Published date: 10/28/2020

When public works contractors sign up for a project, they better know what they are getting themselves into. What does that mean exactly? Well, on any construction project where federal funds are involved, Davis-Bacon requirements apply. And contractors need to be well-versed in the various nuances of federal prevailing wage, like certified payroll reports (CPR), crafts and classifications, and overtime pay – because if they are not, they will have to face one of the less glamorous and often feared aspects of public works… a US Department of Labor (USDOL) investigation!

How Investigations Happen IRL (In Real Life)

Imagine this – a contractor on a large, federal construction project oversees hundreds of subcontractors and lower-tier subcontractors. It is not their first prevailing wage project, so they are pretty familiar with the various nuances of Davis-Bacon that are attached when federal money is at play.

The project proceeds as planned until one day they receive a notice of an impending investigation. They are given five days to prepare their documentation and notified that an investigator will be visiting the project site. This is naturally a nerve-racking ordeal for our contractor, but they feel pretty confident that their bases are covered. They are paying prevailing wages; they submit certified payroll reports. What could go wrong, right? They gather most of the documentation outlined in the checklist provided, with the exception of some daily logs (despite their best efforts, they could not find them on the Superintendents’ desk, in the Foremen’s trucks, or in the file cabinet at the site trailer).

Before they know it, the investigation is done and over with and findings are issued. But the outcome is far from good. They are notified that two of their subcontractors committed prevailing wage compliance violations. One lower-tier subcontractor that completely flew under the radar was not submitting CPRs for their employees. And another subcontractor was hit with two infractions: one for misclassification and the other for failure to pay overtime. Now the prime is dealing with the aftermath, and funds are being withheld until restitution is made and corrected CPRs are submitted. The contractor stares down at the document outlining the investigation findings and wonders: How could this have happened?  

Pre-empting the Triggers to Avoid the Consequences

There are different catalysts that trigger investigations; the most common are complaints from employees or ‘red flags’ on compliance documentation. And investigations can be limited in scope, surrounding just a particular complaint, or it could span your entire project where every subcontractor is placed under a microscope.

When an investigation comes back with a negative outcome, contractors are faced with potential fines, withholding of funds, and in worst case scenarios, prosecution and even debarment. While you cannot guarantee that an investigation will never happen on one of your projects, there are measures that you can take to reduce your chances of getting investigated and/or lessen the risk of an unfavorable outcome. Let’s explore these measures in the context of the case above and see what our contractor could have done differently to swing the results a different way.

Perform Regular Self-Audits

The preparations for an investigation should begin way before an investigation even happens. For starters, our contractor should have incorporated regular self-audits or self-assessments to their labor compliance protocol. One might ask, how do I approach these self-audits? Well, you have to think like an investigator. Typically, investigators review compliance documentation, such as copies of subcontracts, CPRs, and supporting payroll documentation, so naturally a thorough review of these documents should have been included in our contractor’s regular self-assessments.  

Another practice they could have included in their audit is creating a checklist of all vendors and subcontractors working on the project. This may seem like busy work, but since the prime was working on a large project, chances are it would be difficult to keep tabs on all vendors and subcontractors. By creating this checklist and ensuring that CPRs are submitted for all subcontractors (and even some vendors, if applicable), our contractor would have detected the missing CPRs from the lower-tier subcontractor and could have reduced their risk of a negative investigation outcome by a huge margin.

Conduct Field Wage Interviews

Be proactive and think like an investigator, right? What else do investigators do in the course of an investigation? They conduct employee field wage interviews, which is exactly the practice that our prime contractor should have adopted to mitigate the issues they are currently facing. Interviews are critical to rounding out a labor compliance program. The reason being is that there are some violations that are only detected by talking directly to employees. For example, have you heard of ‘ghosts’? In the context of a prevailing wage project, these are workers who perform work, but do not show up on any CPR. They are hard to detect unless you visit the project site and actually speak with the employees.

During the interview process, our prime should have asked their employees questions, like: What is your pay rate? What is your classification? What type of work do you perform? The objective of these interviews is to corroborate the information submitted on CPRs (or uncover issues not reported on CPRs), so it is imperative to include questions that will verify the data on compliance documentation.  

Had this contractor conducted regular field wage interviews, the misclassification violation that one of their subcontractors committed could have been quickly identified by comparing the employee’s responses to the questions listed above with the classification listed for that employee on the CPR.

Establish an Official Process for Daily Logs

Lastly, our contractor should have made their labor compliance protocols airtight by leveraging one of the most helpful tools in their arsenal: daily logs. While the submission of daily logs (or dailies) is not mandated by law, it would be remiss to not add this to one’s labor compliance program. How could this have helped with our prime’s compliance efforts? Well, for one, since it is a record of hours worked by each employee, it serves as another means of corroborating data submitted on CPRs. For example, if the CPR states 40 hours of work in a workweek, but the daily logs show a total of 48 hours, this indicates a deficit of 8 hours and a failure to pay overtime.

By the sound of it, our contractor did not have a standardized process for daily logs. Ideally, daily logs follow a uniform submission and management process where they are collected in a standardized format, cross-checked against CPRs, then properly archived in a central location. You want to avoid situations where some daily logs are submitted via email, while others are handed to your Superintendent at the site trailer. And you definitely want to avoid cases where workers’ hours are scribbled on the back of a random piece of paper and then submitted as a daily log. 

If our contractor had a more efficient system of collecting dailies and made it a practice to then compare the data against the information on CPRs, they could have caught the overtime violation committed by one of their subcontractors ahead of time and potentially even prevented this investigation from being set in motion (if this investigation was triggered by one of the most common reasons, which is an employee complaint).  

Pre-Empting Investigations: Protocols + Tools

Investigations can be costly if you take more of an ‘I’ll-deal-with-it-when-it-happens’ kind of approach. However, if you take proactive measures, like conducting self-audits regularly, performing your own employee interviews, and leveraging daily logs as a compliance tool, you can significantly reduce the chances of a negative investigation outcome or potentially even avoid an investigation from being set in motion.

There are tools readily available on the market that can help and do this heavy lifting for you. LCPtracker provides labor compliance solutions that electronically collect and manage certified payroll reports from all subcontractors, plus it offers add-on modules for daily logs and field wage interviews. The best part: the systems are integrated, which means all the data is synced and cross-checked with one another, making it easier for you to identify violations before investigators come knocking at your door.

While investigations are never fun, there are ways to deal with them and potentially even pre-empt them; you just need to have the right compliance protocols and the proper tools that will do the manual work for you. For more information about LCPtracker and its construction site compliance modules, please visit www.lcptracker.com.