Working as a contractor or subcontractor on government projects can be both daunting and lucrative. Contractors working on these projects are required to abide by the Davis Bacon Act, which regulates many aspects of the payroll compliance process involved with these projects. The Davis Bacon Act applies to federally funded or assisted contracts that are in excess of $2,000, projects which require construction, alteration, or repair of public buildings or public works. We have broken down the components of Davis Bacon compliance to make it easier for your business to get into government contracting.
Components of the Davis Bacon Act:
- Certified Payroll– Submitting certified payroll reports is an important part of the Davis Bacon Act because it is the document that certifies that the correct wages and fringes are paid to workers. Certified payrolls need to be submitted weekly to the governing agencies. The agency that oversees collating and processing these reports differs based on the projects. In general, the federal WH-347 form is used to submit these certified payroll reports, however; many local governments have their own forms and submission methods.
- Fair Labor Standards Act– Applies most workers in the U.S and sets required minimum wage, overtime, and recordkeeping requirements. For more information visit the DOL site.
- Copeland “Anti-Kickback Act”– Prohibits contractors or subcontractors working on projects, funded fully or partially by federal government funds, from giving up any part of the funds received to compensate government officials for awarding the project to them. The consequences can be a $5,000 fine and up to five years in prison.
- Little Davis Bacon Acts– Some states have enacted their own prevailing wage and reporting requirement laws. See this map for state specific prevailing wage laws. These laws impose stricter regulations on federally funded projects. It is important to become familiar with your local sate’s laws, when it comes to compliance on federally funded projects.
- Prevailing Wage– Unlike private construction projects, federally funded projects require employees to be paid based on the specific work they do(classification). Many contractors don’t accurately determine the classification of work, since every time a worker switches tasks a different prevailing wage may apply. Without a robust cloud-based prevailing wage compliance system it can be difficult to keep track of the correct classification and the correct wages to pay.
Scope of Davis Bacon
The Davis Bacon Act applies to all onsite employees who are working on federally funded projects in which construction, alteration or repair is occurring. Workers are defined by their classification; these classifications are provided on the federal Wage Determination site. However, it is important to note that some states have their own prevailing wages rates, so always check with any local sources first.
On federally funded projects the Department of Labor(DOL) has the authority to conduct investigations and audit the worksite. Most commonly checking certified reports and verifying this data with employee interviews. Most common violations are caused by contractor’s failure to pay the correct prevailing wage based on the classification of the employee. Millions of dollars are paid out each year in back wages. It is important to note the failure of a subcontractor to pay back wages leaves the general contractor liable.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.