Subsribe to our email newsletter today to receive update on the latest news and tutorials!
Withholding Of Funds
- The labor standards clauses require the proper classification and payment of wages to:
- Laborers and mechanics on construction projects subject to the DDBA, DBRA, and CWHSSA.
- To protect the rights of covered workers, these Acts and related Department of Labor (DOL) regulations provide for remedies when compliance with the prevailing wage requirements is in question. An important element is the withholding of contract funds sufficient to satisfy alleged wage underpayments pending resolution of a wage dispute. The contracting agency may withhold funds on its own initiative or at the direction of DOL.
- The relevant statutory and regulatory provisions are 40 U.S.C. § 3142(c)(3), 40 U.S.C. § 3702(d), and 29 C.F.R. § 5.5(a)(2) and 5.5(b)(3).
- The withholding of contract funds is a very effective enforcement tool in DBA/DBRA/CWHSSA cases.
- It ensures the availability of monies for the payment of the back wages if a contractor refuses to make restitution when back wages are found due to covered workers.
- It ensures that when federal agencies, states and local communities have benefited from the work performed by the contractor's employees, funds will be used to pay the employees the applicable prevailing wage and overtime compensation.
- The prime contractor is responsible for compliance on the contract, will be liable for payment of the back wages not paid by a subcontractor, and may decide to withhold payments from the subcontractor until the back wage issues are resolved.
- Ensuring that the proper wages are received by covered workers on government contracts lies with representatives of the contracting agency and/or DOL.
- A contracting officer should withhold funds when he/she believes that a back wage violation exists.
- In addition, contracting officers shall withhold funds upon written request from DOL. Contracting officers should respond immediately confirming that the funds have been withheld.
- Additionally, if the request has been made by DOL, it is imperative that the agency preserve the withheld funds until notified in writing by DOL regarding final disposition of the withheld funds.
Davis-Bacon and CWHSSA contract clauses
- The contract clause language set forth at 29 C.F.R. § 5.5(a)(2) states:
- Withholding - The federal agency or the loan or grant recipient shall upon its own action or upon written request of an authorized representative of DOL withhold or cause to be withheld from the contractor under this contract or any other federal contract with the same prime contractor, or any other federally-assisted contract subject to Davis-Bacon prevailing wage requirements, which is held by the same prime contractor, so much of the accrued payments or advances as may be considered necessary to pay … the full amount of wages required by the contract.
In the event of failure to pay any laborer or mechanic, including any apprentice, trainee, or helper, employed or working on the site of the work, … all or part of the wages required by the contract, the (Agency) may, after written notice to the contractor, sponsor, applicant or owner, take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds until such violations have ceased.
- 29 C.F.R. § 5.5(b)(3) is a similar provision concerning the withholding of contract funds to satisfy overtime pay obligations and liquidated damages determined to be due because of CWHSSA violations.
- The comparable FAR contract clause language "Withholding of Funds" is at 48 C.F.R. § 52.222-7 and "Contract Work Hours and Safety Standards Act - Overtime Compensation" is at § 52.222-4. (The FAR guidance for applying the DBA/DBRA/CWHSSA contract clauses is at 48 C.F.R. §§ 22.403-3, 22.403-4, 22.407(a)(2), and 22.305.)
- FAR guidance regarding the "Withholding from or suspension of contract payments" at 48 C.F.R. § 22.406-9(a) states:
- Withholding from contract payments.he contracting officer believes a violation exists (see 22.406-9), or upon request of the Department of Labor, the contracting officer must withhold from payments due the contractor an amount equal to the estimated wage underpayment and estimated liquidated damages due the United States under the Contract Work Hours and Safety Standards Act. (See 22.302.)
- Continuing, the FAR guidance, at 48 C.F.R. § 22.406-9(a)(2), states:
- If subsequent investigation confirms violations, the contracting officer must adjust the withholding as necessary. However, if the DOL requested the withholding, the contracting officer must not reduce or release the withholding without written approval of the Department of Labor.
- At 48 C.F.R. § 22.406-9(a)(3) the FAR further requires that the withheld funds are to be used to satisfy assessed liquidated damages and (unless the contractor makes restitution) validated wage underpayments. (See also 48 C.F.R. § 22.406-9(c), "Disposition of contract payments withheld or suspended" and 48 C.F.R. § 406.10 "Disposition of disputes concerning construction contract labor standards enforcement.")
- Cross-withholding provisions under the Davis-Bacon and related Acts give DOL and contracting agencies some recourse in collecting back wages in situations where the contract on which the violations occurred has been paid off by the contracting agency. Where funds remaining on the contract under which the violations occurred are insufficient to cover the back wages due, the contracting agency may withhold funds from other contracts subject to DBA/DBRA/CWHSSA or any other federal contract held by the same prime contractor. (See 29 C.F.R. § 5.5(a)(2) and 29 C.F.R. § 5.5(b)(3). For FAR guidance see 48 C.F.R. § 22.406-9(a)(1).)
Consulting Services We Provide
- Review public works preconstruction contracts
- Monitor DIR contractor/subcontractor certified payrolls
- Audit labor classification for each worker employed
- Review DIR pre-DAS 140/142 submissions
- Review CAC training fund contributions form CAC-2
- Review DIR Fringe Benefits Statement PW-26
- Monitor DIR wage determinations
- Audit fringe benefits allowances
- Review DIR holiday payment requirements
- Audit DIR travel & subsistence requirements
- Caltrans Labor Compliance
- County of Sacramento Labor Compliance
- City of Los Angeles Labor Compliance
- Los Angeles Unified School District Labor Compliance
- Federal Davis-Bacon Project Monitoring
- Federal DBE Implementation & Review
- Federal FAA AIP Goal Setting
- DIR & Davis-Bacon Training
- DIR Civil Wage Penalty Review
- Local-Hire Review (e.g., San Francisco)
- Skilled and Trained Workforce
Give us a call to discuss your labor compliance requirements.
This email is intended for general information purposes only and should not be construed as legal advice
or legal opinions on any specific facts or circumstances.