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What to Expect From Changes Made to the Davis-Bacon Act

Accounting Support • Mar 25, 2022
What would you do to be part of a $217 billion industry? Would you be willing to file some more paperwork and follow specific guidelines? That is what contractors have to

What would you do to be part of a $217 billion industry? Would you be willing to file some more paperwork and follow specific guidelines? That is what contractors have to ask themselves when accepting federal construction work.

Every year the federal government spends $217 billion on construction projects. Their work affects over one million construction workers. To make sure they are paying fair wages contractors have to follow the Davis-Bacon Act.

Keep reading to find out about how the Davis-Bacon Act can affect contractors and what changes might be coming in the future.

What Is the Davis-Bacon Act?

The Davis-Bacon Act is a labor law enacted by the federal government that oversees contractors on federal construction projects. It mandates that they must pay their laborers and mechanics the prevailing wage and benefits.

It applies to all construction projects over $2000.00 that deal with public buildings or public works. This includes new construction, repair, or alterations. 

Who Is Affected by the Davis-Bacon Act?

Contractors and contracting companies must abide by the Davis-Bacon Act in their payments and their reporting. Contractors must pay the standard minimum hourly wage rate for their workers.

This includes all workers and sub-contractors that work on the job. The Wage and Hour Division of the Department of Labor creates the wage determinations the contractors must follow.

They publish the numbers online and the contractor is responsible for knowing them. The wages configuration is based on the geographic region of the project and the type of construction that will take place.

Payment Requirements

The contractors must pay their workers every week. Then they must submit certified payroll reports to the contracting agency each week. The report must show the cash wage and bona fide fringe benefits workers receive.

If the contract exceeds $100,000, contractors must pay their workers one and a half times the basic wage for overtime. This is for any work done over forty hours each week. All amounts are accounted for in the report.

Contractors do not have to pay the wage rates to apprentices and trainees if they are part of a Department of Labor program. However, they must show their pay within the weekly reports to the agency.

Some may wonder, "Is the Davis-Bacon Act good?" That is an argument that must be decided in Congress. Contractors who want federal work must abide by Davis-Bacon whether they like it or not.

Penalties for Non-Compliance to Davis-Bacon

Contractors who have not complied with Davis-Bacon will have substantial consequences. Penalties can be assessed even if the contractor did not violate Davis-Bacon on purpose.

Termination of contracts and large fees are often assessed. The business could also be kept out of the ability to get a contract for as long as three years. 

The contractor's liabilities for past wages not paid to employees or for overtime are often collected. The agency can also hold back payments on the contract based on violations.

The contractors can challenge the violations by going before an Administrative Law Judge. They can also appeal the Judge's decision to the Department's Administrative Review Board.

The board's determinations can also be appealed to the federal courts. The federal courts can enforce the board's decisions against the contractor.

The Little Davis-Bacon Acts

DContractors must also keep up with the many state laws affecting their projects. The Little Davis-Bacon Acts, as they are called, are the same types of rules as the federal but they apply to state-funded projects.

Each state has a different set of rules and the contractor must understand these rules and comply. If the project has both federal and state funds, both laws will be applicable.

When the project includes federal and state funds, the contractor is expected to comply with the most stringent of the two laws. This puts the responsibilities of compliance squarely on the shoulders of the contractors.

Contractors must make sure all of their payrolls comply. They do this through regular reporting to both federal and state agencies when applicable.

How Did the Davis-Bacon Act Change?

The Department of Labor recently proposed some changes to the Davis-Bacon Act. They ask that the definition of the term "prevailing wage" change to the one used over 40 years ago.

The Reagan administration changed the definition of "prevailing wage" because they believed that they contributed to inflation. The Department of Labor now says the change would reflect actual wages around the country.

They also seek to update the system that maintains the prevailing wage. This would keep the wage from getting outdated which would mean a higher wage for the worker.

Since many state and local authorities have wage guidelines, the federal government wants to adopt these when certain guidelines are met.

They want to add supplemental rates for certain classifications that don't have survey data. The agency wants to update regulatory language so that it includes new modern construction practices.

Their proposal also seeks to include greater guidelines for worker protections and enforcement. This means increasing the debarment and anti-retaliation abilities of the agency.

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