A New Jersey government contractor working on a public works project was recently found to be in violation of state prevailing wage law. During the investigation, additional violations were found, leading to not only a find, but additional investigations into the prime contractor.

This case may not be as large in terms of financial costs, but it does demonstrate the way mistakes and omissions can lead to violations. It also showcases how a single violation by company can lead to the exposure of additional violations, as well as leave other companies under investigation and in hot water!

Here’s what happened

The New Jersey Department of Labor (DOL) received a complaint that a steel fabrication company was not following state prevailing wage law. The company in question was hired by a prime contractor to create reinforced steel cages for the Passaic Valley Sewerage Commission project, a public works job in Newark. The work they did was performed at the contractor’s fabrication facility, an off-site location.

According to New Jersey law, P.L. Chapter 44, work that is performed off-site for covered projects is still covered prevailing laws. This means that the 6 workers that performed work for the purpose of the Passaic Valley project should have been paid prevailing wages. The DOL ruled that the 6 workers were owed back wages adding up to $8,300.

Additionally, the steel fabricator was cited for not being registered as a public works contractor, failing to provide certified payroll records, obstructing or hindering with the enforcement of prevailing wage laws, and not indicating the crafts being contributed to the public works projects. The investigation also found that some independent contractors should have been classified as workers according to the state’s ABC test.

And last but not least, the DOL looked at the prime contractor for the project and found that they were not properly registered as a public works contractor. They are also being investigated for hiring a non-registered subcontractor.

How to prevent it

This is an interesting case that illustrates how a single complaint can lead to an avalanche of violations. It also serves as a warning that prime, or general contractors, should be cautious about the practices of every subcontractor that works under them. Not only may you be liable, you may also find yourself being investigated.

The first step to preventing this type of situation is to understand ALL of the prevailing wage laws that may apply to your industry. Here are some of the laws governing public works projects:

  • The Davis Bacon and Related Acts applies to federally funded or assisted contracts that require construction, alteration, or repair of public buildings or public works and are in excess of $2,000.
  • The Service Contract Act (SCA) applies to all contracts that have costs associated with them that exceed $2,500. It comes with its own wage determinations and impacts service employees such as computer programmers, accounting clerks and other professionals.
  • States and municipalities may also have prevailing wage and labor rules in place that must be followed. Find your state’s DOL office by following this link.

Next, you’ll want to create a solid compliance process and consider utilizing payroll software that can reduce manual tasks while helping to catch and eliminate errors.

Here are some links that can help you and your certified payroll team get started:

Certified payroll checklist
Certified payroll best practices
Certified payroll FAQ
Certified payroll resource list

Compliance tips for government contractors 

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.