Understanding Prevailing Wage Requirements

Employers working on federally funded construction projects must comply with the Davis-Bacon Act, which requires payment of locally prevailing wages and fringe benefits to laborers and mechanics. Similar prevailing wage laws exist at the state level for state-funded projects. Non-compliance can result in contract termination, debarment, and liability for back wages.

The Davis-Bacon Act

The Davis-Bacon Act applies to contractors and subcontractors on federally funded or assisted construction contracts exceeding $2,000. Key requirements include:

• Pay workers no less than the prevailing wage rates and fringe benefits listed in the wage determination included in the contract
• Post the applicable wage determination at the job site in a prominent and accessible location
• Submit weekly certified payroll reports (using Department of Labor Form WH-347 or equivalent)
• Maintain payroll records for three years after completion of the contract

Prevailing wage rates are determined by the Department of Labor based on surveys of wages paid for similar work in the geographic area. Rates vary by trade, location, and type of construction (building, heavy, highway, or residential).

Calculating Compliance

Prevailing wage compliance involves both the basic hourly rate and fringe benefits:

• The basic hourly rate must be paid directly to the worker
• Fringe benefits may be paid as cash, contributed to a bona fide benefit plan, or a combination of both
• Common fringe benefits include health insurance, pension contributions, vacation pay, and apprenticeship training fund contributions
• If you provide benefits worth less than the prevailing fringe rate, the difference must be paid in cash

Apprenticeship Programs

Registered apprentices may be paid at reduced rates under certain conditions:

• The apprentice must be individually registered in a program approved by the Bureau of Apprenticeship and Training or a recognized state apprenticeship agency
• The reduced rate must be specified in the approved apprenticeship agreement
• The ratio of apprentices to journeyworkers must not exceed the ratio permitted by the apprenticeship program
• Unregistered workers must be paid the full prevailing wage for the classification of work they perform

Common Compliance Issues

Frequent violations include:

• Misclassifying workers to pay a lower wage rate
• Failing to pay the required fringe benefit amount
• Not submitting weekly certified payroll reports
• Falsifying payroll records
• Failing to pay overtime at the prevailing rate for hours over 40 (under the Contract Work Hours and Safety Standards Act)
• Not paying workers for all hours worked, including travel time when applicable

Enforcement and Penalties

Violations can result in serious consequences:

• Withholding of contract payments to cover back wages owed
• Contract termination
• Debarment from future federal contracts for up to three years
• Liability for back wages plus potential liquidated damages
• Criminal prosecution for willful falsification of payroll records