insurance Plan – complies with Davis-Bacon, while saving you money on Prevailing Wage projects l
Associated Builders and Contractores of
Michigan
ABC says no to mandatory green building In March, testimony was given to the House Regulatory Reform Committee against House Bill 4575 introduced by State Rep. Kate Ebli (D-Monroe) which would dismantle the Single State Construction Code Act in the name of Rep. Kate Ebli mandatory green building requirements. HB 4575 would allow local units of government to adopt their own construction code consisting of the National Green Building Standard (ICC-700) or the current versions of the Leadership in Energy Environmental Design (LEED) Green Building Rating system at a specified level. The locals would then be able to mandate every newly constructed building and home be a “green” building despite the owner’s desire. In opposition to the bill were Associated Builders and Contractors of Michigan, the Michigan Association of Home Builders, AIA/ Michigan, the Michigan Plumbing and Mechanical Contractors Association, the Sheet Metal and Air Conditioning Contractors National Association Michigan Chapter, the Mechanical Inspectors Association of Michigan, the Michigan Society of Professional Engineers, American Council of Engineering Companies, the Michigan Association of Realtors, the National Federation of Independent Business Michigan, Michigan Forest Products Council and the Michigan Department of Energy, Labor and Economic Growth. 16 Spring 2010
During the debate, ABC stressed that although our organization and members strongly support green building, HB 4575 is significantly flawed. To underscore the point, ABC wrote in opposition of the bill (excerpted): Although Associated Builders and Contractors (ABC) members lead the industry in green and sustainable building practices, we are writing in opposition to House Bill 4575 (HB 4575). As a green building leader, ABC seeks to advance our members’ ability to support their customers and thrive in the green building industry by: l
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Providing education and resources to ABC members, their employees and ABC chapters Advocating for smart energy policy and legislation that supports ABC members’ commitment to sustainability Establishing partnerships and working relationships with construction owners to champion green initiatives that are inclusive of ABC members Developing and communicating best practices to ABC members and chapters to demonstrate a commitment to sustainability and promote an ecofriendly culture throughout the association’s programs, services and events.
Our commitment to sustainability and environmentally friendly construction practices is
unmatched, yet we strongly oppose HB 4575. It has long been the position of ABC that green building should not be mandated, but rather be a viable and incentivized option for construction owners. Moreover, we are very concerned that HB 4575 dismantles the Single State Construction Code, which was thoughtfully compiled after years of work and bipartisan agreement. We see no cause to unravel the code, even though sustainability is a top priority of our organization. Instead of pursuing an admittedly divisive bill, we instead encourage members of the committee and all interested parties to work on ways to champion green building in our state through incentives, education and cooperation.
ABC opposes unfair independent contractor proposal Like all employer organizations, ABC of Michigan takes the issue of independent contractor misclassification seriously, in particular those in which an unscrupulous employer may seek to gain an unfair advantage against a competitor. However, legislation
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Michigan Merit
“It has long been the position of ABC that green
building should not be mandated, but rather be a viable and incentivized option for construction owners.” presently under consideration, which has been drafted by the State Workers’ Compensation Agency is flawed and lacks input by key employer groups and industry stakeholders. ABC opposed the poorly drafted legislation, unless the following concerns are satisfactorily remedied: l
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The penalties are nothing short of excessive and unjustifiably punitive for not only intentional offenses, but most alarmingly, for unintentional offenses as well. It inappropriately allows a single individual, in this case an agency director, to bring work on a construction project to an immediate halt resulting in the project owner having the project
disrupted. The rights of the owner need to be taken into account. l
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Primary contractors can be subjected to disruption of their project when a subcontractor is in violation of the act. Not allowing work to continue can unfairly impose economic hardship on law-abiding employers and their employees. The work-stop provision needs to be entirely removed. The bill states that a court may award attorney fees for someone who has not been properly classified, yet that same “loser pays” protection is not also afforded to employers who prevail against a frivolous misclassification claim. Adequate and fair loser pays protections are essential.
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Frivolous misclassification claims are another valid concern. The bill opens up the complaint process to third party organizations, such as labor unions, which can file claims with little or no merit. Third party complaints are a non-starter. In addition to the establishment of fines for violating the act itself, fines referred to as “administrative penalties” may be further assessed at a rate up to $2,500 to $5,000 per offense. The penalties are the same for intentional and unintentional violations. State law and regulations should recognize the difference between a mistaken violation that is remedied and a willful violation.
Insurance for the
Construction Industry Valenti Trobec Chandler, Inc.
1175 West Long Lake Road, Suite 200 Troy, MI 48098 (248) 828-3377 www.vtcins.com
Griffin, Smalley & Wilkerson, Inc. 37000 Grand River, Suite 150 Farmington Hills, MI 48335 (248) 471-0970 www.gswins.com
An Independent Agency Representing
www.abcmi.com
Spring 2010 17
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If an employer dismisses an employee within three months of that employee filing a misclassification complaint, the act creates a “rebuttable presumption” that the employer automatically did so in retaliation for the complaint having been filed. The rebuttable presumption means that the
employer is considered guilty until proven innocent of the unfair retaliation even if the worker was justly dismissed for a different valid reason. The inclusion of such language is entirely unreasonable. Given the bill’s serious flaws, ABC will oppose it and work with the state House and Senate to defeat it, unless the flaws are remedied.
ABC criticizes Governor’s plan to raise taxes before tackling needed reforms
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18 Spring 2010
Reaction to Governor Jennifer Granholm’s plan to extend Michigan’s sales tax to consumer services and pair it with Michigan Business Tax relief ranged from opposition to the services tax – a $554 million overall tax increase in the coming year and criticism that tax relief and costcutting budget reforms don’t go far enough – to skepticism whether promised tax cuts would materialize once enacted. Granholm’s tax proposal
was unveiled in March and would lower Michigan’s 6 percent sales tax to 5.5 percent, but extend the tax to consumer services (excluding construction), phasing out the 21.99 percent Michigan Business Tax surcharge and reducing the gross receipts tax in the MBT’s base. In a joint statement, ABC and 20 other leading business groups made the following statement: Unfortunately, the Governor’s plan addresses only one third of the deficit through proposed reform and fills the rest with tax hikes and stimulus money. Once again, we have a short-term solution to a longterm problem that puts off necessary spending reforms for future policy makers to address. The business community has consistently called for enacting significant, cost-saving structural reforms. The plan is a net tax increase for 2011 that does not provide necessary immediate progress toward economic competitiveness. The plan does not meet the needs of either Michigan’s residents or Michigan’s job providers. We are disappointed in the Governor’s budget plan and we encourage all legislators to go further to enact meaningful cost-saving structural reforms before moving on to tax reform. Since the beginning of 2010, members of Michigan’s business community have met with more than 125 legislators from both parties and chambers to discuss the state’s structural deficit and the importance of enacting cost saving structural reforms to balance the budget. While we have already met with the vast majority in meetings, we will continue until we have met with all lawmakers. Members of our organizations have been enacting cost saving reforms for almost a decade and are unwilling to pay higher taxes to support status quo government spending.MM Michigan Merit
LOOMIS, EWERT, PARSLEY, DAVISEWERT, & GOTTING, P.C. LOOMIS, PARSLEY,
LOOMIS, EWERT, PARSLEY, A T T& O GOTTING, R N E Y S L A W DAVIS P.C. A T DAVIS & N GOTTING, P.C. A T T O R E Y S A T L A W A T T O R N E Y S
A T
L A W
Jeffrey S. TheuerJeffrey S. Theuer Jeffrey S. Theuer 124 West Allegan, Suite 700 124 West Allegan, Suite 700 Lansing, MI Suite 48933 124 West Allegan, 700 (517) 482-2400 Lansing, MILansing, 48933 MI 48933 BCT Benefits.............................................................. 2 (517) 482-2400(517) 482-2400 BlueBook...................................................................11 Capital Steel............................................................. 19 Dependable Fire Protection...................................... 13 Gulf States, Inc........................................................... 9 Jackson Associates, Inc............................................ 13 J.E. Johnson............................................................... 6 Kal-Blue..................................................................... 18 Lezotte Miller Public Relations Inc............................ 16 Loomis, Ewert, Parsley, Davis & Gotting.................. 19 Mass Mutual Financial Group................................... 13 Pinnacle Insurance Partners..................................... 17 Regency Group......................................................... 20 Titan Equipment....................................................... 14 Valenti Trobec Chandler Inc....................................... 17 Welch Tile & Marble...................................................11 Wm. Molnar Roofing................................................ 18
Advertisers Index
Discount Bulk Fuel Member Benefit If you are buying gasoline, diesel or dyed diesel in bulk, your ABC membership now saves you money.
Now ABC Members can save 10% off the margin per gallon of fuel through a special arrangement with four oil companies across the state. Over the course of the year that could add up to a significant savings for your company. l
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This program covers diesel fuel, dyed-diesel and gasoline in bulk quantities. Covers wet-hosing, on-site fueling, above-ground and below-ground tanks. New and current ABC member customers of these vendors are both eligible for the discount. Vendors available across the state to serve the entire ABC of Michigan membership. These vendors are: Brenner Oil, Eiseler Oil, Foster Oil and Blarney Castle Oil. Members can also buy fuel at a fixed price for delivery over an extended period of time. This may allow you to bid jobs more accurately by locking in the price of fuel for the entire job.
Contact Brian Wohlscheid at (616) 218-3813 or brianw@brenneroil.com; or Mary Boardway at 517-853-2545 or boardway@abcmi.com to begin saving money on bulk fuel today! This is one more way that your ABC membership pays for itself. www.abcmi.com
Associated Builders and Contractores of
Michigan
Spring 2010 19
PRESORTED STANDARD U.S. POSTAGE PAID LANSING, MI PERMIT NO. 193
Associated Builders & Contractors of Michigan 120 N. Washington Square, Suite 805 Lansing, Michigan 48933
Take Control of Your Take Control of Your Workers’ Compensation Costs Take Control of Your Workers’ Compensation Costs Workers’ Compensation Costs ABC of Michigan Self-Insured Workers’ ABC of Michigan Compensation Fund Self-Insured Workers’ • $2,300,000of Distributed to Participants in 2010 ABC Michigan Compensation Fund • Over $14.7 Million Returned Since 1995 Self-Insured Workers’
• $2,300,000 Distributed Participants in 2010 Members Average a 35%toReturn of Premium
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