"Prevailing wages" are a rate of pay and fringe benefits that must be paid to certain workers who perform certain types of work. Prevailing wages are determined by the U.S. Secretary of Labor ("Secretary"), based upon the wages and benefits that workers typically receive in the area where the work is being done.
Under several federal laws, employers with federal contracts are required to pay the prevailing wage to their employees. These laws are the:
- Walsh-Healey Act
- Service Contract Act
- Davis-Bacon Act
In addition, many states have laws that set prevailing wages for various types of work that are performed under contracts with the state or local governments.
Whether you're an employer or a worker, if a government contract is involved in your work, there are some things you should know about prevailing wages.
The Walsh-Healey Public Contracts Act ("PCA") applies to contractors with contracts in excess of $10,000 for the manufacturing or furnishing of materials, supplies, articles, or equipment to the U.S. government or the District of Columbia. For the most part, it applies to all employees who work in the production or processing of materials supplied under the contract. These workers must be paid minimum wages and overtime compensation for hours worked in excess of forty (40) per week.
While the Walsh-Healey overtime requirements mirror those contained in the Fair Labor Standards Act ("FLSA"), the minimum wage requirements of the two statutes differ significantly. The FLSA establishes a national minimum wage for covered workers. The PCA, on the other hand, requires the payment of prevailing wages. If no prevailing wage rate has been set, contractors must pay the FLSA minimum wage.
There are various penalties that can be imposed on contractors and subcontractors who violate the PCA. For example, the underpayment of wages and overtime pay may result in the withholding of contract payments in amounts sufficient to reimburse the underpayment.
The PCA includes other requirements and penalties, and doesn't cover various types of contracts, so it's important that you read the law carefully, or seek the advice of an experienced labor and employment law attorney if you have questions about the PCA.
Service Contract Act
The McNamara-O'Hara Service Contract Act (SCA) covers contracts entered into by federal and District of Columbia agencies where the principal purpose of the contract is to furnish services in the U.S.
The SCA requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay their workers no less than prevailing wages. The U.S. Department of Labor makes wage determinations on a contract-by-contract basis in response to specific requests from the government agency. For contracts equal to or less than $2,500, contractors are required to pay the current FLSA minimum wage.
The penalties for violating the SCA include the termination of the contract and debarment from future contracts for up to three years.
The Davis-Bacon Act ("DBA") requires the payment of prevailing wage rates and overtime compensation to laborers and mechanics employed on federal projects for the construction, alteration, and repair of public buildings or public works in excess of $2,000.>
In addition, the DBA's prevailing wage requirements also apply to numerous "related" federal laws that govern federal assistance for construction through loans, grants, loan guarantees, and insurance.
Like the SCA, the penalties for violating the DBA include the termination of the contract and debarment from future contracts for up to three years.
Many states have their own prevailing wage and hours laws that apply to contractors and subcontractors working under contracts with the state (and local) government that involve construction projects. These state laws are often referred to as "Little Davis-Bacon" Acts."
The types of workers covered and prevailing wages, of course, vary greatly from state to state, so be sure to check the laws in your area to make sure you're being paid (or paying your employees) the right wages.
Questions For Your Attorney
- How do I find out what the prevailing wage is for a federal contract that I want to submit a bid for?
- If I submit a bid for federal contract and my bid is based on current prevailing wages, what happens if the prevailing wage increases after I get the contract?