Compliance With

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Compliance With Prevailing Wage Laws
Presented by Dan Argentati, Director
Michigan Fair Contracting Center
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Definition Prevailing Wage is the hourly rate,
plus benefits, and overtime, required by law to
be paid for each trade or occupation while
performing work on State or Federal projects.
The prevailing wage is established by the State
or Federal government (depending on the funding
source of the project).
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• Applicable Laws
• MDOT requires compliance with either the
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• Federal Prevailing Wage Law (Davis-Bacon Act),
  or
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• Michigan Prevailing Wage Law (Act 166)
• The prevailing wage requirements are very similar
  except for the overtime provisions.

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• Wage Determination
• The wage determination contains the worker
  classifications and corresponding prevailing
  wage rate that applies in a specific county
  where the work takes place.
• The wage determination is simply a listing of
  different work classifications and the
  required prevailing wage rates that must be
  paid to anyone performing work in those
  classifications.

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Example of Federal (Davis-Bacon) Wages
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Example of State Wages
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• Wage Determination (continued)
• Prior to preparing your bid, it is important to
  obtain a copy of the actual wage determination
  that applies to the job your firm is bidding.
• The wage determinations are included in the MDOT
  bid specifications. If you are a subcontractor,
  it is imperative that you obtain a copy of the
  wage determination from the prime contractor,
  prior to preparing a bid.
• Be aware of addendums that are issued which could
  affect the wage rates. Request any addendums
  from the prime contractor.
• Check for multiple wage determinations, and
  understand which part of the project your crew
  will be involved.

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• Workers Classification
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• The workers classification on MDOT projects is
  based on the type of work being performed,
  which often is different than the title his/her
  employer may assign to them on private work. It
  is the duty of the employer to classify the
  worker based on the definitions in the wage
  determination. An MDOT inspector will also
  classify the worker, and it is necessary that
  there is an agreement on classification.

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• Workers Classification (continued)
• Example from MDOT Proposal
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• Scope of work Curb and Gutter
• Identify the trades required to perform the
  work.

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• Workers Classification (continued)
• Type of Work Classification
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• Construct curb with curb machine Slip
  form paver operator
• Install concrete forms Form
  setting laborer
• Finish the cement Cement
  mason
• Landscape, seed, etc., to
  Unskilled laborer
• repair disturbed areas.

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• Workers Classification (continued)
• Summary
• Classification Rate Fri
  nge
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• Group 1 Operator - Slip form paver 27.23
  14.80
• Group 1 Laborer - Form setting
  laborer 22.59 8.75
• Cement Mason 23.79
  6.45
• Group 1 Laborer - Unskilled laborer 22.5
  9 8.75

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• Workers Classification (continued)
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• Some workers may have multiple duties. They may
  be using a hand rake for several hours a day,
  and then using a front end loader for the
  remainder of the day. Under this scenario, the
  employer must split up the employees time into
  two categories (Laborer and Operator). Both have
  different hourly wages and benefits, and the
  employer should be aware of the amount of time
  spent conducting each activity within practical
  reason.
• An employee must be paid for all principal
  activities as well as activities which are an
  integral part of a principal activity. For
  example, these include wait time and standby
  time while sitting idle until the next gravel
  truck arrives for a reload.

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• Workers Classification (continued)
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• Working foreman. Foremen or supervisors that
  regularly spend more than 20 percent of their
  time performing construction work are covered
  under prevailing wage for the time spent
  performing construction work.
• Exclusions. People whose duties are primarily
  administrative, executive or clerical are not
  laborers or mechanics. Examples include
  superintendents, office staff, timekeepers,
  messengers, etc.
• Apprentices. Some workers may be classified
  as apprentices which allows for a lower
  prevailing wage rate. Apprentices are allowed,
  however, they must be enrolled in a program
  registered with the Bureau of Apprenticeship
  Training (BAT), US Department of Labor.

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• Prevailing Wage Components
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• The prevailing wage is made up of two
  interchangeable components
• The basic hourly rate listed on the wage
  determination.
• The fringe benefit value listed on the wage
  determination.
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• Bona fide fringe benefits include, Health
  Insurance, Profit Sharing Plans, Training and
  Apprentice Programs, Pension Plans, 401k plans,
  Vacation, and Holiday. Company trucks, meals,
  paid lodging, tools, paid travel time, gas and
  cell phones, are not considered bona fide fringe
  benefits, and cannot be used to meet the
  prevailing wage requirement.
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• Legally required payments, such as taxes,
  workers compensation, social security and
  medicare contributions cannot be credited toward
  prevailing wage.

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The total including the value of the fringe
benefits may be paid entirely as cash wages, or a
combination of cash wages paid and bona fide
fringe benefits used together to meet the total
required prevailing wage.  For
example  Hourly Rate Fringe Total
Package 22.00 8.00 30.00 The contractor
can comply by paying 1.   30.00 in cash
wages 2.   22.00 plus, 5.00 in health insurance
benefits, and 3.00 contributions in a 401k
account. 3.   19.00 plus 11 in 401k
contributions or any other bona fide fringe
benefit that would have a value of 11.
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Fringe Benefit Credit Example Benefit
Paid Total Vacation
40 hours X 20/hr 800/yr Blu
e Cross monthly premium 90
0/month 401K Employer Contribution of
3.00 per hour 3.00/hr   To
calculate the Fringe Credit Benefit Ca
lculation Total Vacation 4
0 hours X 20/hr 800/2080hrs
.38 Blue Cross 900 X 12
10,800/2080hrs 5.19 401K 3.
00 per hour 3.00
8.57 Credit   Note
When a fringe benefit is not paid by an hourly
rate, the hourly credit will be calculated based
on the annual value of the fringe benefit divided
by 2080 hours per year. (52 weeks _at_ 40 hours per
week)
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• Application of Overtime (Davis-Bacon)
• Time and one half must be paid for all hours
  worked after 40 hours.
• Fringe benefits must be paid for all hours
  worked, including the overtime hours. However,
  the fringe benefit amounts may be excluded from
  the half- time premium due as overtime
  compensation.
• For Example
• An employee worked 44 hours. The wage
  determination hourly rate is 22, and the fringe
  portion is 8.00. The worker would be due
• 44 hours x 30 1,320 (straight time pay)
• 4 hours x ½ (22) 44 (overtime pay)
• 1,364

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Application of Overtime (Davis-Bacon)
(continued) Example Assume the published rate
is 22.00 and the fringe is 8.00 Straight
Time Overtime 22 and 8 22
8 ½ of 22 41 30 30 0
½ of 22 41 20 and 10 20 10
½ of 22 41 20 and 12 20 12
½ of 20 42 As shown, overtime can be
computed on a hourly rate less than the
published hourly rate, as long as the sum
equals or exceed the sum of the overtime if it
had been calculated on the published hourly
rate.
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• Application of Overtime (Davis-Bacon) (continued)
• Example Dual rates of pay for a worker that
  performs a different job during overtime.
• Weighted average is allowed in calculating
  overtime
• 15/hr for 40 hours as a laborer 600
• 25/hr for 10 hours as an operator 250
• Average Rate (Total Dollars) ? (Total Hours)
  or 850/50 hours 17
• Overtime Rate 17 X 1.5 25.50

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• Application of Overtime (Davis-Bacon) (continued)
• Example Overtime calculations when working on a
  prevailing wage project and a private project
  during the same work-week.
•  Calculate Average Straight Time Rate
•        45 hours x 20 (PW hourly rate)
  900
•        15 hours x 10 (non PW rate)
  150
•        Total Straight Time earnings
  1,050
•  Average Straight Time Rate 17.50
  (1,050/60 total hours worked)
• (all 60 straight time hours are now accounted
  for)
•  Calculate the Overtime Premium
•        PW Overtime 5 hours x ½ (20) 50
•        Non PW Overtime 15 hours x ½ (17.50)
  131.25
•  Total Due (1,050 50 131.25) 1,231.25
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• Application of Overtime (State Prevailing Wage)
• Time and one half must be paid for all hours
  worked after 8 hours.
• Be aware of double time provisions for certain
  trades.
• Overtime rates are listed in a separate column
  on the State wage determination.
• Overtime provisions are represented as a
  nine-character code on State projects.

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• Record Keeping
•  Recommendations to prevent problems
• Keep original records (not photo copies).
• Require employees signature on timecards or
  foreman logs.
• Breakdown the rates, applicable hours, and
  benefits on the employees check stub.
• Educate employees upfront about the rates,
  benefit credits, etc.
• If employees are confused, incorrect
  information could be recorded during a wage rate
  interview.
• Poor record keeping could slow down payments
  if a problem arises during a wage inspection.

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• Please use the Michigan Fair
• Contracting Center as a Resource
• Website Address www.mifcc.org
• Mailing P.O. Box 530492
• Livonia, MI 48153-0492
• Phone [phone]
• Cell (Dan Argentati) 248-202-5465

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Thank You!
Michigan Fair Contracting Center