Prevailing Wage Labor Requirements for Solar & Renewable Energy Construction
Prevailing Wages for Government-funded Labor
Prevailing wages have been a long-standing part of the U.S. labor landscape, ensuring that construction workers receive fair compensation for their efforts on government-funded projects. The Davis-Bacon Act, enacted in 1931, mandates that construction workers employed on federally funded or assisted projects receive prevailing wages that align with the local labor market rates. This landmark legislation aims to help protect workers from unfair wage practices and ensure that they receive reasonable compensation for their labor.
Prevailing wages are the hourly rates, along with fringe benefits, determined by the U.S. Department of Labor, and are applicable to most construction workers in a specific locality or region. The primary objective of prevailing wage laws is to ensure that laborers involved in government-funded projects, like for renewable energy, receive fair compensation that aligns with the local standard of living.
When submitting bids for government or state-funded solar and renewable energy projects, contractors must factor in the prevailing wage labor requirements. These laws also require contractors to fulfill specific reporting and record-keeping obligations, which add an administrative burden for these projects. Compliance with certified payroll reporting and other requirements is crucial to avoid penalties and potential disqualification from future government projects.
Ensure You Know Your State’s Renewable Energy Wage Requirements
It is crucial for contractors and companies involved in government-funded solar and renewable energy projects to research and understand the prevailing wage laws specific to their state and region. Some states have uniform prevailing wage rates, while others may have different rates based on the county or locality where the project is located. Additionally, the frequency of prevailing wage rate updates may vary, necessitating continuous monitoring and compliance.
In one instance, a bill is being considered in Minnesota that would require all projects funded even just in part by Xcel Energy’s Renewable Development Account to be subject to the same prevailing wage laws as the more typical state-funded green energy projects.
Some states, like New York, have specific system capacities that play into their prevailing wage requirements on renewable energy. For example, some systems that have a capacity of less than 1 megawatt and are not a thermal energy network don’t have prevailing wage requirements.
It is also important to stay up-to-date on any changes with your solar and renewable energy contract requirements. For example, the Department of Labor announced the final rule for the Davis-Bacon and Related Acts, titled “Updating the Davis-Bacon and Related Acts Regulations” on August 10, 2023. Staying up to date on changes like this is crucial to staying compliant and avoiding any penalties for your renewable energy company.
Know Whether Prevailing Wages Will Be Applied to Your Solar or Renewable Energy Project
To illustrate how prevailing wages can affect different renewable energy projects, let's take a look at a few examples:
Eligible for Prevailing Wages:
- Solar farms constructed using state funding to promote clean energy initiatives.
- Wind energy projects supported by government grants or tax credits.
- Biomass energy facilities receiving financial assistance from state-sponsored programs.
These simple examples by no means cover all cases where companies will be expected to pay prevailing wage. NOTE: Some jobs, including those in Renewable Energy, use requirements beyond government-funding to determine prevailing wage necessity. For example, some states require jobs over a certain wattage to adhere to prevailing wage compliance.
Some of the credits that prevailing wage applies to according to the Department of Labor include: the Production Tax Credit, the Credit for Carbon Oxide Sequestration, the Credit for Production of Clean Hydrogen, the Clean Fuel Production Credit, the Investment Tax Credit, the Advanced Energy Project Credit, the Energy Efficient Commercial Buildings Deduction, Alternative Fuel Refueling Property Credit, the New Energy Efficient Home Credit, and the Zero-Emission Nuclear Power Production Credit.
Working with experts in labor law or partnering with organizations or compliance software providers experienced in government-funded projects can prove valuable in navigating the complexities of prevailing wage requirements and Davis-Bacon Act violations. These experts can provide guidance, assistance with compliance, and ensure accurate record-keeping to maintain compliance throughout the project.
Compliance for Solar Energy Projects is Easy with Points North
To stay compliant with the prevailing wage labor requirements, it is imperative for solar and renewable energy companies to gain clarity on the regulations applicable in their respective states. Failure to comply with these provisions could lead to penalties from the IRS and adversely affect the company's reputation.
For comprehensive guidance on prevailing wages and navigating government-funded projects, companies can seek assistance from reputable organizations like Points North. Seeking expert guidance and using compliance software, such as Certified Payroll Reporting by Points North, can prove instrumental in navigating these complexities and ensuring long-term success in the renewable energy industry. Contact us today to learn how we can help prepare your payroll for your solar and renewable energy projects.