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State Appellate Court Rules That State Prevailing Wage Law Not Preempted by Federal Law

On December 2, 2019, the Appellate Court of Illinois for the Third District ruled that an Illinois state law that requires employers to pay fringe benefits to workers on public projects is not preempted by the federal Employee Retirement Income Security Act (ERISA). The state law in question—the Illinois Prevailing Wage Act—sets minimum wage and benefit levels for workers on public works projects. The Court ruled that the law does not have a significant connection with an ERISA benefit plan saying in its ruling that “[s]etting prevailing wage on public works projects has long been regulated by the states and is ‘quite remote’ from the areas with which ERISA is expressly concerned.”

The case was brought by the state’s Labor Department against an Illinois-based construction company alleging violations of the Illinois Prevailing Wage Act. The Department alleged that the company failed to make required fringe benefit contributions on behalf of more than 25 workers across six public projects. The construction company moved to dismiss the case on the basis that the prevailing wage state law was preempted by ERISA because it involved salary deductions sent to an ERISA-covered benefit plan. A trial court ruled in favor of the company, however, the appellate court reversed the lower court’s decision this week.

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