Published date: 12/02/2021

Q: What is prevailing wage?

Prevailing wage refers to the minimum hourly wage and benefits that are required to be paid by contractors to workers working on public works projects in a given area. These rates can be imposed federally and/or by state – and in some cases, locally.

Q: How is a project determined to be public works?

Although there are some exceptions, public works is generally the term used to describe construction involving infrastructure that is open to public use (i.e. highways, bridges, federal buildings, etc.). Typically, any projects that are funded in some capacity by government funds constitute as “public works”. This funding can be in the form of grants, loans, or loan guarantees. Even projects with split funding between private and public bodies can be considered public works and therefore be subject to prevailing wages. On the federal level, this is enforced per the Davis-Bacon Act and the Davis-Bacon Related Acts.

Q: What is the Davis-Bacon Act?

The Davis-Bacon Act (DBA) is the federal law that established prevailing wages in 1931, and it is common in the vernacular of the public sector of construction when contracting directly with the United States government. The Davis-Bacon Related Acts (DBRA) are applicable when the US government only assists in providing a portion of the funds for a project. Various other related laws have been added, such as the Contract Work Hours & Safety Standards Act (CWHSSA) and Copeland Act.  This includes many states adopting their own prevailing wage requirements.

Q: When does a public works project become subject to prevailing wages?

On the federal level, Davis-Bacon applies to all projects that are $2,000 or more in value. An important distinction: this threshold is concerning prime contract value. It does not mean that a subcontractor performing less than $2,000 of work on a project is exempt. It means that as long as the project value as a whole (the sum of every contractors’ work on the project) exceeds that threshold, then any amount of work performed by anyone must be subject to prevailing rates.

Q: Which types of work does prevailing wage apply to?

By the United States Department of Labor’s (USDOL) definition, all laborers and mechanics must be paid prevailing wages. Both of those terms can be broken down further. In totality, all contractors – general or specialty – that provide services such as construction, demolition, repair, installation, alteration, and clean-ups for public works contracts must abide by prevailing rates. This includes the prime contractor(s) for the project, any of the subcontractors that the prime contractor hires, and any lower tier subcontractors that those subcontractors hire… and so on and so forth.

Q: Who is the prime contractor?

The prime contractor (also commonly referred to as just the prime) is the main contract holder for the project. They are typically contracted directly with the government body and are ultimately responsible for the delivery of all work on the project. In many cases, the prime is one entity, but sometimes there can be joint ventures with multiple primes on a project. Many do not perform all of the work themselves, and so they subcontract work out to other contractors.

Q: How do you determine what a worker should be paid?

Workers have different prevailing rates depending on what craft they perform and where the project is located. For example, a carpenter will have a different rate than a brick layer. And a brick layer working on a project in Los Angeles will likely get paid a different rate than a brick layer in New York City. You should also note that a worker’s craft is a term used to describe a broader type of work. Crafts are often broken down into multiple smaller classifications and can have their own separate rate. For instance, the USDOL could make a distinction between a “tile setter” and “tile finisher” as two separate classifications with different rates.

Q: Where do I find the wage rates for different classifications?

The government entity awarding the prime contract will include wage determinations in the contract. These wage determinations come in the form of a schedule that list each of the classifications included in the project and their designated rates. The prime contractor should then include these flow-down provisions in their contracts with their subcontractors so that they are aware of the correct wages as well.

Q: How do government bodies enforce compliance?

Per Davis-Bacon and other state compliance mandates, contractors are required to submit certified payroll reports as a measure to help prove to they are using the correct rates. Depending on the severity of violations, non-compliance can result in back-wages due to workers, withheld payment from the awarding body/contractor, penalties, fines, potential debarment, and in egregious and malicious cases, even criminal prosecution.

Q: What other components of prevailing wage compliance should we be aware of?

Davis-Bacon and other state prevailing wage compliance can be quite complicated and there are many smaller pieces that are important to understand. Some of these include: 

• Overtime calculations
• Weekend work
• Holidays by craft
• Fringe benefits
• Subsistence and travel
• Shift work
• Apprenticeship requirements
• Training contributions
• Possible periodic wage increases

Many of these topics have been touched upon in some of our other blog posts. But if you’d like to dive even deeper into these subjects and gain more in-depth knowledge about prevailing wage compliance and software tools to streamline it, check out 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.