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Davis-Bacon Act Requirement Changes and the Wage Laws to Know

Accounting Support • Jun 04, 2022
Keeping up with Davis-Bacon Act wage laws and requirements is important for contractors, but it's also difficult. Points North is here to help.

The Davis-Bacon Act, enacted in 1931, regulates wages for construction workers. Since its inception, there have been multiple changes to the act as the Department of Labor tries to update Davis-Bacon Act requirements and wage laws to keep up with the times.

Following the COVID-19 pandemic and accompanying economic adjustments, the Department of Labor continues making modifications. Keep reading to learn more about what these changes are and how they could affect you.

What Is the Davis-Bacon Act?

The Davis-Bacon Act of 1931 applies to contractors who work on federally funded jobs. It requires those contractors to pay laborers wages that are equal to or more than what other contractors pay workers for similar projects in the same area. This wage is called the "prevailing wage." As the name suggests, the wage is the amount that “prevails” over that area for the type of work in question.

The Davis-Bacon Act also stipulates that contractors have the option to pay this wage as a combination of both cash and fringe benefits.

The law applies to contracts that involve the U.S. government as a party. These contracts must also be worth more than $2,000. 

The actual work itself includes multiple scenarios, including construction, alteration, and repair of public buildings or other public works. Also stated in the act, contractors (or subcontractors) must display their relevant wage scale at the worksite. 

Has the Davis-Bacon Act Changed Before?

Since the Davis-Bacon Act was brought forth more than 90 years ago, it has gone through a lot of revisions — 71 to be exact.
These additions are known as the Davis-Bacon and Related Acts. Some well-known examples include the Copeland "Anti-Kickback" Act of 1934 and the Contract Work Hours and Safety Standards Act (CWHSSA) of 2015.
Changes like these are common as the Department of Labor works to keep up with the demands of the current economy. As a result, it falls on the contractors to keep up with revisions and additions to the law. 
If contractors fail to keep up with any provisions or edits to the law, they could get in legal trouble. So, it's essential that you understand each and every change to the Davis-Bacon Act as well as other laws that may affect your contracting business.

What Are Davis-Bacon Wages?

The Department of Labor sets the minimum Davis-Bacon wages. The Secretary of Labor sets these wages based on the prevailing amount for related laborers and mechanics working on similar projects.

However, the prevailing amount may differ depending on the way in which you measure it. 

The Department of Labor also ensures that these wages keep up with inflation.

Other than these federal requirements, there may be state or local requirements for these workers. Contractors should be up to date on federal, state, and local requirements and how they affect employee wages.

Recent Davis-Bacon Law Changes

Based on recent findings, the Department of Labor is suggesting new changes to the Davis-Bacon Act.

While requirements and Davis-Bacon law changes aren't uncommon, they shouldn't be taken lightly. They can affect contractors, workers, and other professionals in the industry.

The Department of Labor pushed for two major changes to the Davis-Bacon Act in 2022.

The 30% Rule

The federal government wanted to redefine the term "prevail" as it relates to the law. Previous to this proposed change, the definition was last changed in 1983.

Between the 1930s and 1980s, the Department of Labor dictated the prevailing wage by following a three-step process:

  1. Determine if more than 50% of workers were paid at the same rate for the same job
  2. Determine if 30% of workers received a single rate
  3. Use a weighted average rate of comparable workers in the area

With this three-step process, you would reach step three only if steps one and two were not true. 

In 1983, the Department of Labor removed steps two and three. But the Department of Labor opted to bring them back in 2022.

This change could be good or bad, depending on who you talk to. Some suggest that the 30% rule leads to unnecessarily high wages for workers. On the other hand, others suggest that only using the weighted average in step one sets the wages too low.

Regulatory Changes

The Department of Labor also proposed regulatory changes, including those in the following areas:

  • Enforcement provisions
  • Definitions of geographic areas
  • Types of work covered by the law

The Department of Labor believes that these regulatory changes will "increase efficiency and reduce confusion." Therefore, they believe that contractors should be open to the change.

In March 2022, the Department of Labor unveiled the publication of “Updating the Davis-Bacon and Related Acts Regulations” with an open comment period to follow. If further Davis-Bacon wage laws are updated, this would affect wage rates, the prevailing wage system and definitions, increasing enforcement of Davis-Bacon Law requirements, and emphasizing anti-retaliation provisions.

The Implications of Changing Davis-Bacon

There is one main problem that may arise for contractors during this period of widespread change: compliance reporting. Keeping up with rules and regulations is important, but it's also difficult.
Contractors have to find a way to manage their compliance while keeping up to date with wage requirements. This means that they have to collect accurate time cards, calculate wages, and complete payroll reports.

If this were done manually, this process could be extremely difficult. With all the other responsibilities associated with running a construction business, an increase in the time spent generating and sending certified payroll reports is impractical.

That's why we highly recommend that you invest in certified payroll reporting software. We can help you keep up with the most recent laws, stay compliant with them, and take care of your staff.

With the Points North team by your side, you'll be able to sustain current and future changes to the Davis-Bacon Act and other important laws.

Keep up with Davis-Bacon Act changes and stay compliant with certified payroll reporting software from Points North.

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