What Are Prevailing Wages?

Most business owners are familiar with their minimum wage responsibilities. But if you take on a federal or state government contract, you also need to know about prevailing wages. What are prevailing wages?

What are prevailing wages?

Prevailing wages are rates for wages and fringe benefits set by the Department of Labor (DOL) that employers with government contracts or foreign workers must pay their employees. The prevailing wage rates vary by location and are based on the average wages employees with similar roles receive in the area. Employers who take on federal contracts must pay the rate. Many states also have laws requiring employers who take on state contracts to pay the prevailing wage rate. 

The Davis-Bacon and Related Acts established the prevailing wage for federal contracts. State law names may vary, but many share the title of Little Davis-Bacon Act. 

Under the Davis-Bacon and Related Acts, you must pay employees the prevailing wage if you have a federal contract over $2,000. States with a prevailing wage law have different thresholds that vary from $0 – $1,000,000. 

In short, you must pay employees the prevailing wages if you have:

A federal contract in excess of $2,000 A state contract that meets your state’s prevailing wage law (if applicable) Foreign workers in an employment-based visa program involving the DOL  Prevailing wage determination by state

You know that the threshold for federal contracts is $2,000, meaning that if your contract is more than $2,000, you must pay employees the prevailing wage. But what about state contracts? 

A little over half of the states have a prevailing wage law. So, how much does your state public works contract need to be worth for the prevailing wage law to apply to you? Take a look at the following chart to find out. 

State Prevailing Wage Threshold Alaska $25,000 California $1,000
$25,000 for construction work or $15,000 for qualifying alteration, demolition, repair, or maintenance Connecticut $1,000,000 (new construction)
$100,000 (remodeling) Delaware $500,000 (new construction)
$45,000 (alteration, repair, renovation, rehabilitation, demolition, or reconstruction) Hawaii $2,000 Illinois None Maine $50,000 Maryland $500,000 (for qualifying circumstances) Massachusetts None Minnesota $25,000 (more than one trade)
$2,500 (one trade) Missouri $75,000 Montana $25,000 Nebraska None Nevada $100,000 New Jersey $2,000 – $50,000 (situational) New Mexico $60,000 New York None Ohio $78,258 or $250,000 (new construction, depending on type of work)
$23,447 or $75,000 (remodeling, depending on type of work)
Some types of construction are exempt Oregon $50,000 (major renovations)
$750,000 (any project) Pennsylvania $25,000 Rhode Island $1,000 Tennessee $50,000 (highway construction)
None (all others) Texas None Vermont $100,000 OR at least 50% funded by a capital construction act costing more than $200,000 Washington $25,000 (construction on state colleges/universities)
None (all other) Washington D.C. $100,000 Wyoming $100,000

Contact your state for specifics relating to its prevailing wage law. 

Nearly half of the states do not have laws in place to regulate prevailing wages at the state level. The following states do not have prevailing wage laws:

Alabama Idaho Michigan South Carolina Arizona Indiana Mississippi South Dakota Arkansas Iowa New Hampshire Utah Colorado Kansas North Carolina Virginia Florida Kentucky North Dakota West Virginia Georgia Louisiana Oklahoma Wisconsin OK, but what are the prevailing wage rates?

Now that you know whether your contract falls under federal or state prevailing wage law, you probably want to know what the heck

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