The Davis-Bacon Act requires employers to provide minimum wage and fringe benefits to workers on federal government construction projects. Even though the act applies only to direct contracts between contractors and the federal or Washington, D.C., governments, Congress frequently includes prevailing-wage requirements in laws that fund a wide variety of state and local projects through federal grants or loan guarantees, such as highways, airports, public housing and water-treatment facilities. Following is detailed information about the act and how it affects you and your workers.
History
The Davis-Bacon Act was enacted in 1931 near the close of the Hoover presidency with two Republican legislators as its lead sponsors: Sen. James Davis of Pennsylvania and Rep. Robert Bacon of New York. The law had the twin goals of protecting workers from the corrosive effects of wage competition and protecting the business interests of local construction contractors from out-of-town competitors that had lower labor costs. Because federal government construction contracts traditionally have been awarded to the lowest-priced responsive and responsible contractor, unrestrained competition can result in contract awards to a bidder who cuts wages to the greatest extent possible. Left unchecked, this kind of wage competition can produce a deflationary "race to the bottom" of the wage scale.
Legislation to repeal the Davis-Bacon Act is introduced during almost every session of Congress, yet the law has proved to be remarkably resilient with support that has cut across traditional party and ideological lines for more than 70 years.
Core requirements
The statute requires the "advertised specifications for every contract in excess of $2,000 to which the Federal Government or the District of Columbia is a party, for construction, alteration, or repair ... of public buildings or public works ... shall contain a provision stating the minimum wages to be paid various classes of laborers and mechanics."
The required wage and fringe benefits are set by the U.S. Department of Labor (DOL) and reflect the prevailing rates for various construction trades in localities throughout the United States, typically determined on a county-by-county basis.
The prevailing rates must be paid to "all mechanics and laborers employed directly on the site of the work, unconditionally and at least once a week." These requirements extend to all workers on a project whether employed by a prime contractor or subcontractor of any tier. Although contractors at any tier on a Davis-Bacon Act-covered project may be subject to major penalties if they violate the statute, prime contractors at all times are responsible for ensuring overall compliance with wage requirements on a project, and prime contractors can be held financially liable for subcontractors' violations.
Contractors on Davis-Bacon Act-covered projects are required to post applicable minimum wage rates. DOL's Wage and Hour Division has central authority for implementing the Davis-Bacon Act, setting prevailing wage rates, developing policy and investigating complaints of wage underpayments. However, contracting agencies also play a major day-to-day role in the act's enforcement by including Davis-Bacon Act requirements in contract specifications and monitoring compliance. Contracting agencies typically rely on Davis-Bacon Act requirements in the Federal Acquisition Regulation (FAR) Subpart 22.4.
Other statutes that apply to most federal construction contracts include the Contract Work Hours and Safety Standards Act (mandating payment of overtime pay on Davis-Bacon Act-covered jobs), the Copeland Anti-Kickback Act (including the certified payroll program) and the Miller Act (requiring payment bonds on federal construction contracts).
Covered contracts
The Davis-Bacon Act applies to any federal or Washington, D.C., contract for "construction, alteration or repair" of a public building or public work that exceeds $2,000 in value. Note that a contract does not have to be primarily a construction contract to be covered; even if a contract primarily is for goods and services, there is a strong likelihood Davis-Bacon requirements will apply to any construction-type activity if the value of the construction component exceeds $2,000. Therefore, the Davis-Bacon Act may apply to relatively small construction tasks that are incidental to much larger service or supply contracts.
Most Davis-Bacon Act-covered contracts easily are identifiable because they plainly are construction contracts. DOL defines "buildings" or "works" subject to the act as including the following: "buildings, structures and improvements of all types, such as bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, pumping stations, heavy generators, railways, airports, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, dredging, shoring, rehabilitation and reactivation of plants, scaffolding, drilling, blasting, excavating, clearing and landscaping."
If the act applies to a new construction project, Davis-Bacon Act wage requirements are likely to apply to warranty work performed after the project is complete.
The act also may apply to other types of projects that are not obvious. For example, DOL has concluded the act applies to most asbestos-abatement work, as well as environmental remediation projects that involve significant movement of earth. Federal contracts to erect temporary structures can be covered under the act. The comptroller general once determined a contract to paint mailboxes was covered by the Davis-Bacon Act because they were "public works," or structures that alter the physical environment.
In most instances, projects covered by the Davis-Bacon Act are paid for with federal funds. However, the statute does not actually address direct federal funding of a construction project but instead covers all federal contracts that call for more than $2,000 in construction, alteration or repair costs. As a consequence, even private buildings constructed to fulfill federal lease requirements may be covered by the act. In addition, there have been occasions when DOL has found privately funded construction projects on military bases (such as commercial branch banks or fast-food restaurants) to be covered by the act if a facility was built pursuant to a contract between the government and a private business, the facility was integral to the government's operations and the government ultimately reserved the right to acquire ownership of the building.
One area of long-running debate involves whether the Davis-Bacon Act covers incidental construction-type activities that appear in service or supply contracts. For example, a "maintenance and operations" contract to operate a government power plant or military base plainly is a contract subject to the Service Contract Act, but is an employee of the maintenance contractor (or a subcontractor) engaged in "construction, alteration or repair" work (and subject to the Davis-Bacon Act) if he repairs a broken spout, replaces damaged roof tiles or seals a roof leak?
Because maintenance contracts frequently involve construction work that DOL views as subject to the Davis-Bacon Act, these contracts often include Davis-Bacon Act and Service Contract Act contract clauses and wage determinations. In 1990, the U.S. Army issued guidance to resolve disagreements about the proper application of the Davis-Bacon Act to individual maintenance and repair task orders. This guidance now is incorporated in the Department of Defense (DOD) FAR Supplement with DOL's approval.
Although most work on such maintenance contracts is deemed to be service work and falls under the Service Contract Act, DOD contracting officers are advised that if task orders can be characterized either as "maintenance" or "construction" activities, projects requiring fewer than 32 work hours are subject to the Service Contract Act, and projects requiring 32 or more work hours are subject to the Davis-Bacon Act. In addition, any painting orders that exceed 200 square feet (18.6 m²) are subject to the Davis-Bacon Act regardless of the amount of time required to perform the work.
There are no similar guidelines for nondefense agencies, but because DOL has approved the DOD FAR criteria, a civilian procuring agency presumably should be safe if it follows the DOD FAR standard.
Disagreements also frequently arise about whether equipment supply contracts are within coverage of the Davis-Bacon Act. DOL's Field Operations Handbook states installation work performed with supply or service contracts is covered by the Davis-Bacon Act when it involves more than an incidental amount of construction activity and the work is physically or functionally separate from and can be performed on a segregated basis from the nonconstruction work in the contract.
Examples cited in the Field Operations Handbook as requiring Davis-Bacon Act coverage include installing a security system or an intrusion-detection system, installing permanent shelving that is attached to a structure, installing air-conditioning ducts, excavating outside cable trenches and laying cable, installing heavy generators, mounting radar antenna and installing instrumentation grounding systems where a substantial amount of construction work is involved. Based on these guidelines, it is likely some incidental repairs or alterations resulting from rooftop equipment installations might be covered by the Davis-Bacon Act. DOL's guidelines state there are no fixed rules governing this process and whether installation work involves more than an incidental amount of construction activity depends on the specific circumstances of each case.
Covered workers
As mentioned previously, the Davis-Bacon Act requires payment of prevailing wages and fringe benefits to all "laborers and mechanics." According to DOL regulations, this includes at least those workers whose duties are manual or physical in nature (including those workers who use tools or perform the work of a trade) as distinguished from mental or managerial duties. The terms "laborer" and "mechanic" include apprentices, trainees, helpers and, in the case of contracts subject to the Contract Work Hours and Safety Standards Act, watchmen or guards. The term does not apply to workers whose duties primarily are administrative, executive or clerical.
Those employed in bona fide executive, administrative or professional capacities are not deemed to be laborers or mechanics. Working foremen who devote more than 20 percent of their time during a workweek to mechanic or laborer duties and do not meet the criteria defining bona fide executive, administrative or professional employees, are laborers and mechanics for the time so spent.
Contractors and subcontractors must ensure all laborers and mechanics performing work on a Davis-Bacon Act-covered project are paid prevailing wages and fringe benefits even if they are not technically classified as a contractor's "employees." For example, a contractor cannot avoid liability for Davis-Bacon Act requirements by calling workers independent contractors, partners or owners.
DOL regulations recognize two general classes of workers that can be employed at less-than-journeyman wage rates: apprentices and trainees. In addition, DOL recognizes helper classifications under specific circumstances.
The primary subjourneyman classification consists of apprentices enrolled in formal apprenticeship programs registered with federal or state agencies. A contractor is entitled to employ either apprentices or trainees on federally funded projects without special apprentice or trainee wage and fringe benefit rates being included in the wage determination.
It is important to make sure the ratio of these lower-paid workers to the journeyman classification never is exceeded (except for errors caused by inadvertent employee absences); otherwise, you may be required to pay the "out of ratio" apprentices or trainees at the full journeyman rate. An employee classified as an apprentice who is not registered in a state- or federally approved apprentice program most likely is entitled to full journeyman pay rates regardless of the worker's relative lack of experience or skill.
Since 1971, DOL has allowed "trainees" to work on Davis-Bacon Act jobs at their usual wage rate only if they are participating in certain federally approved trainee programs. Unlike apprenticeship programs, approved trainee programs are relatively rare.
Employment of "helpers" on Davis-Bacon Act-covered jobs has been an area of controversy. Before 1982, DOL had developed a practice of recognizing "helper" or "tender" classifications under limited circumstances and publishing pay rates for these helper classifications as part of Davis-Bacon Act wage determinations. DOL would recognize a helper if the helper classification had duties distinct from the tasks performed by journeymen, the use of the helper classification reflected prevailing local practice, and the helpers were not merely unregistered trainees or apprentices learning a trade. In essence, these helper or tender classifications were independent crafts, frequently a specialized classification of laborer such as a mason tender or carpenter helper.
In 1982, new Davis-Bacon Act regulations were promulgated that would have expanded the use of helpers on Davis-Bacon Act projects. The 1982 "helper" regulations would have allowed large numbers of lower-wage helpers to work on Davis-Bacon Act-covered contracts performing traditional craft work as long as the helpers were supervised by journeymen. The regulations were challenged by the building trades unions, and the helper regulations were the subject of litigation throughout the 1980s. Although the courts finally approved the expanded helper program in 1992, the program never was fully implemented and the regulation was repealed entirely in 1996.
In 2000, DOL promulgated new regulations codifying the pre-1982 three-part requirements. As a result, the only helper classifications DOL is likely to recognize are specialized crafts that perform tasks distinct from work performed by journeymen. In practice, helper classifications that would be approved by DOL simply are not found in the roofing and waterproofing industries.
Before 1994, there were no exceptions under the Davis-Bacon Act to allow volunteers to perform construction work on Davis-Bacon Act-covered contracts. As part of the Federal Acquisition Streamlining Act, Congress included a provision allowing the secretary of labor to waive the application of the Davis-Bacon Act for people who volunteer for state or local governments, public agencies or nonprofit charitable organizations performing work at certain federal or federally funded construction sites. These volunteers can be paid a nominal fee subject to DOL approval.
As a result, it is theoretically possible for workers to volunteer on some federally funded construction that may benefit their local communities.
The exemption generally is limited to projects relating to housing and community development, libraries, public health, and Native American health-care and educational facilities.
Wage determinations
A core DOL function is to set the Davis-Bacon Act prevailing wage and fringe benefit rates, which are published as "wage determinations." Contracting officers must ensure the correct, current DOL wage determinations are included in every set of bid specifications for Davis-Bacon Act-covered contracts. General wage determinations—the most common type—are issued for each county or city nationwide.
DOL subdivides the construction industry into four broad classes of projects and issues four types of Davis-Bacon Act wage determinations: building, residential, heavy and highway. Extensive guidelines describing what types of projects fall within these different classifications were published by DOL in 1978 as All Agency Memoranda 130 and 131.
On large projects, it is possible two or more wage determinations may apply on a single contract. For example, a water-treatment plant ordinarily would be subject to the heavy wage determination; however, a separate administration building constructed as part of the same project would be subject to the building wage determination. If the Davis-Bacon Act wage and fringe benefit rate for a roofing worker differs between the building and heavy wage determinations, a contractor would be subject to different Davis-Bacon Act minimum wage requirements on differing portions of the same project.
The Supreme Court has ruled the Davis-Bacon Act is "not self-implementing," which means, generally, the government must place the proper Davis-Bacon Act clauses in procurement contracts. Notwithstanding this ruling, Davis-Bacon Act contract language and even wage determinations have been read into contracts by law under the so-called "Christian Doctrine," named for a leading government contract case G.L. Christian v. United States. Of course, if a contractor is required to pay higher wage rates because a contracting agency failed to include a wage determination in the bid specifications, the contractor would have a credible claim for a price adjustment.
A wage determination simply is a list of the various job classifications that have been recognized by DOL in a particular community along with the prevailing wage and fringe benefit rates. The contracting officer inserts the most recent wage determinations in the bid specifications; however, wage determinations are subject to modification by DOL throughout the period leading up to a bid opening, and updates must be incorporated into the bid specifications unless they are received by the agency less than 10 days before a bid. Ordinarily, wage determination rates in effect when a contract is bid will be effective for the life of the construction contract. However, a new wage determination may be required if a contract is later modified by adding substantial new work.
Wage determinations are based on surveys conducted by DOL. The survey program in the past often was criticized because the surveys were conducted sporadically. Many communities had not been surveyed in years, and the resulting wage determination rates often were outdated. In addition, the surveys heavily relied on contractors, trade associations and labor unions for voluntarily gathering wage data; in many instances, so little data for some construction crafts would be submitted that DOL could not determine a prevailing rate and, therefore, would issue a wage determination omitting wage and fringe benefit rates for some trades entirely. Questions also were raised during the 1990s about whether some wage determinations were based on inaccurate or fraudulent wage data.
In response to the criticism, DOL initiated efforts to improve its survey methodology, relying on newer technology to reach a larger universe of survey respondents and adding an audit program to confirm the accuracy of the reported data. New Davis-Bacon Act surveys are conducted on a statewide basis with DOL soliciting wage data from all localities in a state and for all types of work simultaneously.
In addition to the published general wage determinations, DOL will issue a wage determination applicable to a specific project when requested by a contracting agency. Unlike general wage determinations, which have no expiration date, project wage determinations are effective only for 180 days. Wage determinations may need to be modified if a contract is not awarded within 90 days after bid opening.
Classifying workers correctly on Davis-Bacon Act-covered roofing projects can be problematic. DOL's wage schedules typically identify wage rates for broad categories of trade classifications, such as "painter," "plumber" or "electrician." But roofing classifications vary depending on the roof system being installed and may be performed by different construction trades, including "roofers" (a classification routinely used by DOL), carpenters, sheet-metal workers, iron workers, etc. To make the situation even more complicated, trade practices often vary across the United States. If a wage determination has a sheet-metal worker wage rate of $25 per hour and "roofer" rate of $18 per hour, can a contractor confidently classify and pay his workers as "roofers" on a roofing job? And what does a contractor do if the wage determination doesn't even list a wage rate for the roofing or sheet-metal trades?
Determining the correct trade assignment and wage rate probably is easier for union contractors compared with their open-shop counterparts because contracting officers most likely will assume workers under collective-bargaining agreements are classified correctly. But because wage determinations have virtually no information relating to tasks actually performed by the various trades, selecting the right classification and wage rate can be challenging for open-shop contractors, especially if they bid work in an area where they typically do not operate.
It is essential contractors with questions about the wage determinations seek clarification from DOL early in the bidding process even though it can be extremely difficult to obtain prompt, authoritative answers. Any party who believes wage determination rates are incorrect can file a request for review and reconsideration with the Wage and Hour Division but only before a contract is awarded.
Contractors who bid on government contracts are presumed to have knowledge of local trade practices and after a contract is awarded, contractors will have little success claiming they bid on the project under the mistaken belief tasks would be performed by lower-wage trade classifications. Also, be aware DOL repeatedly has stated in wage underpayment cases it is not bound by erroneous advice a contractor may receive from a contracting agency. Note that though such advice may not bind DOL, it might be the basis for a price adjustment claim against the agency.
Also, according to DOL, if prevailing rates in a wage determination are based on union-negotiated wages, union jurisdictional practices also apply to Davis-Bacon Act trade classifications. If there are conflicting claims among the construction unions with several claiming jurisdiction over the same work, this policy can create uncertainty about the wage rate DOL ultimately will require for a roofing project.
Frequently, job classifications that are needed on a construction project are missing from a wage determination entirely because DOL was unable to obtain enough data for a craft when it conducted its wage surveys. A missing job classification can be added post-award through a process known as "conformance." The procedure intentionally is designed to be narrow in scope and cannot be used to challenge the underlying wage determination.
A conformance action to add a job classification and rates must be initiated by a contractor, who submits a conformance request to the agency contracting officer proposing a job title and wage rate be added. The contractor must consult with the employees or their labor union and indicate to the contracting officer whether the workers agree with the new classification and rates. The contracting officer then transmits the conformance package to DOL indicating whether a recommendation of the approval of the new classification and rate has been granted.
The Davis-Bacon Act regulations require DOL to issue a conformance decision within 30 days or notify the contracting officer additional time is needed. DOL frequently does not meet the 30-day time limit; on occasion, a conformance decision can take years, leaving contractors with the difficult problem of moving forward with projects while being unsure of the wage DOL ultimately will set.
A "conformed classification" must meet three criteria before DOL approves it: the work to be performed by the proposed classification is not performed by a classification already in the wage determination, the classification is used by the local construction industry, and the proposed wage and fringe benefit rate bears a reasonable relationship to other wage rates already found in the wage determination.
If a major job classification routinely used in the construction industry is missing from a wage determination, adding the classification through a conformance request is relatively straightforward. However, it can be much more difficult to add specialty classifications through the conformance procedure, such as "metal building assembler," because DOL is likely to conclude the work of the proposed classification already is performed by one of the major craft groups. This especially is true in localities where the rates in the wage determination are based on a union scale because union trade practices in such areas are viewed by DOL as prevailing local practice.
DOL wage determinations usually include hourly wage rates and a rate for one or more fringe benefits. Contractors can fulfill the fringe-benefit requirement by contributing to a trustee or third person (pursuant to a fund, plan or program) to provide a variety of benefits, including health benefits, pensions, disability benefits, supplemental unemployment benefits, life insurance, vacation and holiday pay, apprenticeship costs and other bona fide fringe benefits. Note that a contractor may not claim credit for benefit payments required by federal, state or local law, such as workers' compensation.
The act states fringe-benefit contributions may be provided in several ways. The obligation of a contractor or subcontractor to make payment according to prevailing wage determinations may be fulfilled by making payments in cash; contributing to a trustee or third person assuming an enforceable commitment to bear the costs of a financially responsible plan or program; or any combination of payment, contribution and assumption where the aggregate of the payments, contributions and costs is not less than the required sums.
By including "other bona fide fringe benefits," Congress specifically left open the possibility that new benefits would be developed that were not common to the industry when fringe benefits were added to the act in 1964. If a contractor wants to receive credit under the act for costs incurred for a fringe benefit not listed in the act, the contractor must request permission from DOL, which will examine the facts and circumstances to determine whether the fringe benefit is bona fide. DOL generally does not allow contractors to claim payments for job-related tools; truck expenses; or personal items, such as payment of loans, rent or telephone bills, as fringe benefits.
Wage determinations typically show fringe benefits as hourly rates, but sometimes, the benefit contribution appears as percentage-of-wage contribution or another formula. A contractor either must pay the benefit as stated in the wage determination, another bona fide fringe benefit or an hourly cash equivalent. If a contractor is able to recapture or divert money paid into a fringe-benefit plan, DOL will not view the plan as bona fide for Davis-Bacon Act purposes.
If a wage determination includes hourly rates and fringe-benefit rates, contractors can pay employees the hourly wage rate and make the specified contributions for all listed fringe benefits; pay employees the hourly wage rate and make one contribution for all the specified fringe benefits in one amount; or, in lieu of providing fringe benefits, make a cash payment for the hourly rate and fringe-benefit rate.
Contractors who do not typically pay for benefits on a per-hour basis can run into serious problems. For example, if the monthly health-insurance premium for an employee is $250 and the employee divides his time between Davis-Bacon Act-covered and noncovered work, how much of the health-insurance cost can be claimed by the contractor on the covered job?
It is well-established that fringe-benefit payments on Davis-Bacon Act-covered jobs cannot be used to subsidize a contractor's fringe-benefit program on noncovered jobs. If employees work on private and public contracts, a contractor may claim a Davis-Bacon Act credit only for a proportionate share of the fringe-benefit payments relating to the amount of time worked on Davis-Bacon Act-covered jobs."
According to DOL policy, contractors must average all fringe benefits paid to an employee for Davis-Bacon Act-covered and private work during a year's period, calculating the "effective annual rate" of fringe benefits on an hourly basis. Once this is determined, a contractor can claim a fringe-benefit credit only for the portion of an employee's time worked on Davis-Bacon Act-covered jobs.
Last thoughts
A large portion of the U.S. construction market consists of projects funded by the federal government that are subject to Davis-Bacon Act requirements. Contractors interested in working on projects covered by the Davis-Bacon Act need to become thoroughly familiar with DOL's practices and procedures when bidding such work.
Paul Greenberg is an arbitrator and mediator with offices in Miami; Philadelphia; and Washington, D.C.
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