A prevailing wage is defined as the average rate of pay that a worker can receive based on their specific occupation in a particular place or region. Thus, the standard wage paid in one state may be much higher than what a worker receives for doing the same job in another state.
According to the federal laws that govern prevailing wage standards, employers who hire workers to complete projects related to government contracts must pay those employees the required rate.
This is because the purpose of having a prevailing wage standard is to prevent the possibility of giving an employer an unfair advantage during the bidding process for a government contract.
For example, employers who hire non-union workers may try to win the bid for a government contract by paying their workers at a rate that is significantly below the average union pay rate. This would make their bid seem more attractive than others because the contract price would be lower due to the slashed workers’ wages.
Additionally, prevailing wages can also help to ensure safer working conditions for employees and may guarantee that the workers hired possess the necessary skills for the job.
What Type of Workers Receive Prevailing Wages?
In general, workers who perform public work assignments typically can receive prevailing wages. The term “public work” refers to any kind of work that is financed and directed by the government or other local public agency.
The following are some examples of public work activities:
- Construction for public buildings (e.g., schools, hospitals, etc.);
- Remodeling or renovation projects;
- Demolition of publicly funded works;
- Installation of public spaces (e.g., parks) or transportation (e.g., roads); and
- Utilities construction (e.g., electrical grids, water supply treatment, etc.).
Prevailing wage rates may also apply to certain residential and commercial works. This might happen when such projects are paid for either entirely or partly by public funds.
When these circumstances exist, then the workers must be paid in accordance with prevailing wage standards despite the fact that what they are working on may be residential or commercial (as opposed to public).
How is a Prevailing Wage Calculated?
For federal projects, the U.S. Department of Labor is the governmental agency responsible for setting the prevailing wage rates. The department will usually base these standards on the following factors:
- The type of labor involved in the project;
- Where the work is being performed (i.e., the designated geographic location); and
- What kind of project it is (e.g., construction, renovation, demolition, etc.).
There are also several different federal laws that provide what employers must pay out as prevailing wages.
For example, according to the federal law known as “The Davis-Bacon Act”, any contractor or subcontractor who performs work on a federal contract that is worth more than $2,000 must pay basic prevailing wage rates, as well as corresponding fringe benefits (e.g., disability insurance, vacation, sick leave, etc.).
A prevailing wage can also be determined by calculating the hourly wage amount, the basic benefits, and any overtime that is paid to the majority of workers within the vicinity. Again, this means that the prevailing wage can vary widely between different states and even among different municipalities within the same state.
As for state projects, the department of labor for each state will be responsible for setting their own state’s prevailing wage standards, including for every trade and occupation within that state.
One other way that governments can come up with a uniform prevailing wage for an area is by reviewing surveys or collective bargaining agreements made between unions and employers.
As discussed above, although the method for how each state calculates their own prevailing wage rates may be different from state to state, the following are some general ways in which states might do so:
- The Majority Wage in the Largest City: If the largest city in a particular county reports that the majority of all working hours are compensated at a specific wage rate, then that wage rate will be used to determine the prevailing wage for the entire county.
- The Average Wage in the Largest City: If there is no particular majority wage rate that uniformly applies across a county, then a weighted average wage can be computed by using date from the largest city within a county.
- Using the Existing Wage Rate: If there is no new or current data to look at for a county, then a previous prevailing wage in the county will be set as the new prevailing wage rate until some time has passed and more data has been collected.
- Countywide Average Rate: If the largest city has not provided or reported any working hour statistics, then a weighted average wage can be established by reviewing the data from the county in general.
The above list only provides some examples of how states may calculate their prevailing wages. Therefore, there may be many more methods that a state may use to make these determinations.
Do I Need to Hire an Attorney for Help with Prevailing Wage Issues?
As discussed above, prevailing wage laws are meant to cover employees who perform work on projects that are associated with government contracts. Therefore, if you are working on an assignment that fulfills the terms of a government contract and you are not being paid the standard prevailing wage rate, then you may be able to bring a legal action against your employer.
In order to assess the merits of your claim, however, you should consider contacting a local employment law attorney for further assistance and to gain legal advice that is specific to your matter.