Federal projects, worker pay and the Davis-Bacon Act

The Davis-Bacon Act is one of several federal laws that govern payment of workers on federal projects. The Act covers a significant portion of the projects undertaken by the construction industry. Approximately 20% of all construction projects in the U.S. are covered by Davis-Bacon, affecting more than a quarter of all construction workers in the nation at any given time.

The Act requires contractors and subcontractors on federal projects (i.e., construction, alteration or repair of public buildings or public works) to pay their laborers who work on those projects no less than the "locally prevailing wages" and specific employee benefits for corresponding work on similar projects in the area.

The determination of locally prevailing wages is made by the U.S. Department of Labor and includes the (a) basic hourly rate of pay, (b) hourly rate of contributions and (c) hourly rate of cost that may be reasonably anticipated in providing benefits. The determination is generally based on Davis-Bacon wage surveys and by levels set by local collective bargaining agreements (CBAs), whichever is higher.

The Labor Department's local wage determination applies to all identifiable classifications of work to be performed. An employee who works in more than one classification must be paid for the actual time spent doing work under each classification.

BACKGROUND

Davis-Bacon was passed during the Great Depression and signed into law by President Hoover. At a time when much of the nation's construction activity was federally funded, through the Works Progress Administration (WPA) and other federal initiatives, Davis-Bacon sought to protect the wages of local, largely unionized workers against non-union persons who would migrate to an area in search of jobs and were willing to work for whatever they could get.

Today, as throughout its 80-plus-year history, Davis-Bacon is politically controversial and commercially burdensome. Compliance with Davis-Bacon places greater burdens on contractors than simply paying wages set by the Labor Department. On the front end, the higher wages normally required on federal projects affects estimates and bidding.

On the back end:

• Contractors that contract directly with the contracting agency (i.e., "first-tier" contractors) must maintain and submit certified payroll records to that agency (see "Payroll Records" below).

• Second-tier contractors that contract with a first-tier contractor must maintain and submit certified payroll records to the first-tier contractor.

• First-tier contractors are responsible for ensuring that their second-tier contractors are paying the prevailing wage and keeping required payroll records.

• Similarly, second-tier contractors are responsible for compliance by their subcontractors.

• Ultimately, it is the first-tier contractor who will be held responsible if a second-tier contractor (or that second-tier subcontractor's sub) fails to pay the prevailing wages and fringe benefits and the Department of Labor determines that the second-tier contractor is unable to pay.
  

The contracting agency can withhold from payments to first-tier contractors and subs amounts necessary to pay the extra wages imposed by Davis-Bacon.

WHO IS AND IS NOT COVERED

Davis-Bacon applies to employees on the site of the covered work and at any site established specifically for the performance of the contract. That includes job headquarters, batch plants, tool yards, etc., if those sites are dedicated entirely or mostly to the project and are adjacent or very close to the actual site. The Act also applies to operators of vehicles traveling between sites associated with the project.

The Act generally does not apply to work performed at off-site facilities that were in use by the contractor or sub before the opening of bids for the project, or to executive, administrative or clerical work, nor does it normally apply to owner-operators. Apprentices, trainees and helpers are also exempt, under limited circumstances. As for on-site foremen and supervisors, their pay is generally not governed by Davis-Bacon, provided they do not work with tools more than 20% of the time.

The "locally prevailing wages" determination trumps any employment or wage agreements that may exist between the contractor and any employee whose work is subject to the Act.

Contractors must post the scale of wages to be paid in a prominent and easily accessible place at the site of work.

PAYROLL RECORDS

All employers whose workers are covered by Davis-Bacon must maintain weekly payrolls with certifications of compliance. Payroll records must be:

• submitted to the contracting agency or, if the project is only federally funded or assisted, to the project owner or "sponsor";
  

• accompanied by a signed "Statement of Compliance" certifying under oath that (a) the payroll contains all of the required information and is correct and complete, (b) each covered employee has been correctly and fully paid, and (c) each employee was paid the prevailing wage for the classification covering the work performed; and
  

• retained for three years after project completion.
  

ENFORCEMENT

As with all matters concerning the U.S. Department of Labor, compliance is essential, and violations are addressed harshly.

A common ploy by some contractors that try to circumvent the higher wage requirement is to impose payroll deductions or otherwise force workers to repay the extra wages. That is a violation of the Copeland "Anti-Kickback" Act, and punishment includes fines, imprisonment or both.

The DOL's investigative and enforcement powers are massive, agency investigators and staff have no known sense of humor, the presumption of innocence does not apply, and punishment is severe and swift.

OVERVIEW

This discussion of the Davis-Bacon Act is a view from 30,000 feet and barely scratches the surface of a complex and potentially perilous federal law. Any contractor or subcontractor wishing to bid on a federally funded construction project or contract with a first- or second-tier contractor should seek experienced labor counsel before submitting a bid or entering into a contract.

We would be happy to help you assess your opportunity and exposure and, if necessary, introduce you to a local labor attorney who is well-versed in this area of the law.