15f Application of Prevailing Wage and Fringe Benefit Requirements
15f00 Contract clauses.
- In any contract subject to the labor standards provisions of DBRA, the contracting agency is required to include in the contract the clauses set forth in 29 CFR 5.5 relating to minimum wages, apprentices, trainees, withholding, payrolls and basic records, and liabilities and penalties for violations. See FAR 48 CFR 52.222-6 -15.
- The labor standards clauses in 29 CFR 5.5 included in a prime contract are by their terms required to be included as well in any subcontract or any lower tier subcontract made thereunder. Contractors who subcontract by means of purchase orders or other informal type contract forms will be considered in compliance with 29 CFR 5.5 provided they attach copies of the applicable wage determination and labor standards clauses to the subcontract form. See 29 CFR 5.5(a)(6).
- When the labor standards clauses are omitted from subcontracts in which they should have been included, and are not incorporated by reference in the subcontracts, the right of the subcontractor’s employees to receive compensation in accordance with the wage determination in the prime contact is not affected. In such circumstances, since the subcontractor did not contract to pay the DBRA rates, the subcontractor would not generally be held responsible. However, the prime contractor would be obligated to pay the subcontractor’s laborers and mechanics as required by the labor standards provisions of the prime contract.
15f01 Prevailing wage rates and fringe benefits.
The DBA requires the Secretary to predetermine, as a monetary wage, the prevailing wage rates for corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the area where work is to be performed. Bona fide fringe benefits are included within the meaning of the terms “wages, scale of wages, wage rates, minimum wages, and prevailing wages,” as used in the DBA. See 40 USC 3141 and 29 CFR 5.2(p).
15f02 Wage determinations.
- The term “wage determination” includes the original decision and any subsequent decisions modifying, superseding, correcting, or otherwise changing the provisions of the original decision.
- There are four basic categories of wage determinations based on the type of construction (see AAM No.130 and AAM No. 131):
- General wage determinations
- Project wage determinations
Building : sheltered enclosures with walk-in access for the purpose of housing persons, machinery, equipment or supplies. This category includes all construction of such structures, the installation of equipment, as well as incidental grading and paving. Such structures need not be habitable to be building construction. Examples of building construction projects are auditoriums, city halls, apartment buildings (five stories and above), hospitals, office buildings, schools, warehouses, and shopping centers.
Residential : single family houses or apartment buildings of four stories or less.
Highway : alteration or repair of roads, streets, highways, runways, alleys, trails, paths, parking areas, and other similar projects not incidental to building or heavy construction.
Heavy : This is a catch-all category. It includes all other projects not classified as building, highway or residential (e.g., bridges over navigable waters, dams, dredging and irrigation projects, tunnels). Of the four categories of construction, this is the only type of construction that can be broken into subcategories such as water and sewer line projects and dredging projects.
A project which includes elements of two or more types of construction normally requires multiple wage determinations if such category of construction is substantial (i.e. greater than 20 percent of project costs or greater than $1,000,000).
General wage determinations are published at https://beta.sam.gov/.
Project wage determinations are issued in response to specific requests from contracting agencies when there is no general wage determination applicable to the type of construction in the geographical area for the project involved.
15f03 Use and effectiveness of wage determinations.
- General wage determinations contain no expiration date. Once issued, they remain valid until modified, superseded, or canceled. They may be used by the contracting agency, without prior notification to DOL, in contracts to be performed within the specified geographical area and for the types of construction designated in the wage determination.
- Project wage determinations are effective for 180 calendar days from the date they are issued. If the contract for which a project wage determination is requested is not awarded within the 180 days before the wage determination expires, the contracting agency must request a new wage determination or obtain an extension of the expiration date from the Administrator. A project wage determination is applicable only to the particular project for which it was initially requested; it may not be included by the contracting agency in any other construction contracts.
- Modifications to general and project wage determinations, notice of which are published in web site https://beta.sam.gov/ or received by the contracting agency less than 10 days before bid opening, but not after bid opening, are effective unless the agency finds there is not sufficient time to notify bidders of the change. See 29 CFR 1.6(c).
- In addition, 29 CFR 1.6(c)(3)(iv) provides that if a contract to which a general wage determination has been applied is not awarded within 90 days after bid opening, any modification published prior to contract award is effective, unless the agency obtains an extension of the 90 day period from the Administrator. 29 CFR 1.6(e) provides that if a bid solicitation is found to contain a wrong wage determination, or if a wage determination is withdrawn as a result of an Administrative Review Board decision, notification to the contracting agency of such a finding is effective immediately, provided notification is made prior to contract award. Further, 29 CFR 1.6(f) provides a mechanism to require contracting agencies to utilize a wage determination after award if it is found that the agency failed to include any wage determination in a covered contract or used a wage determination which clearly does not apply to the contract. 29 CFR 1.6(g) contains guidelines for the application of wage determinations in situations where federal funding or assistance is not approved until after contract award (or after start of construction where there is no contract award).
- Project or general wage determinations included in a contract are effective for the life of the contract. However, contracts that contain option clauses by which a contracting agency may unilaterally extend the term of the contract require inclusion of a current wage determination at the time the option is exercised. See AAM No. 157.
15f04 Payrolls and reporting requirements.
Payrolls and basic records relating thereto must be maintained and preserved as required by 29 CFR 5.5(a)(3) and 48 CFR 52.222-8. 29 CFR 3.3, 29 CFR 3.4, and 29 CFR 5.5(a)(3) contain the reporting requirements relative to submission of the weekly Statement of Compliance and payrolls to the contracting agency. Contractors and subcontractors on DBRA covered construction projects must submit each week a Statement of Compliance which certifies the contractor’s compliance with the DBRA requirements. This “Statement of Compliance” is usually referred to as the certified payroll record.
The contractor must submit weekly a copy of all payrolls to the contracting agency. The payrolls submitted must set out accurately and completely all required basic payroll information. The payroll information may be submitted in any form desired. Optional Form WH-347 is a WHD form available to contractors on https://beta.sam.gov/. The prime contractor is responsible for submission of the certified payrolls to the contracting agency. Each payroll submitted must be accompanied by a Statement of Compliance which is found on the reverse side of the WH-347.
The contractor or subcontractor must make the payroll records available for inspection, copying, or transcription by authorized representatives of the contracting agency or the DOL and must permit these representatives to interview workers during working hours on the job.
If the contractor or subcontractor fails to submit the required records or to make them available, the federal agency may, after written notice to the contractor, take such action as is necessary to cause suspension of any further payment, advance or guarantee of funds. Failure to submit the required records upon request or to make such records available may be grounds for debarment action.
15f05 Area practice: determining proper classification of work.
- To determine the proper classification of work performed on a DBA covered project, it may be necessary to conduct a local area practice survey. Under the DBA there are not standard classification definitions. (This differs from SCA classifications, which are defined in the SCA Directory of Classifications.) Note: while the Dictionary of Occupational Titles, published by ETA, may be used as reference material, it cannot be relied on for making employee classification determinations.
- The Wage Appeals Board ruled in Fry Brothers Corp. (WAB Case No. 76-6, June 14, 1977) that the proper classification of work performed by laborers and mechanics is that classification used by firms whose wage rates were found to be prevailing in the area and incorporated in the applicable wage determination. Questions as to the proper classification for the work performed by a laborer or mechanic are resolved by making an area practice survey. Area practice surveys can be conducted by the contracting agencies or by WHD using the following guidelines. AAM No. 130 and AAM No. 131 provide guidance regarding the proper categories of the various types of construction (building, heavy, highway, and residential) subject to local or area practice. Beforeany area practice surveyis started, the RWS must be contacted. See https://www.dol.gov/agencies/whd/government-contracts/construction/regions.
- Basic principles/preliminary steps for conducting surveys to determine prevailing local area practice
- Clearly define the scope of work/duties for which proper classification is at issue.
- Refer to the wage determination in the DBA/DBRA covered contract.
- Determine what classifications may perform the work duties in question.
- Examine the identifiers for each classification to determine whether the rates in the wage determination for each such classification reflect union negotiated or non-union wages.
- Non-union rates in a DBA wage determination are listed in a wage rate block that has an SU identifier, and appear in alphabetical order in the list of classifications in the wage determination (e.g. , after sheet metal workers and before truck drivers). Other wage determination blocks reflect rates in collective bargaining agreements.
- Union rates are listed under identifiers that refer to the union whose rates are reflected in a given wage rate block in the DBA wage determination. Examples are: ASBE (International Association of Heat & Frost & Asbestos Workers), ELEC (International Brotherhood of Electrical Workers), PLAS (Operative Plasters and Cement Masons), and PLUM (United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada). The number following in the identifier usually indicates the local union number for the union that negotiated the rates shown in the wage determination block.
- In accord with Fry Brothers Corp., information to be considered in the area practice survey is from firms whose wage rates were found to be prevailing in the area and incorporated in the applicable wage determination.
- If, in the applicable wage determination, the rates listed for all the classifications that may perform the work in question are non-union rates, the dispute will be resolved by examining the practice(s) of non-union contractors in classifying workers performing the duties on similar construction in question in the area (usually the same county).
- If, in the applicable wage determination, the rates listed for all the classifications that may perform the work in question are union rates, the dispute will be resolved by examining the practice(s) of union contractors in classifying workers performing the duties in question on similar construction in the area (usually the same county). (Often such questions can be resolved by a limited area practice survey.)
- If a combination of union and non-union rates are listed in the wage determination for classifications that may have performed the work in question on similar construction in the area (usually the same county), the dispute will be resolved based on the combined information from:
- union contractors for the classification(s) for which union rate(s) are listed in the applicable wage determination; and
- non-union contractors for the classification(s) for which non-union rate(s) are listed in the applicable wage determination.
- To ensure the local area practice survey examines how workers who performed the duties in question were classified when they worked on similar construction projects in the same area as the project in question during the survey timeframe, proper classification of the laborers or mechanics performing the work in question will be resolved by examining the classification practice(s) of contractors who performed the work in question on:
- similar construction projects: building construction, residential construction, highway construction, heavy construction (see AAM No. 130 and AAM No. 131);
- that were in progress in the same area (normally the same county);
- during the year preceding the contract in question (as discussed below).
- The extent of the information required for making area practice determinations will depend on the facts in each case. For example:
- If, in gathering preliminary data, all of the parties agree as to the proper classification, the area practice is thus established (i.e., a limited area practice survey).
- However, if all parties do not agree (i.e., jurisdictional dispute between two unions, or management does not agree with the union, or where non-union rate(s) in the wage determination may apply and the practice among non-union contractors in the area varies), it will be necessary to determine by a full area practice survey which classification actually performed the work in question.
- The survey will collect information on how workers performing the work in question were classified on similar projects underway in the same locality (normally the county), during the year prior to contract award of the DBA/DBRA contract in question (or, in the case of contracts entered into pursuant to competitive bidding procedures – as contrasted with negotiation procedures – the year prior to bid opening; in the case of projects assisted under the National Housing Act, beginning of construction or the date the mortgage was initially endorsed, whichever occurred first; or, in the case of projects to receive housing assistance payments under section 8 of the U.S. Housing Act of 1937, beginning of construction or the date the agreement to enter a housing assistance payments contract was executed, whichever was first).
- To conduct a limited area practice survey to determine the proper classification of work
- If the applicable wage determination reflects union rates for the classifications involved:
- Contact the unions whose members may have performed the work in question to determine whether the union workers performed the work on similar projects in the county in the year prior to the wage determination lock-in date (contract award date, or other date, as described above) for the project at issue.
- The criteria for usable data is similar projects (same type of construction), in the same county as the project in question, within the usable time frame of one year prior to the wage determination lock-in date for the contract in question, as established by 29 CFR 1.6(c).
- If union contractors performed the work, each union should be asked how the individuals who performed the work in question were classified. If no union workers performed any of the work in question in the county during the survey timeframe, the RWS should be contacted for further guidance.
- The information provided by the unions should be confirmed with collective bargaining representatives of management (i.e., the contractor representatives). These would include local chapters of contractors’ associations that bargain with the unions. For example, the Associated General Contractors of America (AGC), the National Electrical Contractors Association (NECA), the Mechanical Contractors Association of America, etc. Contact the NO, Division of Wage Determinations, Branch of Construction Wage Determinations for information needed to contact the contractors’ association and the local union that negotiated the collective bargaining agreement whose rates are reflected in the contract wage determination.
- If all parties agree as to the proper classification of the work in question, the area practice is established. If two unions are engaged in a jurisdictional dispute over a specific type of work and both have performed the work in question during the applicable time period, contact RWS for further guidance. A more extensive area practice survey will be required to resolve the question.
- If the applicable wage determination reflects non-union rates for the classifications involved:
- Contact open shop contractors (many are members of the Associated Builders and Contractors of America (ABC)) and ask whether they performed the work in question on similar projects underway in the county during the survey timeframe. While it may not be possible to know if contractors are union or open shop contractors prior to calling them, there would be no need to request information from the union contractors concerning their classification practices in this case.
- If so, the non-union contractors should be asked how the employees who performed this work were classified.
- If all the non-union contractors agree, or if a clear majority of them agree, the area practice is established.
- If no open shop contractor performed the work at issue in the county during the survey timeframe, contact the RWS for further guidance.
- If the applicable wage determination reflects a mixof union and non-union rates for the classifications involved:
- Contact the unions, and contact union and open shop contractors (and/or their associations) to determine who performed the work at issue on similar projects during the survey timeframe.
- If all parties agree, or if a clear majority of the parties (both union contractors regarding the classification listed with a union rate in the wage determination and non-union contractors regarding the classification listed with a non-union rate in the wage determination) agree on the classification, the area practice is established.
- Contact the RWS if no work of the type at issue was performed in the county during the applicable time frame discussed above.
- For any type of wage determination (whether based on union rates, non-union rates, or a mixed schedule): if the parties contacted in the limited area practice survey do not agree (i.e., jurisdictional dispute between the unions, management does not agree with union, or disagreement between the open shop contractors), or if there is no clear majority in agreement, then it is necessary to contact the RWS and prepare to conduct a full area practice survey.
- How to conduct a full area practice survey to determine the proper classification of work
Follow the preliminary steps described in 15f05(c), above.
Note: with regard to (2) and (3), below, it may be more practical in many instances to proceed directly to a full area practice survey if calls to the contractors are needed anyway to determine whether each contractor is a union or open shop contractor (see information in FOH 15f05(d)(4)).
Follow the preliminary steps described in FOH 15f05(c).
- Identify similar projects in the same geographical area as the project under investigation (usually the county) which were in progress during the period 1 year prior to the wage determination lock-in date of the contract involved in the dispute/investigation. If no similar projects were built in the area during that time frame, contact the RWS for advice in expanding the survey’s geographic scope and/or its time frame. Note: where data regarding the classification practices of union contractors are sought in the area practice survey, it may be appropriate to request a list of contractors who may have performed the work in question from the relevant union(s) and use such list(s) to contact the contractors as a way to identify relevant projects.
- Identify firms that performed the work in question on these projects and determine those from which data should be collected based on whether the relevant classifications in question in the wage determination are either non-union rates, union rates, or both. For example, if only non-union wage rates in the wage determination are involved, information from union contractors is not relevant; if only union rates are involved, information from open shop contractors is not relevant. Similarly, if the classifications in the wage determination that may have performed the work in question are a mix of union and non-union rates, information from both union and open shop contractors will need to be collected, but data from union contractors cannot be used to support the non-union rate and data from open shop contractors cannot be used to support the union classification rate.
- For each project, obtain data from the week in which the greatest number of employees performed the work in question, and record how many performed such work on each project and how such employees were classified and paid.
- Compile all relevant information received and total the number of employees who performed the work in question in each classification reported. The data should be tallied separately for union and non-union contractors/workers – only data from union contractors/workers can be counted to support a union rate listed in the contract wage determination, and only data from open shop contractors can be counted to support a non-union rate in the wage determination.
- The classification which has the clear majority of employees performing the work in question is the proper classification.
- If the data does not show that at least 60 percent of the workers who performed the duties in question were classified in the same classification, contact the RWS for further guidance.
15f06 Business owners.
An employee who owns at least a bona fide 20 percent equity interest in the enterprise in which employed, regardless of the type of business organization (e.g., corporation, partnership, or other), and who is actively engaged in its management, is considered a bona fide exempt executive. The salary and salary basis requirements do not apply to the exemption of business owners under 29 CFR 541.101. An individual with a 20 percent or greater interest in a business who is required to work long hours, makes no management decisions, supervises no one and has no authority over personnel does not qualify for the executive exemption. To qualify for the exemption, a minority owner with at least a bona-fide 20 percent interest in the business must be actively engaged in management. See 29 CFR 541.101.
15f07 Discharging minimum wage and fringe benefit obligations under DBRA.
- A contractor or subcontractor performing work subject to a DBRA wage determination may discharge its minimum wage obligations for the payment of both straight time wages and fringe benefits by (1) paying both in cash, (2) making payments or incurring costs for bona fide fringe benefits, or, (3) by a combination thereof. Thus, under the DBRA (unlike SCA) a contractor may offset an amount of monetary wages paid in excess of the minimum wage required under the determination to satisfy its fringe benefit obligations. See 40 USC 3142(d) and 29 CFR 5.31. This may be done, for example, in the following ways:
- $21.00 in cash wages;
- $17.00 plus $4.00 in pension contributions or other bona fide fringe benefits;
- $15.00 plus $6.00 in pension contributions or any combination of bona fide fringe benefits.
- Regulation of payroll deductions
Minimum Wage Determination
Basic hourly rate
Total minimum wage/fringe benefit obligation
*Note: overtime must be paid at time and one-half the basic hourly rate of $17.00. See 29 CFR 5.32.
- 29 CFR 3.5 permits the following deductions from wageswithout the approval of the Secretary. See 29 CFR 3.5 for further detail.
- Deductions for social security or federal or state income tax withholding
- Deductions for bona fide prepayment of wages
- Deductions for court ordered payments
- d. Deductions for contributions to fringe benefit plans, provided that the deduction is not prohibited by law, that it is either voluntarily consented to by the employee in writing in advance of the time the work is done or provided for in a collective bargaining agreement, that no profit or other benefit is obtained by the contractor, and that the deduction serves the convenience of the employee
- Deductions for purchase of U.S. savings bonds when voluntarily authorized by the employee
- Deductions to repay loans or to purchase shares in a credit union
- Deductions voluntarily authorized for contributions to organizations such as the Red Cross, United Way, or similar charitable organizations
- Deductions to pay union initiation fees and membership dues, not including fines or special assessments, provided that a collective bargaining agreement provides for such deductions and the deductions are not otherwise prohibited by law
- Deductions for the reasonable cost of board, lodging, or other facilities meeting the requirements of section 3(m) of FLSA.
- Deductions for the cost of safety equipment purchased by the employee if such equipment is not required by law to be furnished by the employer, if such deduction is not prohibited by FLSA or other law, and if the cost on which the deduction is based does not exceed the actual cost to the employer.
- Pursuant to 29 CFR 3.6, any contractor may apply to the Secretary for permission to make any deductions not permitted under 29 CFR 3.5.The Secretary may approve payroll deductions whenever all of the following conditions are met:
- The contractor does not make a profit or benefit directly or indirectly from the deduction
- The deduction is not otherwise prohibited by law
- Either the employee voluntarily consented to the deduction in writing in advance of the time the DBA/DBRA work is performed or the deduction is provided under the terms of a bona fide collective bargaining agreement
- The deduction serves the convenience and interest of the employee
15f08 Salaried employees.
In many cases salaried employees perform work on DBRA covered projects and noncovered projects in the same workweek. To determine whether the employee has been properly paid for the time spent on the DBRA project, it is first necessary to determine the hourly rate of pay. For example, an employee who is working 40 hours per week and paid a salary of $600.00 per week would be paid at the rate of $15.00 per hour. If this same employee is entitled to a prevailing rate of $19.50 per hour for DBRA covered work, he or she would be entitled to an additional $4.50 per hour for work performed on the DBRA project. An employer may not arbitrarily allocate a greater portion of the employee’s salary to DBRA work in order to achieve compliance with the act. It should be kept in mind that a nonexempt (i.e., 29 CFR 541) salaried employee is only due the applicable DBRA rate for those hours actually spent performing laborers’ and mechanics’ duties. See 29 CFR 5.2(m) and FOH 15e15(b).
15f09 Hourly paid employees.
The same type of problem as discussed in FOH 15f08 may be encountered with regard to hourly paid employees working on DBRA covered work and non-covered work in the same workweek. The contractor may not arbitrarily change the employee’s hourly wages to meet its DBRA obligations. For example, assume an employee’s regular rate of pay is $15.00 per hour and the prevailing wage under DBRA is $19.50 per hour. In a week in which both DBRA and non-covered work are performed, the employer cannot reduce the employee’s regular rate of pay of $15.00 per hour on non-government work to offset the higher rate required under DBRA. This same principle applies where an employee performs work in more than one DBRA classification; an employee may be paid not less than the specified wage determination rate for each of the actual hours worked in each classification (see 29 CFR 5.5(a)(1)(i)).
15f10 Piece rate employees.
In order to determine the basic hourly rate for a piece rate employee, it is necessary to divide the total hours worked in the workweek into the total wages paid. The basic hourly rate for a piece rate employee must be calculated on a weekly basis.
15f11 Crediting of fringe benefit payments.
- 29 CFR 5.5(a)(1)(i) and FAR 52.222-6(b)(2) require that contributions to fringe benefit plans made by a contractor or subcontractor must be made on a regular basis (i.e., not less often than quarterly).
- Normally, contributions made to a fringe benefit plan for government work generally may not be used to fund the plan for periods of non-government work. See FOH 15f12(b).
- A contractor must make payments or incur costs in the amount specified in the applicable wage determination for each individual laborer or mechanic performing covered contract work. Where the cash wages paid and the per hour cost equivalents for fringe benefits together do not equal the sum of the prevailing wage rate and fringe benefit amounts set forth in the applicable wage determination, the balance due must be paid in cash to each of the employees underpaid. Note: where a fringe benefit includes a percentage, compliance will be achieved by computation of the percentage stated times the basic wage rate.
- Contractors and subcontractors are required to pay fringe benefits for all DBRA covered work in the workweek. Unlike SCA, fringe benefits for DBA must be paid for both straight time and overtime hours. However, fringe benefit payments are not included in the basic/regular rate of pay for CWHSSA overtime purposes. See FOH 15k06.
- A contractor may take credit for contributions for any bona fide fringe benefits regardless of whether the particular benefit is listed on the applicable wage determination.
- The contractor is under no obligation to obtain the employee’s concurrence before contributing to the fringe benefit plan on his or her behalf.
- Fringe benefits must be bona fide. There is no difficulty in determining whether a particular fringe benefit is bona fide in the ordinary case where the benefits are those common to the construction industry and which are paid directly to the employees in cash or into a fund, plan or program. An example of the latter would be the types of benefits listed in the act itself which are funded under a trust or insurance program. Contractors may take credit for contributions made under such conventional plans without requesting the approval of DOL under 29 CFR 5.5(a)(1)(iv).
- Where a particular fringe benefit or benefit plan is not of the conventional type described in the preceding paragraph (g), it will be necessary for the NO to examine the facts and circumstances involved to determine whether the fringe benefit or the plan is bona fide in accordance with the requirements of the act. This is particularly true with respect to unfunded plans, which are discussed in 29 CFR 5.28. Contractors or subcontractors seeking credit under the act for costs incurred for such plans must request specific permission from the WHD under 29 CFR 5.5(a)(1)(iv).
A contractor may not take credit for any benefit required by law, such as social security contributions or workers compensation.
15f12 Computing hourly fringe benefit equivalents.
- In determining cash equivalent credit for fringe benefit payments, the period of time to be used is the period covered by the contribution. For example, if an employer contributes to a hospitalization plan on a weekly basis, the total hours worked (DBRA covered and non-covered) each week by each employee should be divided into the contribution made by the employer on behalf of each employee to determine the hourly cash equivalent for which the employer is entitled to take credit for each employee. If contributions are made biweekly, cash equivalents would be computed bi-weekly. If contributions are made quarterly, cash equivalents would be computed quarterly, etc.
- On occasion, a contractor or subcontractor may offset the annual cost of a particular fringe benefit by converting such costs to an hourly cash equivalent. For example, the hourly cash equivalent may be determined by dividing the cost of the fringe benefit by the total number of working hours (DBRA and non-covered) to which the cost is attributable. Total hours worked by employees must be used as a divisor to determine the rate of contribution per hour, since employees may work on both DBRA and non-government work during the year and employers are prohibited from using contributions made for nongovernment work to discharge or offset their obligations on DBRA work (see FOH 15f11(b)). Note: however, that if the amount of contribution varies per employee, credit must be determined separately for the amount contributed on behalf of each employee (see FOH 15f11(c)).
- To illustrate the principles set out in (b), assume that the annual cost of a pension program is $15,000. The total actual working hours (DBRA and nongovernment) are 15,000. Thus $15,000 / 15,000 hours = $1.00 per hour cash equivalent. Since construction workers often do not work a full year (2,080 hours), where the contractor makes annual payments in advance to cover the coming year and actual hours worked will not be determinable until the close of that year, the total hours worked by the DBRA-covered laborers, mechanics and apprentices, if any, for the preceding calendar year (or plan year), will be considered as representative of a normal work year for purposes of the above formula. Similarly, where the contractor pays monthly health insurance premiums in advance on a lump sum basis, the total actual hours worked in the previous month or in the same month in the previous year may be use to determine (i.e., estimate) the hourly equivalent credit per employee during the current month. Any representative period may be utilized in such cases, provided that the period selected is reasonable. Where the cost incurred included contributions for employees other than covered laborers, mechanics, and apprentices, the hours of such non-covered employees must be included in the computation of the hourly cash equivalent or the contributions for such employees must be eliminated prior to determining the cash equivalent for covered employees.
- In computing cash equivalents, it should be kept in mind that under certain kinds of fringe benefit plans the rate of contribution for employees may vary. For example, under a hospitalization plan the employer often contributes at different rates for single and family plan members. In such situations, an employer cannot take an across the board average equivalent for all employees; rather, the cash equivalent can only be credited based on the rate of contributions for each individual employee.
15f13 Eligibility standards for participation in fringe benefit plans.
Eligibility standards are permissible in an otherwise bona fide fringe benefit plan under DBRA. However, an employer must make payments or incur costs in the applicable specified amounts with respect to each individual laborer or mechanic performing covered contract work. Employees who are excluded from a plan for whatever reason and for whom the employer makes no contribution must be paid in cash. For example, many hospitalization plans require a waiting period of 30 days before an employee can participate in the plan. Since the employer normally makes no contribution for the employee during the waiting period, the employee must be paid the fringe benefit in cash or furnished other bona fide fringe benefits equal in monetary value. If the plan requires contributions to be made during the eligibility waiting period, credit may be taken for such contributions. Since it is not required that all employees participating in a bona fide fringe benefit plan be entitled to receive benefits from that plan at all times, however, credit may not be taken for contributions for employees who by definition are not eligible to participate, such as employees who are excluded because of age or part-time employment. Similarly, employers frequently make contributions to union fringe benefit funds for employees who are not members of the union. If the employee cannot participate in or receive benefits from the union fund, the employee must be paid the fringe benefits in cash, even though the employer, by the terms of his union contract, may be required to contribute to the union fringe benefit fund on behalf of such employees.
15f14 Pension and profit sharing plans.
- In order for a pension plan or a profit sharing plan providing for pension benefits to be creditable towards meeting the prevailing wage requirements of DBRA, the contributions must be irrevocably made to a trustee or a third party as set forth in 29 CFR 5.26 and 5.27. In accordance with 29 CFR 5.26, the trustees must assume the usual fiduciary responsibilities imposed upon trustees by applicable law. However, there is no prohibition against the contractor being a trustee of a plan.
- As a general rule, contributions to profit sharing plans providing pension benefits may not be creditable towards meeting a contractor’s or subcontractor’s prevailing wage obligation because of the uncertainty or discretionary nature of the contribution provisions of the plan.
- However, credit for profit sharing that funds pension benefit plans can be given if certain conditions are met. The contractor would be required to contribute irrevocably to an escrow account not less often than quarterly, during the period of the DBRA covered work, an amount sufficient to meet any claimed fringe benefit credit under DBRA for pensions on behalf of each employee participating in the plan. Upon the annual determination of profits, the monies placed in escrow are transferred to the pension trust fund and used as an offset against the contractor’s obligation to employees under the profit sharing plan. Allowable credit under DBRA would be limited to the contributions made which cover that portion of the total hours worked by the employees during the year which is attributable to work covered by DBRA. Any shortfall in profits which results in actual payments to the pension plan being less than the rate at which the contractor claimed DBRA credit throughout the year would have to be made up by the contractor when the account is settled at year end, by paying the difference (shortfall) in cash directly to the employees, or by making additional contributions to the pension fund in an amount to cover the shortfall. A contractor cannot claim credit for more than the actual costs of, or payments made into, the plan.
- Vesting is a usual provision of a pension plan which requires that an employee must work a specified period of time before he has earned the right to the pension benefits provided in the plan. It is WHD’s position that such provisions are permissible under the act if they meet the requirements of the Employee Retirement Income Security Act.
- Forfeitures are fringe benefit monies which have been contributed on behalf of terminated, non-vested participants who have been terminated prior to having vested in the plan. Pension and profit sharing plans normally contain provisions for the disposition of forfeitures. Such provisions provide that forfeitures are to be used to reduce a contractor’s future contributions or are allocated to the remaining employees’ accounts. In either case, such provisions are not prohibited under the DBA. However, the contractor may not use such forfeitures as a credit toward meeting the requirements of an applicable DBA wage determination. To do so would allow the contractor to take double credit for the same contributions.
- For defined contribution pension plans that provide for a higher hourly rate of contributions to be made for DBRA work than for non-covered work, the higher rate paid for DBRA work will be fully credited only if the plan provides for immediate participationand immediate or essentially immediate vesting schedules ( e.g., 100 percent vesting after an employee works 500 or fewer hours). In addition, if the employer wishes the plan to qualify for tax exempt status, the amount of annual contributions may not exceed a limitation imposed by the Internal Revenue Code.
- For all defined benefitpension plans and definedcontribution pension plans whichdo not provide forimmediate or essentially immediatevesting schedules (100 percentvesting after an employee works 500 or fewer hours), DBA credit for contributions made to the plan is allowed based on the effective annual rate of contributions for all hours worked during the year. In other words, if a contractor wishes to receive $2.00 per hour credit for pension plan contributions, the contractor must contribute at this same rate for all hours worked during the year. If this is not done, the credit for DBRA purposes would have to be revised accordingly.
- For example, assume that a firm’s contributions for the pension benefit were computed to be $2,000.00 a year for a particular employee. If that employee worked 1,500 hours of the year on a DBRA covered project and 500 hours of the year on another job not covered by DBRA, only $1500 or $1.00 per hour would be creditable towards meeting the firm’s obligation to pay the prevailing wage on the DBRA project. This method for determining the allowable DBA credit for fringe benefit payments results from the fact that employers are prohibited from using contributions made for work covered by DBRA to fund the plan for periods of non-DBRA work, except as stated in (g)(2) above.
- It has been found that many vacation and sick leave plans in the construction industry are generally unfunded plans within the meaning of 29 CFR 5.28. 29 CFR 5.28 provides that an unfunded fringe benefit plan will be considered to be a bona fide plan for DBA purposes if the plan:
- reasonably can be anticipated to provide benefits described in the DBA,
- represents a commitment that can be legally enforced,
- is carried out under a financially responsible plan or program, and
- has been communicated in writing to the affected employees.
- If an employee should terminate prior to becoming eligible under a vacation or sick leave plan, and amounts have been paid into an account on such employee’s behalf for which the contractor has taken credit towards meeting its prevailing wage obligations, then the employee must be paid those amounts from the account upon termination.
- Situations may be encountered where unused vacation and/or sick leave is forfeited upon termination of employment. In such cases, the per hour cost of the vacation and/or sick leave credit must be computed on the basis of the total cost of the vacation and/or sick leave actually used by each employee (i.e., forfeited contributions for which the contractor has claimed credit under DBRA may not revert to the contractor). Of course, if the employer pays these accumulated benefits in cash upon termination by an employee, there will be no problem in determining the cash equivalent.
- In order to determine the DBRA credit for vacation and sick leave, the payments made by the contractor to each employee are divided by the hours worked in the period covered by the payments. Since both sick leave and vacation are generally annual type fringe benefits, the total hours worked during the year (government and non-government) should be used as the divisor. For example, let us assume an employee was paid $1500.00 for vacation benefits and worked a total of 1500 hours for the employer during the year. The employer would be entitled to a credit of $1.00 per hour against the DBRA prevailing wage ($1500 / 1500 hours).
- The principles set forth in FOH 15f15 regarding vacation and sick leave plans apply equally to holiday pay.
- If the applicable wage determination for a classification listed specifies paid holiday as a fringe benefit and an employee works any part of a week in which the holiday occurs, the employee must receive the entire holiday pay benefit, unless a different standard is provided in the applicable wage determination. However, if the employee is hired by the contractor after the holiday occurs in a particular week, he or she would not be entitled to the holiday benefit. For example, if New Year’s Day occurs on Tuesday, and the employee is hired on Thursday, the employee would not be entitled to the benefit.
- Costs incurred by a contractor or subcontractor for a bona fide apprenticeship program (i.e., a program registered with either a state apprenticeship agency recognized by ETA (OA) or by ETA (OA) itself) are creditable under DBRA. Only the actual costs incurred for the training program, such as instruction, books, and tools or materials, may be credited. Where the costs incurred exceed the amounts set forth in the applicable wage determination, the excess cost may be credited towards the contractor’s or subcontractor’s other prevailing wage obligations, but only to the extent of the actual costs of the program.
- The cost incurred for apprenticeship training for one classification of laborer or mechanic may not be used to offset costs required to be incurred for another classification. For example, a contractor cannot claim credit for apprenticeship training costs incurred for electricians to satisfy the applicable wage determination apprentice training requirements for carpenters.
- Rather than contributing to apprenticeship training funds on an hourly basis, some contractors contribute a lump sum in advance for the annual cost of the program. It is permissible for a contractor to use such a method of payment and the contractor should be given appropriate credit. For example, a contractor may contribute a fee of $900 to enroll an employee in an apprentice training program for carpenters. In order to determine the amount the contractor may offset to meet this contribution, it is necessary to convert the contribution to an hourly cash equivalent. The hourly cash equivalent would be determined by dividing the cost by the total number of hours worked by carpenters and carpenter apprentices (DBRA and non-government work) to which the cost is attributable. Since construction workers often do not work a full year (2,080 hours) the total hours worked by the contractor’s carpenters and carpenter apprentices, if any, for the preceding calendar year will be considered as representative of a normal work year for purposes of the above formula. The hourly cash equivalent thus obtained would be the contractor’s permissible offset on DBRA covered work. In addition, the contractor’s cost may not be offset over a period longer than the training period the cost was intended to cover. Thus, in this example, if the total hours worked by carpenters and carpenters’ apprentices were 45,000 hours in the preceding calendar year, the contractor would be entitled to a credit of $0.02 per hour ($900 / 45,000) against the prevailing wage obligations for all carpenters and carpenters’ apprentices working on the DBRA project.
Since by its nature a profit sharing plan is only operative if there are profits, there is no guarantee that any contributions will be made on behalf of an employee. In addition, since contributions under such plans are normally made on an annual basis, they fail to meet the requirement that plan contributions be made not less often than quarterly. See 29 CFR 5.5 (a)(1)(i).
15f15 Vacation and sick leave plans.
To insure that such plans are not used to avoid compliance with the act, the Secretary directs the contractor to set aside, in an account, sufficient assets to meet the future obligation of the plan. At the time the employee takes vacation or sick leave the monies in such an account could be distributed and used as an offset against the vacation and sick leave plan obligation of the contractor. However, if a contractor has paid vacation or sick leave out of pocket under an unfunded plan, credit must be given for such payments (see FOH 15f15(d)).
15f16 Holiday pay.
15f17 Crediting apprentice training costs.
15f18 Administrative expenses: fringe benefit plans.
The administrative expenses incurred by a contractor or subcontractor in connection with the administration of a bona fide fringe benefit plan are not creditable towards the prevailing wage under the DBA. For example, a contractor would not be able to take credit for the cost of an office employee who fills out medical insurance claim forms for submission to an insurance carrier.
15f19 Transportation and board and lodging expenses.
Where an employer sends employees who are regularly employed in their home community away from home to perform a special job at a location outside daily commuting distances from their homes so that, as a practical matter, they can return to their homes only on weekends, the assumption by the employer of the cost of the board and lodging at the distant location, not customarily furnished the employees in their regular employment by the employer, and of weekend transportation costs of returning to their homes and reporting again to the special
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