Davis-Bacon overtime: how the 40-hour rule works on federal jobs

On a federal construction contract over $100,000, laborers and mechanics must be paid at least one and one-half times their regular rate for every hour over 40 in a workweek. The Department of Labor says so on its construction contracts page. The tricky part is not the 40 hours. It is figuring out the right rate, and then showing it correctly on your certified payroll.

Which law sets overtime on Davis-Bacon jobs?

Two laws matter. The Davis-Bacon Act sets the minimum wage and fringe benefits for the trade. The Contract Work Hours and Safety Standards Act (CWHSSA) sets the overtime rule.

The DOL explains that for prime contracts over $100,000, contractors and subcontractors must pay laborers and mechanics, including guards and watchmen, at least one and one-half times their regular rate for all hours over 40 in a workweek. It adds that the overtime rules of the Fair Labor Standards Act may also apply to Davis-Bacon contracts, as stated on the same DOL page.

The statute itself, 40 U.S.C. 3702, computes wages on a standard workweek of 40 hours. Hours beyond that are allowed, but they must be paid at no less than one and one-half times the basic rate of pay.

What is the “basic rate” for overtime?

Many offices guess here, and it is where mistakes start. 29 CFR 5.32 covers how overtime is figured when Davis-Bacon applies together with overtime laws like CWHSSA. Its main points:

• The regular rate can never fall below the basic hourly rate listed in the wage determination.
• An employee’s own fringe contributions are not excluded. The straight-time rate is figured on earnings before deductions for those contributions.
• Your own payments or costs for fringe benefits may be excluded from the overtime rate, but only if the regular rate stays at or above the wage determination’s basic hourly rate.
• If you pay cash in place of fringe benefits, that cash can be excluded. But if the cash is really part of the straight-time wage, it cannot be excluded.

The regulation works through examples with a contractor who pays cash wages below the basic rate and credits benefit costs. In that case the regular rate is still the basic rate in the determination. You cannot lower the overtime base by moving money from wages into benefits.

If you want to see where the basic rate and fringe amounts come from, read our guide on how to read a Davis-Bacon wage determination. For how plan costs turn into an hourly credit, see Davis-Bacon fringe benefits.

What does it cost if overtime is missed?

Under 29 CFR 5.5(b), the contractor and any responsible subcontractor are liable to the affected employee for unpaid wages plus interest from the date of the underpayment. They also owe liquidated damages to the government.

The statute sets liquidated damages at $10 for each calendar day an employee worked more than the standard workweek without the required overtime pay (40 U.S.C. 3702(c)). The current regulation lists the amount as $33 per day, because the figure is adjusted for inflation (29 CFR 5.5(b)). Check the current text before you rely on any number.

Daily amounts can add up across a crew and a long job. That is why the weekly total of hours matters more than any single day.

What does an overtime calculation look like?

This example is illustrative only. The numbers are made up and are not from any wage determination. Say the determination lists a $40.00 basic hourly rate, and you pay a worker $40.00 in cash wages plus fringe contributions to a plan. The regular rate for overtime is the $40.00 basic rate. Under the one-and-one-half rule, each overtime hour is paid at no less than $60.00. A worker with 45 hours in the week would have 40 straight-time hours and 5 overtime hours.

Now say you instead cut the cash wage to $36.00 and credit $4.00 an hour in plan costs toward the fringe requirement. As 29 CFR 5.32 describes, the regular rate is still the determination’s basic rate, so the overtime base does not drop. Always confirm the details against your own contract and wage determination, and ask your payroll provider or advisor.

What must your records show?

Under 29 CFR 5.5(a)(3)(i), contractors and subcontractors keep payrolls and basic records during the work and for three years after all work on the prime contract is completed. The records cover each laborer and mechanic and include:

• Name and last known address
• Job classification or classifications
• Hourly pay rates
• Daily and weekly hours worked
• Deductions
• Actual wages paid

Your weekly certified payroll should match those records. If your timekeeping only captures a weekly total, you may not be able to show how a split between straight time and overtime was reached. Keep daily hours.

A simple checklist before you submit

1. Add up each worker’s hours for the full workweek, not one project at a time. Ask a professional how hours on other work should be treated for your situation.
2. Confirm the basic rate from the wage determination and check that the regular rate is not below it.
3. Confirm which fringe amounts you paid in cash and which went to plans.
4. Compare the overtime rate on the report to the rate used in payroll.
5. Make sure daily hours are saved with the payroll records.

Our WH-347 guide covers the form itself, and What is certified payroll? is a good start if you are new to this.

Where Payrung fits

Payrung is being built to turn your payroll export into submission-ready certified payroll, so overtime hours and rates carry through to the report without retyping. It is not built yet. Join the waitlist.

This article is general information, not legal or tax advice. Overtime and prevailing wage rules vary by contract and by state, so check your contract and talk with a qualified professional.