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On December 28, 2004, the Wisconsin Court of Appeals affirmed the Department of Workforce Development’s (DWD's) decision to debar Kruczek Construction, Inc. of Green Bay from working on state or municipal contracts for six months. The basis for DWD’s debarment decision was the Company’s failure to pay the correct prevailing wage to one of its employees in the relatively minor amount of $4,400. The decision in Kruczek Construction v. Wisconsin Dept. of Workforce Development, 04-0090 (Ct. App. Dist. III) shows that even minor violations of Wisconsin’s prevailing wage statute with no credible explanation can result in serious consequences to Wisconsin employers that benefit from state or municipal contracts.
Here are a few tips to guide construction and other contractors that work on state and municipal public works contracts:
1. Review hourly and overtime pay practices to ensure your company is in compliance with Wisconsin’s prevailing wage statutes and their federal equivalent, the Davis-Bacon Act as well as Wisconsin’s Wage payments, claims and collections statute and the Fair Labor Standards Act. Specifically, the Department of Workforce Development can debar companies from state and municipal public works projects under Administrative Code DWD §294.05(2) based on a conviction or civil judgment of a Wisconsin court, a finding of any Wisconsin state agency (as in Kruczek) or local governmental unit, a DWD finding or an admission of one or more of the following:
- Failing to pay an employee the proper prevailing wage rate determined for a public works project.
- Failing to pay an employee at least 1.5 times the proper hourly basic rate of pay for all hours worked in excess of the prevailing hours of labor determined for a public works project.
- Inducing any employee to give up, waive or return any part of the proper prevailing wage rate determined for a public work project.
- Falsifying, deliberately destroying, or failing to keep required payroll records on a public works project.
2. Audit employment records to see if any prevailing wage complaints have been settled in the past that may come back to haunt your company so you can determine what, if any, steps need to be taken to deal with these loose ends. If the case was settled, review whether DWD is a signatory to the settlement agreement.
3. Make the employee whole if the prevailing wage claim is legitimate. One way to do this is to negotiate a settlement with the employee that is contingent on DWD’s signature on the agreement. To convince the Agency to sign off on the agreement, the settlement agreement should make the employee whole for any prevailing wage violations and the release should be narrowly tailored to include a waiver of wage claims only.
4. Gather evidence to show the violation was an isolated incident, inconsistent with your company’s normal payroll practices and not the result of bad faith if DWD does not approve and sign the settlement agreement. Gathering evidence to show how and why the prevailing wage violation occurred and that there was no bad faith are key to avoiding a debarment proceeding.
If you have questions concerning this decision or any other employment law issues, please contact our educational services department at (414)988-8400. For more detailed information on this decision, see our January 2005 Issue of the Month at www.krukowski.com.
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