Prevailing wage and apprenticeship requirements: Best practices to follow and pitfalls to avoid

Overview of PW&A requirements

Prevailing wage and apprenticeship requirements kick in when construction begins, which can be determined by either the physical work test (significant work performed) or the five percent safe harbor (5% of total cost incurred). Once construction starts, the continuity requirement mandates continuous construction or efforts.

Prevailing wages must be paid to on-site laborers and mechanics for construction, alteration, and repair during the credit period. This includes remodeling, renovation, structural repairs, and replacement of fixed components. Maintenance work after a project is in service is not considered construction, alteration or repair.

Wage rates are locked in when a construction project starts and don't need updating unless the contract's scope changes or is extended. However, wages for long-term service contracts must be refreshed annually.

Apprentice requirements apply only during the construction period before a project is in service. The rules include:

• Labor hour test: 12% of labor hours by apprentices if construction began in 2023, 15% after.
• Ratio requirement: Daily apprentice-to-journey worker ratios set by DOL or state.
• Participation requirement: Employers with four or more workers must have at least one apprentice.

If apprentices cannot be found for a project, the good faith effort exemption applies for a full year.

Exemptions

Prevailing wage and apprenticeship requirements do not apply to projects with a net output of less than one megawatt (alternating current) or projects that began construction before Jan. 29, 2023.

Recordkeeping requirements

Certified payroll isn't required but can be agreed upon. Reporting should be at least quarterly to avoid penalties. Final regulations contain a list of records needed to show compliance with PW&A requirements.

Penalty and cure requirements