Published date: 09/17/2025
You might love watching crime dramas where investigators solve mysteries with flair. But if you’re a contractor on a publicly-funded construction project, the idea of an investigation is far less glamorous. In fact, it’s the kind of “excitement” nobody wants.
Even if you follow every rule to the letter, audits and investigations can happen. The good news? Being prepared can make the process far less stressful. Here’s what you need to know.
What Actually Happens During a Prevailing Wage Investigation
What Actually Happens During a Prevailing Wage Investigation
Public entities conduct investigations to ensure contractors comply with prevailing wage laws and labor standards. Federal investigations are usually handled by Wage and Hour Division (WHD) of the U.S. Department of Labor, upholding Davis-Bacon and related acts.
Expect:
- Site visits: Investigators may inspect your job site to observe work being performed and verify worker presence.
- Record reviews: You’ll be asked to provide certified payroll reports, time sheets, and other documentation.
- Confidential employee interviews: Workers may be interviewed privately to confirm job duties and wage rates.
Discrepancies between payroll records and interviews can trigger deeper scrutiny. State-level regulatory guidelines may differ from federal rules, so know the laws for each jurisdiction. Craft classifications, apprentice ratios, and fringe benefits can vary, and small differences matter.
Common Contractor Mistakes
Even experienced contractors sometimes make errors. Frequent issues include:
- Wage and fringe calculation errors
- Missing payroll or employee information
- Misfiled compliance statements
- Misclassification of trades and crafts
Misclassifications are a big one. Investigators focus on actual work performed, not just job titles. For example, if someone listed as a laborer is doing sheet metal work, the contractor may owe back wages at the higher rate.
Red Flags That Invite Analysis
Some mistakes practically invite an investigation:
- Ghost workers: Employees who are either on-site but not on payroll, or listed on payroll but not actually working, can trigger serious scrutiny.
- Apprentice-to-journey-worker ratios: If the ratio isn’t met, apprentices are entitled to full journey-worker wages. Failing to comply can trigger penalties.
Using certified payroll software can help catch discrepancies before they escalate.
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What Happens If Errors Are Found
Investigators typically hold a closing conference to discuss findings. Contractors can present documentation to contest claims or show errors weren’t intentional.
If underpayment is confirmed:
- Back wages must be paid
- Prime contractors may be responsible if subcontractors don’t cooperate
- Penalties or liquidated damages may apply
- Willful violations can lead to debarment from public contracts for up to 3 years
Creating a culture of compliance, where employees understand wage rules and feel safe reporting discrepancies, can help demonstrate good faith and influence leniency.
Q&A: Prevailing Wage Investigations
Q: How do I know if my construction company is being investigated for prevailing wage violations?
A: An official will contact you directly with the scope of the investigation, including record reviews, site visits, and employee interviews.
Q: What types of payroll errors can trigger a prevailing wage audit?
Common payroll errors that can trigger a prevailing wage audit include:
- Misclassification of workers (e.g., labeling a skilled laborer as a general laborer)
- Underpayment of wages compared to the required prevailing rate
- Missing or incomplete certified payroll records
- Failure to pay required fringe benefits
- Incorrect reporting of hours worked
- Deliberate falsification of payroll data
While honest mistakes like misclassifications or missing documentation may receive leniency if promptly corrected, intentional violations can lead to serious penalties.
Q: Can general contractors be held liable for subcontractor wage violations?
A: Yes. Prime contractors, and any responsible upper tiered subcontractors, can be held responsible if lower-tiered subcontractors underpay workers or misclassify employees.
Q: Can a prevailing wage investigation happen without warning?
A: Absolutely! That is why keeping accurate records and using compliance software helps prevent common issues.
Q: What’s the best way to prepare for a prevailing wage audit?
A: Mistakes happen, even to experienced contractors. But preparation, transparency, and cooperation can turn a stressful audit into a manageable one.
Q: Does LCPtracker offer more educational resources in that could assist in preparing for audits or investigations?
A: Yes, and we’ve linked them below:
