The U.S. Department of Labor’s Wage and Hour Division (WHD) investigates labor violations, including prevailing wage violations on federal jobs. Recently, the agency ruled against a Baltimore based company for several labor law violations that occurred while working on contract for the U.S. military. As a result, the company is ordered to pay $293K in back wages and fringe benefits.

Here’s what happened

The Baltimore based company is a federal contractor that works with the U.S. military providing management, logistics, IT and network communications. The violation occurred on work being done at Nevada’s Tonopah Test Range and Creech Air Force Base in Indian Springs. According to WHD, the company did not pay 69 workers the correct prevailing wages, resulting in a substantial bill of owed wages and fringe.

The underpayment of prevailing wages violates Davis-Bacon and Related Acts (DBRA), but additional violations were found during the investigation. It was also found that air traffic control workers were not paid required overtime in violation of the Contract Work Hours and Safety Standards Act (CWHSSA).
This act requires all contractors doing work on a federal service contract, and federal and federally assisted construction contract over $100,000  to pay 1.5 times the basic rate of pay for all hours worked over 40 in a workweek.

Read the complete WHD press release here.

How to prevent it

While we do not know the specifics of this case, it is easy to understand how prevailing wage mistakes are made. Here are a few things that can go wrong and lead to incorrect prevailing wage rates being paid:

Are you selecting the correct wage determinations for the job? This information might be provided in the project bid package, but you should always verify it. If something does go wrong, you’re responsible, not the agency that provided the information.  To better understand how to verify wage determinations, check out this helpful guide.

Are workers reporting the correct work classification?  Prevailing wage rates are directly tied to work classifications. If a worker tracks time as a laborer during one part of their shift, but later switches to do work as an electrician, their prevailing and fringe rates change too.  This must be accurately tracked, paid and reported on.

Additionally, you’ll want to have a process in place to catch and correct common prevailing wage and certified payroll mistakes. This can allow you to flag and correct issues like this before payroll runs. If you happen to find errors that lead to reduced pay, you can make wage restitution and resolve the issue before it becomes a large compliance headache.

Issues related to incorrectly paying overtime could come from several sources as well. For instance, if time is not being accurately tracked you may not realize a worker’s hours  should trigger overtime pay. Overtime laws can also be difficult to understand and your payroll system must understand and account for them. In this instance, the contract was over the required amount to trigger CWHSSA and every hour over 40 hours in a workweek should have been paid at 1.5 times the normal hourly rate.

Having good processes in place is a starting point for preventing compliance issues related to prevailing wages and certified payroll. Additionally, look for software that can help assign prevailing wage and fringe rates along with streamlining time, attendance, and reporting. This will not only help your admin staff be more accurate and efficient, it can reduce your risk so that you don’t find your company facing action by the WHD.

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.