Understanding Prevailing Wage Laws in Construction

Construction sites consist of multiple moving parts. There can be so much to worry about including safety, materials, equipment, deadlines, and payments. One topic that has been very important for contractors and subcontractors over time is Prevailing wage laws.

What are prevailing wage laws? 

Prevailing wage laws apply to public projects, which enables a minimum wage that has to be paid, to the majority of workers. Typically, the projects that provide prevailing wages, are federally funded. This, applies to contractors and subcontractors.

The regulations don’t stop with the federal government. While Davis Bacon regulates the national prevailing wage, each state has its own labor agency handling state specific prevailing wage. And the discrepancy between state budgets is creating issues in adoption across all fifty states. 

History of prevailing wage laws

In 1950, the Davis-Bacon Act was passed, setting the standard for prevailing wage on public and federal projects within all 50 states. Not every state requires prevailing wages but many states have passed the “Little Davis-Bacon Act.” 

As stated, “The U.S. Department of Labor is responsible for determining prevailing wages, issuing regulations and standards to be observed by federal agencies that award or fund projects subject to Davis-Bacon labor standards, and overseeing consistent enforcement of the Davis-Bacon labor standards.”

Current changes to prevailing wage laws

As of August 2023, the Department of Labor announced changes to the Davis Bacon Act that will be enforced starting October 23, 2023. This is the first major shift in the national law in almost forty years. And the Department of Labor is hosting two (2) free seminars to explain the changes. 

The regulations return to the pre-1982 process - understanding that if 50% of workers in one classification have the same wage, it’s then the prevailing wage. If there is no wage that is consistent, the DOL will create a prevailing wage based on at least 30% of designated workers.

Updates:

• Record keeping - the records for prevailing wage must be kept for three years.
• Downstream requirements - new regulations allow for general contractors and upper tier subcontractors to be held accountable for subcontractors violations including licenses being revoked.
• Whistleblower provisions - anti-retaliation is very important in this round of changes 

Issues solving:

• Standardization of laborers/mechanics
• Inadequate record keeping
• Failure to pay prevailing wage and fringe benefits for all hours worked
• Misclassification 
• Failure to submit certified payroll weekly 

The idea behind these changes is that workers will benefit and end up with more money in their pockets. The DOL has explained it will mean thousands of dollars more per year for over one million workers. However, opponents and most contractor groups state that the effects of more regulations will limit who can bid on federally funded projects - specifically hurting small businesses. One called it a “regulatory boondoggle.” 

It is important to remember that the original creation of the DBRA was to ensure that local contractors can bid on local federally funded projects using a local workforce, rather than having contractors come in bid low and bring in workers who would work for less. The last change to DBRA was in 1983, so with forty years of technology and change throughout the construction industry ,the DBRA has a lot of catching up to do. 

How prevailing wages are determined 

There are two main ways prevailing wages are determined.

1. Conducting surveys of wages received by classes of workers employed on projects.
2. Using prevailing wage rates determined by the United States Department of Labor that aligns with the Davis-Bacon Act and subsequent amendments.

Penalties for not paying prevailing wages rates

When contractors or subcontractors do not pay prevailing wage rates, they will receive penalties such as liability for unpaid wages, liquidated damages, the inability to secure future projects, and potential civil or criminal prosecution, which leads to fines or imprisonment. It is crucial for every contractor to abide by the prevailing wage laws for cohesiveness. For any resources on how to inquire about a claim, please visit the FAQ page on Wage & Hour Division.  

How to make a prevailing wage claim

If there has been an incorrect payment, please contact your main contractor for the correct amount. The issue could be a simple accounting error, but if more than an error, hopefully can still be solved in-house. If that doesn’t work, it may be time to contact the US Department of Labor or your state’s Department of Labor. For Federal jobs, please contact the DOL or visit your local office.

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