If you have ever worked on a project for or funded by the federal government, chances are you’ve had to work within the constraints of the Davis-Bacon Act, often referred to as “prevailing wage.” Simply put, federal prevailing-wage laws require contractors working on federal jobs to pay their employees a wage equivalent to that paid by other union and non-union shops in the area. In practice, there is much more involved than just meeting wage standards, and the detailed bidding process, regulations and required paperwork can make you feel as if you need to hire a full-time compliance coordinator. However, with some Davis-Bacon experience under your belt, knowledge about the laws, and good accounting or payroll software, working on prevailing wage jobs can be much less harrowing.
Nothing can teach you all of the ins-and-outs of Davis-Bacon work like real-world experience, but a little reading and research can go a long way in giving you necessary knowledge, whether you’re just starting out or trying to navigate some current contracts. Below are five points you may not already know about the Davis-Bacon Act and its regulations for you to use as a starting point for your work on federal projects.
1. Prevailing wage laws consist of many related acts and statutes.
Most federal projects are governed by the Davis-Bacon Act. However, you may not be aware that there are quite a few related statutes that control how and what you pay your employees for those jobs. Being aware of these acts and their requirements is the first step toward compliance. Federal jobs may be governed by the following:
- Davis-Bacon Act (DBA): This umbrella act requires “payment of locally prevailing wages and fringe benefits to laborers and mechanics.” It applies to construction “contracts in excess of $2,000 to which the U.S. or District of Columbia is a party” and requires compliance for any laborers or mechanics (even those of a subcontractor) on the “site of work.”
- Davis-Bacon-Related Acts (DBRA): These include about 60 acts that reference or rely upon Davis-Bacon regulations. They extend the DBA to projects that are funded by federal grants, loans, loan guarantees and insurance, including such things as low-income housing funded by the Department of Housing and Urban Development and road and bridge construction funded by the Federal Highway Administration. They may also cover projects that provide a lease contract to a federal entity such as the United States Postal Service.
- McNamara-O’Hara Service Contract Act (SCA): While the DBA covers construction work, this act covers federal contracts in excess of $2,500 for service work. The DBA can also apply to SCA-covered contracts if they require “substantial and segregable amounts of construction activity.”
- Contract Work Hours & Safety Standards Act (CWHSSA): Similar to the Fair Labor Standards Act, this act requires that laborers and mechanics working on contracts covered by the DBA, DBRA or the McNamara-O’Hara Service Contract Act receive overtime “at a rate of one and a half times the basic rate of pay for hours worked . . . in excess of 40 in a work week.” It is self-executing, meaning that it does not have to be specifically mentioned in the contract, and it is not limited only to hours worked on the “site of work.”
- Copeland “Anti-Kickback” Act (CA): This act applies when the DBA or DBRA does and has three basic tenants. It prohibits “kickbacks” of wages (i.e., forced or coerced return of wages to the employer), regulates the deductions that can be taken from prevailing wages to those approved by the Department of Labor, and requires contractors to submit weekly a “statement of compliance,” more commonly known as “certified payroll.”
- Walsh-Healey Public Contracts Act (PCA): While the DBA covers construction work, this act covers federal contracts in excess of $10,000 for “manufacturing or furnishing of goods, supplies, articles or equipment.” The DBA can also apply to PCA-covered contracts if they require “more than an incidental amount of construction work.”
2. There are numerous criteria for determining who must be paid DB wages.
The DBA states that “laborers and mechanics” on the “site of work” must be paid prevailing wages. While these two criteria seem simple on the surface, there are several considerations you may take in determining who actually meets these criteria. For example, who qualifies as a “laborer” or “mechanic”? And what qualifies as the “site of work”?
According to the DBA, a “laborer” or “mechanic” is anyone “whose duties are manual or physical in nature (including those workers who use tools or who are performing the work of a trade), as distinguished from mental or managerial.” It does not refer to a specific trade and includes apprentices, trainees and helpers, although they may only be used on Davis-Bacon work and paid less than the journeyman rate if they are enrolled in recognized programs and are working under very specific circumstances. When in doubt, you should pay journeyman rates. It also includes working foremen if they are considered non-exempt by Fair Labor Standards Act standards and devote more than 20% of their time during a workweek to manual or physical duties; they are only subject to prevailing wage for time spent as a laborer. Truck drivers are also included in the definition of laborer or mechanic when they are employed by the contractor or subcontractor and are driving on the site of work, driving between a facility deemed part of the site of work and the actual site, or loading and unloading materials on the site of work. In these cases, drivers are subject to prevailing wages. Owner/operators who are independent contractors are not subject to prevailing wages, but should be listed on certified payrolls with only the notation of “owner-operator.” The hours worked or rates paid do not need to be included.
The second criteria for determining prevailing wage eligibility states that the employee must be on the “site of work.” This is defined as “the physical place . . . where construction called for in the contract remains after the work has been completed, and other adjacent or nearby property used by the contractor or subcontractor.” There has been much debate about the limitations of “adjacent or nearby,” but it typically includes fabrication plants, mobile factories, borrow pits, etc., that are immediately next to the job site only if they are nearly exclusively dedicated to the Davis-Bacon project. It does not include permanent home offices or shops not near or dedicated to the project.
While it may seem daunting to keep track of an employee’s tasks and location in order to ensure compliance, a good payroll software for labor-intensive contractors can solve many of these problems. You can set up task-related cost codes that simultaneously control whether an employee should be paid prevailing wage for that task and if the related hours should appear on certified-payroll reporting. Just be sure to carefully plan and define the codes so that they correspond to DBA regulations.
3. Wage-determination surveys are critical.
Whether you have ever worked a Davis-Bacon job, you may have at some point received a Form WD-10 from the Department of Labor. The regional offices of the Department of Labor conduct wage-determination surveys for each state every three years. They select a number of contractors from Dodge reports and send WD-10s to those contractors for completion. This form, also known as a “Davis-Bacon Wage Survey,” is the primary source of information used by the Department of Labor when creating prevailing-wage determinations.
Three types of construction are surveyed and the results compiled separately: building, heavy and highway, and residential. If enough information is returned for each “key class” of workers for each types, the average hourly and fringe benefit rates are determined. In most cases, Davis-Bacon projects are not included in these averages, as they would significantly skew them. If the information from the returned WD-10 forms is limited, however, certified payrolls from previous Davis-Bacon projects in the area can be used. In the worst-case scenario, if the information is severely limited, the wage determinations may not include information for all construction types or key classes.
It’s in a contractor’s’ best interest to return data whenever possible so that rates are fair, accurate and not inflated with other Davis-Bacon rates. In most cases, when you receive a WD-10, you are not required by law to return it; however, even if you don’t plan to work Davis-Bacon projects in a particular area, the entire industry benefits your submission of the forms. Because completing the WD-10 requires careful analysis of past payroll records, many contractors feel it’s just not worth the effort. However, good construction-specific software should produce reports that include most—if not all—of the information needed. In fact, you should look for a software that allows you to produce certified payrolls retroactively. Producing a certified-payroll report for a non-Davis-Bacon job should provide you all the wage information needed to complete the WD-10. The Department of Labor will also accept additional wage information not listed on the WD-10 as long as all of the required information is included.
4. There’s a wealth of information on the Internet.
As you continue to gain experience working on Davis-Bacon guidelines, your list of questions regarding the regulations will grow. Many contractors say that the most frustrating part of working under Davis-Bacon is trying to find resources to answer those questions. Because the work involves so many related acts, it’s often difficult to pin down a definitive answer. Your best bet will often be the direct source: the text of the law itself or other Department of Labor materials. Most of this information is available on the Internet.
- www.dol.gov/whd: The main Web page of the Wage and Hour Division of the Department of Labor
- www.oalj.dol.gov: Recent court decisions and other judicial materials regarding Davis-Bacon and related acts from the Office of Administrative Law Judges
- www.dol.gov/whd/programs/dbra/wd-10.htm: An electronic WD-10 form that can be completed and submitted online, along with instructions
- www.wdol.gov: Davis-Bacon wage determinations and reference material
5. Payroll software is key in following regulations.
If understanding Davis-Bacon regulations is half the battle, the other half is following them. Even if your payroll staff knows the regulations by heart, they require the proper information from the field, and they must determine and compute wages and fringes very carefully in order to meet those regulations. Without the help of a good construction-specific software, human error can cause problems. Either your employees will be underpaid and you may be subject to an investigation by the Department of Labor’s Wage and Hour Division or your employees may be overpaid with prevailing wages and your company will needlessly lose profits. The right software can help eliminate many of those errors.
If you plan to bid on Davis-Bacon projects, you simply must have a software application that will accommodate its nuances. The following are essential things to look for:
The ability to set up different rate tables for distinct geographical areas and jobs
Chances are that not every job you work will require prevailing wages. Additionally, employees can earn different rates for a Davis-Bacon job depending on whether they are on the “site of work.” In order to avoid error, your software should allow you to define those various rate tables along with rules you can define that will automatically determine which table should be used based on other information such as the job and task on which the employee was working.
The option to pay fringes in cash earnings or to accrue them to a third-party plan
Davis-Bacon regulations allow the employee to receive compensation for fringes in either method. In most cases, it may be preferable for the contractor to pay fringes to a third party plan. If your software does not easily accommodate this, it may limit your options.
The ability to reduce fringe rates by the cost of current fringes automatically
The ability to reduce the required fringe rate by the cost of bona fide fringes you already offer your employees is a feature of the law of which all contractors should take advantage. Unfortunately, many don’t simply because it is too difficult to calculate that information each week for each employee. If your accounting software takes care of those calculations automatically, however, you can save a great deal of money while remaining compliant.
Extensive reporting capabilities
Obviously, your system should be able to produce certified payrolls on a weekly basis. However, it should also provide historical certified-payroll reports as well as other, related reports such as minority compliance. Look for a system that is capable of meeting both federal and state prevailing-wage reporting regulations and one that provides sufficiently detailed payroll history to complete WD-10 forms easily. Ideally, the payroll system should be fully integrated with job costing so that Davis-Bacon wage and fringe expenses are automatically included in over/under billing reports and other job history reports.
When working under the Davis Bacon Act, there’s no substitute for research, but this shouldn’t discourage contractors from bidding on prevailing-wage jobs. Resources are readily available to help companies understand requirements and ensure their compliance to the various legislation and wage determinations that govern their jobs. These should form an adequate base from which contractors can then begin to gain or build upon practical experience navigating these complex waters. Between some basic research, real-world experience and the right software to help carry out compliance, contractors can become knowledgeable and save money.