By: Cheryl Adams, Esq. Davis Bacon Consultant
Construction contracting with the U.S. Government can be complicated, especially when it comes to knowing what to do to comply with labor law. One of the important federal labor laws to understand is the Construction Wage Requirements Statute, otherwise known as the Davis Bacon Wages(Public Law 71-789). It is an old law, from the Herbert Hoover administration, passed in 1931, but it is very much alive and well today. See wage determination 15-4281.
Understanding and complying with the Davis Bacon Act Wages Determination (DBA) is easier if you are aware of these twelve basic concepts:
- The Davis Bacon Wage Determination Applies to Laborers and Mechanics.
The Davis Bacon wage determination applies to laborers and mechanics, as well as provides special provisions for use of unskilled helpers or apprentices. Within the general umbrella of “laborers and mechanics” there are many classifications of employees and many job descriptions for those classifications.
Apprentices and helpers may be used, but to comply with Davis Bacon Act, apprentices and helpers must be employed through programs that are registered with the U.S. Department of Labor (DOL), or with a state program recognized by the U.S. Department of Labor.
2. Davis Bacon Act Applies to Construction, Alteration or Repair of U.S. Federal Government Public Buildings or Public Works.
The government contract must be for “the construction, alteration or repair (including painting and decorating) of public buildings or public works. Davis Bacon Act is not limited to buildings, it can apply to highway and other projects.
3. The Davis Bacon Wages Apply to Contracts over $2,000.
The Davis-Bacon wages determinations apply to prime contracts, and subcontracts, over $2,000.
4. Pay Local Prevailing Wage Rates, In Accordance with the Contract’s Prevailing Wage Determination.
Davis Bacon wages require payment of “prevailing wage rates” for the local area where the contract work will be performed. Prevailing wage rates are established by the U.S. Department of Labor, and are available through prevailing wage determinations, which are specific to the contract, and are usually included in the contract, or at least incorporated by reference.
Of course, these are minimum wage rates. There is no problem with paying workers higher wages. If another applicable law requires payment of higher wage rates, then the contractor would be required to pay the higher wage rate.
There are two kinds of prevailing wage determinations (FAR 22.404-1):
(a.) General Wage Determinations – contain prevailing wage rates for the types of construction designated in the determination, and are used in contracts performed within specified geographical areas. They do not expire — they remain valid until modified, superseded, or canceled by the Department of Labor. General Davis-Bacon wages determinations are published on the WDOL website https://www.wdol.gov, and published by the Government Printing Office (GPO), as well as being available through some other sources.
(b.) Project Wage Determinations – are used when no general wage determination applies – they are contract-specific. These can expire. Pre-award, they are effective for 180 days, but can be extended. Post-award, they are generally effective for the life of the contract.
There can be more than one prevailing wage determination in a contract. The Government Contracting Officer (CO) is required to designate the work to which each prevailing wage determination or part thereof applies. (FAR 22.404-2)
Typically, the Contracting Officer (CO) submits the requests for prevailing wage determinations to the U.S. Department of Labor. However, contractors are responsible for making sure the appropriate mix of labor is used to perform a contract, so sometimes contractors need to submit to the CO proposals for prevailing wage determinations, or requests for changes such as adding a new labor classification. Usually,SF 1444 is used for contractor proposals for adding new employee classifications (FAR 22.406-3). A properly submitted request for a Project Wage Determination contains the following information (FAR 22.404-3):
(1) The location, including the county (or other civil subdivision) and State in which the proposed project is located.
(2) The name of the project and a sufficiently detailed description of the work to indicate the types of construction involved (e.g., building, heavy, highway, residential, or other types).
(3) Any available pertinent wage payment information, unless wage patterns in the area are clearly established.
(4) The estimated cost of each project.
(5) All the classifications of laborers and mechanics likely to be employed.
The Contracting Officer reviews proposals for new wage classifications to determine whether they:
- Are appropriate and the work to be performed by the classification is not already performed by any classification contained in the applicable prevailing wage determination.
- The classification is utilized in the area by the construction industry.
- The proposed wage rate, including any fringe benefits, bears a reasonable relationship to the wage rates in the prevailing wage determination in the contract.
Note that there is a requirement for the new employee to sign off on the proposal, and either agree, or note his/her disagreement, with the new classification information provided in the proposal.
Additional information about prevailing wage determinations can be found on the Wage Determinations OnLine.gov website, currently at: https://www.wdol.gov . There are plans to move the site to beta.SAM.gov later in 2019.
(5.) Workers Do Not Need To Be Local.
There is no requirement for workers under Davis Bacon Act wages covered government contracts to be local residents. The requirement is for payment of local prevailing wage rates, regardless of where the workers came from or reside.
(6.) There Can Be Significant Penalties for Noncompliance.
There are penalties for failing to comply with the Davis Bacon Act wage determination laws, including:
- The Contracting Officer (CO) is required to withhold funds sufficient to pay workers, and an amount equal to any estimated liquidated damages, if the CO believes a violation exists. (FAR 22.406-9). If you are a contractor having cash flow issues, it might be tempting to underpay your workers to try to deal with that. This is a bad idea, under a Davis Bacon Act covered contract. If you get caught, and the CO starts withholding payments, that can only make your cash flow problems worse.
- Contracting Officers are required to submit an enforcement report to the Administrator, Wage and Hour Division (Department of Labor) if a CO’s investigation reveals that a contractor or subcontractor has been underpaid by $1,000 or more (FAR 22.406-8)
- The contract can be terminated. (FAR 406-11)
- The contractor, or a subcontractor, can be suspended or debarred. (FAR 22.406-10(f)
- Other law, sometimes law with criminal penalties, can apply. For example, the False Claims Act, and/or False Statements Act can come into play. Invoices or reports submitted to the government with inaccurate or intentionally fraudulent information can trigger audits, federal investigations, and sometimes even criminal penalties.
(7.) Davis Bacon Wage Determinations Must Be Posted At the Work Site
As part of compliance requirements, Davis Bacon wages determination must be posted at the worksite, in a prominent place where workers can easily see them. The poster must include the:
- address, and
- telephone number
of the Government officer responsible for the administration of the contract, to inform workers to whom they may submit complaints or raise questions concerning labor standards.
Federal government contractors also must keep copies of the applicable prevailing wage determinations (including any approved additional classifications) at the work site. (FAR 22.404-10)
(8.) A New Wage Determination May Be Required for An Option to Be Exercised.
If the government contract has options that extend the term of the contract, depending on the contract type, the Contracting Officer (CO) may be required to incorporate the most current prevailing wage determination. When figuring out how to calculate Davis Bacon wages, there are various ways that a price adjustment to the contract can be calculated to capture prevailing wage rate changes in the new Davis Bacon wage determination. (FAR 22.404-12). See also information about Service Contract Act Fringe Benefits (SCA)
(9.) Government Contracting Agencies Are Responsible for Monitoring and Enforcing Davis Bacon Act Compliance
Federal Government Contracting agencies (usually the government agency issuing the contract) are responsible for ensuring full and impartial enforcement of labor standards. Contractors can expect the government to have an enforcement program that includes:
- – prior to the commencement of work, ensuring that prime contractors, and subcontractors, are informed of their obligations;
- – payroll reviews, on-site inspections, and employee interviews to determine compliance;
- – prompt initiation of corrective action when required;
- – prompt investigation and disposition of complaints;
- – Prompt submission of all required reports, as well as
- – a CO issued letter and/or post-award conference explaining the labor standards clause and wage determination requirements of the contract. (FAR 22.406-1)
(10.) The U.S. President Can Suspend Davis Bacon Wage Determination Requirements.
In case of emergency, such as a natural disaster, the Davis Bacon Act can be suspended by the U.S. President. A suspension is very rare. Davis Bacon Act has been suspended only four times since it was passed. The most recent suspension was by President George W. Bush, for one month, following Hurricane Katrina.
(11.) Employers May Not Take Kickbacks From Employees.
The Copeland Anti Kickback Act (18 U.S.C. 874) was passed in 1934 as a supplement to the Davis Bacon Act wages. If laws, such as the Davis Bacon Act, require employers to pay minimum wages and benefits to employees, they are not very effective if the employees can be forced to pay kickbacks to their employers out of those wages. The Copeland Anti-kickback Act prohibits federal contractors from accepting kickbacks from their employees.
(12.) State Law: Some States Have “Little Davis Bacon Acts.”
Many, but not all, states have passed what are known as “Little Davis Bacon Acts.” Be aware that state laws can be different from the federal Davis Bacon Act. For example, the dollar threshold for various states’ Little Davis Bacon Act laws to apply can vary from $0 to $1,000,000, whereas the dollar threshold for the federal Davis Bacon Act remains $2,000.
Simply put, the Davis Bacon wages apply to federal government construction contracts and subcontracts over $2,000. It provides for many classifications of laborers and mechanics to be paid, at a minimum, the local prevailing wage rates for the worksite. The wages that must be paid can be found in the relevant U.S. Department of Labor-issued Wage Determination. Applicable prevailing wage determinations are normally included in the contract.
Contractors are required to post applicable Davis Bacon wage determinations at the worksite. Government agencies are responsible for ensuring that contractors and subcontractors comply with Davis Bacon Act, and there are a number of mechanisms that Contracting Officer (COs) use to monitor and enforce compliance. Penalties for non-compliance range from the CO withholding funds sufficient to pay workers (plus liquidated damages), to criminal penalties if other laws, such as the False Claims Act, are brought into play.
In unusual circumstances, such as a natural disaster, the U.S. President can suspend Davis Bacon Act. The Copeland Anti Kickback Act employers from defeating the purpose of the Davis Bacon Act by taking kickbacks from employees. And, the federal government is not the only governmental entity with labor law mandating minimum wages for construction workers. If you are contracting with a state, you may run into “Little Davis Bacon Acts” which are similar to, but not exactly the same as, the federal Davis Bacon Act.
For a free and confidential consultation with our government contracts attorneys and Davis Bacon consultants, call Cheryl Adams at Watson & Associates, LLC on 1-800-601-5518 or 720-941-7200.