Labor Compliance Newsletter - October 2011

This quarterly newsletter is intended to achieve greater compliance and consistency throughout the State in our Federal Aid requirements, primarily with respect to payroll and payroll reporting issues.  To help make this happen, operational consistency between Districts is essential.  This newsletter was established as a common communication tool to all of the stakeholders striving to comply with our Federal Aid requirements - those within FDOT, the consultant community and our contracting partners.  It is our common goal to fully comply with applicable Federal Aid requirements and to do so in a manner that is consistent in application, effective in achieving compliance, and efficient in administration.  Hopefully, this newsletter will promote these ideals.
 

Note from the editor:  The topic of Fringe Benefits has been a point of interest and confusion for both contractors and state compliance individuals.  It has been a recurring topic in the newsletter and will continue to be until it is fully understood.

Davis Bacon Act & Fringe Benefits                                                                                                          Back to Top

The Davis-Bacon Act (DBA) requires that all laborers and mechanics employed on the site of the project be paid not less than the wages and fringe benefits determined by the Department of Labor (DOL) to be prevailing in the area. The Davis-Bacon Act, the first Federal wage law protecting non-government wage rates, was passed in March 1931. A 1964 amendment added a requirement to pay fringe benefits if they prevail in the area for the craft.

President Truman issued Reorganization Plan 14 in March of 1950. The Plan authorized the Secretary of Labor to standardize regulations and procedures governing DBA enforcement and administrative activities of Federal agencies, which until then had been conducting enforcement activities under their own individual guidelines. The responsibility to investigate complaints and violations remained the duty of the Federal agencies, under the Plan, but DOL was also given secondary enforcement powers to conduct investigations as it saw necessary.

The regulations were issued by the Secretary of Labor in 29 CFR for administration and enforcement of the Davis-Bacon Act
(Parts 1, 5, & 7) and for accompanying statutes such as the Copeland Anti-Kickback Act (Part 3) and the Contract Work Hours and Safety Standards Act (Part 5, Section 5.15). DOL also issues periodic guidance concerning these regulations by way of legal memoranda sequentially numbered and called All Agency Memorandum

What is a Fringe Benefits                                                                                                              Back to Top

Funded fringe benefit plans

Fringe benefits are contributions irrevocably made to a trustee or third party pursuant to a bona fide fringe benefit fund plan or program.  The "third person" is not affiliated with the contractor or subcontractor.  The plan or program must be set up in such a way that in no event will the contractor or subcontractor be able to recapture any of the contributions paid in or any way divert the funds to his own use or benefit.

Contractors may take credit for contributions made under such conventional plans without requesting the approval of the Secretary of Labor.

Types of funded fringe benefits:

• Life insurance

• Health insurance

• Disability insurance

• Pension

• Death benefits

Unfunded plans

No type of fringe benefit is eligible for consideration as an unfunded plan unless it can be reasonably  anticipated to provide benefits and it represents a commitment that can be legally enforced.  This unfunded plan is carried out under a financially responsible plan or program and has been communicated in writing to the laborers and mechanics affected.

Contractors or subcontractors seeking credit under the act for costs incurred for such plans must request specific permission for the Secretary of Labor under 29 CFR part 5.5

"(iv) If the contractor does not make payments to a trustee or other third person, the contractor may consider as part of the wages of any laborer or mechanic the amount of any costs reasonably anticipated in providing bona fide fringe benefits under a plan or program, Provided, That the Secretary of Labor has found, upon the written request of the contractor, that the applicable standards of the Davis-Bacon Act have been met. The Secretary of Labor may require the contractor to set aside in a separate account assets for the meeting of obligations under the plan or program."

Types of unfunded fringe benefits:

•  Vacation

• Holidays (paid)

• Sick leave

What is Not a Fringe Benefits                                                                                                                Back to Top

Fringe benefits are not:

Benefits that are required by Federal, State, or local law to provide any of such benefits, such as:

• Workers compensation

• Unemployment Compensation

• Social security contributions

Fringe benefits are not:

• The use of a truck

• Thanksgiving Turkey

• Christmas bonus

Compensation Requirements                                                                                                                Back to Top

Minimum Compensation-General:
DBA work must be compensated at no less than the applicable wage determination wages and fringe benefits (FB) for the classification of work actually performed. A contractor may elect to pay some or all of any required FBs in cash or some of the wages in FBs. Generally, a contractor can comply with DBA by paying any combination of wages and FBs that totals or exceeds the required wages and fringe benefits. Wages include only the amount paid for work performed and do not include any payments for lodging, meals, or employee-furnished vehicles, gas, tools, or materials. These payments are considered reimbursements for company business expenses initially paid by the employee.

Fringe Benefits include cash payments in place of FBs and irrevocable contributions (made at least quarterly) to bona fide fringe benefit plans or programs (pension funds, health plans, etc.).

Overtime Compensation is required for all hours worked over 40 per week. Non-work hours such as holidays, vacation, and sick leave are not counted towards the 40 hours. No premium is required for night, weekend, or holiday work. The overtime rate is 1 1/2 times the regular rate of pay. The regular rate of pay, for this calculation, can be no less than the applicable DBA WD rate-even if the contractor is paying part of the required wage rate in fringe benefits. In instances where required fringe benefits are paid in cash, the fringe benefit portion may be excluded from the overtime calculation. While fringe benefits are required to be paid on overtime hours, they are added after the calculation of "1 1/2 X regular rate".

Calculation of Compensation (Examples)                                                                                            Back to Top