Prevailing Wage Compliance Essential to Preventing Penalties (1)

Across more than 119,000 violations of the Davis-Bacon Act since 1985, the most common violations are failure to pay employees the required prevailing wage, said a payroll expert July 10.

The DBA lays out minimum wage requirements for federally funded construction projects on public buildings or public works. The act standardizes pay by setting minimum wage requirements based on the area where the construction is to take place. The act also covers the payment of fringe benefit requirements, all of which can vary depending on the type of work contracted.

Given the act’s emphasis on federally funded construction projects, penalties under the DBA are most common in the construction industry, followed closely by waste management and manufacturing services, said Cari Breitinger, payroll director for BELFOR Property Restoration. If you don’t follow the act’s requirements, you can end up paying a heavy penalty, she said.

Any construction that uses public money will generally be covered under the act, said Breitinger. However, the act does not cover administrative employees as defined by the Fair Labor Standards Act, nor does it cover business owners with at least 20% equity in the business entity, unless those individuals are performing physical labor on site.

Covered contractors must pay laborers on federally funded projects a prevailing wage approved by the government and must also provide them with fringe benefits.

Compliance with the DBA can at times cause confusion, as it only applies to work done “on the site” of the project, which exempts home offices and tool yards. Truck drivers are generally covered by the act, Breitinger said, and must be paid a prevailing wage for travel in between work sites, as well as time spent transporting materials between a warehouse and the main site of work, she added.

Prevailing wage determinations are generally made by the awarding body, the client responsible for identifying local rates as part of their initial bid for the contract. All initial bids must be submitted with a clear prevailing wage, said Breitinger. Once a project starts, that is the set wage, even if you receive an update mid-year, she said. One a bid is approved, changes to the wage determination must receive government approval. If any changes take place, companies bidding for the job must also be informed.

All subcontractors must be notified of prevailing wage amount and payments made in an accurate and timely manner. Otherwise, “you’ll be responsible for it,” said Breitinger.

If issues arise due to noncompliance, employers must allow the Labor Department to interview employees on site during normal hours. “It’ll happen. They’ll just pop up and don’t have to give you notice,” said Breitinger. If discrepancies are found, retroactive pay can provide a quick solution. Completing a site audit can also help ensure the job includes all appropriate rate determinations, she said.

The most typical compliance issues arise from misclassification of laborers and mechanics, along with failure to pay full prevailing wages. “You must pay prevailing weekly, regardless of whether your payroll is biweekly,” said Breitinger. The most common and easiest mistake is failure to post the DBA wage determination for the site. “That’ll save you a few hundred dollars.”

Special attention should be given to state and local laws, as well as other federal laws that can affect the chosen prevailing wage. “Contractors may also be subject to additional prevailing wage or overtime requirements under state laws,” Breitinger said. “The majority of the states have their own prevailing wage laws, so you really need to understand who you’re covered by.”

(Update removes an erroneous citation in the opening paragraph.)