New Law Impacts Construction Contractors: Are You A "Responsible Contractor"?

If you are like most employers, you probably don't have all of the Fair Labor Standards Act ("FLSA") and state wage rules memorized. You are, after all, running a business, not studying wage and hour law. Nevertheless, failing to comply with wage and hour laws could have dire consequences for employers, including large backpay awards, liquidated (i.e., double) damages, and significant attorney fee awards to successful plaintiffs' counsel. The legislature, however, believes these penalties are not significant enough for government contractors.

As a result, this year, the Minnesota legislature debated the merits of the "Responsible Contractor" bill, which was pushed by the union-funded Fair Contracting Foundation ("FCF"). The FCF, which receives its funding through unions and union contractors, spends its resources fly-specking certified payroll reports submitted by government contractors to find alleged prevailing wage violations by contractors. The "Responsible Contractor" law provides FCF and the unions with opportunities to put contractors out of business for unintentional wage and hour and other legal violations.

As passed, this law essentially bars any contractor from doing business with the State for three years, if, among other things, during any three year period commencing July 1, 2014: (1) the United States Department of Labor Wage and Hour Division has issued a finding of underpayment of wages that has become final regardless of the amount; (2) the Commissioner of the Department of Labor and Industry issued an order to comply that has become final; (3) the Minnesota Department of Transportation has issued at least two determination letters finding an underpayment by the contractor regardless of the amount; (4) the Commissioner of the Department of Labor and Industry has found the contractor to have repeatedly or willfully violated the Minnesota Prevailing Wage Act; or (5) the contractor repeatedly failed to pay wages or statutorily required penalties on one or more separate projects that total $25,000 or more.

This law has the significant possibility of putting many contractors out of business as a result of violating wage and hours laws. It could also put contractors out of business for violating many other laws, such misclassifying individuals as independent contractors, or failing to meet disadvantaged business enterprise goals. In preparing to comply with this law, take the following "Pop Quiz" and see how you do:

  TrueFalse
An employer must pay employees for ordinary travel time from home to work, and from work to home. 

If an employee is merely required to pick-up or carry tools, materials or supplies at the shop before leaving for a job site, the employer is not required to compensate the employee for travel from this central location to the designated place of work. 

If a terminated employee demands in writing to be paid his/her final paycheck immediately, the employer can wait until the next payroll to do so. 

An employer is required to compensate employees who merely ride in a carpool from the central location to the jobsite? 

On a state prevailing wage construction project, employees only get overtime pay after 40 hours. 

If employees record the actual hours they worked on a given day, the employer does not need to know when they started or stopped working for the day. 

On a state project, unloading, carrying, placing, and tying of rebar is classified as laborer work. 

Employers are not required to pay employees for 15 minute breaks. 

Bonuses never impact an employee's overtime calculation. 

Even without an employee's agreement, employers can deduct from an employee's wages, the value of property he/she lost or damaged. 

The answer to each of these questions is "False." If you answered "True" to any of the above questions, under the Responsible Contractor bill, as a contractor, your business could be prohibited from doing business with the state of Minnesota for three years if: (1) the U.S. Department of Labor Wage and Hour Divisions issues rulings or finding of underpayment that become final regardless of the amount; (2) the Commissioner of the Department of Labor and Industry issued an order to comply that has become final; or (3) the Minnesota Department of Transportation has issued at least two determination letters finding an underpayment by the contractorregardless of the amount.

UPCOMING SEMINAR ON THE “RESPONSIBLE CONTRACTOR” LAW

In order to help prepare your company for the “Responsible Contractor” law, we are sponsoring a two hour seminar on June 11, 2014.  During this session, we will discuss common mistakes made by employers in complying with both state and federal wage and hour laws as well as addressing other provisions in this new law at it relates to independent contractors status, workers compensation and unemployment insurance requirements and disadvantaged business enterprise requirements.    

We hope you will join us on June 11, 2014 from 8:00 to 10:00 AM (check-in begins at 7:30 AM) at the Hilton Garden Inn, 5140 American Blvd West, Bloomington, MN (952-831-1012).  The cost of the session is $25.  Click HERE to register and pay with Paypal. You can also mail a check prior to the date.  For questions, or additional registration information, call Linda at 952-896-1700.  

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