CDBG Federal Labor Standards

Trainer Guide

[Notes to the trainer are presented in italics.]

Introduction of trainer and participants: Trainer briefly introduces him/herself. Participants give their names, their positions and, if multiple agencies are present, the agency and whether they represent an Entitlement or a State CDBG grantee.

Purpose of the workshop:

The purpose of the workshop is to ensure that each participant:

Is familiar with the statutory provisions imposing Federal labor standards requirements; and

Understands the administration and enforcement of Federal labor standards provisions, including Davis-Bacon wage and reporting requirements.

Training Norms: Please--

Turn off all cell phones and pagers or set them on vibrate.

Step outside the training room to answer calls.

No smoking in the training room. There will be breaks when you can smoke.

Questions are fine at any time, but please keep them to the topic being discussed.

Discussion Questions: There is a set of questions for group discussion at the conclusion of the workshop.

Entitlement vs. State CDBG: Summarize the two programs, emphasizing any differences with regard to labor standards.

Overview

This workshop begins with an overview of Federal labor standards laws, requirements, general thresholds, and Davis-Bacon and Related Acts (DBRA) provisions. It also contains information on agency responsibilities and applicability for the CDBG program, as well as discussion of common compliance problems and corrective actions.

[Go through first 10 slides quickly, noting that there will be in-depth discussions later.]

Why Labor Standards

[Slide 5]

[Expand on introduction and purpose of the workshop. It’s good to characterize prevailing wages as another benefit of CDBG.]

1. Prevailing Wage

2. Prevents Worker Overtime Abuse

3. Eliminates Kickback Schemes

4. It’s The Law

Team Lingo

[Slide 6]

Take 5 minutes to:

– Review Acronyms

– Select Spokesperson

– Stand Ready to Report

Alphabet Soup

[Slide 7]

CDBG – Community Development Block Grant

CFR – Code of Federal Regulations

CPR – Certified Payroll Report

CWHSSA – Contract Work Hours and Safety Standards Act

DBA – Davis-Bacon Act

DBRA – Davis-Bacon and Related Acts

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DOL – Department of Labor

FLSA – Fair Labor Standards Act

HUD – Housing and Urban Development

LCA – Local Contracting Agency

LDP – Limited Denial of Participation

O/T – Overtime

S/T – Straight-time

SAC – State Apprenticeship Council/Agency

Pre-Test

[Slide 8]

1. How many residential units kick in Davis Bacon?

2. T/F. State grantees do not have to follow 24 CFR Part 85.

3. T/F. You can verify the prime contractor’s eligibility right after award.

4. T/F. Davis-Bacon requires weekly payment.

5. T/F. Preconstruction conferences are optional, not required.

Agenda

{Slide 9]

Agency Responsibilities

Tools

Administration Compliance & Reporting

Discussion Questions & For More Information

10 Agency Responsibilities

[Slides 10-11]

Overview of Responsibilities

Local contracting agencies (LCAs) that administer HUD programs agree to administer and enforce Davis-Bacon requirements as a condition for receiving HUD program assistance. In general, grantees and subgrantees are considered LCAs. LCAs have the following responsibilities:

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1. Designate appropriate staff (aka Contract Administrator) before the start of construction to ensure compliance with all applicable labor standards

requirements and to act for and in liaison with HUD. Provide the name(s) of the staff to the appropriate HUD Labor Relations Field staff.

2. Establish a construction contract management system that meets the standards of 24 CFR Part 85, Administrative Requirements for Grants and Cooperative Agreements to State, Local and Federally Recognized Indian Tribal Governments. This HUD regulation provides instruction on procurement and contracting and how to ensure compliance.

[Note: States do not have to follow Part 85. They may adhere to a comparable standard.]

3. Ensure that all bid documents, contracts and subcontracts for Davis-Bacon covered work contain Federal labor standards provisions (HUD 4010) and the applicable Davis-Bacon wage decision.

4. Ensure that no contract is awarded to a contractor that is ineligible (e.g., debarred) for Federally-assisted work. This can be checked at http://epls.gov and should be checked prior to contract award, when the LCA is going through the process to determine if the apparent low bidder is “responsible.”

5. Conduct on-site inspections including interviews with laborers and mechanics employed on the construction project. Ensure that the applicable Davis-Bacon wage decision and the Department of Labor’s “Employee Rights Under the Davis-Bacon Act” are posted at the job site.

6. Review certified payroll reports and related documentation. Identify any discrepancies and/or violations. Ensure any needed corrections are made promptly.

7. Maintain full documentation of Federal labor standards administration and enforcement activities.

8. Refer potential criminal or complex investigations to HUD, in addition to Contract Work Hours and Safety Standards Act (CWHSSA) liquidated damages assessments for overtime violations and debarment recommendations.

9. Comply with all HUD requirements concerning special statutory, program and/or other requirements.

10. Prepare Federal labor standards enforcement reports as required in Department of Labor (DOL) regulations (29 CFR, Part 5, Section 5.7) and with HUD requirements.

[This may be a good place to reference the “Top 11” list.]

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Your Labor Standards Toolkit

[Slide 12]

PowerPoint

Case Study (Coda City)

Example Documents

CD - A Reference Goldmine

A Practical Guide

A Contractor’s Guide

DOL Regulations

[Slide 13]

Unlike a lot of regulations for CDBG grantees, the primary regulations for Davis-Bacon labor standards are promulgated by the Department of Labor. In this section, we briefly discuss where we can find key issues and regulations. More detail about each will be provided throughout the workshop.

29 CFR Part 1: Procedures for Predetermination of Wage Rates

Obtaining and compiling wage rate information

Procedure for requesting wage determinations

29 CFR Part 3: Contractors and Subcontractors on Public Building or Public Work Financed In Whole or In Part by Loans or Grants from the United States

Payroll records

Payroll deductions

29 CFR Part 5: Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction (Also, Labor Standards Provisions Applicable to Non-construction Contracts Subject to the Contract Work Hours and Safety Standards Act)

Davis-Bacon and Related Acts Provisions and Procedures

Federal Labor Standards Provisions – Davis-Bacon and Related Acts (DBRA)

[Slide 14]

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Davis-Bacon and Related Acts (DBRA)

The Davis-Bacon Act (DBA) requires the payment of no less than prevailing wage rates (which are determined by the U.S. Department of Labor) to all laborers and mechanics on Federal government and District of Columbia construction projects in excess of $2,000. Construction includes alteration and/or repair, including painting and decorating, of buildings or public works.

Davis-Bacon Act isn’t really applicable to CDBG or even most HUD-assisted projects. Rather, it is labor standards provisions in the Related Acts that apply Davis-Bacon requirements to some work funded by Federal agencies, including CDBG work. The labor provisions define when and how Davis-Bacon requirements are applicable.

The labor provisions in the various Related Acts vary greatly, so it’s important to understand the factors of applicability for CDBG. [This will be discussed in more detail later. ]

The Contract Work Hours and Safety Standards Act (CWHSSA)

[For CWHSSA, do not go much into the loan-guarantee/insurance caveat. Since CDBG is a grant program, CWHSSA is always a factor if the $100K threshold is met.]

CWHSSA requires time and one-half pay for overtime (O/T) hours (over 40 in any workweek) worked on the covered project. The CWHSSA applies to both direct Federal contracts and to indirect Federally-assisted contracts (such as a contract that a subgrantee makes) except where the assistance is solely in the nature of a loan guarantee or insurance. CWHSSA violations carry a liquidated damages penalty ($10/day per violation). Intentional violations of CWHSSA standards can be considered for Federal criminal prosecution.

[Note: CWHSSA does not apply to prime contracts of $100,000 or less. CWHSSA also does not apply to construction or rehabilitation contracts that are not subject to Federal prevailing wage rates (e.g., Davis-Bacon wage rates, or HUD-determined rates for operation of public housing and Indian block grant-assisted housing). However, even where CWHSSA overtime pay is not required, Fair Labor Standards Act (FLSA) overtime pay is probably still applicable.]

The Copeland (Anti-Kickback) Act

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The Copeland Act makes it a Federal crime for anyone to require any laborer or mechanic (employed on a Federal or Federally-assisted project) to kickback (i.e., give up or pay back) any part of his/her wages. The Copeland Act requires every employer (contractors and subcontractors) to

submit weekly certified payroll reports (CPRs) and regulates permissible payroll deductions

Section 110 of the Housing and Community Development Act of 1974, as amended

[Note that section 110 of the HCDA is one of the Related Acts and has applicability under CDBG. Will be discussed in more depth later….]

(a) All laborers and mechanics employed by contractors or subcontractors in the performance of construction work financed in whole or in part with assistance received under this title shall be paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor in accordance with the Davis-Bacon Act, as amended.... Provided, that this section shall apply to the rehabilitation of residential property only if such property contains not less than 8 units....

(b) Subsection (a) shall not apply to any individual that—

(1) performs services for which the individual volunteered;

(2) (A) does not receive compensation for such services; or (B) is paid expenses, reasonable benefits, or a nominal fee for such services; and

(3) is not otherwise employed at any time in the construction work.

* Section 107(e)(2) of the HCDA permits the Secretary of HUD to waive the provisions of Section 110 in connection with grants to Indian tribes. This waiver action was taken and can be found in HUD regulations at 24 CFR §1003.603.

DOL Regulations (again)

[Slide 15]

29 CFR Part 6: Rules of Practice for Administrative Proceedings Enforcing Labor Standards In Federal and Federally-Assisted Construction Contracts and Federal Service Contracts

29 CFR Part 7: Practice Before the Administrative Review Board With Regard to Federal and Federally-Assisted Construction Contracts

Other References

[Slide 16]

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Labor Relations Letters. This is a “special directives” series designed to provide current and thorough guidance on Davis-Bacon issues in HUD programs. Popular topics include prevailing wage requirements concerning self-employed laborers and

mechanics. Labor Relations Letters are available on-line at the HUD Labor Relations Library at www.hud.gov/offies/olr

Labor Relations Desk Guides. These Guides provide basic information, instructions, advice and assistance concerning prevailing wage requirements in HUD programs. HUD offers a Practical Guide for States, Indian Tribes and Local Agencies and A Contractor’s Guide to Prevailing Wage Requirements for Federally-Assisted Construction Projects. These are easy-to-use resources that explain Davis-Bacon wage and reporting requirements and what agencies and contractors must do to comply with these requirements. These Guides are available on-line at the HUD Labor Relations Library.

[Emphasize electronic availability of the Desk Guides.]

On the Mark! Series. Also available at the Labor Relations Library, this series contains simple, one-page suggestions containing timesaving tips to improve efficiency and effectiveness, including new technologies and services available through the Internet.

[Depending on timing, a 10-minute break may be here, or just after Administration / Slide 18. Also, may do CD-ROM demonstration just after the break, if not done already.]

4 Administration Steps

[Slide 17]

Labor Standards Administration involves the activities that take place primarily before construction begins. Administration sets the stage for the enforcement activities that occur during the construction phase.

[Start by explaining who IS in a covered class, and then by deduction who IS NOT.]

1. Determine Davis-Bacon applicability. The first and sometimes most difficult step is determining whether and to what extent Davis-Bacon wage standards apply to a particular contract or project. Most HUD-assisted construction work is covered by Davis-Bacon, but there are some exceptions. The best and safest approach is whenever the contract/project involves construction work that is valued in excess of $2,000 to assume that Davis-Bacon rates will be applicable and then look more closely to see if there’s any reason for non-coverage.

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CDBG: Factors of Labor Standards Applicability

1. ...construction work financed...

CDBG can finance activities other than “construction work” which do not trigger Davis-Bacon requirements; e.g., real property acquisition, purchase of equipment, architectural and engineering fees, other services (legal, accounting, construction management), and other non-construction items (furniture, business licenses, real estate taxes, tenant allowances for such items).

Also, financing is not limited to the act of paying for the construction work directly. Financing can mean, for example, using CDBG assistance to pay the interest charged or to reduce the interest rate on a construction loan (including certain collateral accounts). Generally, financing also means using CDBG funds to provide permanent financing (take-out loan) following construction.

2. ...in whole or in part...

If CDBG funds finance only a portion of a construction work, labor standards are applicable to the entire construction work. This is true even if the work is primarily funded by the private sector or nonprofits.

3. All laborers and mechanics employed by contractors or subcontractors...

Labor standards provisions do not apply to employees of the grantee (force account workers) that may be engaged on an otherwise covered project. Note: The construction work is covered but these force account workers are excluded.

4. ...shall apply to the rehabilitation of residential property only if such property contains not less than 8 units.

Typically, single-family homeowner properties are excluded under this exemption. However, property is not limited to a specific building. Property is defined as one or more buildings on an undivided lot or on contiguous lots or parcels, which are commonly-owned and operated as one rental, cooperative or condominium project. Examples of 8+ unit properties include:

5 townhouses side-by-side which consist of 2 units each.

3 apartment buildings each consisting of 5 units and located on one tract of land.

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8 single-family (not homeowner) houses located on contiguous lots.

HUD has concluded that new construction (as well as rehabilitation) of residential property is exempt from Federal labor standards if the property contains less than 8 units.

Assuming that a determination has been made that Davis-Bacon wage rates are applicable:

2. Prepare the bid documents/contract. The contract for construction is the vehicle to ensure contractor compliance and Davis-Bacon wage enforcement. Therefore, the bid specifications and/or the contract for each project subject to Davis-Bacon wage rates must contain both a Davis-Bacon wage decision and its own labor standards clauses. These are often bound into the contract specifications.

a. Davis-Bacon Wage Decisions. The Davis-Bacon wage decision is a listing of various construction work job classifications (such as Carpenter, Electrician, Plumber, Laborer, etc.) and the minimum wage rates (and fringe benefits, where prevailing) that people performing work in those classifications must be paid. How to select/obtain the correct wage decision

Categories of construction work (residential, building, heavy, highway)

Davis-Bacon wage decisions are available on-line at no cost at: www.wdol.gov. You can also contact the HUD Labor Relations staff for assistance and/or for a copy of a Davis-Bacon wage decision. Reference HUD Form 4720: Project Rate Wage Sheet.

b. The labor standards clauses. The labor standards contract clauses must be included as a part of the contract. The labor standards contract clauses obligate the contractor to comply with Davis-Bacon wage and reporting requirements and provide for remedies and sanctions should violations occur. HUD has standard forms that contain the labor standards clauses appropriate for different programs: the HUD-4010, Federal Labor Standards Provisions is used for CDBG and HOME. This form is available on-line at: http://www.hudclips.org/forms/HUD-4010

c. Wage Decision lock-in rules (29 CFR Part 1, Sec 1.6). Most Davis-Bacon wage decisions are “General” decisions. General wage decisions do not expire but may be modified, from time to time, to keep them current. In general, modifications are effective if published before contract award or start of construction, whichever occurs first, except that:

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In the case of contracts entered into pursuant to competitive bidding, modifications are effective if published prior to the opening of bids. However, if a modification is published less than 10 days prior to bid opening and if the LCA finds that there is not a reasonable amount of

time to notify prospective bidders of the modification, and the LCA makes a report to its contract file of this circumstance, such modifications may be considered inapplicable.

If, under this previous provision, the contract is not awarded within 90 days after bid opening, any modification(s) published as of the date of contract award is applicable.

3. Verify contractor eligibility. Once you have selected the contractor to whom you want to award the contract, you must verify that the contractor is eligible (e.g., not debarred) from participation in Federal programs. You only need to verify the eligibility of the prime contractor, but this MUST be done prior to contract award. The U.S. General Services Administration maintains a list of debarred contractors that can be accessed on-line at: http://epls.gov (See On the Mark! OTM #6 (6/97) for more information about on-line verification.)

4. Provide contractor training. Make certain the contractor understands its responsibilities for Davis-Bacon compliance: The principal contractor (also referred to as the prime or general contractor) is responsible for the full compliance of all employers (the contractor, subcontractors and any lower-tier subcontractors) with the labor standards provisions applicable to the project. HUD has published a Contractor’s Guide to Prevailing Wage Requirements for Federally-Assisted Construction Projects for this purpose, which provides basic information and instructions to contractors concerning Davis-Bacon wage and reporting requirements.

[Provide explanation of tailoring to contractor’s level of expertise. Refer participants to the “Practical Guide” for further details.]

Prepare Bid Documents & Contract

[Slide 19]

Davis Bacon Wage Decision

Standards clause (HUD 4010)

Lock in rules 10 days prior to bid opening

Verify Eligibility

[Slide 20]

Apparent Low Bidder

Prime Contractor Only

Online (epls.arnet.gov)

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• Prior to Award

Contractor Training

[Slide 21]

Prime contractor responsible

Contractor’s Guide

Subs often need training

Compliance - Posting

[Slide 22]

Posting Requirements

Labor standards enforcement involves the activities that take place during construction to ensure contractor compliance. The contractor is required to display on the job site a copy of the applicable Davis-Bacon wage decision and the form WH-1321, Employee Rights Under the Davis-Bacon Act. The purpose of this posting is to provide information to the construction laborers and mechanics working on the project about their entitlement to the prevailing wage rate for their trade and to inform them of whom to contact (the contract administrator) if they have any questions or want to file a complaint.

a. Wage Decision

b. Employee Rights Under the Davis-Bacon Act. This poster (WH-1321) is available on-line at HUDClips (www.hud.gov/offices/adm/hudclips.) This form is used to alert workers to the existence of minimum wages by job category, overtime provisions, and whom to contact to address any issues.

Optional Posting

a. Project Wage Rate Sheet (HUD-4720). Many wage decisions are multi-paged and cover several counties and/or more than one type of construction. To make this vital information easier to read and understand, contract administrators can offer a Project Wage Rate Sheet (HUD-4720) – a one-page listing of only the wage rates applicable to the specific project involved – for posting on the job site. This form is available in an on-screen fillable format at HUDClips and the Office of Labor Relations website.

This one-page listing is much more user-friendly than the full-text wage decision for these three uses:

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A Project Wage Rate Sheet spells out more clearly the work classifications and wage rates contained in the wage decision for the contractor and subcontractors.

The Project Wage Rate Sheet is much easier for laborers and mechanics to understand so that they can tell whether they are paid properly.

And last, a Project Wage Rate Sheet – a one-page listing – is more helpful as a ready reference for contract administrators reviewing payroll reports.

The Project Wage Rate Sheet should be prepared only after the wage decision has been “locked-in” by contract award or start of construction, as applicable. HUD Labor Relations staff are available to provide assistance in preparing Project Wage Rate Sheets. [Emphasize that the prevailing wage is the minimum – and the GC may have to pay more.]

Additional Classifications and Wage Rates

Sometimes, the applicable Davis-Bacon wage decision does not contain all of the work classifications that are needed for the construction work. In such cases, a request for an additional classification(s) and wage rate(s) must be submitted. This process is usually very simple and LCAs will want to start the request right away. Basically, the employer (contractor or subcontractor) needs to identify the classification(s) that is needed and recommend a wage rate for DOL to approve for the project. There are a few rules about additional classifications; these rules can be found in DOL regulations, Part 5, and in the labor clauses (HUD-4010) in the contract. Note that the additional classification does not have to be at the prevailing wage due to the short duration and unique activity.

[Do not go into much detail here about additional classifications. Refer participants to the Contractor’s Guide.]

Compliance - Interviews

[Slide 23]

Conduct on-site interviews

Targeting interviews

Getting “The Story”

Hudclips.org

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On-site interviews with laborers and mechanics

The contract administrator or a designee (such as an agency construction inspector) must periodically conduct interviews with the construction workers on the job site. The purpose of the interviews is to capture observations of the work being performed and to get the workers’ views on the hours they work, the type work they perform and the wages they receive. Information gathered during the interviews is recorded on form

HUD-11, Record of Employee Interview. The HUD-11’s are compared to the corresponding contractor and subcontractor certified payrolls to test and verify the accuracy of the payroll information. HUD-11 forms are available on-line in a fillable format in HUDClips. [Deal with the general contractor if you need access to people or information.]

LCAs can target on-site interviews to specific subsets of laborers and mechanics. HUD is much more interested in using on-site interviews as a proactive enforcement tool than as a means to meet a “representative sampling” quota. Rather than conducting interviews randomly for the sake of assembling a sample, LCAs are encouraged to focus interviews to projects or groups of workers where violations are suspected or alleged. In this way, on-site interviews can be used to support a specific on-going investigation. HUD realizes that such focusing may mean that fewer on-site interviews may be conducted randomly; HUD considers focusing a far more effective means of utilizing on-site interview resources.

[discuss targeting interviews and “getting a good story”, e.g., if when the interviewer is approaching the job site and a worker takes off a tool belt and picks up a broom, they may have a good story to tell. Also, it's important to note that interviews are voluntary on the part of the workers and that interviews are confidential.]

Employers must….

[Slide 24]

[Before discussing the falsification indicators, discuss general compliance concepts – what do employers have to do, what do payrolls have to report.]

Employers must:

1. Classify workers in accordance with the wage decision based on the type of work they actually perform. (e.g., they must use the classifications listed on the wage decision or request an additional classification - they can't use Mechanic, or Journeyman, etc.).

2. Pay no less than the wage rate (plus any fringe benefits) on the wage decision.

3. Pay employees for all hours worked and pay no less often than 1/week.

4. Apprentices and trainees may be paid less than the journeyman's rate for their craft only if registered in a program approved by the DOL or a state apprenticeship agency recognized by DOL.

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Certified Payroll Reports

[Slide 25]

Payrolls (CPRs) must:

1. Be submitted for every employer, for each week work is performed on the project.

2. In addition to name, must include identifying number (No longer requires address and SSN, effective January 18, 2009, per On the Mark #12, published 5/09).

3. Must be signed with an original signature of a principal or designee.

4. Form WH-347 is optional. Other forms must contain all information required on WH-347 and must have exact certification language.

5. Be maintained/preserved by the employers, any prime contractors, and the agency for no less than 3 years following the completion of the work.

[This might be a good time to discuss the sensitive nature of payroll information (e.g., worker personal identifiers). Discuss that payrolls (and other labor standards documents that contain sensitive data, e.g., HUD-11s) should be secured while in custody and must be disposed of properly. (See and reference Labor Relations Letter LR-2006-02.)]

Compliance – Review Reports

[Slide 26]

Review contractor and subcontractor certified payroll reports.

In addition to comparing HUD-11’s to the certified payroll reports, the contract administrator reviews the payroll reports generally to ensure that all laborers and mechanics are being paid no less than the wage rates contained on the applicable Davis-Bacon wage decision for the type of work they perform. Contract administrators should be particularly alert for indications of payroll falsification – misinformation on

payrolls to conceal underpayments. Falsification on payrolls indicates an employer (contractor or subcontractor) is aware of its obligations, is knowingly underpaying their employees and is attempting to avoid detection of the violations.

a. Discrepancies and/or underpayments on the payrolls. Some underpayments and other errors can appear on the face of the payroll (i.e., do not involve falsification). In these cases, the contract administrator contacts the employer and/or the prime contractor and provides instructions as to what steps should be taken to correct the payroll and to pay any back wages that may be due to the affected workers.

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b. Indications of falsification on payrolls. Information reported on payrolls that indicates falsification suggests much more serious violations in terms of the amount of back wages that may be due and the number of employees affected. Such cases most often warrant investigation, which can include on-site interviews with the workers, mailing questionnaires to employees, taking written statements or

Falsification Indicators

Ratio of laborers to mechanics. Look for excessive use of laborers over mechanics. Generally, there should be no more than one laborer for each mechanic (1:1) except for landscaping, or cement or other paving work. An overabundance of laborers may be indicative of misclassification of the work performed – that is, workers are performing mechanic's duties but are misclassified and paid at lower laborers' wage rates.

Too few or irregular hours. Look for employees that never work 40 hours a week, crews that work in a scattered fashion or for hours reported in tenths or hundredths (e.g., 13.6 hours). Most people are on a 40-hour workweek. Most crews work together on a job site. Most employers and employees track work hours by whole, half and quarter-hours, not by tenths or hundredths.

Too few or irregular hours may be indicative of falsification of hours. In this scenario, actual work hours may have been reduced to "fit" in a fabricated calculation: (Reduced hours) x (Rate required on wage decision) = Actual gross wages based on lower rate of pay.

Discrepancies in wage computations. Look for gross wages in "round" numbers (e.g., $700) that don't agree with product of reported hours multiplied by the rate of pay. For example, a payroll showing 20 hours times $33.68 (the rate on the wage decision) and gross wages of $700. (20 hours times $33.68 equals $673.60, not $700.)

This may be indicative of piecework or lower (but more "even") hourly rate such as $17.50 (40 hours times $17.50 equals $700). The employer can't make the fabricated calculation "fit" precisely because the Davis-Bacon wage rate is generally not an even figure.

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Extraordinary deductions. Look for unidentified or disproportionate deductions – for example, an employee whose savings account deduction is nearly as much or more than weekly take home pay.

This may be indicative of kickbacks or basic underpayment. The employer takes his "cut" from the back end of the computation (after gross earnings) rather than the front end (falsifying the classification, hours or wage rate).

[In discussing other falsification indicators, provide examples such as those that are offered in the Practical Guide, especially showing how the calculations might look.]

Coda City Case Study

[Slide 27]

Take 5 minutes to read first page

State Grantee

Davis-Bacon Wage Standards

DHCD Review

[Introduce the case study here – providing Question 1 for discussion]

State Grantee

Davis-Bacon Wage Standards

• DHCD Review

Coda City – Pass 1

[Slide 28]

[Begin discussion of the Case Study here – with Question 1]

Why could a laborer to mechanic ratio indicate a problem?

When would irregular hours indicate a issue?

Why could “short weeks” indicate problems?

Discuss with team.

Select spokesperson.

Why would the ratio of laborers to mechanics and the irregular hours indicate that a problem might exist? Why would an employee’s timesheet reflect only 20-25 hours per week?

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The landscaping work is a relatively small part of the job and most of the landscaping work will be performed at the end of the project. The construction phase should have a higher number of mechanics, due to the higher skills needed for the different phases of construction. Generally, employees on construction sites work 40 hours per week.

Unless the job is getting to a point that one category of worker is finishing a portion of the work, and that should be for only one or two weeks. Additionally, an employee may be splitting time between two projects for the same employer, so the total time spent by the employee may be 40 hours.

Typical Payroll Errors and Required Corrections

[Slide 29]

[Summarize and go through quickly. In discussing typical errors and corrections, the trainer should note that submitted payrolls are never returned to the employer for correction. Employers submit corrected payrolls when needed but HUD always keeps the original.]

Now let’s talk about some of the common payroll errors and the corrective steps you must take.

a. Inadequate Payroll Information

If an alternate payroll format used by an employer (such as some computer payrolls) is inadequate, e.g., does not contain all of the necessary information that would be on the optional form WH-347 (Payroll), require the employer to resubmit the payrolls on an acceptable form.

b. Missing Addresses and Social Security Numbers

If the first payroll on which an employee appears does not contain the employee’s address and Social Security Number, require the employer to supply the missing information. A short note providing the information is all that is needed.

c. Incomplete Payrolls

If the information on the payroll is not complete (for example, if work classifications or rates of pay are missing), require the employer to send a corrected payroll.

d. Classifications

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If the payrolls show work classifications that do not appear on the wage decision, require the employer to reclassify the employees in accordance with the wage decision or the employer may request an additional classification and wage rate. If reclassification results in underpayment (i.e., the wage rate paid on the payroll is less than the rate required for the new classification), require the employer to pay wage restitution to all affected reclassified employees.

e. Wage Rates

If the wage rates on the payroll are less than the wage rates on the wage decision for the work classifications reported, require the employer to pay wage restitution to all affected employees.

f. Apprentices and Trainees

If a copy of the employee’s registration or the approved program ratio and wage schedule are not submitted with the first payroll on which an apprentice or trainee appears, require the employer to submit a copy of each apprentice’s or trainee’s registration and/or the approved program ratio and wage schedule. If the ratio of apprentices or trainees to journeymen on the payroll is greater than the ratio in the approved program, the employer will be asked to pay wage restitution to any excess apprentices or trainees. Also, any apprentice or trainee that is not registered in an approved program must receive the journeyman’s wage rate for the classification of work they performed.

g. Overtime

If the employees did not receive at least time and one-half for any overtime hours worked on the project, require the employer to pay wage restitution for all overtime hours worked on the project. The employer may also be liable to the United States for liquidated damages computed at $10 per day per violation.

h. Computations

If the payroll computations (hours worked times rate of pay) or extensions (deductions, net pay) show frequent errors, require the employer to take greater care. Wage restitution may be required if underpayments resulted from the errors.

i. Deductions

If there are any “Other” deductions that are not identified, or if employee authorization isn’t provided, or if there is any unusual (very high, or large number) deduction activity, require the employer to identify the deductions, provide employee authorization or explain unusual deductions, as necessary.

j. Fringe Benefits

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If the wage decision contains fringe benefits but the payroll does not indicate how fringe benefits were paid [neither 4(a) nor 4(b) is marked on the Statement of Compliance], require the employer to submit corrected payrolls and to pay wage restitution if underpayments occurred. However, if the basic hourly rates for the employees are at least as much as the total wage rate on the wage decision (basic hourly rate plus the fringe benefit rate), no correction is necessary.

k. Signature

If the payroll Statement of Compliance is not signed or is missing, require the employer to submit a signed Statement of Compliance for each payroll affected. If the Statement of Compliance is signed by a person who is not a principal of the firm and that person has not been authorized by principal to sign, require the employer to provide an authorization or to resubmit the Statement(s) of Compliance bearing the signature(s) of a principal or other signatory.

l. On-Site Interview Comparisons

If the comparison of on-site interviews to the payrolls indicates any discrepancies (for example, the employee does not appear on the payroll for the date of the interview), require the employer to submit a corrected payroll report.

Payroll Exercise

[Slide 30]

[NOTE: “Problems” with sample payroll report include:

No taxes withheld.

Discrepancy in Column 7 for Hiram.

Day and Date missing: did they work Sun-Thurs?

Fatima has odd hours.

Carol’s net wages are wrong.

Coda City Interviews

[Slide 31]

[Continue discussion of the Case Study here – with Question 2]

Table Discussion

When?

Why?

Whom to Interview?

When and why would a Contract Administrator conduct interviews with construction staff? Who would be interviewed?

20

A Contract Administrator may conduct interviews as a routine monitoring/compliance tool, or in response to Information (such as payroll data) that warrants further investigation due

to possible falsification. In either case, grantees can target on-site interviews to specific subsets of laborers and mechanics. The purpose of the interviews is to capture observations of the work being performed and to get the workers’ views on the hours they work, the type work they perform and the wages they receive.

Wage Restitutions/Correction Payrolls

[Slide 32]

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Restitution for Underpayment of Wages

Where underpayments of wages have occurred, the employer is required to pay wage restitution to the affected employees. Wage restitution must be paid promptly in the full amounts due, less permissible and authorized deductions.

a. Notification to the Employer/Prime Contractor

The contract administrator must notify the employer and/or prime contractor in writing of any underpayments that are found during payroll or other reviews. The contract administrator must describe the underpayments and provide instructions for computing and documenting the restitution to be paid. The employer/prime contractor is allowed 30 days to correct the underpayments.

Note that the prime contractor is responsible to the contract administrator for ensuring that restitution is paid. If the employer is a subcontractor, the subcontractor will usually make the computations and restitution payments and furnish the required documentation through the prime contractor.

b. Computing Wage Restitution

Wage restitution is simply the difference between the wage rate paid to each affected employee and the wage rate required on the wage decision for all hours worked where underpayments occurred. The difference in the wage rates is called the adjustment rate. The adjustment rate times the number of hours

involved equals the gross amount of restitution due. Wage restitution may also be computed by calculating the total amount of Davis-Bacon wages earned and subtracting the total amount of wages paid. The difference is the amount of back wages due.

c. Correction Payrolls

The employer is required to report the restitution paid on a correction certified payroll. The correction payroll reflects the period of time for which restitution is due (for example, Payrolls #1 through #6; or a beginning date and ending date). The correction payroll must list each employee to whom restitution was paid and their work classification; the total number of work hours involved (daily

hours are usually not applicable for restitution); the adjustment wage rate (the difference between the required wage rate and the wage rate paid); the gross amount of restitution due; deductions and the net amount actually paid. A signed Statement of Compliance must be attached to the correction payroll.

d. Review of Correction Certified Payroll Report

The contract administrator must review the correction certified payroll to ensure that full restitution was paid. The prime contractor must be notified in writing of any discrepancies and will be required to make additional payments, if needed, documented on a supplemental correction payroll within 30 days.

e. Unfound Workers

Sometimes, wage restitution cannot be paid to an affected employee because, for example, the employee has moved and can’t be located. After wage restitution has been paid to all of the workers who could be located, the employer must submit a list of any workers who could not be found and paid (i.e., unfound workers) providing their names, Social Security Numbers, last known addresses and the gross amount due. In such cases, at the end of the project the prime contractor will be required to place in a deposit or escrow account an amount equal to the total amount of restitution that could not be paid because the employee(s) could not be located. The contract administrator will continue attempts to locate the unfound workers for 3 years after the completion of the project. After 3 years, any amount remaining in the account for unfound workers must be forwarded by the contract administrator to HUD.

Enforcement

[Slide 33]

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Withholding/Escrow Accounts/Sanctions

HUD has implemented a no-tolerance policy against contractors who repeat violations of Davis-Bacon labor standards. The first time an employer is found in violation, the employer is required to pay full restitution to all affected workers and to pay any CWHSSA liquidated damages (for overtime violations) that may be assessed. In addition, the employer must provide a written assurance of future compliance. If the employer promptly completes these corrective actions, HUD will not object if the LCA does not recommend debarment against the employer unless there are extenuating circumstances that warrant debarment. If the employer is found in violation again, the LCA must require full correction of any underpayments and payment of CWHSSA liquidated damages computed and a debarment recommendation made by the LCA against the employer is expected. [Note: this is a responsibility, not a requirement, to recommend debarment on the second offense.]

An administrative review process exists to address some of the areas of dispute that may arise. For example, if additional classifications and wage rates are denied, a reconsideration request can be submitted through HUD's OLR. The request must specifically address the reasons cited n the denial. Any person can appeal the denial to the DOL Administrative Review Board.

In the case of findings of underpayments, the LCA should try to work through the issues to ensure prompt and accurate payment to the employees of the underpayment. If the employer disagrees with the findings or no agreement can be reached, a final determination and schedule of back wages must be given to the employer. The employer has 30 days to correct the underpayment or to request a hearing before the DOL. The request must be made in writing and must specifically address the areas in question and must be made through HUD's OLR. DOL will review the written materials submitted and provide a decision. That decision may be appealed to the DOL Administrative Review Board by the contractor or subcontractor.

The LCA must withhold payment from the contractor if underpayments are not corrected within 30 days. The contractor must be notified in writing if this serious step is taken. Remember, the prime contractor is responsible for the payments made by its subcontractors, so the payment to the prime contractor will be withheld, even if the problem lies with the subcontractor.

In general, wage issues should be resolved prior to closing the contract and making the final payment. However, a contract can be closed and final payment made with outstanding wage issues, if the contractor deposits the full amount of the liability into an escrow account that is controlled by the LCA.

Coda City Falsification

[Slide 34]

[Continue discussion of the Case Study here – with Questions 3 & 4.]

No Falsification then….

Falsification indicated then….

Investigate

Interview

If the discrepancies or underpayments noted on the payroll do not appear to involve falsification, how should the Contract Administrator handle the issue?

23

Some underpayments and other errors can appear on the face of the payroll (i.e., do not involve falsification). In these cases, the contract administrator contacts the employer

and/or the prime contractor and provides instructions as to what steps should be taken to correct the payroll and to pay any back wages that may be due to the affected workers.

If the payroll information indicates falsification, what steps must the Contract Administrator take?

Information reported on payrolls that indicates falsification warrants investigation, which can include on-site interviews with the workers, mailing questionnaires to employees, taking written statements or complaints, and other methods to gather and assess the facts of the case. In addition to the HUD-11, Record of Employee Interview, HUD has developed a questionnaire form (HUD-4730) and a complaint intake form (HUD-4731) for HUD and State and local agency use.

Coda City Findings

[Slide 35]

[Conclude discussion of the Case Study here – with Question 5.]

Contractor disagrees. Now what? Final determination and back wages 30 days to correct underpayment or request hearing DOL review and decision Appeal process - DOL administrative review board

What happens if the contractor disagrees with the findings of the Contract Administrator?

If the employer disagrees with the findings or no agreement can be reached, a final determination and schedule of back wages must be given to the employer. The employer has 30 days to correct the underpayment or to request a hearing before the DOL. The request must be made in writing and must specifically address the areas in question and must be made through HUD's OLR. DOL will review the written materials submitted and provide a decision. The employer may appeal the decision to the DOL Administrative Review Board by the contractor or subcontractor.

Enforcement Reports

[Slide 36]

Reports

Employer-based enforcement reports

HUD------- DOL

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Due April 15; October 1 thru March 31

Due October 15; April 1 thru Sept 30

Form HUD 4710

Semi-annual enforcement reports

25

Prepare and submit enforcement reports. In accordance with DOL regulations (29 CFR, Part 5, §5.7), the contract administrator must prepare enforcement reports on any case where an employer (contractor or subcontractor) has underpaid its employees by $1,000 or more, or where there is reason to believe the violations are aggravated or willful. The contract administrator must also prepare reports semi-annually concerning all Davis-Bacon labor standards administration and enforcement activities involving all Federal agencies and programs.

a. Employer-based enforcement reports. These enforcement reports are used for three general purposes. First, to report to the Secretary of Labor on Davis-Bacon enforcement actions successfully completed in the field by all Federal and local agencies. Second, HUD uses an enforcement report to refer to the Wage and Hour Administrator investigative findings which are in dispute (e.g., where the employer contests findings of underpayment made against it and requests a hearing to appeal the findings). Third, the enforcement report is used to make recommendations for debarment and other sanctions and for recommendations concerning liquidated damages computed for CWHSSA overtime violations.

b. Semi-annual Enforcement Reports. HUD must submit a report to DOL on all covered contracts awarded, and on all enforcement actions taken, each six months. HUD collects the reports from its grantee agencies and compiles a comprehensive report to DOL covering all HUD-assisted Davis-Bacon construction activity. A copy of the Semi-Annual Report form (HUD-4710) and instructions (HUD-4710i) for LCAs are available on HUDClips and the Office of Labor Relations web site. The report may be completed on-screen, saved and attached to an email message for submission purposes.

Due Dates: First semi-annual report for the first half of the fiscal year (Oct 1-March 31) is due in mid-April. The second semi-annual report – for the period covering April 1-September 30 – is due in mid-October.

Labor standards administration and enforcement reports are required by regulation and are important vehicles for recommendations concerning the disposition of investigative findings and debarment against employers that violate Davis-Bacon

Requirements. These reports also allow the Secretary of Labor to gather important information about government-wide Davis-Bacon contracting and enforcement.

HUD has relieved LCAs of certain reporting and processing requirements which were duplicative or unnecessary in order to promote full, timely and accurate LCA participation in the enforcement reporting system required by DOL regulations. In this way HUD enhances its accountability for Davis-Bacon labor standards administration and enforcement and can better measure its performance in applying Davis-Bacon wage standards where applicable, and in protecting the right of the laborers and mechanics to receive prevailing wages when employed on covered work in HUD programs.

Proactive System

[Slide 37]

Subgrantee - Feasibility Analysis

Architect - RFQ

G612 Owner’s Instructions to Architect

Contractor - RFP

AIA Supplemental Condition (A201-SC)

Computerized Payroll

Bid Review

Trade by trade

Pre Construction

Conference & Training

First Payroll Review

Streamlining Davis-Bacon

[Slide 38]

Wages online

Preconstruction optional!

One-page wage rate sheet (HUD-4720)

No start/stop notices

LCA filing system

Targeted interviews

Serious violations targeted

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Telephone, email, fax

Willful violations targeted

Reporting streamlined

HOME Revisions

[Slide 39]

12 units, not 7

Home assisted units versus construction financed

Sweat equity exempt

Discussion Questions

[Slide 40]

Open Book - May Use:

Notes

PowerPoint

Practical Guide

Group Work

1. From the list below, circle all of the statutes that pertain to Federal labor standards and CDBG

Davis-Bacon and Related Acts – Requires the payment of no less than prevailing wage rates as determined by the Department of Labor.

Contract Work Hours and Safety Standards Act – Requires the payment of time and one-half for all hours worked over 40 in a work week.

The Copeland (Anti-kickback) Act – Prohibits kickbacks from wages; requires the submission of weekly certified payroll reports; regulates permissible deductions.

Housing and Community Development Act of 1974, as amended – Contains the labor standards provision specific to the CDBG program at Section 110.

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2. Describe what these key applicability factors mean concerning labor standards and CDBG.

Section 110 of the HCDA contains the labor standards provisions for CDBG and establishes applicability factors. The best and safest approach is whenever the contract/project involves construction work that is valued in excess of $2,000 to assume that Davis-Bacon rates will be applicable and then look more closely to see if there’s any reason for non-coverage. There are four key applicability factors:

Construction work financed – Labor standards are applicable when CDBG funds are used to finance construction work. CDBG can finance activities other than “construction work” which do not trigger Davis-Bacon requirements; e.g., real property acquisition, purchase of equipment, architectural and engineering fees, other services (legal, accounting, construction management), and other non-construction items (furniture, business licenses, real estate taxes, tenant allowances for such items).

In whole or in part - If CDBG funds finance only a portion of a construction work, labor standards are applicable to the entire construction work. This is true even if the work is primarily funded by the private sector or nonprofits.

Laborers and mechanics employed by contractors and subcontractors – The covered classes of construction workers are those employed by contractors and subcontractors. Force account workers (those employed by the grantee) are not covered.

8-unit threshold for residential property – Labor standards do not apply to residential properties that contain less than 7 units. However, property is not limited to a specific building. Property is defined as one or more buildings on an undivided or contiguous lots or parcels that are commonly-owned and operated as one rental, cooperative or condominium project. Also, even though the statute refers to residential rehabilitation, HUD has concluded that this threshold also applies to residential new construction.

3. Circle all of the labor standards documents that must be incorporated into bid documents and contracts.

The bid documents/contract must contain a copy of the applicable Davis-Bacon wage decision and the form HUD-4010, Federal Labor Standards Provisions.

4. Wage decisions can be obtained by logging onto www.wdol.gov. True

Davis-Bacon wage decisions are available on-line at no cost at: www.wdol.gov (Wage Determinations OnLine). You can also contact the HUD Labor Relations staff for assistance and/or for a copy of a Davis-Bacon wage decision.

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5. What labor-related documents are contractors required to post at the job site?

a. The applicable Davis-Bacon wage decision. In addition to the wage decision, contractors may choose to post the Project Wage Rate Sheet (HUD-4720). A Project Wage Rate Sheet is a one-page listing of only the wage rates applicable to the specific project involved – for posting on the job site. This form is available in an on-screen fillable format at HUDClips and the Office of Labor Relations website. The Project Wage Rate Sheet should be prepared only after the wage

decision has been “locked-in” by contract award or start of construction, as applicable. HUD Labor Relations staff are available to provide assistance in preparing Project Wage Rate Sheets.

b. Employee Rights Under the Davis-Bacon Act (WH-1321). The Employee Rights Under the Davis-Bacon Act poster is available on-line at http://www.hud.gov/offices/adm/hudclips/. This form is used to alert workers to the existence of minimum wages by job category, overtime provisions, and whom to contact to address any issues.

6. What are the two most common methods used to monitor contractor compliance?

The two primary methods of monitoring agency compliance with labor standards are:

Conducting on-site interviews with laborers and mechanics; and

Reviewing contractor and subcontractor certified payroll reports.

The contract administrator or a designee must periodically conduct interviews with the construction workers on the job site in order to capture observations of the work being performed and to get the workers’ views on the hours they work, the type work they perform and the wages they receive. Information gathered during the interviews is recorded on form HUD-11, Record of Employee Interview, which are then compared to the corresponding contractor and subcontractor certified payrolls to test and verify the accuracy of the payroll information. Grantees can target on-site interviews to specific subsets of laborers and mechanics, and are encouraged to focus interviews to projects or groups of workers where violations are suspected or alleged.

In addition to comparing HUD-11’s to the certified payroll reports, the contract administrator reviews the payroll reports generally to ensure that all laborers and mechanics are being paid no less than the wage rates contained on the applicable Davis-Bacon wage decision for the type of work they perform. Contract administrators should be particularly alert for indications of payroll falsification – misinformation on

payrolls to conceal underpayments. Falsification on payrolls indicates an employer (contractor or subcontractor) is aware of its obligations, is knowingly underpaying their employees and is attempting to avoid detection of the violations.

7. Listed below are the four falsification indicators. Explain what each indicator suggests

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High ratio of laborers to mechanics - Excessive use of laborers, i.e., more than 1:1 laborers to mechanics suggests that workers that are classified and paid as Laborers are actually performing mechanic work and should be receiving the mechanic wage rate.

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Too few or irregular hours – Payrolls that never show employees working a 40-hour week; that show crews working in a scattered fashion; or that show hours in tenths or hundredths suggests that the hours are being reduced to “fit” into a fabricated wage calculation intended to conceal underpayments.

Discrepancies in wage calculations - Gross wages reported in round numbers that don’t agree with the product of reported hours multiplied by the rate of pay suggests that earnings are being based on a lower (but more even) wage rate or on a piece-rate.

Extraordinary deductions – Unidentified or disproportionate deductions suggest that the employer is taking a “cut” (e.g., kickback) from workers protected earnings.

Labor Standards Acronyms

[Slide 43]

ARRA – American Recovery & Reinvestment Act

CDBG – Community Development Block Grant

CDBG-R – Community Development Block Grant Recovery

CFR – Code of Federal Regulations

CPR – Certified Payroll Report

CWHSSA – Contract Work Hours and Safety Standards Act

DBA – Davis-Bacon Act

DBRA – Davis-Bacon and Related Acts

DOL – Department of Labor

FLSA – Fair Labor Standards Act

HUD – Housing and Urban Development

LCA – Local Contracting Agency

LDP – Limited Denial of Participation

NSP – Neighborhood Stabilization Program

NSP-2 – Neighborhood Stabilization Program Round 2

O/T – Overtime

S/T – Straight-time SAC – State Apprenticeship Council/Agency