Wage theft is a broad phrase commonly used to describe worker misclassification, as well as wage and hour violations. The U.S. Department of Labor enforces the Fair Labor Standards Act, but many states are increasing their focus on this issue and have stronger wage theft laws. Wage theft can come in many forms and can sometimes be tricky to identify. In this post, our team discusses what general contractors can do to be proactive in their identification of wage theft.
As a first step, it can be very helpful to conduct some background research on the subcontractors you are considering for the project to review performance on past projects.
Once you have selected a subcontractor for your job, it’s critical that you have visibility into the work that is being done on your project by all your subcontractors and their tiers, and the manner in which they are engaging their workers.
- how they are classifying their workers,
- the wages that are being paid to their workers,
- the functions the workers are performing,
- and even if their workers are designated as a 1099 or w-2 employee.
Each of these areas can be ripe for wage theft. In addition, it’s important you protect yourself by including appropriate language in your subcontractor contracts articulating the subcontractors’ responsibilities to their workers. It is also important for the organization to be able to follow the money by increasing your line of sight into what contractors and subcontractors pay their workers. This will provide a mechanism to flag potential issues early and get ahead of any inconsistencies that may arise.
Other precursors are often the trades and scope of work. Wage theft can be more prevalent within drywall, landscaping, and carpentry trades where you can see issues like not paying the correct overtime formula. In the MEP trades, you should be aware of worker misclassification, where workers are sometimes identified as an unskilled laborer vs. a skilled laborer.
These are the types of issues where researching the subcontractors during the prequalification phase can be helpful by looking for “flags” that may give indication that data and what they are reporting/inputting do not align. Assessing these issues up front, before the project begins, confirms data and wage classifications prior to issuing the first check.
Another helpful review is to look at the size of the contract being awarded and the employee capacity of that firm doing the work. For example, if there is multi-million-dollar contract awarded to a firm with a limited number of employees, there is a likelihood they are using contract workers to increase the capacity of the firm. This is not necessarily inappropriate but provides a flag for the contractor to check in. If there is a proportionally high share of laborers to skilled workers you may want to observe the work at the project site that is being conducted, and by whom, to see if there is any worker misclassification.
Observations on the job site can be very informative. For example, the PPE of the workers on the job site. Does the PPE match or reflect that of the company that the subcontractors are working for on the job? If there is a mismatch it could be indicative of someone working in a 1099 capacity or a tiered subcontractor that is unaware of the wage rate for the project.
None of these examples necessarily represent wage theft situations but provide you with signs to look for to help you protect your organization.
What tools can an organization use to aid in addressing wage theft issues?
Accessing and reviewing labor data for the individuals working on a project can be a tremendous resource in addressing potential wage theft issues. Too often, data doesn’t get captured, gets lost, or is incorrectly documented which then inhibits your ability to review any potential issues. SkillSmart’s InSight technology addresses these organizational challenges around collection of wage and other data from all prime contractors and all subcontractors on any project. It provides a scalable, single, and secure repository of information that, with the right software, can be configured to flag and alert staff to many of the key issues. This allows the project team to address any issues with a subcontractor in real time. It will also give your project team a view into which subcontractors to engage with on regular project site visits to get more information and proactively address any potential wage theft issues.
An example of how technology can be used, in addition to capturing wage data, is the collection daily reports, electronically. It is no longer enough to have papers dropped off at the site trailer for someone to review at the end of the week. Dynamic data allows for in time review of who is on site and the work be performed. This ensures that the workers on site match the scope of work to be performed and most importantly the worker has been correctly classified and receiving the correct wage.
There are other technology solutions an organization could consider. For example, RFID technology can track workers who are accessing the site throughout the project. This data can be correlate to subcontractors’ payroll data and their employees working on the project. This technology along with real time payroll data can confirm and document who is on-site well before the scope of work has been completed.
Finally, the use of consultants or increased staff to either be on site for all of your projects or to do periodic site visits to identify prospective wage theft issues is another avenue for an organization to explore. They, along with technology, can help to observe and identify trends that may be potential cases of wage theft.
In each of these approaches you’ll want to look at effectiveness, cost and scalability to ensure that which of these best meet the firms needs on the jobsite while providing you with information and ability to be proactive to address items in the moment.
This article builds on our previous posts about wage theft and hopefully provides some insight into how you can better protect your organization by:
- asking the right questions up front,
- setting up the right contractual structure,
- observing actions on the jobsite,
- incorporating tools that give your organization real time insight beyond what is directly observable, flagging certain issues that need further investigation, and
- being proactive, instead of reactive.
Please reach out to us for more information about how SkillSmart’s software solutions can help you address wage theft issues and to discuss the ways we are helping general contractors, developers and owners across the country be proactive in their review of project teams, at all tiers, to try and prevent liability throughout the project.Learn More