Complying with all of the regulations for government funded projects can be difficult, confusing and costly. A Florida-based company recently found this out the hard way after the U.S. Department of Labor’s Wage and Hour Division (WHD) determined that they had violated the Fair Labor Standards Act (FLSA) and the Davis-Bacon and Related Acts (DBRA). As a result, they had to pay $115, 839 in back wages to four employees impacted by the violations.
According to WHD, employees were misclassified as laborers instead of elevator mechanics. As a result of the misclassification, the employees did not receive fringe benefits and were paid a lower prevailing wage rate. Additionally, the employer did not correctly record and pay for time spent loading, unloading and traveling to worksites. The result of this oversight was an overtime violation under the FLSA.
Understanding prevailing wage violations
This situation highlights the difficulties construction companies, contractors and subcontractors face when they work on government funded projects. Among other requirements, Davis-Bacon and Davis-Bacon Related Acts requires companies to pay employees specific prevailing wage rates based on the type of work they complete. Additionally, fringe benefits must also be paid on top of wages. The fringe benefit amount varies based on the prevailing wage rate being paid.
It can be complicated to track the actions of an employee throughout the day, especially on construction sites. For instance, if a worker uses machinery to dig a ditch, they are being paid one prevailing wage and fringe benefit rate. When they stop using that machinery to do a different job, those rates may change. This means that a single employee may have multiple prevailing wage and fringe benefit rates over the course of a single day.
While intended to protect the rights of workers, such regulations can actually make life more difficult for both employers and employees. For employees, continuously tracking their changing roles throughout the day can be burdensome. For employers, staying in compliance is an ongoing struggle that involves meticulously tracking and reporting the different prevailing wage and fringe rates for each employee that works on a jobsite.
Stories like this illustrate how important it is for companies that work on government funded construction projects to stay compliant. Even an accidental oversight or minor mistake can lead to costly penalties and legal issues. Under some circumstances, contractors and subcontractors are even subject to debarment from government funded contracts for up to three years.
Fortunately, there are ways to simplify the compliance process while protecting yourself from common errors and simple mistakes. Here are a few areas of particular importance to get you started:
Keeping track of hours on paper timecards and spreadsheets can be difficult under normal circumstances. When it comes to the complex tracking needed to stay compliant with Davis-Bacon and related regulations, it’s nearly impossible. Switching to a digital time keeping system will help reduce errors and make it easier to stay compliant.
Review wage determinations
Paying your employees for the hours they work is only half the battle. In addition to accurate time keeping, you must also pay the correct prevailing wage rate for the work being done. Since this rate changes over time, and in some cases by geographic location, you have to constantly review and keep up with the latest wage determinations.
Track work classifications carefully
It’s important to use the correct wage determinations, but it’s equally important to correctly classify workers and track their time accordingly. This means you must pay the respective rate for each classification of work an employee does throughout the day. As illustrated with the case of the Florida-based company, misclassifying an employee can have serious consequences.
Stay current with reporting
Companies that work on construction projects and receive government funding have several reporting requirements. For instance, contractors and subcontractors on most public works projects must submit certified payroll records regularly. Falling behind, or failing to submit accurate and timely records, can result in penalties and legal issues.
Maintain good records
While nobody wants to think about being investigated or audited, it’s always a possibility for companies that work on government contracts. To protect yourself, it’s important that you maintain good records detailing your timekeeping and payroll policies and procedures. Additionally, you should keep all documents regarding your certified payroll for a minimum of three years after your contract has ended.
Given the complicated nature of any construction project, it’s easy to see how mistakes in tracking hours and determining prevailing wage rates can happen. To help clarify the issue, we created this simple overview that discusses some of the laws you should be aware of before you take on any government funded construction or service contract.