Federal Projects, Worker Pay and the Davis-Bacon Act
Contractors and subcontractors on federally funded or assisted construction projects must be alert to wage and record-keeping requirements imposed by an 80-year-old federal law.
The Davis-Bacon Act is one of several federal laws that
govern payment of workers on federal projects. The Act covers a significant
portion of the projects undertaken by the construction industry. Approximately
20% of all construction projects in the U.S. are covered by Davis-Bacon,
affecting more than a quarter of all construction workers in the nation at any
The Act requires contractors and subcontractors on
federal projects (i.e., construction, alteration or repair of public buildings
or public works) to pay their laborers who work on those projects no less than
the "locally prevailing wages" and specific employee benefits for corresponding
work on similar projects in the area.
The determination of locally prevailing wages is made by
the U.S. Department of Labor and includes the (a) basic hourly rate of pay, (b)
hourly rate of contributions and (c) hourly rate of cost that may be reasonably
anticipated in providing benefits. The determination is generally based on
Davis-Bacon wage surveys and by levels set by local collective bargaining
agreements (CBAs), whichever is higher.
The Labor Department's local wage determination applies
to all identifiable classifications of work to be performed. An employee who
works in more than one classification must be paid for the actual time spent
doing work under each classification.
Davis-Bacon was passed during the Great Depression and
signed into law by President Hoover. At a time when much of the nation's
construction activity was federally funded, through the Works Progress
Administration (WPA) and other federal initiatives, Davis-Bacon sought to
protect the wages of local, largely unionized workers against non-union persons
who would migrate to an area in search of jobs and were willing to work for
whatever they could get.
Today, as throughout its 80-plus-year history,
Davis-Bacon is politically controversial and commercially burdensome. Compliance
with Davis-Bacon places greater burdens on contractors than simply paying wages
set by the Labor Department. On the front end, the higher wages normally
required on federal projects affects estimates and bidding.
On the back end:
Contractors that contract directly with the
contracting agency (i.e., "first-tier" contractors) must maintain and submit
certified payroll records to that agency (see "Payroll Records" below).
Second-tier contractors that contract with a
first-tier contractor must maintain and submit certified payroll records to the
First-tier contractors are responsible for
ensuring that their second-tier contractors are paying the prevailing wage and
keeping required payroll records.
Similarly, second-tier contractors are
responsible for compliance by their subcontractors.
Ultimately, it is the first-tier contractor
who will be held responsible if a second-tier contractor (or that second-tier
subcontractor's sub) fails to pay the prevailing wages and fringe benefits and
the Department of Labor determines that the second-tier contractor is unable to
The contracting agency can withhold from payments to
first-tier contractors and subs amounts necessary to pay the extra wages imposed
Who Is and Is Not Covered
Davis-Bacon applies to employees on the site of the
covered work and at any site established specifically for the performance of the
contract. That includes job headquarters, batch plants, tool yards, etc., if
those sites are dedicated entirely or mostly to the project and are adjacent or
very close to the actual site. The Act also applies to operators of vehicles
traveling between sites associated with the project.
The Act generally does not apply to work performed at
off-site facilities that were in use by the contractor or sub before the opening
of bids for the project, or to executive, administrative or clerical work, nor
does it normally apply to owner-operators. Apprentices, trainees and helpers are
also exempt, under limited circumstances. As for on-site foremen and
supervisors, their pay is generally not governed by Davis-Bacon, provided they
do not work with tools more than 20% of the time.
The "locally prevailing wages" determination trumps any
employment or wage agreements that may exist between the contractor and any
employee whose work is subject to the Act.
Contractors must post the scale of wages to be paid in a
prominent and easily accessible place at the site of work.
All employers whose workers are covered by Davis-Bacon
must maintain weekly payrolls with certifications of compliance. Payroll records
submitted to the contracting agency or, if the
project is only federally funded or assisted, to the project owner or "sponsor";
accompanied by a signed "Statement of
Compliance" certifying under oath that (a) the payroll contains all of the
required information and is correct and complete, (b) each covered employee has
been correctly and fully paid, and (c) each employee was paid the prevailing
wage for the classification covering the work performed; and
retained for three years after project
As with all matters concerning the U.S. Department of
Labor, compliance is essential, and violations are addressed harshly.
A common ploy by some contractors that try to circumvent
the higher wage requirement is to impose payroll deductions or otherwise force
workers to repay the extra wages. That is a violation of the Copeland
"Anti-Kickback" Act, and punishment includes fines, imprisonment or both.
The DOL's investigative and enforcement powers are
massive, agency investigators and staff have no known sense of humor, the
presumption of innocence does not apply, and punishment is severe and swift.
This discussion of the Davis-Bacon Act is a view from
30,000 feet and barely scratches the surface of a complex and potentially
perilous federal law. Any contractor or subcontractor wishing to bid on a
federally funded construction project or contract with a first- or second-tier
contractor should seek experienced labor counsel before submitting a bid or
entering into a contract.
We would be happy to help you assess your opportunity
and exposure and, if necessary, introduce you to a local labor attorney who is
well-versed in this area of the law.