Message from the President-CEO: Prevailing Wage Jobs? Contractors, Beware!

BY: G. DAVID SLOAD, ABC KEYSTONE PRESIDENT-CEO

Prevailing wage work has been around since the Sixties. In Pennsylvania, a majority of the work on PA prevailing wage jobs is constructed by Merit Shop Contractors. As with any government funded project, contractors need to be aware of the risks, the rules and all the requirements placed on the job by the contracting agency.

There are three basic areas we want to focus on this month: worker misclassification; fringe benefits and employer carve outs; and the misclassification of independent contractors. Recently, indictments for worker misclassification, misappropriation of fringe benefit dollars and misclassification of independent contractors are a serious reminder that not properly following these rules could result in a company being barred from preforming prevailing wage work, having to pay fines, and possibly, even jail time. ABC is your resource to help you navigate these challenges.

Worker Misclassification:

It is not unusual for a contractor to use a mechanic and have them perform some work tasks that fall outside the scope of the mechanic descriptions. Some examples include things such as unloading trucks or cleaning up. A contractor can pay the mechanic the determined labor rate when they are performing such tasks. However, there are two major rules that must be followed. First, the time recorded must be the actual time spent on the task. Do not assume a mechanic spends one-hour each day laboring. Second, make sure the tasks are actually laborer tasks as defined by the PA Department of Labor & Industry.

Fringe Benefits and Employer Carve Outs:

This area involves moneys you owe your employees, ERISA Trusts (401K), cents-per-hour training dollars, vacation, and health care. You must get this right. Failure to do this right could cost the owners of the business financially, and possibly, criminally. ABC has a few members that specialize in this area of expertise and can assist you in doing it right. In addition, we continue to hold seminars, such as the recently held “Prevailing Wage & Davis Bacon Workshop.” When in doubt, call.

Misclassification of Independent Contractors: Failure to follow PA Act 72, the law that regulates this, could cost you fines and criminal prosecution. To make this simple, if all the items listed below are not followed (for all construction, not just prevailing wage), the person is not an independent contractor and could be reasonably looked at as your employee:

  • The individual has a written contract with you to perform construction services.
  • He or she is free from control or direction over the performance of these services.
  • The individual possesses the essential tools to perform their work.
  • The individual must realize a profit or suffer a loss for the project.
  • The individual must have a proprietary interest in the business.
  • The individual must have a business location separate from the business or person for whom the work is being performed.
  • The individual independently performed the same work for another person or was available to independently perform the work for another person and represented that the work could independently be performed for another person.
  • The individual must maintain liability insurance of at least $50,000 during the term of the contract.

Do not get caught doing things incorrectly. While ABC may not have an immediate answer to your question, we do know where to find them. We are here to serve you and help keep you compliant with these sometimes-confusing regulations.

G. David Sload
G. David Sload
ABC Keystone President-CEO
dave@abckeystone.org

Posted May 6, 2021