A provision in New York's new data center bill requires contractors to pay prevailing wages on covered projects—and most construction firms don't know it exists yet.
Most construction and trades owners in New York haven't heard about a labor cost requirement buried in S10642, the state's new data center regulation bill. But if your firm bids on data center work, this provision will affect your bottom line and your compliance obligations immediately.
Here's what's happening: S10642 includes a prevailing wage mandate that applies to any contractor or subcontractor performing construction or expansion work on a data center with peak demand capacity of 5 megawatts (MW) or more. The requirement is codified in a new section 224-g of New York Labor Law and takes effect immediately upon enactment.
Under the mandate, covered contractors must pay prevailing wages as determined under existing Labor Law Article 8. This is the same prevailing wage framework that applies to public works projects in New York—meaning wages are set at union rates for each trade and geographic area, regardless of whether your workers are union members.
The 5 MW threshold is the key trigger. Data centers below that capacity are not covered. But any facility meeting or exceeding 5 MW peak demand—whether a new build or an expansion of an existing facility—triggers the requirement for all construction work performed on it.
For small and mid-sized construction firms, this creates several practical challenges:
Labor costs rise significantly. Prevailing wage rates in New York typically run 50 to 100 percent higher than standard market wages, depending on the trade and region. This directly increases your bid costs and reduces your competitive advantage if you're competing against firms already familiar with prevailing wage compliance.
Compliance obligations increase. You'll need to file certified payroll records, track and document wages by trade and classification, and maintain records that satisfy Labor Department audits. Mistakes can result in penalties and back-wage liability.
Project bidding changes. You'll need to know prevailing wage rates before submitting a bid. Underestimating labor costs because you didn't account for the requirement can be costly.
The provision applies to both new data center construction and expansions of existing facilities. It covers all contractors and subcontractors involved in the construction work, not just the general contractor.
Data centers are a growing sector in New York, particularly in regions outside Manhattan. Several large projects are in development or planning stages. If your firm does commercial or industrial construction, you should assume data center work may come your way—and you need to understand this requirement before you bid.
What You Should Do Now
Review the prevailing wage rates published by the New York Department of Labor for your region and trades. Confirm your payroll and record-keeping systems can handle the compliance requirements. If you're unfamiliar with prevailing wage projects, consider consulting with a labor compliance specialist before bidding a data center job.
The provision is found in section 10 of S10642, which adds section 224-g to Labor Law (page 11 of the bill text). It is effective immediately upon enactment.
Source: S10642, Section 10 (adding Labor Law § 224-g), effective upon enactment.