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Increasingly prime contractors are finding themselves in hot water with the Department of Labor for their subcontractors’ behavior.  Recently, Lettire Construction Corp and 16 of its subcontractors were found to have violated provisions of the federal Davis-Bacon and Related Acts as well as the Contract Work Hours and Safety Standards Act. The filing upholds the DOL’s claim that the company and its subcontractors had committed numerous violations of federal law while constructing on two federally funded affordable housing developments. Violations included contractors failing to pay required payroll records to the government, failing to pay for all hours employees worked and improperly classifying employees who performed work on the projects. To protect workers’ rights, the Wage and Hour Division secured the withholding of project funds sufficient to pay the back wages owed.  Other contractors are usually found in violation of OSHA standards, and increasingly, back wages and resulting penalties. Such companies include C.J.’s Seafood, Altura Concrete Inc, and Nathil Corp all of which have been found in violation of safety standards; as well as C.J.’s Seafood violating minimum wage, overtime compensation, and record-keeping requirements. With the DOL’s increased investigations, prime contractors will have to monitor their subcontractors more diligently or else face tougher penalties.

Reporting requirements to contractors will vary depending on the federal agency overseeing the funding.  Additionally, each state administering the federally funded project may have its own disclosure and reporting guidelines.  Federal laws do not preempt requirements of state laws, but can apply concurrently.  With such requirements, contractors must research which set of guidelines will apply on a project-to-project basis.  For example, prevailing wage requirements, overtime, and fringes may vary on the same project for State and Federal wage rates.  In California, the State requires a variant ratio of apprentice hours worked based on the craft while on the same project federal funds of a 1-1 ratio are allowed.  Craft selection can also be a problem as some work in some states call for ‘dry wall taping’ to select a ‘carpenter’ to complete the work while the same project on the federal craft list calls for a ‘painter’ to do the work.  Typically, then, the prime or subcontractor would need to select the higher of the two wage rates to ensure prevailing wage is met.

Electronic systems like LCPtracker Pro are rescuing many primes from potentially large fines and restitution payments.  LCPtracker Pro has 50 plus validation checks that are pre-built into the software, so when subcontractors don’t meet one of the labor law requirements, the software automatically notifies the subcontractor of the error.  LCPtracker Pro also has the ability to prevent the submission of a certified payroll report if it has not met each of the validation checks that the administrator has set up in the application.

For more information, read the DOL’s full press release.