Tag: Prevailing Wage

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Inflation Reduction Act Apprenticeship Requirements

Supervisor and group of factory workers wearing hard hats meeting brief together before starting the day's work.

The contents of this blog post have been partially transcribed from our YouTube video, “Inflation Reduction Act (IRA) Apprenticeship Requirements”. We also cover the recordkeeping and prevailing wage requirements.

The Inflation Reduction Act opens tax incentives available to all taxpayers, and the requirement to comply with regulation to keep these credits becomes a rising priority. Amongst these requirements are the apprenticeship requirements. There are three main apprenticeship requirements under IRA: the Labor Hour Requirements, Ratio Requirements, and Participation Requirements. All requirements must be met to qualify for certain tax benefits and to avoid penalties.

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Labor Hour Requirements

The first requirement is the Labor Hour Requirement. This requirement sets a percentage of registered apprentice hours performed in reference to the total labor hours across the project. These percentages vary depending on the beginning of construction. 

  • If construction on your project began before January 1st, 2023, 10% of your overall project’s labor hours should be performed by registered apprentices. 
  • If the project began after December 31st, 2022, and before January 1st, 2024, 12.5% of hours should be registered apprentice hours.
  • Any construction occurring after December 31st, 2023 will have a 15% percentage requirement.

Ratio Requirement

When apprentices are on a project, they are typically supervised by journeymen. However, the provisions for the ratio at which the number of apprentices that a journeyman may supervise can vary. Under IRA, taxpayers must ensure that they are meeting the applicable supervision requirements under the state or federal provisions. The ratio will be determined either by the DOL or the applicable State apprenticeship agency. You may consult the applicable body to find your journeyman to apprentice ratio to avoid violations.

Base Participation Requirement

The base participation requirement for apprentices under IRA is as follows:

Each taxpayer, contractor, or subcontractor that hires 4 or more employees to work on a qualified facility must employ at least 1 registered apprentice. This requirement is maintained across the life of the project and is applicable across all contractors. 

Let’s examine a few scenarios to see how this is applied.

  • In scenario one, a contractor begins work on site and is going to have 6 employees. The participation requirement states that, because a minimum of 4 employees are performing work, at least 1 registered apprentice should be on payroll.
  • In scenario two, a contractor is consistently employing a different employee each week. Once the employee count of workers on site meets 4, a registered apprentice must be employed.

Good Faith Effort Exception

A contractor may possibly be exempt from apprenticeship requirements if they demonstrate the “Good Faith Effort Exception”. Under this exception, a taxpayer would be considered compliant under the apprenticeship requirements if they’ve demonstrated attempts to request an apprentice from a registered apprenticeship program and one of the following occurs: 1) The request is denied through no fault of the taxpayer, or 2) No response is provided within 5 business days after the request was received by the apprenticeship program. 

As noted by the IRS, “The good faith effort exception only applies to the specific portion of the request for apprentices that was not responded to or was denied. If a request was not responded to or was denied, the taxpayer must submit an additional request(s) to a registered apprenticeship program after 120 days to continue to be eligible for the good faith effort exception.” 

As provided by the IRA requirements, records must be kept, such as those indicating these attempts and proof of instances of exemption to thoroughly document efforts. 

How to Employ Apprentices

The IRS Guidance references an apprenticeship program tool, available at apprenticeship.gov. The Office of Apprenticeship’s “partner finder” and “apprenticeship job finder” tools provide access to different apprenticeship programs depending on your location and occupation. You may use either of these tools to find an apprenticeship program for a classification being employed on your project, and you may reach out to halls listed and attempt to employ a registered apprentice. 

You may also reach out to any state or local apprenticeship programs or offices in the project region that would assist in dispatching apprentices to meet this requirement.

Penalties

Per 87 FR 73580 Section 2, taxpayers who are unable to meet the ratio or participation requirements, or the “Good Faith Effort Exception”, may have to pay a penalty of $50 multiplied by the number of hours for which the requirement was not satisfied to the Secretary of Labor. If this is determined by the Secretary of Labor to be an intentional disregard for the provisions, the fine increases from $50 to $500 per hour. Taxpayers may also be forced to pay back the majority of credit received.

With this in mind, it’s important to meet the Apprenticeship Requirements under IRA and avoid costly penalties. If you have any questions or need further assistance, feel free to contact us. 

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What is Prevailing Wage?

The contents of this blog post have been transcribed from our YouTube video, “What is Prevailing Wage?” 

Project funding and changes in policy within the construction industry have increased the applicability of prevailing wage payments on projects. Enforcement is increasing, and the need to be in-the-know is higher than ever. Here is our summary of prevailing wage and what you should know to remain informed with the evolving project requirements. 

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Prevailing Wage Defined

The U.S Department of Labor, also known as the DOL, defines prevailing wage as “the average wage paid to similarly employed workers in a specific occupation in the area of intended employment.” These average wages are then set to become a standard for payment. In short, prevailing wages can be known as the minimum wage that must be paid to employees performing work on Public Work construction projects. Prevailing wage varies depending on the actual work being performed by employees and the location of the Public Work. 

As mentioned, prevailing wages are typically paid on public works projects across the nation. The definition of “Public Works” may vary from state to state. For example, per California Labor Code 1720, “Public Works” is defined as “the Construction, alteration, demolition, installation, or repair work done under contract and paid in whole or in part out of public funds. It can include preconstruction and post-construction activities related to a public works project.” 

Prevailing Wage Applicability

Although public works projects are common in prominence with the payment of prevailing wage, prevailing wages may still be applicable to other construction projects that are not considered “public works.” 

Taxpayers performing construction and attempting to claim tax credits and incentives under the Inflation Reduction Act can be required to pay Davis Bacon prevailing wages depending on the tax credit or incentive. Prevailing Wage applicability can also vary depending where your project is. In California, projects subject to Prevailing Wage are those that complete work under the Public Works definition, and are receiving public funding over $1000. 

Exemptions to prevailing wage payment in California include projects less than $1000 in public funding and specific worker types, such as security guards and volunteers. The liability to pay prevailing wage in California is also project-wide and isn’t the general contractor’s sole responsibility. All contractors, sub and tier, are required to pay the prevailing wage rates if their applicability is triggered. 

What’s at Stake

It’s best practice to remain informed on the prevailing wage information on the state and federal level to avoid underpayment penalties. In California, for example, Labor Code section 1775 states that penalties are assessed at no less than forty dollars ($40) for each employee and day they worked and were paid less than the prevailing wage rate. The penalty escalates to $120 for each calendar day if the violation is found to be an intentional disregard for prevailing wage. 

Federal consequences can include debarment, payment for insufficient amounts on unpaid wages, liquidated damages for overtime underpayments, and contract termination amongst other penalties. 

We offer a general state-by-state overview of compliance at the Federal and/or State levels. For more information or resources, feel free to watch our Frequently Asked Questions series and contact us if you need further assistance.

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California AB 2143 Overview

The contents of this blog post have been transcribed from our YouTube video, “California’s New Solar Regulation and Requirements: AB2143”  

Renewable energy is taking the construction space by storm and keeping up with regulations can be a tough feat, but we’re here to help. We’ll be discussing changes made to California’s net energy metering program that came into effect January 1st, 2024 in this overview of Assembly Bill 2143, also known as AB 2143. 

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Net Energy Metering Explained

Net energy metering is a tool that allows customers with renewable energy  systems, namely solar panels, to gain credit for solar projects exceeding 15 kW of energy generated that is fed back into the grid. So, extra energy gathered from a renewable energy source can be sold for credit. 

Applicability and Requirements

AB2143 is applicable to contractors entering into a contract to perform work on a renewable electrical generation facility or associated battery storage.  

The requirements include:  

• Paying Prevailing Wages  

• Maintaining and Verifying Payroll Records 

• Submitting digital copies of payroll records biannually  

Paying Prevailing Wages

Prevailing wages are the minimum rate required to be paid out to workers in a specific occupation, also known as a classification. California prevailing wage rates are issued by the Department of Industrial Relations, also known as the DIR. Not only are there required base rates assigned to each occupation type, but there are also fringe amounts and provisions that can differ per classification. For an in-depth review on prevailing wage, you can visit this video on our YouTube channel.

Maintaining and Verifying Payroll Records

The second requirement is the requirement to Maintain and Verify Payroll records. Payroll records must be accurate and display the following: 

• Employee name 

• Address 

• Social security number 

• Work classification 

• Straight time and overtime hours worked each day and week

• Actual wages paid 

They must also be signed under penalty of perjury, which is a legal statement by the signer verifying that all information on the payroll record is true.  

These payroll records must also be available for inspection or furnished upon  request to the awarding body and Division of Labor Standards Enforcement, also known as the DLSE. 

Biannual Payroll Submissions

Finally, each contract must submit digital copies of certified payroll records biannually. The dates for submission are July 1st and December 31st of each year.  The commission team that monitors Net Energy Metering projects will be retaining these records as public record for five years. 

So, to summarize the key points, prevailing wages must be paid at minimum to employees on renewable energy projects, payroll records of these wages must be kept and available upon inspection or request, and records must be submitted biannually. 

Penalties

While the requirements can be vast, violation of the requirements can pose major issues. AB 2143 is enforced through the following means: 

A civil wage and penalty assessment can be issued. So, if a contractor is found to be in violation, interest will accrue on all due and unpaid wages and the violator will be publicly listed by The Labor Commissioner. Construction workers cannot be underpaid and administrative complaints or civil action can be pursued for violation of the bill. 

Additionally, willful violation can result in revoked eligibility for the energy facility to receive service pursuant to AB 2143 Section 769.2(d).  

Exemptions

Please note, this bill is not applicable to the following (as derived from AB 2143 Section 769.2(f)):  

“  

• A residential renewable electrical generation facility that is eligible to receive service pursuant to the standard contract or tariff developed pursuant to Section 2827.1 and has a maximum generating capacity of 15 kilowatts or less of electricity. 

• A residential renewable electrical generation facility that is eligible to receive service pursuant to the standard contract or tariff developed pursuant to Section 2827.1 and that is installed on a single-family home. 

• A project that is a public work, as defined in Section 1720 of the Labor Code, and that is subject to Article 2 (commencing with Section 1770) of Chapter 1 of Part 7 of Division 2 of the Labor Code. 

• A renewable electrical generation facility that serves only a modular home, a modular home community, or multiunit housing that has two or fewer stories. 

“  

Conclusion

With everything discussed in mind, it’s important to be aware of and comply with the requirements of AB2143. Our team works closely with contractors through dozens of project types to assist in remaining compliant. If you would like in-depth assistance, please feel free to get in touch. 

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New York Roadway Excavation Quality Assurance Act

The contents of this blog post have been transcribed from our YouTube video, “New York Roadway Excavation Quality Assurance Act Overview” 

A New York Labor Law published in August of 2023 has triggered prevailing wage requirements on certain roadway construction work by utility company contractors. Here’s an overview of what this act is and what requirements are posed for you. 

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Which Projects are Applicable?

The New York Roadway Excavation Quality Assurance Act came into effect on September 15th, 2023. The rules under this law are enforced on “all contracts for construction solicited on or after the effective date.” A contract is “solicited” when bidders on a project are requested to submit their offers. If there was no solicitation or contract, the act is enforced on work performed under a permit issued on or after the effective date. If a permit was required for the job but not obtained, the work would still be covered. 

The type of work covered under this law is defined as a “covered excavation project.” This includes “construction work issued to a contractor or subcontractor of a utility company by the state, a county, or a municipality.” The work covered isn’t exclusive to excavation, and the law generally covers “projects requiring a permit to excavate, open, or otherwise use a street to perform utility work are covered by this law.” This can include the opening, patching, and closing of the street as well. 

Covered types of utility work include “Electric, gas, water, steam, sewer, fuel, geothermal and telephone/telegraph.

Prevailing Wage Requirements

With the effective date and types of covered work in mind, the payment of prevailing wage rates would follow. The payment of prevailing wages is applicable to all contractors and subcontractors and would go to the laborers, workers, or mechanics performing work for the utility company, For an extensive overview of what prevailing wages are, you can visit this video on our YouTube channel. 

Contractors are recommended to contact the nearest Bureau of Public Work district office to gather which prevailing wage rates are applicable to the different types of utility work. 

Recordkeeping Requirements

Alongside the payment of prevailing wages, contractors are instructed to maintain records of payment. Per the Quality Assurance Act guidance, “Contractors and subcontractors to a utility are now always required to keep records of the payment of prevailing wages.” Commonly kept records for general prevailing wage documentation includes certified payroll reports, pay stubs/itemized wage statements, and fringe benefit documentation. The overarching best practice is to keep all documents that provide a full picture of the employees’ pay. 

Enforcement and Penalties

Regulations of The Quality Assurance Act and penalties for violation are further defined through the following Labor Laws: 

Labor Law 220, which defines the 8 hour workday, 

Labor Law 220(a), which requires contractors to maintain statements showing the amounts due for wages toward employees and the payment of prevailing wages. 

Labor Law 220(b), which defines withheld payments on laborers’ wages,

Labor Law 223, which defines the contractor’s responsibility if found non-compliant with the proper payment of wages 

Labor Law 224-b, which defines the stop-work order if a contractor is found to be non-compliant, 

And Labor Law 227, which penalizes contractors who have failed to pay prevailing wage rates. This can result in being guilty of a misdemeanor and, in certain cases, a fine of $500 – even imprisonment. 

Conclusion

The payment of prevailing wages under the New York Roadway Quality Assurance Act is important to maintain to keep your business above penalties and remain in compliance with the prevailing wage laws.

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Inflation Reduction Act Overview

The contents of this blog post have been partially transcribed from our YouTube video, “Inflation Reduction Act (IRA) Overview”.

The Inflation Reduction Act, or, the IRA is the biggest investment in clean energy in the United States. The goal is to fight climate change and increase economic opportunity. The tax incentives are available to all taxpayers, corporate and private entities that meet the criteria within each tax provision. For many of these provisions come the inclusion of prevailing wage and apprenticeship requirements.

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Inflation Reduction Act (IRA) and Tax Credits

On August 16th, 2022, the Inflation Reduction Act was signed into action, providing tax incentives for several tax credit provisions that involve clean energy projects. 

One specific example Is the Production Tax Credit. This provides taxpayers the possibility of acquiring $2.60 per kilowatt hour credit for electricity produced at qualified facilities. To gain this credit, taxpayers would have to satisfy the prevailing wage and apprenticeship requirements, otherwise that credit is reduced.

In the context of the IRA, a taxpayer is anyone attempting to receive the tax credit or incentive, and this includes contractors.

The Davis-Bacon Act and the Related Acts itself are not subject under the IRA, including enforcement regulations. However, there are similarities in how certain provisions are derived. 

  • The IRA follows the same prevailing wage requirement as it pertains to “Laborers & Mechanics” under DBA.
  • Apprentices are expected to have the same certification requirements under DBA. 
  • What’s considered the “Site of Work” and “Construction, Alteration, and Repair” are defined the same both under DBA and IRA.

Requirements to Obtain Tax Credits

The IRS 87 FR 73580 guidance outlines requirements for obtaining tax credits. The two main ones to be found for prevailing wage are (1) the payment of prevailing wage rates and (2) maintaining records. The applicable rates are to be found for laborers and mechanics as defined at 29 CFR 5.2(m), performing construction, alteration, or repair. 

Remember, there is no exception for independent contractors.

Maintaining Records

Section 16.001-1(a) of the Income Tax Regulations states taxpayers must keep records to establish the amount of claimed credits. This documentation should include the applicable wage determination provided by the DOL and documentation showing each worker, their classification, gross pay, hours worked, and proper prevailing wage rate of pay. This includes the appropriate fringe benefits. It’s important that these records are maintained to prove the requirements are being met.

If a taxpayer fails to pay prevailing wage rates, they can still be considered to have satisfied the requirements if they:

  1. Pay the laborers or mechanics the difference between the paid wages and the prevailing wage rates, plus interest of 3%; and
  2. Pay a $5,000 fine per laborer or mechanic who was underpaid, to the Secretary of Labor

This fine increases to three times the sum of (a) and $10,000 per violation if it was found to have been an intentional underpayment.

The IRA Proposed Rules

On August 29th, 2023, the IRS and the Treasury issued “proposed rules” that would update the PWA (prevailing wage and apprenticeship) requirements under the Inflation Reduction Act. The document provides clarification on many issues that arose after the original guidance was published in November of 2022. Some of the highlights include: 

  • A denial of a request for a qualified apprentice would not automatically qualify the taxpayer for the Good Faith Effort Exception. There would be a requirement to resubmit a request for apprentices every 120 days, in the event of a valid denial by the apprenticeship program. 
  • A new general wage determination is required to be used when a contract is changed to include additional, substantial construction, alteration, or repair work not within the scope of work of the original contract, or to require work to be performed for an additional time period not originally obligated. 
  • Apprentices not in a Registered Apprenticeship Program, or not supervised at the correct ratio, must be paid at the full prevailing wage rate for the classification and cannot have those hours counted towards the Apprentice Labor Hour Requirement. 

Many major topics are addressed, including cure and penalty provisions for failure to meet the requirements. Any taxpayer wishing to claim the increased tax credits should ensure that they are familiar with these proposed regulations. Alliant is here to help answer any questions, help clients stay informed, and to ensure full compliance with all of the IRA PWA requirements. If you’d like any further assistance, feel free to contact us.

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Prevailing Wage in Ohio

In the heart of the Buckeye State, Chapter 4115 of the Ohio Revised code sets the prevailing wage for the state of Ohio. The Ohio Department of Commerce enforces provisions that set the minimum wage and hour requirements for laborers and mechanics working on public works projects in Ohio. These statutes apply to all partially and fully publicly funded projects over the following threshold values:

  • New Building Construction: $250,000.00
  • Building Construction (reconstruction, repair, renovation, etc.): $75,000.00
  • New road or bridge construction: $96,901.00
  • Road or Bridge construction (reconstruction, repair, renovation, etc.): $28,789.00

These thresholds are adjusted every two years and cannot decrease or increase by more than 3% at a time. The law aims to ensure that workers are paid fairly for their work on public projects and to prevent contractors from underbidding one another by paying their workers less than the prevailing wage. It is important to note that Ohio state is committed to protecting the rights of workers shown through Ohio revised Code Section 4115.071, which stipulates that the public authority contracting for a public works project must appoint one of their employees as a “prevailing wage coordinator” for the life of the project to protect the rights of workers and ensuring that they are compensated fairly for their work on public projects.

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Fringe Benefits Overview

technical documentation

Fringe Benefits are an important factor of prevailing wage and can include a variety of benefits in addition to normal wages. According to the IRS, they are considered a form of compensation for services rendered. These benefits can include health or pension plans, among others. In the context of prevailing wage, fringe benefits are significant for two reasons:

  1. What counts as a Fringe Benefit: It is essential to determine what can be categorized as a fringe benefit. The amount must be paid to a 3rd party on behalf of and to benefit the employee. Examples of bona fide fringe benefit plans include health or pension plans.
  2. Factoring into Prevailing Wage: Fringe benefit payments may be taken into account when calculating prevailing wage rates for employees. Employers need to calculate the hourly cost of providing these benefits to the employees. This amount can be added to regular wages when determining the total compensation offered to employees to meet the prevailing wage requirements.

On August 23, 2023, the Department published in the Federal Register the final rule, “Updating the Davis-Bacon and Related Acts Regulations.”  The final rule updates regulations issued under the Davis-Bacon and Related Acts. The final rule is effective on October 23, 2023.

The final rule adds new paragraph (c) to § 5.25 to codify the principle of annualization that is used to calculate the amount of Davis-Bacon credit that a contractor may receive for contributions to a bona fide fringe benefit plan (or the reasonably anticipated costs of an unfunded benefit plan) when the contractor’s workers work on both DBRA-covered and private (non-DBRA) work. Contractors, plans, and other interested parties may request an exception from the annualization requirement by submitting a request to WHD, but such exceptions may be granted only if the benefit provided by the plan is not continuous in nature and does not compensate both DBRA-covered and non-DBRA work.

Generally, Fringe Benefits encompass employer contributions relayed to employees, firmly entrusted to a trustee or an external party as part of a genuine fringe benefit fund plan or program. This plan should be reasonably anticipated and represent a binding financial commitment for the employees’ benefit. It’s important to note that employer contributions mandated by federal, state, or local regulations do not fall under the category of fringe benefits.

Fringe benefits can be confusing, but taking these factors into account will help you remain compliant and avoid penalties! 

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Prevailing Wage in Hawaii

Prevailing Wage Hawaii

Surf, sand, and prevailing wage in the Land of Aloha!? Chapter 104 of the Hawaii Revised Statutes (HRS) established and details Prevailing Wage mandates in Hawaii. The code sets the minimum wage and hour requirements for laborers and mechanics working on public works projects in Hawaii. It requires contractors and subcontractors to pay their workers no less than the prevailing wage rate for similar work in the same locality. The law aims to ensure that workers are paid fairly for their work on public projects and to prevent contractors from underbidding one another by paying their workers less than the prevailing wage. It is important to note that Chapter 104 applies to all public works projects over $2,000 involving a Governmental Contracting Agency, regardless of funding source. By enforcing this law, Hawaii is committed to protecting the rights of workers and ensuring that they are compensated fairly for their work on public projects.

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Prevailing Wage for California Temporary Staffing Agencies

Awarding Agencies

Misclassifying employees from Temporary Staffing Agencies is a frequent mistake in prevailing wage. It’s important to know how contractors utilizing these employees are subject to the prevailing wage requirements on applicable projects. 

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What is a Temp Agency?

A temporary staffing agency, or most popularly known as a temp agency, is a recruiting firm that acts as an intermediary between candidates looking for work and companies needing short-term employees or indefinite temporary positions. Temp agency employees work for what is referred to as a “host employer” (or an employer who has general supervisory authority over the worksite) but are on the payroll of a “primary employer.” The primary employer can be either: A temp agency that hires workers and sends them to work for a host employer, or a professional employer organization (PEO) that puts a host employer’s employees on the PEO’s payroll as its own employees. 

What are the Prevailing Wage Requirements?

Prevailing wages are expected to be paid on certain project types. Public works projects most commonly enforce the payment of prevailing wages. Temp agencies may be called in by contractors to assist in performing work for these projects. The “primary employer” status designates which body, between the Temp agency and the hiring contractor, would be held under the prevailing wage requirements in this situation. 

When it comes to prevailing wage, temporary staffing agencies must register with the DIR if the temp agency submits their own payroll as the primary employer (See CCR Title 8, § 16410). However, if the hiring contractor includes the temp 

employee on their payroll and can submit payroll for them, the temp agency does not need to be registered with the DIR. 

Temp Employees, Apprenticeship, and Violation Penalties

As referenced on the DIR’s FAQ website, “Apprenticeship requirements are the responsibility of the contractor. If a Contractor relies on the temp agency and there are problems, it is the Contractor who will be responsible for any resulting penalties.” 

Apprenticeship standards are enforced on public works projects and published under Labor Code 1777.5. Meeting these standards are included within a contractor’s duties on public works projects. If a contractor chooses to utilize employees from a temp agency in place of a valid request for apprentices, the contractor may be in violation. 

Some of the requirements regarding apprenticeship standards can include but are not limited to not employing apprentices if utilizing an apprenticeable craft, late and/or DAS 140 forms not being sent for apprenticeable crafts, and/or failure to make training payments for all hours worked. 

1777.7(a)(1) notes that contractors who violate any of the apprenticeship standards found in §1777.5 “shall forfeit as a civil penalty” an amount not exceeding $100 “for each full calendar day of noncompliance.” 

Conclusion

Although temp agency employees can be beneficial when it comes to saving time on training and hiring, employers must be aware and do their due diligence to ensure they are meeting the prevailing wage requirements when they are choosing to work with temp agencies to avoid costly penalties on California State Funded Public Works projects.