Are SGIG awardees ready to
comply with Davis-Bacon Act?
November 5, 2009
Labor experts explain costs,
complications, risk of penalties
A surprise could await winners under the DOE's Smart Grid Investment Grants (SGIG) that were announced last week -- in the form of wage and benefit requirementsthat could mean higher-than-expectedcosts plus other complications. A perhaps lesser-known element of the SGIG awards is that they have tocomply with a federal law on worker compensation, the Davis-Bacon Act (40 USC 3141).
Awardees that have never before receivedfederal grants may find Davis-Bacon compliance challenging, two labor lawyers and a law professor told us yesterday. Though simple on its face, the law is complex to obey and employers may be vulnerable to fines even for inadvertent violations, they said.
The law may also compel addedcompensation during the term of the grants -- and higher wages are hard to reducewhen the grants end, the experts warned.
Compliance can open employers' doors to unions and though only the Davis-Bacon Act specifically applies to the grants, another broader federal compensation provision -- the Service Contract Act -- might also apply as might affirmative-action requirements.
“I'm not trying to give you a litany of horrors but you've got to be aware of all the complications of being involved with the federal government,” said Vasilis (“Bill”) Katsafanas, an attorney with labor law firm Fisher & Phillips. After then delivering such a litany, Katsafanas made the same suggestion as Charles Craver, a labor law professor at George Washington Law School.
“What the awardees need to do is to get a labor person who really knows this law,” Craver said. “It could be a labor lawyer or an expert in government contracts or public-contract law.”
Davis-Bacon is imposed on the grantees not by the SGIG program itself but by a reference to the ARRA in the grant program's authorization. On its face, Davis-Bacon, enacted in 1931 to favor local workers and avoid a “race to the bottom” in wages, is fairly clear. It requires that each contract over $2,000 to which the USor the District of Columbia is a party for the construction, alteration or repair of public buildings or public works shall contain a clause setting forth the minimum wages to be paid to various classes of laborers and mechanics employed under the contract.
The law requires contractors or their subcontractors to pay workers employed directly upon the site of the work not less thanthe locally prevailing wages and fringe benefits paid on projects of a similar character as determinedby the Secretary of Labor.
What do the SGIG projects have to do with public buildings or public works? Little, it would seem but that doesn't mean Davis-Bacon is inapplicable, said Donald Featherstun, a partner with labor law firm Seyfarth Shaw. “What is or isn't a ‘public building' may seem simple but it's subject to interpretation and is a very complex area,” he added.
In an online fact sheet, the US Dept of Labor lists point-by-point the act provisions that affectedemployers have tomeet. It says:
  • Contractors and subcontractors have topay laborers and mechanics employed directly uponthe site of the work at least the locally prevailing wages including fringe benefits, listed in the Davis-Bacon wage determination in the contract, for the work performed. Davis-Bacon labor standards clauses have to be included incovered contracts.
  • The Davis-Bacon “prevailing wage” is the combination of the basic hourly rate and any fringe benefits listed in a Davis-Bacon wage determination. The contractor's obligation to pay at least the prevailing wage listed in the contract wage determination can be met by paying each laborer and mechanic the applicable prevailing wage entirely as cash wages or by a combination of cash wages and employer-providedbona fide fringe benefits. Prevailing wages, including fringe benefits, have tobe paid on all hours worked on the site of the work.
  • Apprentices or trainees may be employed at below the rates listed in the contract wage determination only when they are in an apprenticeship program registered with the Dept of Labor or with a state apprenticeship agency recognized by the department.
  • Contractors and subcontractors are requiredto pay covered workers weekly and submit weekly certified payroll records to the contracting agency. They are also requiredto post the applicable Davis-Bacon wage determination with the Davis-Bacon poster (WH-1321) on the job site in a prominent and accessible place where they can be easily seen by the workers.
  • Davis-Bacon wage determinations are published on the Wage Determinations Online Website for contracting agencies to incorporate them into covered contracts. The “prevailing wages” are determinedbased on wages paid to various classes of laborers and mechanics employed on specific types of constructionprojects in an area. Guidance on determining the type of construction is provided in All Agency Memoranda Numbers 130 and 131.
Whether those requirementsarea big deal to comply with “depends on what you've been doing,” Katsafanas said. For example, Davis-Bacon requires weekly payrolls, regardless of current pay periods. Every time an employee works in a different classification, the wage and fringe benefits requiredcan change. Payrolls have tobe certified, indicating how many hours were worked at what rates.
The compliance is subject to auditing by the Labor Dept and noncompliance can lead to an audit. With all the stimulus money it is spending, the Obama administration wants to make sure it is spent properly.
QUOTE OF THE DAY: [The Obama
administration has placed] a tremendous
emphasis on hiring investigators looking
for prevailing-wage violations.
Vasilis (“Bill”) Katsafanas,
attorneywith labor law firm
Fisher & Phillips
The law can function to invite in unions, said Craver, the law professor, becausethe unions often lobby the administration to set prevailing wages at or near union scale. They hope that if employers do not realize any wage savings from maintaining a non-union workforce, they may lower resistance to the union.
“The law was designed to boost wages so work wouldn't go to companies paying at the low end of the scale,” Craver said. “But what it means is that if I'm trying to compete by offering low wages, I won't be able to compete on these contracts. It has been very contentious over the years and a lot of non-union companies don't like it.”
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