Wednesday, February 20th, 2008...9:26 am
AkDOL Revises Little Davis-Bacon Formula
State adopts federal rule; OT problems may result
Effective February 8, 2008, the Alaska Department of Labor revised the Little Davis-Bacon Act formula in a way that conforms to the federal Davis-Bacon formula, gives Title 36 contractors greater flexibility in dividing up the total wages, but may also cause mistakes in the calculation of overtime compensation. WHPL # 204.
Under Alaska’s Little Davis-Bacon Act, the state sets a Basic Hourly Rate (BHR) and a Fringe Hourly Rate (FHR). The sum of the two is the Total Package Rate (TPR). Overtime compensation is 1.5 times the BHR.
Under the old state rules, if a contractor paid fringe benefits higher than the FHR, it was still required to pay the full Basic Hourly Rate. For example, if the BHR were $30/hr. and the FHR were $15/hr., the contractor could pay fringes of $18/hr., but it would still have to pay a BHR of $30/hr.
Under the current federal rules and now the new state rules, a contractor may pay an employee more than the FHR and then pay an hourly rate an equal amount less than the BHR. Using the same example, the contractor could pay fringes of $18, but could also now reduce the straight wage rate to $27.
Note: Under the new rules, the overtime must be calculated on the official BHR. Thus, using the same example, OT for the same employee must be based on the $30/hr. BHR, i.e., will be $45/hr.
DOL recommends that contractors who choose to use the option given by WHPL # 204 provide DOL with an explanation:
This policy may necessitate that contractors who pay a lower BHR provide an explanation of the fringe benefit amounts paid on behalf of an employee. This could be accomplished through a cover letter with the first certified payroll for a project or in the remarks section of the certified payroll form.
AEL comment: At least equally important, the Title 36 contractor should advise its employees that overtime compensation will still be based on the BHR, without regard to any reduction that is offset by an increase in fringes. Employees and unions will have to be particularly vigilant of Title 36 contractors who take advantage of the option now provided by WHPL # 204.
Further note: WHPL carries a date of February 8, 2007. That is a typographical error. It was issued in 2008.
1 Comment
February 21st, 2008 at 1:20 pm
The unions have an advantage over non-union contractors. The unions can divert taxable wages into a non-taxable fund (which by the way really benefits them if the member doesn’t vest, that member will never see any of those wages diverted, that’s another story).
This means the unions can bid the public construction contracts at a lower rate than the non-union companies because their tax burden is so much lower. This is really an unfair change; it is no longer a level playing field, where are the ethics in this?
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