Companies face Department of Labor (DOL) fines all of the time, but this news story out of New York has a twist. An environmental contractor out of West Nyack, a suburb of New York City, was found to be in violation public works laws due to underpaying prevailing wages. The contractor is now suing the city that provided them the incorrect prevailing wage rates in hopes of mitigating the financial damage caused by the DOL decision.
Let’s take a look at what happened and how you can prevent it from happening to you.
Here’s what happened
In 2010, Away Environmental was hired to provide cleaning and environmental remediation work on publicly owned buildings in Clarkstown, New York. The work was to be performed on publicly owned buildings, placing the project under state public works law. The town provided Away with the prevailing wages for the job, which they placed at $30.18 per hour. Away paid workers the prevailing wage rate provided by the city and completed the work.
The New York State Department of Labor later investigated the project and determined that Away underpaid workers. They ruled that the company underpaid workers nearly $326,000 and added a 10% penalty of $316,000. Additionally, they added 16% interest on the unpaid wages which was approximately $65,000.
Away recently notified Clarkstown of its intent to sue for damages, which are expected to exceed $1 million dollars. However, the amount is growing because the interest continues to accrue as the case awaits its day in court. The premise of the case is that the town is at fault for the underpaid wages, fines and interest because they provided the incorrect prevailing wage rates.
How to prevent it
Any project that falls under prevailing wage law requires extra vigilance, especially when it comes to wages, fringes and reporting. In this case, the project holder supplied the prevailing wage rate, which is not unusual at all. The rate provided, however, was incorrect and resulted in a significant underpayment.
While we do not know the details regarding how or why the wrong rate was provided, there are a few ways this can happen. For example, if an outdated wage determination is used, the corresponding wages will also be incorrect. And if the wage determination does not match the actual work being done, the wages paid for the work will also be wrong.
There are a few ways to prevent this type of problem from happening, including the following:
- Double check all wage determinations and prevailing wage rates at the start of any project. Be sure that you only use official sources of information, either the federal government or state depending on who is funding the project. If you aren’t completely sure about anything, reach out to the agency directly and ask for guidance.Follow this link for a list of the DOL office in every state.
- Make sure that you are using the exact wage determination for the work being done. This can be tricky, because there can be multiple rates published for variations on a work classification. For example, using low voltage electrical wage determinations cost an electrical subcontractor $94 K because the workers did more than low-voltage work.
- Make sure everyone tracks hours and changing work roles in the field so you can pay the correct wages. Double check timecards and make sure everything is correct before finalizing payroll. If a mistake is found that requires wage restitution, pay it and resubmit your certified payroll report for every week effected by the mistake.If you’re unsure how to handle wage restitution, this article can help.
Last but not least, make sure that you keep adequate records. Not only are you required to maintain certain records, it can help document your efforts to comply with all laws and may come in handy if you end up facing an audit or investigation.
Additional compliance resources:
Understanding wage determinations
Quick compliance tips
Certified payroll resource list
Fringe benefit FAQ
Certified payroll FAQ
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.