Legislative Update – July 2019

State contractors, subcontractors and bidders should be aware that the Responsible Payment of Employee Health Care Expenses Act, codified at the State Finance & Procurement Article, §17-801 – 17-804, became effective on July 1st.

The Act applies to all bidders, contractors and subcontractors with more than thirty employees whose employees work on or at the site of a State-funded construction project.  Minority business enterprises are exempt from the Act.  This exclusion, however, has been questioned, with the Maryland Attorney General issuing an opinion that the MBE exclusion may be unconstitutional.

The Act requires State bidders, contractors and subcontractors to provide proof that they pay certain health care related expenses for those employees who work on or at the State site.  Employers can either pay

            (a) aggregate health care expenses of at least 5% of their employees’ aggregate social   security wages, or

            (b) 50% or more of their employees’ health care premiums.

The new law does contain a phase-in period.  Before July 1, 2020, businesses can certify that under an existing health care plan or collective bargaining agreement, the employer pays some portion of employee health care expenses, and that, upon renewal, it will meet the more stringent standards.

In the event that a responsible bidder which is awarded a State-funded construction project fails to submit the required certification within a reasonable period of time, the procurement officer may void the contract.  It remains to be seen what regulations are enacted that dictate the time period by which a bidder must provide documentation, and the standards by which a procurement officer can void the contract.  One would also expect non-awarded bidders to protest any bidder that does not comply with the Act.