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Oregon鈥檚 prevailing wage rate law, sometimes referred to as the 鈥淟ittle Davis Bacon Act,鈥� has been in place in some form since 1959. Under the law, contractors that perform work on 鈥減ublic works鈥� projects are required to pay workers at least the prevailing wage rate as determined by the Oregon Bureau of Labor and Industries (BOLI). A public works project is any project administered by a public agency that costs more than $50,000 or that uses at least $750,000 of public agency funding.

Previously, and with some narrow exceptions, prevailing wage was required only for work performed on the project site. However, starting July 1, 2026, contractors that work on public works projects in Oregon will now be required to pay prevailing wage for certain off-site bespoke work. This shift is the result of House Bill 2688, which was adopted by the Oregon Legislature during the 2025 session and signed into law by Gov. Tina Kotek on July 31, 2025.

Specifically, HB 2688 expanded the definition of 鈥減ublic works鈥� to include 鈥渇abrication, assembly, preconstruction or construction that is: (i) bespoke; (ii) performed offsite; (iii) performed specifically for, and in accordance with the specification of, a (public works project); and (iv) performed on (certain systems and components).鈥� Examples of the systems and components referred to in the bill include mechanical systems, such as HVAC systems; electrical systems; ornamental and structural ironwork; and masonry and plaster systems or components. Contractors are encouraged to consult the full list of systems and components covered by HB 2688, as it was drafted to encompass a wide range of components that may be fabricated off-site and then transported and installed on the project site.

During the legislative session, proponents of the bill, including many of the state鈥檚 trade unions, argued that expanding the prevailing wage to off-site work would close a loophole that allowed nonunion contractors to avoid paying the prevailing wage by using off-site prefabrication. Cities, counties, and other municipalities opposed the bill. While the trade unions argued that savings from off-site fabrication were not passed on to customers and taxpayers, the Association of Oregon Counties stated that 鈥渁pplying prevailing wage rates across such a wide range of essential purchases will increase costs and complexity so significantly that it may delay, postpone, or cancel road maintenance and safety improvement projects.鈥�

The League of Oregon Cities also described the added burden placed on public entities by HB 2688. It specifically noted that 鈥渓ocal governments have no ability to track or enforce whether a manufacturer is paying local prevailing wage, particularly if that manufacturer is out of state or international.鈥� This additional burden would be time-consuming and costly, impacting the ability to finish projects that involve parts procured outside Oregon or in rural areas of the state.

Despite the passage of the bill, several questions remained unanswered regarding the scope of the new prevailing wage requirements and how they will be enforced. While HB 2688 limits prevailing wage to off-site fabrication, assembly, or bespoke preconstruction, the legislature did not define the term bespoke. This issue was raised by opponents of the bill, and it appears that BOLI is undertaking rulemaking to clarify the term.

Under BOLI鈥檚 draft rules, 鈥渂espoke鈥� would mean 鈥渨ork that is performed according to individualized specifications that are contained in a public works contract.鈥� The draft rule also specifically excludes from the definition of 鈥渂espoke鈥� work that is performed before issuance of a public works solicitation, manufactured or modular buildings, as well as the creation or application of concrete, asphalt, paint, and certain art. Based on this proposed definition, it appears BOLI intends to limit prevailing wage requirements to off-site work that is custom-made according to specifications unique to a particular project.

While more clarity regarding the scope of the new prevailing wage requirements appears to be forthcoming in the next couple of months, enforcement of these requirements remains an open question. As opponents of the bill pointed out, how would a public entity enforce prevailing wage requirements at off-site locations in rural parts of the state, or, more particularly, at off-site locations in other states or countries? While BOLI likely has jurisdiction to enforce prevailing wage rates throughout Oregon, it is unclear whether BOLI can enforce prevailing wage on work performed outside of the state. Washington state has a similar requirement for prevailing wage payments at off-site locations. However, the attorney general in Washington had previously issued an opinion stating that the state could not determine the prevailing wage for work performed outside of the state.

During the legislative session, legislative counsel acknowledged that the bill contains nothing that describes how its requirements would apply to work outside the state. Assuming the bill鈥檚 requirements cannot apply to off-site work performed outside Oregon, they may put Oregon contractors at a competitive disadvantage. Oregon public contracting law requires public agencies to award projects to the lowest bidder. However, if BOLI is unable to enforce HB 2688 against out-of-state and international manufacturers, it will disadvantage Oregon manufacturers, which will be forced to pay prevailing wage while their competitors are not.

The draft rules from BOLI do not currently address this lingering issue, and it remains to be seen how BOLI will enforce the law when it becomes effective. As a result, contractors are encouraged to consult with their attorneys ahead of July 1 to evaluate which projects and scopes of work may be subject to the law鈥檚 new requirements.

Josh Dennis is a Schwabe, Williamson & Wyatt shareholder. He focuses his practice on real estate and construction. Contact him at 503-796-2985 or [email protected].

This column is intended to provide readers with general information and not legal advice. Consult professional counsel for help regarding specific situations.

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