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Taking Public Funds? Then Pay The Prevailing Wage

New York State Senator Jessica Ramos has introduced a bill to close a loophole that is allowing contractors to under-pay workers.


In January of 2022 the state of New York passed a law that required all contractors working on a project of $5 million or more, that also received public funding of at least 30%, to pay their workers the “prevailing wage” for their specific roles.


According the state of New York, “prevailing wage is the pay rate set by law for work on public projects. This applies to all laborers, workers or mechanics employed under a public work contract.” 


New York City construction unions pay their laborers the prevailing wage. It’s one of the founding principles of union membership - fair work for fair pay. So if you ask a union member about the importance of the prevailing wage they’ll explain a deeper story. 


“When I worked in the non-union companies, the pay was bad. I was always under a lot of stress about it and that can affect the job you do,” said Luis Muñoz, who eventually earned membership into the New York City carpenters union. “The pay I get now from the union allows me to make this work my career. It allows me to raise a family. And that makes me a more appreciative worker, a better worker.”

New York City construction unions pay their laborers the prevailing wage. It’s one of the founding principles of union work - fair work for fair pay.


Luis Muñoz spoke with Union-Built Matters about his experiences working for non-union contractors, and then as a member of the New York City Carpenters Union. In the inset is an image of his brother Angel, who died on a New York City non-union worksite in 2015.

The Loophole

But of course, big developers and contractors found a loophole in the law that was passed in January 2022. As written, the law applies to projects that receive state grants, which do not need to be repaid, but state loans, which are subject to repayment, are not covered by the law. So contractors seeking public funds for their projects who do not want to pay the prevailing wage to their workers will seek public loans rather than grants. This sidestep allows them to take public money and skirt the law regarding prevailing wage.


“It’s a loophole that allows some contractors to lower their bids and win projects they wouldn’t otherwise win. Because they know they can underpay their labor even though they’re taking public money to do the project,” one construction project estimator told Union-Built Matters. “We made it a law here and some of these guys are violating the spirit of that law, even though they may be within the letter of that law. It needs to change.”


A rendering of the Staten Island project at 475 Bay Street for which the developer took nearly $100 million in public funds but used a legal loophole to evade paying their workers prevailing wage.

The New Bill

This year New York State Senator Jessica Ramos introduced a bill that would end the practice of taking public funds and evading the mandate to pay workers fairly. According to the Senate bill S4668, “Since this law went into effect, many projects have received a significant amount of state dollars that were not subject to any requirements simply because there is a repayment requirement.”


The bill cites one recent example in Staten Island in which a developer took nearly $100 million in public loans from the New York State Housing Finance Agency as well as an annual subsidy from the New York Empire State Supportive Housing Initiative, but their workers did not see the prevailing wage benefit. New York State bill 24668 will get rid of the state loan loophole.


In New York, unions and legislators work together to protect their constituencies. They lobby for and pass laws that express the wishes of the people, such as fair work for fair pay. But some wealthy developers and contractors successfully avoid these rules. They line their own pockets while they dash the hopes of workers like Mr. Muñoz. So unions and legislators respond again with more action. It’s a seemingly unending back-and-forth that requires vigilance on the part of those who fight for the working class and the quality of our buildings.


When you’re looking at real estate in New York City, ask to look at buildings that were built by unions.

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