Employers Will Be Held Responsible for Their Subcontractors' Payment of Prevailing Wages

03 August 2012 Labor & Employment Law Perspectives Blog

The Davis-Bacon Act is a federal law that requires contractors to pay their laborers and mechanics prevailing wages and fringe benefits for work performed on public works construction contracts funded by federal dollars.  Each contract over $2,000 to which the United States is a party or that is federally funded or assisted must include a clause providing the minimum wages to be paid to various classes of laborers and mechanics. Davis-Bacon’s coverage also extends to some 60 related acts that provide assistance for construction through loans, grants, loan guarantees, and insurance. Contractors must ensure that their workers employed directly on the worksite are paid no less than the local prevailing wages and fringe benefits, as determined by the Secretary of Labor.Although every subcontractor must ensure that prevailing wages are paid to its employees working on a Davis-Bacon project, the responsibility really runs all the way up the contractor chain. Recently the U.S. Department of Labor (DOL) announced the settlement of an action brought against a large New York construction company, holding the contractor responsible for wage underpayments by its subcontractors.  The DOL has used the settlement as an opportunity to make it clear that general contractors and other contractors who engage subcontractors will be held responsible for their subcontractors’ compliance with Davis-Bacon. As part of the settlement, the New York contractor involved agreed to take affirmative steps to investigate prospective subcontractors and ensure that they are properly classifying and paying their employees prevailing wages on Davis-Bacon projects and accurately report the payments.

The New York contractor involved in the DOL settlement also had run afoul of Davis-Bacon recordkeeping and reporting requirements. Contractors must maintain payrolls and basic records during the course of a contract and for three years after, as well as submit weekly certified payrolls. In order to address the New York contractor’s failure to ensure that its subcontractors were properly reporting certified payroll, the DOL required the contractor to implement electronic timekeeping and certified payrolls and to assign dedicated supervisors to oversee compliance on Davis-Bacon projects. As with the payment of wages, contractors can expect the DOL to hold them responsible for their subcontractors’ shortcomings.

Companies performing work on federally funded construction projects must be aware of Davis-Bacon’s requirements and pay applicable prevailing wages. Although the conditions imposed by the DOL in its recent settlement are not mandatory, they are instructive as to the extent of the DOL’s enforcement of a contractor’s obligation to ensure its subcontractors also comply with Davis-Bacon. Those contractors or subcontractors who disregard their obligations to employees or who commit willful violations while performing work on Davis-Bacon-covered projects, may be subject to contract termination and debarment from future contracts for up to three years. All contractors are well advised to be aware of Davis-Bacon requirements on federal projects, communicate those requirements to subcontractors, and ensure that prevailing wages are being paid.

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