A r c h i v e d  I n f o r m a t i o n

Negotiating the Legal Maze to Volunteer Service - 1998

Prevailing Wage Laws

The federal Davis-Bacon Act establishes payment standards for laborers and mechanics involved in many federally funded public construction projects. In essence, the law requires that the prevailing wage be paid to workers doing any form of construction, alteration, or repair (including painting and decorating) of any public building or public works of the United States or of the District of Columbia. The wage provisions apply only in situations involving federally funded contracts for amounts in excess of $2,000.

The rule applies to "all laborers and mechanics" and can thus potentially extend to individuals who intend to volunteer labor or mechanical services. As a result, the law may interfere with the efforts of public agencies and charitable organizations that hope to conduct construction, rehabilitation and neighborhood improvement projects.

Congress passed the Davis-Bacon Act during the Depression in an effort to prevent migrant workers from undercutting local labor in the construction and building trades industries. Since its passage in 1931, most states have adopted their own prevailing rate statutes covering state funded projects. Although the various state statutes closely parallel the federal Act, variations do exist. Some state statutes apply stricter standards, while others include more relaxed provisions. Any service organization that receives state funding to conduct construction, alteration and/or repair services should carefully examine its obligations under both state and federal law. Federally assisted state or local construction projects covered by both the Davis-Bacon Act and a state prevailing wage statute may be subject to separate federal and state wage requirements. Where the prevailing rates differ, the general rule requires that the higher of the two rates be paid.

Types of Work

The Davis-Bacon Act applies only to programs that have workers involved in the following types of activities:

Construction

Maintenance

Repair

Painting/Decorating

The U.S. Department of Labor expansively interprets each of these categories. The law has been interpreted to include altering, remodeling, installing on-site items fabricated off-site, painting and decorating, the transporting of materials and supplies to or from the building or work by the employees of the construction contractor or subcontractor, and the manufacturing or furnishing of materials, articles, supplies, or equipment on the site of the building or work by persons employed by the contractor or subcontractor.

Public Building or Public Works Project

The Davis-Bacon Act applies where work is performed on the site of a "public building or public works project" under a federal contract worth over $2,000. The phrases "public building" and "public work" refer to:
"building or work, the construction, prosecution, completion or repair of which . . ., is carried on directly by authority of or with funds of a Federal agency to serve the interest of the general public regardless of whether title thereof is in a Federal agency."

A "public building" can be a federal building (such as a courthouse or federal office building) or it can be any other type of building the construction, etc., of which is being financed in whole or in part by the federal government. The phrase "public works" usually refers to some form of public construction, other than a building, where the United States is a party to the contract, or is financing, in whole or in part, the construction, repair, etc. The terms have been held to include buildings, structures, and improvements of all types such as bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, pumping stations, heavy generators, railways, airports, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, dredging, shoring, rehabilitation and reactivation of plants, scaffolding, drilling, blasting, excavating, clearing and landscaping.

Site of the Work

The act's prevailing wage requirement applies only to workers conducting covered activities directly at the physical construction site or at certain specifically defined "off-site" locations described in Department of Labor regulations. The "site of the work" is limited to the physical place or places where the construction will remain when the work has been completed. The "site" also includes adjacent or nearby property used by the contractor or subcontractor in the construction. Fabrication plants, mobile factories, batch plants, borrow pits, job headquarters, and tool yards are also included as part of the "site of the work," provided that they are almost exclusively dedicated to the performance of the project and are located in reasonable proximity to the actual construction.

The Department of Labor's Wage and Hour Division uses both a geographical and a functional test to ascertain whether the activity in question is being conducted at the site of the work. Geographically, the activity must take place at or proximate to the site, and functionally, the work must be almost exclusively related to the project. Under this analysis, the Wage and Hour Division determined that the "site of the work" did not include a camp used to house and feed federal laborers who were employed at a nearby federal construction project. The camp was close enough to the work site to satisfy the geographical requirement. The camp nonetheless failed the functional test because it serviced the workers of many projects and was not dedicated to a particular contract or project.

Contractors and Subcontractors

The Davis-Bacon Act applies both to contractors and to subcontractors on a federal project. The employees of materialmen--companies that supply material for the work away from the construction site, and those that maintain establishments where their goods are sold to the general public--are not covered if they do not spend more than 20 percent of their working time at the construction site. To comply with the act, the contract detailing the work must contain a stipulation that "the contractor or his subcontractor" must pay mechanics and laborers in accordance with the Act, regardless of any contractual relationship that may already exist between the contractor or subcontractor and the laborers and mechanics.

The federal wage law applies to labor, but not to the materials used by the laborers. Thus, the mere use of federal funds exclusively for the purchase of materials, equipment, machinery, or other fixtures installed during the construction work, or to pay for architectural and engineering services rendered before the work commences, does not invoke Davis-Bacon coverage.

Prevailing Wage

The Davis-Bacon Act obligates contractors and subcontractors to pay the prevailing wage to laborers and mechanics. Thus wages for the same work can vary from locality to locality. Different types of laborers may also be entitled to different levels of pay. Prevailing wage rates are set by the Secretary of Labor, based on investigations conducted by U.S. Labor Department officials.

Fringe Benefits

In 1964, Congress amended the Davis-Bacon Act to include fringe benefits within the law's definition of wages. These fringe benefits include medical or hospital care, pensions, work-injury compensation, unemployment benefits, vacation pay, and other bona fide fringe benefits not required by other Federal, State or local law. As a result, wage determinations must specify not only prevailing hourly rates of pay, but also locally prevailing fringe benefits expressed as hourly rates.

Volunteer Exemptions

Over 50 federal statutes expressly reference the Davis-Bacon Act and fortunately many of them exempt "volunteer" workers from prevailing wage requirements. For example, in 1994, Congress passed the "Community Improvement Volunteer Act of 1994," designed:
to promote and provide opportunities for people who wish to volunteer their services to State or local governments, public agencies, or nonprofit charitable organizations in the construction, repair or alteration (including painting and decorating) of public buildings and public works that are funded, in whole or in part, with Federal financial assistance authorized under certain Federal programs and that might not otherwise be possible without the use of volunteers.

The Community Improvement Volunteer Act of 1994 exempts from Davis-Bacon Act prevailing wage requirements laborers and mechanics who perform volunteer services for public entities and for private nonprofit entities. The statutory provisions extend exemptions to projects issued under the Indian Self-Determination and Education Assistance Act, sections 329 and 330 of the Public Health Service Act (applicable to migrant health centers and community health centers), the Indian Health Care Improvement Act, and the Housing and Community Development Act of 1974.

Those who wish an exemption for work for public entities must

Work performed by a volunteer for a public entity may not directly or indirectly benefit any contractor performing work on the same project. The volunteer may not be employed by and may not provide services to a contractor or subcontractor working on the same project, nor may the volunteer be employed by the public agency to perform the same services for which he or she is volunteering.

Individuals who wish to volunteer services for private nonprofit charitable organizations are subject to similar restrictions, except that no parallel provision permits the receipt of expenses, reasonable benefits or a nominal fee.

A number of other statutes also exempt volunteers from the prevailing wage provisions of the Davis-Bacon Act. Waivers appear in statutes that govern federal projects involving the construction of supportive housing for persons with disabilities, national affordable housing, affordable housing for the elderly (The Housing Act of 1959), the U.S. Housing Act of 1937, and The Housing and Community Development Act of 1974.

Penalties

Service organizations involved in contracts not subject to one of the statutory exemptions must pay affected workers the prevailing wage that applies to the type of labor being performed. Violations of the Davis-Bacon Act can result in a variety of fines and penalties. In addition, organizations whose funding agreements require compliance may lose this funding.

Techniques to Avoid Coverage

Organizations that commonly engage in contracts subject to Davis-Bacon restrictions have developed a variety of legal strategies designed to circumvent the law's costly provisions. In doing so, these nonprofit entities offer their volunteers meaningful opportunities closely related to but not always consisting of construction, alteration and repair activities. For example, some organizations have engaged their volunteers in a range of low income neighborhood projects that include installing play structures, landscaping, renovating recreational facilities, rehabilitating urban parks and community gardens, planting trees, and removing graffiti. Before engaging in these projects, the organizations first consult with the local offices of federal authorities to obtain assurances that the proposed service projects fall outside Davis-Bacon Act protections. Other service organizations have engaged their personnel in projects arising from contracts that involve less than the $2,000 minimum cited for Davis-Bacon applicability. Some organizations have applied their federal grant funds exclusively to the purchase of materials, using only funds from nonfederal sources to pay for labor.

Without question, in any situation where a service entity plans to use volunteers for a construction related task, the organization should ascertain whether the Davis-Bacon or comparable state prevailing rate provisions apply. The volunteer organization should consult the project's funders to determine whether the contract itself requires compliance with the labor law. In addition, the organization should confer with both federal and state labor departments to request an advance determination as to whether prevailing rate laws apply. Volunteer organizations are also advised to consult with their local unions, since union approval of a project can often improve the prospects of a favorable labor department ruling.


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