An investigation by the Department of Labor Wage and Hour Division (DOL WHD) recently found that J. Solano HVAC LLC (the Company), a subcontractor on two Washington, D.C. affordable housing projects, willfully violated the DBA (Davis-Bacon Act) multiple times when it: (1) failed to pay workers the prevailing wage and (2) misclassified skilled sheet metal workers and pipefitter mechanics as lower-skilled laborers, thereby underpaying required wages and fringe benefits. DOL action shows that willful violations of the DBA risk more than wage penalties for government contractors.
What is the DBA?
The DBA requires contractors and subcontractors on federally funded or assisted construction projects to pay workers no less than the locally prevailing wages and fringe benefits for corresponding work classifications.
How did the Company violate the DBA?
The investigation revealed a kickback scheme where the Company paid 31 employees the required prevailing wage rate via check, but then verbally required the workers to return any wages exceeding $30 per hour. The investigation also found the Company’s misclassification of skilled workers as laborers with a lower prevailing wage rate led to underpayments in the basic hourly rate, holiday pay, and fringe benefits.
Result: Not only did the Company have to pay the hefty sum of $596,443 in back pay and fringe benefits, but DOL WHD debarred the Company and its owner from bidding on federal construction contracts for 3 years because of the Company’s clearly willful efforts to violate the DBA.
Recommendations for Federal Contractors:
- Prior to bidding, understand your obligations under the DBA or “Mini DBAs”
- The DBA applies to construction projects funded in part or in full by federal dollars. That means DBA obligations could be lurking behind many types of construction projects.
- Many state-funded construction projects have prevailing wage requirements mirroring DBA requirements called “Mini DBAs.”
- Ensure your company understands DBA and Mini-DBA requirements prior to bidding so you don’t lose contracting opportunities.
- Worker Classification Drives Wage Liability
- Employers must match job duties, rather than job titles, to assign the correct wage determination rates. This means that when classifying workers, it’s important to look at the specific duties the workers perform to evaluate how local prevailing practice would classify the work.
- Employers must continuously monitor the duties of forepersons and laborers to ensure they are not performing skilled trade work without proper classification.
- The Prevailing Wage Includes Fringe Benefits
- Even if hourly wages are compliant with the prevailing wage, employers must pay required fringe benefits to avoid liability.
- Remember that under the DBA, wage and fringe benefits can be combined.
- Unique vacation and holiday pay requirements may also apply.
- The Stakes are High in DBA cases
- Suspension or debarment are serious potential consequences for a company relying on government contracts.
- False certifications in certified payrolls can create costly False Claims Act exposure.
- Seek counsel to avoid willful violations.
The Labor and Employment team at PilieroMazza works with multijurisdictional employers on meeting their compliance requirements, particularly those related to the Davis-Bacon Act and the Service Contract Act. If you have questions, please contact Sarah Nash, Sara Ryan, or another member of the Group.
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