Prevailing Wage Compliance for Government Contractors

Federal Prevailing Wage Requirements

The Davis-Bacon Act of 1931 requires contractors and subcontractors performing work on federal government construction contracts exceeding $2,000 to pay workers no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. The Department of Labor's Wage and Hour Division determines prevailing wage rates through surveys of wages paid on similar construction projects in each geographic area.

In 2023, the DOL issued a final rule updating Davis-Bacon regulations for the first time in over 40 years, making significant changes to wage determination methodology, enforcement procedures, and the definition of prevailing wage. Employers performing federal construction work must understand these updated requirements.

Wage Determination and Classification

Prevailing wage rates are published in wage determinations that list the hourly base rate and fringe benefit rate for each classification of worker. Contractors must identify the correct wage determination for their project based on the type of construction (building, highway, heavy, or residential) and the geographic area where the work is performed.

Workers must be classified according to the actual work they perform, not their job title. If a worker performs tasks falling under multiple classifications during a single workweek, they must be paid the highest applicable rate for each type of work performed. Misclassifying workers to pay lower rates is a common violation that can result in significant liability.

Certified Payroll and Recordkeeping

Contractors must submit weekly certified payroll reports using DOL Form WH-347 for each week in which contract work is performed. The certified payroll must list each employee's name, address, classification, hourly rate, daily and weekly hours, deductions, and net pay. The contractor or an authorized officer must sign the Statement of Compliance certifying the accuracy of the information.

Records must be maintained for three years after completion of the project. Falsification of certified payroll records can result in civil penalties, contract termination, debarment from future federal contracts, and criminal prosecution under the False Claims Act.

State Prevailing Wage Laws

In addition to federal requirements, approximately 30 states and the District of Columbia have their own prevailing wage laws that apply to state-funded construction projects. These state laws have varying coverage thresholds, wage determination methodologies, and enforcement mechanisms. Some state prevailing wage rates exceed federal rates for the same area.

Contractors working on projects that receive both federal and state funding may need to comply with both federal and state prevailing wage requirements, paying the higher of the two applicable rates.

Compliance Best Practices

Contractors should review wage determinations before bidding on projects to ensure accurate cost estimates. Implementing robust time-tracking systems that capture hours by work classification helps ensure proper pay. Training supervisors on proper worker classification and conducting internal payroll audits before submitting certified payrolls reduce the risk of violations. Engaging experienced compliance counsel for complex projects involving multiple trades and funding sources is a prudent investment.