New York State Governor Kathy Hochul signed the Roadway Excavation Quality Assurance Act, codified as NYS Labor Law Section 224-F, on August 16, 2023. It took effect on September 15, 2023. This new law expands prevailing wage and fringe benefit requirements, outlined in Article 8 Section 220 of the NYS Labor Law, to utility contractors and subcontractors—referred to here as employers—when a permit is issued by the state, county, or municipality for street work, also known as “covered work.”

Before this law, employers performing covered work were exempt from paying utility workers the mandated prevailing wage and fringe benefits.

Challenges for Non-Union Employers

Union shops are unaffected by the new law as their pay and benefits match the prevailing rates. They contribute the hourly fringe benefit rate to the union benefit plan to comply. However, non-union shops face more complex challenges.

Non-union employers can meet the hourly fringe benefit requirements in two ways:

• Pay the hourly fringe benefit rate as additional cash wages in weekly paychecks.
• Pay the hourly fringe benefit rate to a bona fide benefit plan, fund, or program.

If paid as cash wages, these amounts are subject to payroll taxes like FICA, FUTA, SUTA, and workers’ compensation.

If paid to a benefit plan, the employer must pay the hourly rate for all hours, including non-covered work, to receive full credit. Otherwise, the New York State Department of Labor (NYSDOL) will adjust the contributions, reducing the credit. The difference between the required fringe benefit rate and the allowed credit must be paid as cash wages.

Other factors complicate developing a compliant fringe benefit strategy:

• Total public work hours versus non-public (private) work hours
• Current employee benefits
• Contractor or subcontractor administrative capacity
• Workforce demographics and seasonality

Alternative, but near-term solution

Paying the fringe benefit rate as cash wages increases payroll taxes and costs, making bidding less competitive. This might be suitable for employers with infrequent covered work.

Contractors with frequent covered work and robust benefit plans can use these plans for credit but must regularly calculate annualization and make up any shortfalls. This method is administratively demanding and requires careful management to avoid NYSDOL penalties.