Davis-Bacon Act Penalties: What Happens When Contractors Don't Comply

The Stakes Are Higher Than You Think

The Department of Labor's Wage and Hour Division (WHD) is responsible for enforcing the Davis-Bacon Act and related statutes. In recent fiscal years, the WHD has recovered hundreds of millions in back wages for workers on federal construction projects. The 2023 rulemaking update expanded the DOL's enforcement tools, making it easier to pursue violations and increasing the consequences for non-compliance.

Types of Davis-Bacon Penalties

1. Back Wage Liability

The most common penalty is straightforward: if you underpaid workers relative to the prevailing wage determination, you owe the difference. This includes the base hourly rate AND fringe benefits. Back wages must be paid for every hour worked at the incorrect rate — and this can go back years if the violation persisted across multiple payroll periods.

The contracting agency can withhold contract payments sufficient to cover back wages. If the prime contractor underpaid a sub's workers, the prime is liable too — this is joint liability, and it's written into every federal construction contract.

2. Contract Withholding

Under the Copeland Act (40 U.S.C. 3145), the contracting agency can withhold contract payments to satisfy back wage claims. This means the money you're counting on to cover your costs and margin gets held until wage issues are resolved. For small contractors, this cash flow disruption alone can be devastating.

3. Debarment

This is the nuclear option: the Comptroller General can debar a contractor from all federal contracts for up to three years. Debarment means you can't bid on, work on, or receive payments from any federally-funded project. For contractors who depend on government work, debarment is effectively a business death sentence.

Debarment applies to the company, its officers, and sometimes to successor companies. You can't simply reorganize under a new name and continue bidding.

4. Criminal Prosecution

Willful violations of the Davis-Bacon Act can result in criminal prosecution under 18 U.S.C. 1001 (false statements) and 31 U.S.C. 3729 (False Claims Act). The certified payroll form (WH-347) includes a Statement of Compliance signed under penalty of perjury. Knowingly submitting false information is a federal crime carrying potential fines and imprisonment.

5. False Claims Act Liability

Under the False Claims Act, the government (or a whistleblower through a qui tam action) can pursue treble damages — three times the government's actual damages — plus civil penalties per false claim submitted. Each false WH-347 is a separate false claim. On a 52-week project, that's 52 separate violations.

6. Contract Termination

Serious or repeated Davis-Bacon violations give the contracting agency grounds to terminate the contract for default. Default termination means you lose the remaining contract value, may be liable for completion costs, and the termination goes on your performance record in the Federal Awardee Performance and Integrity Information System (FAPIIS) — visible to every federal agency evaluating your future bids.

Common Violations That Trigger Enforcement

Worker Misclassification

Classifying a worker as a "Laborer" when they're performing "Carpenter" work pays them a lower prevailing wage rate. This is one of the most frequently cited violations. The DOL looks at the actual work performed, not the title you assign. Make sure you're using the correct classification from your wage determination.

Fringe Benefit Shortfalls

Claiming to pay fringe benefits to approved plans but not actually making the contributions creates an immediate wage deficiency. The DOL will audit plan contributions during investigations.

Failure to Submit Certified Payroll

Not submitting WH-347 forms, submitting them late, or submitting incomplete forms triggers investigation. The forms are your proof of compliance — without them, the DOL assumes non-compliance. The 2025 form revision includes updated requirements you need to follow.

Kickbacks and Wage Theft

Any arrangement where workers return part of their wages to the contractor — directly or indirectly — violates the Copeland Anti-Kickback Act. This includes charging workers for tools, equipment, or transportation that effectively reduces their pay below prevailing wage.

How Investigations Start

DOL investigations are triggered by several sources: worker complaints, routine agency reviews, tips from other contractors, and targeted WHD enforcement initiatives. The 2023 rule changes also allow cross-referencing between agencies, making it easier to identify discrepancies.

Once an investigation starts, the DOL has broad authority to examine payroll records, interview workers, and review certified payroll submissions. Investigations typically go back at least three years.

How to Protect Yourself

The best defense against Davis-Bacon penalties is proactive compliance. Here's what that looks like in practice:

• Use the correct wage determination. Verify your wage determination matches your contract — not the current one on SAM.gov. See our prevailing wage lookup guide.
• Classify workers accurately. Match classifications to actual duties performed, not job titles.
• Submit certified payroll on time. Weekly WH-347 submissions, every week, no exceptions. Read our WH-347 step-by-step guide to get every field right.
• Document fringe benefits. Keep proof of contributions to benefit plans.
• Use compliance tools. Manual processes invite errors. Our free WH-347 generator helps you create compliant forms with auto-calculated fields.