Demystifying Union vs. Prevailing Wage in NYC

For an owner-side project manager, the labor budget is the single most volatile line item in the Pro Forma. In New York City, we often hear “Union” and “Prevailing Wage” used interchangeably. However, mistaking one for the other is a risk-management failure that can result in six-figure back-pay liabilities or project delays.

The Fundamental Split

The difference isn’t necessarily the dollar amount — it’s the regulatory framework and the compliance requirements.

Union Wages are a private contractual obligation. If you hire a union contractor, they are bound by a Collective Bargaining Agreement (CBA).
Prevailing Wages are a statutory requirement. If your project sits on city land, uses public funding, or leverages tax incentives (like the successor to 421-a), the law dictates the minimum you must pay.

The “30% Rule”: Why the Rates Match

In NYC, the Comptroller’s office determines the prevailing wage by looking at the market. If 30% or more of workers in a trade are covered by a union contract, that union’s negotiated rate (including their specific benefit contributions) becomes the “prevailing” rate for the entire city.

This is why, when you look at the Comptroller’s 220 Schedule, the rates for IBEW Local 3 or Laborers Local 79 are identical to the legal minimums. The union sets the “floor” for the entire market.

The Three “Gotchas” for Owners

1. The Benefit Breakdown (Fringes)

On a Union site, supplemental benefits are paid directly to the Union’s benefit funds (pension, annuity, health). On a Non-Union Prevailing Wage site, the contractor can choose to pay those benefits to the worker as cash in their check. While the total cost to the owner is the same, the non-union worker sees a much higher take-home pay, which can lead to turnover issues if not managed.

2. The “Residential” Discount

NYC often has two different prevailing wage schedules: General/Commercial and Residential.

The Risk: If you are building a university housing project, you might assume the lower Residential rate applies. However, if you sign a PLA with the Building Trades, they may demand the General rate regardless of the building’s use. Always clarify the “Work Classification” before the first shovel hits the dirt.

3. Certified Payroll vs. Union Audits

Prevailing Wage compliance is managed via LCPtracker or similar software where contractors submit certified payroll to the city.
Union compliance is managed by the Shop Steward and periodic audits from the Union’s benefit funds. As an owner, you need to ensure your CM is auditing both if you are on a public-incentivized project.

The Bottom Line

In the NYC metro area, “Prevailing Wage” is essentially the “Union Rate” with a government badge on it. As an owner, your job isn’t just to budget for the $120/hr total package; it’s to ensure the contractor’s “Member Classifications” — from Apprentices to Foremen — are being reported accurately to avoid a “misclassification” claim that could halt your Certificate of Occupancy.

✓ Checklist for the Owner’s Representative

Determine if the project is "Article 8" (Public Work) or "Private."
Verify if tax incentives trigger prevailing wage requirements.
If using a PLA, confirm which schedule (General vs. Residential) is being utilized.
Ensure the CM has a dedicated compliance officer for certified payroll review.

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