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Section 2: Labor Requirements

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Policy

Contractors must be familiar with and comply with all laws, ordinances, and regulations regarding labor-related requirements that affect the contract. Monitor the contractor and subcontractor to ensure compliance with contract labor provisions.

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Labor Laws

Following are applicable labor-related laws and descriptions of each.

Contract Work Hours and Safety Standards Act (29 CFR Part 5)

The Contract Work Hours and Safety Standards Act is a federal law that:

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  • applies to all construction contracts;
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  • provides that any laborer, worker, mechanic, watchman or guard must be paid on the basis of a forty-hr workweek. Overtime must be paid at 1-1/2 times the regular rate for every hour worked more than 40 hr. per week. Overtime payments are based on time actually worked (including break periods but not lunch) and cannot include holiday, vacation, or other time paid but not worked; and
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  • gives the Department the primary responsibility for ensuring compliance with the requirements of this Act.

The Contract Work Hours and Safety Standards Act does not apply to:

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  • contractor's supervisory and office employees;
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  • contracts or subcontractors furnishing supplies and equipment when such operations are located off-site of the project;
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  • contracts with a political subdivision; and
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  • contracts or work agreements for construction work or services with railroads or public utilities when the work or services is done by their employees.

Copeland Anti-Kickback Act (29 CFR Part 3)

The Copeland Anti-Kickback Act, a federal law, provides regulations concerning the construction and repair of public works contracts and subcontracts exceeding $2,000 and financed in whole or in part by federal funds. A portion of the Act concerns the payment of wages to the contractor and subcontractor employees. The Act authorizes the U.S. Department of Labor (USDOL) to develop regulations, including payroll records and submission requirements.

The Copeland Anti-Kickback Act permits certain payroll deductions, such as:

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  • bona fide fringe benefits;
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  • any deduction made in compliance with the requirements of federal, state, or local law, such as income and social security taxes;
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  • any deduction required by court process, such as child support; and
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  • any deduction for the cost of safety equipment for the employee's own protection such as safety glasses provided the cost is nominal and the employer is not otherwise required to furnish the equipment pursuant to law.

The Act also permits certain payroll deductions from the wages of laborers and mechanics when the employee's written consent is provided, such as life insurance, hospitalization and medical insurance, retirement plan, vacation plan, safety shoes, and safety hats. Other deductions require a written application and approval of the USDOL. For example, gasoline and uniforms that are required by the employer as a condition of employment.

No monitoring responsibilities are required for certain types of personnel, contracts, and employers, such as:

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  • supervisory and office employees;
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  • contracts or subcontractors furnishing supplies and equipment when such operations are located off-site of the project;
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  • contracts with a political subdivision; or
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  • contracts or work agreements for construction work or services with railroads or public utilities when the work or services is done by their employees.

Davis-Bacon and Related Acts (29 CFR Parts 1, 3, 5, 6, and 7)

These federal Acts apply to all federally funded construction contracts, except for projects with functional class code 6 (rural minor collector) or 7 (local road or street). The Davis-Bacon Act:

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  • sets a prevailing minimum wage rate for various labor classifications predetermined by the U. S. Secretary of Labor to be paid to laborers and mechanics;
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  • requires the laborers and mechanics be paid weekly at prescribed rates for all hours worked;
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  • provides that fringe benefits, or wage equivalent, are to be paid laborers and mechanics when included in the U. S. Secretary of Labor's prevailing minimum wage rate decision; and
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  • requires that the contractor post the prevailing minimum wage rates at the job site.

The Davis-Bacon Act does not apply to:

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  • contractor's supervisory and office employees;
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  • contractors or subcontractors or suppliers furnishing supplies and equipment when such operations are located off-site of the project;
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  • contracts with a political subdivision; or
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  • contracts or work agreements for construction work or services with railroads or public utilities when the work or services is done by their employees.

Fair Labor Standards Act (29 CFR Chapter V)

The Fair Labor Standards Act (FLSA), a federal Act, applies to all contracts and requires contractor and subcontractor compliance with USDOL regulations.

Many of the requirements contained in this Act mirror those in the previous laws described. FLSA does, however, provide additional requirements regarding child labor, as follows.

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  • Children of any age are generally permitted to work for businesses entirely owned by their parents, EXCEPT those under 16 years of age may not be employed in mining or manufacturing, and NO ONE under 18 years of age may be employed in any occupation determined to be hazardous by the U. S. Secretary of Labor.
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  • Children under 14 years of age may not be employed on Department contracts.
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  • Young persons 14 and 15 years of age may be employed in non-manufacturing and non-hazardous jobs for limited periods of time and under specified conditions.
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  • Young persons 16 and 17 years of age may work an unlimited number of hours in any occupation other than those determined by the U. S. Secretary of Labor to be hazardous in nature.
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  • Individuals 18 years of age and older are no longer subject to the Child Labor Provisions of the FLSA.

The FLSA establishes an 18-year minimum age for all nonagricultural occupations determined to be hazardous in nature by the U. S. Secretary of Labor. The following are considered hazardous occupations.

*Limited exemption is provided for apprentices and student-learners who are at least 16 years of age and enrolled in approved programs.

Additional detailed information may be obtained from the USDOL website regarding FLSA Child Labor Provisions.

Prevailing Wage Rates (Title 10, Texas Government Code, Chapter 2258)

Title 10, Chapter 2258 of the Texas Government Code requires payment of prevailing wage rates for each craft needed to execute a public works contract on behalf of the State of Texas. This statute mirrors the federal Davis-Bacon Act and may be referred to as a state-mandated “little Davis-Bacon Act.” This statute:

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  • sets a prevailing minimum wage rate for various labor classifications predetermined by the Secretary of Labor to be paid to laborers and mechanics, and
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  • requires the contractor and all subcontractors keep, or cause to be kept, copies of weekly payrolls for review for a period of 3 years from the date of the completion of the contract.
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Contract Labor Requirements

At the preconstruction meeting, advise the contractor of their contract labor requirements and obligations.

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  • All mechanics and laborers working on a TxDOT construction project must be paid at least once a week.
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  • Mechanics and laborers must be paid at least the minimum prevailing wage as shown in the contract for the work classifications being performed (Mechanics and laborers performing in more than one classification must be paid at the rate specified for each classification for the time actually worked in each.)
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  • The prevailing wage rates applicable to the contract must be posted at the project site where they can easily be seen by all employees.
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  • If an employee is performing in a work classification that does not appear in the prevailing wage rate, the contractor must submit Form CST-C-1, “Additional Classification and Wage Rate Request,” to the Area Engineer.
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  • Contractors must submit weekly certified payrolls listing the wages paid to each employee. Effective with projects let August 2017, contractors must use LCPtracker, the Department's certified payroll system. The weekly certified payrolls must be submitted to the appropriate Area Engineer’s office within 7 calendar days after the end of the payroll period. The chart “Subcontracting and Payroll Requirements” illustrates when payroll records are required and when a firm must be approved as subcontractor.
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  • All weekly certified payroll records must be retained for a period of 3 years from the contract completion date. These payroll records must be made available at all times for inspection by the Department, any authorized state governmental investigating or state auditing agency, and authorized representatives of the USDOL.
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  • Only the following payroll deductions are permissible without prior approval from the USDOL (For more detailed information, please refer to 29 CFR Part 3.5.)
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    • Deductions made in compliance with federal, state or local law (i.e., federal or state withholding income taxes, and federal social security taxes)
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    • Deductions of sums previously paid an employee (prepayment of wages), but only if such deduction is made without discount or interest
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    • Deductions of amounts required by court order
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    • Deductions authorized by the employee that constitute a contribution for the purpose of providing medical or hospital care; pensions or annuities on retirement; death benefits; or compensation for injuries, illness, accidents, sickness, or disability (or similar payments) for the benefit of the employee. These deductions are permissible provided they are not otherwise prohibited by law and are included in a bona fide collective bargaining agreement between the contractor and subcontractor and its employees or are pre-approved by the employee and serve the convenience or interest of the employee. In addition, the contractor and subcontractor may not profit from or otherwise receive benefits (e.g., commissions and dividends) for any employee payroll deductions.
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    • Deductions contributing toward the purchase of U.S. Defense Stamps and Bonds when voluntarily authorized by the employee
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    • Deductions requested by the employee to enable repayment of loans or to purchase shares in credit unions
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    • Deductions voluntarily authorized by the employee for contributions to governmental or quasi-governmental agencies (e.g., American Red Cross)
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    • Deductions voluntarily authorized by the employee for contributions to Community Chests, United Givers funds, and similar charitable organizations
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    • Any deductions to pay regular union initiation fees and membership dues, provided that a collective bargaining agreement exists between the contractor and subcontractor and its employees, and the deductions are not otherwise prohibited by law
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    • Deduction for the “reasonable cost” of reimbursement for board, lodging, or other facilities meeting the requirements of the FLSA (See 29 CFR Part 531.)
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    • Deduction for the cost of nominal value safety equipment (e.g., hard hats, safety shoes, safety glasses, and safety gloves), provided that such equipment is purchased by the employee as their own property for personal protection in work. This deduction is permissible provided the deduction is only for the actual cost of the safety equipment, and such deduction is provided for in a bona fide collective bargaining agreement between the contractor and subcontractor and its employees or voluntarily consented to by the employee in writing.
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  • All payment of wages must be made by cash or negotiable instruments payable on demand.
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  • Payments of fringe benefits are limited to those benefits as stated in the contract wage determination. Fringe benefits not included in the contract wage determination must be paid as an hourly cash equivalent.
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  • Employees who work in excess of 40 hr. in any given workweek must be paid at a rate of 1-1/2 times their regular rate for all hours worked in excess of 40 hr. Such work hours are exclusive of payments made for non-work hours (such as vacation, holiday, or illness). For more complete information regarding the payment of overtime wages, please refer to 29 CFR, Part 778.
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District Monitoring for Federally Funded Projects

Conduct periodic site inspections of the work to ensure contractor and subcontractor labor requirements as listed in “Contractor Labor Responsibilities,” above. Ensure that the contract prevailing wage rates are posted on the work site in an area accessible to all contractor and subcontractor employees.

The names of truck owner-operators are to appear on the contractor’s weekly payroll under the heading, “Truck Owner-Operator.” No other information is required.

Recommend the use of the standard job classifications contained in the booklet Standard Job Classifications and Descriptions for Highway, Heavy, Utilities and Industrial Construction in Texas for the contractor’s and subcontractor’s payrolls. The contractor may use other code numbers or abbreviations on the payroll forms, provided the contractor attaches a list of the code numbers or abbreviations with the corresponding title classification to each payroll.

When no work is performed, obtain from the contractor a statement of compliance with the statement “No work done this week.” When no work is performed for long periods of time, the statement “No work until further notice” should be shown, and weekly statements are not required.

Additional Labor Classifications

When the contract wage schedule does not include a job classification used on the contract, the contractor must submit Form CST-C-1, “Additional Classification and Wage Rate Request,” to the Area Office for review and signature by the Area Engineer (AE). Upon signing, forward to the District Construction Office (DCO) for review and signature by the Director of Construction or Representative. Ensure that recommended wage rates are proportionate to similar wage rates contained in the contract wage decision and conform to like wage rates in surrounding areas. The DCO will submit these requests to the Construction Division (CST) for approval by emailing CST_LaborCompliance@txdot.gov.

Labor Interviews

For federally funded projects, conduct at least three employee labor interviews for each project per quarter to determine if the contractor and subcontractors are in compliance with labor laws. Randomly select employees to be interviewed. Inform the contractor when payroll errors are found. Refer to the following table for guidance in resolving payroll errors.

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If

then

payrolls do not match interview information

notify the contractor to correct the problem

the contractor does not correct the problem

notify the district office



Contact CST for additional guidance in conducting wage dispute investigations.

Payroll Review

For federally funded projects, review at least 10% of all payrolls for each contract. Use discretion in determining the composition of this 10% is left to the AE's discretion. Verify that the payrolls submitted include the following information for each employee.

Ensure that legal holiday work is paid at the regular prevailing per diem wage rate, and overtime pay for actual hours worked in excess of 40 hr. per workweek is compensated at a rate not less than 1-1/2 times the basic rate of pay.

Review selected payrolls to ensure that employees are compensated at least the appropriate prevailing minimum wage for the actual work performed. Document in the project file the review results, review date and reviewer name. Bring any discrepancies or questionable wage rates to the attention of the contractor for explanation or correction. Bring any contractor failures to correct or adequately address deficiencies and requests for information by the contractor to the attention of the district office. If the contractor still does not address identified issues, request that the Financial Management Division (FIN) withhold the monthly estimates. Once the problem is corrected, provide notification to FIN to resume monthly estimates.

Semiannual Labor Compliance Enforcement Report (federally funded projects only)

Twice annually, CST will send a request and instructions for completing Form FHWA 1494, “Semiannual Labor Compliance Enforcement Report,” to the districts. Submit completed forms via email to CST_LaborCompliance@txdot.gov on or before April 15 and October 15 of each year. Reporting periods are October 1-March 31 and April 1-September 30 each year. Provide data for questions 4-11. CST personnel will compile district information received to report statewide information for questions 1-3 and will provide the completed report to USDOL and FHWA.

Wage Rate Survey

Wage rate surveys are conducted periodically as mandated by the USDOL and State statutes. These surveys determine applicable prevailing wage rates for highway construction in Texas. Extract wage information from contractor and subcontractor payrolls as requested by CST and enter this information into the automated Wage Rate Survey system. The frequency of the surveys depends on the Department’s survey plan for a given year. Forward questions regarding wage rate surveys to CST_LaborCompliance@txdot.gov or call the Construction Division at 512-416-2428.

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