NEW INJURY MANAGEMENT PROGRAM
Phillip B. Russell, Esq.
Labor and Employment Lawyer for Business
Constangy, Brooks & Smith, LLP
The Davis-Bacon Act, 40 U.S.C. § 3141 et seq. (“DBA”), requires covered contractors and subcontractors to pay covered employees a minimum “prevailing wage” while they are working on the site of a Federal government project for the construction, alteration, and/or repair (including painting or decorating) of buildings or public works of the United States. DBA has been the law since 1931, but has taken on more importance for FTBA members in 2009 because the U.S. Department of Labor (“DOL”) has issued all new wage determinations or tables that set forth the basic hourly wage and fringe rate requirements, some of which are much higher than before. Over the last two years there has also been a dramatic increase in federal government funding. Moreover, the DOL has hired hundreds of new investigators and signaled an increased emphasis on enforcement activity to all contracting agencies. FTBA members who are already doing DBA work or anticipate doing more DBA work should review their DBA policies and practices before bidding on covered projects. This article assumes the reader has basic information and experience in dealing with the DBA’s coverage, pay, reporting, posting, and record-keeping requirements.
What is the “Prevailing Wage?” The “prevailing wage” required by DBA is expressed as one total number, but has two somewhat interchangeable components: the basic hourly rate and the fringe rate. For example, the prevailing wage for the classification of Operator:Bulldozer in Hillsborough County for Highway construction is $15.85 with a basic hourly wage rate of $14.00 and a fringe rate of $1.85. See Wage Determination FL080316 (available at www.wdol.gov and posted on the FDOT’s web page at www.dot.state.fl.us/construction/wage.shtm). To pay the prevailing wage a contractor could pay the bulldozer operator by any combination of monetary wages or fringe benefits that equals or exceeds $15.85. For example, a contractor could pay all $15.85 in monetary wages; $14.00 in monetary wages, plus $1.85 in fringes; or $12.00 in monetary wages, plus $3.85 in fringes. So, under the DBA, monetary wages paid in excess of the basic hourly rate may be used as an offset or credit to satisfy fringe obligations, and vice versa.
What Fringe Benefit Contributions Can A Contractor Use to Meet the DBA Fringe Requirements? To satisfy the DBA’s fringe requirement, a contractor can use two types of fringe benefits: funded and unfunded. Funded fringe benefit plans include health insurance, life insurance, pension and other contributions made regularly (i.e., at least quarterly) and irrevocably to a trustee or third party pursuant to a fund, plan, or program. The contractor does not need DOL or FDOT approval. A contractor cannot take credit for any benefit required by federal, state, or local law, such as workers’ compensation, unemployment compensation, or social security contributions. A contractor also cannot take any fringe credit for performance, attendance, safety, or other bonuses that are not guaranteed. The contractor must make payments or incur costs in the amount specified for each individual employee; it cannot take credit based on the average premium paid or an average contribution per employee.
Unfunded fringe plans include plans or programs under which the cost a contractor may reasonably anticipate providing will be paid from the general assets of the contractor and generally include paid holidays, vacations, and sick pay plans. Unfunded fringe plans must meet the following criteria to be approved by the DOL and FDOT as the contract administrator: (1) it could be reasonably anticipated to provide benefits described in the DBA; (2) it represents a commitment that can be legally enforced; (3) it is carried out under a financially responsible plan or program; and (4) the plan or program providing the benefits has been communicated in writing to the affected employees. See 29 C.F.R. § 5.28. Typically, the DOL and FDOT will approve unfunded plans without enforcing the optional escrow requirement, but prudent contractors will make sure their policies meet these criteria. Some policy revisions may be necessary. The option to properly use unfunded fringe plans presents a real opportunity for contractors who have job classifications with high fringe rates and should be carefully considered before bidding on DBA projects.
How Does A Contractor Value Fringe Benefit Contributions? To value fringe benefit contributions (funded and unfunded), the contractor must annualize the rate of contributions for all hours worked during the year by an employee (not just for the hours worked on DBA-covered projects). The contractor must also pay the fringe for all hours worked û both straight and overtime hours.
For example, where a contractor provides health insurance in the amount of $200 per month, the contractor would use $2,400 a year for a year’s worth of work, typically 2,080 hours (40 hours/week for 52 weeks), to arrive at an allowable fringe benefit credit of $1.15 per hour. In the example above, if the contractor paid the operator $14.00 per hour in a basic wage rate, it would be short by $0.70 ($1.85 fringe rate – $1.15 credit for health insurance) and would not be in compliance with the DBA. However, the contractor could offer a qualified paid vacation policy allowing for two weeks of paid vacation, valued as follows: $14.00/hr x 80 hours = $1,120; $1,120 / 2,080 = $0.54. The contractor would still be short, so it could also offer a 5-day maximum paid sick days plan and generate $0.16 in additional credit to meet the $1.85 fringe, as follows: $14.00/hr x 24 hours = $336 (only three days were used here because the contractor must look at historical data to see how much sick time has actually been used); $336 / 2,080 = $0.16. So, the certified payroll for the employee would report $14.00 in basic hourly wage and $1.85 in fringe contributions credit ($1.15 + $0.54 + $0.16).
This example illustrates how a contactor could modify its existing policies to take advantage of the unfunded fringe benefit credits and meet the DBA requirements. Many contractors already offer unfunded plans and with minor revisions, they should be able to qualify for additional credits they are not presently using.
Mr. Russell is a labor and employment lawyer that represents businesses only. He is a managing partner with Constangy, Brooks & Smith, LLP. He can be reached at (813) 222-1354 or firstname.lastname@example.org.
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