Payroll Compliance: How to Avoid Scary Mistakes and Penalties in Construction

In the world of construction, payroll compliance is a critical but often challenging aspect. Mistakes can lead to severe consequences, ranging from financial penalties to legal nightmares. This blog post delves into actual horror stories from the construction industry, highlighting the chilling outcomes of compliance errors.

California Construction Firm Faces Chilling Payroll Compliance Fines

A Californian construction company was fined nearly $12 million. This is described as the biggest wage theft violation in California. The company was found in violation of multiple labor laws. They range from underpaying workers and withholding pay to failing to pay overtime and issuing improper wage statements. Additionally, workers were not given required breaks and when they were paid, many received checks that bounced.

While this situation is extraordinary, companies can use it as a cautionary tale in their practices. First, it’s important to know all of the regulations you’re required to follow. Since regulations change over time and are often complicated, your team has to be ahead of the law. Make continuing education a part of your company’s core values. Next, make sure you’re auditing your practices regularly, finding and correcting mistakes that could lead to compliance and payroll problems.

Contractor Haunted by Prevailing Wage Mistakes

A Florida-based contractor was ordered to pay $124,000 in back wages and fringe benefits when they were found guilty of violating the Labor Standards Act (FLSA), the Contract Work Hours and Safety Standards Act (CWHSSA), and Davis-Bacon and Related Acts (DBRA). The problem stemmed from not assigning and paying the correct prevailing wages, along with not accurately tracking the hours worked. Even one of these issues can lead to being out of compliance, creating an administrative, legal, and financial nightmare.

It’s easier than you think to be caught in this type of sticky situation. Prevailing wages change regularly and wage determinations can be complicated to read. It’s also difficult to track changing work classifications in the field. This leads to paying workers the wrong hourly and fringe rates. Consolidating your time, attendance and payroll system to reduce errors. Using a platform made for construction, and able to handle the unique needs of prevailing wage payroll, is your best bet.

Georgia Electric Contractor’s Shocking Payroll Compliance Mistake

An electrical contractor working on a federal contract in Georgia incorrectly classified 32 electricians as laborers. This mistake created a domino effect with workers being paid the wrong prevailing wages, the wrong fringe benefits, and ultimately, underpaid for their work. The company was ordered to pay out $221K in back wages and benefits to make restitution for the mistake.

This is a classic example of how one mistake can cascade into an absolute compliance nightmare. Simply misclassifying workers will lead to prevailing wage violations, which in turn can create legal and financial hardship. To prevent it, you should check, and double-check worker classifications before each payroll. Make sure everyone understands how to assign classifications, including workers in the field. And consider using a payroll compliance platform created for the construction industry to make compliance far easier to find, and fix.

Idaho Concrete Company Stuck with Frightful Back Wages Bill

Prevailing wage projects are full of regulations you must comply with to stay out of trouble. It only takes a single violation to cause big problems, which is a lesson an Idaho-based concrete company learned earlier this year. The violations, as found by the U.S. Department of Labor’s Wage and Hour Division (WHD), include failing to pay prevailing wage and not paying workers weekly, as required by law.

Many things can cause this type of situation, from misclassifying workers to not using the correct wage determination for each role. This could be due to workers not properly tracking and reporting their roles and hours, to payroll teams and not understanding how to select the right prevailing wage rate. Timekeeping problems can also be to blame. To make sure you don’t face a similar situation, prioritize education with your staff and create a system to check hours, roles, and wages before payday.

A Costly Subcontractor Nightmare

When it comes to compliance, a general contractor has a lot to worry about because the overall compliance of the project falls to them. This means if a subcontractor is out of compliance, the contractor can be in big trouble. This is exactly what happened to A & D General Contracting, who was forced to pay over $53 K in back wages when their subcontractor failed to pay prevailing wages. Adding drama to the situation, the sub went bankrupt, leaving the general contractor to clean up the mess and pay for the violation.

It can be very difficult for general contractors to keep subs compliant, but this tale explains why it’s so essential. Contractors must continually check with subs to make sure they are following best practices for tracking hours, paying prevailing wages, and handling fringe. It is also up to the contractor to make sure certified payroll reports are accurate and filed on time. While there are a few ways to automate this, you can use a platform designed for GCs to manage the compliance of their subs.

As you can see, these are real-life horror stories. Compliance and reporting problems can lead to some pretty scary, and uncomfortable, situations. In reality, though, mistakes don’t have to make headlines to make trouble for your organization. Something as seemingly small as not assigning each worker the correct labor classification can lead to a labor violation, fine, and even legal trouble. This makes it especially important to fully understand prevailing wages. Have a system in place to check and resolve problems on time. It’s far better for you to find and fix any wage and hour issues than waiting for the WHD to come knocking on your door!

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.