Two of the scariest words for a construction business owner or HR director are “Fraud” and Compliance”. Both of them refer to the kinds of business problems that can keep people up at night.
You probably feel that if you never had to worry about construction labor law compliance (or safety or environmental compliance) again, your business would run a lot more smoothly. Unfortunately that’s not the case.
What is compliance in the construction industry?
Compliance is all about rules (mostly government ones).
So why do all those rules exist, anyway? They are designed to protect the employee from dangerous working conditions and other potential abuses and ensure they are paid a fair wage. Companies that don’t comply with all local, state and federal regulations face fines and even prosecution.
But some of these rules exist to protect contractors, too. For example, Workers’ Compensation Insurance establishes a sort of “gentleman’s agreement” that workers will not bring civil suits against employers if they are injured on the job. In return, the employer guarantees the ability to provide for their workers in case of an injury that occurs on the job.
The flip-side of compliance is fraud: the instances where the worker tries to game the system by falsely claiming a law was violated or an injury sustained that requires reparation from their employer. If the claim is dishonest there are protections from the State Insurance Board and in the court.
Popular construction compliance questions
Here are some of the main compliance questions that pop up in the construction business, and some basic guidance on finding answers:
#1. What are the basics of labor law? Who do I have to answer to—the state or the feds?
The U.S. Department of Labor enforces labor laws. The DOL’s Wage and Hour Division (WHD) enforces the Fair Labor Standards Act, which dictates regular and overtime wage payment. The WHD conducts audits throughout the country, so they are the main body you answer to regarding wages and hours.
#2. Does my state have its own overtime laws and what are they?
#3. I’m doing my first government job. What rules apply?
If you’re doing a job for the federal government, get ready to prepare certified payroll. Under the Davis Bacon Act, contractors are required to pay workers on federal jobs the prevailing wage for their region (in short, the typical local pay rate for that trade). Certified payroll consists of paying workers a prevailing wage and keeping regimented records of this along with other required information. (Form WH-347 is the form on which all certified payroll information must be submitted, by the way.)
#4. If the DOL is auditing me, I’m in deep trouble—right?
The Wage and Hour Division will visit you for one of three reasons: a random audit, they were reported by a competitor, or—most commonly—they were reported by an employee.
The WHD does provide notice that an auditor is coming, so you will have a (limited) time to produce the wage and hour-related records you need to show that you’ve been labor law compliant. (Let’s hope you have.)
The good news is that if you have been compliant or 99.5% compliant and you have the records to show it, your penalties will be none or next to none.
#5. What can I do if I suspect a worker is making a false unpaid wages or workers’ comp claim?
As far as a false unpaid wages claim, the best defense you have is accurate records.
A fraudulent workers’ comp claim is a different animal. First off, be aware that most states require workers’ comp insurance (with a few exceptions)—and fine companies that fail to provide it, in addition to possibly making them pay claims out of pocket or removing their right to do business in the state.
With that said, if your employee’s claimed injury under workers’ comp doesn’t seem to match their official diagnosis, or their lost time has exceeded American Medical Association guidelines without a reasonable explanation, you can fight it. You’ll have to produce certain evidence in order to make a case to your state’s Department of Insurance of a false claim. Necessary evidence includes descriptions and details surrounding a contraindicated activity the individual engaged in while collecting workers’ compensation benefits, for example, and the names of any other witnesses.
#6. How many safety standards does a business in my industry have to comply with? Where can I get a list?
Not to scare you, but there are 15 high-level categories in the “General Safety and Health Provisions” subpart of 29 CFR 1926, construction’s U.S. Code of Federal Regulations (CFR) section. Reading through those categories is probably a good place to start if you have a new construction business, a new safety director, or are simply looking to up your safety game.
OSHA also offers this hub for viewing the latest updates in construction rules and standards.
If you aren’t in construction, you can find your industry’s regulations linked on OSHA’s Laws & Regulations page.
Solution Talk // Words of Wisdom
How do these provide construction compliance solutions? Here are just a few ways:
#1. With accurate digital time tracking
…you know automatically and with certainty how many hours are worked and when overtime is owed.
#2. A certified payroll cost code
…helps you separate your certified payroll jobs from non-certified jobs for accurate record-keeping.
#3. Secure, cloud-based digital time records
…are saved indefinitely for easy reference so minor disputes can be resolved—and for airtight protection in case of a major dispute or audit.