Construction contractors are scrambling to secure contracts funded by the $1 trillion Infrastructure Bill signed by President Biden on November 15, 2021. Although lucrative, those contracts come with extensive obligations and stiff penalties for noncompliance. The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) and the Wage & Hour Division (WHD) have jurisdiction over certain construction contractors. Both agencies will soon be laser-focused on the construction industry.
OFCCP Affirmative Action and Non-Discrimination Obligations
OFCCP enforces affirmative action and non-discrimination obligations imposed on covered federal contractors and subcontractors, including construction contractors. Covered construction contractors are required to take affirmative action and refrain from discriminating against applicants and employees based on their sex, race, national origin, religion, sexual orientation, gender identity, disability, and protected veteran status. The threshold for coverage is quite low.
- Executive Order 11246 (EO 11246) affirmative action and non-discrimination obligations are triggered by a minimum of $10,000 in total federal contracts.
- Section 503 of the Rehabilitation Act’s (Section 503) prohibition on discrimination applies to construction 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 one contractor for $50,000 or more.
- The Vietnam Era Veterans Readjustment Assistance Act’s (VEVRAA) non-discrimination requirement applies to construction contractors with at least one contract with a value of $150,000 or more. AAPs are required once the contractor has at least 50 employees and a contract for at least $150,000.
In addition to developing annual affirmative action plans and not discriminating, construction contractors are subject to a myriad of other obligations including document and data collection and retention requirements, posting specific legal notices, compliance with pay transparency requirements, listing available positions with local workforce agencies, and submission of an annual Vets-4212 report, among other requirements.
OFCCP assesses contractors’ compliance with affirmative action and non-discrimination requirements primarily by conducting compliance reviews that include a comprehensive evaluation of the contractor’s recruitment, hiring, promotion, termination, and compensation efforts. OFCCP provides contractors with some advance notice of an upcoming review by posting the list of contractors selected for audit on its website. The issuance of a scheduling letter initiates a compliance review. If OFCCP identifies indicators of a violation at the initial stages of a review, it will schedule an on-site investigation that will include employee and management interviews.
A construction contractor who is found to be not in compliance with OFCCP’s regulations will be given an opportunity to conciliate and enter into a conciliation agreement. Remedies range from annual reporting to monetary damages. If the contractor and OFCCP are unable to reach a settlement, OFCCP will initiate an enforcement action. The ultimate penalty for non-compliance is cancellation of current contracts and debarment from future contracts.
Additionally, OFCCP recently announced that covered construction prime and subcontractors will soon be required to register and certify compliance through an on-line portal. 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 in place for VEVRAA and Section 503 and the 16 specifications required for compliance with EO 11246.
- Assess compliance with other requirements, including that:
- bid solicitations for construction contracts in excess of $10,000 include a Bid Solicitation Notice and Contract Specifications for Construction Contracts;
- all federal construction contracts and subcontracts include an Equal Opportunity Contract Clause or reference to it;
- the correct participation goals for women and minorities have been implemented;
- required notices and posters are displayed where they can be viewed by employees and applicants; and
- EEO-1 and VETS-4212 reports have been filed.
- Conduct a self-assessment under 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 Bill. The majority of the projects flowing from the Infrastructure Bill will be covered by the Davis-Bacon Act, requiring contractors to pay construction workers at locally prevailing wages (as determined by WHD surveys) and including fringe benefits. The Davis-Bacon Act can cover certain federal government contracts, as well as specified projects that receive federal assistance for construction. These future infrastructure projects will include: roads, bridges, and public transit; airports, ports, and waterways; passenger and freight rail; water infrastructure, power, and grids; disaster resiliency and pollution projects; and electric vehicle charging and low-carbon/emission buses and ferries.
The WHD intends to require both the contracting federal agencies and funding recipients check for compliance with Davis-Bacon standards in contract clauses and wage determinations. To meet the Davis-Bacon requirements, contractors need to ensure:
- Accurate records of hours worked, wages paid, and fringe benefits contributions;
- Submitting certified payroll on a weekly basis to the funding agency or recipient;
- The inclusion of standard clauses and applicable wage determinations in all subcontracts, confirmed by the prime contractors; and
- The posting of the required “Employee Rights under the Davis-Bacon Act” poster at the worksite.
In addition to outreach 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 begun providing added training to investigators to spot Davis-Bacon violations, as well as training to and coordination with outside agencies to ramp up their compliance.
Misclassification with the wage determination is a frequent problem for employers. Contractors who learn that they have employees who do not match an existing category in the wage determination should immediately work to obtain a conformance of the wage determination. Also, contractors must preserve worker records for a period of three years following the conclusion of work for inspection by the WHD. Prime contractors have the additional responsibility of ensuring compliance by subcontractors and could be held liable for unpaid wages or fringe benefits if “flow down” contract clauses and wage determinations are not correct. Because of the potential for debarment from federal contracts, confirming compliance is vitally important for contractors.
David Gobeo is the Office Managing Partner for our West Palm Beach office and member of FordHarrison’s Construction industry practice group. If you have any questions regarding the OFCCP’s affirmative action and non-discrimination requirements or the David-Bacon Act’s requirements or if you would like assistance in assessing your compliance with the relevant obligations imposed on those who hold construction contracts with the federal government, please contact David at dgobeo@fordharrison.com. Of course, you can also contact the FordHarrison attorney with whom you usually work.