Federal Employment Laws That Impact Compensation and Benefits

Federal Contract Wage Laws

There are federal laws that require government contractors to pay a minimum wage other than the FLSA minimum or "prevailing" rates.

Davis-Bacon Act

The Davis Bacon act of 1931 requires the Secretary of Labor to determine prevailing wage rates applicable to federal government construction, alteration, or repair contracts in excess of $2,000.

The law is controversial primarily because the Secretary has used union rates in the geographical area as the prevailing rate.

Employers argue that:

• the law doesn't require the secretary of labor to use union rates
• using union rates raises wages and government expenditures

Labor leaders argue that changes in administration of the law would weaken:

• unions
• union contractors

Walsh-Healy Public Contracts Act

The Walsh-Healy Public Contracts Act of 1936 applies to employers that are a party to federal contracts for materials, supplies, and equipment in excess of $15,000.

Walsh-Healy requires these employers that are awarded government contracts to pay:

• not less than the FLSA minimum wage or a minimum wage established by the Secretary of Labor pursuant to Executive Order 13658, which is currently $13.30 per hour. If the state or local minimum wage is more, it will apply.
• overtime at 1.5 times the regular hourly rate for all hours in excess of 40 in a workweek

McNamara-O'Hara Service Contract Act

The McNamara-O'Hara Service Contract Act of 1965 extends Davis-Bacon concepts to government contracts for services such that:

• Contractors holding service contracts of $2,500 or less must pay service employees at least the minimum wage established by the Secretary of Labor pursuant to Executive Order 13658, which is currently $13.30 per hour. If the state or local minimum wage is more, it will apply.
• Contractors holding service contracts in excess of $2,500 must pay employees no less than the wage rates and benefits found by the Department of Labor to be prevailing in the area, or no less than the compensation (pay and benefits) found in the previous contractor's collective-bargaining agreement.

The Department of Labor audits federal contractors to ensure that there is no discrimination in government contracts. Compensation and benefits are affected by these audits since part of the reason for having them is to examine wages and salaries by job category and level.