There are certainly no shortages of confusing local, state and federal regulations with which contractors must contend. But it would be hard to imagine anything more befuddling than trying to comply with Maryland’s prevailing wage law.
Even seasoned companies, those who have performed prevailing wage work for decades, can still get tripped up trying to adhere to the convoluted intricacies of this regulation and commit innocent. What chance does the newer, smaller contractor have, who does not have a full-time compliance officer on their staff?
When a contractor does make a mistake, they often face a fine. Right now, those fines are relatively modest, but there is a bill before the Senate Finance Committee that would take those fines from modest to out and out scandalous. So instead of being assessed a $25 fine per violation, per day, that fee will skyrocket to as much as $1,000!
The bill, SB 711, ignores a reality well-known by every contractor who has ever attempted to fill out a certified payroll report: and that is this is one confusing, complex and poorly-understood regulation.
The prevailing wage laws currently in place already create many hardships for contractors and lead to confusion and mistakes. The so-called reforms in SB 711 would further add to the dizzying connect-the-dots bureaucracy.
So how easy is it for contractors to make a mistake which could be financially devastating? The short answer is: It happens all the time.
The long answer is this: When a contractor starts a job, the contractor assigns its employees particular tasks. These tasks fall under particular classifications which determine an employee’s rate of pay. On a construction site, there are up to three prevailing wage classifications; a laborer, an apprentice and a mechanic and each is paid a different wage.
But within each of these classifications, there are sub-classifications and then within those there are even more classifications!
Here’s just one example: a carpenter is considered a type of mechanic. Within a class of carpenters there are drywall carpenters and within that classification there are hanging carpenters, and finish carpenters (and that’s not even the entire list).
That’s not too bad, but now consider if there is a drywall carpenter on a job and he is done hanging the drywall and now has to finish it. Under the regulations, that now makes him finish carpenter, and he must now be paid a different rate than he was when he was as a drywall hanger. It gets even more confusing if throughout the day at different times he is hanging and finishing drywall.
Who comes up with this stuff?
It is not uncommon to call a state investigator seeking clarification and get the wrong answer to your question (much like when you call the IRS).
When a job is under prevailing wage, it is funded by the State of Maryland. In many instances, contractors are unaware if the job is under state prevailing wage, or federal wage under the Davis-Bacon Act.
Another issue associated with the classification of employees on a prevailing wage job: The rules and classifications created by unions and are unavailable to non-union contractors. If a contractor is from Baltimore County and gets a job in Montgomery County, they have a lack of understanding about the prevailing wage law in that area. If the contractor tries to call state regulators, they are given unclear information or they do not hear back at all. Once again, a contractor trying to meet a project deadline will be forced to guess what classifications to give and hope to eventually hear back from the state. These unintentional mistakes can and have resulted in the contractor receiving fines, sometimes incredibly high fines that really affect their bottom line and their ability to do business competitively.
The fines would be even higher if SB 711 becomes law.
Contractors are often fearful to contact investigators with questions because they aren’t confident they will get the right answer, or it could result in an audit of their job, which means, you guessed it, more fines. The contractor has to start the job totally blind using the highest rates to pay employees so that they are not given extra fines.
When creating the rates of pay for each classification, DLLR sends out surveys to all union and non-union contractors to fill out and send back. This is a way to measure how much each position is being paid. If SB 711 passes, the state will do away with this survey and honor the rates set by the union.
When 9 out of 10 construction workers choose not to unionize, SB 711 hits contractors and their employees in their pocket book and prevents them from growing their business and earning an honest living. Similar legislation was struck down last session, and should receive a resounding NO again. It’s bad for business.