With the downturn in the U.S. economy causing delay or cancellation of many private sector construction projects, a growing number of employers in the construction industry find themselves seeking federal contracts or subcontracts for the first time. And the Davis-Bacon Act is waiting.
The Davis-Bacon Act and related acts generally require contractors and subcontractors on certain federally-funded projects to pay the “prevailing wage” to all workers for all work on the site of such projects. The prevailing wage for each job classification typically consists of two components: (1) the basic hourly rate, and (2) the fringe benefit rate (which may be further divided into subcomponents). For each hour worked on a project covered by the Act, the worker must receive both the basic hourly rate and the fringe benefit rate. The fringe benefit requirement may be satisfied by providing the employee (a) a cash payment equal to the fringe benefit rate; (b) actual benefits worth at least the fringe benefit rate; or (c) some combination thereof. For newcomers to the Act, common questions include the following:
Q If we pay more than required for fringe benefits, may we use that excess as a credit toward the basic hourly rate?
A Generally, yes. Under the Act, the basic hourly rate and the fringe benefit rate are interchangeable. If the employer pays more than the basic hourly rate, it may pay less for the fringe benefits, and vice versa.
Q Must we include the fringe benefit rate when calculating overtime?
A No. The Davis-Bacon Act contains no overtime provision, but the Contract Work Hours and Safety Standards Act and the Fair Labor Standards Act cover most workers on federal construction contracts and require an overtime premium equal to one-half of the basic hourly rate for hours worked over 40 hours in a given work week on a federal construction project. That overtime premium is based solely on the basic hourly rate shown on the wage determination governing the project; it does not apply to the fringe benefit rate.
Q How do we calculate the overtime premium for workers who work at two different rates during the week
A Generally, employers may base the overtime premium on (a) the average rate paid for all hours worked during the workweek; or (b) the rate in effect when the overtime hours were worked (if the employee has agreed in advance to that method). However, employers should choose one method and apply it consistently.
These are just a few of the many questions facing newcomers to the Davis-Bacon Act and related acts. Employers unfamiliar with those statutes should consult with counsel before venturing into the world of federal contracting.