Prevailing Wage Exemption for Company Owners

The Washington State Department of Labor and Industries (L&I) recently adopted a new version of its “Statement of Intent to Pay Prevailing Wages” (“Intent”), a form required to be filled out by the contractor and every subcontractor on public works projects before a public agency makes any payments to the contractor.

One of the new questions on the Intent requires contractors and subcontractors to note the “number of Owner/Operators that own at least 30% of the company who will perform work on the project.” The question is an attempt to educate the industry that only certain individual owners are exempt from prevailing wage requirements.

Actually, the question on the form isn’t as specific as it should be to describe the requirements of L&I’s regulations on prevailing wage exemptions for owners. They probably just didn’t have room on the form to be more complete.

Under L&I’s prevailing wage regulations (WAC 296-127-026) only certain owners of construction companies are exempt from the State’s prevailing wage requirements, defined as follows:

1. Sole owners and their spouses.
2. Any partner who owns at least 30% of a partnership
3. The president, vice-president and treasurer of a corporation if each one owns at least 30% of the corporation.

The regulations are intended to prevent contractors from simply labeling all of their workers as owners. Nevertheless, in certain trades such as floor laying and drywall, it is a common practice for an individual worker to become a registered contractor. They are then hired by general contractors for an amount that equates to less than the prevailing wage rate, with many of them working not by the hour, but by the “piece” or how much work they actually accomplish.

Ensuring payment of prevailing wages on public works projects is an ongoing challenge that is of concern to many. Without compliance with the law, the integrity of the competitive bidding process is undermined, and quality on the project may suffer as well.