Certified payroll can be a confusing process and finding help online isn’t always easy. The guidance offered by the Department of Labor is often general and doesn’t cover many practical questions the average user may have. It is also written in a way that can raise more questions than it answers, leaving you feeling less than confident.
But compliance risk is real risk, and it comes with legal and financial implications. This highlights the importance of understanding prevailing wage laws, how to comply and how to avoid common mistakes.
Simple certified payroll mistakes are most likely to get you in trouble
Small mistakes are more likely to cause compliance issues on prevailing wage projects. According to the DOL, the most typical problems they see are as follows:
1. Massification of laborers and mechanics.
2. Failing to pay full prevailing wages and fringes on all hours worked.
3. Inadequate record keeping, including not tracking when workers work two or more classifications during a day.
4. Failing to keep a copy of the bona fide apprenticeship program and individual registration documents for apprentices.
5. Failing to submit certified payroll weekly.
6. Failing to post the required Davis-Bacon poster and applicable wage determinations.
These might start small, but that doesn’t mean it stays that way once an investigation begins. Not only is the issue often compounded by involving multiple employees, the DOL may find other violations during the course of the investigation.
Let’s look at examples of real cases that involve these types of common errors:
- This electrical subcontractor paid workers for low-voltage electrical work but their work was not restricted to this and work classification. This mistake cost them $94,000 in back wages and fringe.
- This federal contractor didn’t pay 69 workers the right prevailing wages and fringe benefits. During the investigation it was found that workers were not paid overtime as required under the Contract Work Hours and Safety Standards Act (CWHSSA). The total cost of these mistakes was $293,000 in back pay, fringes and fines.
- This construction company had to pay over $35,000 in back wages for classifying nine workers as roofers. They were installing metal roofs, so the DOL said they should have been classified as sheet metal workers. The DOL also said the company wasn’t keeping records correctly and added another $8,000 in fines.
The lesson here is to pay attention to basics and realize the importance of details and documentation. It doesn’t matter if it is an oversight, a well-intentioned mistake or simple error in data entry, the results are the same.
You’re ultimately responsible for your company’s compliance
At the end of the day, your company is responsible for knowing, understanding and following all laws and regulations. If something is wrong, you have to answer for it. If workers fail to track the different work classifications they work on and you don’t catch it and pay them correctly, you’re out of compliance. If apprentices are required on a project but your subcontractors aren’t using them, you are at fault.
And if you win a public works bid and use the wage determinations provided by the government agency, but they are incorrect, you are the one fined. An interesting recent example of this hit the court after the city of Clarkstown, New York provided a contractor the wrong wage determinations for one of their projects. The result was a DOL case worth nearly $1 million in back wages, fringes and fines. The contractor is now in suing to try and recover the damages.
This case is unusual but illustrates the fact that the contractor that holds the contract is ultimately responsible for every aspect of compliance. The following compliance checklist is a good starting point for catching mistakes:
- Verify all prevailing wage and fringe rates at the start of each project. Check wage and fringe rates carefully before the project begins by consulting official sources.
– Federal wage determinations can be found here.
– California wage determinations are published by the Department of Industrial Relations.
– Download the free wage determination guide here for detailed wage determination help.
- Verify that pay and fringe rates are keyed in correctly
Some companies transfer data multiple times, from timecards and/or spreadsheets to payroll software. Every time you key information into a system or spreadsheet, you
increase the opportunity for mistakes. Check every point of entry so mistakes get caught early.
- Double-check work classifications
Verify that the work classifications each employee reports every week are consistent with the work actually performed. You should spot-check this routinely, especially if your
workers work on multiple projects, or if you know that a worker regularly performs multiple roles.
- Know and follow overtime laws
Make sure that overtime is counted correctly and paid according to federal and state requirements. You can learn more about overtime and wages by following the links below:
Davis Bacon is just one of many federal prevailing wage laws
There are many federal laws that govern prevailing wage projects. A single project will have to contend with an array of these laws, from the wage rates of Davis-Bacon to the reporting requirements of the Copeland “Anti-Kickback” Act. These are in addition to other labor laws that are not specific to prevailing wage projects, like work safety or record keeping.
The type of project, source of funding and amount of the contract are all factors that determine which prevailing wage laws apply. Ultimately, you are responsible for understanding which laws apply and following them. Here is an overview of some of major federal prevailing wage laws:
|Davis-Bacon Related Acts (DBRA)||Davis-Bacon applies to contractors and subcontractors working on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works.
DBRA includes roughly 60 additional statutes that pertain to projects aided financially by the government. The related acts include construction in areas like transportation, housing, air and water pollution reduction, and health.
If a construction project is funded or assisted under more than one of these Federal statutes, the Davis-Bacon prevailing wage provisions may apply to the project. Read more about it here.
|McNamara-O’Hara Service Contract Act (SCA)||SCA applies to federal contracts in excess of $2,500 for service work. It covers contracts that are principally intended to furnish services through “service employees.” This includes roles like food service, custodial, grounds maintenance, logistics support, data collection and analysis. See more covered roles here. Construction contracts are not included in SCA.|
|Contract Work Hours and Safety Standards Act (CWHSSA)||CWHSSA covers overtime requirements on Davis-Bacon and SCA contracts. It applies to certain contracts with the federal government or the District of Columbia that require or involve the employment of laborers or mechanics, including federal service contracts and federal construction contracts over $150,000.
Laborers and mechanics must receive one and a half times the basic rate for hours worked in excess of 40 per week. This requirement is “self-executing,” meaning it can apply even without the contract stating it. Read more about it here.
|Copeland “Anti-Kickback” Act||The Copeland Act prohibits employers on covered contracts from requiring workers to give up any part of their compensation under threat of fine or imprisonment. applies to more than just wage kickbacks.
The act also governs deductions from prevailing wages and sets weekly reporting requirements, which is the basis for certified payroll.
Following these laws is mandatory on covered projects, so your best defense is to make sure you and your admin team fully understand how to stay compliant. Bookmark official sources of information, seek out additional resources for learning and make continued education a part of your payroll process.
Our resource hub is a great source of information for government contractors. Bookmark it along with the following official sites:
You can also simplify compliance and reduce mistakes by using payroll software designed to handle certified payroll. Look for options that auto assigns prevailing wage rates, verifies data to limit errors and has robust reporting to save your team hours each week.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.