Published date: 10/24/2023

It’s been quite the past few months for news in public works. The Treasury Department and the IRS are tag-team releasing new prevailing wage guidance and a Notice of Proposed Rule Making on the Inflation Reduction Act (IRA). And most recently, the U.S. Department of Labor’s (USDOL’s) Final Ruling on the Davis-Bacon and Related Acts (DBRA) finally went into effect – as of a only few short days ago.

Speaking of which… One of the aspects of prevailing wage compliance being addressed in the new Final Ruling involves frequently requested conformances. If you’re not familiar with the topic, don’t fret, we’ll touch on it briefly towards the end of this post. But you should note that conformances happen to go hand in hand with one of the most fundamental and frequently misunderstood matters of labor compliance: the proper classification of workers.

The Dominos of Crafts and Classifications

When we get down to brass tacks, the appropriate prevailing wage and fringe rates must be paid to workers depending on the type of work they perform. The onus is on the contractor to properly classify workers so that they fall into the correct category and thus receive the correct wage. There are a few steps to take, much like a series of dominos, to ensure this happens. If one domino is out of place – even just a little bit off – it can create huge headaches down the road.

The First Domino: Understanding What Work is Subject to Prevailing Wage

Prevailing wage laws in the construction industry are governed by strict legal standards; they do not care about one’s personal beliefs or opinions on the matter. These regulations extend beyond the “traditional” sense of labor, encompassing a wide range of activities from demolition, repair, installation, and even ancillary tasks such as painting, decorating, or landscaping.

Several trades are often overlooked; activities such as equipment repair, surveying, tire repair, and material delivery may also fall under prevailing wage laws, but their qualification might require a more nuanced evaluation. For instance, surveying work done before a contract is awarded is usually (but not always) exempt from prevailing wage requirements. Likewise, material suppliers simply transporting materials – without any additional assistance offered to jobsite laborers or mechanics – may also fall outside of “covered work”(unless your State prevailing wage regulations are even more stringent than the Federal regulations). Even foremen can be exempt… unless they actively engage in skilled labor and dedicate a substantial portion of their time to it.

In general, prevailing wage laws do not cover labor that isn’t physical in nature, meaning that a contractors’ executive, administrative, or otherwise “office-related” staff is almost certainly not subject to prevailing wages. Or, at least, as long as they don’t step onto a project site and pick up a hammer (among other related things, of course).

The Second Domino: Scope of Work and Reading a Wage Determination

Once you have identified whether the scope of work is subject to prevailing wage requirements, the next crucial step is distinguishing between the types of work. In construction projects, various trades – such as electricians, carpenters, equipment operators, etc. – often have multiple subcategories, known as classifications, each with their distinct prevailing wage and fringe benefit rates.

Contractors must determine the appropriate minimum pay rate for workers based on their classification. But how exactly is this determined? The answer: wage determinations. Wage determinations are typically provided by the project owner or awarding entity and include descriptions of the scope of work for each particular classification and its applicable rates.

The Third Domino: Applying the Correct Classification

Paying close attention to even minor distinctions among classifications is essential. It’s also important to note that different projects with different funding sources (i.e. federal, state, local, etc.) might vary on how classifications are defined within the wage determination. A specialized type of work might fit under a specific classification for one project while belonging to a slightly different classification for another. And different regions of the country might even have entirely different names for the same work (i.e. truckers, teamsters, power equipment operator, etc.). Contractors frequently make errors in this area, so meticulous attention to detail, and knowing the area practice is paramount to ensure compliance and appropriate compensation for workers.

The Common Errors of Misclassifying Workers

Contractors can often make the mistake of grouping various classifications of work into a single, broad category. The electrician trade, for example, may have multiple classifications. Lumping all your workers under the first electrician classification you see on the determination could be a costly mistake. The same could be said for classifying someone as a laborer simply because you aren’t sure what else to classify them as. If you’re unclear, it’s considered best practice to ask your prime contractor or project owner for guidance.

Another misstep is to always rely on a worker’s job title when determining their pay. The appropriate pay rate must be determined by the type of work actually performed, not the employee’s position on paper or as listed in your payroll system. For instance, if a worker is a carpenter but spends a day finishing concrete in a school parking lot, the appropriate prevailing wage rate for that day’s work would be based on a concrete finisher or cement mason craft classification rather than a carpenter classification.

The exact craft classification would depend on the prevailing wage laws, and practice, in the specific area. Contractors need to pay attention to such distinctions, as they can have serious consequences. The awarding agency, for instance, may visit the jobsite and conduct field interviews (as part of a federal regulation) to enforce compliance. You can imagine what the end result might be when they see Jimmy working with sheet metal roofing, even though he’s classified as a laborer on certified payroll…

The Conformance Process

We promised we’d get to it… Conformances. As a contractor or agency, it’s essential to be aware of them. What exactly is this? Well, there might be instances where the wage determination(s) provided by the awarding body does not include specific classifications that are necessary on the job site. In such cases, filing a conformance request with the awarding body is the best approach. The SF-1444 form is available for this very purpose. Again, it’s not wise to assume that because the prevailing wage determination that the awarding body deemed applicable didn’t include a particular classification, that it can be lumped in with another craft. It’s the contractor’s responsibility to rectify the situation, and they can still be held liable if an auditor or investigator detects any discrepancies.

If you’d like to learn about electronic solutions that can help streamline your labor compliance process, please check out https://lcptracker.com/solutions/.

And, if you are looking to take an even deeper dive to learn more about misclassifications and conformances, check out our online Davis-Bacon courses at https://lcptracker.com/academy/.

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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.