Prevailing Wage in Construction: What You Need to Know

Maybe you’re familiar with this scenario: You add a new job number to your payroll and timekeeping system. Then you find out that crew members have already been on site for two weeks. Only then does some well-meaning coworker pop in to say, “You know that’s a prevailing wage job, right?”

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Navigating Prevailing Wage Compliance

All you can do is take a deep breath and backtrack to add the correct information to the job setup. You can pay employee restitution if your regular rates don’t meet the general wage determination. Next, you will have to scramble to create reports that should have been submitted already. With some simple steps, you can prevent this problem and comply with prevailing wage laws.

The Contracting Agency’s Role in Prevailing Wage Notification

You may assume correctly that it’s the contracting agency’s responsibility to notify your company about prevailing wage projects. The contracting agency will identify and assign the proper wage determination. Perhaps the contracting agency did indeed notify your company. They are supposed to notify during the bid process. Maybe the owner forgot to mention it to you, the designated point person for all things prevailing wage. In the real world, critical information doesn’t always trickle down to the administrator in charge of paperwork and payroll processing.

Ask These 3 Important Questions

Finger pointing aside, the obligation to follow Davis-Bacon Act (DBA) laws does eventually fall to your company as a contractor or subcontractor. Lack of awareness is no defense when an auditor comes calling. The trick to covering yourself is to ask key questions from the outset, such as:

1. Is the project federally funded or assisted?
2. Will the construction contract be more than $2,000?
3. Is the type of work construction, alteration, or repair (including painting and decorating) of public buildings or public works?

If the answer to these questions is yes and your project is funded by public dollars, chances are good that it falls under DBA rules. Then you need to verify prevailing wage rates with your awarding agency. Prevailing Wage (PW) is the combination of the basic hourly wage rate and any fringe benefits listed on an applicable Davis-Bacon wage determination. You must comply with these set total pay rates, as well as submit weekly reports and other forms.

State and Federal Regulations on Prevailing Wage

In addition to federally funded rules, many states have their own PW laws (sometimes referred to as “Little Davis-Bacon Laws”) that regulate state-funded projects. The project could also be a joint job that receives both federal and state funding. In this case, you’re required to follow Davis-Bacon PW requirements. But when state or local PW demands are also applicable, you should pay whichever rate is higher and meet the standards that protect workers the most.

If you’re not performing actual construction but are still working with the federal government, there are other PW regulations you may run across. You should determine if you have contracts covered by the McNamara-O’Hara Service Contract Act (SCA). This law covers contractors and subcontractors performing services for prime government contracts worth more than $2,500.

Exploring Further Regulations: The Impact of Walsh-Healey Public Contracts Act (PCA)

Something else you may have heard of that could bring extra restrictions is the Walsh-Healey Public Contracts Act (PCA). This one applies to government contracts of more than $10,000 that involve the manufacturing or furnishing of supplies and materials to the government.

Regardless of which situation you fall into, keep in mind that the cost of ignoring PW rates can be steep. Penalties could include fines, contract termination, or even civil and criminal liability. It’s best to protect yourself from the start and educate yourself about the type of project you’re working on and its reporting and payment rules.

Taking Charge of Prevailing Wage Compliance

What it all comes down to is this: don’t bury your head in the sand and assume you will be spoon-fed the information you need. To successfully navigate a prevailing wage job, stay inquisitive and plan for any reporting commitments. Make it your mission to know what your company is accountable for from the beginning bid room through the ending storage room.

At eBacon, we make it easy to create Davis-Bacon jobs that pay your workers the exact PW rates, while also striving to save you time and money. Find out more here.

Prevailing Wage Q&A –

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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.