Prevailing Wage Determinations: Your Guide to Policies, Processes, Timelines, and More

Prevailing wage determinations help ensure workers get fair pay on government-funded construction projects. These rates protect workers from being underpaid and make bidding fair for contractors. Laws like the Davis-Bacon Act and other US labor laws have set the foundation for these wage rules.

New changes in 2023 updated how prevailing wages are calculated, bringing higher pay for workers and new rules for employers. These updates also impact labor costs for contractors, making it important to stay informed and compliant.

Here’s what this guide covers:

• What prevailing wages are and why they matter.
• How wage rates are calculated and updated.
• Steps to stay compliant and avoid penalties.
• How wage laws affect workers and contractors.
• Tools and resources to help with wage determinations.

Let’s get started.

Understanding Prevailing Wage Determination

Prevailing wages are the standard hourly rate and benefits commonly paid to workers in a specific job and location. These rates ensure fair pay for workers on government-funded construction projects, aligning their compensation with local wage standards.

By doing so, prevailing wage laws protect workers from underpayment, support local economies, and create a level playing field for contractors bidding on projects.

Prevailing laws matter because:

• They make sure workers earn enough to support themselves and their families.
• They protect local workers by discouraging underbidding on wages.
• They help communities by keeping money in the local economy.
• They create fair competition among contractors by keeping wage costs balanced.

Whether you’re a worker or a contractor, understanding how prevailing wages are determined—and staying updated on recent changes—is critical for compliance and competitiveness.

Historical Context

Prevailing wage laws date back to the Davis-Bacon Act in 1931. This important US labor law was created to stop contractors from bringing in lower-paid workers from other areas to undercut local workers. The law requires federal construction contractors to pay wages that match local standards.

Over the years, several other laws have been enacted to build upon the foundation of the Davis-Bacon Act and strengthen protections for workers on federally funded projects:

Walsh-Healey Public Contracts Act (1936)

The Walsh-Healey Public Contracts Act requires minimum wage and hour standards to be met by contractors producing goods for federal government contracts. It contributes to the broader framework of fair labor practices in government contracts, rather than a specific industry.

Fair Labor Standards Act (1938)

The Fair Labor Standards Act establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments.

Contract Work Hours and Safety Standards Act

Also known as the Construction Safety Act, this legislation regulates the hours of labor, safety, and health standards on federal government and federally funded construction projects. It complements prevailing wage laws by addressing worker safety and well-being in addition to compensation.

McNamara-O’Hara Service Contract Act (1965)

The McNamara-O’Hara Service Contract Act extends prevailing wage requirements to service contracts entered into by federal agencies, ensuring that workers engaged in providing services to the government receive fair compensation.

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Together, these laws, overseen by the U.S. Department of Labor (DOL), continue to uphold fair labor standards, protect workers, and promote equity in federally funded projects.

Recent Updates: 2023 and 2024

The 2023 updates to the Davis-Bacon and Related Acts (DBRA) introduced significant changes to how prevailing wages are calculated, aiming to better reflect real-world labor conditions. However, a 2024 court injunction has temporarily halted specific provisions of these updates. Below is a breakdown of these changes:

2023 Updates

The Department of Labor implemented a new three-step calculation method for determining prevailing wages:

1. Majority Rule: If over 50% of workers in a job category earn the same wage, that rate is set as the prevailing wage.
2. 30% Rule: If no majority exists, the wage paid to at least 30% of workers is used.
3. Weighted Average: If neither condition is met, a weighted average of all wages in the group is applied.

These updates, effective October 2023, were designed to improve accuracy and fairness in wage determinations. Most of the 2023 updates remain active and enforceable.

2024 Court Injunction

On June 24, 2024, a federal court issued a preliminary injunction temporarily halting the enforcement of certain provisions of the 2023 updates. The affected provisions include:

• Material Suppliers: Rules distinguishing between material suppliers and contractors/subcontractors.
• Delivery Truck Drivers: Requirements for paying prevailing wages to delivery truck drivers for onsite time exceeding a de minimis amount.
• Operation of Law: Directives requiring DBRA provisions to apply via operation of law if a contracting agency omits them from covered contracts.

The injunction does not affect the core wage determination methods, allowing most aspects of the 2023 updates to remain in effect.

How Prevailing Wage Rates Are Determined

Prevailing wage rates are established through a structured process aimed at ensuring fair and accurate compensation for workers on government-funded construction projects. Federal and state agencies play distinct yet complementary roles in this process.

Overview of Wage Determination Processes

The DOL manages wage determinations for federally funded projects under the Davis-Bacon Act. These determinations ensure workers are paid wages and benefits that align with local labor standards.

State agencies handle wage determinations for projects funded by state prevailing wage laws. They may conduct their own surveys or adopt federal rates, depending on local regulations.

These agencies rely on data from wage surveys and other tools to align wages with regional labor market conditions.

Updated Process for Federal Wage Determinations

As mentioned in the previous section, the federal process now includes a three-step calculation method introduced in October 2023, ensuring that prevailing wages reflect actual labor conditions:

1. Use the majority wage when more than 50% of workers earn the same rate.
2. If no majority exists, use the wage paid to at least 30% of workers.
3. Otherwise, calculate a weighted average of all reported wages.

Role of the Foreign Labor Application Gateway (FLAG) (NPWC) and FLAG System

The National Prevailing Wage Center (NPWC) is responsible for processing federal wage determinations. Employers submit their requests through the Foreign Labor Application Gateway (FLAG) system, an electronic platform that simplifies applications and ensures compliance.

• Form ETA-9141: Employers use this form to request wage determinations.
• Compliance Benefits: Submitting through FLAG provides “safe harbor” protection during compliance investigations.

How Wage Surveys Shape Prevailing Wage Rates

Wage surveys are the foundation of prevailing wage determinations, ensuring that rates reflect local labor market conditions. These surveys capture real-world data on wages and benefits for specific job classifications across different regions, making the process both accurate and equitable.

❶ Survey Administration

Wage surveys are conducted by federal and state agencies and are designed to account for regional differences in labor markets.

• Regional Focus: Surveys target geographic areas to reflect variations in living costs, labor availability, and wage standards. For example, a survey in Los Angeles County may show higher wages than one conducted in a rural area due to cost-of-living differences.
• Participants: Surveys gather data from contractors, subcontractors, labor unions, and individual workers involved in construction projects. This ensures diverse inputs from all stakeholders in the industry.

❷ Data Analysis

Once survey data is collected, it undergoes a rigorous analysis process to derive accurate prevailing wage rates.

• Normalization: Raw data is adjusted to address inconsistencies, such as outliers or varying job titles, ensuring comparability across responses.
• Statistical Techniques:
  • Mean: Calculates the average wage paid across all responses.
  • Median: Identifies the middle wage when all responses are ordered numerically, reflecting the most typical wage.
  • Mode: Highlights the most frequently reported wage for each job classification.
    These techniques help agencies identify the most representative wage for a particular role while ensuring accuracy.
• Validation: Survey findings are cross-referenced with other data sources, such as union wage agreements or historical wage rates, to ensure consistency and reliability.

❸ Publication of Rates

After analysis, agencies finalize and publish prevailing wage rates through official platforms, making them accessible to all stakeholders.

• Public Access: Rates are disseminated on platforms like SAM.gov and through state labor departments to ensure contractors, unions, and workers can easily access them.
• Regular Updates: Wage determinations are periodically reviewed and updated to reflect changes in labor market dynamics, inflation, and industry trends.

Compliance and Best Practices for Employers

Ensuring compliance with prevailing wage laws is critical for contractors working on government-funded projects. Non-compliance can result in penalties, delayed payments, or even disqualification from future bids. By following best practices, employers can navigate these regulations effectively and maintain good standing.

❶ Accurate Payroll Records and Documentation

Maintaining detailed and accurate payroll records is a cornerstone of compliance.

• Certified Payroll Records: Submit certified payroll reports (Form WH-347) weekly, detailing worker classifications, hours worked, and wages paid.
• Fringe Benefit Documentation: Clearly record any fringe benefits provided to meet prevailing wage requirements.
• Project-Specific Records: Ensure that records for each government-funded project are kept separately for easier audits and reviews.

❷ Reporting Requirements and Audit Preparation

Understanding reporting obligations and preparing for potential audits helps contractors stay compliant.

• Wage Determination Posting: Display the applicable wage determination prominently at the worksite to inform workers of their rights.
• Audit Readiness: Organize records chronologically and cross-check for inconsistencies to prepare for potential audits by agencies such as the U.S. Department of Labor (DOL).
• Timely Submissions: Submit all required reports promptly, as delays can raise red flags during audits.

❸ Navigating Updated Compliance Rules

The 2023 updates to prevailing wage laws introduced new compliance challenges:

• Wage Calculation Updates: Ensure your payroll systems account for the three-step calculation method (majority rule, 30% rule, and weighted average).
• Electronic Submissions: Use the FLAG system for wage determinations and compliance filings to streamline processes.

❹ Recent Examples of Enforcement

Staying informed about enforcement actions can highlight common pitfalls to avoid.

• NYC Comptroller Settlements: Recent cases involved contractors who failed to meet prevailing wage requirements, resulting in hefty fines and project delays.
• National Enforcement Trends: Increased audits and penalties under the updated Davis-Bacon Act regulations signal the importance of proactive compliance measures.

More About Prevailing Wage

Certain states have prevailing wages different from the federal standard. Check out some state-specific prevailing wage:

• Prevailing Wage in Colorado
• Prevailing Wage in California
• Prevailing Wage in Ohio
• Prevailing Wage in Florida
• Prevailing Wage in Nevada
• Prevailing Wage in New Jersey
• Prevailing Wage in Washington

Prevailing Wage Impacts

Prevailing wage laws have a far-reaching impact on both workers and employers involved in government-funded construction projects. These laws aim to balance fair compensation for workers with the operational realities faced by employers.

For Workers

Prevailing wage laws are designed to protect workers and ensure equitable pay and benefits.

• Fair Wages and Benefits: Workers receive compensation that reflects local labor standards, preventing underpayment and fostering economic stability.
• Job Stability and Economic Security: By standardizing wages across government projects, these laws promote consistent employment opportunities and financial security.
• Opportunities for Skill Development: Prevailing wage projects often encourage contractors to invest in workforce training, leading to increased skill development and career growth for workers.

For Employers

While the laws provide a level playing field for bidding, they also introduce challenges for employers.

• Balancing Compliance and Competitiveness: Employers must navigate complex wage requirements while remaining competitive in their bids. Adhering to prevailing wage laws can involve additional administrative work and increased oversight.
• Cost Implications of Updates: The 2023 updates, including the three-step wage calculation process, can raise labor costs, requiring employers to plan and budget carefully to remain profitable.

Real-World Impact

Case studies illustrate how prevailing wage laws affect workers and employers alike:

• For Workers: In one example, electricians working on a federally funded infrastructure project saw a 15% increase in pay due to accurate prevailing wage determinations, which helped support their families and local communities.
• For Employers: A contractor in New York City faced penalties for underpaying workers but used the experience to improve compliance systems, securing future contracts with confidence.

Tools and Resources for Wage Determinations

• Key platforms:
  • SAM.gov wage determinations.
  • FLAG system for electronic filings.
• Links to tools and user guides for employers.
• Additional Information: Updates on Executive Orders and their applicability

Final Thoughts on Prevailing Wage Compliance

Understanding and staying informed about prevailing wage determinations is essential for ensuring fair compensation for workers and maintaining compliance with labor laws. For contractors, balancing compliance requirements with competitive bidding is key to succeeding in government-funded projects.

Workyard simplifies compliance with labor laws, helping you manage wages, track hours, and ensure accuracy. Take the hassle out of wage determinations—Try Workyard for free today and stay ahead!