If you are bidding on a contract or already working for a government entity, there are specific requirements to ensure compliance with the Davis-Bacon Act. One of the requirements is the concept of prevailing wage. State laws are different from federal laws. So, it is essential to understand the difference between these laws.
What is the Davis-Bacon Act?
According to the Davis-Bacon Act, contractors and sub-contractors must pay their workers employed under contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. In 1931, the Davis-Bacon Act was passed by Congress, which requires contractors and subcontractors to pay prevailing wages to workers and mechanics on all federally funded construction projects over $2,000.
Why Was The Davis-Bacon Act Passed?
- During the Great Depression, Congress feared that the fierce competition for jobs would result in contractors and workers working for lower wages.
- Davis-Bacon Act was passed to prevent immigrant and non-unionized black workers from competing with unionized white workers for scarce jobs.
Federal Prevailing Wage Laws
In addition to Davis-Bacon Act, there are almost 60 Related Acts nationwide, such as the McNamara-O'Hara Service Contract Act, which covers contracts over $2,500. These federal laws affect state and local projects funded partially or wholly by federal funds. Here are some things to know about federal prevailing wage laws:- In the past, federal prevailing wage laws mainly applied to infrastructure and transportation projects.
- In February 2014, the U.S. Department of Labor issued a final rule to implement the provisions of Executive Order 13658.
- Executive Order 13658 raised the federal minimum wage paid by contractors to workers to $10.10 per hour beginning in January 2015.
- Davis-Bacon Act mainly applied to construction projects. This new requirement also applies to contracts for goods and services.
State Prevailing Wage Laws
It is sometimes called the Little Davis-Bacon law. These laws set thresholds for salary requirements. As with federal law, states with prevailing wage laws only apply to construction and specific jobs. Contractors and subcontractors may think that prevailing wage laws do not apply to them because their project is not funded by the federal government. However, many states have prevailing wage laws that cover state-funded public projects, such as public buildings and roads. State prevailing wage laws differ in their requirements, such as:- Some states are triggered at higher dollar amounts.
- Some states have lower thresholds than federal cut-offs.
- California has an additional requirement that contractors must register with the state.
- Maryland not only includes construction projects but also consists of state-funded businesses.
How Is The Prevailing Wage Determined?
- The U.S. Department of Labor oversees the rules and requirements for the Davis-Bacon Act.
- The prevailing wage law only applies to construction workers in certain types of professions.
- The Department of Labor conducts surveys of wages paid for these specific jobs in surrounding areas and determines prevailing wages to reflect the local economy.
- The prevailing wages are not determined by the state or federal government but by these surveys, consisting of both union and non-union workers. Because of this, a state with higher construction wages will have higher prevailing wages.
Takeaway Payroll is the nucleus of the workforce. Suppose you are a contractor or subcontractor for a project funded partially or wholly by the federal government. In that case, you must understand all state and federal prevailing wage laws to correctly submit your certified payroll to the U.S. Department of Labor and the governing body for whom you are doing the job. Failure to submit an accurate certified payroll can result in heavy penalties and loss of contracts. Build and manage a better workforce with integrated HR solutions from ADP Marketplace partners like Points North.
FAQs
+ What is the difference between federal and state prevailing wage?
- Federal and state prevailing wages serve the same purpose but apply to different types of projects with varying requirements and oversight.
- Federal prevailing wage applies to projects funded by federal dollars under the Davis-Bacon Act. The U.S. Department of Labor sets wage rates based on surveys of wages paid to workers in specific geographic areas. These rates usually apply to construction contracts over $2,000 and require the federal WH-347 reporting format.
- State prevailing wage laws, often called "Little Davis-Bacon" acts, apply to state-funded construction projects. Each state conducts its own wage surveys, sets its own rates, and establishes unique reporting requirements.
- The key difference is the funding source and jurisdiction. Federal projects follow federal rules regardless of location, while state projects follow the specific state's requirements, which can vary significantly from federal standards.
+ Are there different thresholds or requirements per state?
- Each state with prevailing wage laws sets its own project thresholds, coverage requirements, and compliance procedures.
- Common variations include: Project dollar thresholds ranging from $1,000 to over $100,000 before prevailing wage applies. Some states cover all public construction while other exempt certain project types like schools or transportation. Reporting frequencies that vary from weekly to monthly submissions.
- State-specific requirements: Different wage determination sources and update schedules, unique report formats beyond the federal WH-347, electronic filing through state-specific portals, varying apprentice ratios and enforcement, and different penalty structures for non-compliance.
- Geographic complications: Depending on project funding sources, some states require both state and local prevailing wages. Multi-state projects may require compliance with different wage laws simultaneously.
- Always verify the specific requirements for each project location since state laws change frequently and can differ significantly from federal standards.
+ How can I find and apply the correct prevailing wage determination?
- Finding the correct wage determination requires identifying the project’s funding source, location, and applicable laws before work begins.
- For federal projects: Check the U.S. Department of Labor's wage determination site at sam.gov. Look for the specific wage determination number listed in your contract documents. Verify the project location matches the determination's geographic coverage area and that the determination is current and hasn't been superseded.
- For state projects: Visit your state’s Department of Labor or prevailing wage agency website. Many states maintain separate databases from federal determinations. Check project bid documents for specific wage determination references since some states issue project-specific rates.
- Application steps: Identify each worker's classification based on actual work performed, not job titles. Match classifications to those listed in the wage determination. Apply the correct base wage plus fringe benefit rates for your project's location and funding source.
- Important: Wage determinations can be modified or superseded during construction. Set up a system to check for updates regularly, since using outdated rates can result in underpayment violations and required wage restitution to employees.
