Field Personnel & Prevailing Wage Compliance. Clancy Finnegan, MnDOT Labor Compliance Unit

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1 Field Personnel & Prevailing Wage Compliance Clancy Finnegan, MnDOT Labor Compliance Unit

2 FUN FACTS Did You Know? Betty White (1922) is older than sliced bread (1928). Banging your head against a wall will burn 150 calories/hour. If you leave everything to the last minute it will only take a minute. If you sneeze while driving at 60 mph your eyes are closed for an average of 50 feet. In an average lifetime a person will swallow 70 assorted insects and 10 spiders while sleeping. 2

3 What Do Fish Take To Stay Healthy? 3

4 Training Purpose Explain the role of the MnDOT Labor Compliance Unit and the role of the contracting agency. Briefly explain the state and federal prevailing wage regulations. Provide basic guidance on how: aworker should be classified (labor classification); aworker should be paid (wage rate); aworker is to be reported (reporting). Illustrate 2 criminal cases, both of which was referred by field personnel. 4

5 Role Of MnDOT Labor Compliance Unit To ensure that the labor specifications incorporated into a state and/or federally funded contract are followed. The labor specifications include but are not limited to: Special Provisions Division A (DBRA and MNPWA) WDs wage determinations (federal and/or state) state truck rental rates (Applies to MnDOT Highway Projects ONLY) Provide contract administration assistance and education to contractors and the Contracting Agency (CA), and 5

6 Role Of MnDOT Labor Compliance Unit Investigate alleged prevailing wage violations which may entail: interviewing workers, inspectors, PEs, contractors, analyzing various records, issuing findings, conducting informal conferences, issuing determinations, processing restitution, and referring matters to other governmental authorities for administrative, civil or criminal action. 6

7 Role Of Contracting Agency To ensure that all contractors comply with the federal and state prevailing wage laws, including state TRRs. This is accomplished by: comparing the data collected in the field (i.e., interviews, daily work records) to certified payroll and month end trucking reports submitted by a contractor, requesting documentation (i.e., pay stubs, time records, fringe benefit statements, etc.) from the contractor if necessary, or contacting the MnDOT LCU for assistance. Failure to ensure compliance could subject the CA to possible legal action and loss of funding. 7

8 What is Prevailing Wage? Federal and State minimum wage laws that apply to a project funded in whole or part with federal and/or state funds. However, a locally funded project may require prevailing wage. Wages and fringe benefits that are established based on data provided by contractors through a voluntary, periodic survey process. Establishes wages and fringe benefits that are reflective of an area where the project is located, which 8

Non compliance bidding advantage Tends to attract a workforce that is well trained; resulting in quality

9 Why is Prevailing Wage Important? Prevents local wage standards from being undercut. Promotes competitive bidding by establishing a wage standard that all contractors must follow. Non compliance bidding advantage Tends to attract a workforce that is well trained; resulting in quality workmanship and projects that are completed on time and on budget. The goal is to ensure that a contractor complies with the proper Classification Wages Reporting 9

10 Labor Classification Who is subject to prevailing wage? A laborer or mechanic that is performing work under a contract. Work is considered duties that are manual or physical in nature as distinguished from those duties that are mental or managerial. A worker must be classified based on the actual work performed regardless of the worker s skill level. This is the foundation of prevailing wage. Laborers and mechanics include: Laborers (e.g., common, landscape, flag person, pipelayer, etc.) Special equipment operators (e.g., articulated hauler, boom truck, etc.) Equipment operators (e.g., backhoe, front end loader, bulldozer, etc.) Truck drivers (e.g., tractor trailer, dump truck, etc.) Skilled journeyworkers (e.g., carpenter, electrician, ironworker, etc.) 10

11 Labor Classification How to determine an appropriate classification of labor? Refer to the state and/or federal wage decision. Refer to the MN definition rules. Refer to the O*NET OnLine. If unsure about how a worker should be classified: Contact the MnDOT Labor Compliance Unit for assistance. If necessary, the MnDOT LCU may recommend that the contractor complete a Classification Clarification Request form for a formal classification assignment. 11

12 Labor Classification How can field personnel ensure that a contractor is classifying a worker correctly? Become familiar with the definition rules, observe the work performed by documenting tasks/duties, tools, and equipment; periodically interview a random sample of workers and truck drivers. Here is an example of a picture and a written document describing tasks/duties, tools, and equipment. 12

13 Labor Classification # Workers Equipment Rebar tying Forming 13

14 Labor Classification 14

15 Labor Classification Pay attention to apprentices, they may be paid less than prevailing wage only if: the apprentice is employed and registered in a bona fide apprenticeship program registered with the USDOL or state apprenticeship agency, the apprentice is performing work of the trade, and the ratio of apprentices to journeyworkers on the project site of work meets the ratio requirements established in the registered program. Failure to meet the aforementioned requirements requires the contractor to pay the apprentice the full prevailing wage rate. 15

16 Wage Rate What is the hourly prevailing wage rate comprised of? PW = Basic Wage Rate + Fringe Benefit Rate A contractor must compensate a worker at a minimum, an hourly combination of wage and fringe benefits that meets or exceeds the total PW rate required for the appropriate classification of labor. Wage rates are contained in a wage decision, usually found in the front end of a proposal or contract. In situations when different types of decisions are included into bid specifications, contact the MnDOT LCU for clarification. Here is an example of how a contractor complies with a wage rate. 16

17 Wage Rate A contractor assigns a worker a Common Laborer classification; the wage decision incorporated into a contract requires the following: Basic Hourly Rate $20.00 Fringe Benefits $ 5.00 TOTAL Prevailing Wage $25.00 A contractor can comply by paying the following hourly rates: $20.00 as a wage plus $5.00 in fringe benefits, $25.00 as a wage with NO fringe benefits, $22.00 as a wage plus $3.00 in fringe benefits, $18.00 as a wage plus $7.00 in fringe benefits. 17

18 Wage Rate Missing wage rate in a state and/or federal wage decision If the state and/or federal wage decision is missing a wage rate for a classification of labor that will be utilized on a project, contact the MnDOT LCU at lcusupport.dot@state.mn.us or call (651) for assistance. Once a wage rate has been assigned, the prime contractor must post that decision on the poster board, and may be required to pay additional wages to a worker(s). 18

19 OT Wage Rate STATE. A worker must be paid 1.5 times the prevailing hourly basic rate of pay plus fringe benefits for: hours worked in excess of 8 hours per day on the project, or hours worked in excess of 40 hours per week on the project. FEDERAL. A worker must be paid 1.5 times the prevailing hourly basic rate of pay plus fringe benefits for: hours worked in excess of 40 hours per week on the project. If a project is funded with state and federal funds, the more stringent of the two overtime laws applies. If a worker s non government (private) rate of pay is higher than the prevailing hourly basic rate of pay, the contractor must calculate overtime based on that hourly rate. 19

20 Fringe Benefit Wage Rate A contractor can take a credit for an irrevocable contribution made on behalf of an employee into a funded or unfunded plan or program. This includes but is not limited to: pension or retirement plans; health insurance or reimbursement plans; life insurance; disability insurance; apprenticeship training or other similar programs; vacation pay; holiday pay; and sick or PTO pay. Benefits other than those listed above would need approval. 20

21 Fringe Benefit Wage Rate What if the hourly fringe benefit credit determined is less than the hourly fringe benefit required in the wage decision? The contractor must compensate the employee the difference as a wage. This is called wages in lieu of fringe benefits. Costs not considered fringe benefits include but are not limited to: Employer contributions for workers compensation insurance; Employer contributions for unemployment insurance; Employer contributions for social security and medicare; transportation, board, and lodging expenses; clothing/uniform; and/or cell phone. Questions regarding fringe benefits can be directed to lcusupport.dot@state.mn.us or (651)

22 TRR Wage Rate Truck rental rates only apply to state funded highway construction contracts that are administered by the Minnesota Department of Transportation. Minimum truck rental rates must be paid by a prime contractor, subcontractor, or broker, to a hired trucking entity that is providing trucking services. Truck rental rates are established for various types of trucks and are comprised of two components: average hourly operational cost, plus prevailing wage. 22

23 Wage Rate How can field personnel ensure that a contractor is compensating a worker correctly? Periodically interview a random sample of workers and truck drivers. Compare the interview information to the wage decision and truck rental rate decision to determine if the hourly rate information collected is correct. If suspicious, request documentation (i.e., pay stubs, fringe benefit statements, etc.) from the contractor, or contact the MnDOT LCU. 23

24 Reporting Certified Payroll Report (CPR) A CPR includes a payroll report and a statement of compliance. Refer to the contract specifications for CPR submission requirements. 14 days from the end of the pay period for state funded only projects. 7 days from the end of the pay period for federally funded projects. Projects administered by the MnDOT require weekly electronic reporting. Questions about electronic reporting should be directed to the MnDOT at lcusupport.dot@state.mn.us or (651)

25 Reporting Month End Trucking Report METR A METR includes a MTO and/or an ITO report and a statement of compliance. Refer to the contract specifications for submission requirements. Subcontractor to prime contractor within 5 days after the last day of the month; Prime contractor to contracting agency within 10 days after the last day of the month. 25

26 Reporting How can field personnel ensure that a contractor is reporting correctly? Compare the interview information to the wage decision and truck rental rate decision to determine if the hourly rate reported is correct. Compare a CPR to field data (daily work records) to determine if the labor classification(s) reported is correct based on the work performed. If necessary, refer to the definition rules. Compare a CPR to the daily work records to determine if straight time and overtime hours reported are accurate. Are fringe benefit contributions reasonable or excessive? Here is an example. 26

27 (trucks) Reporting

Reporting = $19.72 ST: $34.69 + 19.72 = $54.41 OT: $52.04 + 19.72 = $71.

28 Reporting = $19.72 ST: $ = $54.41 OT: $ = $71.76 Contract Minimum Wage Requirements $ $19.70 = $50.40 $ $19.70 = $65.75 = ST = OT 28

29 Criminal Cases Referred By Field Personnel

30 Criminal Case T.H. 694 in New Brighton & Arden Hills Contract administered by MnDOT Bridge widening project, which included electrical work (i.e., lighting and TMS) $2.5 million project Work conducted in 2010 Honda Electric, Loretto, MN Initiated by an inspector (field personnel) 30

31 Document Daily Work Activities Criminal Case Electrical Work Names Provided 10.5 Hours 31

32 Criminal Case Conduct Interviews To Validate Class. & Wages Incorrect Wage Rate Low Describe Work Observed 32

33 Compare Field Data to CPRs Criminal Case Class. Didn t Match Work Observed On DWR Hours Worked Didn t Match DWR Wage Data Collected Didn t Match Interview Report 33

34 Criminal Case Field personnel referred matter to MnDOT LCU. MnDOT LCU: had received complaints based on field personnel interviews; contacted workers to discuss matter; requested records from workers; requested records from the contractor (2 months late); analyzed records (FALSE); and determined that a possible criminal violation existed, and contacted the FBI. What Was The Scheme? 34

35 Criminal Case Hours reported on CPR = (ALL hours * Reg. Rate) / (PW) 1. Employee claimed an approximate hourly wage of $17 per hour total hours multiplied by $17 per hour = $ $ divided by PW ($41.29) = hours (rounded to see slide 33) hours multiplied by $41.29 = $ (matched CPR &DES) 5. Actual hourly rate paid to employee was $

36 Criminal Case Search warrant executed on 4/9/2013 The minority owner (husband) of Honda Electric pled guilty in federal court to False Statements in July The majority owner (wife) of Honda Electric pled guilty in state court to 16 counts of Theft By Swindle. $250, in restitution paid to 22 workers on 26 projects, many of which were administered by local agencies. This case wouldn t have been possible without the GREAT work from field personnel. 36

37 Criminal Case Century Avenue/County Road 120 Ramsey and Washington County Contract administered by Ramsey County $13 million project Work conducted in 2008 & 2009 Danner, South St. Paul, MN 37

38 Criminal Case Initial case was referred to MnDOT LCU by field personnel: Danner failed to pay the correct truck rental rates to hired trucks. The MnDOT LCU worked with the Danner office manager to determine amount of underpayment. Danner agreed to pay hired trucks $185,000 & issued payment. Not Criminal Criminal Driver contacted MnDOT LCU and claimed that Danner was requesting the money back. Secondary criminal case: In some instances, Danner threatened their jobs if they failed to pay the money back. Danner had received about $125,000 back. Some drivers refused 38 to give back the money & participated in the investigation.

39 Criminal Case Search warrant executed on 6/3/2010. Money seized from Danner s business bank accounts. Danner indicted for fraud on 12/22/2010. Danner pled guilty on 7/29/2011. Danner sentenced to 15 months in prison, $50,000 fine, and $125,000 in restitution. If field personnel come across conversations or statements from workers or contractors that appear to be related to misconduct (i.e., PW, materials, DBE, harassment, discrimination, etc.) report it to the project engineer and/or the MnDOT LCU. 39

40 Conclusion Why should field personnel care about whether or not a worker receives PW? employees underpaid, employee lose benefits, unfair bidding, potential litigation from contractors, labor unions and workers, other governmental agency involvement, which will delay the finalization of a contract, loss of federal and/or state funding. 40

41 Conclusion The LCU doesn t expect you to be an expert! Do the best you can with the knowledge and resources that you have, ask questions, attend statewide biennial Contract Administration Trainings, review the MnDOT Labor Compliance website, or contact me. 41

42 Thank you for attending! Clancy Finnegan, MnDOT LCU (651)

43 Where do fish keep their money? 43

FEDERALLY FUNDED ONLY CONSTRUCTION CONTRACTS SPECIAL PROVISIONS DIVISION A - LABOR May 17, 2006

FEDERALLY FUNDED ONLY CONSTRUCTION CONTRACTS SPECIAL PROVISIONS DIVISION A - LABOR May 17, 2006 I. PREAMBLE It is in the public interest that public buildings and other public works projects be constructed