On April 8, Pennsylvania Attorney General (AG) Josh Shapiro announced the results of the largest prevailing wage criminal case in US history to date. The recording breaking case involved a large contractor that has received around $1.7 billion in project funding as of 2021.
According to AG Shapiro:
“This is the largest prevailing wage criminal case on record — under Pennsylvania prevailing wage law and across the United States under federal law. My focus now is on holding the company accountable for breaking the law, and getting these workers their money back.” (Source)
Here’s what happened
Contractors are allowed to satisfy part of their responsibilities under the Pennsylvania Prevailing Wage Act and the Davis-Bacon Act by providing qualifying fringe benefits. This is called a fringe benefit credit, and in the state of Pennsylvania this amount is calculated by determining the hourly equivalent of the value of the benefit to the contractor.
A three-year investigation looked into how the contractor calculated and claimed fringe benefit credits. It was discovered that the company used fringe benefits from prevailing wage workers to fund retirement accounts for all company employees, including owners, executives and non-prevailing wage workers. As a result, the company was able to reduce its own costs while the prevailing wage workers received less of the money they were owed under law.
Additionally, it was found that the contractor tried to disguise the practice by inflating records of benefits. This made it appear as though they were providing benefits at a far higher rate than they actually where. They also claimed credit for prohibited costs.
The investigation found that this scheme was in place for decades, but the law only allowed prosecution for violations occurring in the last five years.
How to prevent it
In this case, the law appears to have been intentionally broken, so it’s not a situation where mistakes led to the violation. However, it does serve as a reminder to take a closer look at how your construction company deals with fringe benefits management. Pay special attention to your certified payroll processes, reporting processes and fringe benefit management.
You can also work to prioritize compliance by making sure that everyone on your team fully understands the laws surrounding prevailing wage work. To get started, your team should have a detailed understanding of:
• Prevailing wage requirements
• How to locate correct wage determinations
• How to classify every worker role on the jobsite
• How to locate official resources pertaining to wage determinations, prevailing wage regulations, and worker classifications.
We have created the following resources to help you stay educated and in front of prevailing wage laws. Bookmark them and share them with your team.
Learn how to find and read wage determinations with this updated guide.
Learn how to prevent common prevailing wage and certified payroll mistakes.
Access certified payroll resources for contractors that do prevailing wage work.
Visit our construction resource hub for additional resources
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.