A Cautionary Tale on the Prevailing Wage Law

A modular housing manufacturer and Somerville housing officials are learning the cost of not fully understanding how special legislation impacted a project.

Normally, Chapter 149, section 44(E)4 exempts modular building manufacturing from the prevailing wage law on public projects. However, the Legislature exempted a single Somerville project from section 44(E)4 when it passed Chapter 197 of the Acts of 2018, according to the Attorney General’s Office and the Department of Labor Standards.

Now, the DLS says the prevailing wage should have been paid to workers in the modular housing factory located about 40 miles from the Clarendon Hill project site in Somerville. A DLS draft ruling leaves the company and project exposed to a potentially steep financial liability if the AG’s Fair Labor Division pursues enforcement – which seems likely.

In 2018, the City of Somerville asked the Legislature for a special act (H. 4580) that exempts the project from state construction statutes, except the prevailing wage. The intent was to reduce the cost of red tape in building public housing, according to the testimony of project managers during a DLS hearing in June. The Clarendon Hill Project replaces 216 low-income apartments with 591 units of affordable and market rate housing. Lower project costs would enable more housing. The project is being developed by the Preservation of Affordable Housing, a nonprofit developer, the Somerville Community Corporation, and the Somerville Housing Authority.

Project managers and the modular housing manufacturer, Lab 9 of Littleton, Mass., said in the hearing they did not believe prevailing wage applied to the offsite manufacturing. DLS took up the question at the request of the Attorney General’s Office, which apparently fielded complaints from Lab 9 workers. With the DLS opinion, the AG’s office can now seek enforcement.

The original legislation requested by Somerville said the project would be subject to the prevailing wage for work conducted “on this site.” However, those three words were excised prior to its enactment into law as Chapter 197 of the Acts of 2018. Those three words might have saved the project from being subject to the prevailing wage for offsite work.

In his ruling, DLS Director Michael Flanagan said he agreed with the AG’s opinion that the 2018 special act gutted section 44(E)4 exempting modular housing manufacturing from prevailing wage. He then gave his analysis of why the prevailing wage applies to the manufacturing of modular housing units at a permanent factory located about 40 miles from the construction site.

“The factors outlined above as to why the Littleton work constitutes construction demonstrate that there is a significant connection between the two sites. Lab 9 was only producing modular units for the Project during the period in question. These units were produced in Littleton with specifications and on a schedule that was dictated by the awarding authority’s development plan. The construction plan from the beginning of the Project was reliant on the two sites operating in tandem. As a result, there is sufficient nexus between the offsite construction in Littleton and the Somerville site for prevailing wage to apply,” the draft letter states.

The DLS draft opinion letter, which will become final after a public comment period, includes language clarifying it only applies to the specific Clarendon Hill Project and not other projects. “[N]othing in this determination changes the applicability of G.L. c. 149, § 44E to other modular housing projects nor does the decision subject either off-site manufacturing or all off-site fabrication to the prevailing wage laws.”

Included in its comments on the draft, MCA has requested that DLS strengthen that section. The MCA in June and July submitted oral and written testimony against the application of the prevailing wage to offsite manufacturing work at a permanent facility.