Government Contracts
Prevailing wage: what it is and when it applies
Prevailing wage laws require contractors on government-funded construction projects to pay workers the "prevailing" local wage rate for each trade classification. Federal projects use the Davis-Bacon Act. Most states have their own prevailing wage laws — called "little Davis-Bacon" acts — that apply to state-funded projects.
Federal threshold
$2,000 contract value
Davis-Bacon Act applies to federally funded construction contracts over $2,000
State thresholds
Varies widely
Some states trigger prevailing wage at $1,000; others at $25,000 or $50,000
Certified payroll
Weekly submission
Form WH-347 required within 7 days after each payroll period on federal projects
Fringe benefits
Cash or bona fide plan
Fringe portion of prevailing wage can be paid as cash or toward a bona fide benefits plan
Misclassifying workers into lower wage classifications is the most common Davis-Bacon violation
A worker performing journeyman carpentry must be paid the carpenter rate — not the laborer rate — regardless of job title. The contracting agency determines which classification applies based on the work actually performed. Violations result in back wages, debarment from future federal contracts, and criminal prosecution for willful violations.
Apprentice wage rates on prevailing wage projects
Apprentices may be paid at a reduced apprentice rate (a percentage of journeyman wage) only if they are enrolled in a DOL-registered apprenticeship program. The journeyman-to-apprentice ratio must be maintained. Using unregistered "apprentices" at reduced rates is a Davis-Bacon violation.
Worker Classification
Employee vs. independent contractor in construction
Worker misclassification is the #1 compliance risk in construction. The IRS, DOL, and state agencies each apply different tests — and construction's supervisory, tool-providing, multi-project model frequently fails these tests even when the parties intend an independent relationship.
The ABC test in CA, MA, NJ, and other states makes 1099 classification nearly impossible for core construction work
The ABC test presumes all workers are employees. To classify someone as a contractor, you must prove: (A) they are free from control in performing the work; (B) the work is outside the usual course of the business; and (C) the worker is customarily engaged in an independently established trade. A framing carpenter working for a construction company fails prong B — framing is exactly what the company does. Most craft workers cannot be 1099s in ABC-test states.
Exposure if misclassified
3 years of back wages
Plus overtime, FICA taxes, workers' comp premiums, unemployment insurance, and benefits
IRS test
Behavioral + financial + type of relationship
20-factor common-law test. Behavioral control is most heavily weighted.
DOL test
Economic reality test
Is the worker economically dependent on your company, or truly in business for themselves?
ABC test states
CA, MA, NJ, VT, CT, IL
Strictest classification standard — presumes employee status
Safety
OSHA compliance for construction companies
Construction falls under OSHA Part 1926 (Construction Industry Standards), not the general industry standards. The construction standards are more specific and in some ways stricter. Falls are the leading cause of construction fatalities and OSHA's most-cited violation in the industry.
Fall protection
Required at 6 feet
Guardrails, safety nets, or personal fall arrest systems required for work at 6+ feet above lower level
Fatality reporting
Within 8 hours to OSHA
Any work-related fatality must be reported. Hospitalizations of 3+ workers: within 24 hours.
OSHA 300 logs
Required for 10+ employees
Maintain injury/illness logs, post Form 300A from Feb 1–Apr 30 each year
Safety training
Must be in workers' language
OSHA 10 commonly required by GCs; OSHA 30 for supervisors. Training must be comprehensible.
Multi-employer worksite liability
On a construction site with multiple employers, OSHA can cite the creating employer (who created the hazard), the controlling employer (who supervises the work area), the exposing employer (whose workers are exposed), and the correcting employer. As a general contractor, you may be cited for subcontractor violations if you had actual knowledge or constructive knowledge of the hazard.
Payroll
Multistate payroll for construction crews
Construction crews frequently work across state lines. Each state where an employee performs work creates independent compliance obligations — wage rates, overtime rules, break requirements, and payroll tax registration.
State minimum wage
Apply the higher rate
If a worker performs work in a state with a higher minimum wage, that rate applies for those hours
Payroll tax registration
Required per state
Working in a new state for as few as a few days may trigger payroll tax registration obligations
Workers' comp
Coverage in each state
Most states require workers' comp coverage valid in that state — a policy from your home state may not be sufficient
Per diem
IRS rate — no payroll tax
Per diem at or below IRS rates for travel away from home is not subject to payroll tax
Insurance
Workers' comp and subcontractor insurance requirements
Workers' compensation is mandatory for all employees in every state. In construction, the insurance requirement extends to verifying that your subcontractors carry their own coverage — gaps in sub coverage can expose your policy.
Always collect and verify certificates of insurance before subs start work
Get certificates for general liability and workers' comp from every subcontractor before work begins. Set up a tracking system to catch renewals — a lapsed certificate means that sub's workers may fall on your policy if injured. Many GC contracts require this and allow withholding payment until proof of coverage is received.
Using 1099 subs does not eliminate workers' comp liability if they're misclassified
If state authorities determine your "independent contractors" are actually employees, you owe workers' comp premiums for the entire period — often with penalties. Workers' comp carriers audit payroll records annually and will assess additional premiums if they find uncovered workers.
FAQ
Construction HR — common questions
What is certified payroll and when is it required?
Certified payroll (Form WH-347) is a weekly report submitted on Davis-Bacon prevailing wage projects certifying that each worker received at least the required prevailing wage for their classification. It must be submitted within 7 days after each payroll period. Falsifying certified payroll is a federal crime.
Can my working foreman or superintendent be exempt from overtime?
Only if their primary duty is managing — not performing construction work alongside the crew. A foreman who spends the majority of their shift doing hands-on work is non-exempt and entitled to overtime. Job title is irrelevant; actual duties determine exempt status.
Do I need to pay travel time for workers commuting to jobsites?
Normal commute from home to the first jobsite is generally not compensable under the FLSA. Travel from one jobsite to another during the workday is compensable. Travel away from home on out-of-town projects during normal working hours is compensable. Check your state — some states have stricter rules.
What notices must I post at a construction jobsite?
At minimum: OSHA Job Safety and Health notice, FLSA Employee Rights notice, FMLA notice (50+ employees), EEOC notice. On Davis-Bacon projects: the Davis-Bacon poster and applicable wage determination. States add additional posting requirements. On mobile jobsites, notices must be posted at each work location.
What are the rules for hiring workers who may not be authorized?
I-9 verification is required for every employee within 3 business days of hire. Knowingly hiring unauthorized workers violates IRCA and carries fines of $573–$22,927+ per worker. Importantly, undocumented workers retain all FLSA wage rights — you cannot pay sub-minimum wages or withhold overtime because a worker is undocumented, and doing so compounds your liability.
Are construction workers entitled to paid sick leave?
Under federal law, no. But 22+ states require paid sick leave — including California, Colorado, Illinois, Massachusetts, New York, Oregon, and Washington. The obligation follows where the employee works, not where your company is based.
Check your state requirements →