Prevailing Wage in Arizona: State Ban and Federal Rules

Arizona does not require prevailing wages on state or local public construction projects. Under ARS § 34-321, no state agency, city, county, school district, or other political subdivision can condition a public works contract on paying workers at or above the locally prevailing rate.¹ Federal prevailing wage rules under the Davis-Bacon Act still apply to Arizona projects that receive federal funding, and that is where most of the confusion happens.

The State Ban Under ARS § 34-321

The statute treats wage rates on public works as a matter of statewide concern, which preempts any local attempt to impose a prevailing wage. A city or county cannot pass its own ordinance to fill the gap.¹

The prohibition reaches further than wage floors. On any public works contract, a state agency or political subdivision cannot require a bidder or contractor to agree to:¹

A project labor agreement — defined broadly to include pre-hire, collective bargaining, model construction, or similar agreements that set employment terms on a construction project before work begins.
A neutrality agreement, where an employer promises to stay neutral during union organizing, share private employee information beyond what federal law requires, or recognize a union without a secret-ballot election.
Participation in or contributions to a registered apprenticeship program.

“Political subdivision” is written to catch essentially every unit of government that funds construction: cities, charter cities, towns, counties, school districts, community college districts, multi-county water conservation districts, industrial development authorities, and special taxing districts primarily supported by taxes. If any of these entities funds the project, the prohibition applies to it.

Federal Prevailing Wages Still Apply to Federally Funded Projects

Arizona’s ban does nothing to displace federal law. Under 40 U.S.C. § 3142, every federal construction contract above $2,000 must include a provision requiring that mechanics and laborers be paid at least the prevailing wage determined by the U.S. Department of Labor for similar work in the area. The wages must be paid unconditionally, at least once per week, and the applicable wage scale posted at the job site.²

This matters because many Arizona projects blend funding sources. Highway work backed partly through the Federal Highway Administration, public buildings supported by federal grants, and construction tied to federal facilities commonly trigger Davis-Bacon. A project that looks state-run on the surface can still carry federal wage obligations. Before you finalize a bid, pull the project’s funding sources. If any federal money is in the mix, ARS § 34-321 will not protect you from a Davis-Bacon violation.

Roughly half the states operate without a state-level prevailing wage law.³ The federal rule is the same across all of them.

What Private Parties Can Still Do

The statute restricts government conduct, not private bargaining. Section 34-321(D) preserves two things that readers often assume are gone:¹

Private parties can still enter collective bargaining relationships voluntarily. A contractor working on a public project is free to negotiate a union agreement with its own workforce, and a unionized contractor that wins a public bid keeps its existing labor agreement in place. The law only prevents the government from making such an agreement a precondition for the contract.

The statute also leaves rights under the National Labor Relations Act untouched. Workers on Arizona public projects retain their federal rights to organize, form unions, and bargain collectively. What ARS § 34-321 limits is what a government agency can write into its contract terms, not what workers and employers can agree to between themselves.

How Arizona Got Here

Arizona once had its own version of Davis-Bacon, sometimes called the Little Davis-Bacon Act, requiring prevailing wages on state-funded projects. A 1979 legal challenge struck down part of the method used to calculate prevailing rates, and the legislature referred the question to the voters. A 1984 referendum repealed the state prevailing wage law outright. The repeal took effect November 30, 1984, and the prohibition has lived at ARS § 34-321 ever since.⁴

The “statewide concern” language in the statute is what blocks municipalities from reintroducing prevailing wages at the local level. The Arizona Attorney General has addressed this question directly, and the answer tracks the statute: cities and counties lack the authority to enact their own prevailing wage ordinances for public construction.⁴

What This Means in Practice

For contractors bidding on Arizona state or local public work, wages are set by the market rather than by a government-determined rate schedule. There is no requirement to sign a project labor agreement, enter a neutrality agreement, or participate in a registered apprenticeship program as a condition of winning the job. Non-union contractors face one fewer barrier to entry than they would in a prevailing wage state. Union contractors can still bid and win, but they do so carrying their own labor costs without any contractual tilt from the government.

For workers on Arizona state and local public projects, there is no guaranteed wage floor beyond the federal and state minimum wage. The protections that come with a prevailing wage determination — set rates for each trade classification, fringe benefits built into the hourly figure, enforcement through the contracting agency — do not exist on purely state-funded work. They do exist on federally funded work in Arizona, under Davis-Bacon, with the Department of Labor setting the rates.

The practical rule is the same for both sides of the bid: identify the funding before you assume which wage regime applies. State and local money means no prevailing wage. Any federal money means Davis-Bacon.

1
Arizona Legislature. Arizona Code 34-321 – Public Policy; Prevailing Wage Contract; Prohibited Agreements; Definitions
2
GovInfo. 40 USC 3142 – Rate of Wages for Laborers and Mechanics
3
U.S. Department of Labor. Dollar Threshold Amount for Contract Coverage
4
Arizona Attorney General. Municipal and County Authority to Enact an Ordinance Requiring Prevailing Wages