By Christina Martinez
One of the hottest issues in the construction industry today is that of wage theft–theft of wages paid to workers who are employed on construction projects. With wage theft being a hotbed issue and with strengthened legislation for this type of theft, the spotlight is shining even brighter on The Davis-Bacon Act for enforcement of applicable laws and rules against non-compliant parties.
What is the Davis-Bacon Act?
The purpose of the Davis-Bacon Act (DBA)–created in the 1931 by the Department of Labor–is to protect communities from economic disruption from federal government contracts by leveling the playing field. It requires payment of “local prevailing wage rates and fringe benefits to workers and mechanics employed on federal government contracts in excess of $2,000 for construction, alteration or repair of public buildings or public works.” This prevents non-local contractors from coming into an area and underbidding local wages.
During contract performance, it is mandatory that employees are paid at least once a week with full wages and fringe benefits or cash in lieu of benefits.
Basic recordkeeping rules of Davis-Bacon for compliance
Companies must maintain payroll and basic records for all laborers and mechanics during the course of the work and for a period of three years thereafter. Below are several basic rules for compliance.
- Name, address and Social Security number of each employee
- Each employee’s work classifications
- Hourly rates of pay including rates of contributions or costs anticipated for fringe benefits or their cash equivalents
- Daily and weekly numbers of hours worked
- Deductions made
- Actual wages paid
- If applicable, detailed information regarding various fringe benefit plans and programs, including records that show that the plan or program has been communicated in writing to the laborers and mechanics affected
Harsh Penalties for Non-Compliance
The Department of Labor’s Wage Hour Division [WHD]–the group responsible for administering and enforcing the DBA currently have contractors facing more audits and more severe penalties. WHD is generally less willing to negotiate and will quickly use the legal remedies at their disposal to punish non-adherence to statutes by contractors. Some of the penalties are:
- Payment of back wages and fringe benefits to employees
- Withholding of payments due the contractor on active Federal contracts
- Contract termination (including payment for any additional Government procurement costs)
- Personal liability for company officials
- Prohibition from all government contracts for a 3-year period
Case in point, according to the US Department of Labor—WHD news release, February 9, 2014, an electric contractor had to pay over $350,000 in back wages earned on federally funded construction projects. The company was non-compliant with the DBA, The Contract Work Hours and Safety Standards Act [CWHSSA], and Fair Labor Standards Act [FLSA] because they did not adhere to the requirement of paying workers time-and-a-half for hours worked over the 40-hour work week.
Strategies for Successful Compliance
- Include key personnel in the compliance process–make sure that you have legal, contracts, human resources, accounting and finance, and project management involved. That way, compliance is an integrated effort from all parties involved in the process with knowledgeable input. The likelihood of errors and/or omissions goes down significantly.
- Understand the requirements and implement processes to uphold the requirements.
- Identify DBA requirements early on. It is necessary to know the required wages early in the bidding process to make sure the level of profitability is captured.
- Knowing and complying with wage rates will help determine the true costs of wages. from the onset rather than dealing with penalties due to non-compliance on the back end.
- As the general contractor, you are responsible for the compliance of your subcontractors. As such, consider including contractual protections such as audit rights or indemnifications in your subcontract agreements.
Adhering to the above strategies and paying attention to regulating laws and policies will lessen your odds of coming under fire from non-compliance in the future.
Christina Martinez is Triune’s Director of Marketing and Business Development. Christina brings over 10 years of high level marketing experience to Triune. Triune is a leading, integrated, design-build General Contractor founded in 1997. Triune is headquartered in Dallas, TX – www.tmvllc.us
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