MARYLAND’S LIVING WAGE
FREQUENTLY ASKED QUESTIONS
1. What is the Living Wage?
Governor Martin O’Malley signed a bill into law establishing Maryland’s Living Wage. The new law is effective as of October 1, 2007. The Living Wage Law requires certain contractors and subcontractors to pay minimum wage rates to employees working under certain State services contracts. The Living Wage Law currently requires the payment of the Living Wage of either $12.28 per hour, effective September 27, 2010 or $9.23 per hour effective
September 27, 2010 depending upon the jurisdiction where the services are performed. The State Living Wage does not apply to county and municipal contracts although some local governments such as Montgomery County and Baltimore City have their own living wage requirements. This law applies prospectively only to contracts awarded after October 1, 2007.
2. How is a Living Wage different from the current Prevailing Wage Law?
The long-established prevailing wage applies to contractors and subcontractors under government public works contracts over $500,000 when State public funds are used to provide 50% or more of the funds for the construction of any project. The Living Wage applies to most services contracts, including maintenance contracts. Like the Living Wage, the Prevailing Wage is set annually by the Commissioner of Labor and Industry.
3. Does the Living Wage apply to all types of State services contracts?
No. The Living Wage Law applies to State services contracts and subcontracts for services under Title 21 awarded on or after October 1, 2007. The procurement regulations define a contract for “services” as one for “the rendering of time, effort, or work rather than the furnishing of a specific physical product other than reports incidental to the required performance.” The term “service contract” includes maintenance services, information
technology services, but does not include construction, construction-related services, architectural and engineering services, energy performance contracts, supplies (including commodities and printing), real property, or the purchase of goods.
4. What State service contracts are exempt from the Living Wage Law?
The Living Wage Law exempts State service contracts that are:
; under $100,000 in value;
; under $500,000 in value if the contractor has 10 or fewer employees;
; for services needed immediately to prevent or respond to imminent threat to public
health or safety (emergency procurements);
; less than 13 weeks in duration;
; with a public service company;
; with a non-profit organization;
; between units (interagency agreements); or
; between a unit and a county or Baltimore City.
The Living Wage Law exempts State service contracts where application of the Title would conflict with federal program requirements.
Agencies exempt from State procurement law, such as the University System, Morgan State University, and the Stadium Authority, are not required to comply with the Living Wage laws (see State Finance and Procurement Article, ?11-203, Maryland Code).
Assuming that the contract value and number of employee thresholds are met, contracts subject to the Living Wage include:
; sole source services contracts;
; services contracts acquired through competitive sealed proposals, competitive sealed
bidding, negotiated award after unsatisfactory competitive sealed bidding, expedited
procurements, and non-competitive negotiated procurement of Human, Social or
; unsolicited proposals for health or human services, educational services, or business
and economic development services; and
; Intergovernmental cooperative purchasing agreements when sponsored by a
5. Are options that occur on or after October 1, 2007 covered by the Living Wage Law if
the original (base) contract was approved prior to October 1, 2007?
No. The law applies prospectively and applies to contracts awarded after October 1, 2007.
6. When is a prime contractor covered by the Living Wage Law?
A contractor with more than 10 employees is covered when the State contract for services is valued at $100,000 or more. A contractor with 10 or fewer employees is only covered when the State contract for services is valued at $500,000 or more.
7. When is a subcontractor covered by the Living Wage Law?
A subcontractor is only covered if the prime contractor for the State contract for services at issue is covered, and:
; The subcontractor is not otherwise excluded and has more than 10 employees and is
performing services on a State contract for services valued at $100,000 or more; or
; A subcontractor is not otherwise excluded and has 10 or fewer employees and is
performing services on a State contract for services valued at $500,000 or more.
8. How is contract value determined?
Contract value is determined by adding the value of the base period plus all option periods.
9. What about a contractor (or subcontractor) that is not initially covered because of the value of the contract, but, due to a modification or change order, the contract value is increased and then exceeds the value thresholds?
A contractor or subcontractor that is not initially covered due to value (e.g., a contract of $75,000) remains exempt. An agency may not artificially divide a procurement to avoid application of the Living Wage Law.
10. What about a contractor (or subcontractor) that is not initially covered because the contractor (or subcontractor) has 10 or fewer employees at the time they submit their bid or thproposal, but that subsequently hires an 11 employee?
A contractor/subcontractor that is not initially covered due to number of employees remains exempt on that contract.
11. In determining whether an employer has 10 or fewer employees, are part time employees included? In other words, is an employer with 5 full time and 6 part time employees covered?
Part time positions will be added to equate to full time equivalents (FTEs). A 40 hour week will be used as the standard, unless the contractor provides evidence that they define full time by a lower number of hours (e.g., 35 hours). For example, under a 40 hour work week, two individuals working 20 hours each equate to one FTE.
12. Which employees must be paid a living wage?
Covered prime contractors and covered subcontractors must pay the living wage to employees who:
; are 18 years old, or will turn 18 during the contract;
; work at least 13 consecutive weeks on the contract; and
; work at least one-half of their time during any week on the State contract.
13. For employees who turn 18 during the contract term, are they to receive a living wage
from day one of the contract (before they turn 18) or from the day they turn 18?
Living wage applies from the start of the contract or the start of employment (whichever is later) for those covered employees who are under 18 but are anticipated to turn 18 while they are still employed on the contract.
14. For covered employees, must they be paid living wage for those hours they are not
working on State contract business?
No. Living wage must be paid only for those hours spent on State contract business.
15. What are the wage rates?
There are two wage “tiers” established in Maryland - Tier 1 includes Montgomery
County, Prince George’s County, Howard County, Baltimore County, Baltimore City, and Anne Arundel County. Tier 2 is comprised of the counties not included in Tier 1. The living wage rate for Tier 1 is $12.28 per hour, effective September 27, 2010 and the rate for Tier 2 is $9.23 per
hour effective September 27, 2010.
16. What if my business has operations in areas with two different wage tiers? Which rate should I pay?
The wage tier is determined by the area where services valued at 50% or more of the total contract value is performed. For example, if 45% of contracted services are performed in a Tier 1 area and 55% of the services are performed in a Tier 2 area, the wage for all eligible employees is Tier 2 because Tier 2 is the region where 50% or more (55%) of the services are performed.
17. What if my business has all of its operations out of state? Am I required to pay the Maryland Living Wage?
Yes. If the employees who perform the services are not located in either Tier 1 or Tier 2, the procurement officer will assign the tier(s) based upon where the majority of the recipients of the services are located.
18. What are the possible adjustments to the Living Wage?
The Commissioner of Labor and Industry is in charge of annually adjusting the living wage rates based upon the consumer price index for the previous calendar year. An employer may commit in its bid or proposal that it will provide health insurance and may reduce the living wage by all or part of the hourly cost of the employer’s share of the premium. An employer may also reduce the living wage by no more than 50 cents of the hourly cost of the employer’s contribution to an employee’s deferred compensation plan.
19. How is the annual rate adjustment calculated?
Each year within 90 days of July 1, the Commissioner of Labor and Industry will adjust the Living Wage rate by the annual average increase or decrease, if any, in the consumer price index (CPI) for all urban consumers for the Washington-Baltimore metropolitan area or any successor index for the previous calendar year. In determining the annual average increase or decrease, the Commissioner of Labor and Industry will determine the percentage change in the level of the CPI from one year to the next.
20. What are the contractor and subcontractor obligations when the living wage
During the term of the contract contractors and subcontractors must pay the living wage in effect, including any living wage increase, from the date of such increase.