Complying with prevailing wage laws can be difficult, especially when it comes to keeping up with elements that change, like wage determinations. It can also be difficult to navigate official sources of information for guidance, which can make taking on prevailing wage work feel a bit risky. For those eager to grow, however, government contracts can be a fantastic source of projects. The key is to fully understand the laws governing public works projects and have solid processes in place so that you’re able to keep up with the administrative work it takes to stay compliant.
The following prevailing wage facts can help you understand some of the more complicated, less talked about aspects of prevailing wage law. We’ve included official links for you to bookmark and additional learning resources to help round out your prevailing wage knowledge.
Prevailing wages laws are not only federal.
Currently, only twenty-two states do not have their own set of prevailing wage laws in place. If labor trends continue, it is likely that more states will adopt similar laws. This means that there are federal prevailing wage laws, such as Davis Bacon and Related Acts and the McNamara-O’Hara Service Contract Act, but additional local laws contractors must understand. The type of contract determines if a job falls under federal or state prevailing wage rules. Typically, this comes down to where the money is coming from, a federal or state agency. There are also federally assisted projects which may fall under both federal and state laws. It is your responsibility to understand which rules you are required to follow.
Prevailing wage rates change
Prevailing wage rates, both federal and state, change. Federally, the actual prevailing wage rate comes from wage surveys conducted by the Department of Labor. These surveys, otherwise known as Form WD-10, are sent out to contractors and other interested parties through the Wage and Hour Division(WHD) of the DOL. They analyze the data and use it in determining prevailing wage rates, which are usually published once a year. From this information, wage determinations are created or updated for each classification of laborer and mechanic. States with prevailing wage laws have their own methods for determining prevailing rates, but many are similar to the federal process.
Learn how to read a wage determination.
Prevailing wages are more than hourly pay rates
Prevailing wage rates actually refer to the hourly prevailing wage plus an hourly fringe benefit rate. To pay the correct rate, you have to add these two rates up. In this example, you see the hourly rate for a Pipefitter, along with a fringe rate. You must add these two up to arrive at the prevailing wage rate, which in the case below would equal $54.08 an hour. To be compliant, you must pay this rate for every hour the worker performs this type of work on the jobsite. If they switch roles to another type of work, their prevailing wage rate will change.
Prevailing wage rates change by role
Prevailing wage rates are directly connected to labor classifications. These rates are published in wage determinations, which are created for every labor and mechanic classification. When a worker performs work that falls under one work classification, they are due the prevailing wage rate listed on that work classifications’ wage determination. If they happen to change roles during their shift, they are under a new work classification and wage determination, so their prevailing wage rate changes as well. This means a worker can switch roles throughout their shift and be paid different rates for each one. All of this must be tracked to prove that you’re complying with prevailing wage laws.
Prevailing wage laws include reporting
Davis Bacon, along with other prevailing wage laws, largely focus on how much workers are paid, but they include reporting regulations as well. Certified payroll is the term often used to refer to the type of payroll and reporting requirements tied to prevailing wage work. The purpose of certified payroll, and reporting in general, is to make sure that contractors are complying with all applicable laws. Reporting includes detailed information on hourly and fringe rates and work classifications for every worker on the jobsite. Learn more about certified payroll and reporting.
Prevailing wage rates have exceptions
Every worker on a qualifying public works projects must be paid prevailing rates as published on wage determinations. There are, however a couple of limited exceptions to this rule for federal projects. Apprentices or trainees may actually be paid at reduced rates from what appears on the wage determinations if they are with an apprenticeship program registered with the DOL or under a recognized state program. Read more about the use of apprentices on Davis Bacon projects.
Many states have similar rules in place to encourage the use and training of apprentices in the skilled trades. For example, there is a Division of Apprenticeship within the California Department of Industrial Relations which offers guidelines for state public work requirements. It is important to understand all requirements and responsibilities regarding using apprentices, so be sure to visit your state’s DOL for guidance.
Mistakes can lead to financial penalties
A single mistake often gets compounded, creating a situation that can be difficult and time consuming to resolve. For instance, if you use the wrong wage determination for the job, the hourly and fringe rates for every worker under that determination will be incorrect. This can impact multiple workers and every week’s payroll and corresponding report. When the mistake is found, restitution must be made to all affected workers, and corrected reports must be submitted. If a representative from the DOL finds an error, or if a worker reports suspected errors, they will investigate. The end result can be owing back wages and fringes, including fines and even debarment from government contracts for a period of time.
It’s important understand that even small, well-intentioned mistakes can have serious repercussions. For this reason, it’s even more important to understand your responsibilities under the law.
Prevailing wage resources
How to read a wage determination
Compliance tips for government contractors
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.