Construction and service contracts for government funded projects come with an overwhelming amount of regulation requirements. Knowing the names of the laws, what they mean, how they’re similar, and how they’re different can seem daunting, especially when you’re trying to run a business. Finding a single source of truth online is unlikely and getting information from legal experts can be costly.
That is why we put this simple post together to break down the laws that seem to have the most amount of impact in the construction and service industries:
If you’re considering taking on contracts for government funded projects, it certainly pays off to have some clarity on these laws and know how they relate to one another.
There are many laws that trickle down from the Davis-Bacon Act at the federal, state, and local level. Some minor differences start right from the top-level in the hierarchy of laws — starting with the Davis-Bacon Act (DBA) and the Davis-Bacon and Related Act (DBRA) — yes, there’s actually a difference between the two.
The main difference between the two, is that the DBA applies to federal government and District of Columbia (D.C.) buildings and public property (such as national memorials or parks), while the DBRA applies to non-federal construction contracts that are funded by federal dollars.
Some examples of DBA projects could include work done directly for federal agencies such as:
- Department of Veterans Affairs
- General Services Administration
- Department of Defense
- Department of the Interior
DBRA contracts for state or local projects funded by federal grants, loans, loan guarantees, or insurance programs could be funded by one of the following:
- Federal Highway Administration which provides grants to states for the reconstruction of roads and bridges on federal-aid highways.
- U.S. Department of Housing and Urban Development (HUD) that finances the construction of low-income residences on housing authority projects.
- Other federal agencies which assist construction through grants, loans, loan guarantees and insurance including the Departments of Health and Human Services, Education, and the Environmental Protection Agency.
The following “related acts” fall under the DBRA that fund/assist construction projects:
- National Housing Act
- Housing Act of 1950
- Federal Aid to Highway Acts
- Federal Water Pollution Control Act
- U.S. Housing Act of 1937
- Housing and Community Development Act of 1974
Other “related acts” do contain specific criteria that make certain projects exempt from DBA and DBRA requirements including:
- The labor standards provision of the Housing and Community Development Act of 1974 that does not apply to the rehabilitation of residential property that contains fewer than 8 units.
- The Davis-Bacon labor standards provision of Title II of the National Affordable Housing Act of 1990, (HOME) does not apply if there are fewer than twelve HOME-assisted units in the project.
- The labor standards provision of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) that applies only to projects funded in whole or in part under Section 104 of the Act and not to clean-ups provided/funded through other sections of that Act.
Both the DBA and DBRA apply to contracts in excess of $2,000 for construction, alteration, or repair (including painting and decorating) of public buildings and public works. Each of these contracts must specify that at least prevailing wage rates and fringe benefits, applicable to the location of the jobsite, will get paid to employees. Wage rates and fringe benefits are based on the contract’s Davis-Bacon wage determinations for corresponding classes of laborers and mechanics.
Penalties for not paying prevailing wage rates and fringe benefits
Since contracts for work covered by the DBA and DBRA specify prevailing wages and fringes that must be paid to workers, contractors and subcontractors are obligated to pay these rates and benefits to their workforce. Failure to comply with paying the correct rates and fringe benefits can result in:
- Fines and payment of back wages to employees incorrectly compensated
- Withheld payments, contract termination, or debarment from government contracts
- Class-action lawsuits and criminal prosecution
Although the DBA does not have any provisions that grant the Department of Labor to waive how it is enforced, there are certain instances where a waiver or exception could be granted by a government agency.
Certified payroll reports are required for federal contracts
Federal contract jobs that have DBA or DBRA requirements are subject to certified payroll reports that must be submitted by contractors every week. In addition to the contractor and project information, all of the items listed below (set out in the federal WH-347 form) must be entered in these weekly reports:
- The name and ID number of every employee who works on site.
- Each employee’s job classification (e.g. carpenter, electrician, etc.).
- The number of hours each employee worked, including overtime.
- Every employee’s rate of pay based on the prevailing wage, including fringe benefits (or cash paid in lieu of fringe benefits).
- Every employee’s gross amount earned.
- Every employee’s deductions or withholdings.
- Every employee’s net wages paid.
Contractors that do not submit such reports can face fines, withheld payments, debarment from government contracts, and other penalties similar to not complying with prevailing wage rate and fringe benefit requirements (listed above).
Prevailing wage regulations that apply to state, county, or city funded-construction projects are often referred to as “Little Davis-Bacon” laws. Similar to the DBA at the federal level, these laws apply only to construction workers in specific occupations for projects that have a certain cost associated with them.
As of this writing, 26 states (plus D.C.) and numerous counties have their own prevailing wage laws with their own dollar amount thresholds. In these states and localities, we strongly advise you check with the contracting agency what wage requirements need to be in place before performing work.
For example, Los Angeles County in California might have a prevailing wage rate of $45.78 per hour for a “Metal Roofing Systems Installer.” Wage rates such as these can be found on state and local government websites to help contractors determine the appropriate wage rate. California has their own Department of Industrial Relations (DIR) website where most wage determinations by job category can be found for each county.
Prevailing wages are generally reflective of local wage conditions, based on data collected in surveys conducted by the Wage and Hour Division. Prevailing wages can also be determined from a database of collective bargaining agreements. Some localities may also base prevailing wage rates established by state or federal wage rates.
While the DBA and DBRA have wage requirements for federal government sponsored contracts for construction, alteration, or repair of public property — the Service Contract Act (SCA) has its own wage determinations for service work. There are a wide array of occupations that fall under the SCA — from accounting clerks to automotive workers to computer programmers to janitors. As of this writing, approximately 1,800 wage determinations for different counties for innumerable SCA occupations are listed on beta.sam.gov.
Based on SCA requirements, general contractors and subcontractors must pay service employees no less than the local prevailing wage rates and fringe benefits determined by the U.S. Department of Labor (DOL) or previous contractors’ collective bargaining agreements. This applies to all contracts that have costs associated with them that exceed $2,500. The DOL issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies and incorporates these determinations into the contract.
The Wage and Hour Division does accept complaints of alleged SCA wage violations. Employers must notify employees working in connection with an SCA contract of the compensation due to them under the wage and fringe benefits provision.
Each contractor and subcontractor performing work subject to the SCA must maintain certain records for each employee performing work on the covered contract. The following is a list of the basic records that must be maintained for three years from completion of the work:
- Name, address, and Social Security number of each employee.
- The correct work classifications, wage rates, and fringe benefits provided (or cash equivalent payments provided in lieu of fringe benefits).
- The total daily and weekly compensation of each employee.
- The number of daily and weekly hours worked by each employee.
- Any deductions, rebates, or refunds from each employee’s compensation.
- Any list of a predecessor contractor’s employees showing employees’ length of service information.
The SCA does not apply to certain types of contractual services. These statutory exemptions include:
- Contracts for construction, alteration, and/or repair of public buildings or public works, including painting and decorating (those covered by the Davis-Bacon Act as mentioned above)
- Work required in accordance with the provisions of the Walsh-Healey Public Contracts Act
- Contracts for transporting freight or personnel where published tariff rates are in effect
- Contracts for furnishing services by radio, telephone, telegraph, or cable companies subject to the Communications Act of 1934
- Contracts for public utility services
- Employment contracts providing for direct services to a federal agency by an individual or individuals
- Contracts for operating postal contract stations for the U.S. Postal Service
- Services performed outside the U.S. (except in territories administered by the U.S., as defined in the Act)
- Contracts administratively exempted by the Secretary of Labor in special circumstances because of the public interest or to avoid serious impairment of government business
We can help you navigate through these complexities
If you have any specific questions on different laws regarding wages or what records you are obligated to submit and maintain for government contract work, an eBacon representative would be more than glad to help. Reach out to us to find out how we can simplify compliance for your business.
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.