The Davis Bacon Act and Walsh Healey Act impact on government acquisition

Business Management

The Davis Beacon Act and Walsh Healy Act

History of Each Act

Features of Both Acts

Coverage

Effects

Advantages/Benefits

Disadvantages

Differences between the Two Acts

Penalties

Current federal labor laws in this country have been built around many acts of legislation that have been passed over the years. Two of these acts were the Davis-Beacon Act and the Walsh Haley Act. Both of these acts have had tremendous impact on labor relations in this country.

History of Each Act

The first of these acts to be passed was the Davis-Bacon Act in 1931. It required that contracts for construction entered into by the Federal Government state the minimum wages to be paid to persons employed under those contracts. In 1936, the Walsh-Healy Act was passed. It stated that workers must be paid not less than the prevailing minimum wage that was normally paid in a locality. It restricted regular working hours to eight hours a day and 40 hours a week, with time-and-a-half pay for additional hours. It also prohibited the employment of convicts and children under 18 and established sanitation and safety standards (Federal Labor Laws, 1993).

Features of Both Acts

These acts were somewhat similar, yet had different features unique to them. The Walsh-Healy Act provides general employment regulations for employers holding manufacturing or supply contracts with the Federal government that are in excess of $10,000. While it originally required payment of overtime rates for hours worked in excess of 8 hours per day or 40 hours per week, the law was amended in 1986 to eliminate the requirement of overtime rates after eight hours of work in a day. The U.S. Department of Labor is the government agency that enforces the Walsh-Healy Act (The WorldatWork Handbook of Compensation, Benefits & Total Rewards, 2007).

The Davis-Bacon Act applies to contractors and subcontractors working on federally funded or assisted contracts that are in excess of $2,000. This includes construction, alteration, or repair contracts of public buildings or public works. This act requires that contractors and subcontractors pay their laborers and mechanics that are employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. The Davis-Bacon Act requires that the Department of Labor to determine the locally prevailing wage rates. The Davis-Bacon Act prevailing wage provisions also apply to the related Acts under which federal agencies help construction projects through grants, loans, loan guarantees, and insurance. The act also states that for those contracts that are in excess of $100,000, contractors and subcontractors must pay laborers and mechanics, including guards and watchmen, at least one and one-half times their regular rate of pay for all hours worked over 40 in a workweek (Davis-Bacon and Related Acts, n.d.)

Coverage

Each of these acts states the specific parties to which the act applies. In regards to coverage under The Walsh Healy act all persons employed by the contractor in the manufacture or furnishing of the materials, supplies, articles, or equipment used in the performance of the contract will be paid, without subsequent deduction or rebate on any account, not less than the minimum wages as determined by the Secretary of Labor to be the prevailing minimum wages for persons employed on similar work or in the particular or similar industries or groups of industries currently operating in the locality in which the materials, supplies, articles, or equipment are to be manufactured or furnished under said contract. Executive, administrative, professional, office and custodial workers are exempt (Contracts for materials, etc., exceeding $10,000; representations and stipulations, n.d.).

Who is covered by the Davis-Beacon act has been the center of several court litigations over the years. The 6th Circuit Court of Appeals has stated that this act was designed to give local laborers and contractors fair opportunity to compete for federally funded contracts and to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area. The language in the Davis-Bacon Act stated that the prevailing wages were applicable to all mechanics and laborers that were employed directly at the site of the work. The court has since decided that the phrase employed directly upon the site of the work refers only to employees working directly on the physical site of the construction (Parvin, 1997).

Effects

Both of these acts have had their advantages and disadvantages to labor relations over the years. Although the acts are similar in nature they have slightly different requirements and interpretations as to what contracts and sub-contracts that they cover.

Advantages/Benefits

At the time that the Davis-Beacon legislation was passed it appeared to be a relatively non-controversial statute designed to bring order to the construction industry. The intent of the bill was clearly to assure that local construction companies and workers would not be undercut by low wage competition from the outside (Vedder and Gallaway, 1999).

When the Walsh-Healy Act was passed it advantages included being paid a prevailing minimum wage for workers along with requiring overtime pay for work being done more than 8 hours per day or 40 hours per week.

Disadvantages

By raising wages paid on federally funded contracts, the Davis-Bacon Act has increased the cost of government. Those who are in favor of repeal suggest that it would reduce expenditures without reducing the amount of government provided services. If this act did not exist a highway contractor could hire a college student for eight dollars an hour to be a traffic flagger instead of using a unionized worker making twice or more that amount, thus helping to reduce excessive government spending (Vedder and Gallaway, 1999).

A disadvantage of the Walsh-Healy Act has been that has been ineffective in establishing minimum wage scales on most government contracts and has managed to drive a lot of small businesses out of the market because they couldn't compete.

Differences between the Two Acts

Both acts deal with contractors and sub-contractors but with slightly different requirements.

The Walsh-Healy Act applies to employers holding manufacturing or supply contracts with the Federal government in excess of $10,000. While the Davis-Beacon Act applies to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair of public buildings or public works.

Penalties

Contractors or subcontractors that have been found to have disregarded their obligations to employees, or to have committed violations while performing work on Davis-Bacon or Walsh-Healy covered projects, may be subject to contract termination and debarment from future contracts for up to three years. Also, contract payments may be withheld in sufficient amounts to satisfy liabilities for unpaid wages and liquidated damages that result from overtime violations of the Contract Work Hours and Safety Standards Act (Prevailing Wages in Construction Contracts, n.d).

Conclusions

Both the Davis-Beacon Act and the Walsh-Haley Act have contributed significantly to the labor relations laws in this country over the years. Both acts had good intentions when they were developed, but have since then come under question and scrutiny.

In the beginning they were enacted to help stabilize the construction industry while promoting fair wages. As times have changed throughout the years these acts are now seen as doing more harm than they are good.

I would not recommend that these acts continue to be enforced as they are today. They both have a good basic foundation and with some amendments they could both once again be viable contributing factors in fair labor relations in this country.

The wording of the Davis-Beacon act specifies that prevailing wages will be paid on government-financed projects. This has been found to mean that very high union pay scales that are well above the equilibrium wage necessary to secure a desired number of workers are being used. These are often double the non-union equilibrium wage. During the era in which Davis-Bacon was enacted the established wage in different cities, using union scale, varied from $1.00 to $1.75 an hour for bricklayers, in a time when the average wage for a production worker in manufacturing was barely 50 cents. Non-union construction workers were averaging about 80 cents on the hour. Because of the equilibrium mandated wages, the Davis-Bacon Act has lead to unemployment, since it becomes unprofitable to pay some workers the higher government-mandated rate of pay. It has also been found that Davis-Bacon promotes obvious racially discriminatory practices (Vedder and Gallaway, 1999).

There has been considerable evidence that the Davis-Bacon Act and other related legislation, such as the Walsh-Healey Act of 1936 and the Service Contract Act of 1965, have served to reduce employment and business opportunities for minorities, particularly African-Americans. When these acts were put into law there was a fear over wage cutting in the construction industry that stemmed in large part from a concern about blacks and foreigners taking jobs from native-born white Americans. The momentum for these bills was a fear of the harmful effects of labor competition from these groups on native white Americans (Vedder and Gallaway, 1999).

When the Davis-Beacon Act was developed it was established in order to stabilize the construction industry as well as promote fair wages. The way that the Davis-Beacon act is interpreted today in regards to prevailing wages, they tend to drive the price of the labor up unnecessarily causing tremendous expenses for the government. It also tends to promote unemployment because of the high price of the labor while discriminating against minorities in the construction industry. This act needs to be looked at again and amended so that it is more appropriate for today's times. Government expenses are at an all time high and having this act adding to those expenses is unnecessary. The act needs to be revised as to make free market competition available in the construction industry when it comes to government contracts. This would help to eliminate the excessive spending, the unemployment and the discrimination that is currently going on.

The Walsh-Healy act basically disallows suppliers of manufacturing and furnishing materials from buying such products and then raising their rates before re-selling them to the government to use on contracts over $10,000. It also requires employers with government contracts to pay prevailing wages at time and half the basic rate for hours in excess of 40 in a week. The Act requires payment of prevailing wages that have been defined by the Secretary of Labor as the same level as minimum wage under the Fair Labor Standards Act. It has also been found that the overtime requirements are essentially the same as those set down by the FLSA as well.