What happens if you charge workers for using equipment during their shift and also fail to pay them the correct prevailing wage rates? A public works contractor in Illinois found out the hard way after an investigation uncovered serious labor law violations. The result was an intense audit and a $568K bill for back wages and fines.

Here’s what happened

A bulk storage building contractor that specializes in constructing storage facilities for sand, salt and fertilizer was found in violation of state prevailing wage law. The investigation started after the Mid-America Carpenters Regional Council (MACRC) provided information to the Illinois Department of Labor (DOL) regarding non-compliance with prevailing wage requirements.

The investigation found that the contractor was not paying the correct prevailing wage and fringe benefit rates to workers. Multiple projects were involved, including a storage facility for the City of West Chicago, a public works building for Elk Grove Village and a salt barn for Dundee Town Road District.

Additionally, auditors found that the company was deducting large amounts from workers and listing them as “other” on paystubs. Upon investigation it was found that they were charging workers for using company tools, equipment and vehicles. Not only is this illegal, but it was also done in a way that initially made it appear as though workers were being paid prevailing wages. Gross pay was close to what may be expected, but the “other” deductions put the money back in the employer’s pockets.

It took legal intervention to get to the root of this issue. The result was a settlement between the contractor and the DOL for $483,828 paid to workers and $85,000 in penalties to the DOL. Read the full story here.

How to prevent it

This situation appears to indicate more than a simple lack of knowledge or a misunderstanding of the law. However, it’s easier than you may think to accidentally pay workers the incorrect prevailing wage and fringe rates.

Mistakes that lead to incorrect prevailing wage and fringe rates:

  • Using the wrong wage determination.
  • Not tracking work classification changes so that workers are paid incorrectly for all or part of their shift.
  • Incorrectly entering wage rates into your payroll system.

The easiest way to avoid these mistakes is to reduce manual steps, like transferring time and payroll data from one place to another. For instance, keying in data from handwritten timecards or manually moving data from spreadsheets to your payroll system. You can also use certified payroll software that auto-verifies data, including wage determinations and allows data to be imported. This removes manual tasks and common error points in the payroll process.

Last but not least, make sure you know the laws governing your projects. Failing to understand the law does not save you from legal action should an investigation take place. You can use the following resources to take a deeper dive into prevailing wage law.

Helpful prevailing wage 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.