Fringe Benefits in the Prevailing Wage World

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The purpose of this article is to increase the awareness of the requirements related to federally funded Davis Bacon construction projects.

Established in 1974, Interstate Mechanical Corp. is a mechanical contractor located in Phoenix, Arizona that specializes in HVAC within commercial construction. In the past year, we were contracted to perform specialty welding on large piping at a power plant located west of Phoenix. This project was federally financed and therefore required us to pay the prevailing wage and fringe benefits to all laborers and mechanics as specified under the Davis Bacon Act.

The Department of Labor, Wage & Hour Division (DOL) is a federal agency that enforces compliance with all provisions of the Davis Bacon Act. The DOL notified us that we were the subject of an investigation aimed to review compliance on this specific project. We were required to provide various records and allow for our current and former employees to be interviewed by federal investigators.

The DOL determined we were in compliance with the prevailing wage portion of the law but did not properly credit vacation fringe benefits to some of our employees. We agreed to comply with all aspects of the Davis Bacon Act moving forward and the investigation was resolved rather quickly. The investigation provided us the opportunity to take preventative measures by conducting annual internal audits, attending DOL Prevailing Wages Seminars and allows us to contact DOL directly for answers on specific areas of compliance.

The DOL was very reasonable and a pleasure to work with throughout the compliance review and determination process. Since this was our first interaction with the DOL and our actions were not intentional, the process was resolved without any additional sanctions beyond the payment of back wages. However, in cases where companies engage in violations of the Davis Bacon Act that are beyond mere negligence, the DOL could possibly debar a contractor from bidding on federally financed projects for up to three years. We learned that this was not a risk we were willing to take and will take all necessary steps to remain compliant with all aspects of the Davis Bacon Act.

For additional information on the Davis Bacon Act and other labor laws, visit the Wage and Hour Division Website: http://www.dol.gov/whd and/or call the toll-free information and helpline at 1-866-487-9243.

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