Orange County Branch Newsletter
Law and CE News
Law and CE News - So You Were Awarded a Public Contract - Are You Required to Pay Prevailing Wages to Your Employees?
Although you may not meet the classic definition of a “contractor” (i.e. electrician, plumber), you may still be required to pay your employees prevailing wages. Failing to pay prevailing wages may subject you to penalties, serious cost overruns, sanctions, and even debarment.
PREVAILING WAGE DEFINED
“Prevailing wage” is, per various regulations, the rate of compensation normally paid to a particular class of workers, laborers, and mechanics in a specific geographic area. Contractors and subcontractors who are engaged in the performance of public construction projects are required to pay the prevailing wage as determined by the applicable state or federal entity to their workers, ?/laborers, and mechanics.
FEDERAL AND STATE PREVAILING WAGE LAWS
The Davis-Bacon Act is the controlling federal prevailing wage law for projects funded by federal funds. The Davis-Bacon Act requires all federally funded construction contracts in excess of $2,000 to pay workers, laborers and mechanics no less than the prevailing wage. Since the passage of the Davis-Bacon Act in 1931, over 50 related laws have been enacted, including the McNamara-O'Hara Service Contract Act, the Housing and Community Development Act of 1974, the Walsh-Healy Act, the American Recovery and Reinvestment Act of 2009, the Federal-Aid Highway Acts, and the Federal Water Pollution Control Act. These Acts are commonly referred to as the Davis-Bacon Related Acts (“DBRA”). The DBRA provides that federally assisted construction contracts, whether through loans, grants, loan guarantees, or insurance, must also pay prevailing wages to workers, laborers, and mechanics performing on the contract. The Davis-Bacon Act and the DBRA are administered through the United States Department of Labor.
Under the DBRA, contractors and subcontractors are required to specify the prevailing wage in the public construction contract, pay their workers, laborers and mechanics weekly, submit weekly certified payroll records to the applicable agency, and obtain a payment bond for contracts over $100,000. The DBRA requirements cannot be avoided by classifying workers, laborers, and mechanics as independent contractors, partners, or owners.
The federal prevailing wage is determined based on the calculation provided in the Code of Federal Regulations. The controlling Code of Federal Regulation, 29 C.F.R. § 1.2(a)(1), provides that a prevailing wage is the wage paid to the majority of the laborers, workers, or mechanics in a specific classification (e.g. boilermaker, electrical utility lineman) working on a similar project in a particular geographic area. If there is no majority wage, the prevailing wage is the average of the wages paid, weighted by the total employed in the classification.
California has also passed its own “Little Davis-Bacon” law. In California, the prevailing wage must be paid to all workers, laborers, and mechanics performing on a public construction contract over $1,000. The prevailing wage is calculated by the basic hourly rate paid on public construction contracts to a majority of workers engaged in a particular craft, classification, or type of work within a particular geographic area, or alternatively in the nearest labor market area if a majority of such workers are paid at a single rate. If a particular geographic area does not have a single rate paid to the majority of its workers, the single rate paid to the greater number of workers will be deemed the prevailing wage. California’s prevailing wages can be determined by following the steps provided at http://www.dir.ca.gov/OPRL/PWD/.
In California, certain public construction contracts are exempt. For example, a labor compliance program is not required to pay the prevailing wage for any public construction contract of $25,000 or less when the contract is solely for construction work or of $15,000 or less when the contract is for repair, alteration, demolition, or maintenance work. A labor compliance program is defined as a program which is initiated and enforced by an awarding body and is approved by the Department of Labor.
The DBRA applies to public construction contracts entered into for the construction, alteration, or repair (e.g. painting and decorating) of public buildings and public works of improvement. The DBRA applies to workers, laborers, and mechanics whose duties are manual or physical in nature, and not administrative, executive, or clerical. The DBRA does not apply to manufacturing, furnishing of materials, or servicing and maintenance work. However, California’s prevailing wage laws do recognize building/constructor inspectors and field soils and materials testers as persons who must be paid prevailing wages. This group of employees is typically viewed as being outside the reach of prevailing wage laws and can be the source of many compliance problems.
Different rates of compensation are provided for apprentices and trainees. Apprentices may be compensated less than the prevailing wage if they are in an apprenticeship program registered with the Department of Labor or with a state apprenticeship agency recognized by the Department. Trainees may be compensated less than the prevailing wage if they are in a training program certified by the Department.
Violations of the DBRA subject contractors and subcontractors to certain penalties and sanctions, including termination of contract, debarment from future contracts for up to three years, and the withholding of contractual payments for the satisfaction of unpaid wages. The prime contractors will be held financially liable for all violations, including the violations of their subcontractors. Criminal prosecution may be imposed if falsification of certified payroll records is proved.
In order to recover the difference between the wages paid and the prevailing wage rate, the wage rate must cover the period involved. Therefore, in order for a determination of the amount of back pay damages, the employee must specify the number of days employed by the contractor or subcontractor, the number of hours worked on each particular day, and the additional compensation claimed.
Please contact us at the Oakland, South Pasadena, Orange or San Diego offices to discuss further.
Nothing contained within this article should be considered the rendering of legal advice. Anyone who reads this article should always consult with an attorney before acting on anything contained in this or any other article on legal matters, as facts and circumstances will vary from case to case.