(a) The act excludes amounts paid by a contractor or subcontractor
for fringe benefits in the computation of overtime under the Fair Labor
Standards Act, the Contract Work Hours and Safety Standards Act, and the
Walsh-Healey Public Contracts Act whenever the overtime provisions of
any of these statutes apply concurrently with the Davis-Bacon Act or its
related prevailing wage statutes. It is clear from the legislative
history that in no event can the regular or basic rate upon which
premium pay for overtime is calculated under the aforementioned Federal
statutes be less than the amount determined by the Secretary of Labor as
the basic hourly rate (i.e. cash rate) under section 1(b)(1) of the
Davis-Bacon Act. (See S. Rep. No. 963, p. 7.) Contributions by employees
are not excluded from the regular or basic rate upon which overtime is
computed under these statutes; that is, 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. The
contractor's contributions or costs for fringe benefits may be excluded
in computing such rate so long as the exclusions do not reduce the
regular or basic rate below the basic hourly rate contained in the wage
determination.
(b) The legislative report notes that the phrase ``contributions
irrevocably made by a contractor or subcontractor to a trustee or to a
third person pursuant to a fund, plan, or program'' was added to the
bill in Committee. This language in essence conforms to the overtime
provisions of section 7(d)(4) of the Fair Labor Standards Act, as
amended. The intent of the committee was to prevent any avoidance of
overtime requirements under existing law. See H. Rep. No. 308, p. 5.
(c)(1) The act permits a contractor or subcontractor to pay a cash
equivalent of any fringe benefits found prevailing by the Secretary of
Labor. Such a cash equivalent would also be excludable in computing the
regular or basic rate under the Federal overtime laws mentioned in
paragraph (a). For example, the W construction contractor pays his
laborers or mechanics $3.50 in cash under a wage determination of the
Secretary of Labor which requires a basic hourly rate of $3 and a fringe
benefit contribution of 50 cents. The contractor pays the 50 cents in
cash because he made no payments and incurred no costs for fringe
benefits. Overtime compensation in this case would be computed on a
regular or basic rate of $3.00 an hour. However, in some cases a
question of fact may be presented in ascertaining whether or not a cash
payment made to laborers or mechanics is actually in lieu of a fringe
benefit or is simply part of their straight time cash wage. In the
latter situation, the cash payment is not excludable in computing
overtime compensation. Consider the examples set forth in paragraphs
(c)(2) and (3) of this section.
(2) The X construction contractor has for some time been paying
$3.25 an hour to a mechanic as his basic cash wage plus 50 cents an hour
as a contribution to a welfare and pension plan. The Secretary of Labor
determines that a basic hourly rate of $3 an hour and a fringe benefit
contribution of 50 cents are prevailing. The basic hourly rate or
regular rate for overtime purposes would be $3.25, the rate actually
paid as a basic cash wage for the employee of X, rather than the $3 rate
determined as prevailing by the Secretary of Labor.
(3) Under the same prevailing wage determination, discussed in
paragraph (c)(2) of this section, the Y construction contractor who has
been paying $3 an hour as his basic cash wage on which he has been
computing overtime compensation reduces the cash wage to $2.75 an hour
but computes his costs of benefits under section 1(b)(2)(B) as $1 an
hour. In this example the regular or basic hourly rate would continue to
be $3 an hour. See S. Rep. No. 963, p. 7.
