Published date: 07/25/2023
Welcome back! Or to those who missed Part 1 or Part 2, hello there! You’ve stumbled across the next installment of a series of blogs discussing common mistakes contractors make on prevailing wage projects.
Just like each of the previous blogs on the topic, we will begin by reiterating that there truly is no substitute to having a solid grasp of the regulations outlined in the Davis-Bacon Act (DBA) or any of its Related Acts (DBRA). So, if you are brand new to public works or need a refresher, familiarizing yourself with those is probably the best place to start.
That being said, even with a fundamental understanding of prevailing wage, it can be all too easy to make mistakes in this industry. And it’s best to learn from others’ mishaps so they don’t also become your own. So, let’s look at a few more.
Not Applying Overtime Correctly
This one might seem basic to some, but overtime (OT) calculation is still a common issue in construction. Contractors have a legal obligation to pay their employees overtime wages for hours worked over 40 hours in a workweek, as required by the Fair Labor Standards Act (FLSA).
The FLSA requires covered employees to be paid at least one and a half times their regular rate for these OT hours. If an employee’s base wage rate is $30, for example, and he or she works 42 hours in a week, the two additional hours worked over the 40 hour threshold should be paid at a wage rate of $45. What can sometimes trip contractors up, however, is calculating fringe benefits (which are one of the components of wage determinations that must be paid in addition to base wage rates). Fringe benefits are paid along with overtime wages. However, it should be noted that overtime fringe benefits are enforced by two separate regulations: the FLSA enforces the payment of OT, but the DBA enforces the payment of OT fringe benefits.
In addition, contractors should note that some states and localities have their own overtime requirements that may be more stringent than the Davis-Bacon federal requirements. They should be aware of these requirements and ensure compliance with all applicable laws and regulations for their projects.
Failure to pay overtime wages can result in wage violations and penalties, including back pay, damages, and fines. To avoid this, it is best practice for contractors to carefully track and record the hours worked by their employees, and then ensure OT hours are properly calculated. Likewise, it’s important ensure that they are not improperly classifying employees as exempt from the FLSA’s overtime requirements. Contractors may want to seek the advice of legal or accounting professionals to ensure compliance with the FLSA’s overtime requirements.
Forgetting to Include a Worker or Hours on Certified Payroll
This is yet another one that seems as if it should go without saying, but here we go: Whatever is on a contractor workers’ actual paystub should also appear on its certified payroll reports (CPRs). And yet, far too often, some of workers hours are omitted on CPRs when they shouldn’t be.
And look, we get it… It can be an easy mistake to make. Contractors often have many projects going on at once. They may have a worker dispatched on a certain project one day and another project the next. But if a worker touches a jobsite on any given day for a significant period of time, the employee and hours he or she worked need to be reflected on the CPR for that week.
If the contractor were to ever get audited or investigated, and the auditor dug into the project’s daily logs, it could spell trouble if things don’t match up with the CPRs. Likewise, if a contracting agency were ever to visit a jobsite and perform wage interviews with the contractor’s employees, the interviewer might wonder why Joseph (a worker who they clearly recall having a conversation that day) didn’t appear on the CPR for that week.
Some prevailing wage investigators refer to this as a “ghost” – someone who is clearly on a jobsite but does not appear on the proper paperwork. And the same term applies to reverse situation: when a worker appears on a CPR but is nowhere to be found on the actual jobsite. Both tend to be giant red flags for an investigator. Because even though many cases of “ghosts” are simply mistakes, it could also suggest that a contractor might be disingenuous and warrant further inspection.
Not Following Apprenticeship Ratios
Apprentice regulations in general tend to be one of the most frequently misunderstood aspects of the DBA and therefore one in which quite a few contractors tend to make mistakes. Included in these regulations is a requirement to employ a minimum ratio of apprentices to journeymen on a project. In other words, for a contractor to be able to classify and pay workers at the apprenticeship rates, it must also employ a certain number of journeypersons to supervise them.
This ratio may vary by project and location, so it’s important for contractors to refer to each apprenticeship program to understand its specific requirements. Because of this, we can’t necessarily tell you what that ratio may be, but we can use an example. Let’s say the ratio is 3:1. That means that contractors must have at least one journeyperson working on a project for every 3 apprentices. And per DBA, this is a daily threshold, meaning that if a journeyperson calls out sick one day (and he or she was counted on to meet the ratio requirement), the contractor may be in jeopardy of a violation if it does not compensate somehow.
To stay in compliance, the contractor might have to consider either:
1. Temporarily adding another journeyperson to the project to fill the void, or
2. Pulling other apprentices off the project until the journeyperson is back, or
3. Paying one or more of the apprentices as journeypersons until the actual journeyperson returns
Some states, like California, for example, might have their own set of apprenticeship requirements, so it’s generally recommended for a contractor to familiarize itself with the states it typically does business in. Check out a previous blog post on federal apprenticeship requirements to read more on the topic and help answer other common questions regarding the regulations.
If you are looking to take an even deeper dive to learn the ‘ins’ and ‘outs’ of Davis-Bacon and prevailing wage compliance, check out our online courses at https://lcptracker.com/academy/.
These materials are being issued with the understanding that LCPtracker is not engaged in rendering legal or other professional services and is providing these for informational purposes only. If legal, accounting, or tax expert assistance is required, the services of a competent legal, accounting or tax professional should be sought.