A prime contractor is ALWAYS the guarantor of prevailing wages due to a worker on a project. That means if your subcontractor goes out of business, leaves the country or just flat does not pay his/her workers the correct prevailing wage rate, the prime contractor will be responsible to see that those wages are paid. Whether or not the prime contractor may be subject to any penalties imposed by the DOL will most likely depend on whether the prime contractor had reason to believe the proper wages were not being paid and did nothing to correct the situation.  It is strongly recommended that a prime contractor include a contract provision which requires its subcontractors to submit full and complete certified payrolls to the prime contractor as a requirement (condition precedent) before any progress payment or final payment is released.

A prime contractor would b e wise to review the certified payroll for errors an d inconsistencies.  Debarment only occurs after the contractor has been given the right to an administrative hearing. Debarment is for 3 years and prohibits a contractor from working on any Davis-Bacon project during that time frame. Debarment is usually invoked for contractors who falsify certified payrolls, take kickbacks from employees or who have repeat violations.

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The time period when a claim can be made against a contractor for unpaid wages is generally 2 years, 3 years if the violation is found to be willful. It is recommended that contractors keep all certified payrolls and related documents for at least three years from the completion of the project.

In any investigation relating to the proper payment of wages, the burden of proof is on the contractor to keep complete and accurate time and pay records. When faced with an investigation of wages paid, a contractor that has no or inaccurate timecards or pays employees in cash will be at a severe disadvantage. Employees who testify they worked in certain classifications and were not paid proper wages will be believed unless accurate documentation to the contrary can be produced.

When a contractor is asked to rectify a wage underpayment, the Agency will almost always ask for a copy of the cancelled check. Contractors who write a check to an employee and cannot produce a cancelled check (because they never delivered it to the employee) will be subject to disbarment. 

Unless the specific Davis-Bacon wage classification recognizes a Trainee or Helper as one of the specified classifications, then a contractor may not pay workers less than the specified prevailing wage rate for the classification of worker.

Persons registered and receiving on-the-job training in a construction occupation under a program that has been approved in advance by DOL’s Employment Training Administration (ETA) may be paid at the lesser approved “trainee” rate. A contractor may NOT reduce a worker’s wage or pay less than the prevailing wage rate because an employee lacks knowledge or a particular skill set. All workers are paid AT LEAST the prevailing wage rate in the Davis-Bacon determination unless 1) there is a specific category for helper or trainee, or 2) the worker is enrolled in a BAT approved apprenticeship or an ETA approved on-the-job training program.

The DOL does accept the electronic submission of certified payrolls. There are several services available whereby a contractor may complete certified payroll through a web-based program and have the information submitted electronically to the agency. The “electronic signature” is accepted for the purposes of “certifying the payroll”. WH-347 forms can also be downloaded from the DOL site, filled out on a computer and submitted electronically.

In addition to the many state and federal posters which must be displayed on a particular job site, there is a special poster to be displayed on Davis-Bacon projects. A copy may also be downloaded from the DOL website and/or provided free of charge by contacting the local U.S. Wage and Hour Administration office.

 The information above is brought to you by: Deborah Wilder’s

“What Every Contractor Should Know About Prevailing Wages”

“The Perfect Storm”

How SBX2-9 Will Drastically Harm the Construction
Industry in California

“The Perfect Storm”
How SBX2-9 Will Drastically Harm the Construction
Industry in California. The currently written legislation and regulations for SBX2-9 will most certainly negatively affect Construction, Jobs and hurt the economy. Although SBX2-9 was written with good intention, it fails in the details dramatically. The law will create another massive State department called the Compliance Monitoring Unit (CMU) that is supposed to take over the responsibility of the local agency to manage labor compliance on State bond funded construction projects. The idea was for the State to mandate this requirement and charge the local agency ¼% of the construction cost to do the work. Several major problems occur immediately and have no solution.

These include:

1. The estimated revenue to be collected for this CMU department is $10-20 million annually.

• The CMU department’s minimum expenses will be $50 Million or more to operate.
• This is a whopping deficit to start with.
 With a State hiring freeze, my concern is that the services will just not be performed at all.

2. To make matters worse, the new CMU stated (in its’ only policy) that the services provided to the local agency will only be 40% of the monitoring currently required by the California 1776 labor laws.

• This still leaves the local agency with a requirement to pay for the other 60% of the required monitoring.
• I don’t think the local agencies are going to be happy when they find out they have to pay the State to do monitoring and still hire staff to meet required labor compliance laws. I anticipate a massive backlash by the local agencies.

3. The final straw in this is that the law eliminates a private industry that is already supplementing the local agency monitoring requirements.

• This eliminates expertise of thousands of private sector jobs throughout the State
• It basically eliminates a labor compliance system that is considered to be one of the best in the Country.
How does this“Perfect Storm” come to be?

It is being cultivated by a three events:

1. The current economic condition of the State (high unemployment)

2. Lack of construction projects in the private sector

3. SBX2-9
These are the three fronts all-moving very rapidly at each other to create the perfect storm for California Construction.

We can’t do anything about the economy, or the lack of private work, but we can do something about SBX2-9. With 1000’s of public works projects to be awarded in the next few years, swarms of contractors will be bidding on these public works projects. Contractors with little or no public works experience will do anything to win a job and that means very low bidding will occur. Many of these contractors will look to every nook and cranny to save money and make a profit on the job they just won on low bid. Labor rates and workers will be used as a way to make up the losses.
Thousands of projects will go in droves to low bidders; possibly unqualified contractors. Add the effects of SBX2-9’s lack of monitoring and the drastic need for work and you have the Perfect Storm. Those harmed will be the Local Agencies, small and large contractors, workers and craftsmen. The new, low-cost, unskilled workers will be the big beneficiary. Thousands will be employed throughout the State, bringing tax revenue down, loss of wages, and a lower quality of work. In these conditions, injury and death rates are proven to increase by up to 50%. Worker compensation will be affected as well. Where will the skilled carpenters, plumbers and electricians go? With little or no monitoring going on, many professional craftsmen will find themselves with no work.
Are we going to let the perfect storm occur? We can make some key legislative changes to fix the problems with sbx2-9. We need action and we need it quickly.

From The Keystone Research Center:

HARRISBURG – With the Pennsylvania House Labor and Industry Committee scheduled to vote on seven proposals to weaken Pennsylvania’s construction sector prevailing wage law, the Keystone Research Center released a policy brief summarizing research on the impact of these laws.The research shows that prevailing wage laws do not raise construction costs on public projects but do increase investment in skills, improve health, safety and lower dependence of construction workers on safety net programs.“The research shows that there’s one sure-fire way to lower public construction costs,” said KRC labor economist and briefing paper co-author Mark Price. “That is to do more construction when unemployment is high. When the market is soft, contractors bid 20 percent or more below prices at the market peak.”

Price said the myth that prevailing wage laws raise costs is perpetuated by flawed cost accounting studies, which assume nothing else changes when wages and benefits on projects are slashed sharply.Variation in prevailing wage policies across states — some states have laws, some don’t — provides a wealth of “natural experiments” that allow statistical research to determine the impact of such laws, Price said.A rigorous body of economic research examining these natural experiments shows that their repeal leads to less workforce training; a younger, less educated and less experienced workforce; higher injury rates; lower wages and lower health and pension coverage.

Research also reveals that prevailing wage laws do not raise costs.For example, comparing school construction costs before and after Michigan’s suspension of its prevailing wage law revealed no difference in costs.National analysis of data on school construction costs reveals that prevailing wage laws do not have a statistically significant impact on cost. Schools built at times of higher unemployment, when construction bids are much lower, however, can cost over 20 percent less per square foot than schools built during times of high demand. In Pennsylvania, when prevailing wage levels were lowered substantially in rural areas during the second half of the 1990s — a period of declining unemployment and rising prices — school construction costs went up more in areas where prevailing wage levels fell the most.“Lawmakers know from their own experience that in any skilled field, you get what you pay for,” said KRC economist and briefing paper co-author Stephen Herzenberg. “The research on prevailing wage laws and construction costs indicates that any potential cost savings from paying lower wages and benefits are eaten by lost productivity or by higher profits or salaries for construction owners and top managers.”

From The Keystone Research Center:HARRISBURG – With the Pennsylvania House Labor and Industry Committee scheduled to vote on seven proposals to weaken Pennsylvania’s construction sector prevailing wage law, the Keystone Research Center released a policy brief summarizing research on the impact of these laws. The research shows that prevailing wage laws do not raise construction costs on public projects but do increase investment in skills, improve health, safety and lower dependence of construction workers on safety net programs.“The research shows that there’s one sure-fire way to lower public construction costs,” said KRC labor economist and briefing paper co-author Mark Price. “That is to do more construction when unemployment is high. When the market is soft, contractors bid 20 percent or more below prices at the market peak.”Price said the myth that prevailing wage laws raise costs is perpetuated by flawed cost accounting studies, which assume nothing else changes when wages and benefits on projects are slashed sharply.  Research in prevailing wage policies across states — some states have laws, some don’t — provides a wealth of “natural experiments” that allow statistical research to determine the impact of such laws, Price said. A rigorous body of economic research examining these natural experiments shows that their repeal leads to less workforce training; a younger, less educated and less experienced workforce; higher injury rates; lower wages and lower health and pension coverage.also reveals that prevailing wage laws do not raise costs.For example, comparing school construction costs before and after Michigan’s suspension of its prevailing wage law revealed no difference in costs. National analysis of data on school construction costs reveals that prevailing wage laws do not have a statistically significant impact on cost. Schools built at times of higher unemployment, when construction bids are much lower, however, can cost over 20 percent less per square foot than schools built during times of high demand. In Pennsylvania, when prevailing wage levels were lowered substantially in rural areas during the second half of the 1990s — a period of declining unemployment and rising prices — school construction costs went up more in areas where prevailing wage levels fell the most. “Lawmakers know from their own experience that in any skilled field, you get what you pay for,” said KRC economist and briefing paper co-author Stephen Herzenberg. “The research on prevailing wage laws and construction costs indicates that any potential cost savings from paying lower wages and benefits are eaten by lost productivity or by higher profits or salaries for construction owners and top managers.”

LCPtracker was  just rewarded news from the Orange County Business Journal that we are the 28th fastest growing private company in a two-year period. LCPtracker reached a high of 2 million dollars revenue in growth. In 3 short years LCPtracker grew from 5 employees to 15 employees.

LCPtracker’s Story: 

• 1992-2001- Original company name “FM International” Selling facility management software and service.
• 2001- FM International begins development of LCPtracker software as a service
• 2003- LCPtracker signed its first set of customers; these were K-12 school districts in California.
• 2005- all other business was discontinued and the company name officially changed from “FM International” to “LCPtracker”.
• 2006- LCPtracker clients exceed 100 K12 School, and clients like Universities, Cities, and Transit Agencies begin using the service.
• 2007- LCPtracker expands nationally
• Current- LCPtracker has clients in 21 states and is continuing to grow.

It is important to understand that the payment of benefits from Davis-Bacon wages may not pay for benefits covering non Davis-Bacon hours. One cannot use Davis Bacon the “fringe benefit” amount set forth in the Davis Bacon wage determination to pay for an employee’s entire month of healthcare, when the employee also works on many non-prevailing wage projects. The contractor must instead “amortize” the cost of the health care payment into a per hour calculation.
There are several formulas which are acceptable to the DOL. The simplest is to amortize the premium over a year:

 Monthly premium paid on behalf of the employee X 12(months) divided by 2080 (typical number of working hours per year). = XXX per hour credited toward fringes. Or, the DOL will generally accept a monthly amortization rate:

     Monthly premium paid on behalf of the employee divided by 160 hours (or another number which a contractor can validate as an average number of hours worked in a month or a prior year) = XXX per hour credited toward fringes. Remember, if a worker is not eligible to receive health benefits (because of a 30 or 90 day qualification or wait period) then the contractor cannot claim the amount of the anticipated premium. For those months where the employee is not qualified to receive benefits, the contractor must pay the employee the full amount or the cash equivalent of such benefits on the worker’s paycheck. If a contractor only pays for the individual employee’s health care coverage and the employee pays the additional coverage for family, etc. then the contractor may only amortize the amount the employer is actually paying (not the portion the employee is contributing).

The information above is brought to you by:

Deborah Wilder’s

What Every Contractor Should Know About Prevailing Wages