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The US Department of Energy recently published a desk guide containing information regarding the Davis Bacon Act. The guide contains some information specific to Weatherization Projects and can be viewed here.
A recent Request for Information published by the National Labor Relations Board appears to be the first step in a movement toward paving the way for off-site and online elections.
In the published request, the NLRB asks for information regarding secure electronic voting services to support conducting secret-ballot elections to determine representation issues. One of the primary concerns about providing the ability to hold online, offsite elections is that it may not allow employers sufficient time to organize a campaign to present their viewpoint regarding unionization. In addition, there is some concern that offsite voting might be more vulnerable to coercion or intimidation, as opposed to on-site paper ballot votes which are currently conducted.
The deadline to respond to this “sources sought” RFI has been extended twice since its publication, and as of today stands at July 2nd, 2010 at 4 pm ET. The notice can be viewed here.
Government contractors are already required to comply with various laws like the Davis-Bacon Act and the Service Contract Act. The passage of health care reform adds yet another layer of legal requirements with which contractors must comply. Navigating this maze can seem overwhelming – but contractors don’t have to go it alone. There are resources available to ease the burden of compliance and allow contractors to stay focused on running their businesses.
By putting the fringe portion of the prevailing wage toward benefits, business owners will be compliant with the new health care mandates, avoid IRS penalties, and bring down their payroll costs. A benefits partner who fully understands the government contractor marketplace can provide assistance with accounting requirements and compliance with both the DOL and IRS regulations.
Construction industry employers with more than 50 employees will be required to offer health care coverage to their employees beginning in 2014, which can be paid for with fringe dollars via a prevailing wage benefit plan. Effective this year, some small businesses which provide health insurance for their workers may be eligible for a tax credit under the PPACA – another incentive to use these dollars to provide benefits.
Maintenance and service (SCA) contractors who employ workers at government facilities must also pay the wages and fringe benefit amounts of their workers as determined by the Department of Labor (DOL). SCA contractors who currently offer limited medical plans or no benefits to their employees will be required to offer health care coverage, which can also be paid for with fringe dollars.
The time to act is now. Some contractors may currently be offering plans which will no longer be compliant as soon as this September.
Effective June 22nd, federal contractors and subcontractors are required to inform employees of their rights under the National Labor Relations Act (NLRA) in accordance with Executive Order 13496.
This notice informs employees of their rights under the NLRA to organize and bargain collectively with their employers, and to engage in other protected concerted activity. The notice also provides examples of illegal conduct by employers and unions, and provides contact information to the National Labor Relations Board, the agency responsible for enforcing the NLRA.
Exclusions to this requirement include labor unions and employers who are covered by the Railway Labor Act, as well as prime contracts which fall under the simplified acquisition threshold, which is currently $100,000, or subcontracts of less than $10,000.
A copy of the notice which can be downloaded and printed is available here. Federal contractors and subcontractors are required to post the notice conspicuously in plants and offices where employees who are covered by the NLRA perform contract-related activity, including all places where notices to employees are customarily posted, both physically and electronically. Print versions of the notification must be 11”x17” or larger. The notice must be posted exactly as issued by the DOL, with no alterations in size, color or content. Contractors must provide the notice in other languages spoken by their workforce should a significant number of employees not be proficient in English. Translations of the notice may be requested from the Division of Interpretation and Standards of the DOL’s Office of Labor -Management Standards.
Contractors and subcontractors which customarily post notices to employees electronically must also post this required notice electronically. This requirement can be met by displaying a prominent link to the Notice of Employee Rights Under Federal Labor Laws Poster on any external or internal website maintained and customarily used for notices to employees regarding terms and conditions of employment. The text for the link must read “Important Notice about Employee Rights to Organize and Bargain Collectively with Their Employers” and it must link to this page: http://www.dol.gov/olms/regs/compliance/EmployeeRightsPoster11x17_Final.pdf.
According to the Office of Labor-Management Standards, the sanctions, penalties and remedies for noncompliance with the notice requirements include suspension or cancellation of the contract and debarring of federal contractors from future federal contracts.
Last week the U.S. Department of Labor released its annual memorandum noting a rate increase for Service Contract Act (SCA) Health and Welfare Fringe Benefits. The new rate is $3.50 per hour (up from $3.35 per hour last year) and a special rate of $1.42 for Hawaii, up from $1.40 per hour last year. This rate increase takes effect June 22, 2010. SCA benefit change notices are not sent directly to contractors or subcontractors, so we wanted to make sure our SCA contractor clients were aware of this rate increase. A copy of the memorandum can be viewed here.
Solicitations and Contracts which are affected include:
Several recent news reports are projecting state unemployment taxes to double or even triple this year as states request sizable loans from the federal government to replenish their unemployment trust funds.
This is just one more reason it makes sense for Davis-Bacon contractors to use the fringe portion of the prevailing wage for bona fide benefit plans. Every dollar paid as cash wages to hourly workers will be subject to these higher tax rates, putting a squeeze on already slender profit margins.
So far 32 states and the US Virgin Islands have outstanding loans with the Federal Unemployment Account. These loans must all be repaid. And while some states received interest-free loans under ARRA, if those loans are not repaid within two years, states with outstanding balances will lose a portion of their FUTA credit for each year the loan remains unpaid. In order to repay these loans, states have few options other than raising their unemployment taxes, and these increases may be necessary to replenish state unemployment trust funds well after employment improves.
Some states, such as Virginia, impose automatic rate increases across the board when the unemployment trust fund falls below a certain level. Others, such as Michigan and Texas, use an “experience rate” which imposes higher taxes on companies which have a history of more layoffs and claims. In some states, such as Florida, employers will see an increase on both the taxable base* and the minimum tax rate for unemployment. The impact to Florida’s employers is projected to be between 70 and 1200 percent. Because of the increase to both the taxable base and the minimum tax rate, even employers with excellent claims histories and no lay-offs in the previous six fiscal quarters will still receive an increase of 21% to their unemployment taxes.
According to the Texas Workforce Commission, unemployment taxes in that state will nearly double across the board in 2010. In Washington, the increase in the tax rate will be smaller – however, it is charged on a much larger portion of an employee’s wages. Texas taxes the first $9,000 in earnings, while Washington taxes the first $36,000. In Virginia, the state unemployment tax that business pay on each employee will increase from an average of $95 per employee per year to an average of $171 per year in 2010, $234 in 2011 and $263 in 2012, based on an additional levy of .2 percent to be included in the final tax rate assignment, according to the Fredericksburg Free-Lance Star.
Needless to say, these increases come at a time when many businesses, especially smaller businesses, are already struggling. Removing these taxes from the fringe portion of the wage on Davis-Bacon jobs has always been a sound financial decision. In light of the increased state unemployment taxes which are being predicted, making this move is one way to put some breathing room in an employer’s budget.
*State unemployment taxes are based on two factors: the taxable base as determined by the state and an individual employer’s tax rate, which varies within a range of rates set by the state.
One of the most common misconceptions about implementing a prevailing wage benefit plan is that workers will quit or try to unionize once they see the reduced amounts in their paychecks.
While this may once have been more of a concern, the fact is that in today’s challenging economic times, most construction workers have either been unemployed themselves, or have friends who have been unemployed for long periods of time. Most appreciate having work and being able to provide for their families, knowing that more than a million jobs have been lost in the past year alone in the construction sector.
Educating employees about the bidding process can go a long way toward overcoming any objections. Most have never seen a bid, and don’t know what goes into submitting a successful bid. One tactic is to show your workers bid results on an actual project. The margin between the winning contractor and the one who came in second is often just a few hundred dollars – a difference that can be compensated for many times over with the savings realized by having a bona fide benefit plan and removing payroll burden from the fringe portion of the prevailing wage. When your workers realize that having a plan can mean the difference between having work or being unemployed – or working on private jobs which often pay at a much lower rate – they usually see these benefits in a much different light.
Teaching your workers about the differences between union benefit plans and non-union benefit plans is also helpful. With a prevailing wage benefit plan, workers are immediately vested in the retirement plan and have access to all their funds should they quit, be laid off, or change jobs. With a union retirement plan, workers cannot receive any of their funds until they retire, and there are no options as to how the money is paid out. With a union plan, workers also have no say as to how their retirement savings are invested. With the Contractors Plan, for example, workers can choose the investment mix that best suits their goals and/or their anticipated retirement date
Health insurance coverage is another issue that varies greatly between union and non-union plans. Unions have stringent guidelines workers must meet to qualify for coverage, usually requiring that they work a certain number of hours in a specified time period. With seasonality of work and layoffs, it’s not uncommon for workers to be with the union for years and never qualify for health insurance. While there are eligibility requirements attached to a non-union health insurance plan, they are much less restrictive. The Contractors Plan also offers hour banking, which gives employees the opportunity to “bank” extra hours worked during busy times, then use them to continue health insurance coverage during layoffs or slow times. Hour banking also helps employers avoid overpaying premium, and eliminates the problem of trying to get refunds from health insurance providers.
If you’d like more information on how to “sell” your employees on the advantages of having prevailing wage benefit plans, give us a call. If you partner with the Contractors Plan, a representative is available to assist you with your enrollment meetings, and can answer questions your employees may have.
I recently attended the 3-day DOL Prevailing Wage conference in Orlando and thought I would share my observations from that experience. The hotel accommodations at the famous Peabody Hotel provided a great setting with steak restaurants, a diner and strong martinis. The famous mallards marched on red carpets twice a day to much fanfare although when a fire alarm went off the third day, I noticed no one offered to escort the ducks off the premises. What the duck!
The conference was well attended but you couldn’t help but notice that a lot of people from “weatherization” were eager to learn the Davis-Bacon Act rules. The Department of Energy’s successful Weatherization Assistance Program (WAP) has spawned many new companies who help lower income families decrease their home’s energy bills through energy audit and appliance replacement discounts. The American Recovery and Reinvestment Act is providing more than $5 billion to expand the WAP program which is great, however, it also requires these companies to comply with the Davis-Bacon Act which their industry hasn’t had to deal with before. Wage surveys were rushed out, Wage determinations continue being issued and many companies are wracking their brains to understand certified payrolls, conformance and fringe benefit compliance. I thought the DOL did a good job of addressing their concerns.
My only complaint about these conferences is that the DOL is required to speak only to the regulations and not to the business concerns of contractors. I know that there are many COs who would welcome questions from contractors they have hired to perform a contract but many others would prefer not being presented with complicated problems for them to resolve. This is especially true if the contractor is questioning the duties of the CO. It is not realistic to think that contractors should question their clients. Contractors are looking for ways to gain a competitive advantage in a very competitive market and responses like “just pay them the higher wage” when in doubt doesn’t provide the business solutions they need in these tough economic times.
The DOL is sponsoring training sessions across the country throughout this year in an effort to thwart the tired response they receive from contractors during an audit of “ we didn’t know we had to…” The conference is very educational to new contractors and offers something to learn for everyone, but the goal here seems to be that the DOL has provided every contractor with every opportunity to learn the rules of government contracting and the old excuse will not fly in the coming audit years. The DOL is ramping up their staff to perform more audits and the marching orders seem to be a quicker move to debarment than it has been in the past.
While there is still very little recourse for contractors to ask questions, or rather get answers from government officials, the DOL conference offers invaluable information on the regulations that come into play. The best solution for contractors, however, is to partner with compliance experts who have experience with the auditing process and can assist them in “righting the ship” before an audit finds the problem first.
One key difference between union and non-union contractors is how they provide benefits to their employees. Unions generally provide benefits to the employees of signatory contractors. Open shop contractors are on their own to decide what, if any, benefits to provide to their employees. Although this gives the non-union contractor more responsibility, it also offers much more flexibility to determine and implement what benefits are most appropriate for their group.
Health insurance options may include HMO, PPO and POS options with varying premium costs, copayments, and benefit designs. If the contractor performs prevailing wage work, then a plan that accounts for premium payments on an hourly basis will be needed. “Hour-banking,” or the banking of any excess premium for the employees may also be desired for public works contractors to use the fringe dollars for these costs and to compete with union-sponsored plans.
Unlike union health plans, the non-union contractor can structure their benefit rates to reflect the number of dependents, if any dependents are covered. In other words, a union plan generally has the employees pay the same mandated rate regardless of whether the employee is covering any family members or not. This may or may not be a competitive rate for a worker covering a family, but will be very high for a worker who does not need to cover a spouse and children.
Ancillary benefits are generally very affordable and valued by employees as well. Non-union contractors may be able to choose dental and vision benefits and possibly even chiropractic coverage and life insurance.
Retirement plans are also common and can vary considerably in design. Union plans do not have options that allow an employer to implement a program that not only provides benefits to employees, but also helps company owners achieve their own retirement goals. Options for a retirement program might include 401(k), matching and profit sharing contributions. A prevailing wage contractor may deposit part of the fringe benefit package into such a plan if properly designed. These fringe contributions are usually 100% vested immediately, which is a big advantage for employees. If the union plan has a five-year vesting schedule, he or she will never see any of those retirement plan contributions unless they work for the union for at least that amount of time.
With more open shop contractors bidding on prevailing wage work, it is important for these employers to know their options. When unions attempt to persuade non-union employees to organize, they often tout their benefits. Offering a comparable, or even superior benefit package will not only help the employer retain quality employees, but also help them remain open shop. Not only do union employees have significant dollars going to benefit plans they do not have the opportunity to evaluate, but they are paying dues on top of that for the “privilege.”