Published date: 04/16/2026
Across the United States, federal, state, and local agencies are taking a closer look at how contractors handle payroll, worker classification, and prevailing wage compliance. What used to slip through the cracks is now far more likely to be flagged, investigated, and penalized.
At the same time, increased infrastructure spending and new legislation have created an environment where enforcement agencies are both better equipped and more motivated to act.
As a result, labor compliance is no longer something project owners and contractors can afford to overlook.
Why Enforcement Is Increasing
Several factors are driving this shift:
- Record levels of public construction funding tied to federal requirements under the Davis-Bacon and Related Acts (DBRA)
- New state laws introducing stricter penalties for wage theft
- Greater coordination between enforcement agencies, including the U.S. Department of Labor (DOL) Wage and Hour Division
- Increased focus on protecting workers on publicly funded projects
Together, these trends are creating a more aggressive enforcement environment—one where even smaller violations can carry significant consequences.
Federal Enforcement: Closer Scrutiny Under the Fair Labor Standards Act
At the federal level, enforcement actions under the Fair Labor Standards Act (FLSA) and Davis-Bacon and Related Acts (DBRA) are becoming more visible and more consequential.
In one recent case out of Southern California, a contractor was required to pay hundreds of thousands of dollars in back wages and damages after investigators found workers were not properly compensated for overtime. The violations included failure to track all hours worked—such as travel time and weekend labor—and paying straight time where overtime rates were required under the FLSA.
In another case in Idaho, federal investigators recovered nearly $300,000 in unpaid wages after determining that employees were consistently paid straight time for hours worked beyond 40 per week. Additional penalties were applied due to the willful nature of the violations.
These examples highlight a broader trend: enforcement is not limited by company size or geography, what matters is whether payroll practices align with federal wage laws.
State-Level Crackdowns: New Laws Raising the Stakes
States are going even further, introducing legislation that significantly increases the consequences of wage theft.
In California, two new laws that took effect in 2026 are already reshaping enforcement:
- Senate Bill 261 (SB 261) allows for triple damages on unpaid wage judgments that remain unresolved
- Assembly Bill 1002 (AB 1002) gives the state authority to suspend or revoke contractor licenses in cases involving wage theft
These laws raise the stakes beyond financial penalties by strengthening true operational risk for contractors.
Other states are following suit:
- Oregon Senate Bill 426 (SB 426) expands liability, making general contractors and property owners potentially responsible for subcontractor wage violations
- States like New York continue to pursue wage theft cases under criminal statutes, including fraud and larceny laws
Local Enforcement: Wage Theft as a Criminal Offense
At the local level, enforcement is becoming more direct—and in many cases, more severe.
In New York City, prosecutors recently brought charges including grand larceny, scheme to defraud, and falsification of business records against a contractor accused of requiring workers to return a portion of their wages after being paid on record (a process commonly referred to as a kickback and made illegal by the Copeland Anti-Kickback Act of 1934). The case involved falsified certified payroll reports submitted on publicly funded projects.
In another case tied to public construction projects in New York, a subcontractor admitted to maintaining dual payroll systems, one reflecting full compliance with prevailing wage requirements, and another showing significantly lower actual payments to workers. The outcome included financial restitution and a multi-year ban from working on public projects.
And if you’re curious what might happen to any of these contractors that don’t take these violations and penalties seriously, there are have also been examples made of repeat offenders. In Westchester County, New York, for example, a contractor previously charged with wage theft faced additional felony charges after continuing to withhold wages, reinforcing how ongoing non-compliance is being treated more aggressively over time.
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Large Settlements: The Long-Term Cost of Non-Compliance
Civil litigation is also playing a major role in enforcement.
In one recent case in New York City, workers secured millions of dollars in recovered wages after alleging long-term violations tied to improper subcontracting structures. Investigations revealed efforts to bypass prevailing wage requirements under DBRA by routing work through third parties and underpaying workers over an extended period.
These types of cases often take years to surface—but when they do, the financial and reputational impact can be significant.
What Project Owners and Contractors Can Do Now
While enforcement is increasing, there are practical steps contractors and project owners can take to reduce risk:
- Stay current on evolving laws
Understanding legislation like SB 261, AB 1002, and SB 426, along with federal requirements under FLSA and DBRA, is critical. - Conduct regular internal audits
Review payroll, classifications, and certified payroll reports proactively to catch issues early. - Improve documentation and reporting processes
Accurate records are essential for demonstrating compliance during audits or investigations. - Train teams and subcontractors
Many violations stem from misunderstandings around wage classifications, overtime rules, and reporting requirements. - Take a proactive approach to compliance
Addressing issues early (and maintaining consistent practices) can significantly reduce exposure.
Supporting a More Proactive Approach to Compliance
As enforcement continues to evolve, many teams are taking a closer look at how they manage labor compliance day-to-day.
Manual processes can make it difficult to catch issues early, especially when tracking certified payroll and workforce data across multiple contractors and projects. In response, some organizations are exploring more centralized approaches to improve visibility and maintain organized documentation.
Cloud-based solutions for certified payroll, Davis-Baocn compliance, and workforce reporting can support these efforts by helping teams manage compliance data in one place, making it easier to stay prepared as expectations continue to rise.
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These materials are being issued with the understanding that LCPtracker is not engaged in rendering legal or other professional services and is providing these for informational purposes only. If legal, accounting, or tax expert assistance is required, the services of a competent legal, accounting or tax professional should be sought.
