Contractors are scrambling to secure contracts funded by the $1 trillion infrastructure bill signed into law by President Biden on November 15, 2021. While these contracts are lucrative, they come with extensive obligations and heavy penalties for non-compliance. The US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) and the Wage & Hour Division (WHD) have jurisdiction over certain contractors. Both agencies will soon focus on the construction industry.
OFCCP affirmative action and non-discrimination commitments
OFCCP enforces affirmative action and non-discrimination obligations imposed on federal contractors and subcontractors, including contractors. Affected contractors have an obligation to take positive action and not discriminate against applicants and employees based on gender, race, national origin, religion, sexual orientation, gender identity, disability and protected veteran status. The coverage threshold is quite low.
- Executive Order 11246 (EO 11246) affirmative action and nondiscrimination obligations are triggered by federal contracts of at least $10,000.
- Section 503 of the Rehabilitation Act (Section 503) Non-discrimination applies to contractors with at least one contract valued at $15,000. The requirement to implement a construction AAP is triggered once the contractor has at least 50 employees and a contractor of $50,000 or more.
- That Vietnam Era Veterans Adjustment Assistance Act (VEVRAA) Nondiscrimination requirement applies to contractors with at least one contract valued at $150,000 or more. AAPs are required once the contractor has at least 50 employees and a minimum contract of $150,000.
In addition to developing annual positive action plans and non-discrimination, contractors are subject to a variety of other obligations, including document and data collection and retention, publication of specific legal notices, compliance with wage transparency requirements, listing of available positions with local employment agencies, and Submission of an annual Vets 4212 report, among other requirements.
The OFCCP assesses contractor compliance with positive action and non-discrimination requirements primarily by conducting compliance reviews, which include a comprehensive evaluation of the contractor’s recruiting, hiring, promotion, termination, and compensation efforts. The OFCCP gives contractors advance notice of an upcoming review by posting the list of contractors selected for review on its website. The exhibition of a planning letter initiates a compliance check. If the OFCCP finds evidence of a violation in the early stages of an investigation, it will conduct an on-site investigation that includes employee and management interviews.
A contractor who is found not to be in compliance with the OFCCP Rules will be given an opportunity to arbitrate and enter into an Arbitration Agreement. Remedial actions range from annual reporting to monetary damages. If the contractor and OFCCP cannot reach an agreement, OFCCP will take enforcement action. The ultimate penalty for non-compliance is termination of current contracts and disqualification from future contracts.
In addition, OFCCP recently announced that covered contractors and subcontractors in the construction sector will soon be required to register and certify compliance via an online portal. The certification is subject to the penalty of perjury.
Tips for preparing for an audit and certification of compliance
- Confirm compliance with record keeping requirements outlined in EO 11246 Section 503 and VEVRAA regulations.
- Confirm that you have current and complete AAPs for VEVRAA and Section 503 and the 16 specifications required for EO 11246 compliance.
- Assess compliance with other requirements, including the following:
- Renders for construction contracts over $10,000 include a tender notice and contract specifications for construction contracts;
- All federal building contracts and subcontracts contain or refer to an equal opportunity clause in the contract;
- the right participation goals for women and minorities have been implemented;
- required notices and posters are posted where they can be viewed by employees and applicants; and
- EEO-1 and VETS-4212 reports have been submitted.
- Conduct a self-assessment within the scope of legal privilege.
Davis-Bacon infrastructure projects
Similar to the OFCCP, the Department of Labor’s Wage & Hour Division (WHD) has promised increased scrutiny of public projects as a result of the Infrastructure Act. The majority of projects resulting from the Infrastructure Bill are covered by the Davis-Bacon Act, which requires contractors to pay construction workers at prevailing local wages (as determined by WHD surveys) and fringe benefits. The Davis-Bacon Act may cover certain federal government contracts as well as certain projects that receive federal funding for construction. These future infrastructure projects include: roads, bridges and public transport; airports, ports and waterways; passenger and freight railway; water infrastructure, electricity and networks; disaster resilience and pollution projects; and electric vehicle charging and low-carbon/low-emission buses and ferries.
The WHD intends to require both the commissioning federal authorities and the grant recipients to check compliance with the Davis-Bacon standards in contract clauses and wage determinations. To meet Davis-Bacon requirements, contractors must ensure:
- Accurate records of hours worked, wages and benefits paid;
- Weekly transmission of the certified pay slip to the funding agency or recipient;
- The inclusion of standard clauses and applicable wage provisions in all subcontracts, confirmed by the general contractors; and
- Posting the required Employee Rights under the Davis-Bacon Act poster at the job site.
In addition to public relations and education, the WHD is likely to take increased enforcement action to confirm compliance with these infrastructure projects. WHD has already announced the hiring of additional investigators and has begun providing investigators with additional training to identify Davis-Bacon violations, as well as conducting training and coordination with outside agencies to improve their compliance.
Wage misclassifications are a common problem for employers. Contractors who learn that they have employees who do not match an existing wage determination category should immediately seek a wage determination match. In addition, contractors must retain worker records for inspection by WHD for a period of three years after work is completed. Prime contractors have additional responsibilities to ensure compliance by subcontractors and could be held liable for unpaid wages or benefits if ‘flow-down’ contract clauses and wage determinations are incorrect. Due to the possible exclusion of federal contracts, confirmation of compliance is critical for contractors.