Prevailing Wages: Who Needs to Pay Them & What Happens When They Don’t

By: Rachel Costello

Contractors and subcontractors working on certain federally and state-funded construction projects should ensure they follow federal and state prevailing wage laws when submitting bids and paying their employees. Failure to follow these laws can result in steep penalties for the employers.

If a project is (i) federally funded, (ii) involves the construction, alteration, and repair (including painting and decorating) of public buildings or public works, and (iii) the underlying contract exceeds $2,000, the contractor or subcontractor may be required to pay prevailing wages to its mechanics and laborers, under the Davis-Bacon Act of 1931. These prevailing wage rates are determined by the U.S. Department of Labor based on local prevailing wages, which include the basic hourly rate of pay, benefits, and overtime, provided to mechanics or laborers in certain fields within certain geographical areas.

Many states have passed their own prevailing wage laws, sometimes referred to as “Little Davis-Bacon laws,” regulating prevailing wages for state-funded projects. While many states require a minimum contract threshold for prevailing wages, several do not. State prevailing wage laws can cover a variety of state-funded projects and can vary widely from state to state and at the federal level. Prevailing wage laws often include additional requirements, such as paying employees at least once per week, posting the scale of wages at the job site, and submitting certified payroll records weekly.

The penalties for failing to pay prevailing wages can be steep. Penalties can include fines, termination of the contract, and/or civil and criminal liability. If a contractor violates the Davis-Bacon Act, their name can be placed on a list distributed by the federal government. The contractor cannot be awarded contracts by the federal government for three years following the date the list is published. Aggrieved employees may also be awarded a private right of action to bring suit against their employer, which can include the award of multiple damages and attorneys’ fees in certain jurisdictions if the employee is successful.

If you have questions about prevailing wage laws in your state or at the federal level, visit Lewis Brisbois’ Labor & Employment Practice page to find an attorney in your area. You can also subscribe to this blog to receive email alerts when new posts go up.

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