Minnesota Department of Transportation

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Labor Compliance

3 Workers on Jobsites

Wage and fringe benefit requirements

A contractor must compensate a worker in accordance with the state wage determination(s) and/or federal general decision(s) incorporated into a contract for the actual work performed regardless of the worker’s skill level. 

  • Prevailing wage specifications are located in the contract executed for the public works project and can be obtained from the prime contractor or the contracting agency.

A contractor must pay the total prevailing hourly wage rates as specified in the state wage determination and/or the federal general decision. 

  • The decisions contain two components which equal a Total prevailing wage rate:
    • An hourly basic rate of pay
    • An hourly fringe benefit rate of pay;
  • In order to demonstrate compliance, the contractor must compensate a worker with:
    • An hourly rate of pay (no lower than their regular rate of pay)
    • A fringe
      • cash, or
      • bonafide fringes,  or
      • combination of cash and fringe benefits
    • Equaling the total prevailing hourly wage rate or greater.

Multiple wage determinations in a contract

  • A contract may contain multiple wage determinations for various types of construction (Building or Highway/Heavy), the contracting agency will enforce the payment of wages based on the wage determination that is applicable to the type of construction.
  • A contract may contain both state and federal wage determinations for a specific type of construction, the contracting agency will enforce higher total prevailing hourly wage rate whichever is greater between state or federal total prevailing hourly wage rate per classification.
  • A contract may contain multiple state highway and heavy wage determinations, there shall be only one standard of hours of labor and wage rates for the entire project; the contracting agency will enforce payment of the higher total prevailing hourly wage rate per classification.

Fringe benefits provided by the employer on behalf of the employee

  • A contractor may fulfill a portion of its total prevailing hourly wage obligation by providing a "bona fide" fringe benefit to an employee.
  • Fringe benefits must be paid for all hours worked (public and private hours) – both straight time and overtime hours and must be determined separately for each employee.

The two types of plans: funded and unfunded

Funded plan

A fringe benefit plan that allows a contractor to make an irrevocable contribution on behalf of an employee to a financially responsible trustee, third person, fund, plan or program, without prior approval from the United States Department of Labor. Contributions must be made regularly, not less often than quarterly. Types of "funded" plans may include:

  • Pension plans
  • Health insurance
  • Life insurance

In order for a "funded" plan to be considered, it must meet the following:

  • The benefit contribution made by a contractor on behalf of an employee must be submitted to a financially responsible trustee, third person, fund, plan or program;
  • the commitment to provide the benefit must be legally enforceable; and
  • benefit must be communicated in writing to the employee

Unfunded plan

A fringe benefit plan that allows a contractor to furnish an "in-house" benefit to an employee; the cost to provide this benefit if funded from the contractor’s general assets rather than funded by contributions made to a trustee, third person, fund, plan or program. The contractor must set aside, in an account, not less often than quarterly, sufficient assets to meet the future obligations of the plan.

Types of "unfunded" plans that do not need prior approval from the United States Department of Labor are:

  • Holiday plans
  • Vacation plans
  • Sick pay plans

In order for an "unfunded" plan to be considered, it must meet the following:

  • It must be reasonably anticipated that the plan will provide a benefit;
  • The plan represents a commitment that can be legally enforced;
  • The obligation to provide the benefit is carried out under a financially responsible plan or program; and
  • The plan or program has been communicated in writing to the employee

Not considered a bonafide fringe benefit

A contractor is not allowed to take a credit against the total prevailing hourly wage rate for benefits that are required by state, federal and/or local laws, such as:

  • Worker's compensation
  • Unemployment insurance
  • Social security contributions

A contractor is not allowed to take a credit against the total prevailing hourly wage rate for costs related to doing business, such as:

  • Transportation
  • Tools
  • Uniforms
  • Meals and lodging expenses, (unless such expenses are customarily furnished to an employee during the course of his or her regular employment).