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Challenges Of Employment Compliance Of Construction Contractors

February 21, 2020

Cecilia De La Rosa

Cecilia De La Rosa

A worker writing notes on construction site

Not paying attention to labor and employment law compliance is a common problem in the construction industry. While construction law often involves issues related to contract disputes, payment issues, and quality of construction work, there has been a serious lapse in employment compliance by construction contractors. There may be very good reasons… but none of them are acceptable to government agencies that enforce employment compliance laws and regulations. Like every other industry, the construction industry is not exempt from government employment regulations. Important regulations include wage and hour laws as well as prevailing wage laws.

A worker writing notes on construction site

These laws are enforced heavily by both federal and state agencies. Over the last number of years, the construction industry has been a target of the US Department of Labor for wage and hour violations and other compliance issues. On average, penalties levied against construction contractors average $14,000 per case. That’s a lot of money, especially if there are multiple cases against your construction contracting company. Your company could be subject to massive penalties, back wages to employees, as well as fines and ineligibility for contracts. In 2017, a Massachusetts construction contracting company was forced to pay $2.4 million in back wages and an additional $262,900 in fines for falsely classifying employees as independent contractors. Additionally, they created fake records to avoid paying overtime to their workers.

Is an Employee Executive, Administrative, or Professional?

If you have employees who are classified as executive, administrative, or professional – they are not subject to the Department of Labor’s enforcement of minimum wage and overtime requirements. However, it’s not a blanket waiver and you don’t want to get caught misclassifying your employees. Employees in these positions must meet certain criteria to be eligible for exemption. For example:

  • Executive employees must have management duties, the authority to hire and fire, as well as promote employees.
  • They must make more than $913 per week.
  • Annual salaries for highly compensated employees must exceed $134,004 in annual salary
  • An employer may pay commissions without losing the exemption.

Starting in January 2020, every three years these requirements will be reviewed. What does this mean for your construction contracting business? Not much if your employees don’t qualify for the exemptions. The point is… don’t misclassify them or you could face stiff penalties. It’s vital that you know what the federal and state laws are regarding employment and labor compliance and that you comply with them. There are other compliance issues as well that we will share over the coming weeks including:

  • Equal employment opportunity
  • Sexual orientation and gender identification nondiscrimination
  • Affirmative action for those with disabilities
  • Protected veterans
  • Issues concerning apprenticeships
  • Whose responsible and accountable for on-site contractors

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