An investigation by the U.S. Department of Labor’s Wage and Hour Division (WHD) found that an electrical contractor from Wisconsin violated requirements of both the Contract Work Hours and Safety Standards Act (CWHSSA) and Davis-Bacon and Related Acts (DBRA). The company was ordered to pay $221,853 in back wages and benefits to 32 employees working on the Savanna Harbor Expansion Project.

What happened

The Savannah Harbor Expansion Project (SHEP) is a $973 million dollar project aimed at deepening the federally owned channel in Savannah, Georgia.  Although overseen by the U.S. Army Corps of Engineers, SHEP is a jointly funded project with 15 % of the funds coming from the state and the remaining amount being contributed by the federal government. 

A subcontractor hired to do electrical work on the project incorrectly classified electricians as laborers. As a result, those misclassified employees were paid an hourly and fringe benefit rate that was lower than the law required. This misclassification, and the resulting underpayment, violated provisions in CWHSSA and DBRA.

In a press release issued on February 5, Acting Wage and Hour District Director Derrick Witherspoon stated that,

“Employers performing work on federal contracts have an obligation to ensure they pay their employees the wages they have legally earned under all applicable laws. We encourage all employers and employees to reach out to us for assistance in understanding their rights and responsibilities under the law.”

How to prevent it from happening to you

Construction companies that work on government funded projects must follow a range of laws that dictate wage and fringe benefit rates. To process payroll, each worker must be classified based on their role, and the correct wage and fringe benefit rates must be paid.

This can get complicated because work classifications can change over the course of a single day. The same worker that is classified as an electrician may actually need to be reclassified if they switch to a non-electrician task, like helping with clean up or loading materials.

Mistakes at any point in the process can lead to violations and penalties, as in the case of this Wisconsin-based contractor. For instance, a worker may be incorrectly classified, their changing roles may not be tracked, and as a result their wage and fringe rates may be incorrect. This must be corrected, restitution paid, and an amended report must be submitted to avoid penalties.

 Here are a few ways you can be proactive and protect your company from this type of situation:

  1. Make sure that you accurately assign and track work classifications throughout the day. If your employees manually track their time, make sure they know how and when to track role changes.
  2. Always use the correct wage determinations. You can find Davis-Bacon and Service Contract Act wage determinations here.  Some states have additional prevailing wage laws in place, so make sure to check local regulations as well. You can find important information about state prevailing wage requirements here.   

Keep in mind, as a general rule, for federal jobs the wage determinations incorporated into a bid solicitation and related contract award establishes the prevailing wage rates and fringe benefits which must be paid for the entire term of the contract. State laws may vary.

  • Create a process to regularly check timecards to ensure that the correct classification is being used. Don’t wait until the end of the month to look for problems. 
  • If errors are found, quickly correct them and make restitution if the worker was underpaid. If an error is found after you’ve submitted your certified payroll report, pay the affected employees’ restitution and submit an amended report.  Check your state’s guidelines for the preferred process for handling amended reports.

If possible, look for ways to automate aspects of your certified payroll process. This can reduce the administrative burden and risk associated with doing government funded work. You can use advanced time and attendance software to make it easier to track work classifications and make corrections.

Advanced payroll software that’s designed for the construction industry can also streamline your reporting process, simplify restitution payments and automatically generate required reports. This will not only reduce the frustration and risk, but also the amount of time it takes to stay compliant.

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

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.