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In Pennsylvania, all contractors and subcontractors involved in state-financed construction projects exceeding $25,000 must pay workers a minimum hourly wage rate. This wage is known as the prevailing wage rate since it “prevails” upon the entire locality and typically varies depending on location and specific craft.
Pennsylvania established its prevailing wage laws in 1961 to shield local construction workers from out-of-state competition. Out-of-state workers would accept far lower wages than the locals, making them preferable for contractors and subcontractors. This would leave many locals out of work and hurt the state’s economy.
Prevailing wage laws set a mandatory base rate, meaning contractors and subcontractors could no longer undercut workers. This forced them to hire skilled and competent local workers worth the prevailing wage rate. In doing so, local construction workers would get employment, receive fair compensation, and help strengthen the economy.
Today’s guide takes an in-depth look at Pennsylvania’s prevailing wage requirements, including the fundamentals, prevailing wage determination, and enforcement. We’ll also highlight some tips on how contractors and subcontractors can ensure compliance.
Understanding Prevailing Wage Laws in Pennsylvania
The prevailing wage concept has its roots in 1898 when Kansas enacted its prevailing wage law for public works. Many states soon followed suit, but it wasn’t until 1931 that the federal government established its own prevailing wage law. This was known as the Davis-Bacon Act of 1931, and it applied to all public works projects funded by the federal government. Since then, 32 states have established their own prevailing wage laws or “Little Davis-Bacon Acts.”
As mentioned, Pennsylvania enacted its Prevailing Wage Act in 1961 under Section 6 of 1961 Code 442. According to this code, contractors and subcontractors working on public works projects funded by the state or other public agencies exceeding $25,000 in cost must pay workers nothing less than the prevailing minimum wage every week.
The prevailing wage consists of the base wage rate plus fringe benefits, including medical, travel, vacation, and retirement benefits. The law prohibits workers from taking less than the prevailing wage and contractors from making lump sum payments.
Section 6 also requires all contractors and subcontractors to maintain an accurate record with details about the worker’s name, occupation, and the actual hourly wage they pay to all workers involved in the project. They should maintain these records for at least two years after the date of payment and make them available for scrutiny on request. These prevailing wage requirements apply to three categories of public works projects, namely:
- Heavy construction
- Highway construction
- Building construction
Aside from keeping updated records, contractors must submit weekly certified payroll reports (CPRs) to the awarding body. They must use Pennsylvania’s official payroll certification form and number them consecutively with every passing work week. The contractor must sign the certified payroll report in blue ink and submit it within seven days of the last pay date.
Prevailing wage requirements apply to all aspects of public works involved in the projects. This includes construction, reconstruction, demolition, alteration, and repair work. The only exemptions are public works projects under the Walsh-Healey Act of 1936 and federally funded projects inside state borders subject to federal prevailing wage requirements under the Davis-Bacon Act.
Section 9 of Act 442 requires all contractors and subcontractors engaged in public works to post the current prevailing wages for every craft and labor classification involved in the project. These wages should be posted in a visible and accessible place on the job site and should include the effective date and any adjustments made. That way, workers can compare their compensation to prevailing wage rates.
The public body, on the other hand, must obtain the current prevailing wage rates from the Secretary, as stipulated in Section 4 of Act 442. It must then include all applicable prevailing wages in the contract. The contractor and subcontractor responsible for the project must pay the stipulated prevailing wages and post them as required by Section 9.
What Is the Purpose of Prevailing Wage Laws in Pennsylvania?
Prevailing wages are a contentious subject in many states, including Pennsylvania. However, despite the noise and opposition, prevailing wages have had a net positive effect on Pennsylvania’s economy and construction industry. The main reasons for these wages include:
- PROTECTING LOCAL WORKERS FROM UNFAIR COMPETITION: The main reason for passing prevailing wage laws in Pennsylvania is to protect local construction workers from unfair competition from out-of-state workers. Before prevailing wage requirements, contractors would hire out-of-state labor at lower rates, leaving local construction workers jobless. A prevailing wage enforces a standard minimum wage, and contractors look for skilled local workers to get the most value for their money.
- ENSURING FAIR COMPENSATION FOR CONSTRUCTION WORKERS: Prevailing wage requirements ensure workers in the construction industry receive proper compensation for their efforts. The prevailing wage rates are sometimes higher than the local market average. The increased wages mean construction workers can afford middle-class lifestyles. They can support their families and purchase homes.
- MAINTAINING WORK STANDARDS: Without prevailing wage laws, contractors would freely hire cheap labor to increase profits. The result would be an influx of incompetent and untrained labor into the Pennsylvania construction industry workforce, compromising the quality of work and building standards. A prevailing wage ensures that only skilled workers are hired to work on such projects to provide quality work.
- AS AN ECONOMIC STIMULUS: A prevailing wage encourages the hiring of local labor, which, in turn, is good for the state's economy. Prevailing wage laws put money into the hands of local construction workers. They then spend this money on local businesses and uplifting the community, thus stimulating Pennsylvania's economy.
Determining Prevailing Wages in Pennsylvania
Prevailing wages set a standard for construction work compensation, but how exactly do they arrive at these rates? Well, prevailing wage rate determinations are a culmination of concerted efforts between Pennsylvania’s Department of Labor and stakeholders in the construction industry.
Pennsylvania law authorizes the Pennsylvania Department of Labor and Industry to determine prevailing wage rates for different crafts and occupations. Under prevailing wage law, the Secretary of the Department of Labor and Industry determines the prevailing wages.
The Secretary first considers the wages and benefits established by bonafide collective bargaining agreements for different job classifications. The Secretary will use the most recently established expired collective bargaining agreements. Aside from information from collective bargaining agreements, the Secretary can also use information from:
- FEDERAL AGENCIES: The Secretary may liaise with federal agencies responsible for administering labor standards and enforcing federal acts applicable to contractors and subcontractors engaged in federally funded public works. For instance, they may obtain prevailing wage figures from the Davis-Bacon Act to ensure they align with the state's prevailing wage.
- OFFICIAL STATEMENTS FROM CONTRACTORS AND SUBCONTRACTORS: The Secretary may also refer to official signed statements by contractors and subcontractors from different localities. These statements must be pertinent to prevailing wage determinations and must first include the contractors' names and addresses.
- SURVEYS AND OTHER DATA ACQUISITION METHODS: The Secretary may also use data and figures from key construction industry players to supplement the collected data. The Secretary also targets information that reflects the wage rates paid to workers in different occupations and localities. Once the Secretary obtains sufficient data, they may ask a staff member to conduct additional field surveys to collect further information before making the final wage determinations.
Interested parties who feel the wage determinations don’t accurately reflect the actual market wages may request a review by following the procedures outlined in Section 8 (43 P. S. § 165-8) of Act 442. The Secretary will review the request and make a final determination. In the event of any adjustments, the awarding body will extend the date for bid submission to 5 days after the Secretary publishes the final determination. Interested parties have 10 days to appeal the revised wage rate with the Appeals Board before it becomes final.
Who Enforces Prevailing Wage Laws in Pennsylvania?
Under Pennsylvania law, The Pennsylvania Department of Labor and Industry is responsible for determining and enforcing prevailing wage laws. The Secretary of the Department of Labor and Industry enforces these requirements by:
- Determining prevailing wages
- Determining job classifications
- Reviewing request reviews and appeals
- Investigating workers' complaints and alleged violations
- Conducting suits
- Conducting routine investigations
The laws also authorize the Secretary of the Department of Labor and Industry to investigate and resolve disputes between conflicting parties. This may include conflicts between contractors and workers, labor unions and contractors, labor organizations, and the state.
Compliance with Pennsylvania Prevailing Wage Laws
Under Pennsylvania law, contractors and subcontractors must observe all of Pennsylvania’s Prevailing Wage Act provisions or face legal ramifications. Contractors are thus responsible for ensuring maximum compliance with these requirements. Their responsibilities include:
- POSTING APPLICABLE PREVAILING WAGE RATES: Contractors must post the current wage determinations indicated by the Secretary of the Department of Labor and Industry in a visible and accessible place on the project sites. They must also notify workers of the posting so they can know the amounts owed for their work and compare them with the amount on their pay stubs.
- PAYING CURRENT PREVAILING WAGES: All contractors and subcontractors must pay the prevailing wage rates for every applicable craft as indicated in their projects' prevailing wage rate schedules. This includes the base wage rate plus all applicable fringe benefits. The contractors must review these prevailing wages in their contracts and liaise with Pennsylvania's Department of Labor and Industry for the latest wage rates for their projects.
- SUBMITTING CERTIFIED PAYROLL RECORDS: Contractors and subcontractors must also complete and submit weekly certified payroll reports, or CPRs, to the contracting agency. They must use the official, state-recognized, certified payroll report form and submit it within seven days of the last payment date. Using false information on CPRs violates Pennsylvania's Prevailing Wage Act.
- MAINTAINING PROPER RECORDS: Under Pennsylvania law, contractors must also keep accurate records of workers involved in the project. This includes details of the names and addresses of all workers engaged in the project, their specific crafts, and their wage rates. Other details include each worker's working hours and the wages paid. Contractors must also make this information available for scrutiny on request.
- COOPERATING WITH ENFORCEMENT AGENCIES: It's not uncommon for the Department of Labor and Industry or other enforcement agencies to investigate worker complaints and alleged violations. These investigations involve audits of amounts paid to workers and the number and classifications of workers involved in the project.
- OBSERVE APPRENTICESHIP REQUIREMENTS: Under Pennsylvania law, contractors can only hire apprentices from the Apprentices and Training Counsel since their apprenticeship and training comply with the Apprenticeship Training Act under 43 P. S. §§ 90.1 - 90.10. The law prohibits contractors from hiring more apprentices than required and misclassifying workers as apprentices to avoid paying the prevailing wage rate.
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What Are the Penalties for Non-Compliance?
Pennsylvania is stringent about its labor laws, including prevailing wage requirements. Contractors and subcontractors may face legal liability if found guilty of violating any aspect of Pennsylvania’s Prevailing Wage Act. The penalties for non-compliance include:
- FINES: If, after investigation, the Secretary finds a contractor guilty of paying below the prevailing wage, the contractor may be fined between $75 to $2,500 in addition to back payments for the unpaid prevailing wages. Contractors found guilty of submitting false information will also face a $2,500 fine. It's worth noting that contractors who unintentionally fail to pay the prevailing wage will be given reasonable time to resolve the issue by paying the owed wages.
- DEBARMENT: If a contractor unintentionally fails to pay the prevailing wage, the contractor may be barred from working on a public works contract for three years. The Secretary of the Department of Labor and Industry shall notify all relevant public bodies. The barring shall stand for three years from when the Secretary issues this notice.
- LIQUIDATED DAMAGES: Contractors who willingly fail to pay the prevailing wage rate may also be liable to pay the Commonwealth of Pennsylvania liquidated damages. Underpaying workers is a breach of contract, and contractors may be required to compensate the amount payable, which will be indicated in the contract.
- CIVIL ACTION: Pennsylvania allows workers to institute civil actions against contractors for breaching employment law. Failing to pay the required prevailing wage violates labor laws, leaving guilty contractors legally liable. If found guilty, contractors may face a misdemeanor charge and receive a fine not exceeding $300 and no more than 90 days in prison.
The intricacies of prevailing wage law are too broad to be covered in a single article. However, contractors should explore other tools and resources to stay on top of all the ins and outs of Pennsylvania’s prevailing wage requirements and remain fully compliant.
- Employment Law Handbook
- Regulations for Pennsylvania's Prevailing Wage Act
- The official Pennsylvania Code
- Combined Philadelphia Prevailing Wage Determinations (2024)
- Prevailing Wage Project Rates (Bureau of Labor Law Compliance)
Navigating Prevailing Wage Laws
Running a public works project and ensuring compliance with labor laws can be challenging, especially for new contractors. While Pennsylvania is a tad lenient on first-time unintentional violations, repeated violations may have severe legal ramifications.
Workers also have a role to play by ensuring contractors don’t infringe upon their rights. They can protect their rights by:
- KNOWING THEIR PROJECTS: Understanding whether the project you're working on is subject to prevailing wage requirements. Typically, this applies to public construction projects funded by state or local government agencies.
- FAMILIARIZE YOURSELF WITH PREVAILING WAGE RATES: Educate yourself about the prevailing wage rates for your locality and trade. This information is usually available from the Pennsylvania Department of Labor and Industry.
- BE AWARE OF CLASSIFICATION: Know your correct classification under the prevailing wage law. Different trades may have different wage rates, so ensure you are classified correctly. Workers should be extra keen when reviewing their contracts or employee agreements to ensure contractors classify them appropriately.
- KEEP ACCURATE RECORDS: Workers should also maintain detailed records of their hours worked, tasks performed, and wages earned. This documentation can be essential if there are disputes regarding prevailing wage compliance.
- UNDERSTAND OVERTIME AND FRINGE BENEFITS: Ensure you understand how overtime pay and fringe benefits, such as health insurance or pension contributions, are calculated under prevailing wage requirements. Workers should review their pay stubs to ensure they receive their rightful dues, including their fringe benefits and overtime.
Contractors have a bigger role in prevailing wages than workers since contractors are responsible for paying the wages. Contractors often have to deal with the following:
- COMPLEXITY OF COMPLIANCE: Prevailing wage laws can be complex and vary depending on the type of project, funding sources, and other factors. Employers may struggle to understand and interpret the requirements correctly. Contractors can seek assistance from legal or HR experts to better understand their rights under the Prevailing Wage Act.
- RECORD-KEEPING BURDEN: Maintaining accurate records of hours worked, wages paid, and fringe benefits provided can be time-consuming and administratively burdensome for employers, particularly on large construction projects with numerous workers.
- MONITORING SUBCONTRACTORS: General contractors are often responsible for ensuring subcontractors comply with prevailing wage requirements. Monitoring subcontractor compliance can be challenging, especially in larger projects with multiple subcontractors. Contractors should perform their due diligence when hiring subcontractors.
- NAVIGATING APPRENTICESHIP PROGRAMS: Employers may need help in meeting apprenticeship requirements, including ensuring the proper ratio of apprentices to journeyworkers and providing appropriate training opportunities.
Challenges aren’t unique to contractors. Construction workers also struggle to meet prevailing wage requirements or get their fair share. Some of the biggest challenges for workers with prevailing wages include:
- MISCLASSIFICATION: Employers may misclassify workers to avoid paying the appropriate prevailing wage rates. This can result in workers receiving lower wages than they are entitled to under the law.
- LACK OF AWARENESS: Some workers may not be aware of their rights under prevailing wage laws or may not understand how to effectively assert those rights if they believe they are being underpaid. Workers should strive to understand the fundamentals of prevailing wage laws by visiting the Pennsylvania DOL website and using state resources to expand their knowledge of prevailing wages.
- RETALIATION AND FEAR OF REPORTING: Workers may fear retaliation from employers for reporting violations of prevailing wage laws or asserting their rights. This fear can deter workers from coming forward with complaints or seeking assistance. However, Pennsylvania has strict laws on employer retaliation, and workers can take legal action against employers for any act of retaliation, including unfair demotion or dismissal.
What Is the Role of Certified Payroll Reports in Prevailing Wage Projects?
Certified payroll reporting is a fundamental aspect of ensuring compliance with prevailing wage laws on public construction projects in Pennsylvania. These reports serve as detailed documentation of the wages paid to workers, including both base wage rates and any fringe benefits provided. Contractors are required to submit certified payroll reports (CPRs) to attest to their compliance with prevailing wage requirements, promoting transparency and accountability in wage payments.
By requiring contractors to submit CPRs, prevailing wage laws aim to verify that workers are being paid the appropriate wage rates as mandated by law. Government agencies, such as the Pennsylvania Department of Labor and Industry, utilize CPRs for enforcement and auditing purposes. These agencies review CPRs to identify potential violations or discrepancies in wage payments and take appropriate enforcement actions to ensure compliance.
Moreover, CPRs serve as legal documentation of wage payments and can be used as evidence in disputes, investigations, or legal proceedings related to prevailing wage compliance. Contractors must maintain accurate CPRs for a specified period and make them available for inspection upon request.
Ultimately, certified payroll reporting plays a crucial role in upholding the integrity of prevailing wage laws, protecting the rights of workers, and promoting fair labor practices on public construction projects in Pennsylvania.
Conclusion on Prevailing Wages in Pennsylvania
Pennsylvania’s prevailing wage laws present both challenges and opportunities for contractors and workers alike. For employers, the compliance burden includes managing subcontractors, maintaining accurate records, and navigating apprenticeship programs. Conversely, workers may face misclassification, lack of awareness of their rights, and fear of retaliation when reporting violations.
To ensure compliance, contractors must post applicable wage rates, pay current prevailing wages, submit certified payroll reports, maintain proper records, and cooperate with enforcement agencies. Workers, on the other hand, must understand their projects, prevailing wage rates, classifications, and rights and be prepared to report violations.
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