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Avoiding Construction Mistakes: Prevailing Wages

Jan 26, 2021 9:00:00 AM / by Jaqualynn Durbin

According to the Department of Labor, a big mistake associated with construction projects comes from failing to maintain proper documentation and paperwork. Failing to track such things as work hours and required government reports, can lead to unsuccessful projects and hefty fines/citations.

One area of confusion is “Prevailing Wages.” During certain types of projects, workers (but not all workers) must be paid weekly and at the prevailing wage determined either federally or locally. Prevailing wages are a type of minimum wage requirement and depend on your project’s funding, workers, location, and more. The government, both federally and locally, require active reporting and compliance with the prevailing wage standard which means paperwork and worrying that you’re doing it right.

Fortunately, there are resources available that can help you.

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What are Prevailing Wages?

Prevailing wage requirements were enacted in 1931 as part of the Davis-Bacon Act (DBA). After the Great Depression, Congress worried that due to increased competition for jobs, contractors and employees may accept the lowest wage to get the limited amount of jobs. The initial DBA standards stipulated that laborers and mechanics must be paid prevailing wages on federally funded projects receiving funds in excess of $2,000.

This meant that any construction project funded by the U.S. federal government would be subject to this new law. Workers could be judged based on their qualifications and aptitude instead of how little money they were willing to take to have a job.

Prevailing wage is determined by surveys sent out across the county by the U.S. Department of Labor. These surveys ask laborers in specific trades how much they are being paid and take the average to determine what should be the prevailing wage in that area. Due to this methodology, prevailing wages vary on the location where the project will be completed. Just as housing prices differ from California to Oklahoma, so does the average wage in the area.

The DBA has since been supplemented and expanded the areas where prevailing wages are applicable.

Davis-Bacon Relevant Acts (DBRA)

There are 60 “Related Acts” to the DBA. This means there are 60 laws which supplement or extend DBA requirements. While the original act specifies only projects fully funded are subject to prevailing wage requirements, such acts which partially fund projects would also be required to pay their workers prevailing wage.

The Department of Labor states, “If a construction project is funded or assisted under more than one Federal statute, the Davis-Bacon prevailing wage provisions may apply to the project if any of the applicable statutes requires payment of Davis-Bacon wage rates.”

Additional wage determination laws exist outside the DBA and DBRA which can also add to the confusion. How do I comply with requirements to ensure my project runs smoothly? Do I just study the federal requirements? Well, no.

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State Requirements

Just because your project doesn’t qualify under the DBA, DBRA, or other federal wage determination laws, doesn’t mean that it isn’t subject to prevailing wage requirements.

When state funding is involved, state governments may impose similar prevailing wage requirements, but it varies on the state. Some states simply use the federally determined wage while others have their own way of determining the prevailing wage in their region.

Let’s take Ohio’s prevailing wage requirements, for example. Ohio determines their prevailing wage rate from examining local union collective bargaining agreements (CBAs). According to the Ohio Revised Code, prevailing wages are required to be “paid to skilled employees on public improvement construction projects.” While this may sound straight forward, there are exceptions and differences in projects, types of labor, or more which can confuse you. For example, depending on the cost of the project, prevailing wages may not be required.

So, the main takeaway here is, prevailing wage requirements may or may not be required depending on your specific project.

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How do I know what to do?

Many construction companies possess a dedicated Prevailing Wage expert on staff to help make these determinations. This person assists with defining whether your project requires prevailing wage. If it does, then you may be responsible for paying laborers accurately and maintaining necessary reporting.

Once you learn you must pay prevailing wages to those working on your project, you’ll need to file the correct paperwork and maintain detailed reports. This task may be undertaken by the contractors and subcontractors, or it might fall onto you, the project owner.

IAP Government Services Group can help keep those documents together when working with you on your projects. As part of our construction management services, we will ensure that your documents are submitted correctly and on-time to prevent delays or penalties. Don’t let the confusing government jargon scare you from starting your project. We'll help along the way to turn your vision into your reality.

 

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Bibliography

Complete Payroll (2019). “Understanding State vs. Federal Prevailing Wage Laws.” Complete Payroll. https://blog.completepayroll.com/understanding-state-vs.-federal-prevailing-wage-laws

Ohio Rev. Code. § 4115.04 http://codes.ohio.gov/orc/4115

US Dept. of Labor (2009). “Fact Sheet #66: The Davis-Bacon and Related Acts (DBRA).” https://www.dol.gov/agencies/whd/fact-sheets/66-dbra

US Dept of Labor. “What are the Davis-Bacon and Related Acts?” https://www.dol.gov/whd/programs/dbra/whatdbra.htm

US Dept. of Transportation: Federal Highway Division (2014). “Davis-Bacon and Related Acts: Questions and Answers.” https://www.fhwa.dot.gov/construction/contracts/dbra_qa.pdf

Tags: Tips & Tricks, Avoiding Construction Mistakes

Jaqualynn Durbin

Written by Jaqualynn Durbin

Marketing Coordinator for IAP Government Services Group