New York State Department of Labor Issues Enforcement Guidance for Wage Requirements for Certain Renewable Energy Systems

On February 7, 2023, the New York State Department of Labor (“NYSDOL") published Enforcement Guidance providing information regarding the scope of the amendment to the New York State Labor Law provision that governs prevailing wage requirements for projects relating to certain renewable energy systems and NYSDOL’s enforcement power.  

A Brief History of the Law

Article 8 of the New York Labor Law, which covers prevailing wage requirements for public construction contracts, was amended in 2021. The amendment, effective October 1, 2021, included Section 224-d, which established prevailing wage requirements for construction work related to certain renewable energy systems. Renewable energy systems covered by Section 224-d include systems “as defined in section 66-p of the Public Service Law with a capacity of greater than five megawatts alternating current and which involves the procurement of renewable energy credits by a public entity, or a third party acting on behalf and for the benefit of a public entity.” Excluded from the prevailing wage requirement under Section 224-d is the following:  

construction work performed under a pre-hire collective bargaining agreement between an owner or contractor and a bona fide building and construction trade labor organization which has established itself, and/or its affiliates, as the collective bargaining representative for all persons who will perform work on such a project, and which provides that only contractors and subcontractors who sign a pre-negotiated agreement with the labor organization can perform work on such a project, or construction work performed under a labor peace agreement, project labor agreement, or any other construction work performed under an enforceable agreement between an owner or contractor and a bona fide building and construction trade labor organization.

On July 5, 2022, Section 224-d was further amended to expand the definition of covered renewable energy systems to include those defined in Section 66-p of the Public Service Law “with a capacity of one or more megawatts alternating current and which involves the procurement of renewable energy credits by a public entity, or a third party acting on behalf and for the benefit of a public entity; or any ‘thermal energy network’ as defined by subdivision twenty-nine of section 2 of the” Public Service Law. For reference, Public Service Law Section 66-p defines “renewable energy systems” to mean “systems that generate electricity or thermal energy through use of the following technologies: solar, thermal, photovoltaics, on land and offshore wind, hydroelectric, geothermal electric, geothermal ground source heat, tidal energy, wave energy, ocean thermal, and fuel cells which do not utilize a fossil fuel resource in the process of generating electricity.” Additionally, Public Service Law subdivision twenty-nine of section 2 defines a “thermal energy network” as “all real estate, fixtures, and personal property operated, owned, used or to be used for or in connection with or to facilitate a utility-scale distribution infrastructure project that supplies thermal energy.”

NYSDOL’s Enforcement Authority

Section 224-d grants the NYSDOL enforcement authority related to prevailing wage requirements over renewable energy system projects. Before the enactment of Section 224-d, certain renewable energy system projects involving underlying agreements with the New York State Energy Research & Development (“NYSERDA”) for the purchase of renewable energy credits were required to pay prevailing wages pursuant to the NYSERDA procurement policy that are incorporated by reference into the agreements. Accordingly, the NYSDOL lacks jurisdiction to enforce the provisions of Article 8 of the New York Labor Law on projects solicited prior to the effective date of Section 224-d as the prevailing wage obligations were contractual in nature.

Following the effective date of Section 224-d, the NYSDOL, through its Bureau of Public Work, was authorized to enforce the provisions of Section 224-d and the prevailing wage requirements of Article 8 in order to avoid imposing unanticipated costs on contractors and developers. The NYSDOL’s enforcement authority transitioned the prevailing wage requirements from a contractual obligation to a statutory one. Moving forward, the Bureau of Public Works will enforce Section 224-d on the following projects:

• All covered renewable energy system projects, with a capacity of more than five megawatts, that were awarded a contract from an advertisement or a solicitation or a request for proposal, invitation for bid, or solicitation of proposal, or any other method provided for by law or regulation for soliciting a response from offerors intended to result in a contract that is issued on or after October 1, 2021; and
• All covered renewable energy system projects, with a capacity of one or more megawatts or which are thermal energy networks, that were awarded a contract from an advertisement or a solicitation or a request for proposal, invitation for bid, or solicitation of proposal, or any other method provided for by law or regulation for soliciting a response from offerors intended to result in a contract that is issued on or after July 5, 2022.

Key Takeaways

Section 224-d encompasses some of the principles of the prevailing wage requirements under the Inflation Reduction Act but transforms the obligation from a contractual obligation to a statutory one.  (See Crowell & Moring’s prior alert on the IRA). Unlike the IRA in which generous enhanced tax credits are offered in exchange for payment of prevailing wages and engagement of registered apprentices, projects covered under Section 224-d involve the “procurement of renewable energy credits by a public entity, or a third party acting on behalf and for the benefit of a public entity.”  Regardless of these differences, complying with the prevailing requirements is a complex undertaking and requires a well organized and managed approach to ensure proper classification and payment for workers performing covered work.  A robust record keeping practice that confirms compliance with these requirements must be implemented and strictly observed.