1. How to Establish your Prevailing Wage
Phil Berg, MA, SHRM-SCP, QDDP
Director of Human Resources, BCI

2. Agenda 1. Prevailing wage as a concept
2. Fair Labor Standards Act and ”Section 14(c)“ exemption for workers with disabilities
3. Commensurate Wage and Job Analysis
4. Prevailing Wage
5. How to Conduct a Prevailing Wage Survey
6. How to analyze Prevailing Wage data
7. A real-life example

3. The Concept of Prevailing Wage

4. Fair Labor Standards Acts (FLSA)
Federal law passed in 1938 to set pay standards for American workers
Requires overtime pay for employees working over 40 hours per week, outlaws child labor, and requires a minimum wage
The FLSA has contained provisions to employ workers with disabilities at subminimum wages since it was enacted in 1938.
Many Americans exempt from certain FLSA provisions – including employees with diagnosed disabilities working in Department of Labor Certified Work Centers
When a work center is specially certified by the Department of Labor, a commensurate wage, which is less than minimum wage, can be paid to employees with disabilities

5. Commensurate Wage Defined
A subminimum wage paid to a worker with a disability that is based on his or her individual productivity (no matter how limited) in proportion to the productivity of experienced workers who do not have disabilities performing essentially the same type, quality, and quantity of the work in the vicinity where the worker with a disability is employed.
- US Department of Labor Fact Sheet #39B

6. Commensurate Wage Defined
A subminimum wage…
Commensurate wages are generally less than the federal minimum wage
…in proportion of the productivity of experienced workers…
Not in proportion to minimum wage itself, other workers in general or other workers with disabilities
…essentially the same…
Do not need to find exact job matches in order to determine commensurate wage

7. Commensurate Wage Defined
…type, quality, and quantity of work…
These three factors must be identified and assessed in order to establish a compliant commensurate wage
…in the vicinity of where the worker with a disability is employed…
It is therefore necessary to look outside your own organization to establish your commensurate wage(s) = Prevailing Wage Analysis

8. Job Analysis
In order to determine the commensurate wage, an employer must conduct a job analysis of the work to be performed by an employee with a disability.
Job must be analyzed through methods approved by the federal Department of Labor, such as Modular Arrangement of Predetermined Time Standards and Methods-Time Measurement (i.e, “time studies”).
Time studies tell the employer how long it takes for a person without a disability to perform a specific job or task, and establish the Standard performance rate.

9. Prevailing Wage
Prevailing Wage is part of the calculation of an individual’s Commensurate Wage; Commensurate wage results from the combination of individual worker performance and market-based pay rates. SIMPLE EXAMPLE: If a worker with a disability is 60% as productive when performing a particular job, the commensurate wage for that worker should be 60% of the Prevailing Wage as identified by the employer.

10. Prevailing Wage
The wage paid to experienced workers who do not have disabilities performing the the same type of work in the vicinity.
Note: The Prevailing Wage may not be lower than the federal or state minimum wage for the region.
Unless in cases where Prevailing Wage is required by laws other than the Fair Labor Standards Act, the employer must conduct an independent survey of local employers doing the same type of work.

11. What is an “experienced” worker?
“One who has learned the basic elements or requirements of the work to be performed.” –Dept. of Labor
In practice: Anything other than an entry-level, training, or probationary wage.
Typically, such a worker will have received at least one pay raise after completion of some time on the job.
Tip: When conducting a prevailing wage survey ask your respondents to record their entry-level, training or probationary rates to ensure that those data are excluded from the analysis.

12. Conducting the Survey Step 1: Job Description
Establish job descriptions for job classifications that include employees with disabilities
This is not part of the job analysis used for time studies, etc.
This need not be the same job description used for other purposes; generally a brief paragraph will suffice and allow your respondents to quickly identify their comparable job classifications.
Should include: Basic role in the organization; types of tools or equipment used; skills, education and experience required; work location(s); days and times of the week the work is performed.

13. Conducting the Survey Step 2: Identify Comparable Businesses to Survey
Must be those who primarily employ those with without disabilities
Must either employ a similar number of employees or compete for business or contracts of a similar size and nature
The number of businesses surveyed is dependent on applicable businesses operating in the vicinity but should include at least 3.
If not at least 3 comparable employers in your vicinity, use other standardized pay data that excludes entry-level workers, or make more general job descriptions to apply to local employers.

14. Conducting the Survey Step 3: Solicit and Collect Survey Responses
Solicit businesses, preferably in writing
Record the following information for each business solicited:
Date of contact
Name, address, and phone number of business contacted
Individuals contacted with each business, including their titles
Wage rate information provided and the basis for concluding that each rate submitted was not based upon an entry level position
Brief description of work which wage information was collected

15. Conducting the Survey
Step 4: Analyze the Results and Implement your Prevailing Wage(s)
Two options: Simple average or weighted average
Can chose either option but must be consistent in applying type of average
Simple average provides average wage per employer in sample
Weighted average provides average wage per employee in sample
If a minority of your survey employers are inordinately large or small compared to the rest of your sample, a weighted average might be recommended.
Document and keep calculations and employer responses from survey in case of audit
Maintain documentation showing that prevailing wage was communicated to organizational stakeholders and in fact implemented in calculating commensurate wages

16. Weighted Average vs. Simple Average
Employer
Number of Employees
Wage Rate Reported
Gross Wages (Number of employees multiplied by wage)
XYZ, Inc. 99
$5.85
$579.15
ABC, Inc. 17
$5.95
$101.15
RST, Ltd. 25
$6.20
$155.00
Total
141
$18.00
$835.30
Simple Average: $18.00 divided by 3 employers = 6.0
Weighted Average: $ divided by 141 employees = $ , so round up to 5.93*
*Always round up in these instances to avoid paying less than the true prevailing wage.

17. How often do I need to update my prevailing wage?
At least annually but more frequently if something has occurred that may have more immediately or significantly impacted market pay in your area
Department of Labor communicates with certified employers in certain instances of economic changes
Once a new prevailing wage is identified, it must be implemented no later than the next full pay period after the prevailing wage analysis.

18. Minimum Wage Increases
Primary driver of prevailing wage increases
Department of Labor normally sends letters regarding minimum wage changes with instructions regarding conducting an updated survey (both state and federal)
In cases of minimum wage increases, employers generally must either conduct a new survey or increase their prevailing wage to correspond with the percentage increase of the new minimum wage relative to the old minimum wage (safe harbor approach). However, this does not eliminate your need to conduct annual prevailing wage surveys in any case.
“Safe harbor” minimum wage increase example: If minimum wage increased from $8.15 to $9.75 per hour, the percentage increase is 19.4% ($9.73/$8.15 = ). All prevailing wage rates in your organization could be increases by 19.4% to be compliant, without use of a survey.
Timing: The resulting adjustment should be made retroactive to 30 days after the date of the increase in minimum wage.

19. BCI’s 2017 Prevailing Wage Analysis
Letters to businesses
Wage analysis in Excel format
Communication from Dept. of Labor
Documentation of Prevailing Wage Method and Implementation

20. Additional Guidance & Resources
U.S Department of Labor (DOL), Wage and Hour Division(WHD), Field Operations Handbook (FOH)
Internal reference of the DOL
Chapter 64; Employment of Workers with Disabilities at Subminimum Wage under Section 14(c)
DOL Wage and Hour Division Fact Sheet #39…
Prevailing Wage: #39
Guidance from other government entities and agency funders, such as DESE
Legal counsel