The Modular Building Institute has filed a federal lawsuit against Oregon's labor commissioner, challenging a state law that requires out-of-state modular home factories to pay Oregon prevailing wages. The institute argues the rule violates the Constitution by projecting regulatory power beyond state borders and discriminating against interstate commerce.
This lawsuit could determine whether states can impose their labor wage standards on businesses operating outside their borders, potentially impacting interstate commerce and the growth of the modular construction industry.
The Modular Building Institute (MBI) has filed a lawsuit in federal court challenging an Oregon law that mandates out-of-state modular home factories pay workers Oregon's prevailing wages. The trade group, which represents 708 modular construction companies globally, argues that the state cannot extend its regulatory power beyond its borders to dictate wages for work performed in other states.
The lawsuit centers on Oregon House Bill 2688, which expanded prevailing-wage rules to include off-site fabrication of components for public projects, regardless of where the factory is located. MBI contends this violates the dormant Commerce Clause by discriminating against interstate commerce and infringes on the federal government's exclusive authority over foreign commerce. The institute also points to the rule's core term, "bespoke," as being unconstitutionally vague, leaving manufacturers uncertain about compliance.
Violators of the rule risk back wages, civil penalties, debarment from public contracts, and even criminal liability. This legal challenge comes as Oregon actively promotes modular housing, having eased zoning restrictions in 2019 to allow for more manufactured and prefabricated homes. Housing advocates note the irony that labor rules might deter the very modular manufacturers the state is trying to encourage.
New York enacted a similar expansion in December 2025, but MBI's objections were addressed through a subsequent "clean-up" bill signed by Governor Kathy Hochul in February 2026, which narrowed the law's scope. MBI is seeking a permanent injunction to strike down the off-site provisions of Oregon's HB 2688.