The U.S. Department of Labor’s Wage and Hour Division (WHD) is in charge of investigating labor laws, including Davis-Bacon and other prevailing wage regulations. Recently, the agency investigated and ruled against a military subcontractor for over $108K in back wages, fringe benefits and overtime.

Here’s what happened

The Colorado based military subcontractor was performing work on a U.S. Department of Defense contract at the U.S Air Force’s Nevada Test and Training Range, Creech Air Force Base, and Tonopath Range Airfield in Nevada.  According to the WHD, the subcontractor failed to pay prevailing wages and fringe benefits to a series of workers, including electricians, painters, plumbers, carpenters and laborers.  

Additionally, overtime rules under Contract Work Hours and Safety Standards Act (CWHSSA)
were also violated. This act requires companies working under federal service contracts, federal contracts and federally assisted contracts in excess of $100,000  to pay 1.5 times the basic rate of pay for each hour over 40 worked in a workweek. The result was an order for the subcontractor to pay $108,000 in back wages and fringe benefits.
Read the complete WHD press release here.

How to prevent it

We do not know the specifics that lead to workers being paid incorrectly in this case, but it is easy to understand how prevailing wage mistakes are made. Here are three common errors that lead to prevailing wage and fringe benefits mistakes:

Using incorrect wage determinations  
Wage determinations are often provided in the project bid package, but even if you are handed them by the awarding agency, you should verify the info. If something goes wrong, you are the one that will be held responsible. For more information on how to find and read wage determinations, check out this updated guide.

Reporting incorrect work classifications
Every worker in the field must not only track their hours, but also their work classification. This is because prevailing wage rates are directly tied to work classifications. So if someone reports hours as an telecommunications technician, but really worked as a telephone installation worker, their pay will be incorrect and you’ll be out of compliance.   

Failing to track changing roles

A worker sometimes performs duties under multiple work classifications during their shift. For example, a worker might perform work under a laborer classification but then switch to tasks that fall under an electrician’s work classification. This has to be carefully tracked because they will be owed different hourly and fringe rates for each role they perform.

Overtime errors

Issues related to incorrectly paying overtime can come from failing to accurately track hours in the field. Additionally, overtime laws can be complicated, and your payroll system must understand and account for them. For this situation, the contract was about the minimum to trigger CWHSSA so every hour over 40 hours in a workweek should have been paid at 1.5 times the normal hourly rate.

As you can see, there is a lot that can go wrong when it comes to prevailing wage compliance. For this reason, it is important that you have strong payroll and reporting processes in place. This can help you prevent common prevailing wage and certified payroll mistakes. You can further limit errors and risk by using software that can help assign prevailing wage and fringe rates along with streamlining time, attendance, and reporting.

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.