In the world of federal contracting, sticking to prevailing wage laws isn’t just about following rules—it’s about doing business ethically. Understanding prime contractor liability and ensuring subcontractor compliance is key for our prevailing wage clients. Let’s break down what you need to know to protect your projects and reputation.

Prime Contractor Liability: Taking Responsibility

Under the Davis-Bacon Act and the Service Contract Act, prime contractors carry a big responsibility. Department of Labor rules are crystal clear – prime contractors are held fully accountable for any underpayments by subcontractors. It’s not just about obeying the law; it’s about ensuring all workers get fair pay on federal projects.

Flow Down Contract Clauses: Setting the Groundwork for Compliance

Compliance starts with smoothly passing contract clauses from prime to subcontractors. It’s more than just paperwork—it’s a shield against potential problems. Skipping these clauses doesn’t just put subcontractors at risk; it also damages the integrity of the prime contract. By including these clauses, you strengthen your compliance and avoid accidental violations.

Department of Labor Enforcement: Keeping Watch

The Department of Labor keeps a close eye on prevailing wage laws. Recent enforcement actions are clear reminders of the cost of breaking the rules. The message is simple: being unaware isn’t an excuse, and taking action ahead of time is crucial to staying legal.

Mitigating Liability: Strategies for Success

To lower your risk, you need to be proactive. Start by speaking openly with subcontractors about prevailing wage laws, ensuring everyone’s on the same page. Thorough checks provide an extra layer of security, letting you see if subcontractors understand the rules. Consider adding strong indemnity clauses to subcontracts—a smart move to hold subcontractors responsible for any mistakes.

Risk Management: Planning for Compliance

Managing risks isn’t just about spotting problems—it’s about planning for success. Primes should carefully assess the risk of subcontractor non-compliance before starting projects. Taking the lead with measures like thorough subcontractor checks and solid contractual protections helps primes confidently navigate the tricky world of prevailing wage compliance.

Striving for Excellence

In federal contracting, compliance isn’t just a checkbox—it’s about aiming for excellence and integrity. As government contractors, your commitment to following prevailing wage laws goes beyond what’s required by law; it shows your dedication to your values. By taking on prime contractor liability, using contract clauses, and adopting proactive risk management, you pave the way for lasting success and ethical leadership in federal contracting.

The Contractors Plan understands the unique challenges that Davis-Bacon and Service Contract Act contractors face when creating and managing a bona fide employee benefits plan. We specialize in prevailing wage contractor benefits and compliance, and we’ve assembled our knowledge into a flexible, easy-to-use solution that offers great benefit options for your employees.

For over 40 years, we have designed and administered healthcare, retirement, and specialty benefits programs for government contractors.  Our products and services help employers save money, reduce their workload, and stay compliant with local and federal government mandates and regulations. If you have any questions feel free to contact us here.

The U.S. Census Bureau announced construction spending for March 2024 was at a seasonally adjusted annual rate of $2,084 billion, almost flat compared to February. Compared to last year’s timeframe, construction spending in March was up nearly 10%. In the first quarter of this year, construction spending was up 11% to $461 billion compared to 2023.

While private construction spending in December was $1,601 billion, 0.5% below the February amount of $1,608 billion, public construction spending was $483 billion, 0.8% above February at $479 billion. A key contributor to public construction was highway construction at $149 billion, 0.9% above February.

Compared to the same period last year, public construction spending is up 18%. The leading growth contributor was highway construction, up 20 % to $149 from $124 billion in 2023.

More information may be found at: https://www.census.gov/construction/c30/pdf/release.pdf

The U.S. Department of Labor, Wage and Hour Division (WHD) just released Field Assistance Bulletin (FAB) No. 2024-1, addressing the impact of Artificial Intelligence (AI) and automated systems on workplace practices governed by federal labor laws like the Fair Labor Standards Act (FLSA). AI technologies increasingly assist in tasks like tracking work hours and processing leave requests.

While these technologies offer efficiency, they also present compliance challenges. The FLSA mandates fair compensation for all hours worked, including those AI systems monitor. Despite AI’s involvement, employers must ensure accurate tracking of work hours and breaks and proper calculation of wages owed. The bulletin emphasizes the importance of human oversight to prevent potential violations.

Additionally, it highlights AI’s implications under the Family and Medical Leave Act (FMLA) and warns against using automated systems to interfere with or retaliate against employees exercising their rights. Ultimately, it is the responsibility of employers to ensure adherence to labor laws, regardless of technological progress.

For more information, go to https://www.dol.gov/sites/dolgov/files/WHD/fab/fab2024_1.pdf.

The Federal Trade Commission (FTC) has announced a final rule banning noncompete agreements nationwide, effective 120 days after publication in the Federal Register. The rule is expected to promote competition, protect worker mobility, foster innovation, and encourage new business formation.

Projections suggest that the rule will facilitate the formation of over 8,500 new businesses annually, enhance worker earnings by an average of $524 per year, lower healthcare expenditures by up to $194 billion over the next decade, and drive innovation with an estimated 17,000 to 29,000 additional patents per year in the coming decade.

Key provisions of the final rule include:

• Banning noncompete agreements for most workers, except for senior executives (representing less than 0.75% of workers), whose existing agreements can remain in force.
• Employers are prohibited from entering into or enforcing new noncompetes, even for senior executives.
• Employers must notify workers, except for senior executives, that existing noncompetes will not be enforced.
• The rule defines “noncompete clause” broadly to encompass any agreement or policy that limits a worker’s ability to seek new employment or start a business after leaving a job.

The FTC received over 26,000 public comments on the proposed rule, with overwhelming support (over 25,000 comments) for the ban on noncompetes. The final rule is based on extensive research. It aims to address concerns that noncompete agreements suppress wages, hinder innovation, and limit worker mobility, affecting approximately one in five American workers.

The FTC also emphasized effective strategies for employers to safeguard their investments without relying on noncompete agreements, such as implementing trade secret laws and improving wages and working conditions. These alternatives demonstrate proactive measures that can benefit employers and workers while fostering a fair and competitive labor market.

The Department of Labor (DOL) issued a new final rule under the Fair Labor Standards Act (FLSA) to clarify the distinction between employees and independent contractors, enhancing compliance and worker protections. This rule replaces the 2021 Independent Contractor Rule, effective March 11, 2024.

The final rule outlines how the FLSA applies to workers, setting standards for minimum wage, overtime pay, recordkeeping, and child labor protections. It defines employees as economically dependent on employers for work, while independent contractors operate their own businesses.

Whether a worker is an employee or independent contractor depends on an “economic reality test” based on specific factors, not merely job titles or contracts. The Final Rule provides six critical factors for analysis:

1. Opportunity for Profit or Loss Depending on Managerial Skill: This measure focuses on whether the worker can negotiate pay, market their services, or make business decisions affecting profit or loss.
2. Investments by the Worker and Potential Employer: This section examines whether the worker’s investments (e.g., tools and equipment) are entrepreneurial and enhance business independence.
3. Degree of Permanence of the Work Relationship: Considers if the work is ongoing and exclusive, indicating employee status, or project-based and non-exclusive, suggesting independent contractor status.
4. Nature and Degree of Control: Assesses the employer’s level of control over work performance and business aspects, such as setting schedules and supervising work.
5. Extent to Which Work is Integral to the Employer’s Business: Considers if the work is central to the employer’s core business functions.
6. Skill and Initiative: Whether the worker uses specialized skills and business-like initiative.

Each factor is weighed based on the specific circumstances of the employment relationship. The rule clarifies that workers cannot waive their FLSA rights by signing independent contractor agreements. Additionally, the FLSA’s definition of “employ” (to “suffer or permit to work”) is broader than the IRS’ standard law control test for tax purposes, potentially resulting in different classifications for workers.

Employers who incorrectly classify employees as independent contractors could be subject to liability for unpaid wages, damages, and penalties under the FLSA. This highlights the critical need for accurate worker classification to ensure compliance with FLSA standards.

The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) has initiated the acceptance of online submissions from covered contractors as of April 1.

For the third consecutive year, existing federal contractors and subcontractors must utilize the OFCCP’s Contractor Portal to complete this certification, with the deadline set for July 1, 2024.

Contractors must certify that they have diligently developed and upheld affirmative action programs for their establishments or functional units. These obligations apply to contractors meeting specific contract dollar and employee thresholds. The Contractor Portal facilitates this process, allowing multiple users to register, manage records, and certify compliance.

The affirmative action programs they implement ensure that all applicants and employees of federal contractors enjoy equal employment opportunities, regardless of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran.

The U.S. Department of Labor, Wage and Hour Division (WHD) released an updated version of the Prevailing Wage Resource Book (PWRB) on April 1, 2024. This update followed the implementation of the final rule, Updating the Davis-Bacon and Related Acts Regulations, on October 23, 2023. The update’s purpose was to simplify language, restructure the format, and offer additional guidance and examples to address stakeholder requests for clarification.

The PWRB has been a crucial resource for contractors, contracting agencies, enforcement staff, unions, associations, and workers, providing insight into labor standards for federal and federally funded contracts. These contracts include those governed by the Davis-Bacon and Related Acts (DBRA), the Service Contract Act (SCA), the Walsh-Healey Public Contracts Act (PCA), the Contract Work Hours and Safety Standards Act (CWHSSA), the Copeland “Anti-Kickback” Act, and Executive Orders affecting federal contracts.

The updated PWRB aims to make WHD policies more accessible and understandable to stakeholders, enhancing their understanding of labor standards applicable to many federal contracts and federally funded projects. The updated PWRB can be found here: https://www.dol.gov/agencies/whd/government-contracts/prevailing-wage-resource-book

The Inflation Reduction Act of 2022 offers several benefits to government contractors participating in apprenticeship programs, including increased tax incentives and contributions to workforce development. To qualify, contractors must adhere to specific eligibility criteria:

• Employing Qualified Apprentices: Contractors must hire apprentices in registered programs recognized by relevant authorities. These programs typically involve a blend of on-the-job training and classroom instruction, leading to certification in a trade or occupation.
• Minimum Percentage of Construction Work Hours: Contractors must ensure that qualified apprentices perform a certain proportion of labor hours for construction, alteration, or repair work. The Act may specify varying percentages based on the project’s construction commencement year.
• Compliance with Prevailing Wage Standards: Contractors must pay laborers and mechanics employed in construction work no less than prevailing wage rates set by the Department of Labor for their respective classifications in the geographic area.
• Documentation and Recordkeeping: Contractors must maintain detailed records of laborers, mechanics, and apprentices, including hourly rates, hours worked, deductions, and actual wages. Proper recordkeeping is essential for demonstrating compliance and auditing.

Adhering to these requirements is crucial for contractors to qualify for tax incentives and avoid penalties or disqualification. Positive outcomes may include a skilled workforce and improved project outcomes. However, government contractors may face challenges, such as initial investment costs and compliance burdens.

On March 8, 2024, Judge J. Campbell Barker made a significant ruling, vacating the National Labor Relations Board’s (NLRB) new joint employer rule and reinstating the 2020 rule in response to a lawsuit filed by a coalition of industry associations led by the U.S. Chamber of Commerce. This decision immediately affects how businesses navigate joint-employer relationships under the National Labor Relations Act (Act).

The 2023 rule, issued by the NLRB in October, redefined the criteria for determining joint-employer status. It broadened the definition, allowing multiple entities to be considered joint employers if they collectively influenced essential terms of employment. This approach, aligning with common-law agency principles, recognized the significance of indirect control in determining joint-employer status.

However, legal challenges prompted the NLRB to delay the implementation of the 2023 rule until February 26, 2024. And now, with Judge Barker’s ruling, the 2020 rule, with its stricter requirement of substantial direct control, takes precedence once again.

The 2020 rule imposes a higher threshold for establishing joint-employer status, focusing on direct and immediate control over essential employment terms. This narrower definition may provide more clarity for businesses and limit liability for labor violations and obligations.

Although the NLRB may appeal Judge Barker’s decision, businesses must currently adhere to the 2020 rule’s standards. This uncertainty underscores the importance of understanding joint-employer relationships, particularly for those involved in contracting, joint ventures, or other collaborative arrangements.

The Michigan Prevailing Wage for State Projects Act, effective on February 13, 2024, closely resembles a previous prevailing wage regulation repealed in 2018. It mandates that construction workers on state-sponsored or financed projects receive wages and benefits comparable to those in the same locality on similar contracts.

Within the framework of the Act, a “state project” encompasses various construction activities authorized by a contracting agent, which includes new construction, alterations, repairs, installations, and improvements of public buildings, schools, infrastructure, bridges, highways, or roads. Additionally, construction mechanics, defined as skilled or unskilled workers involved in construction projects, must receive wages and benefits meeting or exceeding the prevailing rates established by the state based on union-level standards.

The Act also requires Contractors to enroll apprentices in Department of Labor-approved training Programs and maintain payroll records for at least three years. Future construction contracts must include language ensuring wages and fringe benefits are not lower than established rates, with nondiscrimination and nonretaliation provisions and the right for aggrieved employees to take legal action against contractors for damages or injunctive relief.

The Act applies to projects with bid acceptance dates on or after its effective date, excluding contracts entered before or with bid acceptance dates before this date. Contractors should seek guidance from experienced professionals to help them navigate Prevailing Wage Act issues effectively and minimize the risks and potential penalties linked with non-compliance.