Investigative Procedures and Remedies on Davis-Bacon Contracts

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CONTRACTING AGENCY REPORTS TO DOL

THE DBRA HEARING PROCESS AND APPEAL RIGHTS

REORGANIZATION PLAN NO. 14 OF 1950

Purpose

To promote consistency in the administration and enforcement of the Davis-Bacon and Related Acts (DBRA) among federal agencies, with the Department of Labor (DOL) playing a coordinating role.

DOL functions/responsibilities

Secretary of Labor – and, by delegation, the Wage and Hour Division (WHD) – is responsible for:
- Determining prevailing wages
- Issuing regulations and standards to be observed by contracting agencies
DOL performs a coordinating function and also has authority to conduct independent investigations.

Contracting agency functions/responsibilities

Federal agencies that award contracts and provide federal assistance have day-to-day enforcement responsibilities. See 29 CFR 5.6(a), 48 CFR 22.406-7, 22.406-8. The federal agency responsibilities include activities such as:
- Ensuring the incorporation of Davis-Bacon contract clauses and appropriate wage determinations in DBRA covered bid solicitations and contracts (and appropriate guidance concerning the application of multiple wage determinations) in accordance with 29 CFR 1.6(b) - (c) and 29 CFR 5.5 - 5.6. Any question related to the applicability of the DBRA or the appropriate wage determination must be referred to the Administrator of WHD for an appropriate ruling or interpretation. However, the labor standards contract clauses and appropriate wage determinations are effective by operation of law and are considered to be incorporated even when they have been wrongly omitted from a covered contract. See 29 CFR 3.11 and 5.5(e). Where operation of law applies, prime contractors must be compensated for any difference in labor costs resulting from the incorporation in accordance with applicable law. See 29 CFR 5.5(e).
- Ensuring that the Davis-Bacon poster (WH-1321) and the applicable wage determination(s) and any approved conformances are posted at the site of the work. 29 CFR 5.5(a)(1)(i). This poster can be downloaded from the WHD website (http://www.dol.gov/agencies/whd/).
- Reviewing certified payrolls in a timely manner. 29 CFR 5.6(a)(3).
- Conducting worker interviews. 29 CFR 5.6(a)(3).
- Conducting investigations, as appropriate, and forwarding refusal to pay and/or debarment consideration cases to WHD for appropriate action. 29 CFR 5.6(a)(3) and All Agency Memorandum (AAM) 182.
- Submitting enforcement reports (29 CFR 5.7(a)) and semi-annual enforcement reports (29 CFR 5.7(b)) to the DOL. See also AAM 189.
Contracting agencies cannot contract out responsibility for the enforcement of the DBRA requirements.
Federal contacting agencies are responsible for ensuring that recipients of federal assistance who have contracting responsibilities include the Davis-Bacon labor standards clauses and applicable wage determinations in their contracts and properly enforce DBRA per 29 CFR 5.6(a)(1)(i).

DAVIS-BACON LABOR STANDARDS & CONTRACT CLAUSES

Davis-Bacon labor standards defined - 29 CFR 5.2

The term “Davis-Bacon labor standards”within the meaning of the DBRA means the requirements of:
- The Davis-Bacon Act (DBA)
- The Contract Work Hours and Safety Standards Act (CWHSSA) (other than those relating to safety and health)
- The Copeland Act
- The prevailing wage provisions of the Davis-Bacon Related Acts (Related Acts)
- Regulations, 29 CFR parts 1, 3, and 5, which govern the administration and enforcement of the DBRA (including CWHSSA) requirements

Davis-Bacon contract clauses

29 CFR part 5 requires contracting agencies to incorporate specified labor standards requirements (contract clauses) into DBRA-covered contracts by inserting the contract clauses in full in the contract, or (for contracts covered by the Federal Acquisition Regulation) by incorporating the contract clauses by reference.
Typically, these required contract clauses are found in the contract under the heading “Davis-Bacon Act” or “labor standards” or “prevailing wage requirements”or “federal requirements”and they include:
For contracts governed by the FAR, the required Davis-Bacon clauses are listed at 48 CFR 22.407.

CWHSSA contract clauses

29 CFR 5.5(b) requires contracting agencies to include CWHSSA contract clauses in covered contracts. The requirements at 29 CFR 5.5(b) include:

Overtime requirements

Contractors and subcontractors contracting for any part of the contract work and employing any laborer(s) or mechanic(s), including watchpersons or guards, over 40 hours in a workweek on such work are required to pay such laborer(s) and mechanic(s) at least one and one-half times the basic rate of pay for all hours worked in excess of 40 in the workweek.

Violation; liability for unpaid wages; liquidated damages

The contractor responsible for violation(s) of the above CWHSSA contract requirements is liable for the unpaid wages and, in addition, is liable for liquidated damages computed with respect to laborers and mechanics paid in violation of the CWHSSA overtime requirements.

Withholding

The withholding requirements regarding CWHSSA parallel those in the Davis-Bacon contract clause described above, and also provide for withholding for liquidated damages due.

Subcontracts

The CWHSSA requirements for inserting contract clauses in subcontracts are similar to those in the Davis-Bacon contract clause described above.

Anti-retaliation

The CWHSSA anti-retaliation contract clause requirements parallel those in the Davis-Bacon contract clause described above.

SPECIFIC STEPS IN CONDUCTING DBRA INVESTIGATIONS

The following guidance describes the steps that are typically undertaken by the WHD in conducting a DBRA investigation and may serve as an example of best practices for contracting agencies in developing their own investigation procedures.

Preliminary steps

Contact the contracting agency and obtain the following information:
- Complete copy of the contract and all modifications
- Copy of the Davis-Bacon wage determinations included in the contract, and in the case of multiple wage determinations, any instructions concerning their application
- Copies of the certified payrolls submitted by the contractor under investigation
- Employer identification number

Initial contractor contact

A responsible official of the firm must be contacted at the start of the investigation.
When investigating a subcontractor, find out what information on DBRA labor standards and wage determinations have been provided by the prime contractor (or higher-tier subcontractor or otherwise) to the subcontractor. Ask the subcontractor for a copy of the subcontract, if one exists.
When a subcontractor is being investigated, the prime contractor should be notified at the beginning of the investigation.
- The prime contractor can provide information on the subcontractor’s work on the project and may also have records relating to the number of workers the subcontractor had on the project, the hours they worked, and the period of time they were on the project. The prime contractor should be asked to provide a copy of the subcontract, if it exists.
- The prime contractor is responsible for compliance by all subcontractors with the DBRA contract clauses, and is liable for back wages not paid by the subcontractor, and may decide to withhold final payment from the subcontractor until the back wage issues are resolved.
Inform the contractor that the purpose of the investigation is to determine compliance with the pertinent statutes and regulations and outline in general terms the scope of the investigation, including the examination of pertinent records, worker interviews and physical inspection of the project.
Obtain the exact legal name of the contractor or company and any trade names, the full address, full names of owners or officers and their titles, number of persons employed, number of any workers on the project, name and address of any subcontractors, and such similar information as may be necessary to conduct and complete the investigation.

Examination of certified payrolls

The contractor’s certified payrolls should be examined for accuracy, completeness, and true representation of the facts. The initial examination should cover the current or most recent certified payrolls as well as those for selected periods which reflect the practice of the contractor during the life of the contract.
- Check for completeness and accuracy of the certified payrolls as to the names, classifications of work performed, hourly wage rates, daily and weekly hours worked during the payroll period, gross weekly wages earned, deductions made from wages, and net weekly wages paid the worker.
- If the CWHSSA is applicable and a worker worked on covered contracts in excess of 40 hours in any workweek, determine whether one and one-half the worker’s basic rate of pay was paid.
- Certified payrolls should be examined for discrepancies such as a disproportionately high number of laborers or apprentices on the project.
- The wage rates should be compared against those listed on the wage determination. If workers perform work in more than one classification, the certified payroll records should accurately reflect the time spent working in each. Unlisted classifications should be identified, and additional classification procedures initiated, if applicable.
- Check certified payrolls for information on contributions to fringe benefit plans and/or cash paid in lieu of fringe benefits.

Examination of other records

Examine the current or most recent regular payrolls (sometimes referred to as “in-house” payroll) as well as those for selected periods which reflect the practice of the contractor during the life of the contract. The examination should include a review of the basic timecards, time sheets, or other time, work or personnel records of a representative number of workers in each classification, records of the method used to calculate the hourly credit the contractor takes for costs incurred for bona fide fringe benefit or reasonably anticipated costs, and written DOL approvals of unfunded plans. These basic records should be checked against the certified payrolls in order to identify any possible discrepancies including, but not limited to, potential misclassification, falsification of hours worked or wages paid on certified payrolls, or to give reasonable assurance that no discrepancies exist.
Examine documents related to any contributions (or incurred costs) to fringe benefit plans. These documents might include portions of the pension plan, documentation from the Internal Revenue Service that indicates the plan has been approved by the IRS, and records of contributions made or costs incurred.

Check for compliance with apprenticeship requirements

Apprenticeship program information should be obtained and examined to verify that the program has been approved by the appropriate authority. If the contractor’s evidence is not sufficient, contact ETA/OA and/or the SAA (where appropriate) for verification. A list of local ETA/OA offices and SAAs is available at http://www.doleta.gov/oa/stateoffices.cfm..
Obtain copies of the individual workers’ apprentice/registration forms, as well as copies of the approved apprenticeship program itself.
The apprenticeship program requirements should be compared with the certified payrolls and other records to verify that the ratio of apprentices to journeyworkers has been met on a daily basis, not merely weekly, and that apprentice wage rates were calculated correctly.

Determine if a conformance is necessary

Determine if the wage determination contains classifications and wage rates for all the types of work performed on the contract.
- If the applicable wage determination does not contain a classification for the work performed, the conformance procedure in 29 CFR 5.5(a)(1)(iii) must be followed. Contracting agencies cannot arbitrarily determine a rate.
- Questions as to whether a conformed rate has been approved should be directed to WHD.

Worker interviews

Worker interviews are essential to the completeness of the investigation.
- They should be sufficient in number to determine the degree of completeness and accuracy of the records and the nature and extent of any violations.
- They should also be representative of all classifications of workers on the project under investigation.
- Every effort should be made to interview both current workers and former workers, as the latter group is an important source of information regarding compliance over the course of the entire project and is typically willing to cooperate with the investigation and provide detailed interview statements.
- In cases involving alleged misclassification and/or falsification of payroll records, it is important to identify, through the interview process, as many workers as possible who worked on the contract.
- Workers should be asked about other workers they worked with, the duties performed by those other workers, and their work schedules.
Each worker should be informed that the information given is confidential to the fullest extent possible under the law, and that their identity will not be disclosed to the contractor without the worker’s permission insofar as the law permits. (See29 CFR 5.6(c).)
Place of interview
- Workers currently on site may be interviewed during working hours on the job, in accordance with 29 CFR 5.5(a)(3)(iv), provided the interview can be properly and privately conducted on the premises.
- In cases involving possible falsification of records or worker fear of reprisals or intimidation, it may be more advisable to conduct the interview elsewhere, such as in the worker’s home, at the agency’s office, or other suitable place where it may be arranged.
- Workers should not be interviewed in the presence of the contractor or a representative of the contractor (e.g., a lawyer). Workers should be interviewed individually unless there are special circumstances in which another person accompanies the worker to help them during the interview.
Telephone and virtual interviews
- Ordinarily, an interview should be made virtually or by telephone only if an in-person interview is impracticable. When a telephone or virtual interview is used, the statement should be sent to the worker together with a request that the worker read the statement, make and initial any changes, sign, date, and return the statement. A copy of the statement should be kept until the original is returned.
Mail and email interviews
- Ordinarily, an interview should be sent by mail or email only if an in-person, telephone or virtual interview is impracticable.
Preparation of interview statements
- When a written statement is taken, it should be recorded in the manner stated by the worker; it should be read by the worker and contain a statement that it has been read and that it is correct.
- In government contracts cases, it is preferred that all interviews be signed. Where the statement is not signed, the reason for the lack of signature should be noted. Any changes in a signed worker statement should be initialed by the worker.
- Each interview statement should contain the following information:
  - Place and date of interview
  - Name of contractor (firm) for whom the worker works
  - Name, last known address, telephone number, and email address of worker being interviewed
  - Employment status (whether current or former worker)
  - Period(s) of employment
  - If an apprentice, the age, date of birth, and information concerning their status as an apprentice
  - The statement should include specific information regarding the:
    - rate(s) of pay and wages received,
    - hour for starting/stopping work and daily/weekly hours worked,
    - manner in which time and work are recorded,
    - classification(s) of work performed, and actual work performed.
  - In cases alleging misclassification, the interview statement must specifically address the various types of duties performed. For example, it is not sufficient for a worker to only state they were a carpenter. The interview statement must state the specific carpentry work performed, and the tools and materials used. If a worker worked in more than one classification, the worker must be asked how much time was spent in each classification.
  - The interview statement should include any details corroborating statements given by other workers. For example, the worker should be asked to identify other individuals who performed the same work as well as to provide descriptions of work performed by other workers, hours worked, etc.
  - The interview statement should cover all the allegations of violations (particularly those in a complaint).
  - The interview statement should also cover any other details necessary to indicate the accuracy of the contractor’s records, statements, or certifications.
  - The interview statement should identify the worker’s supervisors and management, including their roles at the worksite, as well as contractor personnel involved in payroll and timekeeping. It should also identify any prime contractor or upper-tier contractor representatives they interacted with or saw at the worksite.
All interview statements must be legible.

Restrictions on disclosure of information to contractors

Interview statements should not be released to a contractor by either WHD or the contracting agency, except as provided by law. Workers should never be told the amount of back wages computed.
In accordance with normal operating procedures, the contracting agency may be furnished various investigatory material from the investigation files of the Department of Labor. None of the material, other than computations of back wages, liquidated damages, and monetary relief for violations of 29 CFR 5.5(a)(11) or (b)(5), and the summary of back wages due, may be disclosed in any manner to anyone other than Federal officials charged with administering the contract or program providing Federal assistance to the contract, without requesting the permission and views of the Department of Labor. See 29 CFR 5.6(a)(4).
- It is the policy of the Department of Labor to protect from disclosure the identity of its confidential sources and to prevent an unwarranted invasion of personal privacy. Accordingly, the identity of a worker or other informant who makes a written or oral statement as a complaint or in the course of an investigation or other compliance action, as well as portions of the statement which would tend to reveal the identity of the informant, will not be disclosed in any manner to anyone other than Federal officials without the prior consent of the informant. See 29 CFR 5.6(c).

Case record

Transcriptions or copies of records, and computations of back wages, must be made when violations are found.

Discharging DBRA minimum wage and fringe benefit obligations

“Prevailing wage” is made up of two interchangeable components – basic hourly wages and fringe benefits.
- Both may be paid in cash
- Payments can be made or costs incurred for “bona fide” fringe benefits, or
- Any combination thereof.
  - Additional discussion of how the Davis-Bacon prevailing wage obligation can be met, with examples, is provided in the discussion of “Fringe Benefits” in the Prevailing Wage Resource Book, DBRA Compliance Principles.
- Monetary wages paid in excess of the Davis-Bacon minimum wage may be used as an offset or credit to satisfy fringe benefit obligations, and vice versa.
Fringe benefits listed in the applicable Davis-Bacon wage determination must be paid for all hours worked – both straight time and overtime hours – on covered contracts.
Excess payments for overtime may not be offset/credited towards minimum wages due.
Excess wages paid for work in one classification may not be used as an offset or credit towards wage deficiencies in another classification. Under DBRA, each classification stands alone. This is also true when workers are paid in excess of the required minimum wage for non-DBRA covered work in the same workweek – no offset or credit may be taken towards a DBRA prevailing wage deficiency for such payments.

Resolution of disputes regarding proper classification of workers

To determine the proper classification for work performed on a Davis-Bacon covered project, it may be necessary to examine local area practice. An area practice survey may be conducted by the WHD or by the contracting agency to determine proper classification of workers in accordance with local prevailing area practice. An overview of this topic is provided in the Prevailing Wage Resource Book, DBRA Compliance Principles.

Determining compliance with CWHSSA

See the Prevailing Wage Resource Book, Overtime Pay on DBRA Contracts, for a detailed overview of determining compliance with CWHSSA overtime pay requirements, including examples of how to meet CWHSSA requirements.

CWHSSA liquidated damages

Liquidated damages are computed on a per day, per worker basis for CWHSSA violations. The liquidated damages amount is adjusted annually; the current amount can be found at https://www.dol.gov/agencies/whd/government-contracts/cwhssa.

Example :

	M	T	W	T	F	S	S	TOTAL
REGULAR TIME	10	10	10	10	10	5	0	55

In the above example, no overtime premium was paid to one worker. The 15 weekly overtime hours were worked on two calendar days, Friday and Saturday. Thus, assuming liquidated damages were $31.00 per day at the time of the computation, $62.00 in CWHSSA liquidated damages would be computed.

The decision on whether to assess liquidated damages is made by the federal contracting or funding agency.
- The contractor should be advised of the potential for liquidated damages, and that they will be advised of the federal agency’s determination concerning the assessment of liquidated damages.
As a matter of administrative policy, WHD does not compute liquidated damages for workers whose CWHSSA back wages are less than $20.
Liquidated damages in excess of $500 may be waived or adjusted only with the concurrence of the appropriate WHD Regional Administrator. (A listing of WHD Regional Offices and Administrators is located here https://www.dol.gov/agencies/whd/about/organizational-chart.)
If a federal Agency Head determines that a sum of liquidated damages administratively determined to be due under CWHSSA for a contract is $500 or less, an appropriate adjustment may be made in such liquidated damages or the contractor may be relieved of liability for the liquidated damages without submitting recommendations or a report to WHD if the Agency Head finds that:
- the sum of liquidated damages computed is incorrect, or
- the contractor inadvertently violated the provisions of CWHSSA notwithstanding the exercise of due care on the part of the contractor or subcontractor involved.
  40 USC 3702(c); 29 CFR 5.8(d) and 5.15(c)(3).

Overtime requirements under the Fair Labor Standards Act (FLSA), as amended

CWHSSA requires the payment of an overtime premium when a laborer or mechanic works in excess of 40 hours in a work week on covered contract(s). Overtime hours not subject to CWHSSA may still be subject to FLSA overtime pay requirements.
Where questions arise concerning overtime pay obligations under the FLSA, referral to the local WHD office is appropriate.

Conclusion of investigation

Final conference procedure

Inform the contractor generally of the investigation findings and indicate that these findings are based solely on the facts and information disclosed by the investigation.
Detail specifically what must be done to eliminate the violations, if any, discuss how future compliance will be maintained, and provide any available informational/educational material such as copies of 29 CFR part 3 and/or part 5.
Be willing to consider additional evidence from the contractor which may affect the findings, such as an unresolved conformance request, evidence of contractor contributions to a fringe benefit plan, or inspection reports.
Request for payment of back wages:
- The DBRA contains no injunctive action procedures. Therefore, a demand for the payment of the back wages must always be made even if the contractor refuses to comply.
- Contracting officers may accept partial back wage restitution for undisputed issues.
- Contracting officers may attempt to collect back wages even though the case meets the debarment criteria, unless there is evidence of possible Copeland “Anti-kickback” Act violations. However, in no event should a contractor be left with the impression that the payment of back wages will eliminate the possibility of debarment.
- If the contractor is a subcontractor and refuses to make full restitution, the prime contractor must then be requested to make restitution. The prime contractor is ultimately responsible for the payment of the back wages. Upper-tier subcontractors may also be responsible for the payment of back wages resulting from violations by lower-tier subcontractors. See 29 CFR 5.5(a)(6).
Notify the subcontractor and/or prime contractor of the potential for the assessment of liquidated damages (the daily amount of liquidated damages is updated annually) under CWHSSA. The contractor (s) should be advised that the contracting agency will make a decision on the assessment of liquidated damages at a later date.
- If there is no agreement to pay back wages, the file must be forwarded to the appropriate WHD Regional Office pursuant to 29 CFR 5.7 for review, collection of back wages, and debarment consideration. (SeeAAM 182. This procedure must also be followed if the contracting agency conducted its own investigation. The addresses for the WHD regional offices are available at https://www.dol.gov/agencies/whd/about/organizational-chart under the heading “WHD Regional Offices.”)

WITHHOLDING AND DISBURSEMENT OF FUNDS

Purpose of withholding

The Davis-Bacon labor standards clauses require the proper classification and payment of wages to laborers and mechanics on construction projects subject to the DBRA (including CWHSSA).
To protect the rights of covered workers, these Acts and related DOL regulations provide for remedies when compliance with the prevailing wage requirements is in question. An important element is the withholding of contract funds sufficient to satisfy alleged wage underpayments pending resolution of a wage dispute. The contracting agency may withhold funds on its own initiative and must withhold funds at the direction of DOL.
- The relevant statutory and regulatory provisions are 40 USC 3142(c)(3), 40 USC 3702(d), and 29 CFR 5.5(a)(2) and 5.5(b)(3).
The withholding of contract funds is a very effective enforcement tool in DBRA cases.
- It ensures the availability of monies for the payment of the back wages if a contractor refuses to make restitution when back wages are found due to covered workers.
- It ensures that when federal agencies, states and local communities have benefited from the work performed by the contractor’s workers, funds can be used to pay workers the applicable prevailing wage and overtime compensation.
- The prime contractor has the contractual obligation to cover any unpaid wages or other liability for contractor or subcontractor violations of the contract clauses and will be liable for payment of the back wages unpaid by a subcontractor. Because such liability for prime contractors is contractual, it represents strict liability and does not require that the prime contractor knew of or should have known of the subcontractors’ violations. The prime contractor may decide to withhold payments from the subcontractor until the issues over worker back wages are resolved.
- Upper-tier subcontractors are also required to pay back wages on behalf of their lower-tier subcontractors under appropriate circumstances, such as when the upper-tier contractor has disregarded its obligations to their subcontractors.
Responsibility for ensuring that the proper wages are received by covered workers on government contracts lies with representatives of the contracting/funding/assisting agency and/or DOL.
- A contracting officer should withhold funds when they believe that a back wage violation exists.
- In addition, contracting officers must withhold funds upon written request from DOL. Contracting officers should respond to such a request immediately confirming that the funds have been withheld.
- If the request to withhold funds was made by DOL, it is imperative that the agency preserve the withheld funds until notified in writing by DOL regarding final disposition of the withheld funds.

Withholding for recordkeeping violations

The contracting agency may withhold funds, after appropriate written notice to the contractor, when the contractor has failed to submit certified payrolls, has not provided the required records under 29 CFR 5.5(a)(3) upon request, or has refused to permit worker interviews during working hours on the site of the work.

Davis-Bacon and CWHSSA withholding contract clauses

The contract clause language set forth at 29 CFR 5.5(a)(2)(i) provides:
The Agency may, upon its own action, or must, upon written request of an authorized representative of the Department of Labor, withhold or cause to be withheld from the contractor so much of the accrued payments or advances as may be considered necessary to satisfy the liabilities of the prime contractor or any subcontractor for the full amount of wages and monetary relief, including interest, required by the clauses set forth in 29 CFR 5.5(a) for violations of this contract, or to satisfy any such liabilities required by any other Federal contract, or federally assisted contract subject to Davis-Bacon labor standards, that is held by the same prime contractor (as defined in 29 CFR 5.2).

The necessary funds may be withheld from the contractor under this contract, any other Federal contract with the same prime contractor, or any other federally assisted contract that is subject to Davis-Bacon labor standards requirements and is held by the same prime contractor, regardless of whether the other contract was awarded or assisted by the same agency, and such funds may be used to satisfy the contractor liability for which the funds were withheld.

In the event of a contractor’s failure to pay any laborer or mechanic, including any apprentice or helper working on the site of the work (or otherwise working in construction or development of the project under a development statute) all or part of the wages required by the contract, or upon the contractor’s failure to submit the required records as discussed in 29 CFR 5.5(a)(3)(iv), the Agency may on its own initiative and after written notice to the contractor, sponsor, applicant, owner, or other entity,

as the case may be, take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds until such violations have ceased.
29 CFR 5.5(b)(3)(i) has a similar provision concerning the withholding of contract funds to satisfy overtime pay obligations and liquidated damages determined to be due because of CWHSSA violations.
Comparable FAR contract clause language “Withholding of Funds” can be found at 48 CFR 52.222-7 and “Contract Work Hours and Safety Standards Act – Overtime Compensation” can be found at 52.222-4 (the FAR guidance for applying the DBRA/CWHSSA contract clauses can be found at 48 CFR 22.403-3, 22.403-4, 22.407(a)(2), and 22.305).
FAR guidance regarding the “Withholding from or suspension of contract payments” at 48 CFR 22.406-9 provides that:
- If the contracting officer believes a violation exists, or upon request of the DOL, the contracting officer must withhold from payments due the contractor an amount equal to the estimated wage underpayment and estimated liquidated damages due the United States under the CWHSSA. 48 CFR 22.406-9(a).
- If subsequent investigation confirms violations, the contracting officer must adjust the withholding as necessary. However, if the DOL requested the withholding, the contracting officer must not reduce or release the withholding without written approval of the DOL. 48 CFR 22.406-9(a)(2).
- Further, withheld funds are to be used to satisfy assessed liquidated damages and (unless the contractor makes restitution) validated wage underpayments. 48 CFR 22.406-9(a)(3). (See also 48 CFR 22.406-9(c), “Disposition of contract payments withheld or suspended”and 48 CFR 406.10 “Disposition of disputes concerning construction contract labor standards enforcement.” )

Due process for withholding action

To ensure that contractors receive due process prior to the withholding of funds at the direction of the WHD, the following steps are included in the WHD enforcement procedures.
- Where a contractor refuses to pay back wages under DBRA, including CWHSSA, and funds are available for withholding, WHD will generally send a “due process letter” to the prime contractor, and, where the violations occurred on a subcontract, to the subcontractor. This letter will include:
  - A statement that the final conference was conducted at which time the contractor was provided an opportunity to discuss alleged violations; or if a final conference was not held, provide the reason(s) why;
  - A brief description of the alleged violations;
  - An affirmation that the contractor received a Summary of Unpaid Wages;
  - A statement that the matter is being forwarded to a designated WHD authorized official, who will determine whether withholding action will be taken regarding the back wage findings;
  - A statement that the contractor has 15 days to provide the WHD authorized official with written views on whether the violations occurred; and
  - A statement that any determination regarding the withholding of contract funds will not result in the distribution of the funds to the underpaid workers until such time as the administrative remedies available to the contractor have been completed. See discussion of “The Hearing Process and Appeal Rights,” below.
- If the authorized official determines that withholding action is warranted, a copy of the WHD withholding request to the contracting agency and a letter indicating the authorized official’s decision on withholding will be sent to the prime contractor, and, where the violations occurred on a subcontract, to the subcontractor.
In certain cases, such as missed payrolls, likely bankruptcy filings, or imminent contract close out, it may be necessary to request withholding before the measures described above can be provided. In those cases, the procedures outlined above should be followed as quickly as reasonably possible after the withholding action; and based on the contractor’s submission, the WHD deciding official may choose to revoke an earlier withholding request.

Cross-withholding

Cross-withholding, a type of withholding under the DBRA, gives DOL and contracting agencies additional recourse in collecting back wages in situations where there are insufficient funds remaining to be paid under the contract on which the violations occurred.
DOL or the contracting agency may pursue cross-withholding regardless of whether the contract on which withholding is sought was awarded by, or received Federal assistance from, the same agency that awarded or assisted the prime contract on which the violations necessitating the withholding occurred. Where the contract clauses have been properly incorporated into all contracts, funds may be cross-withheld from contracts awarded to any entity that would meet the definition of prime contractor in 29 CFR 5.2 for the prime contract on which the violations necessitating the withholding occurred.
In addition to the contracting entity itself, the prime contractors for a contract may include the controlling shareholders or members of any entity holding a prime contract, the joint venturers or partners in any joint venture or partnership holding a prime contract, and any contractor (e.g., a general contractor) that has been delegated the responsibility for overseeing all or substantially all of the construction anticipated by the prime contract.
For example, if a general contractor secures two prime contracts for two Related Act-covered housing projects through separate single-purpose entities that it controls, the proposed cross-withholding language would allow the Department to seek cross-withholding against either contract even though the contracts are nominally with separate legal entities.

Refusal to pay cases

In refusal-to-pay cases under DBRA (including CWHSSA), the contracting agency may, upon its own action, or must, upon written request of an authorized representative of the DOL, withhold sufficient contract funds to cover the back wages and monetary relief due, and to cover any liquidated damages and pre-judgment or post-judgment interest which may be due.
If there are insufficient funds remaining on the contract under which the violations occurred to cover the back wages due, the contracting agency can withhold the necessary funds from any other Federal contract with the same prime contractor, or any other federally assisted contract that is subject to Davis-Bacon requirements and is held by the same prime contractor, regardless of whether the other contract was awarded or assisted by the same agency. This is called “cross-withholding.”
Contracting officers should immediately notify WHD if they become aware that the contractor may be filing for bankruptcy.
In situations where WHD has instituted withholding actions, a letter to the prime contractor, and, where violations occurred on a subcontract, the subcontractor, will describe the nature of the alleged violations and back wages found due. The contractor will have 15 days to provide written views on the alleged violations. Withholding procedures and the back wage disbursement process are discussed further in the “DBRA/CWHSSA Withholding and Disbursement” section of this chapter above.

Priority of withheld funds

Accrued funds withheld for payment of wages may not be used or set aside for other purposes until such time as the DBRA prevailing wage issues are resolved. To give contracting agency reprocurement claims priority, for example, would essentially make the workers unfairly pay for the breach of contract between the contractor and a federal agency or grant recipient.
Wages due to underpaid workers have priority over any competing claims against a contractor, regardless of when the claims were raised. DOL believes that to hold otherwise would be inequitable and contrary to public policy since the affected workers have already performed the work subject to a contractual obligation to fulfill the labor standards requirements.
As stated in 29 CFR 5.5(a)(2)(ii) and 5.5(b)(3)(ii), withheld funds have priority over claims to those funds by:
- A contractor’s surety(ies), including without limitation performance bond sureties and payment bond sureties;
- Reprocurement costs of the contracting agency after a contractor’s default or termination for cause;
- A trustee(s) (either a court-appointed trustee or a U.S. trustee, or both) in bankruptcy of a contractor, or a contractor’s bankruptcy estate;
- A contractor’s assignee(s);
- A contractor’s successor(s); and
- A claim asserted under the Prompt Payment Act, 31 USC 3901–3907.
Additionally, it is long-standing policy that an IRS tax levy cannot attach to money withheld for DBA underpayments in which a contractor has no interest. See, e.g.,Richard T. D’Ambrosia, 55 Comp. Gen. 744, 746 (1976).

Disposition of withheld funds

WHD Regional Offices (ROs) are responsible for directing the processing of back wage disbursements. After completion of administrative processes (and timely litigation, if any) in a DBA and/or Related Act (including CWHSSA) case, the WHD RO will request the contracting agency to transfer withheld funds due for underpayment of prevailing wages and overtime pay to WHD for disbursement. The DOL/WHD request for release of monies to be disbursed to the workers will include information identifying the contractor(s) and contract(s) on which funds in question were withheld, describe the final determination preceding a request, and identify the amount of withheld funds to be transferred to WHD for disbursement to workers for work performed on the covered contract(s). Such requests for the release of withheld funds to WHD must be made:
- When a contractor agrees to distribution of contract funds to the covered workers (whether or not they have been subject to a formal withholding process); or
- When a contractor (the prime contractor or subcontractor) does not request a hearing pursuant to 29 CFR 5.11(b) or 5.12(b); or
- Following the issuance of administrative law judge decisions (including decisions approving settlement agreements); or
- Following Administrative Review Board decisions; or
- Subsequent to final resolution of further litigation.

Sending funds to DOL for disbursement

AAM 215, dated March 10, 2014, provides contracting agencies with directions to follow in submitting refusal-to-pay and debarment cases to the WHD regional offices. It further discusses how contracting agencies are to send WHD withheld funds due covered laborers and mechanics for underpayment of prevailing wages and overtime pay for disbursement. These procedures apply to all DBRA covered contracts (including CWHSSA covered contracts) as well as to SCA-covered contracts.
- When appropriate, WHD will send a written request to the contracting agency to transfer withheld funds to WHD for disbursement. The procedures here also apply to the processing of funds in cases in which a contractor authorizes the contracting agency to apply contract funds to back wages due covered workers.
- In cases other than the refusal-to-pay cases, when the agency has not sent the case file to WHD and, as a result of the agency’s enforcement of DBRA, including CWHSSA, requirements, a contractor authorizes the agency to use contract funds to cover back wages due or the agency forwards other funds collected to cover the back wages due, the agency should provide the appropriate WHD RO with the name, current address, last known telephone number, email address, social security number (if available), and back wage amount due each worker when it forwards such funds to WHD.
- Before contracting agencies forward withheld funds to WHD, they should contact the WHD government contracts Regional Enforcement Coordinator (REC) for guidance on the information needed for the transfer. RECs are identified at: https://www.dol.gov/agencies/whd/government-contracts/contacts
- WHD will accept the transfer of withheld funds through wire deposit or paper check.
  - Additional details on the transfer and disbursement of withheld funds can be found in AAM 215.
  - Questions about a particular transfer/disbursement should be directed to the RECs, Government Contracts, in the appropriate region. https://www.dol.gov/agencies/whd/government-contracts/contacts

DEBARMENT

Debarment occurs when a contractor or responsible officer is declared ineligible (debarred) from receiving federal or federally assisted contracts for a period of 3 years because of violations of the DBRA involving disregard of the contractor’s obligations to workers or subcontractors. Contractors may not be removed from the ineligible list prior to the expiration of the 3-year period.
At the conclusion of the investigation, the contractor may be advised of the potential for debarment where appropriate but will not be advised of any recommendation concerning debarment.
In no event should a contractor be left with the impression that payment of back wages eliminates the possibility of debarment.

Debarment criteria

The facts and circumstances of a given case will dictate whether debarment is appropriate. Some of the more common instances in which the DOL finds debarment appropriate are when a contractor has:
- Submitted falsified certified payrolls;
- Required kickbacks of wages or back wages;
- Committed repeat DBRA violations;
- Misclassified covered workers in clear disregard of proper classification of actual work performed; or
- As a prime contractor, failed to ensure DBRA compliance by subcontractors.
For debarment purposes, in appropriate circumstances, DOL may hold contractors responsible not only for their own violations of the Davis-Bacon labor standards, but also for those violations committed by their subcontractors.

CONTRACTING AGENCY REPORTS TO DOL

Federal agency responsibilities to conduct labor standards investigations under DBRA and to submit investigation reports to DOL are described at 29 CFR 5.6(a)(3) and in the FAR at 48 CFR 22.406-8. Investigation reports to DOL are addressed there and at 29 CFR 5.7. Agency investigation/enforcement reports to DOL, with relevant information, are required where:
- Underpayments by a contractor or subcontractor total $1,000 or more, or
- Where there is reason to believe that either the contractor has disregarded its obligations to workers and subcontractors under DBRA, or
- Back wages and restitution have not been paid and future compliance has not been assured, or
- The agency investigation was made at the request of DOL.
- AAMs 182 and 215 discuss the procedures for transferring refusal-to-pay or potential debarment investigations to WHD.
- Semi-annual reports on compliance with and enforcement of the labor standards provisions of the DBRA, including CWHSSA, are required from each contracting agency for the reporting periods October 1 through March 31 and April 1 through September 30. 29 CFR 5.7(b) and FAR 48 CFR 22.406-13. AAM 189 provides further guidance and includes the required reporting format.
- In addition, upon DOL request, a federal Agency Head must transmit to the WHD Administrator such information available to their agency with respect to contractors, their contracts, and the nature of the contract work as the WHD Administrator may find necessary for the performance of their duties with respect to the labor standards provisions referred to in 29 CFR part 5. 29 CFR 5.7(c) and FAR 48 CFR 22.406-12.

THE DBRA HEARING PROCESS AND APPEAL RIGHTS

Refusal-to-pay cases are resolved pursuant to 29 CFR 5.11.
- If factual issues are in dispute, WHD notifies the contractors (both prime and subcontractors) in writing of the investigation finding and offers the opportunity to request a hearing before an administrative law judge.
- If only issues of law are in dispute, WHD offers the contractors the opportunity to appeal a WHD ruling before the Department’s Administrative Review Board (ARB).
In both agreement-to-pay and refusal-to-pay cases where WHD seeks debarment, the contractors are offered a hearing before an ALJ pursuant to 29 CFR 5.12 on the issue of debarment and other disputed findings.
ALJ decisions may be appealed to the ARB under 29 CFR part 7.
The ARB hears all appeals of ALJ cases. The ARB, which acts on behalf of the Secretary of Labor, consists of members appointed by the Secretary. The ARB also acts on petitions for review of rulings issued by the WHD Administrator about coverage, interpretations, and wage determination matters.

Investigative Procedures and Remedies on Davis-Bacon Contracts

REORGANIZATION PLAN NO. 14 OF 1950

DAVIS-BACON LABOR STANDARDS AND CONTRACT CLAUSES

SPECIFIC STEPS IN CONDUCTING DBRA INVESTIGATIONS

WITHHOLDING AND DISBURSEMENT OF FUNDS

DEBARMENT

CONTRACTING AGENCY REPORTS TO DOL

THE DBRA HEARING PROCESS AND APPEAL RIGHTS

REORGANIZATION PLAN NO. 14 OF 1950

Purpose

DOL functions/responsibilities

Contracting agency functions/responsibilities

DAVIS-BACON LABOR STANDARDS & CONTRACT CLAUSES

Davis-Bacon labor standards defined - 29 CFR 5.2

Davis-Bacon contract clauses

Minimum wages

Withholding

Maintaining regular payrolls and other records

Submission of certified payroll records

Apprentices

Copeland Act requirements

Subcontracts

Contract termination and debarment

Rulings and interpretations

Disputes concerning labor standards

Certification of eligibility

Anti-retaliation

CWHSSA contract clauses

Overtime requirements

Violation; liability for unpaid wages; liquidated damages

Withholding

Subcontracts

Anti-retaliation

SPECIFIC STEPS IN CONDUCTING DBRA INVESTIGATIONS

Preliminary steps

Initial contractor contact

Examination of certified payrolls

Examination of other records

Check for compliance with apprenticeship requirements

Determine if a conformance is necessary

Worker interviews

Restrictions on disclosure of information to contractors

Case record

Discharging DBRA minimum wage and fringe benefit obligations

Resolution of disputes regarding proper classification of workers

Determining compliance with CWHSSA

CWHSSA liquidated damages

Overtime requirements under the Fair Labor Standards Act (FLSA), as amended

Conclusion of investigation

Final conference procedure

WITHHOLDING AND DISBURSEMENT OF FUNDS

Purpose of withholding

Withholding for recordkeeping violations

Davis-Bacon and CWHSSA withholding contract clauses

Due process for withholding action

Cross-withholding

Refusal to pay cases

Priority of withheld funds

Disposition of withheld funds

Sending funds to DOL for disbursement

DEBARMENT

Debarment criteria

CONTRACTING AGENCY REPORTS TO DOL

THE DBRA HEARING PROCESS AND APPEAL RIGHTS