Davis-Bacon Act (Federal Prevailing Wage)

The United States Department of Labor (DOL) recently announced its decision to once again issue Opinion Letters, Ruling Letters, Administrator Interpretations and Field Assistance Bulletins.  They will be published on the DOL website here, along with past opinions (pre-2009).  Interpretations by the DOL Administrator that interpret the Fair Labor Standards Act (FLSA), Davis-Bacon Act (DBA) or Walsh-Healey Public Contracts Act (PCA), are considered “official rulings”, and thus, provide employers with a good faith reliance defense when so relying. This guidance is very helpful when employers are trying to understand how to interpret the FLSA, DBA or PCA with various facts.

Often, numerous employers have the same questions of interpretation, and thus, opinion letters are very helpful when such common questions arise. The last opinion letters were published in January 2009, and withdrawn by the Obama Administration when the letters were literally not put in the mail in time before the administration changed. If you’d like to receive a notice when new rulings and interpretations come out, you can do so here.

 

 

Band Aid ClockA year after President Obama’s executive order establishing paid sick leave for federal contractors, the DOL has finally published its final rule, Establishing Paid Sick Leave for Federal Contractors, at 29 CFR Part 13. For those of you not wanting to read all 466 pages of the Final Rule, I’ll try to summarize the good stuff below. Keep in mind that this rule is applicable to covered federal contract work (more on that below). Importantly, many of the provisions are very similar to requirements in the Minneapolis and St. Paul Sick and Safe Leave ordinances, so if you are a federal contractor doing business in those cities and this new rule applies to your business, it would be wise to craft a policy that covers all the requirements.

The rule applies to new contracts after January 1, 2017 covered by the Davis-Bacon Act, Service Contract Act, and other concessions contracts and service contracts related to federal property or lands. All contracts that fall under the executive order Establishing a Minimum Wage for Contracts are also covered. The rule does not apply to work under collective bargaining agreements that provide at least 56 hours of PTO that can be used for health-related reasons until January 2, 2020 (or the date the CBA ends if sooner). Employers may use multiemployer plans to provide leave under this Final Rule. Also the rule does not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment, including those subject to the Walsh-Healey Public Contracts Act. It also does not apply to employees “performing in connection with covered contracts for less than 20 percent of their work hours in a given workweek.”

  • PTO Accrual or Up Front Bucket – Employees must be able to accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, up to 56 hours (7 days) per year (MSP and St. Paul cap at 3 days). Employees who do not need to record their time can be assumed to work 40 hours under the contract each week, or can use an estimate of hours worked (so long as reasonable and based on verifiable information). In lieu of accrual, employers may chose to provide 56 hours of PTO at the beginning of each accrual year.
  • Use of PTO – Employees must be able to use it while working on or in connection with a covered federal contract for own health needs or those of a family member, or due to being a victim of domestic violations, sexual assault or stalking (or to assist a family member who is a victim). Note, there is no waiting period.  Requests for PTO may be verbally or in writing (you can’t force them to put the request in writing, but after it is approved, you could ask that they follow the normal procedures to record that request such as through an online system). Denial of PTO for this purposes must be in writing with a reason why it is denied. Failure to find replacement worker is not a reason to deny.
  • Carryover of PTO – Employees must be able to carryover up to 56 hours from year to year while working for the same contractor on covered contracts – and get unused PTO back if return to work within a  year of leaving a job on a covered contract.
  • Recordkeeping – Employers must provide the employee with their PTO availability each pay period.
  • Payout of PTO – not required, but if an employer pays out PTO upon termination, and the employee later returns to the job, the employer does not need to restore unused leave.
  • Proof – Employers may require a doctor’s note or other documentation supporting the need for leave of 3 days or more (be sure to follow the process provided).

In any event, given the direction of city ordinances and the spread of such sick and safe leave laws, contractors should consider revising their PTO policy (hopefully you still don’t have a separate sick leave and vacation policy) to incorporate the most employee generous of all the applicable leaves to your business, so that your PTO policy will be compliant with all the laws and ordinances your business needs to function with little further administrative burden. As always, employers should be sure not to retaliate for requesting or taking such leave, or otherwise discriminate or interfere these rights. Finally, if you can’t get enough, or want more information, the DOL has a series of information on the Final Rule that can be located here.

ConstructionEach month I receive in my inbox the City of Minneapolis’ Compliance Monthly – a newsletter that the Minnesota Department of Civil Rights Contract Compliance Divisions publishes. Often, as it does in the September 2016 edition, it toots its own horn about how many contractors they have “held accountable”, and how much they have collected and disbursed in restitution (17 and $53,995 for 2016 Q2 if you are curious). But this month they also provided in their compliance tips something I thought may actually be of interest – a simple “how to” obtain the most current prevailing wage decision under the Davis-Bacon Act (DBA). So, here it is, with a few of my thoughts.

Step 1 – go to http://www.wdol.gov  (this is the federal Wage Determinations OnLine)

Step 2 – Choose “Selecting DBA WDs” (if you want to search old ones, click on “Archived WDs”; if you know the number you can put that in there instead)

Step 3 – Choose the State, County, and Construction Type – then click “search”

Step 4 – The wage decision will populate – click “printer friendly version” to print

Step 5 – (Optional) – Select “Sign Up for Alert Service”

Assuming you checked the right boxes/selections, this will provide the most current wage decision. Note, you can sign up for the Alert Service which will alert you when that determination has changed. While a DBA project will use the same rates throughout the project, keep in mind that some cities or other municipalities may adopt the published DBA rates, but also require that the pay be updated during the course of a project. This means the contractor is responsible for updating prevailing wages during the course of a contract. Also, if more than 90 days lag between the bid and the contract, the new rates may apply. Accordingly, I would suggest selecting signing up for the alert if this is the case with your project. Of course, we all know finding the list of rates isn’t the hard part, but selecting the one that you think is right based on the job duties performed that the government will actually agree on, when the job title doesn’t line up with those offered. But that is a whole other topic…

Construction progress of the U.S. Bank Stadium (new Minnesota Vikings stadium), as seen from the Haaf Ramp in Downtown East, Minneapolis, Minnesota, on 3 December 2015.

The Minneapolis City Council significantly amended its Prevailing Wage Ordinance today.  The revised ordinance will go into effect following publication (generally 8 days after the approval of the revisions).  Accordingly, the revisions will likely be finalized before July 1, 2016. The revisions provide individuals with a private right of action for violations (they can sue their employer); add certification requirements; requires certified payrolls be provided to the City, and add penalties, among other things. Following are the key changes:

  • Clarification of the City’s current practice to enforce contracts of at least $50,000.  Any contracts less than $50,000 will be reviewed on a complaint-made basis only, unless subject to the DBA.
  • Mandating that all contracts requiring prevailing wages to be paid must contain a provision stating that the contractor must comply with the City of Minneapolis Prevailing Wage Ordinance. This onus is on the City – though certainly if they forget to put it in a contract, the contractors will still have to comply with the ordinance as they will argue it was clear in pre-bid meetings…yes, I’ve heard that before.
  • Determining that any laborer, mechanic, or employee employed by a contractor (or sub) is intended to be a third-party beneficiary of the contract.  This is actually a very big deal – currently, contractors are able to argue that third-parties (such as employees) are not beneficiaries of a contract between the city and a contractor, and thus, the lawsuit is improper. Accordingly, when a contractor allegedly breaches the contract by failing to pay prevailing wages, the employee has no private right of action to sue the employer because the employee was not a party to the supposedly breached contract.  This change will allow anyone to sue the contractor for breaching the agreement with the City.  This will bring the ordinance in line with the Minnesota Prevailing Wage Act. The Federal Davis-Bacon Act does not allow a private right of action.
  • Adding certification requirements after bid opening and prior to the contract award.  The contractor will have to submit to the Minneapolis Director of Civil Rights, a wage compliance certificate guarantying payment of prevailing wages and confirming identity of subs and suppliers and their benefits agents, job classifications that will be used (including each sub), anticipated number of hours to be worked for each class of labor, the prevailing wages and benefits for each class, and proof that all subs are independent contractors.
  • Requiring that all laborers and mechanics working on the project are paid at least every two weeks (bi-weekly).  Minnesota law mandates that wages must be paid at least monthly, so this will reduce that by half.  However, rarely are contractors paying monthly, so this is likely to be a non-issue.
  • Requiring that the contractor provide the Director a bi-weekly certified payroll. Failure to do so may result in withholding of payments and audit of books and records. Certified payrolls must be retained for 1 year after completion of the work.
  • Confirming the Department will monitor compliance, including review of certified payrolls and job site visits.  The Department must participate in the pre-award conference and the review of the certified payroll reports.
  • Adding penalties for failing to comply with the ordinance. Such penalties may include withholding payment for that project or other projects with the City, a 5% penalty on contract price as liquidated damages, and suspension or debarment. The rules for this exact process will have to be created (i.e. due process).
  • Adding a section requiring subcontractors and independent contractors to provide the Department of Civil Rights with certain proof regarding their status.  Specifically, that they are a “bona fide” independent contractor including business filing with the Secretary of State (be sure it is right too – I’ve seen them confused over a “Co.” and “Inc.” error!).  Also need to provide proof of workers’ compensation and unemployment insurance.

So, what’s next? Expect these changes to roll out in pre-bid documents starting in July. Contractors bidding prevailing wage jobs in Minneapolis should be familiar with the revised ordinance, and be prepare to follow the new requirements, lest you find yourself in a sticky situation with the Department.

MinneapolisMinneapolis recently “reaffirmed” its commitment to the 2015 Minnesota Responsible Contractor Act, Minn. Stat. 16C.285, and enacted additional factors and implementation procedures when determining whether a contractor is “responsible” for purposes of being awarded public construction projects.  Are you a responsible contractor?  If you are a contractor doing business with the State of Minnesota pursuant to a contract of over $50,000, you must be, or you may be prohibited from doing business with the State.  For more information on the actual Act, click here for the Minneapolis PowerPoint presentation.  In any event, the Act states that a contracting authority (such as a city), may establish “additional factors for defining contractor responsibility.”  Of course, Minneapolis has done just that.

On April 21, 2016, Minneapolis passed Resolution No. 2016R-127, stating that, in order to be “responsible”, a contractor must verify that, for the past 3 years, it has not violated the requirements for payment of wages for construction work as provided by any Minneapolis ordinance, resolution, policy or contract.  Specifically, the contractor must not have had to pay back wages or penalties in excess of $10,000 on one or more projects during this 3 year period.  Further, the contractor must not have made any false statements in a verification of compliance submitted to Minneapolis during the 3 year period.

How is this implemented? Contractors should see these additional factors in solicitation documents for all covered projects. Keep in mind, nobody is excluded; it applies to the general and subcontractors alike. Failure to comply with these new procedural requirements will render the contractor ineligible to be awarded the bid.

 

Minneapolis panoramaOn January 15, 2016, the Minneapolis City Council first introduced proposed revisions to the Minneapolis Prevailing Wage Ordinance.  The initial draft was revised on April 13, 2016, and on May 27, 2016, the City Council referred the proposed ordinance to the Ways and Means Committee.  So, what’s in store for Minnesota public works contractors? Not surprisingly, not much good.  The proposed amendments are:

  • Clarification of the City’s current practice to enforce contracts of at least $50,000.  Anything below that will be reviewed on a complaint-made basis only, unless subject to the DBA.
  • Mandating that all contracts requiring prevailing wages to be paid must contain a provision stating that the contractor must comply with the City of Minneapolis Prevailing Wage Ordinance. This onus is on the City – though certainly if they forget to put it in a contract, the contractors will still have to comply with the ordinance as they will argue it was clear in pre-bid meetings…yes, I’ve heard that before.
  • Determining that any laborer, mechanic, or employee employed by a contractor (or sub) is intended to be a third-party beneficiary of the contract.  This is actually a very big deal – currently, we are able to argue that third-parties (such as employees) are not beneficiaries of the contract between the city and a contractor and thus the lawsuit is improper. Accordingly, when a contractor allegedly breaches the contract by failing to pay prevailing wages, the employee has no private right of action to sue the employer because the employee was not a party to the supposedly breached contract.  This change will allow anyone to sue the contractor for breaching the agreement with the City.  This will bring the ordinance in line with the Minnesota Prevailing Wage Act.  Recall, the DBA still does not allow a private right of action.
  • Adding certification requirements after bid opening and prior to the contract award.  The contractor will have to submit to the Minneapolis Director of Civil Rights, a wage compliance certificate guarantying payment of prevailing wages and confirming identity of subs and suppliers and their benefits agents, job classifications that will be used (including each sub), anticipated number of hours to be worked for each class of labor, the prevailing wages and benefits for each class, and proof that all subs are independent contractors.
  • Requiring that all laborers and mechanics working on the project are paid at least every two weeks (bi-weekly).  Minnesota law mandates that wages must be paid at least monthly, so this will reduce that by half.  However, rarely are contractors paying monthly, so this is likely to be a non-issue.
  • Requiring that the contractor provide the Director a bi-weekly certified payroll. Failure to do so may result in withholding of payments and audit of books and records.  Certified payrolls must be retained for 1 year after completion of the work.
  • Confirming the Department will monitor compliance, including review of certified payrolls and job site visits.  The Department must participate in the pre-award conference and the review of the certified payroll reports.
  • Adding penalties for failing to comply with the ordinance.  Such penalties may include withholding payment for that project or other projects with the City, a 5% penalty on contract price as liquidated damages, and suspension or debarment. The rules for this exact process will have to be created (i.e. due process).
  • Adding a section requiring subcontractors and independent contractors to provide the Department of Civil Rights with certain proof regarding their status.  Specifically, that they are a “bona fide” independent contractor including business filing with the Secretary of State (be sure it is right too – I’ve seen them confused over a “Co.” and “Inc.” error!), proof of workers’ compensation and unemployment insurance.

Since this is still in the works, we can’t say for sure how it is going to shake out in the end.  However, it is likely we will see many of these changes in the near future, so stay tuned…

CementA few weeks ago I got to toot our horn about the J.D. Donovan case, whereby the Minnesota Supreme Court held that transportation of supplies to non-work sites is not “work under the contract” pursuant to Minn. R. 5200.1106, and thus not subject to the Minnesota Prevailing Wage Act (MnPWA), Minn. Stat. 177.41-.44.  Unfortunately, it took the Minnesota Supreme Court to determine whether the MnPWA applied to a Minnesota Department of Transportation project – overruling the Minnesota Court of Appeals.  If those learned judges were unable to determine properly whether work was covered, what about the rest of us?!  Unfortunately, the MnPWA and related rules are not as clear as they could be, leading up to cases such as J.D. Donovan v. Minnesota Department of Transportation.

Generally, the prevailing wage is the hourly rate plus fringe benefits, required by law to be paid for each trade or occupation while performing work on qualifying federal, state, or local municipality-funded construction projects.  The federal Davis-Bacon Act (DBA) and each state (often called “Little Davis-Bacon Acts”) may (and often do) define “prevailing wage” and “covered work” differently.  Thus, even if you are not a Minnesota contractor – if you are doing work in Minnesota, you should take care to understand the MnPWA and how it differs from either the DBA or your usual state prevailing wage statue.

What is the Minnesota Prevailing Wage?

Under the MnPWA, the prevailing wage is the hourly basic rate of pay plus the employer’s contribution/cost for fringe benefits (medical or hospital care, pensions on retirement or death, life insurance, disability and sickness insurance, or accident insurance, for vacation and holiday pay, for defraying the costs of apprenticeship or other similar programs, or for other bona fide fringe benefits—but only where the contractor or subcontractor is not required by other federal, state, or local law to provide any of those benefits).  Whether something is a “fringe benefit” is another big issue – one for another post.  The prevailing wage rates for a project should be listed on the determination included with the bidding documents.  What if the bidding documents are missing the rates, or you want to verify?  The current commercial wage rates can be found here. The highway/heavy prevailing wage rates may be found here. Unlike some other state prevailing wage acts, Minnesota’s prevailing wage rates do not change throughout the project (with some extremely limited exceptions such as a correction).

When Does the MnPWA Apply to a Project?

The MnPWA applies to “laborers, workers and mechanics” that erect, construct, remodel, or repair public buildings or other public works, financed in whole or part by state funds.   Continue Reading When Does the Minnesota Prevailing Wage Act Apply to a Project?

logo-markOn Wednesday, April 27, 2016, Seaton, Peters & Revnew will be hosting its 11th Annual Upper Midwest Labor Law Forum from 8:15 a.m. – 4:30 p.m at the Doubletree – Bloomington – Minneapolis South (yes, same place the DOL’s prevailing wage seminar is taking place in May).  We anticipate another great turnout and hope you can make it!  It has been approved for Minnesota and Iowa CLE credits as well as HRCI credits.  The agenda is below…notably, yours truly will be presenting the Hot Topics in Employment Law session (and do my best to keep everyone awake after lunch).

If you are interested in attending you can find more information and how to sign up here.

PROGRAM AGENDA:

Continue Reading Join Me at the Upper Midwest Labor Law Forum – April 27, 2016

USDOL_Seal_circa_blue_2015The Department of Labor’s Wage and Hour Division is coming to town!  Oh my!  On May 3 – 5, 2016, the DOL WHD will be presenting its traveling three-day Prevailing Wage Seminar compliance training program just around the corner from our office at the Doubletree, Bloomington – Minneapolis South, 7800 Metro Blvd., Bloomington, MN 55439.

The seminar is intended for unions, private contractors, state agencies, federal agencies and workers and will cover the following:

  • The Davis-Bacon Act and McNamara O’Hara Service Contract Act
  • Executive Order 13495 “Nondisplacement of Qualified Workers”
  • Executive Order 13658 “Establishing a Minimum Wage for Contractors”
  • The process of obtaining wage determinations and adding classifications
  • Compliance assistance and enforcement processes
  • The process for appealing wage rates, coverage, and compliance determinations

There is no cost (except time) to attend the three-day seminar.  Contractors can sign up here.

Computer stethescopeOn March 11, 2016, the US DOL WHD extended the comment period through April 12, 2016 for its Notice of Proposed Rulemaking implementing Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors.
First published on February 25, 2016, the proposed rule seeks to implement the Executive Order signed by President Obama on September 7, 2015.  The proposed rule requires employers who enter into federal covered contracts (such as those prevailing wage jobs under the Davis-Bacon Act) to provide covered employees with up to 7 days of paid sick leave per year, including paid leave for family care.   

The proposed rule is anticipated to affect over 828,000 employees and would apply to new contracts and renewed contracts from solicitations issued on or after January 1, 2017 – or awarded thereafter.  Specifically, the rule would put many new burdens on employers with respect to paid sick leave.  Under the proposed rule, employees must accrue at least 1 hour of paid sick leave for every 30 hours worked in connection with a covered contracts – calculated at the end of each workweek.  Or, covered contractors can provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year (administratively easier).  In addition, the proposed rule mandates that employees must be informed in writing at least once a month regarding their amount of accrued paid sick leave.

Under the proposed rule, employers can limit the amount of paid sick leave to 56 hours per year, or may allow employees to carry over accrued, unused leave to the following year (and to cap it to 56 hours at any one point in time).  If terminated employers are not required to pay out unused sick time, however, if the employee is rehired withing 12 months, the employer must reinstate the employee’s unused paid sick time.

What will employees be able to use it for?  Among the usual suspects – actually being sick – they can also use it for caring for other family members who need care, as well as domestic violence, sexual assault, or stalking (if time away is for illness, injury, counseling, relocation, legal action, etc.).  Paid sick leave must be in increments of no more than 1 hour, and employees must be paid the same pay and benefits they would have received if they haven’t been used (this is where it is going to get tricky when an employee works on multiple sites, perhaps with different (or no) prevailing wage rates during a single week or even day).  In short – nothing has been finalized yet, but federal contractors should know that it is likely coming this year, and to prepare for policies and procedures to handle the same in 2017.  For example, the use of paid time off (PTO) may be a consideration for employers currently providing vacation plus sick leave.  Stay tuned!