Anne Hensley Poindexter Scott P. Wyatt CAMPBELL KYLE PROFFITT, LLP 11595 N. Meridian Street Suite 701 Carmel, Indiana 46032

Phone: 317–846-6514

This presentation is intended to highlight only various changes to public bidding as a result of the common construction wage repeal. There may be several options and application of one or more of the available procedures should be made only after individual consultation with your counsel and reviewing the particular facts of your case.

Background Indiana passed its common construction wage law in 1935. Established government-mandated wages for taxpayer-

funded construction projects.

The theory was this would raise wages and give local contractors an advantage over out-of-state competitors.

Over time, concerns arose whether common construction wage laws drive up cost of public works projects to detriment of taxpayers.

Studies • Ohio

• Exempted public school construction projects from its common construction wage law in 1996

• During the first five years of exemption, the state saved nearly $500 million, or 10.7 percent of total school construction costs

• Urban counties reported savings of $310.5 million • Rural counties savings totaled $177.4 million

• Michigan • Researchers concluded that common construction wages cost taxpayers an average of

$224 million every year • Had common construction wage not been in place between 2002 - 2011, $137 million in

annual savings would have gone back to Michigan’s K-12 schools

• Analyses of Florida, Iowa, Kentucky, Louisiana, Maryland, Minnesota and New Hampshire all concluded that repealing each state’s respective common construction wage laws would produce average savings of nearly 10 percent for taxpayers.

• Source: Chase Downham, Op-ed: Repeal Indiana’s Common Wage Law, JConline Lafayette Journal & Courier (Mar. 15, 2015)

Common Construction Wage

a/k/a Prevailing Wage Law

Repealed by HEA 1019 July 1, 2015

Common Construction Wage

a/k/a Prevailing Wage Law

So What Does this Mean?

Contractors working on common construction wage projects awarded prior to 7/1/2015 continue to comply with common construction wage law. IC 5-16-7.1-2

Unless federal or state law provides otherwise, a public

agency may not establish, mandate of otherwise perform a wage scale for public works contracts. IC 5-16-7.2-5

What is a public agency? IC 5-16-7.2-3 states that it has the meaning as defined by IC 5-30-1-11

Per IC 5-30-1-11, a Public agency” means: a state agency (as defined in IC 4-13-1-1); a state educational institution; a unit (as defined in IC 36-1-2-23 ); a body corporate and politic created by state statute; a school corporation (as defined in IC 20-26-2-4); a conservancy district established for a purpose described in IC 14-33-1-

1(a)(4) or IC 14-33-1-1(a)(5); a fire protection district established under IC 36-8-11; a department of aviation established under IC 8-22-2-1(a); or an airport authority established under IC 8-22-3-1. The term does not include the Indiana Dept. of Transportation.

A regional sewer district is created by state statute

What is a public works project?

Any construction project governed by an applicable public works statute

Applicable public works statutes: State public works statute (IC 4-13.6 et seq.) State and local public works statute (IC 5-16 et seq.) Public works by political subdivisions or their agencies (IC 36-

1-12 et seq.) Regional Sewer Districts are political subdivisions

Any other statute applicable to public works projects of a public agency

Ok, so now what? Indiana law requires that the substance of the provisions set

forth in IC 5-16-13 be stated or incorporated by reference in each public works contract.

IC 5-16-13-7

Need to change public works documents to conform with the law.

“A provision of an invitation for bids, request for proposals, or a public works contract inconsistent with this chapter is void.” IC 5-16-13-1

Some provisions of new law apply requirements on all

contractors, other only apply to certain types of contractors 4 different types of contractors discussed in law

Tier 1 Contactor Each person that has a contract with the public agency to

perform some part of the work; supply some of the materials; or supply a service

for the public works project. Also known as the prime or general contractor Must contribute, by any combination of work, supplies or

service, to at least 15% of the tier 1 contractor’s total contract price. IC 5-16-13-9

Tier 2 Contractor

Each person that has a contract with a Tier 1 contractor to perform some part of the work; supply some of the materials; or supply a service

for the public works project

a/k/a subcontractor

Tier 3 Contractor

Each person that has a contract with a Tier 2 contractor to perform some part of the work; supply some of the materials; or supply a service

for the public works project.

a/k/a sub-subcontractor

Lower Tier Contractor

Each person that has a contract with a Tier 3 contractor to perform some part of the work; supply some of the materials; or supply a service

for the public works project.

a/k/a lower tier subcontractor

Insurance and Qualifications Each contractor, in every tier, must:

Maintain general liability insurance of at least:

$1,000,000 for each occurrence limit $2,000,000 for the general aggregate limit

And be qualified under either:

IC 4-13.6-4 Contractors for public works projects

IC 8-23-10 Contractors for public works projects with the Indiana Dept. of

Transportation

IC 5-16-13-10 Effective after June 30, 2016

IC 4-13.6-4-2 (a) All persons desiring to perform professional services relating to a public works

project must apply to the board for qualification.

(b) A contractor is not required to apply to the board for qualification before submitting a bid on a public works contract unless the estimated cost of the project is one hundred fifty thousand dollars ($150,000) or more.

(c) An applicant for qualification under this chapter shall use the forms prescribed by the board. The board shall provide separate and specific forms for contractors and for persons desiring to perform professional services.

(d) An applicant must verify the applicant's application.

(e) Notwithstanding IC 5-14-3-4(a)(5), a financial statement submitted to the board under this chapter is considered confidential financial information for purposes of IC 5-14-3.

Additional Requirements Submit E-Verify Case verification numbers as required by

IC 22-5-1.7 Must comply with E-Verify unless the program no longer exists; and Contractors must signs affidavit affirming the contractor does not

knowingly employee an unauthorized alien. Have to terminate contract if later discovered that contractor is in breach.

Only exception is if termination would be detrimental to public interest or public property, then can keep on until new contractor is procured

Contractor could be liable for actual damages

Must be in compliance with Federal Labor Standards Act of 1938 and IC 22-2-2-1 through IC 22-2-2-8

Minimum Wage Statutes

Additional Requirements Must be in compliance with IC 22-3-5-1 and IC 22-3-7-34

Worker’s Compensation and Occupational Diseases

Must be in compliance with IC 22-4-1 through IC 22-4-39.5 Unemployment Compensation

Must be in compliance with 4-13-18-1 through IC 4-13-18-7 Drug Testing of Employees

A solicitation for a public works contract must require each contractor that submits a bid for the work to submit with the bid a written plan for a program to test the contractor's employees for drugs.

A public works contract may not be awarded to a contractor whose bid does not include a written plan for an employee drug testing program.

When estimated cost of public works project is $150,000 or more.

Additional Requirements Contractor that employs ten (10) or more employees Must be in compliance with 5-16-13-12 (a)

Effective after June 30, 2016 A contractor must provide access to a training program applicable to the tasks to

be performed in the normal course of the employee's employment with the contractor.

A contractor may comply with this section through any of the following: An apprenticeship program A program offered by Ivy Tech Community College of Indiana A program offered by Vincennes University A program established by or for the contractor A program offered by an entity sponsored by the United States Department of Labor, Bureau of

Apprenticeship and Training A program that results in the award of an industry recognized portable certification A program approved by the United States Department of Transportation, Federal Highway

Administration A program approved by the Indiana Dept. of Transportation

Additional Requirements Contractor that employs fifty (50) or more journeymen Must be in compliance with 5-16-13-12(b)

Effective after June 30, 2016

The contractor shall participate in an apprenticeship or training program

that meets the standards established by or has been approved by any of the following: The United States Department of Labor, Bureau of Apprenticeship and Training The Indiana Department of Labor The United States Department of Transportation, Federal Highway

Administration The Indiana Department of Transportation

Additional Requirements

Cannot pay cash to anyone working on public works project

Contractor must preserve payroll and related records concerning public works project for at least 3 years

Open to inspection by Indiana Dept. of Workforce Development

Effective after 6/30/2016

What if a Violation? If Public agency reasonably suspects a contractor has

violated a provision of chapter, then public agency shall refer it to the appropriate agency.

Indiana Dept. of Labor for E-Verify violation Minimum wage laws

Indiana Worker’s Compensation Board for Worker’s compensation or occupational disease

Indiana Dept. of Workforce Development for Unemployment insurance

What if a Violation? For all other violations, public agency shall require

contractor to remedy within 30 days after notice from public agency.

Notice must be signed by chief executive officer Sent by method to verify receipt

Violations could include (but not limited to): Lack of training program for employees Contractor not qualified Lack of drug testing program Tier 1 contractor not contributing, by any combination of work,

supplies or service, to at least 15% of the tier 1 contractor’s total contract price

What if a Violation? If not remedied within 30 days, then contractor shall be deemed not

responsible.

Public agency must determine how long determination shall last: Not to exceed 48 months Begins on date of substantial completion

A determination that a contractor is not responsible is final and conclusive, and subject to judicial review under IC 34-13-5.

IC 5-16-14-3

Determination cannot be used by any other public agency making finding of whether contractor is responsible for award of public works contract.

Also… If Public Agency suspects misclassification of one or more

workers, then public agency may report in writing to Indiana Department of Workforce Development.

Also… If Public Agency suspects misclassification of one or more

workers, then public agency may report in writing to Indiana Department of Workforce Development.

IC 5-16-13-14

Worker misclassification occurs when a worker who meets the statutory or common law definition of an employee is treated as a self employed worker or independent contractor.

If reported, then pubic agency shall provide records it has concerning misclassification to department.

Effective after 6/30/2016

Anne Hensley Poindexter Scott P. Wyatt CAMPBELL KYLE PROFFITT, LLP 11595 N. Meridian Street Suite 701 Carmel, Indiana 46032

Phone: 317–846-6514