News Story

Mackinac Center, ABC sue over prevailing wage standard

Revival of prevailing wage standard was government-by-press release

The Mackinac Center Legal Foundation, on behalf of its client Associated Builders and Contractors of Michigan, has sued Michigan's Department of Technology, Management and Budget over the department's use of prevailing wage standards that were specifically repealed in 2018.

"The Governor has seemingly revived this repealed procedure, but has not done so by either enforcing legislation or through the procedures of the Administrative Procedures Act," reads a portion of the complaint, which was filed in the Michigan Court of Claims. "Rather, the policy has been implemented by unilateral edict from the Governor’s office. This is not a proper method of governance and is not binding on Plaintiff."

ABC Michigan, as the Ingham County-based trade group is known, represents "900 construction and construction-related firms through the State of Michigan and in bordering states," which employ 30,000-plus people, per the complaint. 

The complaint argues the institution of a prevailing wage standard "was not done in the proper manner." 

Rather than using an executive order or executive directive, the governor re-imposed the prevailing wage standard through an Oct. 7, 2021 press release.

"The move reinstates the prevailing wage requirement, which was repealed in June 2018, and ensures that any construction worker working on a state construction project receives a fair wage," read the release. "The governor is proud to lead by example at the state level and deliver real change for working people in Michigan."

Whitmer indicated a belief that the 2018 repeal of the 1965 prevailing wage law left a loophole. 

"Michigan's repeal eliminated the state's prevailing wage requirement, but left the door open for (Department of Technology, Management and Budget) to require prevailing wage under its authority to develop the terms of state contracts. Governor Whitmer is proud to make that call and reinstate prevailing wage."

The press release appears to have been the only authorization the governor provided. No executive order or directive followed, but the prevailing wage standard returned anyway. 

As the Department of Technology, Management and Budget's website read months ago, announcing the policy change:

“Beginning March 1, 2022, the State of Michigan will require state contractors and subcontractors to pay prevailing wage on construction-based contracts issued by the Department of Technology, Management & Budget. These changes do not impact or change any provisions in place to comply with the Federal Davis-Bacon act.”  

In Oct. 2021, the Mackinac Center for Public Policy filed a Freedom of Information Act request with the department, asking for any official directives regarding prevailing wage. The request was sent Oct. 21, 2021, three weeks after Whitmer's press release.

Just four days later, on Oct. 25, the department responded with a denial, saying: “It is hereby certified that, to the best of the undersigned’s knowledge, information, and belief, records do not exist within the Department of Technology, Management and Budget, under the description you provided or under another name reasonably known to the department.” 

Another Mackinac Center FOIA, filed March 2, 2022, resulted in a fuller response, yielding 750-plus pages of documents of correspondence, mostly between the Michigan Attorney General's office and the department.

"Upon information and belief," the complaint reads, "DTMB was prompted to adopt prevailing wage requirements after a request to do so originating from the Governor’s office."

The complaint continues: "The subject prevailing wage requirements causes harm to Plaintiff and hurts its members’ competitive advantage in bidding on contracts."

The lawsuit argues the prevailing wage policy is unconstitutional, as it violates the separation of powers. 

"The executive branch cannot, under our 1963 Constitution, perform legislative functions such as creating a prevailing wage law, absent an explicit legislative grant of authority," the complaint reads. 

The lawsuit alleges noncompliance with the Administrative Procedures Act, arguing that "an agency may not avoid the requirements for promulgating rules by issuing its directives under different labels."

The lawsuit argues the department is acting outside the bounds of its power, and that its prevailing wage policy is "unenforceable."

"The DTMB cannot simply do by developing contract forms what had previously required legislative enactment," the complaint argues.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.