Update Applicable to:	Effective Date
All Contractors and Subcontractors Engaged in Public Works Projects or Public Building Service Maintenance Contracts in Washington State	January 1, 2026

What happened?

On March 7, 2024, Washington State House Bill 2136 (HB 2136) was signed into law by former Governor Jay Inslee, strengthening enforcement of prevailing wage laws on public construction projects through enhanced penalties, sanctions, and debarment.

Overview:

The law aims to create a fair competitive environment by ensuring businesses that comply with prevailing wage laws are not undercut by those that violate them. It prevents violators from evading accountability by forming new but substantially identical entities.

Highlights

1. Expanded Definition of Contractor: Includes entities with a substantially identical structure to a sanctioned company, based on factors such as continuity of operations, equipment, supervisors, and services.

2. Extended Sanctions: Penalties, debarment, and bidding prohibitions now apply to these substantially identical entities.

3. Enforcement Authority: The Department of Labor & Industries (L&I) can issue notices of violation to extend sanctions. Contractors may appeal under the state’s Administrative Procedure Act.

Impact on Employers

• Higher Compliance Risk: Related entities can no longer avoid penalties by restructuring.

• Financial and Operational Consequences: Increased penalties and risk of losing eligibility for public contracts.

• Administrative Burden: Employers must strengthen compliance systems and internal audits.

Additional information:

Section 1: Legislative Intent

• Prevents government contracts from being awarded to businesses that knowingly violate prevailing wage laws.
• Ensures taxpayer funds do not reward repeat violators.
• Extends sanctions to substantially identical companies to close loopholes where violators create new entities to avoid penalties.

Section 2 – Amendments to RCW 39.12.010

• Expanded Definition of Contractor:
  
  • Includes entities with substantially identical operations, corporate, or management structure to a sanctioned entity.
    
  • Factors for determining “substantial identity” include:
    
    • Continuity of business operations
    • Use of the same equipment or property
    • Similar jobs and working conditions
    • Continuity of supervisors
    • Similar products or services

• Clarifies Key Terms:
  
  • Prevailing Rate of Wage: Based on majority or average wages in the locality.
  • Usual Benefits: Includes health, retirement, insurance, and apprenticeship contributions.
  • Unpaid Prevailing Wages: Failure to pay full wages by the regular payday.
  • Inadvertent Filing Error: Good-faith mistakes despite due care.

Section 3 – New Enforcement Provision

• If a contractor is substantially identical to a debarred or sanctioned entity, it inherits the same penalties and debarment.

• Sanctions Include:
  • Monetary penalties
  • Counting violations toward bidding bans
  • Full debarment from public works projects

• Enforcement Process:
  • L&I can issue a notice of violation.
  • Contractors may appeal under the Administrative Procedure Act (chapter 34.05 RCW).
  • If not appealed, the notice becomes final and binding.
    

Section 4: Effective Date

• January 1, 2026.

Source References

• Washington HB 2136 – Concerning prevailing wage sanctions, penalties, and debarment

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