Wage and Hour Division (WHD)
Section 64g03: Prevailing Wages
- Determining the prevailing wage is the first step toward establishing the correct commensurate wage. The prevailing wage is the wage paid experienced workers who do not have disabilities in the vicinity performing essentially the same type of work (see Regulations 29 CFR Part 525.10(a)). An employer must be able to demonstrate that the prevailing wage rate used to determine a commensurate wage was objectively determined. Normally, prevailing wage rates are based on the results of surveys conducted by the employer holding the section 14(c) certificate.
- The prevailing wage survey must be conducted prior to paying a SMW. It then must be reviewed and updated at least once a year - more frequently
when a change in the prevailing wage has most likely occurred (such as when the FLSA section 6(a)(1) MW has increased). Prevailing wage surveys
are conducted in the same manner regardless of the employer's method of payments - piece rate, hourly wage, salary, etc.
- Prior to the effective dates of the last two increases in the MW, the Child Labor and Special Employment Team, NO/OEP has reminded all certificate holders, by letter, of the requirements of reviewing and adjusting prevailing wage rates.
- It is the intention of the NO to continue this notification process for any future increases in the MW.
- The prevailing wage is not an entry-level wage or a training wage, but the wage rate paid experienced employees after completion of any training or probationary periods. An experienced worker is one who has learned the basic elements or requirements of the work to be performed, ordinarily by completion of a probationary or training period. Typically, such a worker will have received at least one pay raise after successful completion of the probationary or training period (see Regulations 29 CFR Part 525.3(k)).
- The prevailing wage may not be lower than the applicable statutory minimum wage as established by section 6(a)(1) of the FLSA, or where applicable, a higher State minimum wage. Employers must ensure that the wage rates they are quoted when conducting the prevailing wage survey meet this criteria.
- To conduct a survey, the employer must obtain wage information for each job classification being performed by workers to be paid a SMW. A brief
job description should be prepared. This job description will also be important when conducting time studies and will assist the INV in determining
compliance. The job description should:
- define the specific job duties, responsibilities and tasks;
- include types of equipment and supplies used to perform the tasks;
- list types of skills, education or experience levels required; and
- indicate the location, and days and times of the week the work is to be performed.
- The employer should obtain wage data from comparable firms in the area. The appropriate size of the sample - the number of firms surveyed - will
depend on the number of firms doing similar work, but normally should include no less than three (see Regulations 29 CFR Part 525.10(c)).
- The information should be solicited from comparable businesses employing primarily workers who do not have disabilities performing similar work in the vicinity where the worker with a disability is employed (see Regulations 29 CFR Part 525.10(c)). A comparable business is one that either employs a similar number of employees or competes for contracts of a similar size and nature.
- If similar work cannot be found in the area defined by the geographic labor market (the vicinity), the closest comparable community should be used (see Regulations 29 CFR Part 525.10(c)). When this is not possible, the employer has two options:
- The employer may obtain wage information from sources other than comparable businesses as long as the data obtained reflects non-entry level wage rates. Examples of other sources of wage information might be the Bureau of Labor Statistics (BLS), State employment services, temporary help firms, and private employment services.
- The employer may identify the general characteristics of the job to obtain a generic job description and search for employers whose work has similar characteristics. For example, such job comparisons might be made as follows: skilled, semiskilled or unskilled; light duty or heavy duty; and either handwork or machine-assisted. Using these comparisons, a generic job description could, for example, be unskilled, light duty, hand benc assembly, or semi-skilled, machine-assisted packaging.
- There are special situations in which an employer is not required to conduct a survey to determine the prevailing wage.
- If an employer's workforce consists primarily of workers who do not have disabilities, the employer is not required to do a survey.
- Instead, the employer may use as the prevailing wage rate the rate he or she pays to his or her experienced workers who do not have disabilities who perform similar work. Similarly, if an agency or facility places a worker with a disability on the premises of such an employer, the wage paid to the employer's experienced workers who do not have disabilities may be used as the prevailing wage (see Regulations 29 CFR Part 525.10(b)).
- Should an employer whose workforce consists primarily of workers who do not have disabilities choose to perform a prevailing wage survey (rather than adopt as prevailing the established wage rate already being paid his or her experienced workers), WH requires that the employer include the wage data from his or her own firm when conducting the survey and computing the prevailing wage. This is because the employer's own wage data would most perfectly comport with the requirement of Regulations 29 CFR Part 525 that the commensurate wage be based upon the wage rate paid to experienced workers who do not have disabilities performing essentially the same type, quality and quantity of work in the vicinity in which the individual earning the SMW is employed. To ignore the employer's own data in such situations would unfairly ignore the employer's impact on the wages being paid in the vicinity.
- If the section 14(c) employer has a subcontract to perform a job in essentially the same way and with the same type of equipment as the
prime contractor, the section 14(c) employer may use the wage rate the prime contractor pays to his or her experienced workers as the prevailing wage rate.
- The INV should compare the job methods and equipment used by employees of the section 14(c) employer with those of the contractor to determine if there is a difference. If a difference is discovered, the INV must determine whether the difference is great enough to change the characteristics of the work performed. If the characteristics of the work have changed (such as changes in the type of product produced or the process used to produce the product), the contractor's wage may no longer be the appropriate prevailing wage.
- If the prime contractor discontinues the job by subcontracting all the work to the section 14(c) employer, the section 14(c) employer must conduct a prevailing wage rate survey.
- If an employer's workforce consists primarily of workers who do not have disabilities, the employer is not required to do a survey.
- The employer must maintain the following documentation regarding prevailing wage surveys (see Regulations 29 CFR Part 525.10(g)):
- Date of contact with firm or other source.
- Name, address, and phone number of firm or other source.
- Name and title of individual contacted within the firm or other source.
- Wage rate information provided by firm or other source.
- Brief description of work for which wage information was provided.
- Basis for the conclusion that the wage rate was not based upon an entry-level position.
- After obtaining at least three wages rates (see Regulations 29 CFR Part 525.10(c)), the employer must average them to determine the prevailing wage for a particular job. The employer may use either a weighted or simple average so long as he or she is consistent. See the following example:
Weighted Average vs. Simple Average Employer No. of EEs Wage Rate Reported Gross Wages
(#EEs X Wage)
Weighted Average: $835.30 / 141 employees = $5.92411 or $5.93* Straight Average: $18.00 / 3 employers = $6.00 *Note that in this example the prevailing wage rate is $5.92411, but the employer rounded it up to $5.93 per hour. If the employer rounded to $5.92, he or she would be establishing a prevailing wage rate that is less than the true prevailing wage rate (less by $0.0041 per hour). WH will not normally question computations that are carried out to the fifth decimal point and then rounded up to four decimal places. The employer could, of course round up (but not merely round off) sooner. For example, .04974 should be rounded to .0498 or .05 (see FOH 64g06(f)(1)). XYZ, Inc 99 $5.85 $579.15 ABC, Inc 17 $5.95 $101.15 RST, Inc 25 $6.20 $155.00 3 employers 141 employees $18.00 $835.30
- Evaluating employer's prevailing wage rates.
- The INV should review the prevailing wage survey data requested during the initial conference and use his or her knowledge of wage rates in
the area to evaluate the wages contained in the survey.
- If the section 6(a)(1) MW is cited as a prevailing wage, the INV should verify that the employer has sufficient documentation to prove that the MW was the rate being paid experienced workers, rather than entry level workers (see Regulations 29 CFR Part 525.3(k)).
- Should the INV question the accuracy of the employer's prevailing rate, he or she should contact the employer's sources of wage information to verify the validity of the rates listed, the accuracy of the work descriptions, and to confirm that the rates are not for entry level work. When conducting these calls, the INV must take care that the sources contacted are not left with an impression that the employer with the SMW certificate has violated the FLSA.
- The INV should be aware that there might be more than one "correct" prevailing wage in the same vicinity. Depending on sources and the methodology (such as whether a simple or weighted average was used) two employers in the same vicinity may obtain slightly different rates. The range should be fairly narrow. A prevailing wage rate that differs only slightly from others in the same vicinity should not be challenged provided the employer supplies documentation to demonstrate that he or she conducted the survey in a thorough and conscientious manner.
- Employers sometimes make arbitrary adjustments in the prevailing wage to account for differences in duties, methods, equipment and responsibilities between the work done by section 14(c) employees and work done by employees who do not have disabilities in competitive industry. This practice, known as "de-skilling," is not permitted. If comparable jobs cannot be found, prevailing wage data should be collected on jobs requiring the same general skill levels. The following is an example of de-skilling:
- Assume that the properly determined prevailing wage for packaging-by-hand is $8.00 and that the hand packing job performed in competitive industry normally includes the following steps: counting bolts, placing a label on the bag the bolts go in, putting 10 bolts into the labeled bag, putting 24 filled bags into a box for packing and then sealing the box.
- De-skilling occurs when the employer lowers the prevailing wage because the workers with disabilities do not perform all components of the job that was surveyed. The workers with disabilities may not perform all components of the job because of the manner in which the work was assigned, because they are unable to or refuse to perform certain of the work components, or the particular contract being performed does not require all of the components. An example of de-skilling would be when the employer, for whatever reason, decided that labeling the bags is not as difficult as counting 10 bolts and therefore the SMW of an employee who only performed labeling should be based on a prevailing wage of $7.25 an hour rather than $8.00. The same would be true if the employer decided that the SMW of an employee who only sealed the boxes should be based on a prevailing wage of $7.50 an hour.
- De-skilling is an inappropriate adjustment to the prevailing wage that adversely impacts the commensurate wage. Some employers may also attempt to improperly reduce commensurate rates when evaluating the performance of workers with disabilities by penalizing them for not performing all components of a job. This process, known as factoring, is discussed in FOH 64j02(b)(2)b1B.
- If the INV finds the information obtained by the section 14(c) employer unacceptable, or if the employer failed to conduct a prevailing wage survey, the INV should request the employer to perform the survey (following the procedures and guidelines found in this section of the FOH). The INV will then review the results of the new survey. Should the employer decline to conduct a new prevailing wage survey, the INV will conduct the survey. Documentation of the survey conducted by the INV must be included in the case file. The INV shall also determine if the employees with disabilities are due back wages because of the firm's failure to properly determine the prevailing wage.
- The INV should review the prevailing wage survey data requested during the initial conference and use his or her knowledge of wage rates in the area to evaluate the wages contained in the survey.