Contractors: An Ounce of Wage and Hour Prevention Is Worth a Pound of Cure
While legal exposure to wage and hour actions is a part of doing business in every industry, it does not have to be more of an occupational hazard for construction industry employers than others.
By investing time in understanding their obligations and devising effective compliance systems, contractors can substantially mitigate the risk of facing a “bet the company” claim based on how they pay their employees. Here are a few basic principles.
DON’T GET STUNG BY OFF-THE-CLOCK WORK
Federal wage and hour law requires employees to be paid for all hours “suffered or permitted” to work. Translation? If a company benefits from an activity engaged in by employees, it’s probably compensable, even if the company didn’t necessarily want employees performing the work. Some of the most common so-called off-the-clock issues facing construction industry employers include:
- early morning yard or shop work, such as loading vehicles, preparing tools and equipment and warming up trucks;
- post-shift work, such as cleaning vehicles, tools or equipment, setting up for the next day’s work, or dropping equipment at another jobsite;
- administrative work, such as completing job-related paperwork, reviewing plans or undergoing training;
- waiting at the jobsite on equipment, materials, repairs or even the weather; and
- time putting on or taking off personal protective equipment (PPE), and/or waiting to have work gear checked before beginning work.
Failing to pay for off-the-clock work means that back wages are owed. But it could also mean that overtime compensation during the relevant pay period is owed. With federal law calling for liquidated—or double—damages, liability mounts quickly and sometimes overwhelmingly in cases involving an employer’s failure to pay for off-the-clock work.
To avoid off-the-clock work violations, employers should not only be aware of and manage activities that could create exposure, but they should also clearly communicate to employees any prohibition against working before or after their normally scheduled work day. Many employers publish such policies in an employee handbook, which creates a favorable piece of documentary evidence to support a claim of good-faith compliance. Hours worked by employees must always be paid, even if worked in violation of an employer’s policy. An employer’s recourse is to impose discipline for violating policy; it is not to withhold pay.
KNOW THE RULES ON TRAVEL TIME
Employee commuting time is normally not compensable. But what about employees who are expected to report to the employer’s facility, only to pile into company vehicles and continue travel to the first jobsite? The basic rules are as follows: if the employee reports from home to the facility voluntarily and performs no compensable work upon arrival and before climbing aboard a work vehicle as a passenger, merely for the employee’s convenience, the travel time to the first worksite is non-compensable. It is akin to an extension of the employee’s commute.
It is a good practice for a construction industry employer to obtain signed travel time waivers from employees to memorialize this arrangement. Littler’s Construction Industry Toolkit contains many sample forms and policies that may be helpful to contractors.
If, however, the employee performs compensable work such as that identified above (including by driving the company vehicle full of coworkers), the compensable workday has been switched on, and travel time thereafter is compensable (and this includes subsequent travel time between jobsites within the workday).
UNDERSTAND WHEN SPECIAL CIRCUMSTANCES MAY APPLY
Contractors often face unique wage and hour considerations involving prevailing wage laws and/or project labor agreements (PLAs). Prevailing wage laws are basically minimum wage laws applicable to public works projects. These laws have complicated rules as to how employee work is classified, paid and reported. Contractors that plan to perform prevailing wage work are well advised to seek counsel with experience guiding clients through legal requirements and government-initiated audits. The costs of non-compliance can be steep—including back wages, personal liability for business owners, prohibition against performing future government work and even criminal prosecution.
Similarly, PLAs can create significant wage issues for unsuspecting contractors. PLAs are umbrella labor contracts intended to weave together the various building trade unions participating in a covered project. A contractor need not have a union relationship prior to (or after) completion of a project covered by a PLA. Rather, a PLA’s duration coincides with the duration of the project. And therein lies the problem: for contractors that are unfamiliar with union work and pay rules, adhering to the underlying union collective bargaining agreements (incorporated into every PLA) can create significant wage exposure.
For any contractor contemplating signing onto a PLA for the first time, it is advisable to thoroughly read the PLA, as well as the underlying collective bargaining agreements to which they will be bound before signing.
When it comes to wage and hour compliance, flying blind is never a prudent compliance strategy. With some advance planning, contractors can shield themselves from wage and hour issues and keep more of what they’ve worked so hard for.