The construction industry may have temporarily slowed down due COVID-19, but the U.S. Department of Labor’s Wage and Hour Division (WHD) is still investigating potential violations. Recently, they’ve investigated an Idaho-based concrete company for reported Davis-Bacon violations. As a result, the company has paid $92,290 in back wages to 27 employees. Let’s look at what happened so your construction company can avoid facing similar problems on your next government contract.

The Idaho-based concrete company was working on the Lorenzo Bridge Rehabilitation project. This is a $1.8 million dollar project funded by a grant from the Federal Highway Administration and the State of Idaho Transportation Department. As a public works projects, all contractors and subcontractors must follow rules and regulations of Davis-Bacon and Related Acts. This includes paying workers pre-determined prevailing wages and paying wages weekly, among other requirements.

According to the investigation, the concrete company failed to pay prevailing wages and fringe benefits to 27 carpenters, truck drivers, power equipment operators and general laborers. Additionally, the workers were not paid weekly, which is required by law.

Wage and Hour Division’s Regional Administrator Ruben Rosalez stated that, 

“The U.S. Department of Labor’s Wage and Hour Division is committed to ensuring that workers receive all the wages they have legally earned, especially in these unprecedented times.”
San Francisco, CA |  (Source U.S. DOL)

What went wrong

While we can’t know what happened leading up to the violation, we can look at the law and how such oversights and violations may occur.

Davis-Bacon and Related Acts requires that contractors and subcontractors pay no less than the locally prevailing wages and fringe benefits on federally funded or assisted contracts in excess of $2,000. This applies to the construction, alteration or repair of public buildings or public works. Since this project was funded by federal and state dollars, it clearly falls under Davis-Bacon and Related Acts.

Prevailing wages are set  by the government based on wage surveys, and they change periodically. Additionally, some state and municipalities have their own prevailing wages in place. This can make tracking prevailing wages on eligible projects a challenge for government contractors. And since a worker’s role might change over the course of a typical workday, multiple prevailing wages might apply. This means for a single worker; multiple pay rates may be required by law.

Weekly pay is also a requirement for government contractors, which includes reporting requirements. This makes construction for payroll much different than it is for other industries. Certified payroll, as it’s most often called, includes detailed information on what the worker is paid, what role they were paid for and what fringe benefits were paid. If a worker switches role during their shift, the certified payroll information must track and identify it. This makes certified payroll a significant administrative burden for construction companies that do government work.

How to prevent it

There is nothing you can do about the requirements surrounding government contracts, but you can make the administrative burden much easier to handle. The right software can simplify payroll and reporting issues, helping you stay compliant and out of trouble.  Continued education for teams handing certified payroll is also important.

  1. Keep up with laws related to government contracting, prevailing wages and certified payroll.
  2. Become aware of, and look out for, common certified payroll mistakes.
  3. Understand how and when wage restitution is needed.
  4. Understand fringe benefits and have a fringe benefit management plan in place.
  5. Create a certified payroll workflow and checklist to avoid mistakes.

You can also use payroll software that’s made specifically for the construction industry. This can greatly help you reduce the time and stress of processing certified payroll, it can help you stay out of headlines for Davis-Bacon violations. Just make sure that the software you use was designed to handle the unique needs and reporting requirements of construction. Some popular options may help with some tasks, but in reality, create manual work for your team and completely overlook any compliance issues that you may face.

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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