By: Ryan L. Young, Esq.
Last month we covered the notice, posting, and reporting requirements under the Prevailing Wage Act. This month, we will cover the topic of greatest concern for employers; the penalties for violation of the Act. Specifically, we will cover penalties for first and second violations of the Act, the notice penalty, and the reporting penalty.
First and Second Violations of the Act
Under the Act, if an employer pays less than the prevailing wage rate, the employer is liable for the underpaid amount regardless of whether or not the employer received notice that the project was a prevailing wage project. Aside from paying the underpaid amount, the employer might also be liable for an additional penalty depending on whether they received the required notice (discussed below).
For a first violation, assuming the employer received adequate notice and failed to pay the prevailing wage rate, the employer is responsible for paying a 20% penalty (payable to the Illinois Department of Labor), a 2% penalty for each month that the underpaid amount remains unpaid, and the underpaid amount.
For a second violation, the penalties increase to 50% and 5%, respectively. If the employer is not provided with adequate notice, then the subcontractor, contractor, or public body that failed to provide adequate notice will be liable for the additional penalties (but not for the underpaid amount, which always remains the employer's responsibility).
If an employer receives two violation determinations from the IDOL within a five year period, the employer will be placed on a disbarment list and will be unable to work on public works projects for a period of four years.
As stated above, the failure to receive notice does not excuse a contractor or subcontractor from paying the prevailing wage rate. Yet the failure to provide proper notice could place the public body, contractor, or subcontractor responsible for providing the notice at risk of being assessed the penalty for the subsequent failure to pay the prevailing wage. For example, if the public body provides proper notice to the contractor but the contractor, in turn, does not provide proper notice to the subcontractor. If the subcontractor fails to pay the prevailing wage rate, the subcontractor would still be liable for the difference between what it paid its workers and the prevailing wage rate; however, the contactor would be liable for the 20% penalty for failing to provide proper notice.
As stated in last month's article, contractors and subcontractors have a duty to create, keep, maintain, and produce certified payroll records and other documentation under the Act. Additionally, contactors and subcontractors have to prepare truthful certified payroll records. In an effort to provide greater enforcement strength to this provision, the Act was amended to increase the penalty for failing to comply with the reporting/record keeping requirement. Thus, the penalty for a contractor or subcontractor's willful failure to create, keep, maintain, produce, or willfully falsifying such record or document increased from a Class B to a Class A misdemeanor and will result in an automatic disbarment.
Facing an increase in the number of prevailing wage investigations by the Illinois Department of Labor, employers engaged in public works must be proactive to ensure that they comply with the many requirements of the Act. This is certainly a situation where an ounce of prevention is worth a pound of cure.
Next issue, we'll wrap up our discussion of the Prevailing Wage Act by covering some of the Act's lesser known traps and how to steer clear of them.
If you have any questions or concerns about this topic, please call Ryan Young of Wessels Sherman's Chicago, Illinois office at (312) 629-9300 or via email at email@example.com.