The laws and requirements regarding Davis-Bacon and prevailing wage projects can be confusing, especially if you haven’t worked on one of these types of projects before. Mistakes in reporting and paying correct wages are common. Luckily, as long as you correct the mistakes and submit a new report quickly, the penalties should be low.
To help prevent some of the more common prevailing wage mistakes, we’ll give you some tips to avoid them.
Common prevailing wage mistakes
According to the Department of Labor, these are the most common mistakes contractors make on Davis-Bacon projects:
1. Misclassification of workers.
2. Failure to pay full prevailing wages, including fringe benefits, for all hours worked, including overtime.
3. Inadequate record-keeping, such as not counting all hours worked or not recording hours worked by an individual in two or more classifications during the same day.
4. Failure to maintain a copy of Department of Labor apprenticeship certification and individual registration documents for apprentices.
5. Failure to submit certified payroll reports weekly.
6. Failure to post Davis-Bacon applicable wage determinations on the jobsite.
We’ve also seen the following additional issues come up:
Accurate time tracking and overtime calculation
Accurately tracking the amount of time workers perform certain tasks can be difficult when using paper timecards and other low-tech methods of time tracking. There’s also the challenge of determining what to do when workers split their time between prevailing wage and non-prevailing wage jobs in the same week. Overtime has to be calculated based on a weighted average of the worker’s prevailing wage and regular wage. Most of the existing payroll providers don’t handle these overtime edge cases well, which can lead to mistakes or additional manual work double checking every overtime calculation!
Difficulty tracking down the right rates
Not all contractors on a project have the correct information about pay rates. The prime contractor may not have distributed the rates to subcontractors, or to the sub’s subs, or the correct rates somehow get lost in the shuffle. Contractors can spend hours looking through contracts and websites to find the information they need. If you aren’t tracking rates or storing them in your own database, it can delay payroll processing or lead to paying incorrect rates. This can lead to owing backpay, penalties, and fines, and prevent contractors from working on future prevailing wage projects.
Confusion about classifications
When the same work description is found across multiple trades (e.g., Landscape Irrigation is found in Pipe Trades (Landscape Irrigation Fitter) and also under Laborer) it’s easy to get confused about which one is correct. With the right time tracking software, this issue can be avoided. Software controls allow management to set which activities can be selected for each individual job. At job set up, payroll categories are defined, and you don’t have to stress about a worker selecting an incorrect trade.
Using incorrect rate dates
The date of the wage determination is based on when the project is bid. In some cases, projects are put out to bid months or years before construction starts. This can lead to confusion about which rates to use during construction. Contractors on prevailing wage projects must always confirm that they are using the correct wage rate determination date, or they could be paying the wrong rates and be subject to backpay and fines.
Depending on the type of project, state or federally funded, different forms may be required to report prevailing wages. Lower tier contractors often have more difficulty getting the correct forms from their customers. When hours and wages aren’t reported on the correct form, they may not be accepted by the contracting party.
What happens if mistakes are uncovered in a Davis-Bacon audit?
It’s fairly common for contracting bodies to subject prevailing wage reports to regular audits. These audits review the documentation submitted by contractors on a project, ensuring that the correct wages were paid and reported. When mistakes like those listed above are found, the reporting contractor is responsible for correcting the error. Once the mistake has been corrected, a new payroll report needs to be submitted to replace the incorrect one. This process is often stressful and time consuming.
Davis-Bacon projects place all the responsibility for correct payment and reporting on the prime contractor. If any mistakes are found, at any level of the contractor tier, the prime contractor is financially responsible for correcting the problem. This could mean that a prime would need to pay a subcontractor’s wages if they were reported incorrectly. This liability can lead to primes withholding payment until they’ve double checked various forms.
Fortunately, most mistakes can be easily corrected and resolved through a new form. However, for particularly egregious Davis-Bacon violations or when a contractor is unwilling to make corrections, the contractor can be debarred and will never be able to work on a Davis-Bacon project again. States can also debar contractors permanently or for a limited time when mistakes are made and not corrected.
What should you do if you get something wrong?
If you notice you have made a mistake on a prevailing wage report, it’s pretty easy to fix. First, you need to recognize your mistake as soon as possible and figure out how widespread the problem is. You’ll need to make corrections immediately, such as paying workers additional wages.
Next, if you are a subcontractor, you’ll want to notify the prime contractor of the mistake and submit a revised report if necessary. The prime contractor will then submit the revised reports to the contracting authority. If you are the prime contractor on the project and made a mistake, submit the corrected reports directly to the contracting authority.
Most mistakes can be corrected and submitted to the contracting authority without involvement from the Department of Labor. The department only gets involved if there is a complaint and no corrective action has been taken.
How can you avoid these common Davis-Bacon mistakes?
- Use software that has fully integrated time tracking, payroll, and built-in compliance with certified payroll reporting requirements. This is the best way to ensure that you have guardrails and protection throughout the process.
- Maintain accurate records and file management. You’ll need to track files at the job level to make your life easier should an audit occur.
- Set up a simple file sharing system with strong permissions. This is the best way to ensure that you’re staying on track with your reporting deadlines.
Davis-Bacon doesn’t have to be scary
Preventing most mistakes on Davis-Bacon projects is a matter of ensuring that communication has occurred to all levels of the project, keeping accurate records, and having proper software to calculate overtime and weighted wage averages. When you have these three together, you have a better chance of submitting correct reports, paying correct rates, and staying out of trouble.
Ready to learn more?
Are you ready to learn more about managing Davis-Bacon and prevailing wage projects? Check out our series below, or stay tuned for future updates!
Article 1: Introduction to Davis-Bacon
Article 2: Complying with Davis-Bacon forms
Article 3: Common Davis-Bacon Mistakes
Article 4: Managing Fringe Benefits
Article 5: Using Technology to Streamline Davis-Bacon Reporting