Labor Compliance Newsletter - July 2008

This is the inaugural issue of the Labor Compliance Advisor newsletter.  The newsletter is intended to achieve greater compliance and consistency throughout the State in our Federal Aid requirements, primarily with respect to payroll and payroll reporting issues.  Florida Department of Transportation (FDOT) Secretary Kopelousos has established a goal of “One FDOT – We are one agency, united. Central Office and Districts, including Turnpike, we are one DOT working together.”   To help make this happen, operational consistency between Districts is essential.  This newsletter is being established as a common communication tool to all of the stakeholders striving to comply with our Federal Aid requirements – those within FDOT, the consultant community and our contracting partners.  It is our common goal to fully comply with applicable Federal Aid requirements and to do so in a manner that is consistent in application, effective in assuring compliance, and efficient in administration.  Hopefully, this newsletter will promote these ideals.


In This Issue 
Davis-Bacon Rules (Business Owner) 
Equipment Information
    •  Material Transfer Device
    •  Backhoe vs. Excavator
Training Needs 
Change to Federal Minimum Wage  


In the FDOT’s contracts, the Davis-Bacon/Copeland Act requirements are included through two Special Provisions (Articles 7-1.1 and Article 7-16).  Article 7-1.1 requires the contractor to comply with the provisions contained in the FHWA-1273 document (Sections IV and V pertain to wages and payroll reporting).  Further, this document requires that the contract provisions be included in any lower tier subcontract or purchase order and that the required contract provisions not be incorporated by reference in any case.  This means that the entire text of the FHWA-1273 (or the applicable portions) must be included in the subcontract or purchase order.


The FHWA-1273 also states that the Prime Contractor shall be responsible for compliance by any subcontractor or lower tier subcontractor with these Required Contract Provisions.  To better assure this compliance, the inclusion of these Required Contract Provisions in subcontracts and purchase orders isn’t just a contract requirement, it’s a good business practice.  The FHWA-1273 document may be accessed on the internet at:


Davis-Bacon Rules (Business Owner)                                                                     
Recent questions were raised regarding the proper reporting of business owners working on the job site.  A payroll form was submitted listing the names of two persons engaged in pile driving, but no hours or pay rate was listed – only a notation saying, “owners”. 

Some background…The Davis-Bacon requirements apply only to laborers and mechanics.  In the Federal Rules, the regulatory definition of a laborer or mechanic is stated at 29 CFR Subpart A, Section 5.2(m).  The definition references 29 CFR, Part 541.  Part 541.101 states that persons who own at least a bona fide 20 percent equity interest in the organization and participate in management are considered to be “Employees employed in a bona fide executive capacity” (an excerpt of Part 541.101 appears below).  As such, these persons are excluded from the definition of laborer or mechanic, even if many of their duties on the job site are manual or physical in nature.  These persons are not covered by the prevailing wage requirements of Davis Bacon and the reporting of hours worked and compensation will not be required.


To implement this approach, the FDOT will require that business owners eligible for this treatment file a statement attesting to their ownership interest and their management duties within their organization.  This must be filed with an original signature on each job where the business owner performs manual or physical work at the job site.  After this statement is filed, for each week where the business owner works at the job site, the certified payroll should show their name, address and Social Security Number, but the remaining information need not be shown, just a notation, “Owner – 541 Excluded”.  This treatment will be accorded only to bona fide subcontractors.  USDOL Wage and Hour Division Fact Sheet #13 provides general guidance in determining who is and is not an independent subcontractor (attached below).

 Independent Contractor (PDF File, 35kb)
 Business Owners (PDF File, 25kb)

In a 2003 case, the Administrative Review Board upheld the Department of Labor’s position that the use of a “blended rate” for claiming fringe benefits for health insurance was not allowed.  In this case, the contractor had calculated and claimed the average cost of providing health insurance to employees even though the cost varied by employee.  Family coverage cost the contractor $435.80; individual coverage cost $154.57; and some employees were not eligible for coverage.  Despite these variations in cost, the contractor claimed a standard, blended rate for health insurance for all employees in their fringe benefits.  This tended to overstate the benefit for employees with individual or no coverage while understating the benefit to those with family coverage.  According to the DOL Field Operations Handbook, Section 15f11(d):

Under a hospitalization plan, the employer often contributes at different rates for single and family plan members.  In such situations, as an employer cannot take an across the board average equivalent for all employees; rather, the cash equivalent can only be credited based on the rate of contribution for each individual employee.

The Administrative Review Board upheld this long-standing policy interpretation.  The Board also held that a credit for fringe benefits under Davis-Bacon could not be claimed for those individuals who were not eligible to participate in the health insurance plan.  The DOL Field Operations Handbook, Section 15f12 states:

If the plan requires contributions to be made during the eligibility waiting period, credit may be taken for such contributions, since it is not required that all employees participating in a bona fide fringe benefit plan be entitled to receive benefits from that plan at all times. However, credit may not be taken for contributions for employees who by definition are not eligible to participate, such as employees who are excluded because of age or part-time employment.


The contractor in this instance was required to pay back wages to those employees whose health insurance benefit was overstated.  When calculating and reporting fringe benefits, care should be taken to comply with the requirements contained in the DOL Field Operations Handbook, available at the following web site:


  • Material Transfer Device
    Some asphalt paving operations include a piece of equipment that runs just in front of the paver, holding a quantity of hot mix and feeding it steadily to the paver.  These are called “Material Transfer Devices” or “Shuttle Buggies”.  They are used to provide a more uniform supply of hot mix, reducing segregation and temperature variations, as well as insulating the paver from “bumping” the asphalt delivery trucks.  The final result is a smoother, more uniform asphalt mat.  While they operate in concert with the paver, the operator of a Material Transfer Device cannot be classified as an “Asphalt Paving Machine Operator”.  An additional classification must be requested since none of our wage tables includes a Material Transfer Device Operator.  The photos below show this piece of equipment.

Photos of construction equipment

  • Backhoe vs. Excavator
    Many of the wage tables in use do not include classifications that are frequently used in highway construction.  A prime example is the classification “Excavator Operator”.  This classification is one of the most frequently requested for additional classifications.  The classification for “Backhoe Operator” is not an appropriate substitute for the person operating the excavator.  The pictures below show the difference between a backhoe and an excavator.

Photo of construction equipment

Picture of backhoes

Excavators generally have larger capacities than the backhoes, with excavators usually having buckets larger than 1 CY.  While some have tracks and some have wheels, a notable characteristic of the excavator is that the engine, cab, and excavator boom all swivel as a single unit, making the operation of an excavator quite different from a backhoe.


A training document is being prepared by the Central Office focusing on contractor compliance requirements.  This training should provide a handy, easily accessible source of training information for new employees and contractors new to our program; as well as a ready reference when needed.  When completed, the training will be posted on the FDOT Construction web site in both PowerPoint and Adobe formats.  Watch for future announcements when this training document is completed.

 Federal Minimum Wage                                                                                                     

Effective July 24, 2008, the Federal minimum wage changed from $5.85 per hour to $6.55 per hour.  This change has little effect here in Florida where the state minimum wage is $6.79 per hour.  The covered employees and employers under Florida’s minimum wage are, by definition, identical to those under the Fair Labor Standards Act.  We can expect to see the US Department of Labor revise all wage tables having a prevailing wage of less than $6.55.  Again, this should have no impact on our Florida jobs since the minimum required wage has been $6.79 since January 1, 2008.


The Florida minimum wage is codified in Florida Statutes under Section 448.110.  This Section calls for an evaluation of the rate of inflation each September 30, with revisions to the rate effective the following January 1.  Questions regarding the Florida minimum wage should be directed to the Florida Agency for Workforce Innovation at 800-342-3450.