Prevailing Wage Laws

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Prevailing wage laws are intended to create an even playing field for government contractors so that basic labor standards are maintained. Since governments usually award contracts to the lowest bidder, employers would otherwise be incentivized to pay substandard wages and benefits to obtain the contract. In effect, government money would be used to drive down area standards. Prevailing wage laws therefore exist to require all government contractors pay the area standard wages and benefits to their employees.

When Do These Laws Apply?

They apply in two general contexts: construction work and service work.

In construction, the Davis-Bacon Act (and related federal Acts) apply where federal money is used to finance the construction of a federal building or in a myriad of other situations, such as public transit construction, highway improvement, or construction of low-income housing and senior housing.

In the service sector, the Service Contract Act (SCA) applies to federal contracts for services. For example, janitors and maintenance workers providing services at a building where a federal agency is housed are likely covered by the SCA. The SCA covers a wide range of non-exempt employees, even including paralegals employed by contractors of the Department of Justice, and engineering technicians employed by Department of Defense contractors.

Where state or local funds are used to fund construction or services, state and local laws may require that prevailing wages be paid. For example, the New Jersey Prevailing Wage Act applies to construction funded in whole or part with funds of a public body. As another example, the Philadelphia Prevailing Wage Ordinance covers a wide range of construction and service work in which there is some connection to a City contract or City financial assistance (e.g., grants, loans, guarantees, Enterprise Zone designations, waivers of City fees). For certain types of buildings built with City financial assistance, if post-construction, the owner contracts for certain types of buildings services to be performed, they must pay the applicable SCA wages and benefits for at least 10 years from the date the City issues a certificate of approval.

If I am Not Part of a Union, do Prevailing Wage Laws Protect Me? 

Yes, that’s a major purpose of prevailing wage laws. Non-union employers should not be at an unfair competitive advantage over union employers. Any employee performing work that is covered by a prevailing wage law, such as the Davis-Bacon Act, must be paid the prevailing wage for the trade of work performed. Often, in union-dense metropolitan areas, the prevailing wage is equivalent to the wages and benefits a union employee would receive. In some areas, such as Philadelphia, this wage and benefit package may be quite significant.

How Can I Find Out What the Applicable Prevailing Wage Is? 

Under most prevailing wage laws, the federal or state department of labor must issue wage determinations, which list the prevailing wages for each type of employee in a given state and county. At the federal level, construction and service worker wage determinations are available at Descriptions of service worker job categories can be viewed in the SCA Directory of Occupations. The Philadelphia Prevailing Wage Ordinance generally borrows the wages and benefits from the federal wage determinations. 

I Receive Benefits Too?

Most prevailing wage laws have a required wage component and a required benefit component – e.g., wages of $22/hour and benefits of $9/hour. As to the hours of work that are performed on a prevailing wage job, the employer may provide the benefit component in the form of retirement or health care benefits, but could alternately provide it in the form of additional wages (e.g., $31/hour in wages). However, if the employer takes credit for, say $5/hour of health care benefits, that must be the true cost of the benefits provided to the employee.

What is Worker Misclassification?

In the prevailing wage context, misclassification usually refers to trade misclassification (as opposed to independent contractor misclassification or salary misclassification). For example, someone who performs work as an electrician (e.g., pulling and terminating electrical cables), but is given a lower-paid classification (such as laborer) would be misclassified and owed the difference in wage and benefit rates.

What Can Be Done About Prevailing Wage Violations?

There are many laws that may address prevailing wage law violations. For example, the Philadelphia Wage Theft Ordinance creates a right to sue for "Wage Theft," which includes any violation of any federal or state wage law. The District of Columbia’s Wage Payment and Collection Law contains similar provisions. The New Jersey Prevailing Wage Act allows employees to sue their employers over violations of that law. In New York, courts have allowed employees to file breach of contract actions against contractors for failing to pay prevailing wages. The Federal False Claims Act has also been used to provide remedies for an employer’s false statements made to the government concerning compliance with laws such as Davis-Bacon.

*This article is for informational purposes only and should not be interpreted as legal advice.

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