Have you noticed a trend toward increasing enforcement efforts in the world of prevailing wages? California pledged $30 million more toward public works enforcement this year, and recently states like New York and New Jersey have expanded what falls under the umbrella of “public works.” Penalties have also become more aggressive, with more criminal prosecutions for violations like wage theft and similar transgressions.
Connecticut is joining the ranks with Public Act 22-17: An Act Concerning Wage Theft. This act increases fines to $5,000 per violation for contractors and subcontractors who violate state prevailing wage law. It also requires that the state maintain a list of contractors and subcontractors that violated prevailing wage laws or entered into a settlement with the Commissioner of Labor to settle a prevailing wage claim against them.
The list must go back three years and has to contain the following information:
1) The nature of the violation.
2) The total amount of wages and fringe benefits making up the violation or agreed upon in any settlement.
3) The total amount of civil penalties and fines imposed for the violation.
If a company on the list during the preceding rolling three-year period has settlements that exceed $50,000 in back wages and benefits, OR in civil penalties or fines, they are referred for debarment. Additionally, the Commissioner can review the list and refer anyone on the list for debarment at their discretion.
If a contractor or subcontractor is referred for debarment, they have the right to request a hearing before the commissioner to contest the decision. This law goes into effect on July 1, 2023, and will impact any company required to follow prevailing wage laws if they work within the state of Connecticut.
These are just a few examples illustrating the move toward increased enforcement of prevailing wage laws. And while multiple industries are affected, the construction industry is especially targeted. For this reason, general contractors and subcontractors should make compliance a central part of their process.
Violations often come from mistakes and misunderstanding the law, so focusing on these areas is a good starting point. Let’s look at a few things you can do to protect yourself.
Prevailing wage laws
Do you know the laws overseeing the project you’re working on? Federal and state-funded jobs fall under different laws and it’s your responsibility to understand your legal obligations under each. Not only do you need to understand them, you should make it a priority to keep up with the laws surrounding prevailing wage labor because they are subject to change, especially at the state level.
Learn more about Davis Bacon and Related Acts for federal government contracts.
Visit this DOL page to find contact information for your state’s Department of Labor.
Federal and state prevailing wage laws include wage rates for different classifications of jobs. These change and vary based on many factors, including the level of work being performed under each classification. For instance, low-voltage electrical work has a different wage rate than high-voltage. The award packet for the project often contains wage determinations, but you must verify them.
If you are given incorrect information, you’re still on the hook for the violation. This is highlighted in a recent news story where an environmental contractor was given incorrect prevailing wage information by Clarkstown, NY. They were cited and fined nearly a million dollars for paying workers the rate provided to them. The contractor is suing the city in an attempt to recover the losses incurred because the city provided them with incorrect information. Read the complete story here and always check with your state’s Department of Labor, or similar governing body, to verify wage information for state jobs.
Certified payroll reports
Both federal and state prevailing wage jobs require some type of certified payroll reporting. The frequency varies from weekly to monthly but must be complied with to avoid problems. Not only do you need to keep up to date with your reporting, but it’s also important that you file correct and complete certified reports.
Filing a certified payroll report with missing or incorrect information leaves you just as vulnerable to compliance action as not filing them. While the information required may vary by state, the following details are most commonly included:
- Basic company information (Legal name, address and contact info)
- Project name, location, contract/project number
- Every worker’s name with an individual identifying number and the following information:
– Work classifications (all work classifications they worked on and the hours worked for each)
– Dates and hours worked
– Total hours
– Rate of pay and rate of fringe
– Earned gross and weekly net wages
Find and fix mistakes
There are many ways to make mistakes dealing with government contracts. Some of these come from incorrect information, like having the wrong wage and fringe rates. Other mistakes come from having manual steps in your payroll and reporting process. In fact, mistakes are unavoidable if you have handwritten timecards, or have to manually key in time information from one system to the other.
You should have a system in place to check this data at several points along the way. This will vary depending on your process, but make sure it includes checking the hours and work classifications reported by workers and verifying this info after it’s entered into the system. Check the wage and fringe rates and make sure workers track work they do under different work classifications. For example, if someone is a bricklayer but spends part of their shift painting, this has to be tracked and paid out according to a painter’s wage rates.
If you find a mistake, make restitution if needed and correct the certified payroll report. Ideally, this should happen long before you submit the information to the government. If you find a mistake after you’ve submitted your certified payroll report, you’ll need to submit a corrected version. The procedure for this varies by state, but it’s an essential step that verifies that the mistake was proactively found and fixed.
If you think this sounds like a lot of work, stress, and risk, you’re right. While government contracts can be lucrative, they come with added administrative costs and risk. This can quickly overwhelm your payroll team and limit your ability to grow. If you want to take on more government contracts, you should consider moving to a certified payroll software platform that is designed to streamline payroll and compliance requirements. This can allow you to take on more work without staffing up, solve process problems and reduce costly errors.
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.