New York's New Contractor Registration Scheme: What You Need To Know, And When You Need To Know It

Once upon a time, working on a prevailing wage project was easy. Contractors knew when the project was prevailing wage (the project was a public project), and they knew that they had to submit certified payrolls showing that they paid their employees the prevailing wage in the area (and actually pay those employees that wage). Now, between the expansion of prevailing wage to cover not only public projects but also private projects which receive a public benefit, and the new contractor registration scheme—which is now only days away—taking and working on prevailing wage projects just got more complicated.

Contractors may recall that over the past four years, the New York State Legislature has been busy enacting amendments to the various Labor Law statutes dealing with prevailing wage. Specifically, the legislature has expanded prevailing wage to cover: transportation of aggregate to and from a public works project site (Labor Law §220 [3-a(f)]); renewable energy projects with a generation capacity of more than one megawatt, thermal energy projects, offshore wind farms, and electric transmission facilities (Labor Law §224-d); broadband projects (Labor Law §224-e); climate risk/energy transmission projects (Labor Law §224-f[1]); and roadway excavation projects (Labor Law §224-f[2]). The legislature has also required that private¹ projects “paid for in whole or in part out of public funds”, where the public funds constitute more than 30% of total costs and where the project costs more than $5 million, also be subject to prevailing wage (Labor Law §224-a). The legislature has determined that payments not subject to repayment, savings in the forms of tax credits, reduced fees, PILOTs (payments in lieu of taxes), reduced insurance rates, savings from waived fees, forgiven costs, contingent loans, and credits applied against the repayment of financing be considered “public funds”. While there is debate about whether some of the foregoing, particularly PILOTs (which are tax incentives given to jump start a project which otherwise wouldn’t happen because the ordinary tax burden would be too high to make the project profitable), are actually payments from public funds, that debate was resolved when Governor Hochul signed the legislation into law.

As far as where the industry is now, in 2022 Governor Hochul signed legislation to require contractors and subcontractors bidding or working on prevailing wage projects to register with the Department of Labor. This law is effective December 30, 2024, which means that prior to bidding on public work, or prior to commencing work on any prevailing wage project (for those contractors who enter contracts without having to bid pursuant to Section 103 of the General Municipal Law, such as subcontractors on public projects or any contractors on private projects subject to  prevailing wages), a contractor must be registered with the Department of Labor. The registration is undertaken online only, there is no mail-in option. During the registration process, contractors will be required to provide the following information (some of which is somewhat intrusive): i) the name, principal business address and telephone number; ii) the contractor’s form of business entity; iii) the name and address of all those with an ownership interest (with percentage), or, for publicly-traded corporations, the names and addresses of the corporation's officers; iv) the contractor's tax ID number, unemployment insurance registration number, and Worker’s Compensation Board employer number; v) whether the contractor has any outstanding wage assessments against it; vi) whether the contractor has been debarred under NY or federal law within the last eight years; vii) whether the contractor has been debarred by any other state within the last eight years; viii) whether the contractor has been determined to have violated any labor or employment tax laws, or failed to have workers' compensation coverage, or failed to pay workers' compensation premiums, income taxes, unemployment insurance contributions, or prevailing wage; ix) whether the contractor has been determined to have violated any laws relating to workplace safety (OSHA, etc.); x) whether or not the contractor has an apprenticeship program under Labor Law; and xi) whether or not the contractor is a M/WBE. The contractor must also submit their worker’s compensation insurance policy, upon the DOL’s request. The goal is to weed out contractors with spotty histories of complying with prevailing wage on public work, and prevent them from participating in the new expanded prevailing wage program. Accordingly, the above information will be made public (with personal information redacted) so that the public can assist DOL in monitoring compliance with the program. The registration will be good for two years, and must be renewed 90 days prior to the expiration. The filing fee is $200 ($100 for M/WBE contractors).

Once the contractor submits the registration, the DOL will undertake a review and make a determination as to whether the contractor is fit or unfit to work on prevailing wage projects. Under the regulations promulgated by the DOL for determining fitness, contractors currently debarred from traditional public work for prevailing wage violations, failing to pay union waves/fringe benefits, failing to obtain or pay for workers’ compensation insurance, or misclassification of employees will be determined unfit. (You may have noticed that amongst the information to be collected during the registration process also includes data relating to safety violations. The regulations are currently silent as to whether excessive, or any level of, safety violations can also supply reason for a determination of unfitness. However, it would not be surprising if some sort of safety-related criterion also emerged during this process.) Once a determination of unfitness has been made, the contractor has only 30 days to demand a hearing on the issue. If the contractor does not file its challenge to the determination within that time, the determination becomes final, and the contractor will not be registered and, accordingly, will be effectively debarred from any prevailing wage project.

Once a contractor is on the job, the DOL still has the ability to make a determination of unfitness and cancel a registration if new facts come to light which would have led to an unfitness determination had they been known at the outset. While this would ordinarily be a large monkey wrench thrown into the progress of the job, the statute offers a relief valve. Specifically, a contractor whose registration is cancelled while on the job can continue under the supervision of an accredited monitor to ensure that contractor’s compliance with prevailing wage requirements. (Of course, the issue arises as to who will ultimately pay for this monitor. This is another subject that should be addressed by experienced construction counsel in revising and negotiating your future contracts.) Similarly, if a contractor’s registration lapses while it is on the project, it can continue its work on that project (but it may not bid or take on new work without renewing its registration). Continuing work under a lapsed registration, as opposed to a canceled registration, does not require the appointment of a special monitor.

The net effect of this new requirement is that contractors cannot bid or start work on prevailing wage projects without being registered. The owner has the responsibility to verify the registration status of all contractors and subcontractors; similarly, upstream contractors have the responsibility to verify the registration status of all of their subcontractors before they commence work on the project. Having an unregistered contractor or subcontractor on the project will result in a $1,000 civil penalty being imposed (which will also likely be an obstacle to a future registration). The DOL’s website (https://dol.ny.gov/contractor-and-subcontractor-landing) is now live, and contractors need to use their NY.GOV credentials to process their registration. The DOL also has a FAQ page for questions about the registration process, and advises that registrations will be processed in three to four weeks. Given how quickly the impending deadline is approaching, and given the volume of traffic that the DOL will inevitably experience, contractors would be well advised to register immediately so that if there are any issues, they can be resolved in sufficient time so that there will be no interruption in bidding on, and taking work on prevailing wage projects.

If you would like more information about the new contractor registration scheme or prevailing wage requirements, come hear me speak on this topic at our Albany office at 6 Airline Drive, Albany, at 9:00 a.m. on December 11, 2024, or our White Plains office at 50 Main Street, Suite 1600, White Plains, at 9:00 a.m. on December 12, 2024. If neither of those dates work out for you, please email me at gspaun@wbgllp.com< or call me at (914) 607-6425.

¹ Of course, one of the issues raised by the inclusion of private projects in the prevailing wage scheme is how contractors can protect themselves where the owner has the incentive to represent that prevailing wage does not apply (which would result in lower bids from contractors), but the contractor cannot verify whether the owner is receiving “public funds” sufficient to require prevailing wage. Robust indemnification provisions (including affidavit representations) could help alleviate contractors’ legitimate concerns; contractors should consult with experienced construction counsel to have their contract documents reviewed and revised accordingly.

If you would like more information regarding this topic please contact Gregory J. Spaun at gspaun@wbgllp.com or call (914) 607-6425