Overtime on prevailing wage jobs: the 40-hour rule and the fringe trap

The Davis-Bacon Act sets minimum wage rates. It says nothing about overtime. Overtime on a federal construction job comes from 2 other laws, and the interaction between them and the fringe benefit is where most certified payroll math goes wrong.

Which law requires the overtime

The Contract Work Hours and Safety Standards Act (CWHSSA) applies to federal and federally assisted contracts over $100,000 that employ laborers or mechanics. It requires pay of at least 1.5 times the basic rate for all hours over 40 in a workweek. The contract clause is in 29 CFR 5.5(b), and it appears in the contract alongside the Davis-Bacon clauses.

The Fair Labor Standards Act applies to almost every employer regardless of contract size. It also requires 1.5 times the regular rate for hours over 40.

On a contract under $100,000, CWHSSA does not apply, but the FLSA still does, so overtime is still owed. The difference matters for penalties: CWHSSA carries liquidated damages payable to the government, currently $33 per worker per calendar day of violation, on top of the back wages. The FLSA does not.

Neither law requires daily overtime. Hours over 8 in a day are straight time under federal rules unless a state law or a collective bargaining agreement says otherwise. California and a few other states have daily overtime for state-funded prevailing wage work, which is one reason the state forms differ.

The 40 hours are the worker's, across all work

Overtime is triggered by the worker's total hours in the workweek, on every job for that employer. If a carpenter works 32 hours on your Davis-Bacon project and 12 hours on a private remodel the same week, hours 41 through 44 are overtime hours, and they fall on whichever job they were worked.

The WH-347 asks only for the hours on this project, split into straight time and overtime rows. When the project is the worker's only work that week, the split is simple: the first 40 are straight time and the rest are overtime. When the worker also worked elsewhere, you have to know the order the hours were worked to place the overtime correctly.

The rate: 1.5 times the basic rate, fringe excluded

This is the rule that catches people. The overtime premium is computed on the basic hourly rate, the cash wage in column 6A. Fringe benefits are excluded from the calculation whether you pay them into a plan or as cash.

The regulation at 29 CFR 5.32(a) says the Act "excludes amounts paid by a contractor or subcontractor for fringe benefits in the computation of overtime" under the FLSA, CWHSSA, and Walsh-Healey. So on a determination of $42.15 basic plus $18.40 fringe:

The fringe still has to be paid on the overtime hours, at the same $18.40. It is not multiplied by 1.5. A worker with 40 straight and 4 overtime hours, fringe paid as cash, earns 40 × $42.15 + 4 × $63.23 + 44 × $18.40 = $1,686.00 + $252.92 + $809.60 = $2,748.52.

Paying $90.83 per overtime hour is legal; you are allowed to pay more than the minimum. Reporting it as the overtime rate confuses reviewers, and a contractor who does it for years is spending real money. The other direction, forgetting the fringe on overtime hours entirely, is an underpayment.

The floor on the basic rate

You can pay fringe as cash and count it toward the determination. You cannot use that flexibility to shrink the overtime base. The regulation is direct: "in no event can the regular or basic rate upon which premium pay for overtime is calculated ... be less than the amount determined by the Secretary of Labor as the basic hourly rate."

The regulation's own example, with its 1960s figures multiplied by 10 to read more naturally, goes like this. The determination says $30.00 basic plus $5.00 fringe. Contractor Y has been paying $30.00 cash and computing overtime on it. Y decides to cut the cash wage to $27.50 and count $10.00 of benefit costs to make up the difference. Total compensation is still $40.00 and meets the determination. The overtime base, though, stays at $30.00, because the determination's basic rate is the floor. Overtime hours must be paid at least $45.00 plus fringe.

The reverse is also in the regulation. If you pay a basic rate above the determination, say $32.50 against a $30.00 determination, overtime is computed on the $32.00 you pay, because that is the worker's regular rate.

So the rule for the WH-347: the overtime line in column 6A is 1.5 times the greater of the basic rate you pay and the basic rate on the determination.

Employee contributions do not reduce the base

If a worker contributes to a 401(k) or pays a share of health premiums through payroll deduction, the overtime base is the wage before those deductions. The regulation: "an employee's regular or basic straight-time rate is computed on his earnings before any deductions are made for the employee's contributions to fringe benefits." Only the employer's contributions are excluded.

Two classifications in one week

When a worker holds 2 classifications with different basic rates in the same week, the overtime hours belong to whichever classification was being worked when hour 41 arrived, and the overtime rate is 1.5 times that classification's basic rate. Keep the daily records by classification so you can show this. If the records do not separate the hours, the higher rate is the defensible one for all of them. More on two classifications.

Weekly overtime and the WH-347 rows

Each worker's row has a straight time line and an overtime line under each day. The 40-hour rule works across the week, so the overtime hours usually land on Friday and Saturday. A worker who did 8, 8, 10, 9, and 8 hours Monday through Friday has 43 hours: the first 5 of Friday's 8 are straight time and the last 3 are overtime. The Friday cell shows 5 on the top line and 3 on the bottom.

Reviewers add the straight time line across the week and expect 40 or fewer for any worker who shows overtime. Forty-two straight time hours with zero overtime is the single most common rejection.

What to check before you sign

• Straight time hours across the week do not exceed 40 for any worker, unless the worker's other jobs that week explain it.
• The overtime rate in column 6A is 1.5 times the basic rate, and the basic rate is not below the determination.
• Fringe was paid on every hour, overtime included, at the plain hourly fringe rate.
• Gross on the project equals straight hours × basic rate + overtime hours × overtime rate + cash fringe × all hours.

The contract's CWHSSA clause makes the contractor liable for unpaid overtime with interest and for the $33 per day in liquidated damages. Agencies can withhold from the prime to cover both. Getting the split right on the payroll costs nothing; getting it wrong for a season costs weeks of correspondence.