Prevailing wage enforcement has received increased attention this year at the state and federal level. Not only has it received more funding, but laws have been passed that increase penalties or expand what falls under the umbrella of prevailing wage law. The combined effect is an increasingly difficult landscape for government contractors. 

Even though more resources are being put toward enforcing compliance, investigators still have a difficult task due to the sheer volume of complaints, active government contractors and open contracts. One method of prioritizing compliance enforcement is to focus on complaints submitted by workers and by looking for red flags.

Certified payroll red flags

Although you may not be able to predict or avoid a prevailing wage investigation, there are red flags that may draw unwanted attention from officials. 

The following mistakes may seem small, but are potential red flags that could trigger a complaint or investigation:  

  1. Falling behind on certified reporting or skipping weeks. 
  2. Failing to accurately track all hours worked.
  3. Failing to accurately track changing work classifications throughout the day.
  4. Making mistakes related to how overtime is handled. 
  5. Incorrectly applying work classifications which can lead to underpaying hourly and fringe rates.
  6. Frequently resubmitting certified payroll reports to correct mistakes.
  7. The absence of apprentice hours on projects where apprentices are typically required.
  8. Submitting incomplete certified payroll or other required reports. 

What to expect in an investigation 

Prevailing wage law enforcement may be proactive to ensure compliance or can be triggered by an employee complaint. This means you can find yourself being investigated even if you are working diligently to do everything right. During a prevailing wage investigation officials can also look for non-compliance with other labor laws, such as:   

It is common for officials to find general record-keeping mistakes, safety problems and related issues. For example, a Michigan-based subcontractor was under investigation for prevailing wage issues and additional CWHSSA violations were found. 

WHD Investigation process

Investigations are carried out by various entities depending on if it is a state or federal matter. Typically federal prevailing wage investigations are carried out by the Wage and Hour Division (WHD), which is part of the Department of Labor. State prevailing wage investigations are carried out according to state law. For instance, in California, the Department of Industrial Relations (DIR) Labor Enforcement Task Force (LETF) carries out investigations. This task force is made up of officials from various enforcement agencies. Your state DOL should be able to give you information regarding local prevailing wage enforcement procedures.

Once a federal WHD investigation has started, an official will contact your business to:

  • Advise you on the steps of an investigation and your responsibilities.
  • Ask you to provide company information including the legal name, officials, trade name, addresses and federal tax identification number (FEIN).
  • Ask you to provide contract documents, payroll records and related documents.
  • Advise you of an on-site inspection and other pertinent information related to the proceedings.

If your job site is visited, officials may also take note of how many workers are on site compared to those listed on certified reports to identify “ghost” workers. These are workers that appear on your payroll but not on the job site or workers that are on the job site but not documented on certified payroll reports. They may also look to see if workers are doing jobs that match what is recorded on certified payroll reports. For example, they might compare the work they see your employee doing with the work classifications listed for that employee on certified payroll reports.

There are a few things you should know about a labor law investigation:

  • The WHD is not required to tell you why they are investigating and usually do not offer that information. They will not disclose details of complaints or even if a complaint was made.   
  • Investigations cover 2 years but this can be extended. So when you’re asked to provide documentation, expect to go back at least two years.
  • The investigators can take notes and make copies of any document they receive, but cannot reveal details about your business to unauthorized individuals.
  • Your employees can be interviewed either on the job, at their home, by phone or by email.
  • Interviews with your employees are private and the details will not be shared.
  • Investigations can take months to carry out and it may take a year or more to receive a ruling.

How to protect your business 

You cannot prevent inspections, but you can take measures to protect yourself. Here are a few steps you can take to help safeguard your company:

1. Move to digital time tracking to eliminate the type of mistakes that come with handwritten timesheets and manually transferring data. This also makes it a lot easier to pull records if required. 

2. Start using payroll and compliance software designed for construction companies. The right system can improve the accuracy of your data, reduce common mistakes that lead to violations and make weekly reporting easier. This can also make it easier for you to provide payroll and related compliance documents.

3. Focus on eliminating common mistakes like worker misclassification and failing to track work classification changes during shifts. This might require changes to your payroll workflow but will leave you with more accurate data in the long run.

4. Audit yourself periodically and correct any issues you find. Look at payroll records, time data, compliance documentation, certification documents and apprenticeship info. If you use subcontractors, you need a system to verify their compliance as well since you’re ultimately responsible for the overall compliance of your projects.

5. Become a meticulous record keeper. Make sure you’re not only following all requirements for keeping records but document your processes as well. This demonstrates compliance and your efforts to stay compliant. This could come in handy if you’re facing an investigation or legal action.

Increased resources are being put into labor law enforcement across the country, with a serious focus on public work contracts. This renewed interest is likely to increase investigations as well, so it is a good idea to prepare yourself. Taking measures to improve processes and tighten up compliance standards may keep an investigation from becoming a serious financial and legal problem. 

Additional resources:

List of Department of Labor offices by state 

Department of Labor compliance assistance

Compliance tips for contractors 

Four ways to make construction payroll easier

Certified payroll checklist 

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.

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