Prevailing Wage Audits: What’s Your Strategy?
As we dive head first into summer, the construction season is well underway. Not only is your team busy in the field, I’m sure that your office staff is fully engaged in keeping the administrative wheels rolling as well.
Understandably the last person anyone wants to see on a job site or at the office is an investigator from the state or federal labor department. At best they represent a time drain and a distraction from the real work.
Throughout my 20+ years working in the construction industry, as both an HR Director and as an entrepreneur / prevailing wage consultant, I have personally assisted in close to 100 job audits/investigations. In other words, I have been there and back.
In this blog I offer some experience sharing that law-abiding contractors interested in doing the right thing may find helpful.
The investigator is not there to “get you”. They have a job to do and like most everyone else, would like to get it done correctly with as little trouble as possible.
When you get a notice or inquiry from an investigator, set a positive tone, acknowledge it as soon as possible and let them know you are eager to resolve any issues. A good attitude goes a long way.
Public works investigators typically have a case backlog that is a mile long. The last thing they want to do is comb through each and every record in your payroll or job files. In my experience the best course of action is to help them. The quicker you can give them the information they are looking for, the faster they can close their case and move on to the next. Investigators love closing out cases quickly!
If you or the investigator discovers a mistake, it’s not the end of the world. Mistakes happen and they can be corrected. This is where some contractors get in trouble. Do not go back and try to reinvent history by changing or covering up records. It’s a one-way road to a vastly expanded investigation and a willful violation of the labor law (and possibly debarment).
Most investigations are the result of an employee complaint related to an underpayment of wages and/or benefits. The investigator will have a good idea of what they are looking for. They wont divulge the name of the employee who filed the complaint but will ask for certain records they will need to determine if a violation occurred. This is good news because the investigation is likely to be very narrow which is preferable than a broad scatter shot type of investigation.
The quick and accurate production of the requested records is one of the key components to a quick resolution. The key records that you should have highly organized at all times include:
- Certified payroll reports
- Signed time sheets documenting hours worked as well as trade classifications
- Payroll registers
Proof of payment of fringe benefits
This can be tricky depending on how you are satisfying the fringe benefit requirement of the prevailing wage law.
If you are paying the fringe supplements to a bona fide benefit trust fund (health & welfare plan and/or retirement plan) you will need to show proof of payment to the trust fund for all hours worked. If you are not making payments for all hours worked (including private work hours) then you will need to show documentation on how you are calculating your credit under the annualization rules.
If you are taking credit for benefits that the company is providing directly, you will need to provide documentation for that credit such as premium statements, etc. If there is a difference between the credit and the amount of fringe owed, you must show verification of the payments to employees for the difference.
Job site investigations
Investigators have the right to inspect job sites for proper postings of required notices as well as interview employees about the type of work they are performing, tools they are using and how much they are getting paid. A job site visit could very likely lead to a payroll investigation if the investigator finds anomalies during the job site visit such as the posting of old or incorrect prevailing wage rates or if the employees claim they are not being paid the proper rates for their trade classification.
It’s in everyone’s best interest to make sure that required job site notices are properly posted and kept up to date. Comprehensive pay stubs that document the various rates and classifications of pay as well as an open door policy for employees to ask questions is the best insurance for trouble free job site investigations.
How We Can Help:
DirectAdvisors, established in 2001 and located in Albany, New York provides bona fide benefit plan consulting and third party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act, Service Contract Act and state prevailing wage regulations. Our clients are located throughout the United States and range in size from 10 to 3000 employees.
In 2015, our construction company clients contributed tens of millions of dollars of prevailing wage fringe benefit contributions to The DirectAdvisors Trust (health & welfare benefits) and retirement plans managed by our team.
Our solutions are free from any conflict of interest as we do not sell any financial or insurance products. We work with existing agents, brokers and insurance companies.