Staying compliant with prevailing wage laws can be a time-consuming nightmare, but there are bigger problems to be had for non-compliance. A paving company in Massachusetts found this out after an investigation by the state left them owing over $1.2 million in restitution and penalties. The problems included prevailing wages and record keeping, and sadly they are all avoidable if you know what to watch for.

Read what happened and learn how you can avoid it in your own company.

Here’s what happened

A paving company from Wareham, a small Massachusetts town, was contracted to perform work on a public works projects in Boston and Mattapoisett. The Attorney General’s office received multiple complaints by current and former workers stating that they had not been paid the correct prevailing wage rates. This started an investigation by the Fair Labor Division.

During the course of the lengthy investigation, the company failed to produce certified payroll records and time keeping records. They also failed to supply proof that they had submitted these records to the various agencies that had awarded them with the prevailing wage contracts. Some of the records submitted were found to be incomplete or otherwise contained errors and omissions.

The state’s investigators were able to determine that the company failed to pay the correct prevailing wage rate to 22 workers. By the time the investigation was complete, it was found that 22 workers were underpaid by about $30 dollars per hour for their work on multiple public works projects. The final total of the violation came to be $1.2 million dollars in restitution and penalties.

How to prevent it

There are many problems here that can be avoided, starting with the violations associated with failing to submit requested documentation. In Massachusetts it is a violation of state law to fail to comply with investigations by Attorney General’s office. Similar laws exist at the federal level and in other states with prevailing wage laws. By refusing to fully comply, and submitting inaccurate or incomplete records, this company was automatically out of compliance.

But the larger problem comes from using incorrect prevailing wage information. We do not know the details of the case in terms of how incorrect wage information was used, but there are a few ways this could happen. Prevailing wage rates are often supplied in the bid packet form the agency offering the contract. Prevailing wage rates are also published and updated by the government on a regular basis.

When you are awarded a project, it is your responsibility to make sure that you have the correct prevailing wage rates. Even if the awarding agency gives them to you, check them because they could be wrong. This is a lesson a New York based environmental clean-up company found out the hard way when the DOL ruled against them for nearly a million dollars in restitution and penalties. They had simply relied on the wage rate given to them by the city but still found themselves in hot water.

There are a few other ways this can happen, even if you have the correct information about prevailing wage and fringe rates.

  1. Selecting the wrong scope of work from the wage determination can result in paying workers the wrong rates. For instance, if you have workers doing low voltage work, but they also do high voltage work and you don’t switch their hourly rates to reflect that, you could be cited and fined. Read about an electrical subcontractor that faced this situation and a $94K citation by the DOL.
  2. Manual errors in transferring information from place to place (i.e. hand written time card to your payroll software) can lead to mistakes in hourly pay and fringe rates and incorrect total hours worked.
  3. Workers may switch roles in the field but don’t correctly record the change, so their pay for the day does not correctly reflect the rates for each role.

You can prevent these and similar certified payroll mistakes by implementing a few changes in your process. Here are a few strategies for limiting and catching mistakes so you can avoid being in trouble with the DOL.

  • Have a solid certified payroll process in place, including a checklist covering key data points like prevailing wage and fringe rates, number of hours worked and work classifications. If any of the information turned in on a timecard seems off, verify it before proceeding.
  • Move away from manual time keeping to a digital time and attendance solution. This makes tracking hours and work roles in the field far easier. It also makes it easy to fix mistakes and can improve employee accountably.
  • Make sure workers in the field understand the rules around tracking changing roles throughout the day. You can include messages on their paystubs, emails and offer periodic training to keep everyone up to speed on what is required.
  • Have a system in place to audit your payroll and reporting processes regularly. Ask everyone for input, from workers in the field to your payroll team. This can help you find and fix the real problems your team is experience.
  • Have a restitution process in place to quickly correct any payroll issues you may find. When you have to make restitution, be sure to carefully and completely document what you found and what you did to resolve it. This can be critical in defending yourself against an audit.

Of course, switching to certified payroll software that is designed to handle the special circumstances involved in prevailing wage and fringe wages is the best way to eliminate errors. Look for a flexible system that includes verifications for key data points and can eliminate manual steps, like the need to key in data.

Learn more about smoothing out your certified payroll processes and reducing mistakes in the following resources:
Fringe trust info
Fringe benefit FAQ
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.

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