This document provides guidance from the U.S. Department of Labor Wage and Hour Division on complying with prevailing wage requirements on federal contracts. It addresses topics like laborers and mechanics coverage, fringe benefits, computing overtime pay, and investigation procedures. The guidance explains how to properly classify workers, pay prevailing wages and fringe benefits, handle multi-rate employees, and calculate back wages owed when violations are found.
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U.S. Department of Labor - Wage & Hour Division
1. U.S. Department of Labor
Wage and Hour Division 1
U.S Department of Labor
Corey Walton
U.S. Department of Labor
Wage-Hour Division
Minneapolis, MN District Office
WAGE & HOURWAGE & HOUR
DIVISIONDIVISION
2. U.S. Department of Labor
Wage and Hour Division
Davis-Bacon
Compliance Principles
3. U.S. Department of Labor
Wage and Hour Division
DBA/DBRA
Compliance Principles
Laborers and
mechanics
Site of the work
Truck drivers
Apprentices Trainees
& Helpers
Area Practice
Fringe Benefits
Federal contracts: PCA
interaction with DBA
Computing overtime pay
4. U.S. Department of Labor
Wage and Hour Division
Laborers and Mechanics
Workers whose duties are manual or physical in
nature
Includes apprentices, trainees, and helpers
For CWHSSA, includes watchmen and guards
5. U.S. Department of Labor
Wage and Hour Division
Wages & Fringe Benefits
DBA: the term “wages” or “prevailing wages”
includes:
The basic hourly rate (BHR)
Contractor contributions irrevocably made to a
trustee or third party pursuant to a bona fide fringe
benefit (FB) fund, plan, or program
The rate of costs the contractor reasonably
anticipates in providing bona fide FB’s where
certain conditions are met
6. U.S. Department of Labor
Wage and Hour Division
Fringe Benefits
Under DBA, FB’s are a component “prevailing wage”
The WD obligation may be satisfied by:
Paying the BHR and FB in cash
Contributing payments to a bona fide plan
Any combination of the two
7. U.S. Department of Labor
Wage and Hour Division
Fringe Benefits
Must be paid weekly for all hours worked
Cash wages paid in excess of BHR may
count to offset or satisfy the FB obligation
(unlike under SCA)
8. U.S. Department of Labor
Wage and Hour Division
Fringe Benefit Example
BHR $10.00
FB $ 1.00
Total prevailing wage $11.00
The contractor may comply by paying:
$11.00 in cash wages
$10.00 in cash wages plus $1.00 for FB
$ 9.00 in cash wages plus $2.00 for FB
9. U.S. Department of Labor
Wage and Hour Division
Examples of Fringe Benefits
Life Insurance
Health Insurance
Pension
Vacation
Holiday
Sick Leave
10. U.S. Department of Labor
Wage and Hour Division
Annualization Principle
Applies to benefits of a continuous nature (e.g., health
insurance, pension plans)
Determine hourly rate of contribution that is creditable towards
contractor’s Davis-Bacon prevailing wage obligation by:
Dividing the total annual contributions by the total annual
hours worked (both Davis-Bacon and non-Davis-Bacon
work); and
Allocating fringe benefit credits so that Davis-Bacon work is
not be used to fund benefits on private (non-Davis-Bacon)
work
11. U.S. Department of Labor
Wage and Hour Division
Annualization Example
Medical Insurance
Employer provides medical insurance at $200 per
month to electrician on Davis-Bacon project. WD
requires $12.00 plus $2.50 in FB’s, or $14.50 an hour.
Employee works 160 hours a month
$200/160 hours = $1.25 (credit per hour)
No other benefit provided
Electrician is due: $13.25 an hour
($14.50 - $1.25 = 13.25, is remaining balance
of applicable prevailing wage)
12. U.S. Department of Labor
Wage and Hour Division
Discharging DB
Prevailing Wage Obligation
If WD requires a prevailing wage of $14.50 ($12.00
BHR plus $2.50 in FB’s), the contractor can comply
by paying:
$14.50 in cash wages; or
$12.00 plus $2.50 in bona fide FB; or
$11.00 plus $3.50 in bona fide FBs
13. U.S. Department of Labor
Wage and Hour Division
Computing Overtime Pay
(CWHSSA Earnings)
An employee worked 44 hours as electrician,
where WD BHR is $12.00 plus $2.50 in FB’s:
44 hours X $ 2.50 = $110.00 FB’s
44 hours X $12.00 = $528.00 BHR
4 hours X $12.00/2 = $ 24.00 OT
$662.00
14. U.S. Department of Labor
Wage and Hour Division
Overtime Computation where
Employee Employed at Two Rates
During a workweek an employee works 20 hours as an
Electrician at $12.00 BHR plus $2.50 in FB’s and as a
Painter for 24 hours at $10.00 BHR plus $3.00 in FB’s.
The regular rate for determining the Overtime rate is:
20 X $12.00 = $240.00 (as Electrician)
24 X $10.00 = $240.00 (as Painter)
$480.00/44 = $10.91
Overtime due: $10.91 X 1/2 X 4 hours = $21.82
15. U.S. Department of Labor
Wage and Hour Division
Davis-Bacon
Investigation Procedures
16. U.S. Department of Labor
Wage and Hour Division
The Investigation Process
Initiate contact with employer
Examine certified payrolls
Examine basic payroll records
17. U.S. Department of Labor
Wage and Hour Division
The Investigation Process (Cont’d.)
Check for compliance with apprenticeship
and/or trainee requirements
Determine if a conformance is necessary
18. U.S. Department of Labor
Wage and Hour Division
Employee Interviews
Are essential to the investigation
Information provided is confidential
Interview statements should contain:
Place and date of interview
Name and address of employer/employee
Employment status and classification
Alleged violations
19. U.S. Department of Labor
Wage and Hour Division
Determining Compliance
Determine compliance with prevailing wages,
including FB’s
Determine compliance with CWHSSA
Compute any back wages and liquidated damages
20. U.S. Department of Labor
Wage and Hour Division
Computing Liquidated Damages
under CWHSSA
Liquidated damages are computed at $10
per day per CWHSSA violation. Example:
S M T W T F S TOTALS
Regular Time 0 10 12 13 9 8 3 55
15 weekly hours of overtime were worked on
three calendar days (Thursday, Friday, Saturday)
without the payment of overtime. Liquidated
damages computed @ $30.
21. U.S. Department of Labor
Wage and Hour Division
Computing Back Wages
(40-hour workweek)
Contractor employs an Electrician on the site of
the work 40 hours a week. WD calls for a
prevailing wage of $14.50 ($12 + $2.50 in FB’s).
Employee paid $13 ($10.00 plus $3.00 in FB’s),
which is the WD prevailing wage for Painters.
Prevailing Wage $14.50 X 40 hours = $587.00
Employee paid $13.00 X 40 hours = $527.00
Back wages per employee $ 60.00
22. U.S. Department of Labor
Wage and Hour Division
Conclusion of Investigation
Final Conference Procedure
Inform contractor of investigation findings
Detail steps to eliminate violations
Consider additional evidence that may impact on
findings (e.g., conformance)
Request payment of back wages and any
liquidated damages under CWHSSA
Contact WHD if no agreement
23. U.S. Department of Labor
Wage and Hour Division
Withholding of Funds
In refusal-to-pay cases, contracting agency can
withhold funds to cover back wages
Contracting agency can withhold funds from other
contracts which have same prime contractor (cross-
withholding)
Contracting agency should immediately notify WHD if
contractor may be filing for bankruptcy
24. U.S. Department of Labor
Wage and Hour Division
Debarment
Occurs when a contractor is declared ineligible for
future contracts due to:
Violations of the DBA in disregard of its
obligations to employees or subcontractors
Aggravated or willful violations under the labor
standards provisions of related Acts
Period of ineligibility is 3 years for DBA and up to 3
years for DBRA
25. U.S. Department of Labor
Wage and Hour Division
Debarment Criteria
Debarment is considered when a contractor has:
Submitted falsified certified payrolls
Required “kickbacks” of wages or back
wages
Committed repeat violations
26. U.S. Department of Labor
Wage and Hour Division
McNamara-O’Hara
Service Contract Act
(SCA)
27. U.S. Department of Labor
Wage and Hour Division
Elements of SCA Coverage
(29 C.F.R. §§ 4.107, 4.108 & 4.110)
Contracts entered into by Federal
Government and District of Columbia
Contracts principally for services
Contracts performed in the U.S.
Contracts performed through the use of
service employees
28. U.S. Department of Labor
Wage and Hour Division
Contracts to Furnish Services
(29 C.F.R. §§ 4.111 & 4.130)
Examples of service contracts:
Security and guard services
Janitorial services
Cafeteria and food services
Support services at Federal installations
29. U.S. Department of Labor
Wage and Hour Division
Use of “service employees”
(29 C.F.R. § 4.113)
Section 8(b) of SCA defines service employee
as:
• Any person engaged in performance of contract,
except
• Employees who qualify for exemption as bona fide
executive, administrative or professional
employees under the FLSA (29 C.F.R. Part 541)
Employee coverage does not depend on
contractual relationship (29 C.F.R. § 4.155)
30. U.S. Department of Labor
Wage and Hour Division
SCA Compliance Principles
Payment of wages and fringe benefits
Bona fide Fringe Benefit Plans
Health & Welfare Fringe Benefits
Paid Vacation Fringe Benefits
Paid Holiday Fringe Benefits
Equivalent Fringe Benefits
Temporary & Part-time employment
31. U.S. Department of Labor
Wage and Hour Division
Payment of Wages
(29 C.F.R. § 4.165)
Wages established by wage determination,
otherwise FLSA minimum wage
Calculated on fixed and regularly recurring
workweek of 7 consecutive 24-hour workday
periods
• Payroll records kept on this basis
• Bi-weekly or semi-monthly pay periods if
advance notice
32. U.S. Department of Labor
Wage and Hour Division
Payment of Fringe Benefits
Cash payments in lieu of fringe benefits
(FBs) must be paid on regular pay date (29
C.F.R. § 4.165(a))
Payments into bona fide FB plans must be
made no less often than quarterly (29
C.F.R. § 4.175(d))
FB costs may not be credited toward wage
requirements (29 C.F.R. § 4.167)
33. U.S. Department of Labor
Wage and Hour Division
Discharging Minimum Wage
& Fringe Benefit Obligations
Under SCA, the contractor may not credit excess
wage payment against the FB obligation:
Wage Determination: Employee Paid:
Wage $10.25 Wage $12.00
FB $ 3.35 FB $ 1.60
Total $13.60 Total $13.60
34. U.S. Department of Labor
Wage and Hour Division
Computation of Hours Worked
(29 C.F.R. §§ 4.178-4.179 & Part 785)
Determined under the FLSA pursuant to 29 C.F.R.
Part 785
Includes all periods in which employee is “suffered or
permitted” to work
Hours work subject to SCA are those performed on
covered contracts
Must keep affirmative proof of time spent on covered
and non-covered work in a workweek
35. U.S. Department of Labor
Wage and Hour Division
Wage Payments for Work Subject
to Different Rates
Employee must be paid -
• Highest rate for all hours worked, unless
• Employer’s payroll records or other affirmative
proof show periods spent in each class of work
Applies when employee works part of workweek
on SCA-covered and non-SCA-covered work
36. U.S. Department of Labor
Wage and Hour Division
Fringe Benefits Plans
(29 C.F.R. § 4.171(a)(2))
Provide benefits to employees on account of:
• Death
• Disability
• Advanced age
• Retirement
• Illness
• Medical expenses
• Hospitalization
• Supplemental unemployment benefits
37. U.S. Department of Labor
Wage and Hour Division
Vacation Fringe Benefits
(29 C.F.R. § 4.173(c)(1))
Are vested and become due after the
employee’s anniversary date
Need not be paid immediately after the
anniversary date, but must be discharged
before, whichever occurs first:
• The next anniversary date;
• The completion of the contract; or
• The employee terminates employment
38. U.S. Department of Labor
Wage and Hour Division
Anniversary Date
(12-months of Service)
Employee eligible for
vacation benefits
Contractor who employs
employee on anniversary
date owes vacation
Paid at hourly rate in effect
in workweek vacation is
taken
H&W benefits due under
“fixed cost” requirements
12-month
6/30/08
7/01/08
JJ entitled
to vacation
JJ starts
work on
7/01/07
39. U.S. Department of Labor
Wage and Hour Division
Holiday Fringe Benefits
(29 C.F.R. § 4.174)
Employee entitled to holiday pay if works in the
holiday workweek
Employee not entitled to holiday pay if holiday not
named in WD (i.e., government closed by
proclamation)
Paid holidays can be traded for another day off if
communicated to employees
40. U.S. Department of Labor
Wage and Hour Division
Equivalent Fringe Benefits
(29 C.F.R. § 4.177)
Contractor may dispose of FBs:
By furnishing the benefits listed in WD, or
Furnish equivalent combinations of
bona fide FBs, or
Make equivalent cash payments
• Equal in cost
• Separately stated in employer’s record
• Not used to offset wage requirements
41. U.S. Department of Labor
Wage and Hour Division
Furnishing Cash Equivalents
(29 C.F.R. § 4.177(c))
For FBs listed in weekly amounts ($60), divide amount by hours
worked (40):
• $60/40 hours = $1.50 per hour
For FBs listed in non-cash amounts (one week paid vacation),
multiply wage ($10) by vacation (40 hours) and divide by annual
non-overtime hours (2080 hours):
• $10 X 40 hours = $400/2080 hours = $0.19
per hour
42. U.S. Department of Labor
Wage and Hour Division
Part-time Employees
(29C.F.R. § 4.176)
Entitled to proportionate amount
Maximum: Vacation/Holidays = 40/8 hours
Part-time employee works 20 hours per week:
• Entitled to ½ week of vacation, or 20 hours
• Entitled to ½ holiday pay, or 4 hours
• Must receive full amount of H&W FBs
44. U.S. Department of Labor
Wage and Hour Division
Overtime Pay
SCA does not provide premium rates for
overtime hours of work, but recognizes other
Federal laws that do
• Fair Labor Standards Act (FLSA) (29 U.S.C.
§ 201, et seq.) has broadest application
• Contract Work Hours and Safety Standards Act
(CWHSSA) (40 U.S.C. §§ 327-332) applies to
contracts in excess of $100,000 that employ
“laborers” and “mechanics”
45. U.S. Department of Labor
Wage and Hour Division
Overtime Pay
Determined in same manner under both laws:
• Calculated at 1-1/2 times employee’s basic
hourly rate of pay for all hours worked over 40 in a
workweek
• Liquidated damages can be assessed under
CWHSSA at $10 per day when overtime not
properly paid
46. U.S. Department of Labor
Wage and Hour Division
Overtime Compliance with “Fixed
cost” H&W Benefits
An employee worked 44 hours on a covered contract as
a janitor at a WD rate of $15 plus $3.35 in “fixed cost”
H&W FBs per hour.
40 hours X $3.35 = $134.00 H&W FBs
44 hours X $15.00 = $660.00 S/T Wages
4 hours X $15.00 x 1/2 = $ 30.00 O/T Pay__
Total $824.00
47. U.S. Department of Labor
Wage and Hour Division
Overtime Computation where
Employee Employed at 2 Rates
During a workweek, an employee works 20 hours as an Electrician
at $22.00 an hour and 24 hours as a Painter at $20.00 an hour.
Electrician $22.00 X 20 hours = $440.00
Painter $20.00 X 24 hours = 480.00
Total Straight time wages $920.00
$920/44 hours = $20.91 (regular rate)
Overtime due: $20.91 X 1/2 x 4 hours = $41.82
48. U.S. Department of Labor
Wage and Hour Division
Computing Liquidated Damages
under CWHSSA
Are computed at $10 per day per violation:
S M T W T F S Total
Regular Time 0 10 12 13 9 8 3 55
15 weekly hours of overtime were worked on 3
calendar days (Thursday, Friday, Saturday) without
payment of overtime. Liquidated damages computed
at $30.
49. U.S. Department of Labor
Wage and Hour Division
Recordkeeping Requirements
(29 C.F.R. §§ 4.6(g), 4.185)
Contractor and each subcontractor must
maintain for each employee for 3 years:
• Name, address and social security number
• Work classification, wages and benefits
• Daily/weekly compensation and hours worked, and
any payroll deductions
• Length of service list of the predecessor contractor
51. U.S. Department of Labor
Wage and Hour Division
Employment Relationship
In order for the FLSA to apply, there must be an
employment relationship between the
“employer” and the “employee”
52. U.S. Department of Labor
Wage and Hour Division
Independent Contractors
(Factors to Determine Relationship)
Extent to which services rendered are an integral part
of principal’s business
Permanency of relationship
Amount of alleged contractor’s investment in facilities
and equipment
Nature and degree of control by principal
53. U.S. Department of Labor
Wage and Hour Division
Independent Contractors
(Factors to Determine Relationship)
Alleged contractor’s opportunities for profit and loss
Amount of initiative, judgment, or foresight in open
market competition required for the success of
claimed independent contractor, and
Degree of independent business
organization/operation
54. U.S. Department of Labor
Wage and Hour Division
“White Collar” Exemptions
55. U.S. Department of Labor
Wage and Hour Division
“White Collar” Exemptions
The most common FLSA minimum wage and
overtime exemption -- often called the “541” or “white
collar” exemption -- applies to certain
Executive Employees
Administrative Employees
Professional Employees
Outside Sales Employees
Computer Employees
56. U.S. Department of Labor
Wage and Hour Division
Three Tests for Exemption
Salary Level
Salary Basis
Job Duties
57. U.S. Department of Labor
Wage and Hour Division
Minimum Salary Level: $455
For most employees, the minimum salary level
required for exemption is $455 per week
Must be paid “free and clear”
The $455 per week may be paid in equivalent
amounts for periods longer than one week
Biweekly: $910.00
Semimonthly: $985.83
Monthly: $1,971.66
58. U.S. Department of Labor
Wage and Hour Division
Salary Basis Test
Regularly receives a predetermined amount of
compensation each pay period (on a weekly or less
frequent basis)
The compensation cannot be reduced because of
variations in the quality or quantity of the work
performed
Must be paid the full salary for any week in which the
employee performs any work
Need not be paid for any workweek when no work is
performed
59. U.S. Department of Labor
Wage and Hour Division
Deductions From Salary
An employee is not paid on a salary basis if
deductions from the predetermined salary are made
for absences occasioned by the employer or by the
operating requirements of the businesses
If the employee is ready, willing and able to work,
deductions may not be made for time when work is
not available
60. U.S. Department of Labor
Wage and Hour Division
Executive Duties
Primary duty is management of the enterprise or of a
customarily recognized department or subdivision
Customarily and regularly directs the work of two or
more other employees
Authority to hire or fire other employees or
recommendations as to the hiring, firing,
advancement, promotion or other change of status of
other employees given particular weight
61. U.S. Department of Labor
Wage and Hour Division
Disclaimer
This presentation is intended as general information only and
does not carry the force of legal opinion.
The Department of Labor is providing this information as a public
service. This information and related materials are presented to
give the public access to information on Department of Labor
programs. You should be aware that, while we try to keep the
information timely and accurate, there will often be a delay
between official publications of the materials and the modification
of these pages. Therefore, we make no express or implied
guarantees. The Federal Register and the Code of Federal
Regulations remain the official source for regulatory information
published by the Department of Labor. We will make every effort to
keep this information current and to correct errors brought to our
attention.
62. U.S. Department of Labor
Wage and Hour Division
Disclaimer
This presentation is intended as general information only and
does not carry the force of legal opinion.
The Department of Labor is providing this information as a public
service. This information and related materials are presented to
give the public access to information on Department of Labor
programs. You should be aware that, while we try to keep the
information timely and accurate, there will often be a delay
between official publications of the materials and the modification
of these pages. Therefore, we make no express or implied
guarantees. The Federal Register and the Code of Federal
Regulations remain the official source for regulatory information
published by the Department of Labor. We will make every effort to
keep this information current and to correct errors brought to our
attention.
63. U.S. Department of Labor
Wage and Hour Division 63
ADDITIONAL
INFORMATION
Visit the WHD homepage at: www.wagehour.dol.gov
Call the WHD toll-free information and help-line at 1-
866-487-9243
Use the DOL interactive advisor system -
ELAWS(Employment Laws Assistance for Workers and
Small Businesses at: www.dol.gov/elaws
Call or visit the nearest Wage and Hour Division Office