The Prevailing Wage was first established by Congress as an incentive for employees and contractors to finish public works projects on time. A prevailing wage is a set wage for trade and/or public works in a specific area. The prevailing wage for each field of work or trade classification is based upon the results of a wage survey, held at regular intervals to determine the current wages and benefits paid to the majority of workers in a given area. The 1931 Federal Prevailing Wage law, known as the Davis-Bacon Act, applies to all federally funded projects valued at $2,000.00 or higher. The Davis-Bacon Act also applies to all publicly funded projects over $2,000.00 in the District of Columbia.
There are a total of 32 states with independent prevailing wage laws and regulations in addition to the Davis-Bacon Act, including Maryland. The Maryland Prevailing Wage law applies to constructions project valued at $500,000 or more if either of the following criteria are met: (1) the contracting body is a unit of State government, and the project has received State funding; or (2) the contracting body is a political subdivision, agency, person, or entity (such as a county) and the State funds 50% or more of the project (except for school construction, where the contract value is $500,000 or greater, with State funding of 25% or more).
In addition to the Federal and State prevailing wage laws, there are four counties in Maryland which have their own prevailing wage statutes for county-funded public works: Baltimore City, Charles County, Montgomery County, and Prince George’s County. Although the specifics of these laws vary from region to region, county prevailing wage laws generally come into play on county funded projects which do not meet the threshold for the State or Federal prevailing wage requirements.
It is not enough to simply establish the prevailing wage. Prevailing wage agencies at the Federal, State, and local levels have a duty to enforce the prevailing wage laws; otherwise, they hold no value. Most of these agencies have a compliance unit which requires contractors to file weekly certified payroll records for all employees working on the project. These records list employee classifications, hours worked, rates of pay, and fringe benefits, and are subject to review by the compliance agency. Contractors are penalized for failure to file and for filing late, and the records are audited to ensure that employees are being paid correctly. This task falls to the Department of Labor for Federal contracts, and to the Department of Labor, Licensing, & Regulation (DLLR) for State contracts. The various counties have their own compliance agencies and procedures, all of which mimic the Federal and State models to some degree.
Although the intention is to enforce the law, these agencies are generally understaffed and underfunded. The number of Davis-Bacon and prevailing wage contracts in progress at any given time generates such a high volume of certified payroll records that it is unlikely all of them received an appropriate and thorough review. Unscrupulous contractors will often falsify certified payroll records by misclassifying employees as laborers, failing to report overtime hours, or forcing employees to provide “kickbacks” (this is when a contractor pays employees the prevailing wage on their weekly paychecks, but goes to the bank with them and takes some of the money back as cash).
Failure to pay employees the corresponding prevailing wage for their work is considered wage theft, and providing false information on a certified payroll record is fraud. Most of the time, these violations are not discovered without the added push of an employee compliant. State and Federal employment laws are in place to protect employees from unscrupulous contractors—an employee cannot be fired for making a complaint for lost wages. Employees who make a successful complaint for wages owed to them can receive three to four times the amount they are owed. If an employer is found guilty of willful violations, they may be subject to hefty fines and penalties; including payment of all wages owed to their employees, exclusion from bidding on government contracts for a period of time, or even the complete loss of their business license.