Tag Archives: Wage

Illinois’ Prevailing Wage Law: Beware… That First Notice of Violation Can Come Back to Haunt You!

A Growing Trend: Using a 1st Notice of Prevailing Wage Violation Against a Contractor—The Shame of It All and What Contractors Can Do to “Right the Ship”

 Contributed by Jeffrey A. Risch

Having handled hundreds of prevailing wage disputes, the IDOL is the only entity that can lawfully determine whether a contractor is in violation of the IPWA. 820 ILCS 130/11(a) et. seq. Under the IPWA, only the Director for the Illinois Department of Labor is authorized to issue a “Notice of First Violation” of the Prevailing Wage Act to a contractor. 820 ILCS 130/11a. This Notice of First Violation should encompass any and all events that occurred prior to the time of issuance. 56 Ill. Adm. Code 100.24. Per the IPWA, a contractor has no ability to respond, dispute or defend against a Notice of First Violation. 56 III. Adm. Code 100.5, 100.24, 100.26. It is not until the Director for the IDOL issues a “Notice of Second Violation” that a contractor may request a hearing at the department, in order to respond to the charges and defend itself against any claim of violations of the Prevailing Wage Act. 820 ILCS 130/11a; 56 III. Adm. Code 100.5, 100.26.

Only after a Notice of Second Violation is sent to a contractor and a hearing is held, if necessary, can the IDOL make a determination that a contractor is debarred or prevented from participating in a public contract because of violations of the Prevailing Wage Act. 820 ILCS 130/11a; 56 III. Adm. Code 100.5, 100.24, 100.26.

In deciding that the act has been violated and that the issuance of a formal notice of violation is required, the Director of Labor shall base the decision on one or any combination of the following reasons (as per the Illinois Administrative Labor Code):

 – The severity of the violations. The Director will consider the following:

  • The amount of wages that are determined to be underpaid pursuant to the act.
  • The activity or conduct complained of violates the requirements of the statute and was not merely a technical, non-substantive error. Examples of a technical error include, but are not limited to, mathematical error, bookkeeping error, transposition of numbers, or computer or programming error.

 – The nature and duration of the present violations as well as prior history of the contractor or the subcontractor related to the act. The prior history considered cannot exceed seven years before the date of the second notice of violation.

 – Whether the contractor or subcontractor filed certified payroll records with the public body in charge of the project; whether the contractor or subcontractor has kept the payroll records and accurate records for 5 years; whether the contractor or subcontractor produced certified payroll records in accordance with Section 5 of the act.

 – Whether the contractor or subcontractor has violated any other provision of the act.

Despite this authority, many local public bodies throughout Illinois are being influenced by certain third parties. These public bodies are being told that that they must reject bids or terminate contracts with any contractor who has any prevailing wage discrepancies, even when the contractor is the “lowest responsible bidder.” These public bodies are using “bad information” — “misleading information” — “outdated information” against contractors who have every legal right to bid and perform public works projects. By rejecting bids or terminating contracts with non-debarred contractors, public bodies throughout Illinois are ignoring their obligations under applicable “lowest responsible bidder” statutes, making arbitrary decision beyond their statutory authority, and depriving contractors of fair due process under the law.

Conclusion

Contractors must know their rights! Although public bodies have an enormous amount of discretion in ascertaining the “lowest responsible bidder,” they cannot make arbitrary decisions in contradiction to applicable law. Contractors should never be discouraged from submitting bids despite what certain public bodies are saying. From experience and observation, contractors should push back. This push back can be in many forms. Although the filing of a lawsuit or motion seeking injunctive or declaratory relief is sometimes necessary, often the public body simply needs clarity concerning the misinformation it had received. This clarity can usually be achieved through simple letter writing or other more informal channels.

California Employers Hold Onto Your Hats…State Minimum Wage Rates to Increase to $10 Per Hour by 2016

Contributed by Samantha Esmond

On Wednesday, September 25, 2013, California’s Governor, Jerry Brown (D), signed into law Assembly Bill 10 (“AB 10”), which approved a two-dollar ($2.00) state minimum wage rate increase to take effect over the next three (3) years. This new law raises the minimum wage, in the most populous U.S. State, from $8.00 per hour (the current rate) to $10.00 per hour as of January 1, 2016. This will be the first minimum wage raise for the state in approximately six (6) years.

Under this new law, California’s minimum wage will go up in two separate one-dollar ($1) increments. The first bump will take effect on July 1, 2014, and raise the state minimum wage from $8.00 per hour to $9.00 per hour. While, the second one-dollar ($1) increase will take effect on January 1, 2016 and raise the state minimum wage rate to $10.00 per hour.

This scheduled wage increase will place California’s minimum wage well above the current federal minimum wage of $7.25 per hour. California employers should also beware of any additional city and county ordinances, such as San Francisco’s Minimum Wage Ordinance, which set the minimum wage for all work performed within the geographic boundaries of the City of San Francisco at $10.55 per hour. Likewise, the City of San Jose’s Minimum Wage Ordinance currently sets the minimum wage for work performed within the City limits of San Jose at $10.00 per hour. Where there are conflicting requirements in state, local, and federal laws, the employer must follow the stricter standard (i.e., the one that is the most beneficial to the employee).

IMPACT:  California employers should be cognizant of these new statewide minimum wage requirements, including updating any and all employee handbooks and policies together with any required employee postings and notices. Employers must also make any necessary changes to their payroll systems to ensure that these minimum wage increases are applied as they become effective.

Not Paying Overtime Properly Can Be Very Costly

Contributed by Sara Zorich

The Department of Labor (“DOL”) announced this week that Harris Health System had agreed to pay over $4 million in back wages and liquidated damages to employees for failure to properly pay overtime.  The issue investigated by the DOL was an alleged failure to include an employee’s incentive pay when calculating overtime premiums resulting in an underpayment.  Under the Fair Labor Standards Act, employers who fail to pay wages properly can owe employees back wages along with an equal amount of liquidated damages.

Employers should review their pay practices to ensure they are properly paying overtime to their employees.  Under federal law and Illinois state law, employers must pay employees 1.5 times their regular rate of pay for any hours worked in a workweek over 40 by the employee.  The regular rate of pay is computed by totaling all of the remuneration for the week (regular pay, incentive pay, shift differential, bonus, etc.) and dividing that number by the number of hours worked in that workweek.  One of the most common mistakes employers make is failing to include the extra compensation (i.e. bonus, incentive pay, etc.) when determining the regular rate of pay.  Below are two examples of overtime calculations:

Weekly Incentive Bonus Example:

An employee earns $10.00 and works 46 hours the week of January 1, 2013.  In that same week, the employee is paid an incentive bonus of $100 for meeting his production goals that week.  His total pay before overtime for the week is $460 (46 hours x $10) + $100 = $560.00.  His regular rate of pay is $560.00 divided by 46 hours = $12.17 hours.  The employee has been paid for all hours worked at straight time for the week so the overtime premium is calculated at one-half of the regular rate of pay: $12.17 (regular rate) x .5 x 6 (overtime hours) = $36.51.  The employees total compensation for the week is $560.00 + $36.51 = $596.51.

Shift Differential Example:

An employee earns $10.00 and works 46 hours the week of January 1, 2013.  In that same week, the employee is paid a shift differential of $1.00/hr for each hour he worked the midnight shift.  He worked the midnight shift for a total of 16 hours this week thus his shift differential was $16.00.  His total pay before overtime for the week is $460 (46 hours x $10) + $16 = $476.00.  His regular rate of pay is $476.00 divided by 46 hours = $10.35 hours.  The employee has been paid for all hours worked at straight time for the week so the overtime premium is calculated at one-half of the regular rate of pay: $10.35 (regular rate) x .5 x 6 (overtime hours) = $31.05.  The employees total compensation for the week is $476.00 + $31.05 = $507.05

Overtime calculations can be even more complicated if employees are paid at more than one rate during a workweek or bonuses or commission payments are allocated over multiple work weeks.  Employers should review the Department of Labor regulations regarding overtime compensation and consult with counsel if they have questions regarding how to properly compute overtime. Small mistakes can add up very quickly and lead to large amounts owed to employees in back wages.