Dive Brief:

• The Employment of Illinois Workers on Public Works Act, also known as the Illinois Preference Act, is no longer in effect, according to the Illinois Department of Labor.
• Illinois legislators knocked down the requirement after the U.S. Department of Labor announced last month that the state's unemployment rate fell below 5%.
• Illinois law requires employers to hire at least 90% Illinois residents on all public work projects when the jobless rate hits above 5%. The law took effect on July 1, 2020, when the unemployment rate hovered above 5% largely due to pandemic-related effects on the state economy, according to the release.

Dive Insight:

The Illinois Chapter of the Associated Builders and Contractors, which represents construction employers, supports the suspension of the Illinois Preference Act, according to Ben Brubeck, ABC vice president of regulatory, labor and state affairs.

"Local labor policies can create an additional hurdle that contractors and governments must meet with regards to taxpayer-funded construction projects," said Brubeck. "Hurdles like these ultimately exacerbate the industry's skilled labor shortage and increase costs."

These types of residency requirements inhibit contractors from working in other states or localities, especially if they work on a regional or national level, said Brubeck. 

Charles Krugel, a management side labor and employment attorney based in Chicago, said the change should give contractors relief. 

"There's a lot of uncertainty in our labor and supply chain markets," said Krugel. "By making Illinois more competitive in regards to construction contractors and a construction labor shortage, it's opening its doors to out-of-state labor and making itself more competitive in the construction labor market."

'Illinois got it right'

Given the overall shortage of workers in the construction industry, contractors often struggle to comply with workforce participation regulations.

For example, in Massachusetts, 95% of contracts administered by the state's Division of Capital Asset Management and Maintenance failed to meet participation goals for women, while another 64% missed minority worker goals.  

In Rochester, New York, where a schools project required contractors to subcontract 15% of their work to minority-owned businesses, and another 5% to women-owned firms, the New York attorney general called out 10 construction companies for allegedly inflating their participation numbers via a pass-through scheme. 

And at the $1.5 billion airport project in Kansas City the Federal Aviation Administration cried foul over whether contractors accurately tracked workforce participation metrics. 

Krugel said most contractors only begrudgingly accept these types of mandates, and welcome the change now.

"Requirements are present in federal contracting laws mandating prevailing wage rates, the usage of union labor or affirmative action mandates," said Krugel. "The requirements are intended to 'level the playing field' for construction companies and laborers, they're not meant to hinder commerce nor do I believe they have that effect."

The challenge is that without these government-funded projects, some construction businesses would become insolvent, Krugel added. That creates a constant push and pull between government and the private sector over labor regulations.

"It's rare that a government suspends or sunsets a law. In this instance, I think Illinois got it right," said Krugel. "This law seems to have run its course with the decline in COVID infections, the economy's rebound and the labor shortage."