Report - Labor Law Compliance on Virginia Public Works Contracts (October 1, 2021)
Summary
The 2021 Report: Labor Law Compliance on Virginia Public Works Contracts, submitted October 1, 2021 by Megan Healy, Virginia Secretary of Labor, as required by Chapter 56, 2020 Acts of Assembly and Chapter 552, 2021 Acts of Assembly. The executive summary says the 2020 mandate directed the Secretary to convene a workgroup to review the Commonwealth's public works payment process to determine whether misclassification, payroll fraud and other forms of wage theft are prevalent problems on public works contracts. It says the workgroup met four times, an online survey received 57 responses, and a George Mason University (GMU) study covered labor laws in 11 states. The report sets out policy recommendations and appendices on workgroup members, presentations, survey results and a multi-state survey.
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Labor Law Compliance on Virginia Public Works Contracts
2021 Report as required by Chapter 56, 2020 Acts of Assembly &
Chapter 552, 2021 Acts of Assembly
Submitted by Dr. Megan Healy, Virginia Secretary of Labor
October 1, 2021
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 2
Table of Contents
I. Executive Summary 3
II. Background 5
III. Multi-State Survey of Relevant Labor Laws 9
IV. Policy Considerations 11
Bibliography 27
Overview of Appendices 29
Appendix A: Workgroup Members & Contributors 30
Appendix B: Workgroup Presentations 32
Appendix C: Results of Public Comment Survey 54
Appendix D: Multi-State Survey of Relevant Labor Laws 61
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 3
I. Executive Summary
The Commonwealth’s Secretary of Labor (previously the Commonwealth’s Chief Workforce Advisor to
the Governor) is submitting this report pursuant to Chapter 56 of the 2020 Acts of Assembly and Chapter 552 of
the 2021 Acts of Assembly . The 2020 legislative mandate directed the Secretary to convene a workgroup to
review the Commonwealth’s public works payment process to contractor employees to determine whether
misclassification, payroll fraud, and other forms of wage theft are prevalent problems on Virginia public works
contracts. In finding that they were, the workgroup was also tasked with identifying potential policies and
process improvements to correct such issues.
The Secretary is required to submit the final report on potential strategies to combat labor law violations
on state contracts to the Chairs of the House Appropriations Committee and Senate Finance and Appropriations
Committee no later than October 1, 2021.
The workgroup was composed of representatives from the House Appropriations and Senate Finance
and Appropriations Committees, Virginia public colleges and universities, labor organizations representing
affected workers, the general contractor and subcontractor business community, and the relevant state regulatory
and enforcement agencies. Additional subject matter experts were consulted as needed. The group met four
times in total to review the Commonwealth’s public works payment process, analyze strategies for potential
implementation, and discuss their impacts on relevant stakeholders.
The Secretary also solicited public comment through an online survey that received 57 responses on
behalf of relevant state regulatory and enforcement agencies, industry associations, and worker advocacy
organizations. A summary of the responses is provided in Appendix C.
In addition, the Secretary commissioned a study from George Mason University (GMU) of applicable
labor laws across 11 states to identify statutes in both law and regulation that could inform this report’s
recommendations. A summary of the findings are outlined in Section III, and the full multi-state survey is
provided in Appendix D.
The following recommendations were developed based on feedback from the workgroup, public
comment, and external research. Each is associated with several policies that the Virginia Governor and General
Assembly may consider to prevent the violation of labor laws related to wage theft and misclassification on
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 4
state public works projects. Implementation considerations and budgetary implications are outlined where
applicable.
Recommendations
1. The Commonwealth should take full advantage of debarment as a tool for preventing individuals
or firms that willfully and repeatedly violate state labor laws from participating on future public
works projects. Policies for consideration include: A) expanded grounds for debarment, B) federal
debarment reciprocity, and C) the extension of debarment to other relevant entities.
2. The Commonwealth should establish processes and mechanisms for more strategic enforcement of
labor law violations on state public works projects. Policies for consideration include: A) an
interagency advisory council, B) enhanced data sharing, C) enforcement of Virginia’s labor laws through
the Virginia Fraud Against Taxpayers Act, D) a centralized repository for subcontractor information, and
E) proactive auditing of contractor data.
3. The Commonwealth should require firms to certify compliance with relevant labor laws as a
minimum standard for contracting with the state. Policies for consideration include: A) a monthly
certified payroll requirement, and B) required compliance with state and federal labor laws.
4. The Commonwealth should bolster its complaint-based enforcement model by ensuring that
workers know their rights and are more easily able to submit a complaint. Policies for
consideration include: A) an online reporting method for worker complaints, and B) an outreach
campaign to workers and employers.
5. The Commonwealth should develop standards for the use of independent contractors on state job
sites to prevent misclassification before it occurs. Policies for consideration include: A) an
independent contractor waiver requirement and B) an independent contractor registration requirement.
6. Policies requiring further research and consideration are outlined at the conclusion of Section IV.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 5
II. Background
Labor Law Violations in the Commonwealth
The negative effects of labor law violations such as worker misclassification and wage theft reverberate
across the economy. While hard-working Virginians are defrauded of the pay and benefits that they rely on to
provide for their families, employers playing by the rules are left at a disadvantage. This results in less tax
revenue for the state while non-compliant businesses enjoy significant payroll cost savings. In the case of
misclassification, for example, research shows that a Virginia employer in the construction industry stands to
save an estimated 26 percent over law-abiding competitors by engaging in this illegal practice.1
The Virginia General Assembly first acknowledged the importance of these issues in 2011 when it
adopted Senate Joint Resolution 345, which directed the Joint Legislative Audit and Review Commission
(JLARC) to examine the prevalence and effects of misclassification in the Commonwealth. The resulting report
served as the basis for later efforts by the Virginia Governor, legislators, and policy leaders to address this and
other forms of wage theft head on. The Inter-Agency Taskforce on Worker Misclassification and Payroll Fraud,
established by Governor Northam’s Executive Order 38 and led by the Governor’s Secretaries of Labor and of
Commerce and Trade, released 11 recommendations in 2019 to support Virginia workers in receiving the pay,
workplace protections, and benefits they have rightly earned.
Governor Northam and Virginia General Assembly members have since worked diligently to strengthen
the laws that protect the Commonwealth’s workers from wage theft. Below is an overview of the expanded
protections that were established during the 2020 legislative session as a result of the Governor’s Interagency
Taskforce Report.2 Information on Tax and DOLI’s enforcement of these laws to date can be found in Appendix
B.
HB 123 and SB 838: The Wage Theft Law, signed by Governor Northam on April 12, 2020, allows
employees to either individually or collectively sue their employers for unpaid wages, a private right of action
not previously available under Virginia law. Following its enactment on July 1st, 2020, DOLI received
1
Joint Legislative Audit and Review Commission (VA), 2012, Review of Employee Misclassification in Virginia, Commonwealth of
Virginia, Pg. iii, http://jlarc.virginia.gov/pdfs/reports/Rpt427.pdf.
2
Inter-Agency Taskforce on Misclassification and Payroll Fraud (VA), 2019, Report for Executive Order 38 (EO38),
https://www.governor.virginia.gov/media/governorvirginiagov/governor-of-virginia/pdf/Final_Worker-Misclassification-Report.pdf.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 6
enhanced authority that allows the agency to investigate suspected wage theft cases that are uncovered in
unrelated investigations.
In addition to owed wages and interest, a worker found to have been the victim of wage theft is now
entitled to compensation for reasonable attorney’s fees. In cases where wage theft was committed knowingly,
employees can recover up to triple damages, and employers can face criminal charges up to a felony depending
on the scale of the offense. General contractors operating in the construction industry are now also held jointly
and severally liable for wage theft claims made against their subcontractors.
HB 1407 and SB 744 Misclassification Omnibus: Effective January 1, 2021, HB 1407 states that an
individual performing services for an employer for remuneration is assumed to be an employee of the party that
pays them unless it has been demonstrated that the individual is an independent contractor. To further protect
Virginians, the law also prohibits employers from requesting that workers sign an agreement embracing a
misclassified status or otherwise inaccurately reflecting the employment relationship.
The Department of Taxation is responsible for making determinations around independent contractor
status in conformance with the guidelines laid out by the Internal Revenue Service. All occurrences of
misclassification by the same employer within 72 hours will be treated as a single offense. If found to be in
violation, employers will be subject to an escalating set of penalties.
Under the new law, a finding of misclassification is particularly impactful for contractors competing for
public dollars. Following repeated determinations of noncompliance by the Department of Taxation, all public
bodies will be prohibited from awarding a contract to violating employers for up to one year for a second
offense and up to three years for subsequent offenses.
HB 1199 and SB 662 Retaliation: Effective July 1, 2020, the signing of HB 1199 protects employees
and independent contractors who report misclassification from professional retribution. Workers facing illegal
retaliation may file a complaint with the Commissioner of DOLI, who can institute remedies including
reinstatement and lost wages following an administrative process.
SB 894 and HB 984 Misclassification Cause of Action: Effective July 1, 2020, an individual who has
not been properly classified as an employee may bring civil action for damages against his or her employer for
failing to properly classify the employee if the employer had knowledge of the individual’s misclassification.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 7
The court may award damages in the amount of any wages, salary, employment benefits, including expenses
incurred by the employee that would otherwise have been covered by insurance or other compensation lost to
the individual, a reasonable attorney fee, and the costs incurred by the employee to bring action. The measure
provides that an individual who performs services for a person for remuneration shall be presumed to be an
employee unless it is shown that the individual is an independent contractor as determined under the Internal
Revenue Service guidelines.
HB 1646 Board of Contractors Requirements: Effective July 1, 2020, this bill provides that the Board
for Contractors shall require a contractor to appropriately classify all workers as employees or independent
contractors, pursuant to law. Any contractor who is found to have intentionally misclassified any worker is
subject to sanction by the Board of Contractors.
SB 48 and HB337 Wage Theft Discrimination: Effective July 1, 2020, an employer is prohibited from
discharging or otherwise discriminating against an employee because such employee has filed any complaint or
instituted or caused to be instituted any proceeding, testified, or is about to testify in any proceeding related to
nonpayment of wages.
SB 49 and HB 336 Wage Theft Investigations: Effective July 1, 2020, the Commissioner of DOLI is
authorized to investigate whether an employer has failed or refused to make a required payment of wages to an
employee who has filed a complaint. The bill also includes employees under the same accused employer who
may have not filed a complaint but who it is reasonable to believe are experiencing wage theft. After initial
complaints, written complaints or written and signed consent is not needed to institute proceedings on behalf of
any employee against his or her employer for nonpayment of wages.
Labor Law Violations on Virginia Public Works Contracts
While the legislation outlined above has significantly strengthened the protections available to Virginia’s
workers, enforcement and prevention of violations continue to be key. Nowhere is this more obvious than on
state public works projects, where evidence suggests wage theft and misclassification continue to harm workers
despite the myriad rules in place to prevent them. Earlier this year, for example, a state investigation found that
contractors working on the new Virginia General Assembly building had misclassified dozens of workers and
thereby defrauded them of overtime pay and benefits including workers’ compensation and unemployment
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 8
insurance.3 As a top buyer of goods and services across the state, the Commonwealth must ensure that these
occurrences are not commonplace and that the public sector serves as a model for the private sector.
The Virginia General Assembly acknowledged the importance of ensuring compliance with labor laws
on public works projects during the 2020 Special Session, when Delegate Carr introduced a budget amendment
directing the Governor’s Secretary of Labor to review the issue. The language is as follows:
"E.1. The Commonwealth's Chief Workforce Advisor to the Governor shall convene a workgroup to review the
Commonwealth's state public works payment process to contractor employees to identify whether
misclassification of workers is a prevalent problem. If the findings reveal such misclassification, the workgroup
shall identify and make process improvement recommendations to correct any identified issues.”
The resulting workgroup affirmed the reality of labor law violations on state contracts and the
importance of addressing this issue for the benefit of workers, law-abiding contractors, and Virginia taxpayers.
Members of the workgroup and other subject matter experts raised a variety of concerns with the public works
bidding and payment process that served as the basis for the final policy considerations. Their consensus was
that as both a major market participant and protector of the public interest, the Commonwealth must ensure the
highest standards of legal conformity are met on both publicly and privately supported job sites. Virginia is well
positioned to serve as a model of good business practice for private and local public employers to follow by
more effectively enforcing its labor laws on state publicly funded job sites, incentivizing good business
practices, and supporting a culture of compliance.
3
Martz, Michael, March 5, 2021, State probe finds worker misclassification in construction of new General Assembly building,
Richmond-Times Dispatch,
https://richmond.com/news/state-and-regional/govt-and-politics/state-probe-finds-worker-misclassification-in-construction-of-new-ge
neral-assembly-building/article_e5ba1226-d97b-560e-8052-ff227b5cc784.html.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 9
III. Multi-State Survey of Relevant Labor Laws
While federal statutes such as the Fair Labor Standards Act (FLSA) and Davis-Bacon Act have
far-reaching impacts on United States labor laws, individual states also have significant leeway to shape and
enhance their realization. As Justice Louis Brandeis said in New State Ice Co. v. Liebmann, 285 U.S. 262
(1932): states serve as critical “laboratories of democracy” by searching for their own unique solutions to
difficult problems.
For this reason, the Virginia Secretary of Labor, in collaboration with the Virginia Department of Labor
and Industry (DOLI), commissioned a study from George Mason University (GMU) of applicable labor laws
across the following 11 states: Maryland, Pennsylvania, New Jersey, New York, Connecticut, Illinois,
Minnesota, Nebraska, Montana, Oregon, and Washington. GMU was tasked with identifying statutes in both
law and regulation that:
❖ address wage theft, by that name or otherwise;
❖ require or authorize state agencies to share information and coordinate actions regarding employers
found to have engaged in wage and hour violations, especially in the field of employee
misclassification;
❖ prescribe standards or principles by which employee/independent classification decisions are made;
❖ address exempt/nonexempt standards for considering alleged wage and hour violations;
❖ address payroll fraud perpetrated by government contractors specifically;
❖ impose payroll certification requirements as part of a public project prevailing wage statute; and
❖ provide civil or criminal sanctions for “labor trafficking.”
There are several areas where the analysis of other states reveals potential challenges, opportunities, and
uncharted territory for the Commonwealth as it works to ensure compliance with labor laws on state contracts.
The following observations in particular have informed the policy considerations that will follow in this report.
For additional information, GMU’s full analysis is available in Appendix D.
Inter-agency Information Sharing: Three observations arise on this topic: (a) most of the surveyed states
have not yet taken steps to require or even encourage information sharing across agencies where labor law
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 10
violations have occurred; (b) that seems likely to change in the short term, as a number of states (e.g. New York,
Oregon) have empaneled groups of experts and stakeholders with the goal of improving cross-agency
communications; and (c) some states have established information-sharing mandates that require relevant
enforcement agencies to collaborate. Beyond information sharing, some states have also authorized
cross-agency agreements regarding prosecution or enforcement of possible labor law violators.
Payroll Fraud By Government Contractors: Few states among those studied have independent criminal
or civil statutes addressing this issue. This appears to be likely because other, less specific statutory schemes
address the subject adequately. Most states have a “little False Claims Act,” patterned to one degree or another
on the federal statute of that name. These statutes usually (although not always) act as “private attorney general”
statutes that encourage civilians aware of fraud against the government to alert state officials and either share in
the damages that flow from government prosecution of a civil case or allow the individual to prosecute the
action on his or her own. Even where no state False Claims Act exists, criminal sanctions are available against
one who attempts to defraud the government.
Payroll Certification As to Prevailing Wage Compliance: Just as many states have their own FLSA-type
statutory regimes and “little False Claims Act” statutes, many have their own “little Davis-Bacon” prevailing
wage statutes. In the prevailing wage area, however, the states stray further from the federal design. The GMU
report focused specifically on the question of whether the studied states have a requirement that a contractor or
subcontractor (or the former on behalf of the latter) must certify that they have been paying, or have paid, the
prevailing wage on their projects. Some require an oath and affirmation both on the front end (in the contract),
during (in periodic bi-monthly or monthly payroll statements), and on the back end (before the project is finally
accepted by the agency). Others require what is called a “certification,” but without the explicit requirement that
it be under oath. Others require no statement at all until the matter has been drawn into question by an allegation
of wrongdoing. Finally, the consequences of a failure to certify or pay the prevailing wage vary considerably, in
some cases leading to long-term debarment.
For additional information, GMU’s full analysis is available in Appendix D.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 11
IV. Policy Considerations
The five recommendations outlined in this section were developed through external research,
discussions with workgroup members, and feedback from public comment. Each recommendation is associated
with several policies for consideration that fall into one or more of the following categories: Legislative
(including budget amendments), Agency, and/or Executive Branch. Budget implications are outlined where
applicable.
It is important to note that while many of the following recommendations refer broadly to state
contracting and enforcement agencies, there are many other categories of organizations engaged in the
procurement of goods and services across the Commonwealth. All initiatives should be developed with this in
mind by incorporating covered institutions and local governments where possible.
Recommendations
1. (Page 13) The Commonwealth should take full advantage of debarment as a tool for preventing
individuals or firms that willfully and repeatedly violate state labor laws from participating on
future public works projects. Policies for consideration include: A) expanded grounds for debarment,
B) federal debarment reciprocity, and C) the extension of debarment to other relevant entities.
2. (Page 15) The Commonwealth should establish processes and mechanisms for more strategic
enforcement of labor law violations on state public works projects. Policies for consideration
include: A) an interagency advisory council, B) enhanced data sharing, C) enforcement of Virginia’s
labor laws through the Virginia Fraud Against Taxpayers Act, D) a centralized repository for
subcontractor information, and E) proactive auditing of contractor data.
3. (Page 18) The Commonwealth should require firms to certify compliance with relevant labor laws
as a minimum standard for contracting with the state. Policies for consideration include: A) a
monthly certified payroll requirement, and B) required compliance with state and federal labor laws.
4. (Page 21) The Commonwealth should bolster its complaint-based enforcement model by ensuring
that workers know their rights and are more easily able to submit a complaint. Policies for
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 12
consideration include: A) an online reporting method for worker complaints, B) an outreach campaign to
workers and employers, and C) certification and professional development requirements for contractors.
5. (Page 24) The Commonwealth should develop standards for the use of independent contractors on
state job sites to prevent misclassification before it occurs. Policies for consideration include: A) an
independent contractor waiver requirement and B) an independent contractor registration requirement.
Several policies were submitted during the public comment period but require additional research before
implementation. These are listed under Additional Considerations.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 13
Recommendation 1. The Commonwealth should take full advantage of debarment as a tool for
preventing individuals or firms that willfully and repeatedly violate state labor laws from participating
on future public works projects.
In the event that a contractor is found to have violated certain state or local laws, the Virginia Public
Procurement Act (VPPA) authorizes debarment of the business “from contracting for particular types of
supplies, services, insurance or construction, for specified periods of time.”4 Entities can be debarred for a
variety of reasons including a breach of contract with a state agency, bribery of a procurement official, or the
violation of anti-discrimination provisions.5 This is a powerful tool for ensuring that the state avoids doing
business with non-responsible contractors and thereby decreases the likelihood of future illegal activity on state
public works projects.
While the Virginia Code generally allows for debarment for “any cause indicating that the individual or
firm lacks the moral and business integrity and reliability that will assure good faith performance6,” additional
clarity is needed on the specific labor law violations that would constitute grounds for debarment in the
Commonwealth. At the federal level, for example, the Secretary of Labor is explicitly authorized to debar
contractors under the Walsh-Healey Act (41 U.S.C. § 37), the Davis-Bacon Act (40 U.S.C.§ 3144), and the
Clean Water Act (33 U.S.C. § 1368), among others. 7 The Commonwealth should evaluate where an expansion
of its own debarment authority beyond misclassification8 would be warranted in order to cover more instances
of noncompliance with local, state, and/or federal labor laws.
Policies for Consideration
A. Expanded Grounds for Debarment (Legislative): Virginia could prevent all public bodies and covered
institutions from awarding a contract to any employer who is found to have willfully and repeatedly violated
state labor laws. In parity with the existing penalty for misclassification, this would entail debarment for a
4
VA. Code §§ 2.2-4300 to -4377, https://law.lis.virginia.gov/vacodefull/title2.2/chapter43/.
Note that certain entities and procurements are exempt from the Virginia Public Procurement Act.
5
Division of Purchases and Supply, Department of General Services, (VA), 2019, A Vendor’s Guide on How to do Business with the
Commonwealth of Virginia, Commonwealth of Virginia, pg. 54, section 7-20,
https://dgs.virginia.gov/globalassets/business-units/dps/documents/vendorsmanual/vendorsmanual_2019_final.pdf.
6
VA. Code §2.2-4300 to -4377.
7
Congressional Research Service, Debarment and Suspension of Government Contractors: An Overview of the Law Including recently
Enacted and proposed Amendments (RL34753), Prepared by Kate M. Manuel, 2008, https://sgp.fas.org/crs/misc/RL34753.pdf.
8
VA. Code § 58.1-1902. https://law.lis.virginia.gov/vacode/58.1-1902/.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 14
period of up to one year from the date of the notice for a second offense and for a period of up to three years
for a third or subsequent offense. In line with states such as New Jersey and Pennsylvania, Virginia labor
laws for which a violation would constitute grounds for debarment could include those governing overtime
wages, minimum wage standards, prevailing wage standards, discrimination in wages, occupational safety,
and child labor. DOLI or other relevant enforcement authority would be responsible for notifying all public
bodies and covered institutions of the name of the employer in the event of a violation.
B. Federal Debarment Reciprocity (Legislative): Virginia could establish a reciprocal statute that prevents
any contractor debarred by the federal government from being awarded a Virginia public works contract
unless the relevant state agency or authority determines that it is in the best interest of the Commonwealth,
pursuant to the authority’s written debarment policy9. In New York, agencies and/or authorities refer to the
federal System for Award Management at the following link to determine if a bidder has been federally
debarred: https://sam.gov/content/home/. Further research is needed to determine if a reciprocal statute for
debarment in other U.S. states is feasible.
C. Extension of Debarment to Other Relevant Entities (Legislative): The Commonwealth could codify the
ability of contracting agencies to extend its debarment to other entities that have a common ownership
relationship with the debarred contractor in order to limit a business owner’s ability to hide under another
entity. NJ Rev Stat § 34:11-56.38 (2013) may serve as an example.10 While this is already practiced by DGS,
additional consideration is needed into how this might be extended to other contracting bodies in the
Commonwealth.
9
Department of Transportation (VA), n.d., Debarment and/or Suspension Policy,
https://www.virginiadot.org/projects/resources/Exhibit_D_debarment_procedures.pdf.
10
N.J. Code § 34:11 - 56.38, https://law.justia.com/codes/new-jersey/2013/title-34/section-34-11-56.38/.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 15
Recommendation 2. The Commonwealth should establish processes and mechanisms for more strategic
enforcement of labor law violations on state public works projects.
For the purposes of this report, “strategic enforcement” is defined as an approach that uses state
agencies’ limited enforcement resources in a data-driven and deliberate manner in order to enhance their overall
impact on employer behavior. This can include using data to map out geographic or industry trends across labor
law violations, going beyond complaints to conduct audits and proactive investigations in high-risk sectors, and
collaborating with businesses at the top of their industry that have a strong history of compliance. Research has
shown that while complaint-based enforcement is more likely to reveal a violation, strategic enforcement has
greater ripple effects on compliance across the industry.11 Additional research is needed, but the following
policies represent the beginnings of a more strategic enforcement infrastructure for the Commonwealth.
Policies for Consideration
A. Interagency Advisory Council for Ongoing Coordination (Legislative, Executive Branch, Agency): In
a manner similar to New York, Virginia could establish a permanent interagency council to combat wage
theft and misclassification on both state public works projects and within the private sector12. The
Interagency Advisory Council Against Worker Exploitation would be responsible for regularly monitoring
data on labor law compliance on state contracts, analyzing strategic enforcement strategies for potential
implementation, gathering input from the public, and developing ongoing recommendations to the Virginia
General Assembly and Governor. This group could also be responsible for evaluating the strategies within
this report that have been flagged as needing further research.
B. Enhanced Data Sharing (Legislative, Agency): The Commonwealth could establish a legislative mandate
that all relevant regulatory and contracting agencies cooperate to share information on confirmed labor law
violations to better streamline statewide enforcement activities.
Currently, the Virginia Department of Taxation is required to refer information on employers determined to
have misclassified their employees to regulating agencies such as the Virginia Department of Labor and
Industry, Virginia Employment Commission, and Department of Small Business and Supplier Diversity.
11
Weil, David, 2010, Improving Workplace Conditions Through Strategic Enforcement, Boston University,
https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/strategicEnforcement.pdf.
12
N.Y. Executive Order 2016-159, July 20, 2016, https://www.governor.ny.gov/sites/default/files/atoms/files/EO_159.pdf.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 16
VOSH will also refer contractors that are found to be unlicensed on state job sites to DPOR/VEC. The data
sharing mandate would expand this activity among the members of the aforementioned interagency council
and include a requirement that agencies develop common data standards and a data-sharing agreement.
C. Enforcement of Virginia Labor Laws through the Virginia Fraud Against Taxpayers Act (Executive,
Agency): The Office of the Governor and relevant regulatory agencies could collaborate with the Office of
the Attorney General to establish a process for the prosecution of unlawful contractors on state projects
through the Virginia Fraud Against Taxpayers Act. 13 Other states such as Massachusetts and Illinois have
taken advantage of their false claims statute to target contractors who have falsely certified information to
the state with regards to prevailing wage, wage theft, and misclassification.14 This approach, with more
substantial penalties than those in existing labor law, could be strategically employed against instances of
willful and egregious misclassification or wage theft.
D. Centralized Repository for Subcontractor Information (Agency): The Public Body Procurement
Workgroup, established through a 2021 budget amendment and led by DGS, was tasked with providing best
practices associated with oversight of subcontracts to include reporting requirements for payroll records,
contracts, and payments to other businesses.15 In alignment with this group’s recommendations, the
Commonwealth should consider instituting a process whereby prime contractors, state agencies, and
covered institutions provide awarded capital outlay contracts above $3 million in a centralized reporting
system. This would provide the state with greater visibility into the presence and activity of subcontractors
on state public works projects.
Prime contractors would be required to gather the information from their subcontractors for entry into
this system. Information requirements to achieve SWaM and oversight goals through centralized reporting
would be determined by the audit and enforcement agencies within the aforementioned interagency council.
Consideration is needed into the specific data elements that will be gathered, particularly if the state adopted
a monthly certified payroll requirement as outlined under Recommendation 3. If developed, this method
13
VA. Code § 5.01-216.3, https://law.lis.virginia.gov/vacode/title8.01/chapter3/section8.01-216.3/.
14
Ortiz, Nicholas F. (2016). “Prevailing Wage and False Claims Acts,” Massachusetts Wage Law,
https://masswagelaw.com/prevailing-wage-false-claims-act/.
15
VA. H.B. 1800, Item 82 #1h, 2021 Special Session I, 2021,
https://budget.lis.virginia.gov/amendment/2021/2/HB1800/Introduced/FA/82/1h/
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 17
should be efficient and effective for state agencies, covered institutions, and contractors, which may include
building interfaces between purchasing systems.
Preliminary Fiscal Impact: It is anticipated that the aforementioned audit and enforcement agencies will
require additional investigators to audit subcontractor data. There will also be a cost for centralized
reporting that involves linking the state’s existing procurement system (eVA) with those of six higher
education, or “covered”, institutions. Additional information is needed before the fiscal impact can be
determined.
E. Proactive Auditing of Contractor Data (Agency): Audit and enforcement agencies with authority to
ensure compliance and oversight could perform an audit of selected contractor data. The selection of
contractors to be audited would be done in a manner prescribed and/or facilitated by the audit agency and in
collaboration with the aforementioned interagency council. Final audit findings, as determined by the audit
agency, should be communicated to the owner agency, DGS or appropriate covered institution, and to the
interagency council.
Preliminary Fiscal Impact: Depending on the number of audits being executed, agencies will likely
require additional staff to review the pay records and documentation of employers onsite. DOLI estimates
the need for two additional compliance officers, each at $99,070 per year, to perform audits of selected
contractor data. The Department of Taxation, which has an existing audit program for misclassification, has
also requested additional auditors and an audit team lead to conduct investigations.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 18
Recommendation 3. The Commonwealth should require firms to certify compliance with relevant labor
laws as a minimum standard for contracting with the state.
The strategy of requiring contractors to certify relevant information to the state, often employed at the
federal level, allows non-compliance to be identified more promptly and establishes a paper trail for
enforcement authorities to later follow. It could also potentially preempt violations of the law by ensuring that
prospective bidders are educated on their minimum contractual obligations.
Policies for Consideration
A. Monthly Certified Payroll Requirement (Legislative, Agency): Virginia could establish a monthly
payroll certification requirement for contracting employers to ensure that they are meeting their prevailing
wage obligations, including both hourly pay and fringe benefits, throughout the length of the contract.
In line with comparable states such as Maryland and New Jersey, DOLI would need an online system to
receive the certified payroll submissions and sufficient staff to monitor and conduct audits based on
complaints and/or inconsistencies flagged within the data. Per input from workgroup members, it is
recommended that Virginia use similar technology systems and/or processes to those that are required at the
federal level, making them more easily incorporated into many contractors’ existing business processes.
Additionally, while employers are currently required to maintain records of wages and provide them to the
Commissioner upon request, there is no penalty for a failure to do so. Several states surveyed by George
Mason University for this report have instituted penalties for a failure to provide records, and for a failure to
certify payroll where required. Alongside the institution of a monthly certified payroll requirement, the
Commonwealth should also establish either a set fine or a per day, per employee penalty for
non-compliance.16
Preliminary Fiscal Impact: It is estimated that this policy would have a general fund expenditure impact
on DOLI, which would be responsible for administering the monthly certified payroll program. DOLI
anticipates that start-up costs will be $1.1 million in FY 2023 and ongoing operational costs will be
$542,063 annually.
16
See Appendix D. Pg. 56, multi-state survey
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 19
Fiscal Year $ Dollars Positions Fund
2022 N/A 0 N/A
2023 $1,098,063 5.0 GF
Recurring (2023 - ) $542,063 5.0 GF
DOLI anticipates that five additional staff (FTEs), including four labor law compliance officers and one
financial services specialist, would be needed to monitor data and conduct audits. Most of the investigations
will require regular onsite visits but some may involve inquiries into more complex fiscal dealings involving
the fringe benefits that are part of most prevailing wage determinations. Maryland, which received 154,000
certified payrolls per year, has five employees to monitor the system. New Jersey estimates that four of their
labor law investigators have been needed. The estimated recurring cost for these five additional staff is
$498,063.
In addition to staffing, DOLI estimates that it would require start-up costs of approximately $600,000 in
order to upgrade its payment of wage computer system to a more modern and responsive program. This
upgrade would include a portal for employers to submit their monthly certified payroll information as well
as an online complaint form as described under Recommendation 4. Recurring expenses would include a
yearly licensing fee of $24,000 for the payment of wage system and an ongoing VITA security scan for
$20,000 that is conducted to ensure personally identifiable information remains protected.
B. Required Compliance with State and Federal Labor Laws (Legislative): Within the state’s process for
competitive sealed bidding or competitive negotiation under the Virginia Public Procurement Act (VPPA),
public bodies could be required to include in every written contract a provision that prospective contractors
must be in compliance with the labor laws of the Commonwealth, other U.S. states, and/or the federal
government, and that they are not currently debarred in any of these jurisdictions. Labor laws for
certification could include those governing overtime wages, minimum wage standards, prevailing wage
standards, discrimination in wages, occupational safety, and child labor. The written contracts should
include language and an overview of the applicable laws to support the education of the prospective
contractor, to be developed by DGS in collaboration with the relevant labor agencies.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 20
This provision would allow DGS to immediately institute debarment proceedings if they find, based on
information provided from an enforcement agency such as DOLI, that a contractor has falsely certified theri
compliance with labor laws. An additional penalty, such as a fine or Class 1 misdemeanor, could also be
established for violations of this rule but should be administered by the enforcement agency rather than the
contracting entity.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 21
Recommendation 4. The Commonwealth should bolster its complaint-based enforcement model by
ensuring that workers know their rights and are more easily able to submit a complaint.
While an important component of federal, state, and local enforcement infrastructure, the approach of
requiring workers to complain to the relevant agency when they suspect that their labor rights have been
violated has significant limitations. Research shows that the number of worker complaints regarding minimum
wage, for example, is often significantly lower than the number of violations occurring in a given industry.17
This demonstrates the importance of educating workers on their rights and removing barriers to the complaint
process to increase the likelihood that victims access protection.
Policies for Consideration
A. Online Reporting Method for Worker Complaints (Legislative, Agency): Virginia could require that
DOLI establish a central online form for workers, including those employed by state contractors, to submit
payment of wage, minimum wage, and overtime complaints electronically. This tool should be prominently
displayed on the agency’s website alongside existing electronic forms and other methods of complaint for
labor law violations such as misclassification, occupational safety, etc., all of which should be available in
multiple languages.
Currently, Virginians may only submit a claim for unpaid wages by U.S. postal mail.18 Taxpayers must
contact the Department of Taxation’s Customer Service Unit regarding instances of potential
misclassification. The Commonwealth would be following the example set by states such as Kentucky,
Colorado, and Idaho by removing these barriers to an already difficult process for workers.
Preliminary Fiscal Impact: It is estimated that this policy would have a general fund expenditure impact
on DOLI, which would be responsible for developing the form and responding to complaints. DOLI
anticipates that costs will be $472,202 annually, beginning in FY 2023.
17
Weil, David & Pyles, Amanda, 2005. Why Complain? Complaints, Compliance, and the Problem of Enforcement in the U.S.
Workplace. Comparative Labor Law & Policy Journal, 27(59). https://hctar.seas.harvard.edu/files/hctar/files/hr08.pdf.
18
Department of Labor and Industry (VA). (n.d.). Labor and Employment Law Forms. Labor & Employment Law.
https://www.doli.virginia.gov/labor-law/claim-for-unpaid-wages-form/.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 22
Fiscal Year $ Dollars Positions Fund
2022 N/A 0 N/A
2023 $472,202 5.0 GF
Recurring (2023 - ) $472,202 5.0 GF
DOLI anticipates five staff (FTEs), including three labor law compliance officers and two assistance
compliance officers, will be needed to process the additional complaints resulting from an online form.
DOLI previously established an online system for the receipt of child labor work permits and began
receiving double the number of permit applications, likely due to the ease of submission. These submissions
are often incomplete and require significant staff time for follow-up. Five employees are now dedicated to
the processing of child labor permit submittals. Based on this experience, as well as the fact that recent
legislation has added minimum wage and overtime wage claims to those processed by DOLI, the agency
estimates that five additional staff are needed at a recurring cost of $472,202.
The online form will require a technology solution in addition to staffing. The development of this form is
included in the estimate for technology previously outlined under Recommendation 3.
B. Outreach Campaign to Workers and Employers (Executive, Agency): State enforcement agencies such
as DOLI and Tax could jointly launch an education and outreach campaign in multiple languages that
targets employees on state contracts with information about their rights and employers with their
obligations. This would include close collaboration with labor unions, immigrant advocacy organizations,
and employment attorneys who already have strong relationships with workers and employers. The
approach could also serve as a pilot for a potential statewide approach to workers’ education beyond state
contracts.
C. Certification and Professional Development for Contracting (Agency): Any state employee who
oversees capital outlay construction contracts with a value as defined by the applicable Appropriations Act
could be required to take an online or face to face certification course by 2023. Information about new labor
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 23
laws specific to construction projects would also need to be integrated into any procurement officer annual
training.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 24
Recommendation 5. The Commonwealth should develop standards for the use of independent
contractors on state job sites in order to prevent misclassification before it occurs.
As outlined in Governor Northam’s 2020 Report from the Inter-Agency Taskforce on Misclassification
and Payroll Fraud, “the misclassification of actual employees as independent contractors creates a competitive
disadvantage for Virginia businesses that follow the law, deprives the Commonwealth of millions of dollars in
tax revenues, and prevents workers from receiving protections and benefits to which they legally are entitled.”19
The negative impacts are compounded when this practice occurs on state public works contracts, thereby
limiting Virginia’s ability to serve as a model employer for the private sector.
Recent Virginia legislation instituted significant penalties for misclassification, including debarment, as
well as a private cause of action for victims. However, many states have gone further to establish standards and
processes that proactively limit opportunities for contractors to misclassify workers. Additional research is
needed, but the Commonwealth should consider one or more of the following approaches to prevent this
damaging practice on state job sites.
Policies for Consideration
A. Independent Contractor Waiver Requirement (Legislative): Building on previously proposed legislation
such as Senator McPike’s SB 1305, the Commonwealth could establish an independent contractor waiver
requirement whereby contractors on state public works projects may only permit the use of independent
contractors by their subcontractors if they have received approval from the relevant contracting authority.20
Versions of this model have been established in the Commonwealth for the Amazon, Inc. headquarters
project in Northern Virginia21 and University of Virginia capital outlay projects, among others.
In alignment with SB 1305, the requirement would apply to all public bodies in a locality with a population
in excess of 25,000 and covered institutions executing construction contracts of more than $500,000.
However, the mandate should not limit contractors’ use of subcontractors given the concerns of several
19
The Inter-Agency Taskforce on Misclassification and Payroll Fraud (VA), 2019, Report for Executive Order 38 (EO38),
https://www.governor.virginia.gov/media/governorvirginiagov/governor-of-virginia/pdf/Final_Worker-Misclassification-Report.pdf.
20
VA. S.B. 1305, 2021 Regular Session, 2021, https://lis.virginia.gov/cgi-bin/legp604.exe?211+sum+SB1305.
21
Sullivan, Patricia, December 14, 2019, Amazon gets final approval for its new HQ in Arlington County, despite protest by organized
labor, The Washington Post,
https://www.washingtonpost.com/local/virginia-politics/amazon-gets-final-okay-for-its-new-hq-in-arlington-despite-organized-labor-p
rotest/2019/12/14/40b37760-1c90-11ea-b4c1-fd0d91b60d9e_story.html.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 25
workgroup members that this would pose a significant barrier to their ability to complete projects. It is also
recommended that the provision apply to all independent contractors, rather than just those representing
over 10% of the cost of the project. Additional consideration is needed into the appropriate grounds for a
waiver.
B. Independent Contractor Registration (Legislative, Agency): Virginia could require any independent
contractor seeking to work on a publicly procured project to register through the Department of Professional
and Occupational Regulation (DPOR) by 2023. This process would support independent contractors in
knowing their employment rights, ensure that they have accurate information about misclassification,
payroll fraud, and wage theft, and help employers identify independent contractors on the job.
A potential pitfall of this approach is the risk that employers will coerce workers, particularly those who are
undocumented, into registering as independent contractors erroneously. In this case, a worker’s registration
would not have legal standing but could serve as a disincentive to speak up about misclassification if they
are not aware of their rights. For this reason, it is critical that any registration process strike a balance
between being accessible and requiring sufficient documentation from the worker to assert that an
independent contractor status is accurate for their situation. Such documentation could include proof of
liability insurance or workers’ compensation.
An alternate version of this strategy could require registration by all independent contractors, regardless of
their work in the private or public sector. Additional research is needed into the efficacy of this approach in
Montana and the strategies for ensuring that registered independent contractors are not vulnerable to
coercion or miseducation through the registration process.22
22
Department of Labor and Industry (MT), (n.d.), Rule: 24.35.101, Independent Contractor Exemption Certificate,
https://rules.mt.gov/gateway/RuleNo.asp?RN=24%2E35%2E101.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 26
Additional Considerations
The following policies were submitted during the public comment period but require additional research before
implementation. These may be areas for future study by the aforementioned Interagency Taskforce Against
Worker Exploitation.
❖ Higher Education Procurement: Examine the existing procurement practices of higher education
institutions and evaluate if any of the policies/procedures outlined in this report should be incorporated
into their Memoranda of Understanding with the state.
❖ Wage and Hour Complaint Hotline: Establish a phone hotline as an easier means for workers to submit
wage and hour complaints. DOLI currently has a phone number where individuals may receive
assistance with filing, but the agency does not have a dedicated staff person available during all business
hours and can only take one call at a time. A system upgrade and additional staff would be required.
❖ VDOT Prequalification Criteria: Amend VDOT’s prequalification criteria to include more stringent
scoring for violations of wage-and-hour, licensing, or safety laws.
❖ Ban on Bid Shopping: Explicitly prohibit practices that encourage bid shopping on public works
projects.
❖ Construction-Specific Independent Contractor Criteria: As in New York, establish a separate standard
for determining whether a worker is an independent contractor in the construction industry specifically.
❖ Expansion of Public Posting Requirements: Ensure that employers are required to publicly post all
relevant information on employees’ labor rights on state job sites.
❖ Public Works Registration Database: Require all contractors, subcontractors, and lower tier
subcontractors to register with the state before bidding on or engaging in the performance of any work
on which the payment of prevailing wage is required.
❖ Ensure Accurate Prevailing Wage Rates: Establish robust processes for the supplementation of Davis
Bacon information by industry.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 27
Bibliography
Congressional Research Service, Debarment and Suspension of Government Contractors: An Overview of the
Law Including recently Enacted and proposed Amendments (RL34753), Prepared by Kate M. Manuel, 2008,
https://sgp.fas.org/crs/misc/RL34753.pdf.
Department of Labor and Industry (MT), (n.d.), Rule: 24.35.101, Independent Contractor Exemption
Certificate, https://rules.mt.gov/gateway/RuleNo.asp?RN=24%2E35%2E101.
Department of Labor and Industry (VA). (n.d.). Labor and Employment Law Forms. Labor & Employment Law.
https://www.doli.virginia.gov/labor-law/claim-for-unpaid-wages-form/.
Department of Transportation (VA), n.d., Debarment and/or Suspension Policy,
https://www.virginiadot.org/projects/resources/Exhibit_D_debarment_procedures.pdf.
Division of Purchases and Supply, Department of General Services, (VA), 2019, A Vendor’s Guide on How to
do Business with the Commonwealth of Virginia, Commonwealth of Virginia, pg. 54, section 7-20,
https://dgs.virginia.gov/globalassets/business-units/dps/documents/vendorsmanual/vendorsmanual_2019_fin
al.pdf.
Inter-Agency Taskforce on Misclassification and Payroll Fraud (VA), 2019, Report for Executive Order 38
(EO38),
https://www.governor.virginia.gov/media/governorvirginiagov/governor-of-virginia/pdf/Final_Worker-Miscl
assification-Report.pdf.
Joint Legislative Audit and Review Commission (VA), 2012, Review of Employee Misclassification in Virginia,
Commonwealth of Virginia, Pg. iii, http://jlarc.virginia.gov/pdfs/reports/Rpt427.pdf.
Martz, Michael, March 5, 2021, State probe finds worker misclassification in construction of new General
Assembly building, Richmond-Times Dispatch,
https://richmond.com/news/state-and-regional/govt-and-politics/state-probe-finds-worker-misclassification-i
n-construction-of-new-general-assembly-building/article_e5ba1226-d97b-560e-8052-ff227b5cc784.html.
N.J. Code § 34:11 - 56.38, https://law.justia.com/codes/new-jersey/2013/title-34/section-34-11-56.38/.
N.Y. Executive Order 2016-159, July 20, 2016,
https://www.governor.ny.gov/sites/default/files/atoms/files/EO_159.pdf.
Ortiz, Nicholas F. (2016). “Prevailing Wage and False Claims Acts,” Massachusetts Wage Law,
https://masswagelaw.com/prevailing-wage-false-claims-act/.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 28
Sullivan, Patricia, December 14, 2019, Amazon gets final approval for its new HQ in Arlington County, despite
protest by organized labor, The Washington Post,
https://www.washingtonpost.com/local/virginia-politics/amazon-gets-final-okay-for-its-new-hq-in-arlington-
despite-organized-labor-protest/2019/12/14/40b37760-1c90-11ea-b4c1-fd0d91b60d9e_story.html.
VA. Code § 2.2-4300 to -4377, https://law.lis.virginia.gov/vacodefull/title2.2/chapter43/.
VA. Code § 58.1-1902. https://law.lis.virginia.gov/vacode/58.1-1902/.
VA. Code § 58.1-1900, https://law.lis.virginia.gov/vacodefull/title58.1/chapter19/.
VA. Code § 5.01-216.3, https://law.lis.virginia.gov/vacode/title8.01/chapter3/section8.01-216.3/.
VA. H.B. 1800, Item 82 #1h, 2021 Special Session I, 2021,
https://budget.lis.virginia.gov/amendment/2021/2/HB1800/Introduced/FA/82/1h/
VA. S.B. 1305, 2021 Regular Session, 2021, https://lis.virginia.gov/cgi-bin/legp604.exe?211+sum+SB1305.
Weil, David, 2010, Improving Workplace Conditions Through Strategic Enforcement, Boston University,
https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/strategicEnforcement.pdf.
Weil, David & Pyles, Amanda, 2005. Why Complain? Complaints, Compliance, and the Problem of
Enforcement in the U.S. Workplace. Comparative Labor Law & Policy Journal, 27(59).
https://hctar.seas.harvard.edu/files/hctar/files/hr08.pdf.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 29
Overview of Appendices
Appendix A: Workgroup Members & Contributors
Appendix B: Workgroup Presentations
Appendix C: Results of Public Comment Survey
Appendix D: Multi-State Survey of Relevant Labor Laws
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 30
Appendix A: Workgroup Members & Contributors
Budget language directed the Secretary to convene a workgroup of stakeholders including relevant state
enforcement and contracting agencies, the business community, labor organizations, and public colleges and
universities. The Secretary consulted additional subject matter experts as needed, who are listed below
alongside members of the workgroup.
Greg Akerman - Northern Virginia Director, Baltimore/DC-Metro Building Trades
Brian Ball - Secretary of Commerce and Trade, Office of Governor Northam (with designee John Begala,
Assistant Secretary of Commerce and Trade)
David Bailey - CEO, David Bailey Associates
Bernie Brill - Executive Director, SMACNA Mid-Atlantic Chapter
Craig Burns - Commissioner, Virginia Department of Taxation
Ernie Caldwell - President, G. J. Hopkins, Inc.
The Honorable Betsy B. Carr - Delegate, Virginia House of Delegates
Ike Casey - American Subcontractors Association
Fred H. Codding - Attorney at Law
W. Mike Coppa - Director, Bureau of Capital Outlay Management, Virginia Department of General Services
Joseph Damico - Director, Virginia Department of General Services
Ray Davenport - Commissioner, Virginia Department of Labor and Industry
Robert Field - Hearing and Legal Services Officer, Virginia Department of Labor and Industry
Joe Flores - Secretary of Finance, Office of Governor Northam (with designee June Jennings, Deputy Secretary
of Finance)
Sandra Gill - Deputy Director, Virginia Department of General Services
Arleen Green - Assistant Commissioner, Office of Compliance, Virginia Department of Taxation
James R. Harvey - Partner, Vandeventer Black LLP
Mary Helmick - Director of Procurement, Virginia Tech
Grindly Johnson - Secretary of Administration, Office of Governor Northam (with designee Asif Bhavnagri,
Assistant Secretary of Administration)
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 31
The Honorable Paul E. Krizek - Delegate, Virginia House of Delegates
Victoria Leonard - Director of Policy and Strategic Communications, Liuna Mid-Atlantic Chapter
Tony Maggio - Legislative Fiscal Analyst, Virginia House of Delegates Appropriations Committee
John McHugh - Director of Procurement Services, Virginia Commonwealth University
Kimberly McKay - Legislative Fiscal Analyst, Virginia House of Delegates Appropriations Committee
Jason Parker - President, Virginia State Building & Construction Trades
Catherine Pasqualoni - Eastern Atlantic States Regional Council of Carpenters
Brandon Robinson - CEO, Associated General Contractors of Virginia
J. Adam Rosatelli - Legislative Fiscal Analyst, Virginia Senate Finance and Appropriations Committee
Felix Schapiro – Assistant Secretary of Labor, Office of Governor Northam
Anthony Smith - Vice President, Service Contracting of Va, Inc.
Jay Stoda - Business Unit Leader, DPR Construction
Donald Sundgren - Associate Vice President and Chief Facilities Officer, University of Virginia
JT Thomas - Executive Director, Washington D.C. Chapter, National Electrical Contractors Association
Lawrence Wilder - Senior Policy Advisor, Virginia Department of Small Business and Supplier Diversity
*Report drafted by Meaghan Green, Policy & Communications Advisor to the Virginia Secretary of Labor
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 32
Appendix B: Workgroup Presentations
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Appendix C: Results of Public Comment Survey
Respondents
57 responses to the public comment survey were received on behalf of the following organizations representing
contracting employers, public works employees, independent contractors, and state regulatory and enforcement
agencies:
❖ Associated General Contractors Of ❖ Service Contracting of Virginia Inc
Virginia ❖ University of Virginia
❖ Mid-Atlantic LECET ❖ Vandeventer Black LLP
❖ IBEW ❖ ATU Local 1177
❖ LiUNA! ❖ UA Local Union 110
❖ Independence Excavating, Inc ❖ VA Building Trades
❖ Operating Engineers ❖ Virginia Tech Procurement
❖ Eastern Millwright Regional Council ❖ CWA Virginia State Council
❖ Chewning & Wilmer, Inc. ❖ UAW Local 2069
❖ Eastern Atlantic States Regional ❖ Folkes Electric
Council of Carpenters ❖ IUPAT DC 51
❖ Iron Workers Local Union 79 ❖ Virginia Office of Emergency
❖ MAROC Medical Services
❖ IAM&AW LL10 ❖ Virginia Commonwealth University
❖ RJATC ❖ Virginia Department of General
❖ Pile Drivers/Divers Local 474 Services
❖ International Brotherhood of ❖ ASA of Metro Washington
Electrical Workers Local 666 ❖ Foundation for Fair Contracting -
❖ Sprinkler Fitters Local 669 Mid-Atlantic Region
❖ Virginia Department of Small ❖ Virginia Department of Labor and
Business and Supplier Diversity Industry
❖ Iron Workers Employers Association ❖ Alliance for Construction Excellence
of Washington, D. C. (IWEA) (ACE)
❖ BAC Local 8 SE. ❖ Construction Contractors Council
❖ Branch Civil ❖ CWA Local 2204
❖ United Food and Commercial ❖ Virginia Department of Taxation
Workers Local 400 ❖ Baltimore Washington Laborers'
❖ Richmond Electricians JATC District Council
❖ Mid-Atlantic Pipe Trades
❖ Ironworkers International
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Survey Questions
Respondents were asked to indicate their support for the following nine strategies for combating the
mistreatment of workers on state public works projects. These do not represent a comprehensive list of those
ultimately included in this report.
1. Virginia employers found to have violated state wage laws should be debarred from bidding on and
receiving awards for public works contracts, in alignment with existing penalties for misclassification.
2. Virginia should establish a monthly payroll certification requirement for contracting employers to ensure
that they are meeting their prevailing wage (i.e. Little Davis Bacon Act) obligations throughout the
length of their state contract.
3. An interagency task force should be formed to analyze strategic labor law enforcement strategies for
potential implementation in Virginia and develop ongoing recommendations to the General Assembly
and the Governor. For the purposes of this survey, “strategic enforcement” is defined as an approach that
uses limited agency resources in a strategic and data-driven manner in order to enhance the overall
impact of state labor law enforcement on employer behavior.
4. Virginia should require enforcement and contracting agencies to establish data collection standards and a
data-sharing agreement to share information on employers who have been found guilty of labor law
violations.
5. Virginia should work to enhance data collection on and monitoring of subcontractors to ensure that the
state has sufficient information about all actors working on state projects.
6. Virginia should establish a reciprocal debarment statute that ensures any contractor debarred by the U.S.
Department of Labor for labor law violations is also debarred from working on Virginia public works
projects.
7. Virginia should establish a requirement that any independent contractor who works on a publicly
procured project must register through the Department of Professional and Occupational Regulation
(DPOR) by 2023.
2021 Report: Labor Law Compliance on Virginia Public Works Contracts 56
8. The Virginia Department of Labor (DOLI) should establish an online form for all Virginia workers,
including those employed by state contractors, to electronically submit complaints of potential wage
theft in addition to by mail.
9. Virginia should coordinate with state enforcement agencies to create an education and outreach
campaign targeting employees on state contracts about their rights under the law. This would include
close collaboration with organizations that already have strong relationships with workers and could
serve as a pilot for a potential statewide approach to workers’ education (beyond state contracts).
Results
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Appendix D: Multi-State Survey of Relevant Labor Laws
The report that follows responds to a request from Secretary Healy to survey certain wage and hour-related
statutes in 11 states (Connecticut, Illinois, Maryland, Minnesota, Montana, Nebraska, New Jersey, New York,
Pennsylvania, Oregon, and Washington), with a focus on wage theft, worker classification, and prevailing
wages issues.23 More specifically, our team was asked to identify statutes in these 11 states that:
❖ address wage theft, by that name or otherwise;
❖ require or authorize state agencies to share information and coordinate actions regarding employers
found to have engaged in wage and hour violations, especially in the field of employee
misclassification;
❖ prescribe standards or principles by which employee/independent classification decisions are made;
❖ address exempt/nonexempt standards for considering alleged wage and hour violations;
❖ specifically address payroll fraud by government contractors;
❖ impose payroll certification requirements as part of a public project prevailing wage statute; and
❖ provide civil or criminal sanctions for “labor trafficking.”
We hope this report is useful in considering “next steps” in the Commonwealth’s efforts to strengthen wage
and hour and procurement compliance by its contractors, and more broadly, to provide its citizens with an
assurance that employers are complying with their statutory obligations and that their tax money is well spent.
It has been an honor to help advance that important policy goal.
23
The GMU team was assigned research and reporting tasks. The information contained in this report is provided for informational
purposes, and should not be construed as legal advice on any subject or to create an attorney-client relationship.
Connecticut
I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
Connecticut’s minimum wage is currently $13 per hour and will increase annually, and
incrementally, to $15 per hour by 2023. CONN. GEN. STAT. ANN. § 31-58(i)(1). After that, the
minimum wage will be adjusted yearly based on the U.S. Department of Labor’s Employment
Cost Index. Id.
Every employer must inform each employee, in writing at the time that he or she is hired,
of the applicable wage rate, hours of employment, and payment schedule. CONN. GEN. STAT.
ANN. § 31-71f. Thereafter, each employer must also inform its employees, either in writing or by
conspicuous posting in the workplace, of any changes in the employer’s policy regarding wages,
vacation pay, sick leave, and other benefits. Id.
Employers must keep records of all hours worked by, and wages paid to, employees for at
least three years. CONN. GEN. STAT. ANN. § 31-66. Hours must be recorded to the nearest unit of,
at most, fifteen minutes. CONN. ADMIN. REGS. § 31-60-11(a). When the amount of wages to be
paid is disputed, the employer must still pay, within the normal pay cycle, all wages that are
conceded by the employer to be due. CONN. GEN. STAT. ANN. § 31-71d.
2. Claim Administration
Employees may file civil suits against employers that do not pay them their required
wages. CONN. GEN. STAT. ANN. § 31-68(a). Employees may also file wage claims with the
Connecticut Department of Labor, and the Labor Commissioner has the authority to investigate
the allegations and file suit on the employee’s behalf. CONN. GEN. STAT. ANN. § 31-59; CONN.
GEN. STAT. ANN. § 31-68(a)(4); CONN. GEN. STAT. ANN. § 31-76a. As part of the investigation, the
Labor Commissioner, the director of the Wage and Workplace Standards Department, or their
designees may enter the employer’s workplace, examine payroll records, interview employees,
call hearings, administer oaths, and take testimony and depositions. CONN. GEN. STAT. ANN. §
31-76a(a).
An employer faces fines between $100 and $250 for each day it refuses to comply with
an investigation by the Director or the Labor Commissioner. CONN. GEN. STAT. A NN. § 31-76a(b).
The Labor Commissioner may adopt regulations as are necessary to carry out the
purposes of the labor statutes. CONN. GEN. STAT. ANN. § 31-60(b).
3. Statute of Limitations
The statute of limitations for all unpaid wage claims in Connecticut is two years. CONN.
GEN. STAT. ANN. § 52-596. However, this period of limitation is tolled while any wage complaint
is pending with the Labor Commissioner. Id.
4. Remedies
In addition to restitution of wages unpaid (as well as costs and attorneys’ fees),
employees may recover double the wages owed unless the employer proves a good faith belief
that the underpayment was lawful. CONN. GEN. STAT. ANN. § 31-68(a)(1).
The Connecticut Department of Labor may assess additional civil penalties of $300 for
each wage and hour violation. CONN. GEN. STAT. ANN. § 31-69a(a). The Labor Commissioner
may assess civil penalties for each wage and hour violation. CONN. GEN. STAT. ANN. § 31-69a(a).
The Labor Commissioner must send the employer notice of the violation and advise the
2
employer of its right to request a hearing to show why the penalty should not be assessed. CONN.
ADMIN. REGS. § 31-71h-3. After a hearing, or after the employer has waived its right to a hearing,
the Labor Commissioner may uphold or modify the penalty. CONN. ADMIN. REGS. § 31-71h-6.
Upon complaint from the Labor Commissioner, the Connecticut Attorney General may institute
civil actions to recover these penalties. CONN. GEN. STAT. A NN. § 31-69a(c).
Employers may also face criminal penalties, including fines, imprisonment, or both, for
paying or agreeing to pay an employee less than the minimum wage. CONN. GEN. STAT. ANN. §
31-69(b). The available penalties vary depending on the amount owed by the employer, but
Connecticut classifies the failure to pay wages due as a Class D felony. Id. The same section
also makes it a criminal offense to not keep or furnish records as required. CONN. GEN. STAT.
ANN. § 31-69(c).
B. Overtime Violations
1. Normative Standards
Employers must pay employees 1.5 times their regular pay rate for each hour worked in
excess of forty hours per week, CONN. GEN. STAT. ANN. § 31-76c, unless they are made exempt
from the overtime requirement by CONN. GEN. STAT. ANN. § 31-58. The exemptions are similar
to, but not nearly as extensive as, the ones found in the federal Fair Labor Standards Act (FLSA).
The exemptions include the so-called “white collar” exemptions (bona fide executive,
administrative, or professional employees), certain domestic workers, outside salespersons, and
individuals employed by a nonprofit theater. Id.
“Hours worked” is defined in line with the definitions in the FLSA, and in fact expressly
references the FLSA’s definitions in multiple places. “Hours worked” include:
3
(1) time during which an employee is required by the employer to be on the
employer's premises or to be on duty, or to be at the prescribed work place;
(2) all time during which an employee is employed or permitted to work, whether
or not required to do so, provided time allowed for meals shall be excluded unless
the employee is required or permitted to work;
(3) time during which an employee is required to be on call for emergency service
at a location designated by the employer; and
(4) time when an employee is required to wait on the premises while no work is
provided by the employer.
CONN. GEN. STAT. ANN. § 31-76b. If an employer uses a timecard system or other device to
record an employee’s work time, the system must use a clock that is easily visible to the
employee. CONN. GEN. STAT. A NN. § 31-13(b).
2. Claim Administration
Same as minimum wage violations. See A.2 above.
3. Statute of Limitations
Same as minimum wage violations. See A.3 above.
4. Remedies
Same as minimum wage violations. See A.4 above.
C. Off-the-clock Violations
1. Normative Standards
As noted above, every covered employee must be compensated for all “hours worked,”
which includes all time during which an employee is required to be on the employer’s premises
or to be on duty. CONN. A DMIN. REGS. § 31-60-11(a).
Any employee who works a shift of at least 7.5 hours must have the option to take a meal
break of at least thirty consecutive minutes. CONN. GEN. STAT. A NN. § 31-51ii(a). The meal break
must occur after the first two hours of the shift and before the last two hours. Id. Some
4
situations are excepted from this rule, such as if adherence would adversely affect public safety
or if the employer employs fewer than five employees at a single location. CONN. GEN. STAT.
ANN. § 31-51ii(c). If the employee is excepted from the meal break requirement, this time must
be included in the employee’s hours worked. CONN. ADMIN. REGS. § 31-60-11(a).
2. Claim Administration
Same as minimum wage violations. See A.2 above.
3. Statute of Limitations
Same as minimum wage violations. See A.3 above.
4. Remedies
Same as minimum wage violations. See A.4 above.
D. Illegal Deductions
1. Normative Standards
Unless the employer obtains the employee’s consent, it may not make any deduction from
an employee’s pay unless authorized to do so by Connecticut or federal law. CONN. GEN. STAT.
ANN. § 31-71e. Neither may an employer withhold the wages of an employee because of an
agreement requiring notice before leaving the employment (i.e., “giving two weeks’ notice”),
CONN. GEN. STAT. ANN. § 31-70, or withhold or require the return of any wages from an employee
as a condition of or requirement for employment. CONN. GEN. STAT. A NN. § 31-73(b).
Any payment from an employer to an employee of less than the wage set forth in a
written wage agreement, or any repayment of any wages received in the absence of a written
debt instrument, is prima facie evidence of a violation of law. Id.
5
An employer may not deduct from its employee’s wages if the employer pays the wages
at an earlier than usual time. CONN. GEN. STAT. A NN. § 31-74.
2. Claim Administration
Same as minimum wage violations. See A.2 above.
3. Statute of Limitations
Same as minimum wage violations. See A.3 above.
4. Remedies
Both civil remedies and criminal sanctions exist for unlawful deductions. Any employee
who has had money unlawfully deducted from his wages has a civil action for the full amount of
the compensation owed, plus costs and attorney’s as may be allowed by the court. If the
employer fails to show that the deduction was made in the good faith belief that the
underpayment of wages was in compliance with law, the employee is entitled to double damages
as well as fees and costs. CONN. GEN. STAT. A NN. § 31-72.
Moreover, criminal responsibility can exist for both the employer and for “any officer or
agent of an employer or any other person authorized by an employer to pay wages” on the
employer’s behalf. CONN. GEN. STAT. ANN. § 31-71g. Violation constitutes a class D felony, with
the sanctions being scaled to the size of the under-payment. Id. An employer that withholds or
requires the return of wages from an employee as a condition of or requirement for employment
faces fines or imprisonment. CONN. GEN. STAT. ANN. § 31-73(d). An employer violating this
provision is liable for a fine of not more than $100 (a figure that has not changed since the statute
was passed in 1949). CONN. GEN. STAT. A NN. § 31-74.
E. Paystub Provisions
1. Normative Standards
6
Employers must issue wage statements with each payment of wages. CONN. GEN. STAT.
ANN. § 31-13a(a). These statements must include the hours worked, gross earnings with regular
and overtime pay shown separately (unless exempt), itemized deductions, and net earnings. Id.
If the employee consents, the wage statement may be issued electronically; in the absence
of consent, it must be in writing. CONN. GEN. STAT. ANN. § 31-13a(a). If the statement is issued
electronically, the employer must provide a secure, private, and convenient means for the
employee to access and print the statement. CONN. GEN. STAT. A NN. § 31-13a(b).
2. Claim Administration
None specified.
3. Statute of Limitations
None specified.
4. Remedies
None specified.
F. Interagency Information Sharing
No statutory information sharing requirement exists with respect to minimum wage or
overtime violations specifically, but as described below and II.A.5, an information sharing
regime exists for misclassification violations.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
To determine whether a worker is an employee or an independent contractor, Connecticut
uses different tests depending on the context. For the purposes of wage claims, Connecticut uses
7
what it calls a three-factor “common law” test. CONN. GEN. STAT. ANN. § 31-222(a)(1)(B)(ii).
The three factors are (1) the degree to which the employer has a right to control the details and
means by which the worker performs the required labor; (2) the degree of financial control that
the worker has over his or her work; and (3) whether the parties intended to form an
employer/employee relationship. Id.; Worker/Employee Misclassification FAQs, Conn. Dept. of
Labor, https://www.ctdol.state.ct.us/wgwkstnd/jec/JEC-FAQs.htm.
For unemployment compensation claim purposes, the relationship between worker and
employer is assumed to be an employment relationship unless the employer can satisfy each of
the three prongs of Connecticut’s “ABC test.” CONN. GEN. STAT. ANN. § 31-222(a)(1)(B)(ii). The
first prong asks whether the worker performs his or her service free from control and direction
both under contract and in fact. Id. The second prong asks whether the worker’s service is
outside the usual course of business for the employer. Id. The third prong asks whether the
worker is engaged in an independently established trade of the same nature as the service being
performed for the employer. Id.
2. Claim Administration
Employees may file civil suits or complaints with the Labor Commissioner to recover
wages against employers that underpay them as a result of misclassification. CONN. GEN. STAT.
ANN. § 31-68(a).
The Labor Commissioner acts as administrator for unemployment compensation. CONN.
GEN. STAT. ANN. § 31-222(c). Employees may file claims with the Labor Commissioner to
recover benefits owed to them. CONN. GEN. STAT. ANN. § 31-240; CONN. GEN. STAT. ANN. §
8
31-241(a). The Labor Commissioner is responsible for determining the validity of the claims
and, if valid, the amount of benefits owed. CONN. GEN. STAT. A NN. § 31-241(a).
3. Statute of Limitations
The statute of limitations for unpaid wage claims as a result of misclassification is two
years, the same as for other claims for unpaid wages. CONN. GEN. STAT. A NN. § 52-596.
4. Remedies
See section I.A.4. Unpaid wage claims arising from misclassification are also subject to
double damages unless the employer can show a good faith belief that it was complying with the
law. CONN. GEN. STAT. ANN. § 31-68(a)(1). An employer that misclassifies its employee is also
subject to civil penalties of $300 per violation per day assessed by the Labor Commissioner.
CONN. GEN. STAT. A NN. § 31-69a(a).
5. Interagency Information Sharing
The Labor Commissioner, the Commissioner of Revenue Services, the Insurance
Commissioner, the Commissioner of Consumer Protection, the chairperson of the Workers’
Compensation Commission, the Attorney General, and the Chief State’s Attorney together
comprise the Joint Enforcement Commission on Employee Misclassification. CONN. GEN. STAT.
ANN. § 31-57h(a). The Joint Commission must meet at least four times per year and coordinate
the civil prosecution of violations of state and federal laws as a result of employee
misclassification. CONN. GEN. STAT. A NN. § 31-57h(b).
If the Labor Commissioner collects a fine or penalty as a result of a violation originally
reported by a municipal official, the Commissioner must remit half of the amount collected to the
municipality. CONN. GEN. STAT. A NN. § 31-76m.
B. Exempt/Non-Exempt Classification
9
1. Normative Standards
Connecticut exempts a variety of occupations from its overtime pay requirements; these
largely follow those found in the FLSA. CONN. GEN. STAT. ANN. § 31-76i. They range from the
exceptionally narrow (taxicab drivers, radio announcers, and mortgage loan originators) to the
broadly applicable (executive, administrative, and professional employees). Id.
2. Claim Administration
See I.A.4. Employees who believe they have been improperly denied overtime as a result
of misclassification can bring a lawsuit or file a complaint with the Labor Commissioner to
recover unpaid overtime wages. CONN. GEN. STAT. A NN. § 31-68(a)(1).
3. Statute of Limitations
Same as minimum wage violations. See I.A.3 above.
4. Remedies
Same as minimum wage violations. See I.A.4 above.
5. Interagency Information Sharing
See supra at II.A.5.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
Connecticut has enacted a statute patterned after the federal False Claims Act, but it
addresses only those who “knowingly present, or cause to be presented, a false or fraudulent
10
claim for payment or approval under a state-administered health or human services program.”
Conn. Gen. Stat. § 4-275(1). No state civil statute more broadly proscribes fraud by government
contractors.
Connecticut’s criminal code, however, addresses “defrauding [a] public community.”
CONN. GEN. STAT. ANN. § 53a-119(6). The offense is defined as “authoriz[ing], certif[ying],
attest[ing] or fil[ing] a claim for benefits or reimbursement from a local, state or federal agency
which he knows is false; or (B) knowingly accepts the benefits from a claim he knows is false; or
(C) as an officer or agent of any public community, with intent to prejudice it, appropriates its
property to the use of any person or draws any order upon its treasury or presents or aids in
procuring to be allowed any fraudulent claim against such community.” Id.
B. Claim Administration
Violations of CONN. GEN. STAT. ANN. § 53a-119 are prosecuted as are all other criminal
offenses in the state.
C. Statute of Limitations
The Connecticut statute of limitations for class D felonies runs after five years. CONN.
GEN. STAT. A NN. § 54-193(c).
D. Remedies
Defrauding a public community under CONN. GEN. STAT. ANN. § 53a-119(6) is defined as
a felony, larceny in the first degree, and, when the amount is greater than $20,000, is punishable
with from one to 20 years of imprisonment and up to $15,000 in fines.
IV. Certification of Prevailing Wage Compliance
A. Normative Standards
11
Connecticut law requires that each government contract for construction or repair of
public works contain a prevailing wage compliance provision. CONN. GEN. STAT. ANN. §
31-53(a). Specifically, the wage rate must be equal to the customary/prevailing rate for the same
work in the locality of the project. Id. Each contract must also contain a provision that no
employee may work more than eight hours per day or forty hours per week on any of the contract
work. CONN. GEN. STAT. A NN. § 31-57.
The Labor Commissioner must predetermine the prevailing wage rate wherever a public
works contract will be completed. CONN. GEN. STAT. ANN. § 31-53(d). To do this, the Labor
Commissioner may either hold a hearing in the area or adopt the applicable prevailing wage rate
as determined by the U.S. Secretary of Labor under the Davis-Bacon Act. Id.
The contractor must submit a certified payroll every month to the contracting agency or
the Department of Economic and Community Development. Id. This payroll certification must
include complete records of the wages earned and hours worked by each employee and a
schedule of each worker’s occupation. Id. The certified payroll must also include a statement
that the employer is aware that knowingly filing a false certified payroll is a class D felony. Id.
Every contractor or subcontractor performing a contract for the state must post the
prevailing wages in prominent places either at the work site or the place where the employees are
paid. CONN. GEN. STAT. A NN. § 31-55.
Each contractor must maintain records of the wages paid and hours worked of each
employee on the project. CONN. GEN. STAT. ANN. § 31-53(f). A contractor must maintain the
books and records related to the contract for at least three years after the final payment under the
12
contract. CONN. GEN. STAT. ANN. § 4e-30(a). The state contracting agency may audit these books
and records to the extent that they relate to the performance of the contract. Id.
B. Claim Administration
If demands for compliance by the agent contracting on behalf of the state or its political
subdivision are not satisfied within a week, the agent can institute a civil action to recover as
liquidated damages for the violation of the contract an amount equal to the underpayment and the
costs of suit, including reasonable attorney’s fees, and is required by statute to notify the office of
the state’s attorney in the judicial district for the area in which such work was performed so that
appropriate criminal action may be instituted against the alleged violator. CONN. GEN. STAT. ANN.
§ 31-52.
The Labor Commissioner may also submit complaints to the “proper prosecuting
authorities” for prevailing wage violations. CONN. GEN. STAT. A NN. § 31-53(c).
Any contractor who is required to pay as a result of a subcontractor’s failure to pay the
prevailing wage to its employees may bring a civil action to recover the cost of the payment plus
reasonable costs and attorneys’ fees. CONN. GEN. STAT. A NN. § 31-53(g).
C. Statute of Limitations
Actions for payment of remuneration for employment payable periodically must be
brought within two years after the right of action accrues, except that this limitation is tolled
upon the filing with the Labor Commissioner. CONN. GEN. STAT. A NN. § 52-596.
D. Remedies
As noted above, the contracting agency has a civil cause of action for actual and
liquidated damages based on violations of the prevailing wage act. See supra at IV.B.
13
In addition, any contractor who knowingly or willfully pays its employees below the
prevailing rate faces fines between $2,500 and $5,000 for each offense. CONN. GEN. STAT. ANN. §
31-53(b).
After the first violation, the contractor is also disqualified from bidding on more
government contracts until six months after it makes the last payment of back wages owed to its
employees. Id. After additional violations, the contractor is disqualified from bidding on
contracts until two years after it makes the last owed wage payment. Id. The contract of any
contractor who fails to pay prevailing wages may be terminated by the Labor Commissioner, and
that contractor can be debarred for a period of three years. CONN. GEN. STAT. ANN. §§
31-53a(a)-(b).
As outlined above, knowingly filing a false certified payroll is a class D felony,
punishable by fines of up to $5,000 and/or imprisonment up to five years. CONN. GEN. STAT.
ANN. § 53a-157a(b). Failing to file a certified payroll is also a class D felony and carries the
same potential punishments. CONN. GEN. STAT. A NN. § 31-53(f).
V. Labor Trafficking
A. Normative Standards
Connecticut’s “trafficking in persons” statute makes it a class A felony in Connecticut for
any person to compel another person by means of the use or threat of force, fraud, or coercion to
provide labor that that person has a right to refrain from doing. CONN. GEN. STAT. ANN. §
53a-192a.
B. Claim Administration
14
Connecticut law permits victims of trafficking in persons to sue their traffickers. CONN.
GEN. STAT. A NN. § 52-571i.
Additionally, the Labor Commissioner may request that the Attorney General file suit
against any employer who employs workers who it knows are being coerced to work. CONN.
GEN. STAT. A NN. § 31-51vv.
C. Statute of Limitations
The statute of limitations for trafficking in persons runs after five years. CONN. GEN.
STAT. A NN. § 54-193(c).
D. Remedies
Trafficking in persons, a class A felony, is punishable by ten to twenty-five years in
prison and/or fines of up to $20,000. CONN. GEN. STAT. ANN. § 53a-192a. Connecticut also
maintains a civil forfeiture procedure to seize funds obtained by human trafficking. CONN. GEN.
STAT. A NN. § 54-36p.
In a civil suit, traffickers are liable for either actual damages or statutory damages of up
to $1,000 for each day that they were coerced to work. CONN. GEN. STAT. A NN. § 52-571i.
An employer sued by the attorney general for employing coerced workers is subject to
fines of up to $10,000 for each violation. CONN. GEN. STAT. A NN. § 31-51v.
15
Illinois
I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
The minimum wage in Illinois for workers over eighteen years of age is currently set at
$11.00 per hour. 820 ILL. COMP. STAT. 105/4(a)(1). The wage rate will adjust annually through
2025 (when it will reach $15 per hour). Id.
In those occupations where “gratuities have customarily and usually constituted and have
been recognized as part of the remuneration,” id. at 105/4(a)(3)(c), tips can help make up the
minimum wage paid, up to 40% of the applicable wage rate. Any employer claiming that
gratuities are a component of the minimum wage paid must “provide substantial evidence that
the amount claimed . . . was received by the employee in the period for which the claim of
exemption is made. . . .” Id.
It is a violation of the Illinois’ Private Employment Agency Act for an employment
agency to refer an individual for employment at a rate of less than the minimum wage, and if the
employment agency knowingly does so, and the referral results in an individual actually
receiving less than the minimum wage, the employment agency is jointly liable for the
underpayment and statutory damages as described below. 225 ILL. COMP. STAT. 515/12.3.
2. Claim Administration
The Director of Labor, through the Illinois Department of Labor (DOL), has the right and
responsibility to oversee all wage theft disputes, minimum wage claims included. In carrying out
its enforcement responsibilities, the DOL has the power to issue subpoenas, call forth witnesses,
Illinois
and administer oaths. 820 ILL. COMP. STAT. 115/11(a). The DOL further has the authority to take
on assignments to represent employees financially incapable of representing themselves,
individually or collectively, in actions for the collection of wages against employers. 820 ILL.
COMP. STAT. 115/11(b). The DOL collects no compensation or fees for these assignments from
the party they represent, except fees obtained from the employer in a successful proceeding after
the employee has been fully compensated. Id. Finally, the DOL has the authority to adjudicate
and reach final decisions on any claims filed with the DOL. 820 ILL. COMP. STAT. 115/11(d).
The DOL’s authority to proceed on the employee’s behalf, however, is not exclusive and
does not impede the individual’s private right of action. See 820 ILL. COMP. STAT. 115/11(a).
Any employee aggrieved by a violation of the Wage Payment and Collection Act (WPCA)
(which covers minimum wage claims, permissible deductions, pay periods and other wage and
hour details) is authorized to file suit in circuit court in the county where the alleged violation
occurred or where any employee who is party to the action resides, without regard to exhaustion
of any alternative administrative remedies. Id. Class actions are expressly allowed. Id.
3. Statute of Limitations
Any claim that an employer has failed to pay the required minimum wage “shall be
brought within 3 years from the date of the underpayment.” 820 ILL. COMP. STAT. 105/12.
4. Remedies
If any employee is paid less than required by the WPCA, he or she may recover treble the
amount of any underpayments, along with costs and such reasonable attorney’s fees as may be
allowed by the Court, as well as damages of five percent of the nominal value of the
17
Illinois
underpayments for each month following the date of payment during which such underpayments
remain outstanding. 820 ILL. COMP. STAT. 105/12(b).
There are administrative costs to be paid as well. Any employer found liable for a
minimum wage violation (and any other form of wage theft), must pay an administrative fee to
the DOL of:
(a) $250 fee if unpaid wages are less than or equal to $3,000;
(b) $500 fee if unpaid wages are between $3,001–$9,999; or
(c) $1,000 fee if unpaid wages are $10,000 or greater.
820 ILL. COMP. STAT. 115/14(b).
There are criminal sanctions as well. Any employer that is able to pay wages due but
willfully fails to do so or falsely denies the amount or validity of the employee’s claim to the
wages is guilty of:
(1) for unpaid wages, final compensation or wage supplements in the amount of
$5,000 or less, a Class B misdemeanor; or
(2) for unpaid wages, final compensation or wage supplements in the amount of
more than $5,000, a Class A misdemeanor.
820 ILL. COMP. STAT. ANN. 115/14. Each day during which any violation of the Act continues is
considered a separate and distinct offense. Id. Subsequent offenses within a two-year period are
treated as felonies. Id.
If an employment agency knowingly refers an individual for employment at a rate less
than the minimum wage, the agency is jointly liable for the underpayment and statutory damages
as described below, as well as jointly liable to pay to the DOL a $1,500 fine plus twenty percent
of the difference between the employee’s actual wage received and the minimum wage. 225 ILL.
COMP. STAT. 525/12.3(a).
B. Overtime Violations
18
Illinois
1. Normative Standards
With certain exceptions (for example, for individuals “impaired by age, or physical or
mental incapacity,” or receiving “remedial” education), all nonexempt employees are generally
entitled to overtime pay for work in excess of forty hours in a workweek at a rate of at least 1.5
times their regular rate of pay. 820 ILL. COMP. STAT. 105/4a(1). Illinois law not only follows the
general pattern of the FLSA in defining the overtime obligation and the scope of those exempted
from the law’s requirements, but it incorporates by reference the federal definitions and rules
interpreting the latter’s most often applied exemptions (the so-called white collar exemptions for
those acting in an executive, administrative, or professional capacity). Id.
With certain exceptions delineated in the statute, no employer can require an employee to
work for more than 10 hours in excess of 40 hours during any workweek. 820 ILL. COMP. STAT.
105/4a. Indeed, Illinois prescribes “eight hours of labor between the rising and the setting of the
sun, in all mechanical trades, arts and employments, and other cases of labor and service [to]
constitute and be a legal day’s work.” 820 ILL. COMP. STAT. 145/1. Notwithstanding this
provision, it is not unlawful for the employee to work as many hours of overtime as he or she
may agree to work. 820 ILL. COMP. STAT. 145/2. Illinois also requires employers to give each
employee at least 24 hours of rest in every calendar week. 820 ILL. COMP. STAT. 140/2.
Certain public sector employers are permitted to provide compensatory time to
employees working in excess of 40 hours in a work week instead of overtime pay. 820 ILL.
COMP. STAT. 105/4a(4). Private sector employers do not have this option.
Illinois exempts many occupations from the overtime requirements of the Wage Payment
and Collection Act. A non-exhaustive list of these exemptions includes: tractor trailer drivers,
19
Illinois
employees of non-profit educational and child care institutions, automobile salespersons and
mechanics, agricultural laborers, towing vessels operators in the Great Lakes and other
waterways contained within or adjacent to Illinois, administrative officials, executives, legal
professionals, and any other individuals exempt under the Federal Fair Labor Standards Act. 820
ILL. COMP. STAT. 105/4a.
Most employers have to obtain a permit to allow employees to voluntarily work seven
days in a workweek. 56 ILL. ADM. CODE 220.200. An employer does not need to provide
justification for the permits for the first 8 weeks of seven-day work. After the 8th week, an
employer needs to justify the request. Id.
2. Claim Administration
Overtime claims are administered using the same DOL procedures as minimum wage
claims discussed in section A above. The Director of DOL or his or her designee has full
authority to assist in collection of wages. 820 ILL. COMP. STAT. 115/6-7. Although the WPCA
does not explicitly so provide, Illinois courts have held that a private right of action exists for
employees to secure unpaid wages directly in court. See, e.g., Miller v. Kiefer Specialty
Flooring, Inc., 317 Ill. App. 3d 370, 376, 739 N.E.2d 982, 988 (2000).
3. Statute of Limitations
Complaints must be filed within one year after the wages, final compensation, or wage
supplements were due. 820 ILL. COMP. STAT. 115/11.
4. Remedies
Any employee who is not paid his or her overtime as earned is entitled to recover through
the DOL’s administrative procedure or in a civil action the amount of the employer’s
20
Illinois
underpayments as well as damages of five percent of the amount of any such underpayments for
each month following the date of payment during which such underpayments remain unpaid. If
the recovery occurs in court, the employee is also entitled to recover costs and all reasonable
attorney’s fees. 820 ILL. COMP. STAT. 115/14(a). That section also provides for administrative
fees owed by the underpaying employer.
Section 115/14a also provides for criminal sanctions. First offenses are treated as
misdemeanors, with a schedule of penalties depending on the amount involved, but second
offenses occurring within two years of a prior conviction under section 115/14a constitutes a
felony.
C. Off-the-clock Violations
1. Normative Standards
Illinois law does not separately address “off-the-clock” violations; it requires that
employees receive pay (and overtime pay, as required) for all hours worked. For these purposes,
Illinois adopts the federal law on what that means: ‘“Hours worked” means all the time an
employee is required to be on duty, or on the employer’s premises, or at other prescribed places
of work, and any additional time he or she is required or permitted to work for the employer.” 56
ILL. A DMIN. CODE § 210.110 (expressly adopting certain federal regulations on work time).
2. Claim Administration
Claims administration follows the same procedures as overtime violations, as outlined in
section I.B.2 above.
3. Statute of Limitations
21
Illinois
Complaints must be filed within one year after the wages, final compensation, or wage
supplements were due. 820 ILL. COMP. STAT. 115/11.
4. Remedies
Overtime remedies are the same outlined above in section I.B.4 above.
D. Illegal Deductions
1. Normative Standards
Under the WPCA, no deduction from pay is permissible unless the deduction is:
(i) required by law;
(ii) to the benefit of the employee;
(iii) in response to a valid wage assignment or wage deduction order;
(iv) made with the express written consent of the employee, given freely at the
time the deduction is made; or
(v) to pay a debt owed to certain specified governmental bodies.
820 ILL. COMP. STAT. 115/9. An employer cannot withhold or deduct a sum from wages pending
the return of uniforms, tools, pagers, or any other employer owned equipment. 56 ILL. ADM.
CODE § 300.830.
Except for those deductions required by law, any deductions from final pay on
termination of employment are limited to those evidenced by the written and express consent of
the employee or according to a consensual repayment schedule, and may not exceed fifteen
percent of the employee’s final paycheck, or twenty-five percent if the party placing the lien is a
public body given express authority under statute. 56 ILL. A DMIN. CODE § 300.760-800.
As with minimum wage violations, employment agencies can be accountable for the
actions of the employers with whom they contract. “It is a violation . . . for an employment
agency to facilitate illegal deductions from wages or nonpayment of wages by an employer[.]
22
Illinois
An employment agency that facilitates illegal deduction of wages or nonpayment of wages is
jointly liable for statutory damages.” 225 ILL. COMP. STAT. 515/12.3(b).
2. Claim Administration
Claims for impermissible deductions arise under the WPCA and the procedures discussed
above at section I.A.2 apply. In any proceeding regarding an allegedly improper deduction, the
employer bears the burden of establishing the applicability of any claimed exception. 56 ILL.
ADMIN. CODE § 300.710.
3. Statute of Limitations
Complaints regarding impermissible deductions must be filed within one year. 820 ILL.
COMP. STAT. 115/11.
4. Remedies
Claims for impermissible deductions arise under the WPCA and the civil remedies
discussed above at section I.A.4 apply.
E. Paystub Provisions
1. Normative Standards
Employers are required to notify employees, at the time of hiring, of their payday and the
rate at which they will be paid. 820 ILL. COMP. STAT. 115/10. “Whenever possible,” that
notification is supposed to be in writing and “acknowledged” by both parties. Id. In addition,
the employer must provide a wage statement or pay stub every payday that includes the
employee’s hours worked, rate of pay, overtime hours and pay, gross wages, an itemized
statement of any deductions each pay period. Id.; 56 ILL. A DMIN. CODE § 300.600(a), 630(c).
2. Claim Administration, Statute of Limitations, and Remedies
23
Illinois
Because the requirement to provide a detailed pay stub is part of the WPCA, the
procedures, limitations period, and remedies discussed above in sections I.A.2-4 apply.
F. Interagency Information Sharing
No provision in the Illinois code requires (or addresses) information sharing among
agencies on wage and hour matters generally, but see discussion at II.A.5 below regarding
information sharing on misclassification issues.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
Illinois has no statute of general application regarding independent contractor
misclassification issues, but the Employee Classification Act was a direct industry-specific
response to the issue of employees being misclassified as independent contractors in the
construction industry. 820 ILL. COMP. STAT. 185/3 et seq. The act provides that “an individual
performing services for a contractor is deemed to be an employee of the employer” unless the
individual is someone who:
(1) is and will continue to be free from control or direction over his or her
performance of the service, both as stated under contract and in fact;
(2) provides a service outside of the typical services provided by the employer or
primary contractor;
(3) is independently engaged in an established trade, occupation, business, or
industry; or
(4) is a legitimate sole proprietor or partnership under Illinois law.
820 ILL. COMP. STAT. 185/10(b). The statute provides a separate test for determining whether a
“sole proprietor or partnership performing services for a contractor as a subcontractor is deemed
legitimate . . . .” 820 ILL. COMP. STAT. 185/10(c). That test has twelve factors:
24
Illinois
(1) the sole proprietor or partnership is performing the service free from the
direction or control over the means and manner of providing the service, subject
only to the right of the contractor for whom the service is provided to specify the
desired result;
(2) the sole proprietor or partnership is not subject to cancellation or destruction
upon severance of the relationship with the contractor;
(3) the sole proprietor or partnership has a substantial investment of capital in the
sole proprietorship or partnership beyond ordinary tools and equipment and a
personal vehicle;
(4) the sole proprietor or partnership owns the capital goods and gains the profits
and bears the losses of the sole proprietorship or partnership;
(5) the sole proprietor or partnership makes its services available to the general
public or the business community on a continuing basis;
(6) the sole proprietor or partnership includes services rendered on a Federal
Income Tax Schedule as an independent business or profession;
(7) the sole proprietor or partnership performs services for the contractor under
the sole proprietorship’s or partnership’s name;
(8) when the services being provided require a license or permit, the sole
proprietor or partnership obtains and pays for the license or permit in the sole
proprietorship's or partnership’s name;
(9) the sole proprietor or partnership furnishes the tools and equipment necessary
to provide the service;
(10) if necessary, the sole proprietor or partnership hires its own employees
without contractor approval, pays the employees without reimbursement from the
contractor and reports the employees' income to the Internal Revenue Service;
(11) the contractor does not represent the sole proprietorship or partnership as an
employee of the contractor to its customers; and
(12) the sole proprietor or partnership has the right to perform similar services for
others on whatever basis and whenever it chooses.
Id.
2. Claim Administration
Outside the construction context, a failure to properly classify an individual as an
employee would result in wages unpaid, which could be pursued under the WPCA as outlined
above in sections I.A.2-4 or the overtime procedures outlined in I.B.2-4, depending on the
consequences of the misclassification.
25
Illinois
Any “interested party” can file a complaint under the Employee Classification Act with
the Department of Labor against an entity or employer covered under this Act if there is a
“reasonable belief that the entity or employer is in violation of this Act.” Once such a complaint
is filed, DOL has a duty to investigate. 820 ILL. COMP. STAT. 185/25. If the investigation leads
DOL to believe that the act has been violated, the “Department may: (i) issue and cause to be
served on any party an order to cease and desist from further violation of the Act, (ii) take
affirmative or other action as deemed reasonable to eliminate the effect of the violation, (iii)
collect the amount of any wages, salary, employment benefits, or other compensation denied or
lost to the individual, and (iv) assess any civil penalty allowed by this Act.” Id.
The statute also provides a private right of action. Any interested party or person
aggrieved can file suit in circuit court without exhausting the administrative remedies provided
by the Act. Actions may be brought individually or on behalf of all persons similarly situated.
820 ILL. COMP. STAT. 185/60.
3. Statute of Limitations
Cases outside of the construction industry (and therefore outside the purview of the
Classification Act) would have the limitations period from the WPCA, as discussed supra in
section I.A.3 or the one-year limitations period found at 820 ILL. COMP. STAT. 115/11, depending
on the nature of the violation. The statute of limitations under the Classification Act is 3 years
from the final date of performing services to the employer or entity. This limitations period is
tolled if an employer or entity has deterred a person’s exercise of rights under this Act. 820 ILL.
COMP. STAT. 185/60.
4. Remedies
26
Illinois
Cases outside of the construction industry (and therefore outside the purview of the
Classification Act) would have the remedies available in the WPCA, as discussed supra in
section I.A.3 or those discussed in I.B.3 for overtime violations, depending on the nature of the
violation.
Under the Classification Act, an employer is in violation of the Employee Classification
Act for each day it has failed to properly designate a laborer as an employee. A person whose
rights have been violated under this Act by an employer or entity is entitled to collect:
(1) the amount of any wages, salary, employment benefits, or other compensation
denied or lost to the person by reason of the violation, plus an equal amount in
liquidated damages;
(2) compensatory damages and an amount up to $500 for each violation of this
Act or any rule adopted under this Act;
(3) in the case of unlawful retaliation, all legal or equitable relief as may be
appropriate; and
(4) attorney’s fees and costs.
In Classification Act matters pursued by the DOL, the employer is subject to a civil penalty not
to exceed $1,000 for each violation found in the first audit by the Department. Following a first
audit, an employer or entity will be subject to a civil penalty not to exceed $2,000 for each repeat
violation found by the Department within a five-year period. For purposes of the Act, each
violation for each person and for each day the violation continues constitutes a separate and
distinct violation. In determining the amount of a penalty, the Director is obligated to consider
the appropriateness of the penalty to the employer or entity charged considering the gravity of
the violations.
Once the penalty is collected, the Department distributes to all affected employees ten
percent of the civil penalty recovered, whether as a result of any administrative proceeding or
civil action brought by the Department. The remaining ninety percent of the amount recovered is
27
Illinois
submitted to the Director of Labor. Even when the case proceeds as a private right of action, the
circuit court awards the interested party ten percent of the amount recovered and the rest goes to
the Director of Labor. 820 ILL. COMP. STAT. 185/40. If the violation is willful, the employer is
liable for punitive damages in an amount equal to the foregoing penalties. 820 ILL. COMP. STAT.
185/45.
Finally, when an employer is found guilty of a second (or subsequent) Classification Act
violation within five years of an earlier violation, the employer’s name goes on a DOL
debarment list, and the employer is precluded from obtaining any state contract until four years
have elapsed from the date of the last violation. 820 ILL. COMP. STAT. 185/42. There are
additional criminal penalties associated with willful misconduct. See, e.g., 820 ILL. COMP. STAT.
185/45.
5. Information Sharing
Although not contained in (or referencing) the Illinois statutes directly relevant to wages
or wage theft, the Illinois Worker Compensation Act provides that the “Department of Labor, the
Department of Employment Security, the Department of Revenue, the Office of the State
Comptroller, and the Illinois Workers’ Compensation Commission shall cooperate under the
Employee Classification Act by sharing information concerning any suspected misclassification
by an employer or entity, as defined in the Employee Classification Act, of one or more
employees as independent contractors.” 820 ILL. COMP. STAT. 305/26.1.
B. Exempt/Non-Exempt Classification
1. Normative Standards
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Illinois
As noted above at I.B.1, Illinois generally follows the exempt/nonexempt classifications
found in the federal FLSA. Illinois law does provide exemptions beyond those found in federal
law (vehicle, trailer, boat, and aircraft salespersons and mechanics, employees who exchange
hours through a workplace exchange agreement, educational or residential childcare employees,
certain agricultural labor, and towing vessel crewmen). 820 ILL. COMP. STAT. 105/4a(2).
In addition to specific occupations, certain institutions are not covered by Illinois wage
law. Among those not covered are “corporations, community chest, fund, or foundations,
organized and operated exclusively for religious, charitable, scientific, literary, or educational
purposes, or for the prevention of cruelty to children or animals [where] no part of the net
earnings . . . benefit of any private shareholder or individual, [does not substantially engage in]
propaganda or otherwise attempting to influence legislation.” 820 ILL. COMP. STAT. 405/221.
2. Claim Administration
Overtime claims based on misclassification of employees are litigated under the
procedures discussed above in section I.B.2, and the Employment Compensation Act, discussed
above at II.A.
3. Statute of Limitations
Overtime claims based on misclassification of employees are litigated under, and have
the limitations provided by, the procedures discussed above in section I.B.2, and the
Employment Compensation Act, discussed above at II.A.
4. Remedies
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Illinois
Overtime claims based on misclassification of employees are litigated under the
procedures, and provide the remedies in, the Wage Payment Act, discussed above in section
I.B.2, and the Employment Compensation Act, discussed above at II.A.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
The Illinois Whistleblower Reward and Protection Act (“IWRPA”) provides that any
person who:
(A) knowingly presents, or causes to be presented, a false or fraudulent claim for
payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or
(G);
(D) has possession, custody, or control of property or money used, or to be used,
by the State and knowingly delivers, or causes to be delivered, less than all the
money or property;
(E) is authorized to make or deliver a document certifying receipt of property
used, or to be used, by the State and, intending to defraud the State, makes or
delivers the receipt without completely knowing that the information on the
receipt is true;
(F) knowingly buys, or receives as a pledge of an obligation or debt, public
property from an officer or employee of the State, or a member of the Guard, who
lawfully may not sell or pledge property; or
(G) knowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to the
State, or knowingly conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the State,
is liable to the state for a civil penalty of not less than the minimum amount and not more than
the maximum amount allowed for a civil penalty for a violation of the federal False Claims Act,
plus three times the amount of damages that the state sustains because of the act of that person.
740 ILL. COMP. STAT. 175/3. The person found liable is also responsible for the costs and fees
30
Illinois
incurred in the enforcement action. See ILL. COMP. STAT. ANN. § 175.740; ILL. COMP. STAT. § 175.
No proof of specific intent to defraud is required. Id.
Unfair methods of competition or deceptive practices, including fraud, are unlawful. 815
ILL. COMP. STAT. 505/2.
B. Claim Administration
Actions under the Act are akin to those brought under the federal False Claims Act. An
action under the IWRPA can be brought under seal by a private citizen in the name of the state.
740 ILL. COMP. STAT. 175/4. The state’s attorney general then has 60 days to consider whether to
intervene in the action; if he or she does, the government runs the litigation with the individual
plaintiff as a party as well. If not, the action proceeds as a private action in the name of the state.
Id. Actions may also be filed as an initial matter by the attorney general on the state’s behalf.
C. Statute of Limitations
A civil action for a false claim may not be brought:
(1) more than 6 years after the date on which the violation of Section 3 is
committed, or
(2) more than 3 years after the date when facts material to the right of action are
known or reasonably should have been known by the official of the State charged
with responsibility to act in the circumstances, but in no event more than 10 years
after the date on which the violation is committed,
whichever occurs last. 740 ILL. COMP. STAT. 175/5.
D. Remedies
The recovery of an individual bringing a false claim action ranges from 15-30% of the
amount recovered, depending on the individual’s role in bringing the misconduct to light and
whether the government intervenes. 740 ILL. COMP. STAT. 175/4(d)(1). The defendant is also
liable to the State for a civil penalty of not less than $5,500 and not more than $11,000 plus three
31
Illinois
times the amount of damages which the State sustains because of the act of the defendant. Id.
Penalties may be reduced if the person cooperates with the fraud investigation. See 740 ILL.
COMP. STAT. § 175.
IV. Certification by Government Contractors of Prevailing Wage Compliance
A. Normative Standards
In the Prevailing Wage Act, 820 ILL. COMP. STAT. 130.0.01 et seq. (PWA), Illinois requires
contractors and subcontractors working on public construction and demolition projects to pay
“[n]ot less than the general prevailing rate of hourly wages for work of a similar character on
public works in the locality in which the work is performed . . . .” 820 ILL. COMP. STAT. 130/3.
Each contractor and subcontractor must individually maintain records, for the purpose of
addressing inconsistencies in the case of an audit, of at least the worker’s:
(i) name,
(ii) address,
(iii) telephone number,
(iv) the last 4 digits of the worker’s social security number,
(v) gender,
(vi) race,
(vii) ethnicity,
(viii) veteran status; and unless the worker qualifies for a minority of cases
involving jointly maintaining a fringe benefit fund with other
employers/organizations:
(ix) classification/profession (ex–carpenter),
(x) gross and net wages paid in each pay period,
(xi) number of hours worked each day,
(xii) starting and ending times of work each day,
(xiii) hourly wage rate,
(xiv) hourly overtime wage rate,
(xv) hourly fringe benefit rates,
(xvi) the name and address of each fringe benefit fund,
(xvii) the plan sponsor of each fringe benefit, if applicable, and
(xviii) the plan administrator of each fringe benefit, if applicable.
Id.
32
Illinois
Payroll certification is expressly required. 820 ILL. COMP. STAT. 130/5. No later than the
fifteenth day of each calendar month, each contractor and subcontractor on a covered project has
to file a certified payroll for the immediately preceding month with the public body in charge of
the project (or upload it to the DOL database created for that purpose). The certified payroll
information must be accompanied by a signed acknowledgement certifying that the records are
accurate, that the wage paid to the worker meets the minimum requirements of the prevailing
wage, and that the individual signing the certification understands that submitting false or
misleading information is a Class A misdemeanor. 820 ILL. COMP. STAT. 130/5. Contractors and
subcontractors are required to retaining payroll certification information for five years. 820 ILL.
COMP. STAT. 130/11.
B. Claim Administration
The PWA can be enforced either by DOL or by private right of action. 820 ILL. COMP.
STAT. 130/11. The Department has a right of action on behalf of any individual who has a right
of action under the Act. Id. An action brought by DOL is deemed to be a suit for wages, and
any entered in such a case has the same force and effect as other judgments for wages. At the
request of any laborer, workman or mechanic employed by the contractor or by any
subcontractor under him who is paid less than the prevailing wage rate required by this Act, the
Department of Labor may take an assignment of such wage claim in trust for the assigning
laborer, workman or mechanic and may bring any legal action necessary to collect such claim,
and the contractor or subcontractor is required to pay the costs incurred in collecting such claim.
820 ILL. COMP. STAT. 130/11.
33
Illinois
“Any laborer, worker or mechanic employed by the contractor or by any sub-contractor”
who is paid less than the prevailing wage has a private right of action for the difference between
the amount paid and the amount due and reasonable attorney’s fees. 820 ILL. COMP. STAT. 130/11.
C. Statute of Limitations
An action must be brought within five years from the date of the failure to pay the
prevailing wage rate.
D. Remedies
Restitution of underpaid wages is the basic remedy under the Act, but even where the
case proceeds as a private cause of action by underpaid employees, the contractor or
subcontractor remains liable to DOL for twenty percent of such underpayments, as well as being
liable to the laborer, worker or mechanic for punitive damages in the amount of two percent of
the amount of the amount paid to the state for each month following the date of payment during
which such underpayments remain unpaid, in addition to underpayments. 820 ILL. COMP. STAT.
130/11. Where a second or subsequent violation occurs involving the same contractor or
subcontractor, the penalty in favor of DOL escalates to fifty percent of the underpayments
payable, and the defendant is also liable for five percent of the amount of any such penalty to the
State for underpayments for each month following the date of payment during which the
underpayments remain unpaid. Id.
A contractor that violates either the payroll certification requirement or that fails to pay
the prevailing wage is subject to an automatic and immediate debarment, prohibiting the violator
from participating in any public works project for 4 years, with no right to a hearing. 820 ILL.
COMP. STAT. 130/11a.
V. Labor Trafficking
34
Illinois
A. Normative Standards
No Illinois statute addresses labor brokers specifically, and the code addresses labor
trafficking only as a feature of its prohibition of human trafficking and involuntary servitude.
The Illinois Trafficking Victims Protection Act (IWTPA) provides that it is a felony to
knowingly: (1) recruit, entice, harbor, transport, provide, or obtain by any means, or attempts to
recruit, entice, harbor, transport, provide, or obtain by any means, another person, intending or
knowing that the person will be subjected to involuntary servitude; or (2) benefit, financially or
by receiving anything of value, from participation in a venture that has engaged in an act of
involuntary servitude or involuntary sexual servitude of a minor. A company commits
trafficking in persons when the company knowingly benefits, financially or by receiving
anything of value, from participation in a venture that has engaged in an act of involuntary
servitude or involuntary sexual servitude of a minor. 720 ILL. COMP. STAT. 5/10-9.
B. Claim Administration
The IWTPA’s criminal provisions are enforced through prosecution by the state. The act
also creates a civil cause of action. 740 ILL. COMP. STAT. 128/15. A victim of the sex trade,
involuntary servitude, or human trafficking can bring an action in civil court by him or herself or
through a legal guardian, agent, court appointee, or, with the express written consent of the
victim, organization that represents the interests of or serves victims may bring a cause of action
on behalf of a victim. The proper defendant in such a case would be, inter alia, any person or
entity who: recruits, profits from, or maintains the victim in any sex trade act; intentionally
abuses or causes bodily harm to a victim of the sex trade; or knowingly advertises or publishes
advertisements for purposes of recruitment into sex trade activity. 740 ILL. COMP. STAT. 128/15.
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Illinois
C. Statute of Limitations
The statute of limitations under the IWPTA is ten years from the time the victim is
initially trafficked or from the time they are freed from their trafficker, whichever is later. If the
victim is a minor at the time of trafficking, the ten-year statute of limitations period does not
begin until the victim has reached the age of 18.
D. Remedies
The IWTPA does not itself specify any civil remedies.
36
Maryland
I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
Under the Maryland Wage and Hour Law (MWHL), a Maryland employee is currently
entitled to a $11.75 minimum wage. MD. CODE ANN., LAB. & EMPL. § 3-413(c)(1)(iv). That
minimum wage will steadily increase through 2025. Id. If the employee is under the age of 18,
he or she is only entitled to 85% of the minimum wage. MD. CODE ANN., LAB. & EMPL. §
3-413(d). The MWHL also prohibits retaliatory actions by employers, MD. CODE ANN., LAB. &
EMPL. § 3-428(b)(2)(iv), and groundless or malicious complaints by employees. MD. CODE ANN.,
LAB. & EMPL. § 3-428(c)(1).
2. Claim Administration
Under the MWHL, an employee may bring a private cause of action. An aggrieved
individual can also file a complaint in the circuit court. MD. CODE ANN., LAB. & EMPL. § 3-426.
On the written request of an employee, the Commissioner may: “(1) take an assignment of the
claim in trust for the employee; (2) ask the Attorney General to bring an action in accordance
with this section on behalf of the employee; and (3) consolidate 2 or more claims against an
employer.” MD. CODE ANN., LAB. & EMPL. § 3-427(b).
The Commissioner also has enforcement powers. To begin an investigation, the
Commissioner must try to negotiate with the employer to obtain evidence that is needed to
determine whether a violation exists. MD. CODE ANN., LAB. & EMPL. § 3-408(b)(1). If the
Commission cannot obtain evidence through negotiation, the Commissioner may issue a
Maryland
subpoena. MD. CODE ANN., LAB. & EMPL. § 3-408(b)(2). The Commissioner (or the
Commissioner’s designee) may enter a place of employment to inspect wage records and
question employees about the employer’s compliance with labor laws. MD. CODE ANN., LAB. &
EMPL. § 3-425(a).
Lastly, an employee may seek a lien for unpaid wages. MD. CODE ANN., LAB. & EMPL. §
3-1102. An employer may file a complaint to dispute a lien for unpaid wages and may request
an evidentiary hearing. MD. CODE ANN., LAB. & EMPL. § 3-1103(a), (c). A lien for unpaid wages
is established after a circuit court issues an order or after the employer does not dispute the
complaint within 30 days after a notice is served. MD. CODE ANN., LAB. & EMPL. § 3-1104.
3. Statute of Limitations
The MWHL does not specify a period of limitations. Maryland’s residual limitations
period is three years from the date the cause of action accrues. MD. CODE ANN., CTS. & JUD.
PROC. § 5-101.
4. Remedies
An employee pursuing an MWHL claim may recover “(1) the difference between the
wage paid to the employee and the wage required under this subtitle; (2) an additional amount
equal to the difference between the wage paid to the employee and the wage required under this
subtitle as liquidated damages; and (3) counsel fees and other costs.” MD. CODE ANN., LAB. &
EMPL. § 3-427. The court can refuse to allow recovery of liquidated damages, or reduce them, if
the “employer shows to the satisfaction of the court that the employer acted in good faith and
reasonably believed that the wages paid to the employee were not less than the wage required.”
Md. Code Ann., Lab. & Empl. § 3-427.
38
Maryland
B. Overtime Violations
1. Normative Standards
For overtime under the MWHL, an employer shall pay an overtime wage of at least 1.5
times the usual hourly wage. MD. CODE ANN., LAB. & EMPL. § 3-415(a). With some exceptions,
overtime is each hour over 40 hours in a week. MD. CODE ANN., LAB. & EMPL. § 3-420; see also
MD. CODE REGS. 09.12.41.14; compare MD. CODE ANN., LAB. & EMPL. § 3-401 (specifying special
overtime standards for identified industries, such as agricultural work, bowling alleys, and the
“music or theater craft or trade”).
Maryland regulations specify that “hours of work” means the time during a workweek
that an individual employed by an employer is required by the employer to be on the employer's
premises, on duty, or at a prescribed workplace. MD. CODE REGS. 09.12.41.10. Meal periods are
included in computing hours of work if the individual is required to perform any duties during
the meal period. Id. Travel time is included in computing hours of work if the individual:
(1) Travels during regular work hours;
(2) Travels from one worksite to another; or
(3) Is called out after work hours in emergency situations.
Id. For example, the time construction workers were required to ride a shuttle bus to and from
the construction site was not compensable under the MWHL. Amaya v. DGS Constr., LLC, 246
A.3d 616 (Md. 2021), cert. granted 2021 WL 2943961 (2021) (No. 58, Sept. Term). Also, by
39
Maryland
regulation, Maryland requires that all hours worked by an employee be included, even though the
employee may perform work in two or more unrelated jobs. MD. CODE REGS. 09.12.41.14.
2. Claim Administration
See I.A.2.
3. Statute of Limitations
See I.A.3.
4. Remedies
See I.A.4.
C. Off-the-clock Violations
1. Normative Standards
The MWHL defines “wage” to include “all compensation that is due to an employee for
employment.” MD. CODE ANN., LAB. & EMPL. § 3-401(d). The definition of “hours work” set out
above applies to off-the-clock claims as well. An employer thus may not ask an employee to
perform work unless the time spent is included in the “hours worked” calculation both for base
pay and overtime pay.
2. Claim Administration
See I.A.2.
3. Statute of Limitations
See I.A.3.
4. Remedies
See I.A.4.
D. Illegal Deductions
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Maryland
1. Normative Standards
As set out in the Maryland Wage Payment and Collection Law (WPCL), the only
permissible deductions an employer may make from pay are those:
(1) ordered by a court of competent jurisdiction;
(2) authorized expressly in writing by the employee;
(3) allowed by the Commissioner because the employee has received full consideration
for the deduction; or
(4) otherwise made in accordance with any law or any rule or regulation issued by a
governmental unit.
MD. CODE ANN., LAB. & EMPL. § 3-503.
2. Claim Administration
The WPCL can be enforced either through an administrative process, MD. CODE ANN.,
LAB. & EMPL. § 3-507.1, or through a private cause of action. For a complaint of unpaid wages
not exceeding $5,000, the Commissioner shall “send a copy of the complaint to the employer
alleged to have failed to pay wages” and “require a written response to the complaint within 15
days.” Id. The Commissioner may investigate the claim and either issue an order to pay wages
or dismiss the claim. Id. If the employer does not request an administrative hearing within 30
days after an order, the order to pay wages becomes the final order of the Commissioner, which
can then be enforced in the relevant district court. Id.
Alternatively, if the Commissioner determines that an employer failed to pay wages as
required, he or she can enforce the WPCL through MD. CODE ANN., LAB. & EMPL. § 3-507(a).
That section gives the Commissioner authorization to attempt to solve the issue through informal
mediation; ask the Attorney General to bring an action on behalf of the employee; or may bring
an action on behalf of an employee in the county court.
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Maryland
A failure to pay wages may also be enforced through a private cause of action. Two
weeks after an employer is required to pay wages, an employee may bring an action under Md.
Code Ann., Lab. & Empl. § 3-507.2 to recover the unpaid wages.
Finally, the WPCL provides that “a general contractor on a project for construction
services is jointly and severally liable for a violation … that is committed by a subcontractor,
regardless of whether the subcontractor is in a direct contractual relationship with the general
contractor.” MD. CODE ANN., LAB. & EMPL. § 3-507.2(c)(2).
3. Statute of Limitations
See I.A.3.
4. Remedies
If an employer violates the WPCL, a “court may award the employee an amount not
exceeding 3 times the wage, and reasonable counsel fees and other costs.” MD. CODE ANN., LAB.
& EMPL. § 3-507.2(b).
E. Paystub Provisions
1. Normative Standards
Under the WPCL, an employer must set regular pay periods, and must pay each
employee at least once every 2 weeks or twice in each month unless the employee is an
administrative, executive, or professional employee. MD. CODE ANN., LAB. & EMPL. § 3-502.
Additionally, an employer must pay each terminating employee all of the wages he or she is due
for work performed before the termination on or before the day on which the employee would
have been paid the wages had the employment not been terminated. MD. CODE ANN., LAB. &
EMPL. § 3-505.
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The MWHL requires employers to provide employees certain specified information when
they are hired: the rate at which the employee will be paid, the “regular payday” established by
the employer, and the “leave benefits” to which the employee will be entitled. See MD. CODE
ANN., LAB. & EMPL. § 3-504(a)(1)(i)-(iii). For each pay period thereafter, the Act requires that
the employer provide the employee with a statement that includes the gross earnings of the
employee for the pay period and specifies any deductions made from those gross earnings. The
employer is also required by the Act to provide notice of any change in the employee’s wages or
in the employer’s regular payday. Id. at § 3-504(a)(2)-(3). Increases in pay, however, can be
granted without prior notice. Id.
2. Claim Administration
See I.D.2 for claim administration under the WPCL. See I.A.2 for claim administration
under the MWHL.
3. Statute of Limitations
See I.A.3.
4. Remedies
See I.D.4.
F. Interagency Information Sharing
Maryland has no statutory provisions requiring or providing for interagency information
sharing in the wage theft context. However, interagency information sharing provisions in the
Workplace Fraud Act are discussed below.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
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Maryland
The Workplace Fraud Act (WFA) prohibits employers from treating employees as if they
were independent contractors if they work in two specific industries—construction services and
landscaping services, MD. CODE ANN., LAB. & EMPL. § 3-902, and creates a presumption that
individuals performing work in those fields are, in fact, employees and not independent
contractors. MD. CODE ANN., LAB. & EMPL. § 3-903(c)(1). Knowingly treating employees in
these fields as independent contractors is classified as “workplace fraud.” MD. CODE ANN., LAB.
& EMPL. § 3-904.
To overcome the statutory presumption and demonstrate that an individual is, in fact, an
independent contractor and not an employee, the employer must show that:
(1) the individual “is free from control and direction” over the performance of the work,
“both in fact and under the contract”;
(2) the individual “customarily is engaged in an independent business or occupation of
the same nature as that involved in the work”; and
(3) the work is:
(a) outside of the usual course of business of the person for whom
the work is performed; or
(b) performed outside of any place of business of the person for
whom the work is performed.
MD. CODE ANN., LAB. & EMPL. § 3-903(c)(1)(ii).
As to whether the work is “outside the usual course” of the employer’s business, the statute
considers whether:
(i) the individual performs the work off the employer’s premises;
(ii) the individual performs work that is not integrated into the employer’s
operation; or
(iii) the work performed is unrelated to the employer's business’s last of
these factors—work performed “outside the place of business.
MD. CODE ANN., LAB. & EMPL. § 3-903(c)(2).
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The presumption created by § 3-903 can also be overcome if the employer both notifies
each individual classified as an independent contractor to that effect and produces specific
documents for inspection by the Commissioner. MD. CODE ANN., LAB. & EMPL. § 3-903.1. The
documents include: a written contract that (a) describes the nature of the work to be performed
by the business entity; (b) describes the remuneration to be paid for the work performed by the
business entity; and (c) includes an acknowledgment by the business entity of the business
entity’s obligations under the WFA to withhold, report, and remit payroll taxes on behalf of all
employees working for the business entity, to pay unemployment insurance taxes for all
employees working for the business entity; and requires the business entity to maintain workers'
compensation insurance. MD. CODE ANN. LAB. & EMPL. § 3-903.1(1).
Evidence that a misclassification was not willful includes evidence that the employer,
before any complaint was made:
(i) sought and obtained evidence that the individual:
1. is an exempt person; or
2. as an independent contractor:
A. withholds, reports, and remits payroll taxes on behalf of all
individuals working for the independent contractor;
B. pays unemployment insurance taxes for all individuals working
for the independent contractor; and
C. maintains workers' compensation insurance; and
(ii) provided to the exempt person or independent contractor a written
notice as required by § 3-914 of this subtitle; or
(2) the employer:
1. classifies all workers who perform the same or substantially the
same tasks for the employer as independent contractors; and
2. reports the income of the workers to the Internal Revenue Service as
required by federal law; and
(ii) has received a determination from the Internal Revenue Service that
the individual or a worker who performs the same or substantially the
same task as the individual is an independent contractor.
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MD. CODE ANN., LAB. & EMPL. § 3-904(c). Both the WFA and regulations thereunder require that
an employer keep records for each independent contractor and exempt person hired. MD. CODE
ANN., LAB. & EMPL. § 3-914; see also MD. CODE REGS. 09.12.40.03.
2. Claim Administration
The Commissioner may issue a citation after an investigation. MD. CODE ANN., LAB. &
EMPL. § 3-906(a). An employer may request an administrative hearing after receiving a citation.
MD. CODE ANN., LAB. & EMPL. § 3-906(d). Any party aggrieved by a final order may seek
judicial review and appeal. MD. CODE ANN., LAB. & EMPL. § 3-906(j).
If a final order of an administrative unit or of a court has not previously been issued, an
individual may bring a civil action against the employer. MD. CODE ANN., LAB. & EMPL. §
3-911(a).
3. Statute of Limitations
Under the WFA, an action “shall be filed within three years after the date the cause of
action accrues.” MD. CODE ANN., LAB. & EMPL. § 3-911(b).
4. Remedies
The Commissioner may issue a citation with a civil penalty. MD. CODE ANN., LAB. &
EMPL. § 3-906(b)(3). Aggrieved parties can seek judicial review. Id. at § 3-906(j).
An employer that comes into timely compliance with all applicable labor laws may not be
assessed a civil penalty (although the phrase “timely compliance” is undefined). MD. CODE ANN.,
LAB. & EMPL. § 3-908(a). However, an employer that does not come into timely compliance
“shall be assessed a civil penalty of up to $1,000 for each employee for whom the employer is
not in compliance.” MD. CODE ANN., LAB. & EMPL. § 3-908(b)(1).
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Maryland
An employer that has knowingly misclassified workers can be assessed a civil penalty of
up to $5,000 for each misclassified employee. MD. CODE ANN., LAB. & EMPL. § 3-909(a). In
determining the civil penalty, the Commissioner shall consider “(1) the gravity of the violation,
(2) the size of the employer’s business, (3) the employer’s good faith, (4) the employer’s history
of violations . . .” and (5) whether the employer “deprived the employee of any rights” or “has
made restitution and come into compliance” with labor laws “with respect to the employee.”
MD. CODE ANN., LAB. & EMPL. § 3-909(b).
In a civil action against an employer, the court may award each individual the damages
owed as well as “an additional amount up to three times the amount of any such damages, if the
employer knowingly failed to properly classify the individual.” MD. CODE ANN., LAB. & EMPL. §
3-911. The court can also award counsel fees and costs. Id.
B. Exempt/Non-Exempt Classification
1. Normative Standards
Following the pattern established by the federal Fair Labor Standards Act (FLSA), the
MWHL exempts employees in a number of occupations, including those working in an
administrative, executive, or professional capacity. MD. CODE ANN., LAB. & EMPL. § 3-403(1).
For all three of these classifications, the state Commissioner of Labor and Industry
(Commissioner) applies the federal definitions. See MD. CODE REGS. 09.12.41.01; MD. CODE
REGS 09.12.41.05; MD. CODE REGS 09.12.41.17. However, Maryland also includes exemptions
not found in the FLSA, such as:
(1) Employees under 16, working 20 or fewer hours per week.
(2) Commissioned employees.
(3) An employer’s children, parents, spouse, or other immediate family members.
(4) Employees of drive-in theaters.
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Maryland
(5) Employees enrolled as part of the training in public school special education
programs.
(6) Employees of certain food and drink establishments that have gross annual
sales of $400,000 or less.
(7) Employees covered under the Secure Maryland Wage Act.
MD. CODE ANN., LAB. & EMPL. § 3-403 as amended by 2021 Maryland Laws Ch. 671 (H.B. 685).
2. Claim Administration
See I.A.2.
3. Statute of Limitations
See I.A.3.
4. Remedies
See I.A.4.
C. Interagency Information Sharing
The WFA also addresses interagency information sharing. First, after the Commissioner
issues a citation, he or she must “notify the Comptroller, the Office of Unemployment Insurance,
the Insurance Administration, and the Workers’ Compensation Commission to enable these
agencies to assure an employer’s compliance with their laws, utilizing their own definitions,
standards, and procedures.” MD. CODE ANN., LAB. & EMPL. § 3-907(a). Second, state agencies
are required to “cooperate and share information concerning any suspected failure to properly
classify an individual as an employee.” MD. CODE ANN., LAB. & EMPL. § 3-910.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
Maryland has adopted its own version of the federal False Claims Act, which in its most
basic prohibition provides that a person may not knowingly present or cause to be presented “a
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Maryland
false or fraudulent claim [to state, local, or county governments] for payment or approval” or
“make, use, or cause to be made or used a false record or statement material to a false or
fraudulent claim.” MD. GEN. PROVIS. § 8-102(b).
B. Claim Administration
As with the federal False Claims Act, a claim under the MFCA can be filed either by a
private citizen or the affected governmental entity. If the suit is initially filed by a private citizen,
the complaint is filed in camera; the plaintiff must provide notice to the governmental entity,
which then can choose whether to intervene and prosecute the action for itself, with the
individual filing the action denominated as a co-plaintiff. MD. GEN. PROVIS. § 8-103(a).
C. Statute of Limitations
The limitations period applicable to a MFCA claim is either six years from the date of the
underlying violation or three years “after the date when facts material to the right of action are
known or reasonably should have been known by the person [or governmental entity] initiating
the action . . . but in no event more than 10 years after the date” of the underlying violation. MD.
GEN. PROVIS. § 8-108(a).
D. Remedies
A person that has violated this Act is liable to the governmental entity for any damages
arising from the violation as well as (a) a civil penalty of not more than $10,000 for each
violation; and (b) an additional amount of not more than three times the amount of damages that
the governmental entity has sustained. MD. GEN. PROVIS. § 8-102(c)(1).
If the affected governmental entity intervenes in a suit filed by a private individual, the
private plaintiff initiating the claim can recover an amount between 15% and 25% of the
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Maryland
proceeds of the action or settlement of the claim. The private plaintiff’s recovery is to be
proportional to the amount of time and effort that he or she contributed to the final resolution of
the civil action. MD. GEN. PROVIS. § 8-105(a)(i)-(ii). In addition, the person who initiates the
action can recover reasonable attorney’s fees and costs. MD. GEN. PROVIS. § 8-105(4)(i).
However, a court may award attorney’s fees and expenses to a defendant and against the person
initiating the action if the defendant prevails or the person initiating the action acted in bad faith.
MD. GEN. PROVIS. § 8-105(c).
E. Interagency Information Sharing
A governmental entity is required to make “all reasonable efforts” to coordinate
investigations with the federal government involving the same violation to avoid unnecessary
duplication. MD. GEN. PROVIS. § 8-109(b).
IV. Certification by Government Contractors of Prevailing Wage Compliance
A. Normative Standards
The Maryland Prevailing Wage Law (MPWL) requires the Commissioner of Labor and
Industry (or his or her designee) to establish for each public works project within the statute’s
purview a prevailing wage rate (both “straight” time and overtime) for each “classification of
worker engaged in work of the same or a similar character.” MD. CODE ANN., STATE FIN. & PROC.
§ 17-208.
Employers are then required to pay this prevailing wage; the employer may not “violate
the wage provisions of a public work contract” or “allow or require an employee to work for less
than the applicable prevailing wage rate.” MD. CODE ANN., STATE FIN. & PROC. §
17-225(a)(1)-(2). The prevailing overtime rate must be paid for each hour worked in “excess of
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Maryland
10 hours in any single calendar day,” in excess of 40 hours for a given work week, and on
Sunday or any legal holiday. MD. CODE ANN., STATE FIN. & PROC. § 17-214(b).
In addition to paying the applicable rate, the employing contractor is required to “post a
clearly legible statement of each prevailing wage rate to be paid under the public work contract”
and keep it posted throughout the project. MD. CODE ANN., STATE FIN. & PROC. § 17-219.
The act also requires the contracting employer to submit to the contracting entity and the
Commissioner of Labor and Industry both its own payroll records and, “for work performed at
the work site, [the payroll records of its] subcontractors in the form that the Commissioner
specifies by regulation.” MD. CODE ANN., STATE FIN. & PROC. § 17-220(b)(1). The contractor is
required to include with the submission a “statement that is signed by the contractor or, for the
subcontractor's records, by the subcontractor [that] indicates that:
(1) the payroll records are correct;
(2) the wage rates paid are not less than those established by the Commissioner as
set forth in the public work contract;
(3) the classification set forth for each employee conforms with the work
performed by that employee; and
(4) the contractor or subcontractor has complied with each requirement of this
subtitle.
(i) the public body; and
(ii) the Commissioner.”
MD. CODE ANN., STATE FIN. & PROC. § 17-220(c)(1)-(4).
B. Claim Administration
An employee who claims to have been paid less than the prevailing wage rate can either
file a lawsuit of his or her own in court or can file a complaint with the Commissioner of Labor
and Industry. MD. CODE ANN., STATE FIN. & PROC. § 17-224(a)(1)-(4). A failure of the employee
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claiming a violation to protest to the employer orally or in writing about the payment of a wage
is not a bar to recovery. MD. CODE ANN., STATE FIN. & PROC. § 17-224(d)(1).
If the Commissioner issues an order requiring restitution and the employer fails to do so,
either the Commissioner or the employee may bring a civil action to enforce the order in the
circuit court in the county. MD. CODE ANN., STATE FIN. & PROC. § 17-224(a)(5).
The Commissioner may inspect payroll records at any reasonable time and as often as
necessary. MD. CODE ANN., STATE FIN. & PROC. § 17-220(a).
C. Statute of Limitations
The statute of limitations for claims under the MPWL is three years from “the date the
affected employee knew or should have known of the violation.” MD. CODE ANN., STATE FIN. &
PROC. § 17-224(c)(3).
D. Remedies
An employer that violates the MPWL is liable to both the individual denied the prevailing
wage and to the contracting governmental entity. First, the employer owes “restitution” to the
harmed employee, calculated to be the difference between the wage paid and the prevailing wage
owed. MD. CODE ANN., STATE FIN. & PROC. §§ 17-222(b)(2), 17-224(e)(1).
In addition, the court can order double or treble damages to the employee if the court
finds that the employer “withheld wages or fringe benefits willfully and knowingly or with
deliberate ignorance or reckless disregard of the employer's obligations under this subtitle.” The
prevailing plaintiff is also entitled to reasonable counsel fees and costs.” MD. CODE ANN., STATE
FIN. & PROC. § 17-224(e)(3)-(4).
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Second, the employer found to have violated the Act is liable to the public body for
liquidated damages. If the violation is unintended, the liquidated damages amount to $20 for
each affected laborer or other employee for each day of the violation. If an employer
deliberately failed or refused to pay the prevailing wage rate, however, the employer is liable to
the public body for $250 for each laborer or other employee for each day. MD. CODE ANN., STATE
FIN. & PROC. § 17-222(1)-(2).
A person found to have made a false statement or fraudulent representation (through
deliberate ignorance or reckless disregard) is liable for a civil penalty of $1,000 for each falsified
record. MD. CODE ANN., STATE FIN. & PROC. § 17-224(g).
If an employee submits a false or fraudulent prevailing wage claim, the court may order
the employee to pay the employer’s reasonable counsel fees and costs. MD. CODE ANN., STATE
FIN. & PROC. § 17-224(e)(5).
If the contractor fails to provide, or is late in providing, the necessary certified records,
the contracting entity “may postpone the processing of partial payment estimates under the
public work contract pending receipt of the copies; and . . . the contractor shall be liable to the
public body for liquidated damages of $10 for each calendar day the records are late.” MD. CODE
ANN., STATE FIN. & PROC. § 17-220(d).
V. Labor Trafficking
A. Normative Standards
Maryland has a criminal code provision applicable to labor trafficking. Specifically, “[a]
person may not knowingly: (1) take, place, harbor, persuade, induce, or entice another by force,
fraud, or coercion to provide services or labor; or (2) receive a benefit or thing of value from the
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provision of services or labor by another that was induced by force, fraud, or coercion.” MD.
CODE ANN., CRIM. LAW § 3-1202(a)(1)-(2).
B. Claim Administration
“A State's Attorney or the Attorney General may investigate and prosecute a violation of
this subtitle or a violation of any crime based on the act establishing a violation of this subtitle.”
MD. CODE ANN., CRIM. LAW § 3-1203(a).
C. Statute of Limitations
In Maryland, a felony criminal case has no statute of limitations. See Smallwood v. State,
443 A.2d 1003, 1006 (Md. 1982).
D. Remedies
“A person who violates this section is guilty of a felony and on conviction is subject to
imprisonment not exceeding 25 years or a fine not exceeding $15,000 or both.” MD. CODE ANN.,
CRIM. LAW § 3-1202(c).
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Minnesota
I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
The Minnesota Fair Labor Standards Act (MFLSA), Minnesota’s primary wage and hour
law, is largely patterned after the FLSA. MINN. STAT. § 177.21-177.35. The avowed purposes of
the MFLSA are to:
(a) establish minimum wage and overtime compensation standards that maintain
workers’ health;
(b) safeguard existing minimum wage and overtime compensation standards that
maintain workers’ health; and
(c) sustain purchasing power and increases employment opportunities.
MINN. STAT. § 177.22.
Minnesota’s wage and hour statutory regime also includes the Minnesota Prevailing
Wage Act and the Minnesota Payment of Wages Act (“PWA”).
The MFLSA outlines what the state requires employers to do, and what the state prohibits
employers from doing regarding minimum wage and overtime requirements. The MFLSA
divides employers into two groups for purposes of the minimum wage, large and small. Large
employers are defined as any enterprise whose annual gross volume of sales made or business
done is not less than $500,000. MINN. STAT. § 177.24, subd. 1(a). Small employers are defined
as any enterprise whose annual gross volume of sales made or business done is less than
$500,000. Id. Effective August 1, 2016, every large employer was required to pay a minimum
wage of $9.50 per hour and every small employer a minimum wage of $7.75 per hour. MINN.
STAT. § 177.24, subd. 1(b) (2020). Beginning on January 1, 2018, the state minimum wages
Minnesota
increased on an annual basis based on inflation. MINN. STAT. § 177.24, subd. 1(f) (2020). On
Jan. 1, 2022, the minimum wage will increase to $10.33 an hour for large employers and $8.42
an hour for small employers. Both large and small employers are prohibited from applying
gratuities towards the calculation of wages for the purposes of meeting minimum wage
requirements. Id.
The MFLSA exempts individuals working in a number of occupations from its minimum
wage requirements, just as the FLSA does. Most of the exemptions under state law mirror those
under federal law, but some are unique to the state and highly specific. For example, MINN. STAT.
§ 177.23, exempts “individual[s] under 18 who [are] employed as a corn detasseler[s].” Id.,
subd. 7(4).
Apart from these employment-related standards, Minnesota has directly addressed the
crime of “wage theft.” Under Minnesota Statute section 609.52, subdivision 1(13)(i), wage theft
occurs when the employer, with the intent to defraud, “fails to pay an employee all wages, salary,
gratuities, earnings, or commissions at the employee’s rate or rates of pay or at the rates required
by law, whichever is greater.” “Wage theft” has also been added to the criminal definition of
“theft” under Minnesota Statute section 609.52, subdivision 2(19).
2. Claim Administration
The MFLSA is enforced by the Minnesota Department of Industry and Commerce,
Division of Labor Standards. Under Minnesota law, the Commissioner of the Department of
Industry and Commerce (Commissioner) can investigate alleged violations of the MFLSA,
making findings, and, where violations are found, issue orders remedying those violations.
MINN. STAT. § 177.27, subd. 4. The Commissioner’s remedial orders can direct the employer to
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Minnesota
cease and desist its unlawful practices, and to take affirmative steps to fulfill the purposes of the
statute by paying compensatory and liquidated damages. Id. The Commissioner may also bring
an action in the district court where an employer resides or where the Commissioner maintains
an office to enforce or require the compliance orders for minimum wage violations. Id. at subd.
5.
Like the FLSA, an employee is authorized to commence a lawsuit directly in district
court without having to file an administrative charge for violations of minimum wage
requirements. Id. at subd. 8; Burt v. Rackner, Inc., 902 N.W.2d 448, 455-57 (Minn. 2017).
3. Statute of Limitations
The wage theft statutes (Minn. Stat. Ann. § 181.03 and 609.52, subd. 1(13)) do not
specify a statute of limitations period, and the Minnesota courts have not addressed the issue.
However, Minnesota courts have held that the statute of limitations for wage claims generally is
two years, and extends to three years if the violation is willful. MINN. STAT. § 541.07(5) and
Worwa v. Solz Enters., Inc., 238 N.W.2d 628, 631 (Minn. 1976).
4. Remedies
The remedies for an employee under the MFLSA for a violation of minimum wage
statutes are also comparable to the remedies under the FLSA. Those include: unpaid wages or
overtime pay, liquidated (double) damages for willful violations, other affirmative injunctive
relief as warranted, disbursements, witness fees, and attorneys’ fees and costs. MINN. STAT. §
177.27, subds. 2, 4, 7, 10; 177.30(c); 177.31; 177.43, subd. 6(a); 177.45.
Any employer who is found by the Commissioner to have repeatedly or willfully violated
the minimum wage provision is subject to a civil penalty of up to $1,000 for each violation of
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Minnesota
each employee. MINN. STAT. § 177.32, subd 7. In determining the amount of the civil penalty,
Minnesota looks at both the size of the employer’s business and the gravity of the violation to
determine the amount. Id.
In all proceedings brought by the Commissioner, he or she may order the employer to
reimburse the department and the attorney general for all litigation and hearing costs unless the
payment of costs would impose “extreme hardship” on the employer. MINN. STAT. ANN. §
177.27, subd. 7. Minnesota also imposes additional fines if an employer retaliates against an
employee due to a proceeding or a complaint regarding the minimum wage statute (ranging
anywhere from $700 to $3,000 per violation). MINN. STAT. ANN. § 177.32, subd. 2; § 181.03,
subd. 6.
In addition, if an employer pays or agrees to pay wages at a rate less than the rate
required under MFLSA for minimum wage, the employer is guilty of a misdemeanor. MINN.
STAT. ANN. § 177.32, subd. 1(7). As stated in the introduction, the violation of the minimum
wage requirement in Minnesota can also cause criminal sanctions for an employer under “wage
theft.” The criminal sanctions vary based on the value of the wages stolen, ranging from a
one-year prison sentence and a $3,000 fine to a 20-year prison sentence and $100,000 fine.
MINN. STAT. § 609.52, subd. 2(19).
B. Overtime Violations
1. Normative Standards
As previously stated, the MFLSA is patterned after the FLSA. The major difference with
respect to overtime pay is that in Minnesota, an individual must work 48 hours in a week to be
entitled to overtime. MINN. STAT. § 177.25, subd. 1 (emphasis added). Every hour worked in
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Minnesota
excess of 48 hours per work week must be compensated at a rate of at least 1.5 hours. Id. In lieu
of monetary compensation, the state and its political subdivisions can give its employees time off
at the rate of 1-1/2 hours for each hour worked more than 48 hours in lieu of overtime pay; this
“comp time” alternative is not available to private sector employers. Id. Minnesota separately
prohibits employers from entering into agreements that would violate the overtime law. MINN.
STAT. A NN. § 177.25.
Minnesota Statutes section 177.25, subdivisions 2-5 and section 177.23, subdivision 7 list
categories of employees to whom the overtime statute does not apply; these include various
agriculture workers, health care workers, motor vehicle salespeople, and air carrier employees.
Under Minnesota Administrative Rule 5200.0150 (“Overtime Pay”), overtime pay must
be paid no later than the payday immediately following the regular payday for the pay period in
which it was earned. Minnesota section 181.01 requires employers to pay employees all wages,
including salaries, earnings, and gratuity at least once every 31 days (regardless of whether the
employee requests to be paid later). MINN. STAT. § 181.01. If the work is of a transitory nature,
such as construction, paving, repair of roads, etc., the employer is then required to pay the wages
at intervals of no more than 15 days. MINN. STAT. §181.10.
2. Claim Administration
As with the minimum wage violations, claims may be brought by affected employees in
court or by the Commissioner. MINN. STAT. A NN. § 177.27, subds. 7-8.
3. Statute of Limitations
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In Minnesota an action for the recovery of wages must be commenced within two years.
If the nonpayment of overtime pay is willful and not due to a mistake, the state of limitations is
three years. MINN. STAT. A NN. § 541.07(5) (emphasis added).
4. Remedies
An employer who pays an employee less than the overtime compensation to which the
employee is entitled under section 177.25 is liable to the employee for the full amount of the
overtime compensation, less any amount the employer can show was actually paid to the
employee, and for an additional equivalent amount as liquidated damages. MINN. STAT. ANN. §
177.27, subd. 8. This applies only to a lawsuit brough by the Commissioner. Id. The employee
can seek damages and any other relief in court provided by subdivision 7 (such as compensatory
damages, gratuities, etc.). An employer who is found to have willfully or repeatedly violated the
overtime pay section of the statute is subject to a civil penalty of up to $1,000 for each violation
for each employee. Attorneys’ fees, witness fees, and other expenses of the proceeding for
overtime pay violations will fall on the employer. MINN. STAT. § 177.27, subds. 7, 10.
The violation of Minnesota’s overtime pay requirement can also result in criminal
sanctions for an employer as “wage theft.” MINN. STAT. § 609.52, subd. 2(19). The criminal
sanctions vary based on the value of the wages stolen. Id.; see discussion supra at I.A.4.
Failing to pay wages based on a faulty claim that the employee is “exempt” can also be a
form of wage theft, allowing for the Commissioner or an individual action to seek redress. Under
Minnesota Statute section 609.52, subdivision 3 whoever commits theft (including “wage theft”)
can be liable for both prison time and fines.
C. Off-the-clock Violations
1. Normative Standards
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Minnesota has not directly addressed “off the clock” work by statute, but it has
promulgated rules regarding what constitutes “hours worked” and thus what must be paid.
Under Administrative Rule 5200.0120, subpart 1, “hours worked” includes as all training time,
on-call time, cleaning time, waiting time, or any other time when the employee must either be on
the premises of the employer or involved in the performance of duties with employment. The
remainder of this regulation section defines the terms “on-call,” “off duty,” and specifies that
bona fide meal periods are not hours worked. MINN. R. 5200.0120, subps. 2-4. In Minnesota (as
under the FLSA), to be considered “off duty” time, the employee must be completely relieved
from any work responsibilities while eating his or her meal; otherwise, the meal period must be
considered as hours worked. Id. Minnesota law prohibits deducting rest periods of less than 20
minutes from total hours worked. MINN. R. 5200.0120, subp. 1. If employees are working on
their meal breaks, then that time must be paid and cannot be illegally deducted. MINN. R.
5200.0120, subp. 4.
2. Claim Administration
“Off the clock” violations are pursued in the same fashion as other wage and hour
violations as explained above. It is clear that a knowing failure to pay for compensable time is
wage theft, allowing for a Commissioner or an individual action seeking redress. It is equally
clear that under Minnesota Statute section 609.52, subdivision 3 “Sentence,” whoever commits
theft (which would be the case under 13(i) “wage theft”) can be liable for prosecution and would
face prison time and fines.
3. Statute of Limitations
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An employer’s failure to pay for time worked would be subject to the general two-year
period of limitation, unless it is willful and not due to a mistake, in which case the statute of
limitations is three years. MINN. STAT. A NN. § 541.07(5) (emphasis added).
4. Remedies/Punishments
The civil remedies available for off-the-clock violations are the same as those described
above for other wage violations. As a form of wage theft, criminal sanctions are available under
MINN. STAT. § 609.52, subd. 2(19).
D. Illegal Deductions
1. Normative Standards
The Minnesota Payment of Wages Act (MPWA) prohibits deductions by employers from
the wages of employees without prior written authorization. Certain types of deductions are not
permitted at all: an employer can never deduct from an employee’s wages for breaks, cash
shortages, tools or uniforms. Minnesota Statute section 181.79 expressly prohibits employers
from deducting sums allegedly due to faulty workmanship, employer’s loss, theft, or damage
when the employee is not an independent contractor. MINN. STAT. ANN. § 181.79, subd. 1(a).
The statute also makes void any agreement between an employer and an employee that goes
against this statute. Id at 1(c). A written contract may be entered into between employer and
employee to authorize payroll deductions for union dues, and for premiums of any life insurance,
health insurance, etc. MINN. STAT. A NN. § 181.06, subd. 2.
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Minnesota section 177.24, subdivisions 4 and 5 address deductions for unreimbursed
expenses. Deductions for up to the full cost of a uniform or equipment for the job may not
exceed $50 (independent of pay period). This section also prohibits any deduction from pay that
would reduce the pay below minimum wage (such as purchased or rented uniforms, equipment,
supplies required in employment, etc.). MINN. STAT. ANN. § 177.24, subd. 4. At the time of an
employee’s termination, the employer must reimburse the full amount deducted for these items,
and the employee must surrender the items. Id at subd. 5.
2. Claim Administration
If the employer makes deductions from an employee’s wage that draw the employee
below minimum wage (§ 177.24, subdivision 4 and 5), the claim would be administered as listed
above under the section “Minimum Wage Violations.”
If an employer violates section 181.79 and illegally deducts from one’s paycheck for
faulty workmanship, loss, theft, or damage, the employee brings a civil action against the
employer. MINN. STAT. A NN. § 181.79, subd. 2.
3. Statute of Limitations
In Minnesota, an action for the recovery of wages must be commenced within two years.
If the nonpayment (in this instance, of rightful compensation that was illegally deducted) is
willful and not due to a mistake, the state of limitations is three years. MINN. STAT. ANN. §
541.07(5) (emphasis added).
4. Remedies
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Minnesota
An employer who makes illegal deductions in violation of section 181.79 is liable in a
civil action brought by the employee for twice the amount of the deduction or credit that was
taken. MINN. STAT. A NN. § 181.79, subd. 2.
If the claim constitutes “wage theft” for failing to pay an employee all wages required by
law, Minnesota can extend criminal sanctions. The criminal sanctions vary based on the value of
the wages stolen. MINN. STAT. § 609.52, subd. 2(19).
E. Pay Stub Provisions
1. Normative Standards
In Minnesota, employers are required to provide each employee with an “earning
statement” (paystub) at the end of each pay period. State law requires that earning statements be
provided either in writing or by electronic means, and if an employee requests earnings statement
in written form, the employer must comply on an ongoing basis with that request. MINN. STAT.
ANN. § 181.032. Earning statements must contain very specific information as specified in
section 181.032(b)(1)-(11). This information includes:
(1) The name of the employee
(2) The rate or rates of pay and the basis—is this employee salary, hourly, etc.?
(3) Allowances claimed pursuant to permitted meals and lodging
(4) The total number of hours worked by the employee
(5) The total amount of gross pay
(6) A list of deductions made from the employee’s pay
(7) The net amount of pay after all deductions
(8) The date on which the pay period ends
(9) The legal name of the employer
(10) The physical address of the employer’s main office or principal place of
business
(11) The telephone number of the employer
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Under Minnesota Statute section 181.032, employers must provide notice to each
employee at the time of hire regarding whether the employee is exempt from minimum wage,
overtime and other state wage and hour laws, and on what basis.
2. Claim Administration
A civil action alleging a violation of earning statement requirements can be brought
either by an affected employee or by the Commissioner. MINN. STAT. ANN. § 181.171, subds. 1
and 3.
3. Statute of Limitations
The statute does not specify a limitations period for paystub violations, but Minnesota
courts have held that the statute of limitations for wage claims is two years. The limitations
period may be extended to three years if the violation is willful. MINN. STAT. ANN. § 541.07(5)
and Worwa, 238 N.W.2d at 631.
4. Remedies
For violating section 181.032, there are various remedies and punishments available.
First, Minnesota Department of Labor and Industry (MDLI) remedies include: (1) an
administrative compliance order from the Commissioner, (2) a cease and desist order, (3)
compensatory damages and an equal amount as liquidated damages, (4) litigation and hearings
costs, and (5) a civil penalty up to $1,000 per violation for each employee for repeat or willful
violations. MINN. STAT. A NN. § 177.27, subds. 4 and 7.
For a civil action, an employee can seek (1) compensatory damages, (2) injunctive relief,
(3) other relief the court deems appropriate, (4) and reasonable attorneys’ fees and costs. MINN.
STAT. A NN. § 181.171, subds. 1 and 3.
F. Interagency Information Sharing
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Minnesota
1. Normative Standards
Minnesota’s wage theft statutes and regulations address interagency cooperation
regarding wage and hour violations in only one other context. As discussed infra, the
Commissioner is obligated by statute to report findings regarding misclassification of employees
as independent contractors to relevant state and federal agencies, including the Commissioner of
Commerce, the Commissioner of Employment and Economic Development, the Commissioner
of Revenue, the federal Internal Revenue Service, and the United States Department of Labor.
MINN. STAT. A NN. § 181.722, subd. 5
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
Under Minnesota Statute section 177.23, subdivision 7, “employee” is defined
tautologically, as any individual employed by an employer. The 19 subsections that follow in
Minnesota Statute section 177.23 outline various exceptions to the definition and lists who is not
considered to be an “employee.” Minnesota Rules also explain the difference between
employee, emergency employee, permanent employee, provisional employee, and temporary
employee. MINN. R. 9575.0010, subp. 17-18, 22, 30, 32, 46.
Minnesota expressly prohibits misrepresentations regarding the nature of employment
relationships in its dealings with any federal, state, or local government entity, to other
employers, or to its employees. MINN. STAT. ANN. § 181.722. That statute also prohibits
employers from requiring or requesting employees to enter into any agreement or sign any
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document that misclassifies the employee as an independent contractor or does not accurately
reflect the employment relationship. MINN. STAT. ANN. § 181.722, subd. 2.
In deciding whether an individual is in fact an independent contractor for wage purposes,
Minnesota has adopted the federal FLSA’s “economics realities” test; that is, all of the available
facts and circumstances must be considered to determine whether the worker is economically
dependent upon the business to which the worker provides their services. MINN. R. 5200.0221.
The most important factor in determining whether a person is an independent contractor is the
degree of control exercised by the supposed “employer” and the method of performing the
contracted work. MINN. R. 5224.0330, subp. 1.
Specialized and more detailed rules apply in the construction field. For those in that
field, state law provides that someone is an independent contractor “only if the individual:
(1) maintains a separate business with the individual's own office, equipment,
materials, and other facilities;
(2)(i) holds or has applied for a federal employer identification number or (ii) has
filed business or self-employment income tax returns with the federal Internal
Revenue Service if the individual has performed services in the previous year;
(3) is operating under contract to perform the specific services for the person for
specific amounts of money and under which the individual controls the means of
performing the services;
(4) is incurring the main expenses related to the services that the individual is
performing for the person under the contract;
(5) is responsible for the satisfactory completion of the services that the individual
has contracted to perform for the person and is liable for a failure to complete the
services;
(6) receives compensation from the person for the services performed under the
contract on a commission or per-job or competitive bid basis and not on any other
basis;
(7) may realize a profit or suffer a loss under the contract to perform services for
the person;
(8) has continuing or recurring business liabilities or obligations; and
(9) the success or failure of the individual's business depends on the relationship
of business receipts to expenditures.”
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MINN. STAT. A NN. § 181.723.
2. Claim Administration
Minnesota law provides a specific remedy for construction workers who are not
independent contractors but are misclassified as such; they may bring a civil action for damages
against the violator. MINN. STAT. ANN. § 181.722, subd. 4. If the construction worker is in fact an
employee but has been injured due to a violation of this section (be it misrepresenting the nature
of employment, requiring an agreement that misclassifies the employment relationship, etc.), the
employee’s representative, as defined in section 179.01, subdivision 5, may bring a civil action
for damages on behalf of the employee.
Claims of misclassification for other purposes (wage payment, worker compensation etc.)
would be pursued under those procedures applicable to those statutory schemes.
3. Statute of Limitations
The independent contractor and employee statute sections do not contain a specific
statute of limitations for this type of violation. However, in Minnesota, the limitations period for
an action for the recovery of wages is two years. If the nonpayment (in this instance, of a
minimum wage requirement under “employee” status, an overtime wage, or some other owed
wages due to employee misclassification) is willful and not due to a mistake, the state of
limitations is three years. MINN. STAT. A NN. § 541.07(5) (emphasis added).
4. Remedies
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Minnesota
For wage purposes (outside of the construction context) a worker claiming to have been
misclassified could bring an action under the MFLSA or other applicable statute. Independent
contractor misclassification is wage theft, so all remedies available for minimum wage and other
categories of wage theft apply to independent contractor misclassification as well, such as
possible liquidated double damages, equitable relief, and witness fees. MINN. STAT. § 177.27,
subds. 7, 10.
Construction workers have a specific procedure applicable only to them. A construction
worker who is not an independent contractor but who has been classified as such has a civil
remedy at law in Minnesota. MINN. STAT. § 181.722, subd. 4. The court may award attorney
fees, costs, and disbursements to a construction worker who is recovering thereunder.
The violation of employee misclassification in Minnesota may also result in criminal
sanctions for an employer under “wage theft.” The criminal sanctions vary based on the value of
the wages stolen. MINN. STAT. § 609.52, subd. 2(19).
5. Information Sharing
A court that finds a violation of section 181.722 regarding employee misclassification,
whether in the construction industry or not, must transmit a copy if its findings to the
Commissioner of Labor and Industry. MINN. STAT. ANN. § 181.722, subd. 5. The Commissioner
is then obligated to report the finding to relevant state and federal agencies, including the
Commissioner of Commerce, the Commissioner of Employment and Economic Development,
the Commissioner of Revenue, the federal Internal Revenue Service, and the United States
Department of Labor.
B. Exempt/Non-exempt Classification
1. Normative Standards
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Minnesota
Both the FLSA and MFLSA exempt certain employees from minimum wage and
overtime requirements. The MFLSA lists more than 20 types of workers that are exempt,
including elected officials, outside salespersons, nonprofit volunteers, and bona fide executive,
administrative, and professional employees. MINN. STAT. ANN. § 177.23, subd. 7. Minnesota’s
employee notice law requires employers to state on the employee earning statement the basis for
designating an employee as exempt. MINN. STAT. § 181.032(d)(4).
Positions under an executive, administrative, and professional exemptions must be paid a
minimum salary and meet certain duty requirements specified in Minnesota Rule 5200.0180. In
determining exempt and nonexempt work under executive, administrative, and professional work
in Minnesota, one should consult Minnesota Rules, part 5200.0180, subpart 5.
A mistaken classification of a worker as exempt would fall under section 181.722, which
specifically addresses “misrepresentation of employment relationship prohibited.” Subdivision 1
declares that no employer “shall misrepresent the nature of the employment relationship,” and
subdivision 2 prohibits employers from allowing employees to enter into any agreement that
“does not accurately reflect the employment relationship with the employer.” MINN. STAT. ANN.
§ 181.722, subd. 2 (emphasis added).
2. Claim Administration
Knowingly evading the obligation to pay overtime wages through a false exempt status
classification is a form of wage theft, allowing for a commissioner or an individual to seek
redress. Minnesota Statute section 609.52, subdivision 3 explains that whoever commits theft
(which would be the case under 13(i) “wage theft”) can be liable for specified prison time and
fines.
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Minnesota
3. Statute of Limitations
In Minnesota, an action for the recovery of wages is two years. If the nonpayment (in
this instance, of an overtime owed due to an exempt misclassification) is willful and not due to a
mistake, the state of limitations is three years. MINN. STAT. ANN. § 541.07(5) (emphasis added).
A specific state of limitations is not set for the statute stating exempt employees.
4. Remedies
All remedies available for minimum wage and other categories of wage theft apply to
exempt misclassification as well, such as possible liquidated double damages, equitable relief,
and witness fees. MINN. STAT. § 177.27, subds. 7, 10.
Avoiding wage obligations through misclassification may be a form of wage theft,
allowing for a commissioner or an individual to seek redress. Minnesota Statute section 609.52,
subdivision 3 explains that whoever commits theft (which would be the case under 13(i) “wage
theft”) can be liable for prison time and fines.
III. Payroll Fraud on State Government by Government Contractors
1. Normative Standards
Minnesota law makes it unlawful to knowingly present, or cause to be presented, any
false or fraudulent claim for payment or approval by an agent of the state or a political
subdivision. MINN. STAT. ANN. § 15C.02. This prohibition is part of the state’s own “false claims
act,” which is largely patterned after the federal False Claims Act. In fact, the state act expressly
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Minnesota
makes those presenting false claims “liable to the state or the political subdivision for a civil
penalty in the amounts set forth in the federal False Claims Act.” MINN. STAT. A NN. § 15C.02(a).
2. Claim Administration
For possible violations of Minnesota Statute section 15C.02, a prosecuting attorney may
investigate. If a prosecuting attorney finds that a person has violated 15C.02, he or she may
bring a civil action. MINN. STAT. §15C.04, subd. 1. According to Minnesota Statute section
15C.05, a private citizen may also bring an action (1) on the individual’s own account and that of
the state; (2) the person’s own account and that of a political subdivision; or (3) on the person’s
own account and that of both the state and political subdivision. MINN. STAT. § 15C.05(a).
3. Statute of Limitations
A state False Claims Act case may not be commenced more than three years after the
date of discovery of the fraudulent activity by the prosecuting attorney or more than six years
after the fraudulent activity occurred, whichever occurs later, but in no event more than ten years
after the date on which the violation is committed.
4. Remedies
Where the government intervenes in an action initially brought by a private citizen, the
person is entitled to receive not less than 15% or more than 25% of any recovery of the civil
penalty and damages or settlement, depending on the extent to which the person substantially
contributed to the conduct of the action. Where the government does not intervene, and the
action is prosecuted by the private citizen, the person is entitled to receive not less than 25% or
more than 30% of any recovery of the civil penalty and damages, or settlement, as the court
determines is reasonable.
IV. Certification by Government Contractors of Prevailing Wage Compliance
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1. Normative Standards
Minnesota has a comprehensive “prevailing wage” statutory scheme for projects
involving the “erection, construction, remodeling, or repairing of a public building or other
public work financed in whole or part by state funds.” MINN. STAT. ANN. § 177.42, subd. 2. The
statutory scheme imposes various requirements on government contractors to ensure that they
pay the “prevailing wage” for work done on certain government contracts. MINN. STAT. ANN. §§
177.41-177.45. To ensure that the employer is complying with its prevailing wage requirements,
the Department of Labor and Industry employs investigators to perform on-site project reviews,
the DLI receives and investigates allegations regarding violations of this section, and conducts
training to contractors for public work projects financed with state funds. Id. at 6.
Employers performing government construction contracts on covered projects have an
explicit certification requirement:
“while performing work on public works projects funded in whole or in part with
state funds, the [covered] employer [must] furnish under oath signed by an owner
or officer of an employer to the contracting authority and the project owner every
two weeks, a certified payroll report with respect to the wages and benefits paid
each employee during the preceding weeks specifying for each employee: name;
identifying number; prevailing wage master job classification; hours worked each
day; total hours; rate of pay; gross amount earned; each deduction for taxes; total
deductions; net pay for week; dollars contributed per hour for each benefit,
including name and address of administrator; benefit account number; and
telephone number for health and welfare, vacation or holiday, apprenticeship
training, pension, and other benefit programs.”
MINN. STAT. A NN. § 177.30(a)(6).
Moreover, each covered government contract “must . . . provide that the contracting
agency shall demand, and the contractor and subcontractor shall furnish to the contracting
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Minnesota
agency, copies of any or all payrolls not more than 14 days after the end of each pay period.
MINN. STAT. A NN. § 177.43, subd. 3.
2. Claim Administration
Minnesota’s prevailing wage statutory scheme is primarily enforced by the Commissioner
of Labor and Industry (although the Attorney General has concurrent enforcement jurisdiction,
see MINN. STAT. ANN. § 177.45). As alluded to above, there are record keeping requirements and
mechanisms for investigation and enforcement by the State. When the Commissioner finds a
violation and issues a compliance order to an employer for violation of the Act, the
Commissioner is required to:
“issue a withholding order to the contracting authority [requiring that the]
contracting authority . . . withhold payment of sufficient sum to the prime or
general contractor on the project to satisfy the back wages assessed or otherwise
cure the violation, and the contracting authority must withhold the sum ordered
until the compliance order has become a final order of the Commissioner and has
been fully paid or otherwise resolved by the employer.”
MINN. STAT. A NN. § 177.43, subd. 6a.
Even while the investigation is continuing, and no final compliance order has issued, if
the Commissioner “reasonably” concludes that he or she will “likely” find a violation, “the
commissioner may notify the contracting authority of the determination and the amount expected
to be assessed”; in that event, the contracting authority is required to “give the Commissioner 90
days' prior notice of the date the contracting authority intends to make final payment.” Id.
No explicit private right of action is created by the Act. See Dicks v. Minnesota Dep’t of
Admin., 627 N.W.2d 334, 336 (Minn. Ct. App. 2001) (“Minnesota's Prevailing Wage Act does
not provide an explicit private right of action for any employees, whether employees of the state
or a private contractor”). Criminal penalties also exist for state contracts that violate prevailing
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Minnesota
wages. A misdemeanor is punishable by either or both: (1) a fine up to $700; and (2)
imprisonment for up to 90 days. MINN. STAT. ANN. § 177.43, subd. 5. A misdemeanor for
permitting a contractor to pay less than the prevailing wage rate or give up compensation entitled
under the contract is punishable by either or both: (1) a fine up to $40; and (2) imprisonment up
to 30 days. MINN. STAT. A NN. § 177.44, subd. 5.
3. Statute of Limitations
For violation of prevailing wages, the statute does not specify a limitations period, but
Minnesota courts have held what is stated above (two years for recovery of wages, and it is three
years if the nonpayment is willful). MINN. STAT. ANN. § 541.07(5).
4. Remedies
It is a misdemeanor for an officer or an employee of the state to execute a contract for a
project without complying with 177.43, or for any person to be employed on the state project for
less than the prevailing wage. This is punishable by a fine of no more than $700, or
imprisonment for no more than 90 days, or both.
V. Labor Trafficking
1. Normative Standards
Minnesota explicitly prohibits “labor trafficking,” which it defines as:
(1) the recruitment, transportation, transfer, harboring, enticement, provision,
obtaining, or receipt of a person by any means, for the purpose of:
(i) debt bondage or forced labor or services;
(ii) slavery or practices similar to slavery; or
(iii) the removal of organs through the use of coercion or intimidation; or
(2) receiving profit or anything of value, knowing or having reason to know it is
derived from an act described in clause (1).
MINN. STAT. A NN. § 609.281.
2. Claim Administration
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Minnesota
As this is a criminal statute, cases of labor trafficking are prosecuted by the state in court.
3. Statute of Limitations
A statute of limitations is not specified in the statute on labor trafficking. The residual
statute of limitations is six years. MINN. STAT. § 541.05 (2020).
4. Remedies
Anyone who engages in these activities is guilty of a felony; if the victim is under the age
of 18, the defendant is subject to imprisonment for not more than 20 years or to payment of a
fine of not more than $40,000, or both. If the victim is an adult, the defendant is subject to a
maximum period of incarceration of 15 years and a fine of not more than $30,000. MINN. STAT.
609.282, subds. 1-2 (2020). There are also provisions for those who aid in labor trafficking and
imposing criminal penalties on corporations that are involved in the crime. No reference is made
in the statutes to labor cartels or labor brokers.
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Montana
I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
The minimum wage in Montana is the greater of either the federal minimum wage or the
state minimum, excluding the value of tips received by the employee. MONT. CODE ANN. §
39-3-409. A new minimum wage rate is calculated each year based on changes to the cost of
living as measured by the Consumer Price Index. Id. The current minimum wage for most
employers is $8.75 according to the Department of Labor and Industry’s website. See Montana
DOL website,
https://erd.dli.mt.gov/labor-standards/wage-and-hour-payment-act/state-minimum-wage (last
accessed on August 25, 2021). For businesses with gross annual sales of less than $110,000 per
year (and are not covered under the federal Fair Labor Standards Act (FLSA), the minimum
wage is $4. MONT. CODE ANN. § 39-3-409.
Montana exempts many occupations from its minimum wage and overtime requirements;
these exemptions largely track federal law. Compare MONT. CODE ANN. § 39-3-406(1) and 29
U.S.C.S. § 213(a). Some state exemptions, however, are not found under the FLSA; for
example, Montana law categorically exempts foster parents and foster care providers; seasonal
religious or education conference workers; and employees of the United States government. The
full list of exclusions is set out in MONT. CODE ANN. § 39-3-406(1) and discussed at MONT.
ADMIN. R. 24.16.211.
2. Claim Administration
Montana
An employee may file an administrative claim with the Department of Labor and
Industry if he or she has not received wages that are due, using a form provided by the agency.
MONT. ADMIN. R. 24.16.752. The form requires information including the employee and
employer’s names and addresses, the period of employment, the employee’s rate of pay, the
period of claim, and the amount claimed. See Montana DOL website,
https://erd.dli.mt.gov/labor-standards/wage-and-hour-payment-act/filing-a-wage-claim (last
accessed on August 22, 2021).
The Commissioner has the power to investigate any potential wage violations, even if no
complaint has been filed, by inspecting payroll and personnel records and conducting interviews.
MONT. ADMIN. R. 24.16.7519. The Commissioner may also institute actions for the collection of
unpaid wages and for penalties. MONT. CODE ANN. § 39-3-209. If the Commissioner determines
that the claim is valid and is asked to do so by the complaining employee, the Commissioner can
take an assignment of the claim and maintain any reasonable proceeding to enforce the claim.
MONT. CODE ANN. § 39-3-211. If the Department finds for the employee on the wage claim and
the employer does not appeal the determination, the Department may enter an order against the
employer for the amount of wages due, and that order can be enforced in court. MONT. CODE
ANN. § 39-3-212; § 39-3-216(1).
Although it might be argued that no private right of action is provided by statute itself,
the state Supreme Court has held that an employee can sue his or her employer directly in district
court for unpaid wages under MONT. CODE ANN. §§ 39-3-206 and 39-3-208. Stanley v. Holms,
883 P.2d 837, 839 (Mont. 1994). However, the Supreme Court of Montana has also said that an
employee is precluded from simultaneously pursuing both administrative and court remedies
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Montana
under the “cumulative remedies” provision of MONT. CODE ANN. § 39-3-408. Von Petersdorff v.
Kenyon Noble Lumber Co., 103 P.3d 1082, 1085 (Mont. 2004).
3. Statute of Limitations
An employee must file an administrative or court complaint within 180 days of a default
or delay in the payment of wages. MONT. CODE ANN. § 39-3-207(1). An employee can recover
unpaid wages for two years from the date of filing if the employee is still employed by the
employer, or two years from the employee’s last day of work. Id. at (2). If an employer has
engaged in repeated violations, an employee can recover unpaid wages for three years from the
date of filing if the employee is still employed by the employer, or otherwise three years from the
employee’s last day of work. Id. at (3). As explained below, failure to pay wages may also be a
misdemeanor; prosecution must be commenced within one year of the offense. MONT. CODE
ANN. § 45-1-205(2)(b).
4. Remedies
An employer who underpays an employee is guilty of a misdemeanor. MONT. CODE ANN.
§ 39-3-206(1). The punishment for such a misdemeanor is imprisonment for up to 6 months, a
fine of up to $500, or both. MONT. CODE ANN. § 46-18-212.
If an employer is guilty of a misdemeanor, the employer must also pay a penalty of up to
110% the amount of unpaid wages. MONT. CODE ANN. § 39-3-206(1). If an employee brings an
action directly and wins, the judgment must include attorneys’ fees and other reasonable costs,
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but if an action is maintained by the Commissioner, costs and fees are not required to be paid.
MONT. CODE ANN. § 39-3-214.
The following conduct by an employer justifies imposition of the maximum civil penalty:
(1) failure to provide information requested by the department and/or not
cooperating in the department's investigation of the wage claim;
(2) there is substantial credible evidence that the employer's payroll records are
falsified or intentionally misleading;
(3) previous violation of similar wage and hour statutes within three years prior to
the date of filing of the wage claim; or
(4) issuing an insufficient funds paycheck.
MONT. A DMIN. R. 24.16.7556(1).
If any of these has occurred, the maximum penalty must be imposed and can only be
reduced upon written mutual agreement of the parties and the department. Id. at (2)-(3).
B. Overtime Violations
1. Normative Standard
An employer must pay an employee 1.5 times the hourly wage for any hours worked
beyond 40 hours per workweek, with several exemptions. MONT. CODE ANN. § 39-3-405; MONT.
CODE ANN. 39-3-406. Many of the exemptions under Montana law also exist under the FLSA,
but there is not complete overlap. Compare MONT. CODE ANN. § 39-3-406(2) and 29 U.S.C.S. §
213(b). The workers exempted from overtime provisions under Montana law, but not the FLSA,
include employees of the state legislative branch and public safety departments. See MONT. CODE
ANN. § 39-3-406(2).
2. Claim Administration
The procedures used to press an overtime claim are the same as those described supra for
minimum wage violations. See I.A.2.
3. Statute of Limitations
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The statute of limitations for overtime claims is the same as described supra for
minimum wage violations. See I.A.3.
4. Remedies
The remedies available for an overtime claim are the same as those described supra for
minimum wage violations. See I.A.4.
C. Off-the-clock Violations
1. Normative Standards
Employees in Montana must be paid for all of the hours worked. The phrase “hours
worked” includes all of the time an employee is required to be on duty, on the employer's
premises, or at a prescribed workplace, and all time during which he or she is permitted to work
for the employer. MONT. ADMIN. R. 24.16.1002. Donning and doffing of clothing is included if
the clothing is indispensable to the performance of the primary activity (such as protective gear).
MONT. ADMIN. R. 24.16.1008. Short rest periods of five to 20 minutes are considered worktime,
but meal periods of 30 minutes or more are not worktime. MONT. ADMIN. R. 24.16.1006.
Whether time spent waiting qualifies as worktime depends on the circumstances, considering the
agreement made by the parties, the nature of the primary service, and its relation to waiting time.
MONT. ADMIN. R. 24.16.1005. Lectures, meetings, and training do not qualify as time spent
working if it occurs outside normal working hours, has voluntary attendance, is not directly
related to the employee’s job, and the employee does not perform productive work while
attending. MONT. A DMIN. R. 24.16.1009.
2. Claim Administration
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The procedures used to press an off-the-clock claim are the same as those described
supra for minimum wage violations. See I.A.2.
3. Statute of Limitations
The statute of limitations for an off-the-clock claim is the same as described supra for
minimum wage violations. See I.A.3.
4. Remedies
The remedies available for an off-the-clock claim are the same as those described supra
for minimum wage violations. See I.A.4.
D. Illegal Deductions
1. Normative Standard
The deductions allowed by Montana law are listed in MONT. CODE ANN. § 39-3-204. They are:
(1) deductions for board, room, and other incidentals supplied by the employer,
(2) deductions specified as conditions of employment, and
(3) other deductions provided by law, such as child support,
(4) income tax, and
(5) Social Security.
MONT. CODE ANN. § 40-5-315; MONT. CODE ANN. § 15-30-2502; MONT. CODE ANN. § 19-1-705.
2. Claim Administration
The procedures used to press a claim of unlawful deductions are the same as those
described supra for minimum wage violations. See I.A.2.
3. Statute of Limitations
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The limitations period for a claim of unlawful deductions is the same as those described
supra for minimum wage violations. See I.A.3.
4. Remedies
The remedies available for a claim of unlawful deductions are the same as those
described supra for minimum wage violations. See I.A.4.
E. Paystub Provisions
1. Normative Standards
Montana allows employers to make “reasonable deductions [from an employee’s pay] for
board, room, and other incidentals supplied by the employer, whenever the deductions are a part
of the conditions of employment, or as otherwise provided for by law.” MONT. CODE ANN. §
39-3-204. With each payment of wages, employers must provide a statement specifying
deductions made for state and federal income taxes, social security, and any other lawful
deductions, including the amount of each deduction. MONT. CODE ANN. § 39-3-101. If no
deductions have been made, the employer shall give the employee a statement that the payment
does not include any deductions. Id. Upon written demand, an employer shall, before
commencement of work, notify each employee as to the rate of wages to be paid, and date of
paydays. MONT. CODE ANN. § 39-3-203.
2. Claim Administration
While not explicitly codified, there is at least one reported case in which an employee
filed a claim for illegal deductions, and it is generally accepted that an aggrieved employee can
file a claim for illegal deductions in a court of competent jurisdiction. Christiansen v. Taylor
Bros., 732 P.2d 841, 842 (Mont. 1987). In addition, the Department of Labor and Industry is
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empowered to enforce all labor laws, although there is no specific provision giving the
Department or the Commissioner power to investigate or assess remedies for illegal deduction
claims. MONT. CODE ANN. § 39-3-102.
3. Statute of Limitations
The statute of limitations is not specified in the statute, but the general statute of
limitations for civil actions is five years. MONT. CODE ANN. § 27-2-231.
4. Remedies
The penalty for a pay stub violation is not clearly defined. It is possible the penalty is the
same as for other forms of wage theft, but this is not explicitly stated.
F. Interagency Information Sharing
There are no laws in Montana addressing coordination or interagency communications
among state agencies on wage theft issues. There is, however, a provision authorizing the
Montana Department of Labor & Industry to assist and cooperate with the federal Department of
Labor in enforcing the Fair Labor Standards Act in Montana. MONT. CODE ANN. § 39-1-104.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards and Claim Administration
Montana statutorily addresses the independent contractor/employee classification
question in only one context—worker’s compensation—although the consequences of a
determination under that statute can have much broader implications, as explained below. The
state’s worker compensation scheme allows any person to apply to the Department of Labor and
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Industry for an independent contractor exemption certificate. MONT. CODE ANN. § 39-71-417.
The exemption lasts for two years. MONT. CODE ANN. § 39-71-417(8); see also MONT. ADMIN. R.
24.35.121. A person with an exemption certificate is not required to obtain a personal workers’
compensation insurance policy. MONT. CODE ANN. § 39-71-417. Montana’s Department of
Labor and Industry has an Independent Contractor Central Unit (ICCU), which has the authority
to grant, revoke, or suspend exemption certificates. MONT. CODE ANN. § 39-71-418.
ICCU decisions are binding on all parties with respect to all employment status issues
under the jurisdiction of the Department of Labor and Industry. MONT. ADMIN. R. 24.35.205. As
a result, these “decisions may affect a party’s liability in matters related to unemployment
insurance, the Uninsured Employer’s Fund, wage and hour issues, human rights, and state
income tax withholding.” Id.
Indeed, when a worker is required to have an exemption certificate and does not, “the
worker is conclusively determined to be an employee for purposes of wage and hour,
unemployment insurance, workers’ compensation, and income tax.” MONT. ADMIN. R.
24.35.203. Similarly, “when the department approves an application for an independent
contractor exemption certificate and the person is working under the independent contractor
exemption certificate, the person's status is conclusively presumed to be that of an independent
contractor.” MONT. CODE ANN. § 39-71-417(7)(a). By regulation an independent contractor is
not an employee and therefore is not subject to wage and hour provisions. MONT. ADMIN. R.
24.16.7520(4).
To be determined to be an independent contractor, an individual must first file an
application with the Department. See MONT. ADMIN. R. 24.35.203; see also MONT. CODE ANN. §
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39-71-419(1)(a). A person who regularly and customarily performs services at a location other
than the person’s own fixed business location must apply to the department for an independent
contractor exemption certificate unless the person has elected to be bound personally and
individually by the provisions of one of three compensation plans adopted by the state. MONT.
CODE ANN. § 39-71-417.
Once an application is submitted, the Department uses a two-step test to determine
whether a person is an independent contractor. MONT. ADMIN. R. 24.35.202. First, the
Department ensures “that the applicant has been and will continue to be free from control or
direction over the performance of the person’s own services, both under contract and in fact.”
MONT. CODE ANN. § 39-71-417(4)(a)(i). Second, the Department examines whether “the
applicant is engaged in an independently established trade, occupation, profession, or business
and will provide sufficient documentation of that fact to the [D]epartment.” MONT. CODE ANN. §
39-71-417(4)(a)(ii); see also MONT. A DMIN. R. 24.35.202.
To determine whether an employer exerts control over an individual, the Department
evaluates: “(a) direct evidence of right or exercise of control; (b) method of payment; (c)
furnishing of equipment; and (d) right to fire.” MONT. A DMIN. R. 24.35.202(2).
The Department details 17 factors for what constitutes control for an exemption
certificate; the factors are “weighed and evaluated depending on the circumstances of each case.”
MONT. ADMIN. R. 24.35.302(1) and (2). The Department lists 13 factors for what constitutes an
independently established business; again, the factors are evaluated and weighed on a
case-by-case basis. MONT. A DMIN. R. 24.35.303(1) and (2).
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After an investigation, the Department may issue a determination on whether an
individual is an independent contractor, but any aggrieved person may request investigation and
a decision by the ICCU within 10 days of notice of the determination. MONT. ADMIN. R.
24.11.2407.
A dispute involving an employer, a worker, or the Department involving whether a
worker is an independent contractor, but not involving workers’ compensation benefits, must be
brought before the ICCU. MONT. CODE ANN. § 39-71-415(2)(a). A decision by the ICCU is final
unless a dissatisfied party requests mediation. MONT. CODE ANN. § 39-71-415(2)(b)(i).
A party who has received an adverse decision may request an appeal to the district court.
MONT. ADMIN. R. 24.17.847(1). The appeal must be made in 30 days. MONT. ADMIN. R.
24.17.847(2).
2. Statute of Limitations
No statute of limitations for independent contractor issues is specifically provided by
Montana law, but the general limitations period for worker compensation matters is 12 months.
MONT. CODE ANN. § 39-71-601.
3. Remedies
A person is subject to a fine assessed by the department of up to $1,000 for each
violation. 2021 Montana Laws Ch. 345 (S.B. 367). A violation includes: “Performing work
without an ICEC; Performing work with a revoked or suspended ICEC; Transferring their ICEC
to another person; or Misrepresentation of the independent contractor status.” See Montana
Department of Labor and Industry website,
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https://erd.dli.mt.gov/work-comp-regulations/montana-contractor/independent-contractor (last
accessed August 25, 2021).
B. Exempt/Non-Exempt Classification
1. Normative Standards
As explained supra, an employee is entitled to overtime pay for hours worked in excess
of 40 hours per week unless the employee is exempt from the overtime requirement set out at
MONT. CODE ANN. § 39-3-405. As most states do, Montana exempts many of the same
occupational categories as the FLSA (including the so-called “white collar” exemptions for bona
fide executive, administrative, and professional employees), as well as a number of state-specific
categories, including, for example, “students participating in a distributive education program
established under the auspices of an accredited educational agency,” and “retired or semiretired
persons performing part-time incidental work as a condition of their residence on a farm or
ranch.” MONT. CODE ANN. § 39-3-406.
2. Claim Administration
Misclassification issues arise as sub-issues in many wage and hour contexts. Those
claims follow the same procedures as those described supra for minimum wage violations. See
I.A.2.
3. Statute of Limitations
The limitations period for wage and hour claims based on misclassification is the same as
those described supra for minimum wage violations. See I.A.3.
4. Remedies
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The remedies available for a claim of misclassification in a wage and hour context are the
same as those described supra for minimum wage violations. See I.A.4.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
Montana’s own False Claims Act prohibits inter alia any person from knowingly
presenting a false or fraudulent claim for payment or approval to the State of Montana. MONT.
CODE ANN. § 17-8-403.
B. Claim Administration
As is typical of false claims statutory regimes, a claim can be filed either by the
government, MONT. CODE ANN. § 17-8-405, or by a private citizen on behalf of him or herself and
the defrauded governmental entity in the name of that entity. MONT. CODE ANN. § 17-8-406. If
the suit is begun by a private citizen, it begins as a sealed case. While the complaint remains
sealed, the plaintiff must give the government all of the evidence he or she has of the fraud, and
the government thereafter has the option of intervening, in which case it takes over management
of the litigation. MONT. CODE ANN. § 17-8-406(1)-(2). If the governmental entity does not do so,
the person who initiated the action has the same right to conduct the action as the government
attorney would have had with intervention, including the right to inspect government records and
interview officers and employees of the governmental entity. MONT. CODE ANN. § 17-8-406(9).
C. Statute of Limitations
A complaint or civil action must be brought either six years after the violation was
committed or three years after the date of when facts are known or reasonably should have been
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known. MONT. CODE ANN. § 17-8-404(1)-(2). However, an action may not be brought more than
10 years after the date on which the violation was committed in any event. Id.
D. Remedies
If the government intervenes, the individual initially filing the case must receive at least
15% but not more than 25% of the proceeds recovered and collected, depending on the extent to
which the person substantially contributed to the prosecution of the action. MONT. CODE ANN. §
17-8-410(1). The person must also receive an amount for reasonable expenses that the court
finds to have been necessarily incurred, plus reasonable attorney fees and costs. Id. at §
17-8-410(3). The expenses, fees, and costs must be awarded against the defendant. Id.
If the government does not intervene, the person bringing the action receives an amount
that the court decides is reasonable for collecting the civil penalty and damages on behalf of the
government. MONT. CODE ANN. § 17-8-410(4). The amount may not be less than 25% or more
than 30% of the proceeds recovered and must be paid out of the proceeds. Id.
The governmental entity is entitled to any damages and civil penalty not awarded to the
person. MONT. CODE ANN. § 17-8-410(6). Any damages and civil penalties that remain after the
distribution to the person “must be distributed first to fully reimburse any losses suffered by the
governmental entity . . . and the remainder of the damages and any civil penalty must be
deposited in the general fund of the governmental entity.” Id.
In addition, any individual who violates the act is liable to the government for a civil
penalty of not less than $5,500 and not more than $11,000, plus three times the amount of
damages that a governmental entity sustains, along with expenses, costs, and attorney fees.
MONT. CODE ANN. § 17-8-403(1).
IV. Certification by Government Contractors of Prevailing Wage Compliance
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A. Normative Standards
All public works contracts must contain: (1) a provision stating the standard prevailing
wage rate; (2) a provision requiring an employer to maintain payroll records “in a manner readily
capable of being certified for submission”; and (3) a provision requiring each contractor to post a
statement of all wages and fringe benefits. MONT. CODE ANN. § 18-2-422. A “public works
contract” is a contract with a total cost in excess of $25,000 let by the state, county, municipality,
school district, or political subdivision. MONT. CODE ANN. § 18-2-401(11)(a).
The Commissioner may determine the standard prevailing rate of wages. MONT. CODE
ANN. § 18-2-402. The department shall conduct an annual survey to calculate the standard
prevailing rate of wages for building construction services. MONT. CODE ANN. § 18-2-413.
No provision of Montana’s prevailing wage law affirmatively requires a routine
certification or sworn statement of compliance, but if a complaint is filed with the Department
alleging noncompliance, the Department may then require the project to submit to it certified
copies of the payroll records for workers employed on that project. MONT. CODE ANN. §
18-2-423. The certifying statement must be executed by the contractor, subcontractor, employer
or by an authorized officer or employee of the contractor, subcontractor or employer who
supervises the payment of wages; it must certify the payroll records as provided are true and
accurate and reflect all payments and deductions made for employees employed on the public
works project for each week. MONT. ADMIN. R. 24.17.307. If payroll records are not submitted,
the commissioner may issue subpoenas. MONT. CODE ANN. § 18-2-424.
B. Claim Administration
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The prevailing wage statute is administered by the Department of Labor and Industry,
which has the authority to inspect (and if necessary, subpoena) payroll records, hold hearings,
take evidence, administer oaths, and make determinations regarding compliance, and has
authority to make necessary rules to enforce the act. See generally MONT. CODE ANN. §
39-3-210; MONT. CODE ANN. § 18-2-431; MONT. CODE ANN. § 18-2-423.
C. Statute of Limitations
The commissioner has the authority to file an action within 90 days after the filing of
notice of completion of the project and its acceptance by the contracting agency in district court
to recover all penalties and forfeitures due. MONT. CODE ANN. § 18-2-407. It is unclear whether
this 90-day limitation period would govern an action by employees who are denied prevailing
wages.
D. Remedies
An employer that does not pay the prevailing wage “shall forfeit to the [D]epartment a
penalty at a rate of up to 20% of the delinquent wages plus fringe benefits, attorney fees, audit
fees, and court costs.” MONT. CODE ANN. § 18-2-407. An employer “shall also forfeit to the
employee the amount of wages owed plus $25 a day for each day that the employee was
underpaid.” MONT. CODE ANN. § 18-2-407.
If a person fails to comply, the government shall retain $1,000 of the contract price.
MONT. CODE ANN. § 18-2-432. If a person fails to comply due to gross negligence, the
government may retain up to $10,000 above the original $1,000. MONT. CODE ANN. § 18-2-432.
Whenever a contractor or subcontractor is found by the Commissioner to have
aggravatedly or willfully violated the prevailing wage act (including its certification obligations
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as described above), the contractor or subcontractor or any firm, corporation, partnership, or
association in which the contractor or subcontractor has a substantial interest is ineligible, for a
period not to exceed three years after the date of the final judgment, to receive any public works
contracts or subcontracts that are subject to the provisions of this chapter. MONT. CODE ANN. §
18-2-432.
Injunctive relief is available too. The court in which an action is pending is authorized to
issue an injunction to restrain the person, firm, or corporation from proceeding with a public
works contract with the state, county, municipality, school district, or political subdivision,
pending the final determination of the instituted action. MONT. CODE ANN. § 18-2-432.
V. Labor Trafficking
A. Normative Standards
Montana has a criminal statute that addresses the trafficking of persons. MONT. CODE
ANN. § 45-5-702. It provides as follows:
(1) a person commits the offense of trafficking of persons if the person purposely
or knowingly:
(a) recruits, transports, transfers, harbors, receives, provides, obtains,
isolates, maintains, or entices another person intending or knowing that the
person will be subjected to involuntary servitude or sexual servitude; or
(b) benefits, financially or by receiving anything of value, from facilitating
any conduct described in subsection (1)(a) or from participation in a venture
that has subjected another person to involuntary servitude or sexual servitude.
(2) (a) Except as provided in subsections (2)(b) and (2)(c), a person convicted of
the offense of trafficking of persons shall be imprisoned in the state prison for a
term of not more than 15 years, fined an amount not to exceed $50,000, or both.
(b) A person convicted of the offense of trafficking of persons shall be
imprisoned in the state prison for a term of not more than 50 years, fined an
amount not to exceed $100,000, or both, if the victim was a child.
(c) A person convicted of the offense of trafficking of persons shall be
imprisoned in the state prison for a term of not more than 25 years, fined an
amount not to exceed $75,000, or both, if the violation involves aggravated
kidnapping, aggravated sexual intercourse without consent, or deliberate
homicide.
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B. Claim Administration
As a criminal statute, MONT. CODE ANN. § 45-5-702 is administered through prosecution
by the state.
C. Statute of Limitations
A prosecution for this felony must be commenced within 5 years after it is committed.
MONT. CODE ANN. § 45-1-201.
D. Remedies
Any person convicted under § 45-5-702 is guilty of a felony and, depending on the
circumstances of the offense, may be imprisoned in the state prison for a term of not more than
25 years, fined an amount not to exceed $75,000, or both. MONT. CODE ANN. § 45-5-702.
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I. Wage Theft
A. Minimum wage violations
1. Normative Standards
The current minimum wage in Nebraska is $9 per hour. NEB. REV. ST. § 48-1203(1)(c).
Tipped employees have a minimum of $2.13 per hour, but the sum of the hourly wage and
gratuities received must equal or exceed the full minimum wage. NEB. REV. ST. § 48-1203(2).
Student-learners taking part in a vocational training program must be paid at a rate of at least
75% of minimum wage. NEB. REV. ST. §§ 48-1203(3);48-1203.01.
2. Claim Administration
An action to recover unpaid minimum wages may be maintained in any court of
competent jurisdiction, or an employee or employees may designate an agent or representative to
maintain the action for all of the employees similarly situated. NEB. REV. ST. §§ 48-1206(5);
48-1231.
Alternatively, an employee with a wage claim can file a complaint with the Nebraska
Department of Labor. NEB. REV. ST. § 48-1233. The Commissioner of Labor has the authority to
subpoena records and witnesses. The Commissioner or his or her agent may inspect all related
records and gather testimony on any matter relative to the enforcement of the Wage and Hour
Act. Id. §§ 48-1206(1) and 48-1233.
3. Statute of Limitations
Nebraska
A civil action to collect wages due falls under the residual limitations period for actions
based on statutory liabilities, which is four years. NEB. REV. STAT. ANN. § 25-206; see Phillips v.
Pearson's Painting, Inc., No. 8:13CV211, 2015 WL 5671397, at *6 (D. Neb. Sept. 25, 2015).
4. Remedies
A successful plaintiff on an action for unpaid minimum wages is entitled to: (1) an
amount equal to the unpaid wages owed; or (2) if the nonpayment of wages is found to be
willful, an amount equal to two times the amount of unpaid wages. NEB. REV. ST. § 48-1206(5).
Plaintiffs are also entitled to the costs of the action and reasonable attorney’s fees. NEB. REV. ST.
§ 48-1206(5). Any employer who violates any of the provisions of the minimum wage
provision is guilty of a Class IV misdemeanor. NEB. REV. STAT. A NN. § 48-1206.
B. Overtime violations
Nebraska does not have any laws related to overtime requirements for private employers.
Employees in the state are left with their remedies under the federal Fair Labor Standards Act.
C. Off-the-clock violations
Nebraska does not have any laws related to off-the-clock violations. Employees in the
state are left with their remedies under the federal Fair Labor Standards Act.
D. Illegal deductions
1. Normative Standards
“An employer may deduct, withhold, or divert a portion of an employee's wages
only when the employer is required to or may do so by state or federal law or by
order of a court of competent jurisdiction or the employer has a written agreement
with the employee to deduct, withhold, or divert.”
NEB. REV. ST. § 48-1230(1).
2. Claim Administration
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Violations are administered by the Nebraska Department of Labor. NEB. REV. ST. §
48-1233. An employee may maintain an action under the Nebraska Wage Payment and
Collection Act to redress unlawful deductions. Malone v. Am. Bus. Info., 262 Neb. 733, 738, 634
N.W.2d 788, 792 (2001).
3. Statute of Limitations
A civil action to collect wages due falls under the residual limitations period for actions
based on statutory liabilities, which is four years. NEB. REV. STAT. ANN. § 25-206; see Phillips v.
Pearson's Painting, Inc., No. 8:13CV211, 2015 WL 5671397, at *6 (D. Neb. Sept. 25, 2015).
4. Remedies
If successful in a civil action, a plaintiff can recover the amount unlawfully deducted,
fees, and costs. Malone v. Am. Bus. Info., 262 Neb. 733, 738, 634 N.W.2d 788, 792 (2001). An
amount equal to the unpaid wages, or an amount equal to two times the unpaid wages in the
event of willful nonpayment, may be recovered and placed in a fund distributed to the schools of
the state. Id.
The Commissioner of Labor must issue a citation to an employer when an investigation
reveals that the employer may have violated the Nebraska Wage Payment and Collection Act by
not paying his or her employees for the appropriate wage period. NEB. REV. ST. § 48-1234(1).
This citation may consist include an administrative penalty of not more than $500 for the first
violation, and not more than $5000 for subsequent violations. NEB. REV. ST. § 48-1234(2). If an
employee has filed suit against his or her employer for a wage payment violation, any citation by
the Commissioner shall be entered into the evidence. NEB. REV. ST. § 48-1234(4).
E. Pay Stub provisions
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1. Normative Standards
Nebraska requires that each employer establish a regular pay day, and give employees 30
days advance notice before the established pay day can be altered, but does not specify how
often employees must be paid. NEB. REV. ST. § 48-1230(1).
For each payday, a covered employer must “deliver or make available to each employee,
by mail or electronically,” a wage statement showing:
(a) The employee’s identity;
(b) The hours worked (unless the employee is exempt under the federal Fair
Labor Standards Act);
(c) the wages earned; and
(d) the deductions made.
NEB. REV. ST. § 48-1230(2).
An employer may only “withhold, or divert a portion of an employee’s wages” sums it is
either required or permitted to withhold by state or federal law or by court order or the employer
has a written agreement with the employee to do so. Id. at § 48-1230(1).
2. Claim Administration
The wage statement requirement is part of the Wage Payment and Collection Act, and is
governed by the procedures specified in I.A.2 above.
3. Statute of Limitations
The wage statement requirement is part of the Wage Payment and Collection Act, and is
governed by the period of limitations specified in I.A.3 above.
4. Remedies
The wage statement requirement is part of the Wage Payment and Collection Act, and
provides the remedies specified in I.A.4 above.
F. Interagency Information Sharing
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Nebraska requires interagency information sharing on wage and hour topics both directly
and indirectly. First, the Employee Classification Act (which creates a presumption of employee
status in the construction industry) requires the Commissioner of Labor to share any violations of
the Act “with the Department of Revenue for analysis of violations of the Nebraska Revenue Act
of 1967 and with the Nebraska Workers' Compensation Court.” NEB. REV. STAT. ANN. § 48-2908.
Thereafter, the Department of Revenue is required to “investigate and, if appropriate, proceed
with the collection of any income tax not withheld plus interest and penalties.” Id. In addition,
the Commissioner of Labor, the Department of Revenue, and the Nebraska Workers’
Compensation Court are required to “refer any violation reasonably believed to be a civil or
criminal violation of the Employment Security Law, the Nebraska Revenue Act of 1967, the
Nebraska Workers’ Compensation Act, or another law to the appropriate prosecuting authority
for appropriate action.” Id.
Second, under Neb. Rev. St. § 48-1236, every year, the Department of Labor is required
to post information on its web site regarding compliance with and enforcement of the Nebraska
Wage Payment and Collection Act, as well as provide notice to the Legislature that the
information has been posted. The posted information must include:
(a) the total number of reports of unpaid wages filed with the department in the
prior calendar year;
(b) the total number of reports investigated in the prior calendar year;
(c) the results of all investigations completed in the prior calendar year, including,
but not limited to, the number of cases in which wages were found to be owed to
an employee, the number of cases in which the employer paid wages owed to the
employee during the course of the investigation, and the number of cases in which
it was found that no wages were owed to an employee;
(d) the number of citations issued regarding failure to properly pay employees
(pursuant to Wage Payment and Collection section Neb. Rev. St. § 48-1234) in the
prior calendar year;
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(e) the total amount of wages owed to employees according to the citations issued
in the prior calendar year;
(f) the number of employers with more than two citations in the previous five
years; and
(g) the number and names of employers with at least one unpaid citation from the
previous five years.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
Two statutory schemes address the independent contractor/employee classification issue.
First, Nebraska addresses the issue directly in the construction industry in the Employee
Classification Act of 2010, which was directed at misclassification as it impacts tax withholding,
unemployment insurance and workers’ compensation insurance benefits. NEB. REV. STAT. ANN. §
48-2903. That statute creates a presumption that any “individual performing construction labor
services for a contractor is . . . an employee and not an independent contractor” for those
purposes unless:
(a) the individual has been and will continue to be free from control or direction
over the performance of such services, both under his or her contract of service
and in fact;
(b) the service rendered is either outside the usual course of the business for
which such service is performed or such service is performed outside of all the
places of business of the enterprise for which such service is performed;
(c) the individual is customarily engaged in an independently established trade,
occupation, profession, or business;
(d) the individual has been registered as a contractor pursuant to the Contractor
Registration Act prior to commencing construction work for the contractor; and
(e) the individual has been assigned a combined tax rate pursuant to sections
48-649 to 48-649.04 or is exempted from unemployment insurance coverage.
NEB. REV. STAT. A NN. § 48-2903
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Second, for purposes of the Nebraska Wage Payment and Collection Act (and outside the
construction industry), the term “employee” is defined to mean any individual permitted to work
by an employer pursuant to an employment relationship or who has contracted to sell the goods
or services of an employer and to be compensated by commission. NEB. REV. ST. § 48-1229(1).
The WPCA also creates a presumption that a remunerative relationship is an employment
relationship and not one with an independent contractor. It can be overcome if it is shown that:
(a) the individual alleged to be an independent contractor has been and will
continue to be free from control or direction over the performance of such
services, both under his or her contract of service and in fact,
(b) the service the individual provides is either outside the usual course of
business for which such service is performed or such service is performed outside
of all the places of business of the enterprise for which such service is performed,
and
(c) the individual is customarily engaged in an independently established trade,
occupation, profession, or business.
2. Claim Administration
For Wage Collection and Payment Act purposes, the procedures outlined in I.A.2 apply.
Unemployment compensation benefits are administered according to an extensive administrative
process described at Neb. Rev. Stat. Ann. §§ 48-631 et seq.
3. Statute of Limitations
For Wage Collection and Payment Act purposes, the limitations outlined in I.A.3 apply.
4. Remedies
For Wage Collection and Payment Act purposes, the remedies outlined in I.A.4 apply.
B. Exempt/Non-Exempt Classification
1. Normative Standards
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Nebraska law does not contain an overtime requirement, and thus there are no state
statutory provisions specifying who might be exempt from them. Employees in Nebraska are
limited to claims brought under the federal Fair Labor Standards Act
III. Payroll Fraud on State Government by Government Contractors
Outside of the Medicaid area, Nebraska has no state False Claims Act, or any other
statute that explicitly deals with fraudulent claims made to the state or its political subdivisions.
More generally, fraud in contracts is dealt with under Neb. Rev. St. U.C.C. § 2-721.
IV. Certification by Government Contractors of Prevailing Wage Compliance
1. Normative Standards
Nebraska created the Commission of Industrial Relations, among other things, to
establish the prevailing rates of pay and conditions of employment for public works projects.
NEB. REV. ST. § 48-818(1). To do so, the commission takes into consideration the overall
compensation presently received by the employees, having regard not only to wages for time
actually worked but also to wages for time not worked, including vacations, holidays, and other
excused time, and all benefits received, including insurance and pensions, and the continuity and
stability of employment enjoyed by the employees. NEB. REV. ST. § 48-818(1). The prevailing
wage statute does not expressly create any payroll certification requirement.
2. Claim Administration
Any public employer, public employee, or labor organization, or the Attorney General of
Nebraska on his or her own initiative or by order of the Governor, may file a petition with the
commission. NEB. REV. ST. § 48-811.
3. Remedies
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Orders, temporary or final, entered by the Commission of Industrial Relations shall be
binding on all parties involved therein and shall be deemed to be of the same force and effect as
like orders entered by a district court and shall be enforceable in appropriate proceedings in the
courts of this state. Failure on the part of any person to obey any order, decree or judgment of
the Commission of Industrial Relations, either temporary or final, shall constitute a contempt of
such tribunal in all cases where a similar failure to obey a similar order, decree or judgment of a
district court would constitute a contempt of such tribunal, and upon application to the
appropriate district court of the state shall be dealt with as would a similar contempt of the said
district court. NEB. REV. ST. § 48-819
After the hearing and any investigation, the commission shall make all findings, findings
of fact, recommended decisions and orders, and decisions and orders in writing, which findings,
findings of fact, recommended decisions and orders, and decisions and orders shall be entered of
record. NEB. REV. ST. § 48-817.
V. Labor Trafficking
1. Normative Standards
Nebraska has a criminal statute aimed directly at human trafficking, labor trafficking, sex
trafficking, labor trafficking of a minor or sex trafficking of a minor. NEB. REV. ST. § 28-831.
No comparable or parallel civil statute exists. For criminal purposes, labor trafficking means
“knowingly recruiting, enticing, harboring, transporting, providing, or obtaining by any means or
attempting to recruit, entice, harbor, transport, provide, or obtain by any means a person eighteen
years of age or older intending or knowing that the person will be subjected to forced labor or
services.” NEB. REV. ST. § 28-831.
2. Claim Administration
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Criminal cases of labor trafficking are prosecuted by the state in court.
3. Statute of Limitations
Neb. Rev. St. § 29-110(4) provides a statute of limitations of 7 years.
4. Remedies
Any person who engages in labor trafficking or sex trafficking is guilty of a Class II
felony. NEB. REV. ST. § 28-831(2). Any person, other than a trafficking victim, who knowingly
benefits from or participates in a venture which has, as part of the venture, an act that is in
violation of this section is guilty of a Class IIA felony. NEB. REV. ST. § 28-831(3).
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I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
Employers in New Jersey must pay nonexempt employees at least the minimum wage,
which is currently $12 per hour. N.J. STAT. ANN. § 34:11-56a. That figure will increase each
year based on the consumer price index for all urban wage earners and clerical workers, with a
minimum of $1 per year increase until 2024, up to $15 per hour. Id. If the federal minimum
wage rises higher than the then-current state minimum, the federal minimum applies. Id. at §
34:11-56a4(a). Specific provisions are provided for tipped employees, training (and
supervision/enforcement of training provisions), seasonal employees and employees working for
a small employer, farm laborers, truckers, and long-term care facility staff. N.J. STAT. ANN. §
34:11-56a4(c)-(g), (i).
New Jersey’s definition of the term “employee” is circular (“any individual employed by
an employer”), and it adopts the federal Fair Labor Standards Act’s definition of “employ,”
which includes any activity “suffered or permitted” by an employer. N.J. STAT. ANN. §§
34:11-56a1(f)-(h). The following are not “employees” as defined by New Jersey minimum wage
law, and are thus exempted from the statutory minimum wage rate:
(1) Full time students employed by university or college, who are paid at least
85% of the minimum wage.
(2) Part time employees primarily engaged in the care and tending of children in
the employer’s home.
(3) Outside salesman and salesmen of motor vehicles.
(4) Minors under 18 years of age.
(i) Unless employed in certain fields that are required to be paid minimum wage,
including: processing of farm products, Hotel and motels, Restaurants,
Mercantile, Beauty, culture and Laundry, cleaning, and dyeing jobs;
New Jersey
(5) Employees at summer camps, conferences, and retreats operated by nonprofit
or religious cooperation, during months of June, July, August, and September.
N.J. STAT. ANN. § 34:11-56a4(b)(3) (full time students); N.J. STAT. ANN. §34:11-56a4(a) (part
time employees, outside salesmen, and minors); N.J. ADMIN. CODE § 12:56-11.2 (farm product
exceptions); N.J. ADMIN. CODE § 12:56-13.2 (hotel and motel); N.J. ADMIN. CODE §§ 12:57-3.3,
4.3, 5.3 (mercantile, beauty, and cleaning); N.J. ADMIN. CODE § 12:56-3.2(6) (summer camp
employees); N.J. A DMIN. CODE § 12:56-11.2.
2. Claim Administration
Employees can file a civil action for unpaid wages or wages lost due to retaliation. N.J.
STAT. ANN. § 34:11-4.10(c). Employees can also file a wage claim with the New Jersey
Department of Labor (NJDOL). N.J. STAT. ANN. § 12:56-11.2, N.J. STAT. ANN. 34:11-4.9; N.J.
STAT. ANN. § 34:11-56a24. The Commissioner of the NJDOL is authorized to investigate any
claim for unpaid wages and wage theft, and make a decision and an award, but only when the
sum does not exceed $50,000. N.J. STAT. ANN. § 2C:40A-2; N.J. STAT. ANN. § 34:11-58(c). The
Commissioner is authorized to supervise the payment of amounts due to employees, and the
employer may be required to pay the damages to a special account in trust overseen by the
Commissioner for the employees. The employer must also pay to the Commissioner an
administrative fee of between 10%-25% of any wage payment ordered. N.J. STAT. ANN.
§34:11-58(e). When the sum exceeds $50,000, the Commissioner cannot investigate on behalf
of the employee.
The Commissioner is also authorized to investigate occupation, rather than specific
individual wage payment failures in order to ascertain whether a substantial number of
employees in the occupation are receiving less than a fair wage. He may do this on his or her
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own motion, but must do so upon a petition of 50 or more residents of the state requesting such
an investigation. N.J. STAT. ANN. § 34:11-56a7. These procedures are further described below.
See infra at I.B.2.
When a dispute over wages arises, the employer is required to pay without condition and
within the time set all wages conceded by the employer to be due, leaving to the employee all
remedies to which he might otherwise be entitled. N.J. STAT. ANN. § 34:11-4.8(a). The employee
does not release any claim he or she might have by accepting such a payment, and any release
required by an employer as a condition to payment shall be in violation of this act. N.J. STAT.
ANN. § 34:11-58(f); N.J. STAT. A NN. 34:11-4.8(b).
3. Statute of Limitations
The statute of limitations on wage claims in six years. N.J. STAT. A NN. § 34:11-58(a).
4. Remedies
If an employer fails to pay the full amount owed, the employee may recover the full
amount of any wages lost, plus not more than 200% liquidated damages together with cost and
reasonable attorney fees. N.J. STAT. ANN. § 34:11-4.10(a). Liquidated damages are “not
required” for a first violation by an employer if the employer shows to the satisfaction of the
court that the non-payment arose out of an inadvertent error made in good faith, the employer
had reasonable grounds for believing that the act or omission was not a violation, and the
employer acknowledges that it violated the law and pays the amount owed within 30 days of
notice of the violation. N.J. STAT. A NN. § 34:11-4.10(c).
In addition to the civil remedies available, an employer that knowingly fails to pay an
employee the minimum wage or has retaliated against employees who have made complaints to
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the Commissioner, the employer’s employer, or its authorized representative regarding failure to
pay full wages or because the employee will be or has initiated proceedings against the employer
is guilty of disorderly persons offense and is punished by a fine of at least $500 and maximum of
$1000 for the first offense, or by imprisonment of 10–90 days, or both fine and imprisonment,
and upon subsequent convictions will be fined between $1000-2000 or 10-100 days or both. In
cases of a retaliatory discharge related to a wage dispute, the employer will additionally be
required to rehire the employee and correct the retaliatory action, and pay all lost wages caused
by the unlawful discharge. N.J. STAT. A NN. § 34:11-4.10(b).
B. Overtime Violations
1. Normative Standards
A nonexempt employee working more than 40 hours in any workweek, must be paid
overtime at a rate of 1.5 times his hourly wage. N.J. STAT. ANN. §§ 34:11-56a4(b)(1); N.J. STAT.
ANN. § 12:56-6.1. The statutory overtime pay requirements do not apply to any individual
employed in a bona fide executive, administrative, or professional capacity; or to employees
engaged to labor on a farm or employed in a hotel; or to an employee of a common carrier of
passengers by motor bus; or to a limousine driver who is an employee of an employer engaged in
the business of operating limousines; or to employees engaged in labor relative to the raising or
care of livestock. N.J. STAT. A NN. § 34:11-56a4(b)(1).
Overtime is not required for those working more than eight hours a day or for work on
Saturdays, Sundays, holidays, or other regular days of rest. N.J. ADMIN. CODE § 12:56-6.4(b).
Hours may not be averaged over two or more workweeks to eliminate the requirement to pay
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overtime wages for hours worked in excess of 40 in a given workweek. N.J. ADMIN. CODE §§
12:56-6.1, 6.2.
2. Claim Administration
In addition to the procedures outlined for minimum wage violations in sections I.A.2-4
above, New Jersey provides a procedure for empaneling a Wage Board to investigate unfair
wages in any occupation or occupations:
Upon a petition by 50 or more residents of New Jersey, the Commissioner can, if of the
opinion that a substantial number of employees in any occupation or occupations are receiving a
less than fair wage, appoint a wage board to report upon the establishment of a minimum fair
wage for employees in such occupation(s). N.J. STAT. ANN. § 34:11-56a; N.J. STAT. ANN. §
34:11-56a8. The wage board can investigate minimum wage or overtime hours issues. N.J.
STAT. ANN. § 34:11-56a10. A wage board is composed of not more than three representatives of
the employers in the occupation, an equal number of representatives of the employees, and not
more than 3 disinterested persons representing the public. The members shall serve without pay
but may be reimbursed for all necessary expenses. N.J. STAT. ANN. § 34:11-56a8. The wage
board has the powers to subpoena and require the attendance and testimony of witnesses, as well
as the production of all records related to the matters under investigation. N.J. STAT. ANN. §
34:11-56a10.
After investigation, the Wage Board can recommend through submission of its report to
the Commissioner minimum fair wage rates, on an hourly, daily, or weekly basis for the
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employees in the occupation or occupations for which the wage board was appointed. The wage
board can also recommend, among other things, a change to the number of hours per week after
which the overtime rate should apply and can recommend an overtime rate. N.J. STAT. ANN. §
34:11-56a13. The Commissioner then decides whether to accept or reject the wage board
decision. If rejected, then the matter is resubmitted to either the same or a new wage board. If
accepted, it is published, and a public hearing is held. N.J. STAT. A NN. § 34:11-56a15.
If the report is approved after a hearing, the commissioner enters a wage order, which
thereafter defines minimum fair wage rates in the occupation or occupations as recommended in
the report of the wage board. N.J. STAT. A NN. § 34:11-56a16.
3. Statute of Limitations
The statute of limitations on wage claims is six years. N.J. STAT. A NN. § 34:11-58(a).
4. Remedies
The remedies for overtime violations are the same as those described above at I.A.4 for
minimum wage violations.
C. Off-the-clock Violations
1. Normative Standards
Employees are entitled to pay for all hours of work, which includes all time that the
employee is required to be at his place of work or on duty. N.J. ADMIN. CODE §12:56-5.1; N.J.
ADMIN. CODE §12:56-5.2. Time spent waiting on-call is not considered hours worked unless the
employee is not free to use the on-call time for his or her own benefit. N.J. ADMIN. CODE
§12:56-5.6. An employee who must stay at home to receive calls from customers while the
office is closed may be compensated under reasonable agreement for determining hours worked.
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N.J. ADMIN. CODE §12:56-5.7. New Jersey law does not require meal and rest breaks other than
for minors. N.J. STAT. A NN. §34:2-21.4.
2. Claim Administration, Statute of Limitations, and Remedies
The procedures, periods of limitation and remedies used in litigating off-the-clock
violations are the same as those described in sections I.A.2-4 above for minimum wage claims.
D. Illegal Deductions
1. Normative Standards
No employer may withhold or divert any portion of an employee’s wage unless:
(1) The employer is required to do so under state or federal law; or
(2) The amounts withheld or diverted are for:
(i) Contributions for welfare, insurance, hospitalization, medical or
surgical, pension, retirement, and profit-sharing plans, under authorization
by employee in writing or under collective bargaining agreement and to
plans establishing individual retirement annuities on a group or individual
basis, or individual retirement accounts at any State or federally chartered
bank, saving banks, or saving and loan associations for the employee,
spouse, or both;
(ii) Contributions authorized in writing or under collective bargaining
agreements for payment into company operated thrift plans, or security
option, or security purchase plans to buy securities of the employing
corporation, affiliated corporation, or other corporations at market price or
less, provide the securities are listed on a stock exchange or are
marketable over the counter;
(iii) Payments authorized into employee personal savings account, such as
payments to a credit union, saving fund society, savings and loan or
building and loan associations, and payments to banks fir Christmas,
vacation, or other savings funds, provided al such deductions are approved
by the employer; or
(iv) To pay for company products, in accordance with a periodic payment
schedule, payments for employer loans to employees, payments to correct
payroll errors, and payment of costs and related to replacement of
employee identifications for airline employees, provided all such
deductions are approved by the employer.
N.J. STAT. A NN. § 34:11-4.4.
2. Claim Administration
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The procedures used in litigating off-the-clock violations are the same as those described
in section I.A.2 above for minimum wage claims.
3. Statute of Limitations
The statute of limitations is six years. N.J. STAT. ANN. § 34:11-58(a).
4. Remedies
The remedies available in off-the-clock cases are the same as those described in section
I.A.4 above for minimum wage claims.
E. Paystub Provisions
1. Normative Standards
Every employer is obligated to notify each employee at the time he or she is hired of the
applicable rate of pay and the regular payday designated by the employer, which must be at least
twice a month (unless the employee is a bona fide executive, supervisory, or other special
classifications, in which case the payday must be at least monthly) and must thereafter notify its
employees of any changes in the pay rates. For each pay period, the employer must also furnish
the employee with a statement which includes:
(1) Gross wages
(2) Net wages
(3) Rate of pay
(4) If relevant to the wage calculation, the number of hours worked by the
employee during the pay period.
N.J. STAT. ANN. § 34:11-4.6. An employer may provide this statement electronically, unless the
employee requests that the statement be provided in a paper format. Id.
2. Claim Administration, Statute of Limitations, and Remedies
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New Jersey
New Jersey does not specifically provide a personal right of action for enforcing the pay
statement requirements.
F. Interagency Information Sharing
New Jersey has a number of information-sharing and joint operation statutes that may
implicate employment-related matters.
Whenever the Commissioner issues a decision that an employer has violated New Jersey
wage laws and the amount owed is equal to or greater than $5,000, the Commissioner must
inform the Division of Taxation in the Department of the Treasury of the decision and may
recommend completing a taxation audit of the employer and any successor firms. N.J. STAT.
ANN. § 34:11-58(f).
The Attorney General must direct the Office of the Insurance Fraud Prosecutor to confer
from time to time with Departments or other units of State Government which have units that
investigate fraud, in order to coordinate activities, share information, and provide any assistance
necessary to any State agency in overseeing enforcement activities. N.J. STAT. ANN. §
17:33A-24.
The Center for Occupational Employment Information and the State Employment and
Training Commission are authorized to access the files and records of other State agencies which
administer or distribute State job training funds or federal job training funds or issue license
necessary for an individual to work in a specific occupation. N.J. STAT. A NN. § 34:1A-88.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
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New Jersey has not codified broadly applicable standards for distinguishing between
employees and independent contractors. The state has, however, determined that
misclassification is of particular concern in the construction industry, N.J. ADMIN. CODE §
34:20-2, and has industry-specific, legislated standards for making those distinctions. Those
“making . . . improvements to real property . . . for remuneration paid by an employer shall be
deemed to be employment unless:
(1) The individual has been and will continue to be free from control or direction
over the performance of that service, both under his contract of service and in
fact; and
(2) The services are either outside the usual course of the business for which the
service is performed, or the service is performed outside of all the places of
business of the employer for which the service is performed; and
(3) The individual is customarily engaged in an independently established trade,
occupation, profession, or business.
(4) The failure to withhold federal or State income taxes or to pay unemployment
compensation contributions or workers' compensation premiums with respect to
an individual's wages shall not be considered in making a determination under
this section.
N.J. STAT. ANN. § 34:20-4. Employers in the construction industry are not permitted to require or
request that any individual enter into an agreement or sign a document which results in the
misclassification of the individual as an independent contractor or otherwise does not accurately
reflect the employment relationship with the employer. N.J. STAT. A NN. § 34:20-8(a).
2. Claim Administration
An individual employed as a construction worker who has not been properly classified as
an employee may bring a civil action for damages against the employer or subcontractor for
failing to properly classify the employee. An individual representative, including a labor
organization, may bring the action on behalf of the individual or as a class action. N.J. STAT.
ANN. § 34:20-8(b).
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3. Statute of Limitations
The statute of limitations to pursue misclassification under N.J. STAT. ANN. § 34:20-8(b)
is six years.
4. Remedies
An employer who fails to properly classify an individual as an employee in the
construction industry is guilty of a disorderly persons offense, and shall be fined not less than
$100 nor more than $1000 or be imprisoned for not less than 10 nor more than 90 days, or both.
Each week the misclassified employee works is a separate offense. N.J. STAT. ANN. §
34:20-5(a)(1). If the misclassification is knowing, the employer is charged with a crime of
varying degrees depending on the contract amount. N.J. STAT. ANN. § 34:20-5(a)(2). An
employer that misclassifies employees is deemed to have caused loss to the employees in any
amount by which the employees were underpaid in connection with the misclassification and is
subject to fines and must pay restitution to the victims. N.J. STAT. ANN. §34:20-5(a). The court
may award attorney’s fees and other costs of the action in addition to damages to an individual or
class of individuals who have not been properly classified as employees in accordance with
section 4 of this act. N.J. STAT. A NN. § 34:20-8(b).
When the Commissioner of Labor and Workforce Development finds that an employer in
the construction industry has misclassified employees as prohibited, the Commissioner is
authorized to assess and collect administrative penalties, up to a maximum of $2,500 for a first
violation and up to a maximum of $5,000 for each subsequent violation, specified in a published
schedule of penalties. N.J. STAT. ANN. § 34:20-5. The factors in determining the amount of the
administrative penalties are:
(1) the history of previous violations by the employer;
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New Jersey
(2) the seriousness of the violation;
(3) the good faith of the employer; and
(4) the size of the employer's business.
Id. Any sum collected as a penalty by the Commissioner in such a proceeding will be applied
toward enforcement and administration costs of the Division of Workplace Standards in the
Department of Labor and Workforce Development. N.J. STAT. A NN. § 34:20-5(b).
Further, the Commissioner can refer the matter to the Attorney General or his designee
for investigation and prosecution. N.J. STAT. ANN. § 34:20-5. The Commissioner may also issue
a stop-work order against the employer requiring cessation of all business operations of the
employer at the specific place of business or employment in which the violation exists. N.J.
STAT. ANN. § 34:20-7.1(c)(1). An employer who is subject to a stop-work order shall have the
right to appeal to the commissioner. N.J. STAT. A NN. § 34:20-7.1(c)(2).
Employers in the industry that are found to have violated the employee classification
rules can be placed by the Commissioner on a list of employers who are prohibited from
contracting, directly or indirectly, with any public body for the construction of any public
building or other public work projects, or from performing any work on the same, for a period of
three years. The commissioner has to give notice by mail of that list to any public body who
requests it. N.J. STAT. ANN. § 34:20-6. The contractor then is afforded an opportunity to contest
the suspension. N.J. STAT. A NN. § 34:20-7.
Misclassified employees working in other industries can pursue wage and hour claims
under the same procedures, and obtain the same remedies, discussed supra for minimum wage
and overtime violations, as the case may be.
B. Exempt/Non-Exempt Classification
1. Normative Standards
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As with the federal Fair Labor Standards Act, the primary exemptions available under
New Jersey law from the state overtime requirements are executive, administrative, professional,
and outside sales employees. N.J. STAT. ANN. § 34:11-56a4. Additional exemptions include farm
laborers, hotel employees, employees of common carrier buses, employees of limousine driving
companies, and employees employed for livestock raising, N.J. STAT. ANN. § 34:11-56a4(b)(1),
and part-time caregivers working in the employer’s home, ignore without vocational work
licenses, and motor vehicle salesmen. N.J. STAT. ANN. § 34:11-56a4(a). Full time students
working for their school or university may be paid only 85% of the minimum wage. N.J. STAT.
ANN. § 34:11-56a4(b)(3).
2. Claim Administration, Statute of Limitations, and Remedies
The procedures and periods of limitation used, and the remedies available, in litigating
off-the-clock violations are the same as those described in sections I.A.2-4 above for minimum
wage claims.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
The New Jersey False Claims Act (“NJFCA”) makes it unlawful for any person to: (1)
knowingly present, or cause to be presented, a false or fraudulent claim for payment or approval;
(2) knowingly make, use, or cause to be made or used, a false record or statement material to a
false or fraudulent claim; (3) knowingly make, use, or causes to be made or used, a false record
or statement material to an obligation to pay or transmit money or property to a government
entity, or knowingly conceal or knowingly and improperly avoid or decrease an obligation to pay
or transmit money or property to a government entity. See N.J. STAT. A NN. § 2A:32C-3.
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B. Claim Administration
The New Jersey Attorney General is responsible for investigating suspected violations of
the NJFCA and may bring a civil action against a person that has violated the NJFCA. An
individual may also bring a private civil action on behalf of the individual and the State. If the
New Jersey Attorney General proceeds with a qui tam action (intervening in and assuming
control of the private plaintiff’s action), the private plaintiff may receive a percentage of the
funds recovered. See N.J. STAT. A NN. § 2A:32C-7.
C. Statute of Limitations
A civil action under the NJFCA may not be brought: more than six years after the date on
which the violation of the act is committed; or more than three years after the date when facts
material to the right of action are known or reasonably should have been known by the state
official charged with responsibility to act in the circumstances, but in no event more than 10
years after the date on which the violation is committed, whichever occurs last. N.J. STAT. ANN.
§ 2A:32C-11. Employees have two years from the date of the event to file a protest in writing to
the Commissioner objecting to the amount paid. N.J. STAT. A NN. § 34:11-56.34(b).
D. Remedies
When the Attorney General proceeds in a NJFCA case initially brought by a private
individual, the individual is entitled to an award of at least 15% but not more than 25% of the
proceeds recovered under any judgment obtained by the Attorney General or of the proceeds of
any settlement of the claim, depending upon the extent to which the person substantially
contributed to the prosecution of the action. N.J. STAT. A NN. § 2A:32C-7.
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If the case proceeds without the Attorney General, the person bringing the action or
settling the claim receives an amount the court determines is reasonable, but not less than 25%
and not more than 30% of the proceeds of the action or settlement. N.J. STAT. A NN. § 2A:32C-7
A violator of the NJFCA is also liable to the state under N.J. STAT. ANN. § 2A:32C-3 for
three times the amount of actual damages sustained by the State and attributable to the violator, if
the person commits any of the following acts:
(a) Knowingly presents or causes to be presented to an employee, officer or agent
of the State, or to any contractor, grantee, or other recipient of State funds, a false
or fraudulent claim for payment or approval;
(b) Knowingly makes, uses, or causes to be made or used a false record or
statement to get a false or fraudulent claim paid or approved by the State;
(c) Conspires to defraud the State by getting a false or fraudulent claim allowed or
paid by the State;
(d) Has possession, custody, or control of public property or money used or to be
used by the State and knowingly delivers or causes to be delivered less property
than the amount for which the person receives a certificate or receipt;
(e) Is authorized to make or deliver a document certifying receipt of property used
or to be used by the State and, intending to defraud the entity, makes or delivers a
receipt without completely knowing that the information on the receipt is true;
(f) Knowingly buys, or receives as a pledge of an obligation or debt, public
property from any person who lawfully may not sell or pledge the property; or
(g) Knowingly makes, uses, or causes to be made or used a false record or
statement to conceal, avoid, or decrease an obligation to pay or transmit money or
property to the State.
Certain violator liabilities may be reduced if the violator furnishes the New Jersey Attorney
General with all information known to the violator within 30 days of receiving such information,
provided that the violator does not have knowledge of an investigation at the time the violator
furnishes such information. N.J. STAT. A NN. § 2A:32C-4.
Criminal responsibility for payroll fraud is also available. Under the New Jersey
prevailing wage statute, a person commits a crime if he or she knowingly submits to the
government any claim for payment for performance of a government contract knowing such
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claim to be false, fictitious, or fraudulent. N.J. STAT. ANN. § 34:11-56.35; see discussion of
prevailing wages immediately below.
Should the Commissioner be made aware of the failure to properly pay employees prior
to full payment to the contractor by the public body, the Commissioner may order the payment
diverted and paid to the employees directly. N.J. STAT. ANN. § 34:11-56.33(b). The New Jersey
Attorney General is required to investigate suspected violations of the NJFCA and may bring a
civil action against a person that has violated the NJFCA. An individual may also bring a private
civil action on behalf of the individual and the State. If the New Jersey Attorney General
proceeds with a qui tam action, the private plaintiff may receive a percentage of the funds
recovered. N.J. STAT. A NN. § 2A:32C-7.
IV. Certification by Government Contractors of Prevailing Wage Compliance
A. Normative Standards
The New Jersey State Prevailing Wage Act requires the Commissioner to determine what
the prevailing wage rate applicable to each construction or public works project let by the State
of New Jersey or any of its political subdivisions. N.J. STAT. ANN. § 34:11-56.30. Every contract
must contain a provision stating the prevailing wage rate to the workers employed and a
stipulation that the workers shall be paid not less than the prevailing wage rate. N.J. STAT. ANN. §
34:11-56.27.
An accurate record showing name, craft, and actual hourly rate of wages paid to each
worker must be kept and preserved for two years from date of payment. The record has to be
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made available at all reasonable hours to inspection by the public body and to the Commissioner.
N.J. STAT. A NN. § 34:11-56.29.
Before any final payment is made on a public works contract, the treasurer of the public
body is obligated to require the contractor(s) and subcontractor(s) working on the project to file
written and sworn statements with the public body in form satisfactory to the Commissioner
certifying to the wages then due from the contractor and subcontractor to any of their workers.
N.J. STAT. ANN. § 34:11-56.37(b). The written statement has to set forth the names of the persons
whose wages are unpaid and the amount due to each respectively. Id. The contractor or
subcontractor making the sworn statement must verify explicitly that (s)he has read the
statement, knows its contents, and that the statement is true of his or her own knowledge. Id.
B. Claim Administration
Any worker denied the prevailing wage on a covered public works project can file a
lawsuit in state court to recoup the wages owed. N.J. STAT. ANN. § 34:11-56.40. A prevailing
plaintiff can also recover attorney’s fees and costs. Id. The Commissioner can also investigate
and remedy violations of the Prevailing Wage Act, as described in Remedies below.
C. Statute of Limitations
Workers have two years to file a protest in writing with the Commissioner objecting to
the amount of wages paid for service performed by him on a public work as being less than the
prevailing wages for such services. N.J. STAT. A NN. § 34:11-56.34(b).
D. Remedies
A contractor who fails to comply with the Prevailing Wage Act is guilty of a disorderly
persons offense and upon conviction will be fined not less than $100.00 nor more than $1,000 or
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be imprisoned for not less than 10 nor more than 90 days, or both. Each week in any day of
which each worker is paid less than the applicable rate constitutes a separate offense. N.J. STAT.
ANN. § 34:11-56.64.
Alternatively, the Commissioner is authorized to assess and collect administrative
penalties, up to a maximum of $2,500 for a first violation and up to a maximum of $5,000 for
each subsequent violation. Id. The Commissioner can also refer the matter to the Attorney
General or his designee for investigation and prosecution. N.J. STAT. ANN. § 34:11-56.35.
Although debarment is a remedy for failure to pay the required prevailing wage, it does not
appear to be a remedy available under the Prevailing Wage Act for failure to certify compliance.
V. Labor Trafficking
A. Normative Standards
No New Jersey statute directly addresses labor cartels or brokers specifically. However,
New Jersey law makes it a felony when an individual:
(1) knowingly holds, recruits, lures, entices, harbors, transports, provides or
obtains, by any means, another, to engage in sexual activity . or to provide labor
or services:
(a) by causing or threatening to cause serious bodily harm or physical
restraint against the person or any other person;
(b) by means of any scheme, plan, or pattern intended to cause the person
to believe that the person or any other person would suffer serious bodily
harm or physical restraint;
(c) by engaging in criminal coercion against the person;
(d) by destroying, concealing, removing, confiscating, or possessing any
passport, immigration-related document, or other document issued by a
governmental agency to any person which could be used as a means of
verifying the person's identity or age or any other personal identifying
information;
(e) by means of the abuse or threatened abuse of the law or legal process;
(f) by means of fraud, deceit, or misrepresentation against the person; or
(g) by facilitating access to a controlled dangerous substance or controlled
substance analog as set forth in chapter 35 of Title 2C of the New Jersey
Statutes; or
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(2) receives anything of value from participation as an organizer, supervisor,
financier or manager in a scheme or course of conduct to do the foregoing; or
(3) knowingly holds, recruits, lures, entices, harbors, transports, provides or
obtains, by any means, a child under 18 years of age, to engage in certain
specified forms of sexual activity, whether or not the actor mistakenly believed
that the child was 18 years of age or older, even if that mistaken belief was
reasonable.
N.J. STAT. A NN. § 2C:13-5.
B. Claim Administration
Although New Jersey’s human trafficking statute is primarily a criminal statute, it also
provides a civil remedy for victims. Specifically, any person injured by an actor who committed
a human trafficking offense may bring a civil action in any court of competent jurisdiction
against the actor and all those acting in concert with that actor. N.J. STAT. A NN. § 2C:13-8.1.
C. Statute of Limitations
Criminal charges have a statute of limitations of 5 years. N.J. STAT. ANN. § 2C:1-6. The
statute of limitations on wage claims in six years. N.J. STAT. A NN. § 34:11-58(a).
D. Remedies
In any civil action brought pursuant to this section, the court must, in addition to any
other appropriate legal or equitable relief, including damages for pain and suffering, recovery of
reasonable costs for necessary medical, dental, and psychological services and punitive damages,
award damages in an amount that is the greater of:
(1) the gross income or value to the defendant of the injured party's labor or
services; or
(2) the value of the injured party's labor or services as determined by the “New
Jersey Prevailing Wage Act,” the “New Jersey State Wage and Hour Law,” or any
other wage act in NJ.
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In addition to any damages, penalty, injunction, or other appropriate relief awarded in an action
brought under the human trafficking statute, the court may award to the injured person bringing
suit reasonable attorney's fees and costs. Damages in such an action would include all
“appropriate legal or equitable relief, including damages for pain and suffering, recovery of
reasonable costs for necessary medical, dental, and psychological services and punitive
damages, award damages in an amount that is the greater of:
(1) the gross income or value to the defendant of the injured party's labor or
services; or
(2) the value of the injured party's labor or services.”
N.J. STAT. ANN. § 2C:13-8.1(b). The perpetrator may also be guilty of a criminal charge of
human trafficking of the second degree. N.J. STAT. ANN.. § 2C:13-9.
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I. Wage Theft
A. Minimum Wage Violations
1. Normative Standard
New York’s statutory scheme uses geography and employer size to establish minimum
wages across the state. N.Y. LAB. LAW § 652. For example, employers in New York City must
pay a wage of at least $15.00 per hour regardless of size, see id. at (1)(a)(i)-(ii), whereas even
“large” employers (11 or more employees) outside of New York City, Nassau, Suffolk, and
Westchester need only pay a minimum of $12.50 per hour. Food service workers receiving tips
must receive an hourly wage of at least two-thirds of the current minimum wage provided that
their tips combined with their wage equal or exceed the minimum wage. See id. at (4).
Each October, the Commissioner of Labor publishes the annual increases in these rates
based on determinations made by the Director of the Budget. See id. at (1)(c). Every January,
until the minimum wage reaches $15 throughout the entire state, the Division of Budget analyzes
the economy in each region to determine whether there should be a temporary delay in scheduled
increases. See id. at (6). New York City, Nassau, Suffolk, and Westchester have already
increased their minimum wage to $15 per hour. Areas outside of these regions are still
increasing their minimum wage until they reach the $15 threshold. See id. Industry-specific
minimum wage levels can also be established through the state’s “wage board” process, as
described below. See N.Y. LAB. LAW § 657;
https://dol.ny.gov/system/files/documents/2021/06/cr142.pdf.
2. Claims Administration
New York
Minimum wage violations can be addressed through civil, criminal, or administrative
processes in New York. Civil minimum wage violation claims in the state of New York may be
brought in court by the underpaid employee or by the Commissioner on behalf of the underpaid
employee. N.Y. LAB. LAW §§ 663(1), (2). The Commissioner also has the authority to bring any
action necessary, including administrative action, to collect unpaid wages. N.Y. LAB. LAW §
663(2).
Failure to pay lawfully required wages can also constitute a crime. An employer,
employer’s agent, or any officer or agent of a corporation, partnership, or LLC who pays or
agrees to pay an employee less than minimum wage is guilty of a misdemeanor. N.Y. LAB. LAW
§ 662(1). If the wrongdoer commits a second or subsequent offense within six years of the date
of conviction for the prior offense, the second offense is a felony. Id. Each payment during the
span of one week that is less than the minimum wage constitutes a separate offense. Id.
Apart from proceedings spurred by an individual complaint about their own
circumstances, the Commissioner has the power to investigate whether the minimum wage is
insufficient in any particular occupation. N.Y. LAB. LAW § 653(1). The minimum wage statute
also has a “citizen action” component: the Commissioner must investigate alleged wage
violations if fifty or more “residents of the state” or employees in the occupation at issue petition
him or her to do so. See id. If, after investigation, the Commissioner believes that the minimum
wage is inadequate in that particular occupation, he or she must appoint a wage board to
investigate further and make recommendations. See id. For example, a wage board established
in 2015 to study the minimum wage in the fast-food industry recommended a statewide increase
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to $15, which was subsequently adopted and implemented in July of this year. See
https://dol.ny.gov/system/files/documents/2021/07/p716.pdf.
3. Statute of Limitations
Civil actions for minimum wage violations must commence within six years. N.Y. LAB.
LAW § 663(3). The statute of limitations is tolled when an employee files a complaint with the
Commissioner or when the Commissioner begins an investigation, whichever is earlier. See id.
Investigation by the Commissioner is not required as a precondition to a complaint in court. Id.
4. Remedies
When an employee brings a civil action, he or she can recover any underpayments,
attorney’s fees, prejudgment interest, and liquidated damages if the employer fails to show that it
acted in good faith. N.Y. LAB. LAW § 663(1). Agreements between the employer and employee
to work for a lower wage than required by law are not a defense to the action. See id.
The Commissioner can bring civil or administrative actions in which the employer is
required to pay the full amount of underpayment, costs, and liquidated damages if the violation is
found not to be in good faith. Id. The Commissioner calculates liquidated damages as no more
than 100% of the total underpayment due to the employee. Id.
Criminal sanctions also exist. First, an employer, employer’s agent, or any officer or
agent of a corporation, partnership, or LLC is guilty of a misdemeanor if it fails to keep
minimum wage records, fails to furnish records, hinders or delays enforcement of the minimum
wage article, falsifies records or refuses to make records accessible, or refuses to furnish a sworn
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statement of its records or any other information required for the enforcement the minimum
wage law. N.Y. LAB. LAW § 662(2). Every day minimum wage records are not kept or furnished
constitutes a separate offense. See id.
For the first minimum wage violation, the guilty party is fined not less than $500 and not
more than $20,000 or imprisoned for one year or less. N.Y. LAB. LAW § 662(1). For subsequent
offenses, the guilty party is charged with a felony. See id. They face the same fines levied for
the first offense or imprisonment not to exceed one year and one day or punishment by both fine
and imprisonment. See id. For record-keeping violations, the guilty party is fined not less than
$500 and not more than $5,000 or imprisoned for one year or less. N.Y. LAB. LAW § 662(2). For
each subsequent offense, the guilty party is charged with a felony and fined not less than $500
and not more than $20,000 or imprisonment not to exceed one year and one day or punishment
by both a fine and imprisonment. See id.
B. Overtime Violations
1. Normative Standard
New York has no independent, generally applicable statutory requirement to pay
overtime. Rather, it has numerous industry-specific overtime regulations, and extensive more
generally applicable regulations that incorporate by reference, expand upon and explain
application of the federal Fair Labor Standards Act’s overtime requirements. 12 NYCRR §
142-2.2 (“Overtime rate”). Under those regulations, employers must pay employees an overtime
rate of 1.5 times the employee’s regular rate for all hours worked. Id. 12 NYCRR § 142-2.2.
Nonresidential employees qualify for overtime if they work over 40 hours per week and
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residential employees qualify if they work over 44 hours per week. The overtime rate is only
paid for “working time” over the hourly maximum.
“Working time” is defined as “time worked or time permitted attendance, including
waiting time, whether or not work duties are assigned, or time an employee is required to be
available for work” in a specific area authorized by an employer “such that the employee is
unable to use the time productively” for personal matters. 12 NYCRR § 146-3.6. Time spent
traveling as part of employee duties is also considered “working time.” See id. New York has
promulgated extensive regulations that give specific guidance for overtime in certain industries.
See e.g., 12 NYCRR § 146-1.4; 12 NYCRR § 141-1.1.
2. Claim Administration
There are two ways to bring claims for overtime violations in New York. First, the
underpaid employee can bring a civil action to recover unpaid wages, attorney’s fees, and
liquidated damages up to 100% of total wages due where the violation was willful. N.Y. LAB.
LAW § 198(1-a). Second, the Department of Labor can conduct an investigation or audit. N.Y.
LAB. LAW § 196. The Commissioner of Labor has the authority to conduct investigations and to
commence civil and criminal proceedings to determine whether an overtime violation has
occurred. See id.
3. Statute of Limitations
The statute of limitations for overtime violations is the same that applies to minimum
wage violations described above in section I.A(4). N.Y. LAB. LAW § 663(3).
4. Remedies
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Civil and criminal penalties for overtime violations are the same that apply to minimum
wage violations described above in section I.A(4). N.Y. LAB. LAW § 662.
C. Off-the-clock Violations
New York has no specific off-the-clock legislation or regulations. Employers are
required to pay their employees for “time worked.” 12 NYCRR § 146-3.6. Because an
employer requiring off-the-clock work is refusing to pay an employee for all time worked,
violations would fall under provisions for minimum wage violations or overtime violations if the
employee qualifies for overtime. See id; N.Y. LAB. LAW § 198; N.Y. LAB. LAW § 198-A; N.Y.
LAB. LAW § 197; 12 NYCRR § 142. The procedures, periods of limitation, and remedies
discussed above for minimum wage claims would apply for off-the-clock claims as well. See
supra I.A.(2)-(4).
D. Illegal Deductions
1. Normative Standards
New York currently prohibits employers from deducting any sum from an employee’s
wage except: (a) those made in accordance with any law or regulation, including instances of
overpayment due to clerical error or repayment of advances of salary or wages; and (b) those
made for the benefit and with consent of the employee such as those for collective bargaining
dues or fee payments. N.Y. LAB. LAW § 193(1)(a)-(b). Section 193(b) lists allowable deductions
with respect to collective bargaining.
In November 2022, revisions to this law will go into effect. Under these revisions, no
employer will be able to make any deduction from an employee’s wages except: those in
accordance with laws and regulations and those expressly authorized in writing by the employee
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that are for the benefit of the employee. N.Y. LAB. LAW § 193(1)(effective 2022). These
authorized deductions will be limited to payments for insurance premiums, pensions or health
and welfare benefits, contributions to charitable organizations, payments for U.S. bonds,
payments for dues or assessments to a labor organization, and similar payments for the benefit of
the employee. See id. In addition, with the exception of deductions authorized by a collective
bargaining agreement, an employee’s authorization for any deductions may be revoked in writing
at any time. See id. at (3)(c)(effective 2022).
2. Claim Administration
Claims regarding illegal deductions may be brought through civil, criminal, and
administrative actions. N.Y. LAB. LAW § 198-a; N.Y. LAB. LAW § 197. An employee or someone
acting on his or her behalf may file a complaint with the Commissioner regarding illegal
deductions. N.Y. LAB. LAW § 196-a. The commissioner may bring any legal action, including
administrative actions, on behalf of the underpaid employee. N.Y. LAB. LAW § 198(1-a).
Underpaid employees may bring civil actions on their own behalf. N.Y. LAB. LAW § 197.
3. Statute of Limitations
Actions to recover for underpaid wages due to illegal deductions must commence within
6 years. N.Y. LAB. LAW § 198(3). The statute of limitations is tolled when an employee files a
complaint with the Commissioner or when the commissioner begins an investigation, whichever
is earlier. See id. Investigation by the Commissioner is not required nor does it bar a person
from bringing a civil action under this article. Id.
4. Remedies
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If an employee brings a civil action and prevails, the court must allow for the full
recovery of all underpayments, attorney’s fees, prejudgment interest, and liquidated damages for
willful violations. N.Y. LAB. LAW § 198(1-a).
In an administrative proceeding, the Commissioner must assess the full amount of
underpayment and, unless the employer shows that it was acting in good faith, liquidated
damages. N.Y. LAB. LAW § 198(1-a). Liquidated damages are calculated as no more than 100%
of the total wages due. See id.
Upon conviction for making an unlawful deduction, the individual is guilty of a
misdemeanor for the first offense and is punishable by a fine not more than $500 and not to
exceed $20,000 or imprisonment for one more than one year. N.Y. LAB. LAW § 198-a. For a
second or subsequent offense, the guilty party is fined not less than $500 and may be imprisoned
for a period not to exceed one year and one day, or punishable by both fine and imprisonment.
See id.
E. Pay Stub Provisions
1. Normative Standards
New York requires all pay stubs (or wage statements) to list the following: dates of work,
name of the employee, name of employee, address and phone number of the employer, rate of
pay, manner in which the employee was paid such as hourly or by shift, gross wages; deductions,
any allowances, benefits information if applicable, prevailing wage supplements if applicable,
and net wages. N.Y. LAB. LAW § 195(3). For employees not exempt from overtime
compensation, the wage statement must include the regular hourly rate of pay, overtime rate of
pay, the number of regular hours worked, and the number of overtime hours worked. Id. For
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employees who are paid a “piece rate,” employers must include the applicable piece rate of pay
and number of pieces completed at each rate. Id. Railroad corporations must furnish employees
with a wage statement listing accrued total earnings and taxes as well as a separate listing of his
or her daily wages and how they were computed. N.Y. LAB. LAW § 195(3-a). Employers must
establish, maintain, and preserve this wage statement information for 6 years at a minimum.
When an employee is promised a particular wage rate, or is entitled to the prevailing
wage rate, it is unlawful for any person to request, demand, or receive a return, donation, or
contribution of the employee’s wages, salary, or supplements, or other thing of value with the
understanding that failure to comply will prevent the employee from gaining or retaining
employment. N.Y. LAB. LAW § 198-b(2). This provision does not apply to labor organizations in
their collection of dues. See id. at (4).
2. Claim Administration
An employee who is not provided a wage statement can bring a civil action to recover
statutorily prescribed liquidated damages. N.Y. LAB. LAW § 198(1-d). The Commissioner can
also bring “any legal action necessary, including administrative action” on behalf of any
employee who has not received adequate statements of wages from his or her employer. Id.
3. Statute of Limitations
Actions to recover for wage statement violations must commence within 6 years. Id. at
(3). The statute of limitations is tolled when an employee files a complaint with the
Commissioner or when the commissioner begins an investigation, whichever is earlier. See id.
Investigation by the Commissioner is not required not does it bar a person from bringing a civil
action under this article. Id.
4. Remedies
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If an employer fails to provide wage statement(s) to an employee as required in N.Y.
Labor Law § 195(3), the employee can recover $250 for each work day the violations occurred
or continue to occur. N.Y. LAB. LAW § 198(1-d). The total amount recoverable cannot exceed
$5,000 together with costs and attorney’s fees. See id. The court may award further relief at its
discretion, including injunctive and declaratory relief. Id.
When an employer violates these wage statement provisions, the Commissioner has the
power to post a notice summarizing the violation in an area visible to employees for up to a year.
N.Y. LAB. LAW § 219-c(1). If the violation is willful, the Commissioner has the power to post a
notice summarizing the violation in an area visible to the public for up to ninety days. See id. at
(2). Anyone who removes or tampers with the notice is guilty of a misdemeanor. Id. The
Commissioner may also may assess damages upon the employer of up to $250 per day, per
employee. N.Y. LAB. LAW § 198(1-d). This amount cannot exceed $5,000 in total. Id. The
statute allows for affirmative defenses including if the employer reasonably believed in good
faith that notice under this provision was not required. See id. The remedies outlined above may
be enforced consecutively or simultaneously. Id. at (2). The employee or Commissioner has the
right to collect attorney’s fees and costs during a civil action when enforcing any court judgment.
Id. at (4). A violation of N.Y. Labor Law section 198-b, the kick-back provision, is a
misdemeanor. N.Y. LAB. LAW § 219-c(2).
F. Interagency Information Sharing
New York has created a Joint Enforcement Task Force on Employee Misclassification to
foster interagency information sharing. 9 NYCRR § 6.17. Task force members include “the
Commissioner of Labor, the Attorney General, the Commissioner of Taxation and Finance, the
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Chair of the Workers’ Compensation Board, the Workers’ Compensation Fraud Inspector
General, and the Comptroller of New York.” Id. at (2). It is charged with: facilitating
information sharing among members relating to suspected employee misclassification violation;
pooling investigative and enforcement resources; assessing whether prevention mechanisms in
New York and other jurisdictions improve prevention and enforcement efforts; identifying
significant cases that should be investigated jointly; forming joint enforcement teams to utilize
the capabilities of members; soliciting the cooperation and participation of local officials and
other agencies to establish procedures for referring cases for prosecution; working cooperatively
with federal to local social services agencies to aide vulnerable populations exploited by
employee misclassification. Id. at (4).
All agencies, departments, offices, divisions, and public authorities are required to
cooperate with the task force and provide information and assistance as the task force determines
is “reasonably necessary” to accomplish its purposes. Id. at (6). The task force is also required
to report back to the governor once a year. Id. at (5). The task force’s annual reports are
available here: https://dol.ny.gov/employer-misclassification-workers.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
New York defines an employee as a “worker who performs services for compensation
under the supervision, direction and control of an employer.” The state has several
context-specific laws and regulations relating to employee misclassification. See, e.g., N.Y. LAB.
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LAW § 862-b (addressing commercial goods transportation services); N.Y. LAB. LAW § 861-e
(addressing construction workers).
For example, the Commercial Goods Transportation Industry Fair Play Act creates a
presumption that an individual “performing commercial goods transportation services for a
commercial goods transportation contractor [is] an employee” and not an independent contractor.
N.Y. LAB. LAW § 862-b. Under this statute, an individual performing industry functions for a
contractor must be classified as an employee unless their wages are reported on a Federal Income
Tax form 1099 and they are a separate business entity which, for purposes of this section, is
defined as any sole proprietor, partnership, firm, corporation, limited liability company,
association, or other legal entity that may also be a commercial goods transportation contractor.
Id. If they are not a separate business entity, they must meet the following criteria in order to be
considered an independent contractor: they must have the ability to perform their job with little
direction or oversight, their service must be performed outside of the usual scope of the business
for which it is being performed, and they must be engaged in an independently established sector
that is similar to the service they are providing. Id.
As noted above, Executive Order No. 17 established the Joint Enforcement Task Force on
Employee Misclassification. 9 NYCRR § 6.17. It targets the improper classification of
employees as “independent contractors.” Id. The duties and powers of the task force include:
facilitating sharing among task force members relating to employee misclassification; pooling,
focusing, and targeting investigative and enforcement resources; facilitating filing of complaints
and identifying potential violators; identifying cases for investigation; establishing protocols
through which agencies can investigate jointly; and soliciting the cooperation of local district
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attorneys and other relevant agencies. Id. at (4). The task force is required to report to the
governor once a year to describe its records and accomplishments; identify legal barriers;
propose appropriate legislative, administrative, or regulatory changes; and identify mechanisms
to prevent employee misclassification. Id. at (5).
2. Claim Administration
The question whether someone is an employee or an independent contractor arises in a
host of employment law contexts, and it would be litigated within those contexts. For example, a
claim that someone is an independent contractor and thus is not entitled to the minimum wage
(which applies only to employees) would be litigated in the context of a wage claim under New
York’s minimum wage law, and administered in the manner described supra at I.A.2-4.
A commercial goods transportation contractor who willfully misclassifies an employee
may face civil and criminal penalties. N.Y. LAB. LAW § 862-d (1). Any penalties imposed by the
commissioner may be appealed to the industrial board of appeals. Id. at (9). Any penalties
imposed by the workers’ compensation board or commissioner of taxation and finance may be
appealed in the same manner as the underlying violation. Id.
3. Statute of Limitations
There is no statute of limitations specific to the Commercial Goods Transportation
Industry Fair Play Act.
4. Remedies
A commercial goods transportation contractor who willfully misclassifies an employee is
subject to a fine up to $2,500 for the first violation per misclassified employee. N.Y. LAB. LAW §
862-d(3). For each subsequent violation within a five-year period, a contractor is subject to a
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fine up to $5,000 per misclassified employee. See id. Additionally, a contractor is guilty of a
misdemeanor for the first offense and subject to imprisonment up to thirty days or fined up to
$25,000. See id. at (4). For each subsequent offense, a contractor is subject to imprisonment up
to sixty days or fined up to $50,000. Id. Some officers, shareholders, and affiliates are subject to
these penalties as well. See id. at (5), (9).
Any commercial goods transportation contractor subject to civil penalties under this
section is also subject to tax penalties. See id. at (6). Failure to pay unemployment insurance tax
will result in penalties imposed by N.Y. Labor Law section 570(3) including paying interest for
the deficiency. See id. at (6)(a). If failure to pay was due to fraud, the contractor will owe 50%
of the total amount of the deficiency plus the deficiency itself. N.Y. LAB. LAW § 570(4).
For “intentional and material understatement or concealment of payroll or failure to
secure workers’ compensation insurance, contractors will face the penalties imposed by N.Y.
CLS Work Comp section 52(d). Failure to keep true and accurate records will result in penalties
under N.Y. CLS Work Comp section 131. Lastly, failure to pay business corporate, or personal
income tax will result in penalties under New York tax law sections 685 and 1085. N.Y. CLS
TAX § 685, 1085; N.Y. LAB. LAW § 862-d(6)(c).
Acts of retaliation by an employer are subject to civil penalties under N.Y. Labor Law
section 862(d), through a private cause of action, or both. N.Y. LAB. LAW § 862-e(2).
B. Exempt and Non-Exempt Classification
1. Normative Standards
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New York law adopts and expands upon the FLSA’s exemptions from its overtime pay
requirement, which itself is an adaptation of federal law. New York exempts those employed in a
“bona fide executive, administrative, or professional capacity,” id. at § 651(5)(b), as well as:
(a) a baby sitter working on a casual basis;
(b) outside salespeople, such as door-to-door salespeople;
(c) taxi drivers;
(d) volunteers, learners, and apprentices;
(e) members of religious organizations, such as pastors;
(f) incidental work for religious organizations;
(g) work done for religious, educational, and charitable institutions if the worker
is a student;
(h) work done for religious, educational, and charitable institutions if the worker’s
earning capacity of such individual is impaired by age, physical, or mental
deficiency;
(i) summer camp workers for religious, education, or charitable institutions
working for less than three months;
(j) staff counselors at children’s camps;
(k) some university or university organization workers if the worker is a student;
(l) federal, state, and municipal government workers;
(m) some volunteers at recreational and amusement events given that the even
lasts no longer than eight consecutive days; and
(n) newspaper delivery workers.
See id.
2. Claim Administration
Employers may face civil and criminal penalties for failing to pay employees under their
exempt or non-exempt classification. N.Y. LAB. LAW § 198-a; N.Y. LAB. LAW § 197. These
procedures are described supra at I.A.2.
3. Statute of Limitations
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The statute of limitations for failing to pay the proper wage under exempt and
non-exempt classifications is the same that applies to minimum wage violations described in
section A(4). N.Y. LAB. LAW § 662.
4. Remedies
Civil and criminal penalties for failing to pay the proper wage under exempt and
non-exempt classifications are the same that apply to minimum wage violations described in
section A(4). N.Y. LAB. LAW § 662(1). These remedies are described supra at I.A.4.
III. Payroll Fraud on State Government by Government Contractors
1. Normative Standards
New York’s False Claims Act prohibits any person from knowingly presenting a false or
fraudulent claim for payment or approval to the State; to knowingly make, use, or cause to be
made or used, a false record or statement material to a false or fraudulent claim; to knowingly
make, use, or cause to be made or used, a false record or statement material to an obligation to
pay or transmit money or property to a government entity, or knowingly conceal or knowingly
and improperly avoid or decrease an obligation to pay or transmit money or property to a
government entity; or to conspire to commit one or more of the above listed violations. N.Y.
STATE FIN. LAW § 189.
2. Claim Administration
The New York Attorney General investigates suspected violations of the Act, and may
bring a civil action against any person or entity he or she believes has violated the Act. An
individual may also bring a private civil action on behalf of the individual and the State, and in
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the event that this “qui tam” action is successful, the individual may be awarded a percentage of
the funds recovered. N.Y. STATE FIN. LAW § 190.
3. Statute of Limitations
A civil action brought under this section must commence no later than 10 years after the
date on which the violation occurred. N.Y. STATE FIN. LAW § 192(1). An action is commenced
when a complaint is filed. See id.
4. Remedies
If found guilty of making a false or fraudulent claim, the court will assess a civil penalty
of at least $6,000 not to exceed $12,000 plus three times the amount of all damages which the
state or local government sustains because of the claim. N.Y. STATE FIN. LAW § 191. If the court
finds that (a) the person committing the violation turned over their information to authorities; (b)
fully cooperated with the investigation; and (c) at the time they turned over their information
regarding the violation, no legal or administrative action had commenced and they had no
knowledge of an investigation into the violation; the court may not assess more than two times
the amount of damages sustained. See id.
IV. Certification by Government Contractors of Prevailing Wage Compliance
1. Normative Standards
Article 8 of the New York Labor Law requires that “laborers, workmen or mechanics” be
paid at least the prevailing rate of wages on public works projects. N.Y. LAB. LAW § 220(2). The
fiscal officer must determine the wages to be paid to workers for public work prior to
advertisement for bids. N.Y. LAB. LAW § 220(3)(c). The contractor or subcontractor must then
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prominently display the wages to be paid at the worksite. See id. at (ii). They must also notify
all workers in writing of the prevailing rates of wages and supplements. Id.
This notification must also be provided “upon hire, with their first pay stub and every pay
stub thereafter.” Id. Additionally, the contractor or subcontractor must provide the worker with
the phone number and address for the state’s fiscal officer and also notify the worker of their
right to contact the fiscal officer if they do not receive the proper prevailing wage rate. Id.
Contractors are required to keep original payrolls accompanied by a copy of each
required notice mentioned previously. See id at (iii). In certain circumstances, if a contractor has
no regular place of business in the state, payrolls should be kept at the worksite. Id. Those with
a regular place of business must be ready to produce these payroll documents at the worksite
within 5 days if ordered by the commissioner. Id. Contractors should also submit payroll
transcripts to the state Department of Jurisdiction within 30 days of its first payroll and every 30
days thereafter. Id. The Department of Jurisdiction is required to collect and maintain these
payroll record transcripts for 5 years. Id. at (iv). The fiscal officer may also require any person
or corporation performing public work to turn over payroll records. Id. at (c).
After receiving a copy of the schedule of wages and supplements specified in the public
improvement contract, a subcontractor is required to provide their contractor or subcontractor
with a verified statement attesting that it has received and reviewed the schedule and agrees it
will pay the prevailing wages and any specified supplements. N.Y. LAB. LAW § 220-a(1). Before
any payment is made by the government, the state comptroller or applicable financial officer
must require the contractor to file every one of these verified statements. See id. at (2). These
statements must also include the amounts known by the contractor to be due and owing from
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each subcontractor or certify that the contractor has no knowledge of these amounts. Id. If the
Commissioner determines that the wages for the employees of the subcontractor have not yet
been paid, the contractor is responsible for the payment of these wages and supplements. Id.
This contractor must verify that he or she has read the statement and knows its contents. Id.
Article 9 of the New York Labor Law addresses the prevailing wage for building service
employees. It requires contractors to pay these employees at least the prevailing wage in that
locality for the “craft, trade, or occupation” of the employee. N.Y. LAB. LAW § 231(1). Building
service contracts must contain a schedule of wages for all employees and must also include a
provision obligating the employer to pay at least the prevailing wage specified. Id. at (3). The
public agency preparing or directing the building service work must retain the employee
classifications and file them with a fiscal officer along with a statement of work to be performed.
Id. at (4). The fiscal officer must then determine the “crafts, trades and occupations” for such
work and make a determination of the wages required under the contract. Id. This schedule of
wages must be included in the contract prior to its advertisement and any bids. Id. The
contractor must then prominently display the wages to be paid at the worksite by the first day of
work performed under the contract. Id. at (6).
The verified statement requirements outlined above for the general prevailing wage
statute (N.Y. LAB. LAW § 220-a) are mirrored in the special-purpose building service prevailing
wage statute; contractors and subcontractors are required to provide verified statements of
compliance, and before any payment is made by the government, the state comptroller or
applicable financial officer must require the contractor to file every one of these verified
statements. N.Y. LAB. LAW § 237.
2. Claim Administration
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Civil and criminal claims may be brought against those who fail to pay the prevailing
wage. N.Y. LAB. LAW § 220(8); § 238.
3. Statute of Limitations
After the fiscal officer files an order with a final determination of a violation, the
complainant or any other person affected has six months after the service of notice of the filing to
bring an action against the person found in violation. N.Y. LAB. LAW § 220(8).
4. Remedies
For prevailing wage violations for building service employees, the contractor or
subcontractor guilty of failing to pay adequate wages is guilty of a misdemeanor and faces a fine
of $500, imprisonment not to exceed 30 days, or both. N.Y. LAB. LAW § 238. For a second or
subsequent offense, guilty parties face a fine of $1000 and are barred from receiving funds from
the contract. See id.
Any contractor or subcontractor that participates in a public works project and willfully
fails to pay the prevailing rate of wage or supplement will be subject to the following penalties:
a. Class A misdemeanor: If the failure results in underpayments, which in the
aggregate for all workers, results in an amount less than $25,000;
b. Class E felony: If the failure results in underpayments, which in the aggregate
for all workers, results in an amount greater than $25,000;
c. Class D felony: If the failure results in underpayments, which in the aggregate
for all workers, results in an amount greater than $100,000;
d. Class C felony: If the failure results in underpayments, which in the aggregate
for all workers, results in an amount greater than $500,000.
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Any contractor or subcontractor convicted of a second offense under the previously
mentioned penalties within 5 years are barred from receiving payments due on the contract. N.Y.
LAB. LAW § 220(3)(d)(iii).
For civil actions, the complainant may receive the difference between the sum actually
paid and the amount which should have been paid together with interest. N.Y. LAB. LAW §
220(8).
When a contractor or subcontractor is found to have twice knowingly participated in a
violation of the prevailing wage law, the contractor (or its subcontractors and any closely
affiliated entities) can be declared ineligible to submit a bid on or be awarded any public work
contract or subcontract with the state, any municipal corporation or public body for a period of
five years. But if the violation involves either the falsification of payroll records or the kickback
of wages or supplements, the contractor or subcontractor is ineligible to submit a bid on or be
awarded any public work contract with the state, any municipal corporation or public body for
five years from the first violation. N.Y. LAB. LAW § 220-b(2)(b)(1).
When a contractor or subcontractor is debarred for having disregarded obligations to
employees under the federal prevailing wage statute (the Davis-Bacon Act, 40 U.S.C. § 3144),
the contractor or subcontractor, and any substantially owned-affiliated entity becomes ineligible
to submit a bid on or be awarded any public works contract with the state, any municipal
corporation, public benefit corporation or public body. 2017 N.Y. SESS. LAWS 461 (McKinney).
V. Labor Trafficking
1. Normative Standards
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In New York, an individual is guilty of labor trafficking if he or she compels or induces
someone to take part in labor or “…recruits, entices, harbors, or transports such other person by
means of intentionally” requiring that labor be performed to pay a debt, withholding important
documents, or by using force or instilling fear. N.Y. CLS PENAL § 135.35.
2. Claim Administration
Labor trafficking is a criminal issue in New York, and violations of N.Y. CLS Penal
section 135.35 are prosecuted by the state.
3. Statute of Limitations
There is no specified statute of limitations for labor trafficking. N.Y. CRIM. PROC.
30.10(2).
4. Remedies
Labor trafficking is a class D felony and imprisonment must not exceed seven years. N.Y.
CLS PENAL § 135.35; N.Y. CLS PENAL § 70.00. There is currently no civil right of action;
however, some monetary relief is available for victims of labor trafficking through civil
forfeiture. N.Y. C.P.L.R. § 1311.
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I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
With limited occupational exceptions, see OR. REV. STAT. ANN. § 653.020, Oregon law
establishes a minimum wage applicable in each year through 2023, and then establishes a
mechanism for the amount to be adjusted annually thereafter to account for inflation. OR. REV.
STAT. ANN. § 653.025. The current minimum wage is $12.75. Id. An employer cannot employ
or agree to employ an individual at rates lower than the statutory minimum wage. OR. REV. STAT.
ANN. § 653.025(1). Tips may not be included in determining the required minimum wage. OR.
REV. STAT. ANN. § 653.035(3). The minimum wage requirement applies to all employers
regardless of size. OR. REV. STAT. ANN. § 653.010(3). For “student learners,” the Commissioner
of the Bureau of Labor and Industries (Commissioner) has the power to specify a wage rate
lower than the otherwise applicable minimum wage when requiring the employer to pay the
minimum wage would substantially curtail employment. OR. REV. STAT. A NN. § 653.030.
2. Claim Administration
An individual aggrieved by a violation of Oregon’s minimum wage laws can file an
action in court, or pursue a complaint before the Commissioner. OR. REV. STAT. ANN. § 653.055.
If the individual chooses the latter approach, the Commissioner may initiate suits against the
employer to recover damages for the individual and to prevent future violations. Id. Multiple
complaints may be addressed in a single proceeding. OR. REV. STAT. A NN. § 653.055(3).
Oregon
3. Statute of Limitations
No limitations period is expressly specified for wage claims in Oregon. The applicable
residual limitations period is six years from the date on which the wages were due. See OR. REV.
STAT. A NN. § 12.080(4); see also Fullerton v. Lamm, 177 Or. 655, 163 P.2d 941 (1945).
4. Remedies
Where the statute has been violated, the employer is liable for the full amount of wages
owed, civil penalties, and reasonable attorney’s fees. OR. REV. STAT. ANN. § 653.055; OR. REV.
STAT. ANN. § 652.200(2). If an employer willfully fails to pay wages to an employee whose
employment has ended, then, as a penalty, the employee wages “continue from the due date . . .
at the same hourly rate . . . until paid or until action therefore is commenced.” OR. REV. STAT.
ANN. § 652.150(1). A violation may also be punished as a misdemeanor. OR. REV. STAT. ANN. §
653.991. In addition, the Commissioner of the Bureau of Labor and Industries may assess a civil
penalty not to exceed $1,000 against any person that willfully violates the statute or any rule
promulgated thereunder. OR. REV. STAT. A NN. § 653.256.
B. Overtime Violations
1. Normative Standards
Oregon declares that the state’s public policy is served by ensuring that individuals do not
work…“for longer hours or days of service than is consistent with the person’s health and
physical well-being[.]” OR. REV. STAT. ANN. § 652.010. Thus, the law specifies certain
maximum hours an employee might work in manufacturing and industrial settings. See, e.g., id.;
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OR. REV. STAT ANN. § 652.020 (establishing, with exceptions, certain maximum hours in
manufacturing plants, planing mills, shingle mills, and logging camps).
For occupations outside these industrial settings, Oregon allows the Commissioner to
adopt rules prescribing “minimum meal periods and rest periods, and maximum hours of work,
but not less than eight hours per day or 40 hours per workweek; however, after 40 hours of work
in one workweek overtime may be paid, but in no case at a rate higher than one and one-half
times the regular rate of pay of the employees when computed without benefit of commissions,
overrides, spiffs and similar benefits.” OR. REV. STAT. ANN. § 653.261; see also OR. REV. STAT.
ANN. § 652.020. The Commissioner has done so in regulations that largely parallel the Fair
Labor Standards Act (FLSA). See OR. A DMIN. R. 839-020-0030.
When employed by a contractor for a state project, the worker may not work more than
ten hours in one day or forty hours in one week unless absolutely required by public policy. OR.
REV. STAT. ANN. § 279C.540(1). This requirement does not apply when an exemption from the
FLSA applies. OR. A DMIN. R. 839-020-0125(3).
2. Claim Administration
To address a violation, an employee may file a complaint with the Commissioner or bring
a civil action. OR. REV. STAT. ANN. § 652.035(1). Upon receiving a complaint, the
Commissioner must investigate, provide for an administrative proceeding, and (if warranted)
make a complaint in criminal court. OR. REV. STAT. ANN. § 652.330. The worker filing a
complaint with the Commissioner is not a party to any court action brought by the
Commissioner. OR. REV. STAT. A NN. § 652.330.
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In an administrative proceeding, the Commissioner may join any number of wage claims
by the same employer. OR. REV. STAT. ANN. § 652.332(1). The Commissioner may also reassign
a wage claim to the labor bureau of another state if the employee has moved to that state and
consents to the reassignment. OR. REV. STAT. A NN. § 652.430.
3. Statute of Limitations
Oregon explicitly distinguishes between “overtime or premium pay” cases and minimum
wage cases for limitations purposes. As noted above, minimum wage cases are governed by the
state’s six year residual limitations period. See OR. REV. STAT. ANN. § 12.080(4). Overtime cases
are expressly governed by the two year limitations period in OR. REV. STAT. A NN. § 12.110(3).
If employed by the state through a contractor, a worker is foreclosed from pursuing an
overtime violation unless the claim is filed with the contractor within ninety days from the
completion of the contract, so long as the contractor has posted a circular in a prominent place
alongside the door of the timekeepers office or similarly obvious location identifying the relevant
Oregon code sections. OR. REV. STAT. A NN. § 279C.545.
4. Remedies
Whether before the Commission or in court, a worker who proves an overtime violation
is entitled to “the full amount of the wages” less wages actually paid and up to a 100% penalty.
OR. REV. STAT. ANN. § 653.055(1); OR. REV. STAT. ANN. § 652.150. The Commissioner may also
assess an additional civil penalty of one thousand dollars. OR. REV. STAT. ANN. § 652.035(2); see
also OR. REV. STAT. ANN. § 652.900(1). Fifty percent of the penalty is waived if the employer
pays the full remedy within fourteen days of the order. OR. REV. STAT. ANN. § 652.035(3). Upon
a court judgment, an employee may also recover costs and reasonable attorney’s fees. OR. REV.
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STAT. ANN. § 652.560. All sums collected as penalties by the state shall be applied to recovering
costs. OR. REV. STAT. ANN. § 652.900(3). Any remainder is paid into the State Treasury and may
be used for general governmental expenses. OR. REV. STAT. ANN. § 652.900(3). Lastly, a
violation is a Class A misdemeanor. OR. REV. STAT. ANN. § 652.990(3).
C. Off-the-clock Violations
1. Normative Standards
An employer must compensate each employee for all hours worked, which includes both
time actually worked and time of authorized attendance. OR. REV. STAT. ANN. § 653.010(11); OR.
ADMIN. R. 839-020-0040(19). “Hours worked” includes all hours for which an employee is on
the employer’s premises, on duty, or at a prescribed workplace. OR. ADMIN. R. 839-020-0040.
Furthermore, an employer must pay for employee attendance at lectures, trainings, and meetings
unless four criteria are met:
(1) attendance is outside of the employer’s regular working hours
(2) attendance is voluntary
(3) the lecture, course, or meeting is not directly related to the employer’s job, and
(4) the employee does not perform any productive work while in attendance.
OR. ADMIN. R. 839-020-0040(1). If these criteria are not met, an employer must compensate an
employee’s attendance at lectures, trainings, and meetings. Time worked may include travel,
although travel between home and work is excluded. OR. A DMIN. R. 839-020-0045.
In addition, Oregon requires employers to provide employees with at least 30 minutes of
uninterrupted break time for each six hours worked, during which the employee must be relieved
of all duties. If an employee is not fully removed from his or her duties during this break period,
the employer must pay for the meal period. OR. ADMIN. R. 839-020-0050. As with the Fair
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Labor Standards Act, preparatory and concluding activities that are integral to the employee’s
work are also included in time worked. OR. ADMIN. R. 839-020-0043. Waiting time must also be
compensated if it is integral to the employee’s work. OR. A DMIN. R. 839-020-0041.
2. Claim Administration, Statute of Limitations, and Remedies
As with a minimum wage claim, an individual with an overtime claim can file an action
in court or pursue the remedies specified above at I.A.2,4. The action follows the same judicial
procedures as a minimum wage claim. Overtime claims are governed by the limitations period
discussed in I.B.2.
D. Illegal Deductions
1. Normative Standards
An employer is not permitted to withhold or deduct money from an employee’s wages
unless required to do so by law or authorized by the employee. OR. REV. STAT. ANN. §
652.610(3)(a)-(b). When an employer deducts a sum from an employee’s wages with
authorization, the employer shall pay the deducted amount to the authorized recipient within
seven days. OR. REV. STAT. ANN. § 652.610(4). Failure to pay as required renders the deduction
unlawful. OR. REV. STAT. ANN. § 652.610(4). Oregon further specifies that deductions from
employee wages shall not benefit the employer. OR. REV. STAT. ANN. § 652.720(1). For
example, an employer cannot apply retained wages to the cost of employee medical care
addressing injuries sustained during the course of employment. OR. REV. STAT. ANN. §
652.720(2). Funds can be deducted from retained wages and placed in a trust to provide medical
care. OR. REV. STAT. ANN. § 652.710(1). A violation of these prohibitions is a Class C
misdemeanor. OR. REV. STAT. A NN. § 652.990.
2. Claim Administration, Statute of Limitations, and Remedies
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A deduction claim follows the same administrative and judicial procedures, limitations
period, and remedies discussed for minimum wage violations. See supra at sections I.A.2-4.
E. Paystub Provisions
1. Normative Standards
All employers must provide their employees with an itemized statement of wages. OR.
REV. STAT. ANN. § 652.620(1)(a). The statement must show the date of payment, dates worked,
rates of pay, gross and net wages, and the amount and purpose of each deduction. OR. REV. STAT.
ANN. § 652.610(1)(b). Further required information includes the employee’s name, the
company’s name, the employer’s phone number and address, allowances, and overtime
information. See also OR. A DMIN. R. 839-020-0012.
2. Claim Administration and Remedies
The Commissioner addresses potential violations of this requirement. OR. REV. STAT.
ANN. § 652.900. The Commissioner may calculate a civil penalty for violations. OR. REV. STAT.
ANN. § 652.900.
An employee may also bring a civil action. OR. REV. STAT. ANN. § 652.615. If successful
in such an action, the employee receives “actual damages” or $200, whichever is greater. OR.
REV. STAT. ANN. § 652.615. The court may also award costs and reasonable attorney’s fees. OR.
REV. STAT. A NN. § 652.615.
F. Interagency Information Sharing
Oregon has established an Interagency Compliance Network by statute. OR. REV. STAT.
ANN. § 670.700. The purpose is to establish consistent classification of workers and ensure
compliance with wage and hour standards. Id. The member agencies have to prepare a report
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every two years. OR. REV. STAT. ANN. § 670.705. The Network’s website has extensive
explanations of various topics of study, including the distinction between independent
contractors and employees, discussed immediately below. These Network documents are
accessible at https://www.oregon.gov/ic/Support-and-Resources/Pages/About.aspx.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
Oregon uses a variety of tests for determining who is a contractor and who is an
employee, depending on the statutory regime at issue. For purposes of state employment
discrimination laws for example, Oregon uses a right-to-control test to determine if workers are
employees. OR. REV. STAT. ANN. § 659A.001(4)(a) (‘“Employer’ means any person who in this
state, directly or through an agent, engages or uses the personal service of one or more
employees, reserving the right to control the means by which such service is or will be
performed”).
Oregon state courts are divided over whether this test applies in the context of wage and
hour claims. Compare Dinicola v. State, Dep't of Revenue, 246 Or. App. 526, 544, 268 P.3d 632,
642 (2011) (Oregon courts “use[] the common-law right of control test in deciding whether a
putative employee is in fact an independent contractor and thus exempt from the coverage of the
Oregon statutes”); with Cejas Com. Interiors, Inc. v. Torres-Lizama, 260 Or. App. 87, 100, 316
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P.3d 389, 396 (2013) (rejecting the right-to-control test, and instead have adopted the FLSA’s
“economic realities” test). Id. Courts refusing to apply the right-to-control test apply the FLSA’s
“economic realities” test. Cejas Com. Interiors, Inc, supra. Under that test, the court
“determine[s] whether, “as a matter of economic reality, [the worker] is dependent on the
[putative employer].” Id. at 397-98. The court focuses on the relative “integration of the
workers into the employer’s production process and the lack of any independent workers’
business organization.” Id. at 398.
The test for determining “independent contractor” status for purposes of the Department
of Revenue, the Employment Department, the Construction Contractors Board, and the
Landscape Contractors Board is found at OR. REV. STAT. ANN. § 670.600. Under this test, an
independent contractor is a person who provides services for remuneration and meets four
statutory requirements. OR. REV. STAT. ANN. § 670.600(2); OR. REV. STAT. ANN. § 657.040. The
requirements are that the worker (1) is free from direction and control over the means of
providing service, (2) is customarily engaged in independent business, (3) if the provided service
requires a license, is licensed, and (4) is responsible for obtaining additional licenses to provide
the service. OR. REV. STAT. ANN. § 670.600(2). For these purposes, a person is considered to be
customarily engaged in an independently established business if any three of the following
requirements are met:
(a) The person maintains a business location:
(A) That is separate from the business or work location of the person for
whom the services are provided; or
(B) That is in a portion of the person's residence and that portion is used
primarily for the business.
(b) The person bears the risk of loss related to the business or the provision of
services as shown by factors such as:
(A) The person enters into fixed-price contracts;
(B) The person is required to correct defective work;
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(C) The person warrants the services provided; or
(D) The person negotiates indemnification agreements or purchases
liability insurance, performance bonds or errors and omissions insurance.
and
(c) The person provides contracted services for two or more different persons
within a 12-month period, or the person routinely engages in business advertising,
solicitation or other marketing efforts reasonably calculated to obtain new
contracts to provide similar services.
OR. REV. STAT. A NN. § 670.600.
2. Claim Administration
A claim that an individual has been improperly classified as an independent contractor
may be entertained in court or before the Commissioner in an administrative proceeding, or both,
depending on the statutory context in which the issue arises.
3. Statute of Limitations
For wage and hour claims, the limitations period will be either the minimum wage period
discussed supra at I.A.3, or the overtime period discussed at I.B.3.
With respect to state employment discrimination laws, a complaint must be filed with the
Commissioner “no later than one year after the alleged unlawful practice.” OR. REV. STAT. ANN.
§ 659A.820(2). A complaint alleging discrimination of a protected class “must be filed no later
than five years after the occurrence of the alleged unlawful employment practice.” OR. REV.
STAT. A NN. § 659A.820(3).
In relation to unemployment insurance, claims must “be filed in accordance with such
regulations as the Director of the Employment Department may prescribe.” OR. REV. STAT. ANN.
§ 657.260(1).
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For worker’s compensation, a claim of civil negligence due to a worker’s compensation
claim being denied “must be commenced within the later of two years from the date of injury or
180 days from the date the order affirming that the claim is not compensable . . . becomes final.”
OR. REV. STAT. A NN. § 656.019(2)(a).
4. Remedies
There is no penalty for misclassification alone, but there will be consequences under
various statutory schemes. There may be, for example, penalties for failure to pay all
employment taxes as a result of the misclassification, OR. REV. STAT. ANN. § 657.457(1), or for an
employer skirting wage and hour requirements on the false pretense that the individual involved
is not an employee. In the latter context, the remedies are the same as those discussed above for
minimum wage and overtime violations, as discussed supra. An employer is also liable for back
taxes and late fees when the employer fails to withhold taxes as a result of a misclassification.
OR. REV. STAT. A NN. § 316.197.
B. Exempt/Non-Exempt Classification
1. Normative Standards
As with most states, Oregon exempts a wide and disparate collection of occupations from
overtime coverage, including certain agricultural workers, domestic service workers, outside
sales people, and taxicab operators. The most important (or most frequently relied-upon)
exemptions, however, are for those employed in a bona fide executive, administrative, or
professional capacity. OR. REV. STAT. ANN. § 653.020(3), (6). An individual is an executive
employee if he or she manages a recognized department, directs the work of other employees,
and has discretion to hire and fire other employees. OR. ADMIN. R. 839-020-0005(1)(a)-(c). The
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test for an administrative employee looks at the employee’s administrative functions, discretion
to use independent judgment, and salary. OR. ADMIN. R. 839-020-0005(2)(a)-(d). An individual
is an exempt “professional” employee if his or her work requires “knowledge of an advanced
type in a field of science or learning customarily acquired by a prolonged course of specialized
intellectual instruction and study.” OR. A DMIN. R. 839-020-0005(3).
2. Claim Administration, Statute of Limitations, and Remedies.
An individual with a misclassification claim would have to follow the procedures, abide
the limitations period, and seek the remedies applicable under the statutory scheme underlying
the claim. See supra sections I.A and I.B.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
A person commits the crime of “public investment fraud” if he or she knowingly makes a
false statement with the purpose of “influencing in any way the action of the State Treasury.”
OR. REV. STAT. ANN. § 162.117(1). The crime is a Class B felony. OR. REV. STAT. ANN. §
162.117(2).
Similarly, the Oregon False Claims Act, OR. REV. STAT. ANN. § 180.755, makes it
unlawful to present to the state or any government agency for payment or approval, or cause to
be presented for payment or approval, a claim that the person knows is a false claim.
B. Claim Administration
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Unlike the federal False Claims Act, Oregon False Claims Act cases can only be brought
by the Attorney General. In such an action, the fact that a public agency has not paid any
amounts to a person as a result of a violation of the Act or has not suffered any injury by reason
of a violation is not a defense in an action under this section. Id., § 180.760(3). Unlike the
federal False Claims Act, the Oregon Act does not have a qui tam provision or provide private
plaintiffs with a mechanism to sue for false claims.
C. Statute of Limitations
A False Claims Act claim must be brought by the Attorney General within three years of
discovering the violation, but in no event more than ten years after the date on which the
violation is committed. OR. REV. STAT. A NN. § 180.765.
D. Remedies
The court is required to state all damages arising from a Oregon False Claims Act
violation. In addition, the court awards the state a penalty equal to the greater of $10,000 for
each violation or an amount equal to twice the amount of damages incurred for each violation.
The court is entitled to mitigate the size of the penalty based on any fine or penalty already
assessed against the defendant for substantially the same acts or omissions in a case filed under
the federal False Claims Act, 31 U.S.C. 3729, et seq. OR. REV. STAT. A NN. § 180.760.
IV. Certification by Government Contractors of Prevailing Wage Compliance
A. Normative Standards
Contractors and subcontractors are obligated to pay the “prevailing rate” of pay on every
“public works” project. See OR LEGIS 104 (2021), 2021 Oregon Laws Ch. 104 (S.B. 493); see
also OR. REV. STAT. ANN. § 279C.815. Every contractor and subcontractor must file a certified
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statement with the public entity involved in the project showing that it has paid the prevailing
wage to each employee working on the project. OR. REV. STAT. ANN. § 279C.845(1); OR. REV.
STAT. ANN. § 658.440(1)(i). The certified statements must completely reflect the contractor’s
payroll records. OR. REV. STAT. ANN. § 279C.845(3). Each contractor is also required to preserve
the certified statements for three years. OR. REV. STAT. A NN. § 279C.845(5).
If the Commissioner finds evidence suggesting a prevailing wage violation, the affected
contractor or subcontractor must send a certified copy of the payroll to the Commissioner. OR.
REV. STAT. ANN. § 297C.860(5). If a subcontractor does not file certified statements, the
contractor is required to keep twenty-five percent of the subcontractor’s earnings until the
certified statements have been filed. OR. REV. STAT. ANN. § 279C.845(8).
B. Claim Administration
The prevailing wage law is administered by the Commissioner. To determine whether the
prevailing wage is being paid, the Commissioner may enter a contractor’s office and gather
information. OR. REV. STAT. ANN. § 279C.850(1). Every contractor or subcontractor performing
work on public works shall make payroll and other records available to the Commissioner. OR.
REV. STAT. ANN. § 279C.850(2). If there is a failure to pay the prevailing wage, the
Commissioner may initiate legal proceedings. OR. REV. STAT. ANN. § 279C.850(4). Prevailing
wage rate violations by employers are wage claims subject to civil wage processes discussed
above and can be initiated by employees. OR. REV. STAT. A NN. § 279C.870.
C. Statute of Limitations
Prevailing wage rate violations by employers are subject to wage claims initiated by
employees for up to six years from the date of the violation. OR. REV. STAT. A NN. 12.080(1).
D. Remedies
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A contractor or subcontractor or contractor’s or subcontractor’s surety that violates the
provisions of OR. REV. STAT. ANN. § 279C.840 is liable to the workers affected in the amount of
the workers' unpaid minimum wages, including all fringe benefits, and in an additional amount
equal to the unpaid wages as liquidated damages. OR. REV. STAT. A NN. § 279C.855.
If the contractor or subcontractor intentionally failed to pay the prevailing wage, the
contractor or subcontractor may not receive a public works contract for three years. OR. REV.
STAT. ANN. § 297C.860(1)(a). The Commissioner is obligated to debar any contractor or
subcontractor for a period of three years if he or she finds:
(1) That contractor or subcontractor intentionally failed or refused to pay the
prevailing rate of wage to workers employed upon public works;
(2) The contractor failed to pay to the contractor's employees amounts required
and a surety or another person paid the amounts on the contractor's behalf;
(3) The subcontractor failed to pay to the subcontractor’s employees amounts
required and the contractor, a surety or another person paid the amounts on the
subcontractor’s behalf;
(4) The contractor or subcontractor intentionally failed or refused to post the
prevailing rates of wage as required; or
(4) The contractor or subcontractor intentionally falsified information in the
certified statements the contractor or subcontractor.
OR. REV. STAT. A NN. § 279C.860.
This penalty may also be imposed if the contractor or subcontractor falsified information
in the certified statements. OR. REV. STAT. ANN. § 279C.860(1)(e). For good cause, the
Commissioner may remove a contractor’s ineligibility for public works contracts. OR. REV. STAT.
ANN. § 297C.860(4). Lastly, the Commissioner may recover the costs for initiating a legal
proceeding. OR. REV. STAT. ANN. § 279C.850(4). On public contracts, employees of a contractor
who commits a willful violation due to a willful falsification of payroll records, a contractor is
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liable for the unpaid wages and twice the amount of unpaid wages as damages. OR. REV. STAT.
ANN. § 279C.540(9).
V. Labor Trafficking
Apart from the state’s statute on involuntary servitude, Oregon has no statutes dealing
with labor trafficking. In 2020, however, the State Attorney General announced the formation of
a task force to study the problem and propose new legislation. See
https://www.doj.state.or.us/crime-victims/advisory-committees-task-forces/trafficking-interventi
on-advisory-committee/.
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I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
Currently, the minimum wage in Pennsylvania is set at $7.25/hour. 43 PA. STAT. ANN. §
333.104. Pennsylvania also provides that if the minimum wage set forth in the Fair Labor
Standards Act (FLSA) is increased above the minimum wage specified by § 333.104, even for
employees not otherwise covered by Pennsylvania law, the higher federal amount prevails. Id.
The caveats are that employees who make at least $30/month in tips can be paid a wage
of $2.83/hour plus a “tip credit” of a maximum $4.42/hour, so employees make at least
$7.25/hour. Employees whose earning capacity is impaired by physical or mental deficiency or
injury may be paid less than the minimum wage if the employer receives a license specifying an
appropriate wage rate from either the state’s Secretary of Labor or from the federal Secretary of
Labor. 43 PA. STAT. A NN. § 333.104(d).
Regular paydays must be designated in advance by employers. All wages (other than
fringe benefits and wage supplements), earned in any pay period shall be due and payable
(1) within the number of days after the expiration of [the] pay period as provided
in a written contract of employment…;
(2) if not so specified, within the standard time lapse customary in the trade; or
(3) within 15 days from the end of such pay period.
43 PA. STAT. A NN. § 260.3(a).
Pennsylvania law exempts many types of workers from its minimum wage and overtime
provisions. Most of these exemptions mirror the FLSA, but there are some exemptions under
Pennsylvania
Pennsylvania law that do not exist under the FLSA, and some exemptions exist under the FLSA
but not under Pennsylvania law. Compare 29 U.S.C.S. § 213(a) and 43 PA. STAT. A NN. §
333.105(a). For example, Pennsylvania minimum wage and overtime exempts:
(1) Educational, charitable, religious, or nonprofit organization workers;
(2) Employees not subject to civil service laws who hold elective office or who
work for someone who does; and
(3) Those who work in connection with the publication of small, local, weekly,
semiweekly, or daily newspapers.
43 PA. STAT. A NN. § 333.105(a).
2. Claim Administration
Any employee or group of employees, labor organization or any party to whom any type of
wages is payable may institute and maintain an action in any court of competent jurisdiction. 43
PA. STAT. A NN. § 260.9a(a)-(b).
Alternatively, an employee or group of employees may inform the Secretary of Labor and
Industry of a claim for unpaid wages, and the Secretary, in his or her discretion, can then bring a
claim for these unpaid wages on behalf of the employee(s). 43 PA. STAT. A NN. § 260.8.
If the Secretary determines that wages have not been paid, he or she must, on the request
of the employee, labor organization, or other party involved, take an assignment in trust of the
claim. The Secretary then has the power (but not the obligation) to settle and adjust any unpaid
wage claim to the same extent as might the assigning party. 43 PA. STAT. A NN. § 260.9a(c)-(e).
If an employee or group of employees informs the Secretary of an unpaid wage claim, the
Secretary must inform the employer by certified mail, unless the claim appears to be frivolous.
If the employer (or former employer) does not pay the claim or provide a satisfactory
explanation for failure to pay the claim within 10 days, the employer is liable for a penalty of
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10% of the unpaid wages found to be due, to be paid to the Secretary. The Secretary then has a
cause of action for this penalty, which may or may not be brought independently of the unpaid
wages claim. 43 PA. STAT. A NN. § 260.9a(c).
3. Statute of Limitations
The limitations period on wage claims is three years from the day wages were due and
payable for all actions, whether the action is brought by the Secretary or by private party. 43 PA.
STAT. A NN. § 260.9a(g).
4. Remedies
If an employer pays or agrees to pay an employee less than the applicable minimum wage
and is convicted in summary proceeding, (whether through the Secretary or independently), the
employer must pay a fine of $75-$300, be imprisoned for 10-60 days, or both. Each week in
which an employee is underpaid is considered a separate offense. 43 PA. STAT. ANN. §
333.112(b). In addition, any employer that does not pay all wages due to its employees on
regular paydays is guilty of a summary offense and, upon conviction, shall be punished by a fine
of up to $300 or by imprisonment for up to 90 days, or both. 43 PA. STAT. A NN. § 260.11a(b).
If an employee has not received compensation as required by the statute, he or she can
recover the minimum wage minus the amount actually paid, plus costs and reasonable attorney’s
fees as determined by the court, regardless of whether the claim goes through the Secretary. 43
PA. STAT. ANN. § 260.9a(f), 43 PA. STAT. ANN. § 333.113. Where wages remain unpaid for thirty
days beyond the regularly scheduled payday, or, in the case where no regularly scheduled payday
is applicable, for sixty days beyond the filing by the employee of a proper claim, or where the
shortage exceeds 5% of the gross wages payable on any two regularly scheduled paydays in the
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same calendar quarter, and no good faith contest or dispute of any wage claim including the good
faith assertion of a right of set-off or counter-claim exists accounting for such non-payment, the
employee is entitled to recover as liquidated damages an amount equal 25% of the total amount
of wages due, or $500, whichever is greater. 43 PA. STAT. A NN. § 260.10.
B. Overtime Violations
1. Normative Standards
Employees must be paid 1.5 times their regular rate for hours worked beyond 40 hours
per week. Pennsylvania law adopts the FLSA’s definition of “regular rate” (excluding gifts, paid
vacation, retirement contributions, etc.), with the exception that stock options and stock
appreciation rights are not excluded from employee pay under Pennsylvania law, but are under
the FLSA. Compare 29 U.S.C.S. § 207(e) and 34 PA. CODE § 231.43.
In addition to the previously discussed exemptions which apply to both minimum wage
and overtime provisions, Pennsylvania law specifies some exemptions that only apply to
overtime law. These include seamen; salesmen, partsmen, and mechanics primarily engaged in
selling and servicing automobiles, trailers, trucks, farm implements, or aircraft; taxicab drivers;
and employees in movie theaters.
All of Pennsylvania’s overtime exemptions are also exemptions under the FLSA, but the
converse is not true; there are several types of workers exempted under the FLSA who are not
exempted under Pennsylvania law. These include but are not limited to those involved in
catching, taking, propagating, harvesting, cultivating, or farming of any kind of fish, shellfish,
crustacea, sponges, seaweeds, or other aquatic forms of animal and vegetable life; criminal
investigators; Border Patrol agents; and minor league baseball players.
2. Claim Administration
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Any employee or group of employees, labor organization or party to whom any type of
wages is payable may institute and maintain an action in any court of competent jurisdiction. 43
PA. STAT. ANN. § 260.9a(a)-(b). Alternatively, an employee or group of employees may inform
the Secretary of Labor and Industry of a claim for unpaid wages. The Secretary has the right to
investigate claims of unpaid wages and, if he or she determines that they have not been paid, he
or she is required, after a request by the employee, labor organization, or other party making the
claim, take an assignment in trust of the claim. The Secretary then has the power to settle and
adjust any unpaid wage claim to the same extent as might the assigning party. 43 PA. STAT. ANN.
§ 260.8; 43 PA. STAT. ANN. 260.9a(c)-(e). If an employee or group of employees informs the
Secretary of an unpaid wage claim, the Secretary must inform the employer by certified mail,
unless the claim appears to be frivolous. If the employer (or former employer) does not pay the
claim or provide a satisfactory explanation for failure to pay the claim within 10 days, the
employer is liable for a penalty of 10% of the claim found to be due. The Secretary then has a
cause of action for this penalty, which may or may not be brought independently of the unpaid
wages claim. 43 PA. STAT. A NN. § 260.9a(c).
3. Statute of Limitations
The limitation period is three years from the day wages were due and payable. 43 PA.
STAT. A NN. § 260.9a(g).
4. Remedies
If an employer is convicted of paying or agreeing to pay an employee less than the
applicable rate, the employer will be fined $75-$300, be imprisoned for 10-60 days, or both.
Each week in which an employee is underpaid is considered a separate offense. 43 PA. STAT.
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ANN. § 333.112(b). In addition, any employer who fails to pay all wages due on the regularly
established payday is guilty of a summary offense and, upon conviction, will be punished by a
fine of up to $300 or by imprisonment for up to 90 days, or both. 43 PA. STAT. ANN. §
260.11a(b).
If an employee has been underpaid, he or she can recover the amount of wages due, plus
costs and reasonable attorney’s fees (as determined by the court), regardless of whether the claim
is brought by the Secretary or by the underpaid employee, labor organization, or other party. 43
PA. STAT. A NN. § 260.9a(b), (e)-(f), 43 PA. STAT. ANN. § 333.113.
If wages remain unpaid for 30 days beyond payday (or 60 days after filing a claim, if no
payday applies), or if the shortage in wages exceeds 5% of gross wages due in two paydays in
the same quarter, and there is no good-faith dispute about the amount due, an employee is
entitled to liquidated damages of 25% the amount of wages due or $500, whichever is greater.
43 PA. STAT. A NN. § 260.10.
C. Off-the-clock Violations
1. Normative Standards
Pennsylvania law requires that all “hours worked” be compensated, 34 PA. CODE §231.21,
and defines that phrase to mean “time during which an employee is required by the employer to
be on the premises of the employer, to be on duty or to be at the prescribed work place, time
spent in traveling as part of the duties of the employee during normal working hours and time
during which an employee is employed or permitted to work. . . .” 34 PA. CODE §§ 231.1(b).
Work time, however, excludes meal times, unless the employee is required or permitted to work
during that time. Id. According to a Pennsylvania Superior Court case, compensated time can
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include time spent donning, doffing, and sanitizing equipment. Lugo v. Farmers Pride, Inc.,
2009 Pa. Super. 5, 967 A.2d 963, 977. Time spent on the premises for an employee’s
convenience is also not included. 34 PA. CODE §§ 231.1.
2. Claim Administration
Any employee or group of employees, labor organization or party to whom any type of
wages is payable (including for off-the-clock violations) may institute and maintain an action in
any court of competent jurisdiction. 43 PA. STAT. ANN. § 260.9a(a)-(b).
Alternatively, an employee or group of employees may inform the Secretary of Labor and
Industry of a claim for unpaid wages. The Secretary has the right to investigate claims of unpaid
wages and, if he or she determines that due wages have not been paid, he or she must, on the
request of the employee, labor organization, or other party involved, take an assignment in trust
of the claim. The Secretary then has the power to settle and adjust the unpaid wage claim to the
same extent as might the assigning party. 43 PA. STAT. ANN. § 260.8, 260.9a(c)-(e). If an
employee or group of employees informs the Secretary of an unpaid wage claim, the Secretary
must inform the employer by certified mail, unless the claim appears to be frivolous. If the
employer (or former employer) does not pay the claim or provide a satisfactory explanation for
failure to pay the claim within 10 days, the employer is liable for a penalty of 10% of the claim
found to be due. The Secretary then has a cause of action for this penalty, which may or may not
be brought independently of the unpaid wages claim. 43 PA. STAT. ANN. § 260.9a(c). 34 PA.
CODE §§ 231.1, 231.21.
3. Statute of Limitations
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The limitations period is three years from the day the wages were due. 43 PA. STAT. ANN.
§ 260.9a(g).
4. Remedies
Any employer that is convicted of committing an off-the-clock violation must pay a fine
of $100-$500. Each day of noncompliance is a separate offense. 34 PA. CODE § 231.21; 43 PA.
STAT. ANN. § 333.112(c). In addition to this, any employer who does not pay all wages due to his
employees on regular paydays is guilty of a summary offense and, upon conviction, shall be
punished by a fine of up to $300 or by imprisonment for up to 90 days, or both. 43 PA. STAT.
ANN. § 260.11a(b).
If an employee has been unpaid for hours worked, they can recover minimum wage for
the time worked, plus costs and reasonable attorney’s fees as determined by the court, regardless
of whether the claim goes through the Secretary or not. 43 PA. STAT. ANN. § 260.9a(b), (e)-(f); 43
PA. STAT. A NN. § 333.113.
If wages remain unpaid for 30 days beyond payday (or 60 days after filing a claim, if no
payday applies), or if shortages in wages exceed 5% gross wages in two paydays in the same
quarter, and there is no good-faith dispute, an employee is entitled to liquidated damages of 25%
the amount of wages due or $500, whichever is greater. 43 PA. STAT. A NN. § 260.10.
D. Illegal Deductions
1. Normative Standards
Rather than specifying unauthorized deductions, Pennsylvania law provides a list of
authorized deductions and states that any other deductions are illegal. 34 PA. CODE § 9.1. The
authorized deductions are:
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(1) Contributions to and recovery of overpayment under employee welfare and
pension plans subject to Federal Welfare and Pension Plans Disclosure Act;
(2) Contributions authorized in writing or by collective bargaining agreement for
employee welfare and pension plans not subject to Federal Welfare and Pension
Plans Disclosure Act;
(3) Deductions authorized in writing for the recovery of overpayments to
employee welfare and pension plans not subject to the Federal Welfare and
Pension Plans Disclosure Act;
(4) Deductions authorized in writing or by collective bargaining agreement for
company-operated thrift plans or stock option purchase plans;
(5) Deductions authorized in writing for payment into employee personal savings
accounts, like payments to a credit union or purchase of US Government bonds;
(6) Contributions authorized in writing for charitable purposes
Contributions authorized in writing for local area development projects;
(7) Deductions provided by law, including for Social Security, withholding for
taxes and court orders;
(8) Labor organization charges, as authorized by law;
(9) Deductions for repayment to the employer of loans;
(10) Deductions for purchase or replacement by employer of goods, wares,
merchandise, etc. if authorized by employee in writing or in collective bargaining
agreement;
(11) Deductions for purchases by employee for his convenience of goods, wares,
merchandise, etc. if authorized by employee in writing;
(12) Other deductions authorized in writing by employee if deemed proper by
Department of Labor and Industry;
(13) Deductions for lodging are allowed, but only if the lodging provides
reasonable space, privacy, sanitation, heat, light, and ventilation; and
(14) Deductions for expenses or charges required or authorized by an employer
“in connection with the employee's performance of the duties assigned by the
employer,” but not if they would reduce the employee’s wages to below minimum
wage.
34 PA. CODE § 232.22; 34 PA. CODE § 9.2.
2. Claim Administration
Any employee or group of employees, labor organization or party to whom any type of
wages is payable, including for illegal deductions, may institute and maintain an action in any
court of competent jurisdiction. 43 PA. STAT. A NN. § 260.9a(a)-(b); 34 PA. CODE § 9.3.
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Alternately, an employee or group of employees may inform the Secretary of Labor and
Industry of a claim for unpaid wages, including for illegal deductions. If the Secretary
determines that due wages have not been paid, he or she shall, upon the request of the employee,
labor organization, or other party involved take an assignment in trust of the claim. The
Secretary then has the power to settle and adjust any unpaid wage claim to the same extent as
might the assigning party. 43 PA. STAT. A NN. § 260.9a(c)-(e); 34 PA. CODE § 9.3.
If an employee or group of employees informs the Secretary of an unpaid wage claim, the
Secretary must inform the employer by certified mail, unless the claim appears to be frivolous.
If the employer (or former employer) does not pay the claim or provide a satisfactory
explanation for failure to pay the claim within 10 days, the employer is liable for a penalty of
10% of the claim found to be due. The Secretary then has a cause of action for this penalty,
which may or may not be brought independently of the unpaid wages claim. 43 PA. STAT. ANN. §
260.9a(c).
3. Statute of Limitations
The limitations period is three years. 43 PA. STAT. ANN. § 260.9a(g).
4. Remedies
If an employee has lost wages due to illegal deductions, they can recover the amount lost,
plus costs and reasonable attorney’s fees as determined by the court, regardless of whether the
claim goes through the Secretary or not. 43 PA. STAT. ANN. § 260.9a(b), (e)-(f). No criminal
penalties exist for making unlawful deductions. If wages remain unpaid for 30 days beyond
payday (or 60 days after filing a claim, if no payday applies), or if shortages in wages exceed 5%
gross wages in two paydays in the same quarter, and there is no good-faith dispute, an employee
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is entitled to liquidated damages of 25% the amount of wages due or $500, whichever is greater.
43 PA. STAT. A NN. § 260.10.
E. Paystub Provisions
1. Normative Standards
With every payment of wages, employers must include a statement of: hours worked,
rates paid, gross wages, allowances, if any, claimed as part of the minimum wage, deductions,
and net wages. 34 PA. CODE § 231.36.
2. Claim Administration
Only the Secretary of Labor and Industry can bring an action in court to enforce these
requirements; no private cause of action exists.
3. Statute of Limitations
No limitations period is specified in the statute. Pennsylvania’s residual limitations
period is 2 years. 42 PA. STAT. A NN. § 5552.
4. Remedies
Upon conviction, an employer who violates pay stub regulations shall be sentenced to
pay a fine of $100-$500. Each day of noncompliance constitutes a separate offense. 34 PA.
CODE § 231.12; 43 PA. STAT. A NN. § 333.112(c).
F. Interagency Information Sharing
There are no provisions expressly requiring interagency information sharing on wage
theft. The Wage Payment and Collection Law, which specifies the procedure for recovering
unpaid wages, imposes on the Secretary of Labor and Industry the duty, but not the exclusive
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right, to enforce and administer the Act, which suggests that other agencies could enforce this
Act, although that is not explicitly stated. 43 PA. STAT. A NN. § 260.8.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
Pennsylvania law provides no single, overarching standard for independent contractor
classification. Nor is there any general statutory mechanism for enforcing independent
contractor misclassification. As described below, however, in the Construction Workplace
Misclassification Act (CWMA), Pennsylvania does specify standards for independent contractor
determinations in the construction industry.
For purposes of workers' compensation, unemployment compensation and improper
classification of employees in the construction industry, an individual is considered an
independent contractor if he or she has a written contract to perform such services, is free from
control or direction over performance of such services both under the contract of service and in
fact; and, as to such services, the individual is customarily engaged in an independently
established trade, occupation, profession or business. 43 PA. STAT. A NN. § 933.3.
Amplifying these standards, the CWMA specifies a rather lengthy and detailed set of
conditions an individual must satisfy in order to be considered an independent contractor. All of
the conditions must be me. The individual must possess the essential tools, equipment and other
assets necessary to perform the services independent of the person for whom the services are
performed; the individual will “realize a profit or suffer a loss as a result of performing the
services”; the individual performs his or her services through a business in which he or she has a
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proprietary interest; the individual has a business location separate from the location where the
services will be performed; The individual maintains specified liability insurance; and the
individual:
(i) either has previously performed the same or similar services for another person
while free from direction or control over performance of the services, both under
the contract of service and in fact; or
(ii) holds himself out to other persons as available and able, and in fact is
available and able, to perform the same or similar services while free from
direction or control over performance of the services.
Id. For these purposes, “construction” refers to “erection, reconstruction, demolition, alteration,
modification, custom fabrication, building, assembling, site preparation and repair work done on
any real property or premises under contract, whether or not the work is for a public body and
paid for from public funds.” 43 PA. STAT. A NN. § 933.2.
An employer violates the CWMA if it fails to properly classify a worker as an employee
under the Workers’ Compensation Act and fails to provide the required coverage under the
Workers’ Compensation Act or if it fails to properly classify a worker as an employee under the
Unemployment Compensation Law and fails to provide contributions, reimbursements, or other
amounts to be paid under the Unemployment Compensation Law. 43 PA. STAT. A NN. § 933.4(a).
2. Claim Administration
If the Secretary of Labor and Industry receives information that any person has violated
the CWPA, he or she may then investigate the claim and issue an order to the employer to show
cause why it has not violated classification law; the burden of proof rests with the employer to
show “employee” status. The employer has 30 days to show cause. If it does not, the Secretary
may petition a court to issue a stop-work order or immediately assess penalties. 43 PA. STAT.
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ANN. § 933.4(c). Each misclassified individual is a separate offense. 43 PA. STAT. ANN. §
933.4(b).
3. Statute of Limitations
The CWMA does not specify a limitations period. Pennsylvania’s residual limitations
period is 2 years. 42 PA. STAT. A NN. § 5524(5).
4. Remedies
If the Secretary finds an employer guilty of misclassification, he or she may impose a fine
of up to $1000 for the first violation, and up to $2500 for subsequent violations. 43 PA. STAT.
ANN. § 933.6(a). Requiring a worker to enter into an agreement that results in improper
classification is a violation of the CWMA and is punishable by an administrative fine of
$1000-$2500. 43 PA. STAT. ANN. § 933.9. An employer’s good faith belief that a worker
qualified as an independent contractor is a complete defense to a classification violation. 43 PA.
STAT. A NN. § 933.4(f).
If an employer fails to show that it has not violated classification law within 30 days, the
Secretary can petition a court to issue a stop-work order. 43 PA. STAT. ANN. § 933.4(c)(3)(i). A
stop-work order forces misclassified employees to cease work within 24 hours of issuance, or all
operations cease if the majority of workers are misclassified. The order remains in effect until a
court releases the stop-work order or it is found that there are no violations. 43 PA. STAT. ANN. §
933.7(a). The court must assess a $1000 penalty for each day an employer conducts business in
violation of a stop-work order. 43 PA. STAT. A NN. § 933.7(c).
Intentional misclassification is a first-degree misdemeanor the first time, and a
second-degree misdemeanor subsequent times. 43 PA. STAT. ANN. § 933.5(a). The Attorney
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General and the county District Attorney have concurrent prosecutorial jurisdiction. 43 PA. STAT.
ANN. § 933.5(c). Negligent misclassification under the Workers’ Compensation Act or the
Unemployment Compensation Law which results in failure to provide appropriate coverage or
failure to pay required contributions is a summary offense (the lowest level of criminal offense)
and, upon conviction, brings a fine of up to $1000. 43 PA. STAT. A NN. § 933.5(b).
In October 2020, Pennsylvania created a Joint Task Force on Misclassification of
Employees to study the independent contractor misclassification issue more broadly. 71 PA.
STAT. ANN. § 569.4. The Task Force is composed of the Attorney General, the Secretary of Labor
and Industry, the Secretary of Revenue, and a handful of private citizens with expertise in the
field. Public meetings are schedule through the end of this year. Some of the powers and duties
of the task force include evaluating existing misclassification enforcement identifying barriers to
information sharing among agencies regarding employee misclassification working with
business, labor and community groups to increase public awareness of the illegality of employee
misclassification and undertaking efforts to reduce its occurrence.
For purposes of the Task Force’s work, the statute defines misclassification to mean
independent contractor misclassification in the context of construction, workers’ compensation,
unemployment compensation, and income tax. 71 PA. STAT. A NN. § 569.4.
B. Exempt/Non-Exempt Classification
There is no separate Pennsylvania state law addressing non-exempt employee
misclassification. Any employee who is denied overtime wages to which they are entitled to can
bring an action as described in the “Overtime” section. Similarly, an employee who is illegally
paid less than the minimum wage can recover unpaid wages as described in the “Minimum
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Wage” section. There is no additional penalty or different administration system for
misclassification of non-exempt employees.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
No Pennsylvania statutes mention “payroll fraud” by name, and Pennsylvania’s
equivalent to the federal False Claims Act applies only to Medicaid or health care fraud. A few
state statutes, however, address various potential forms of payroll fraud.
The “Deceptive or Fraudulent Business Practices,” 18 PA. STAT. ANN. § 4107(6) states
that it is an offense if someone “makes or induces others to rely on a false or misleading written
statement for the purpose of obtaining property or credit.” In context, this seems to refer to false
advertising, but it arguably could apply to payroll fraud. 18 PA. STAT. ANN. § 4107(a)(6). No
research has been performed into cases applying the provision; that research lies beyond the
scope of this project.
It is a first-degree misdemeanor for a person to falsify, destroy, remove or conceal any
writing or record with intent to deceive or injure anyone or to conceal wrongdoing. 18 PA. STAT.
ANN. § 4104. This arguably could apply to timesheet falsification and some other types of
payroll fraud. No research has been performed into cases applying the provision; that research
lies beyond the scope of this project.
It is a second-degree misdemeanor for a person to cause another to execute any
instrument affecting or purporting to affect or likely to affect the pecuniary interest of any person
by deception. This arguably could cover falsified timesheets or false bonuses or even false
insurance payments, if executed by another person. 18 PA. STAT. A NN. § 4114.
B. Claim Administration
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These are all criminal statutes, and no special procedure is specified for any of them, so
administration proceeds like with all criminal offenses: a person is subject to arrest, arraignment,
and bail, the person pleads guilty or not guilty, plea bargains can be arranged. If the person
pleads not guilty, a trial occurs. If the trial has a jury, the jury hears evidence, then gives a
unanimous verdict. The judge then gives a sentence. If there is no jury, a judge hears evidence,
determines guilt, and gives a sentence. See generally Pa. R. Crim. P. 515, 519-20, 590, 620-21,
640-49, 704-06. We have not endeavored to determine whether Pennsylvania courts have been
willing to imply a civil cause of action based on any of these provisions.
C. Statute of Limitations
For 18 PA. STAT. ANN. § 4107 (deceptive or fraudulent business practices), five years. 42
PA. STAT. ANN. § 5552(b)(1). For §§ 4104, 4114 (tampering with records or identification &
securing execution of documents by deception), two years. 42 PA. STAT. A NN. § 5552(a).
D. Remedies
Judges exercise discretion in criminal sentencing, so all specified punishments may be
altered. See generally Pa. R. Crim. P. 702-705. Deceptive or Fraudulent Business Practices, 18
PA. STAT. ANN. § 4107: If the amount involved exceeds $2,000, it is a third-degree felony. If the
amount involved is $200-$2000, it is a first-degree misdemeanor. If the amount involved is less
than $200, it is a second-degree misdemeanor. 18 PA. STAT. ANN. § 4107(a.1). The sentence for a
third-degree felony is a fine of up to $15,000 or imprisonment for up to 7 years. 18 PA. STAT.
ANN. § 1101; 18 PA. STAT. ANN. § 1103. For a first-degree misdemeanor, punishment is a fine of
up to $10,000 or imprisonment for up to 5 years. 18 PA. STAT. ANN. § 1101; 18 PA. STAT. ANN. §
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1104. For a second-degree misdemeanor, punishment is a fine of up to $5000 or imprisonment
for up to 2 years. Id.
IV. Certification by Government Contractors of Prevailing Wage Compliance
A. Normative Standards
The Pennsylvania Prevailing Wage Act, which applies to any contract for public works
where a public body is a party, the public body is required to request the Secretary of Labor &
Industry to determine the prevailing minimum wage in the locality where the public work will
occur for each craft or classification needed to perform the public work. In determining a
prevailing wage, the Secretary considers any relevant collective-bargaining agreements and can
also consider provisions of Federal acts on contracts for public works, the number of skilled,
competent, and experienced workmen within the locality available for work, and statements by
contractors and subcontractors showing wage rates paid on past projects within the locality.
Within 10 days of publication of a prevailing wage determination, any prospective bidder,
representative of construction employers, representative of craftsmen, or representative of the
public may file a petition for review of the prevailing wage rates. Within 20 days of this filing,
the Secretary must investigate and hold a public hearing on the rates. Within 10 days of that, the
Secretary will publish final prevailing minimum wage rates. If a petition is filed, bidding for the
project will be extended.
The governmental officer responsible for disbursement of public funds for a public work
contract must require the contractor and subcontractor to file a statement, under oath, each week
(as well as a final statement at the end of the project) certifying that workmen have been paid
wages in strict conformity with the contract and prevailing wage regulations or, if wages remain
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unpaid, to set forth the amount of wages due and owing to each workman respectively. 43 PA.
STAT. A NN. § 165-10; 34 PA. CODE § 9.110(a).
B. Claim Administration
Pennsylvania provides an extensive administration system for addressing the failure to
pay prevailing wages. 43 PA. STAT. ANN. §§ 165-11-165-12; 34 PA. CODE § 9.111. For the failure
to certify payment of prevailing wages, the civil administration system is not defined. The
Appeals Board within the Department of Labor and Industry has the power and duty to hear any
grievances arising out of the Prevailing Wage Act, so presumably the Appeals Board can hear
certification issues. 43 PA. STAT. A NN. § 165-2.2(e)(1).
C. Statute of Limitations
The Prevailing Wage Act does not specify a limitations period. Pennsylvania’s residual
limitations period is 2 years. 42 PA. STAT. A NN. § 5552(a).
D. Remedies
A contractor or subcontractor who verifies statements he knows to be false is guilty of a
misdemeanor. Upon conviction, he shall be sentenced to pay a fine of up to $ 2,500 or be
imprisoned for up to 5 years, or both. 43 PA. STAT. ANN. § 165-10(c); 34 PA. CODE § 9.110(c).
V. Labor Trafficking
Pennsylvania has an extensive statutory regime intended to fight human trafficking, but it
does not address the subject of labor cartels or labor trafficking directly. It does make it a felony
for any person to recruit, entice, solicit, advertise, harbor, transport, provide, obtain or maintain
an individual if the person knows or recklessly disregards that the individual will be subject to
labor servitude. 18 PA. STAT. ANN. § 3011. It also makes it unlawful for any person to knowingly
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benefit financially or receive anything of value from any of those acts. 18 PA. STAT. ANN. § 3011.
Finally, it makes it unlawful for any business, in connection with, as a part of, or in addition to
engaging in human trafficking, to willfully or with intent to defraud, to fail or refuse to pay
wages for, or otherwise causes financial harm to, any individual in connection with labor
services rendered. 18 PA. STAT. A NN. § 3015.
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I. Wage Theft
A. Minimum Wage Violations
1. Normative Standards
Washington has several statutory provisions that directly address the minimum wage an
employer must pay. The first, the Minimum Wage Act, codifies a specified minimum wage
applicable for each year through 2020, and thereafter requires the Department of Labor and
Industries (Department) to establish a new minimum wage yearly, calculated “to maintain
employee purchasing power.” WASH. REV. CODE. ANN. § 49.46.020(2)(a). To do so, the
Department adjusts the minimum wage to account for inflation as reflected in “the consumer
price index for urban wage earners and clerical workers.” WASH. REV. CODE ANN. §
49.46.020(2)(b). Tips, gratuities, and service charges do not count towards satisfying the
minimum wage. WASH. REV. CODE ANN. § 49.46.020(3).
By separate statute, Washington also provides that “it shall be unlawful to employ
workers in any industry within the state of Washington at wages which are not adequate for their
maintenance.” WASH. REV. CODE ANN. § 49.12.020. It does not appear as though this provision
has been interpreted to establish a baseline wage requirement separate from that established in
the Minimum Wage Act itself.
With certain industry-specific exceptions, all wages due on “account of…employment
shall be paid…at the end of the established pay period” determined by the employer. WASH.
Washington
REV. CODE ANN. § 49.48.010. Private employers must pay wages “on an established regular pay
day at no longer than monthly payment intervals.” WASH. A DMIN. CODE § 296-126-023(3).
Washington specifies that “state officers and [state] employees shall be paid for services
rendered from the first day of the month through the fifteenth day of the month and for services
rendered from the sixteenth day of the month through the last calendar day of the month.”
WASH. REV. CODE ANN. § 42.16.010(1). The director of financial management establishes the
date for these established pay periods. Id.
Washington also requires employers of fifteen or more employees to provide information
to new employees about the minimum wage and the applicable wage rate for the position into
which the employee has been hired. WASH. REV. CODE ANN. § 49.58.110.
2. Claim Administration
To address a wage violation, an employee may file a lawsuit, Wingert v. Yellow Freight
Sys., Inc., 146 Wash. 2d 841, 850, 50 P.3d 256, 261 (2002) (private right of action for wage claim
implied) or may file an administrative complaint with the Department. When an employee
chooses the administrative route, the Department is required to investigate no later than sixty
days after receiving the complaint. WASH. REV. CODE ANN. § 49.48.083(1). During the
investigation, the Department may order the payment of wages, prosecute actions, and issue
subpoenas. WASH. REV. CODE ANN. § 49.48.040. This investigatory authority does not apply to
employees directly employed by any county, municipal corporation, or state. WASH. REV. CODE
ANN. § 49.48.080.
Upon a decision by the Department, a person, firm, or corporation may appeal the
decision to the Department director. The director then assigns the appeal to an administrative
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law judge. WASH. REV. CODE ANN. § 49.48.084. The employee who filed a complaint may
terminate the administrative action. WASH. REV. CODE ANN. § 49.48.085(1).
3. Statute of Limitations
The Department may not investigate a claim that occurred “more than three years before
the date that the employee filed the wage complaint.” WASH. REV. CODE ANN. § 49.48.083(1).
The Washington Supreme Court has held the three-year limitations period applicable to implied
contract claims applies to wage claims as well. Seattle Pro. Eng’g Emps. Ass’n v. Boeing Co.,
139 Wash. 2d 824, 935, 991 P.2d 1126, 1132, corrected op., 1 P.3d 578 (Wash. 2000) (en banc).
4. Remedies
If the Department determines that there has been a violation, it may order the employer to
pay the employee all wages owed. WASH. REV. CODE ANN. § 49.48.083(2). The amount of
wages owed includes interest of one percent per month. WASH. REV. CODE ANN. § 49.48.083(2).
The employer “shall” also be punished with a fine of between twenty-five and one thousand
dollars. WASH. REV. CODE ANN. § 49.12.170. The employer may also be responsible for costs
and reasonable attorney’s fees. WASH. REV. CODE ANN. § 49.46.090(1); see also WASH. REV.
CODE ANN. § 49.48.030; WASH. REV. CODE ANN. § 49.12.150. Department costs, actual damages,
statutory damages equal to actual damages or five thousand dollars, injunctive relief, and any
other appropriate relief are permitted. WASH. REV. CODE ANN. § 49.58.060; WASH. REV. CODE
ANN. § 49.58.070.
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In addition, if the employer is shown to have willfully “deprive[d] the employee of any
part of his or her wages, [or has paid] any employee a lower wage than the wage such employer
is obligated to pay such employee by any statute, ordinance, or contract,” it is liable for double
damages. WASH. REV. CODE ANN. § 49.52.070. These damages are also available in a cause of
action brought in court by an employee. Id.; Wingert v. Yellow Freight Sys., Inc., 146 Wash. 2d
841, 849, 50 P.3d 256, 261 (2002).
If the Department finds a willful violation in an administrative proceeding, the
Department may also order the employer to pay a civil penalty. WASH. REV. CODE ANN. §
49.48.083(3). Repeat willful violators must pay a civil penalty of “not less than one thousand
dollars or an amount equal to ten percent of the total amount of unpaid wages….” WASH. REV.
CODE ANN. § 49.48.125(1). The maximum penalty is twenty-thousand dollars. WASH. REV. CODE
ANN. § 49.48.125(1). The Department may waive or reduce the penalty if all owed wages have
been paid. WASH. REV. CODE ANN. § 49.48.125(2). Finally, the failure to pay the minimum wage
is a misdemeanor. WASH. A DMIN. CODE § 296-126-226.
B. Overtime Violations
1. Normative Standards
A nonexempt employee must receive at least 1.5 times the regular pay for all hours past
the forty-hour workweek. WASH. REV. CODE ANN. § 49.46.130(1). A workweek is defined as a
fixed, regularly recurring period of 168 hours or seven consecutive 24-hour periods. WASH.
ADMIN. CODE § 296-128-015(1). The requirement includes employees who are paid on a piece
rate basis, on commission, or a non-discretionary bonus. WASH. ADMIN. CODE § 296-128-550.
As with the Federal Fair Labor Standards Act, Washington has codified numerous industry- and
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occupation-specific exemptions to the overtime requirement and specify variations on the
general rule that account for different pay schemes (such as commissioned salespersons). WASH.
REV. CODE ANN. § 49.46.130(2)-(9).
2. Claim Administration, Statute of Limitations, and Remedies
Overtime violations are administered according to the same scheme, have the same
limitations period, and have the same available remedies as discussed supra at I.A.2-4 for
minimum wage violations.
C. Off-the-clock Violations
1. Normative Standards
An employee must be compensated for all hours worked, and the failure to do so can be
treated as a violation of the minimum wage requirement, the overtime pay requirement, and a
breach of express of implied contract of employment. “Hours worked” includes all hours an
employer requires an employee to be on duty either (1) on the employer’s premises, or (2) at a
prescribed workplace. See WASH. ADMIN. CODE § 296-126-002(8); WASH. ADMIN. CODE §
296-128-600(9). Travel time may be considered hours worked. WASH. ADMIN. CODE §
296-126-002(8); WASH. ADMIN. CODE § 296-128-600(9). If an employer requires an employee to
remain on duty during the employee’s meal period, then the meal period must be compensated as
work time. WASH. A DMIN. CODE § 296-126-092.
2. Claim Administration, Statute of Limitations, and Remedies
There are no statutory provisions specifically addressing claim administration or
remedies for off-the-clock violations. The procedures and remedies discussed supra at I.A.2-4
for minimum wage violations would apply to off-the-clock situations as well.
D. Illegal Deductions
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1. Normative Standards
An employer is prohibited from deducting any portion of the employee’s wages unless
the deduction is required by law, specifically agreed upon by the employee, or for “medical,
surgical, or hospital care or service, pursuant to any rule of regulation….” WASH. REV. CODE
ANN. § 49.48.010. An employee agreement to allow any deductions must be explicit and in
writing in advance of the employer withholding wages. WASH. REV. CODE ANN. § 49.52.060.
2. Claim Administration, Statute of Limitations, and Remedies
Claims arising out of allegedly unlawful deductions are treated as wage claims and are
generally subject to the same procedures and remedies as described above for minimum wage
violations. See supra I.A.2-4. As noted above, all wage complaints must be filed within three
years of the alleged violation. WASH. REV. CODE ANN. § 4.16.080(3).
E. Paystub Provisions
1. Normative Standards
For each pay period, an employer must provide each employee with an itemized
statement showing the employee’s pay in hours or days worked, the pay rate, the gross pay, and
all deductions. WASH. ADMIN. CODE 296-126-040; WASH. REV. CODE ANN. § 49.30.020(2). This
itemized statement must be a written statement separate from the paycheck and must be issued
on payday. WASH. ADMIN. CODE § 296-126-040(2). The statement may be provided
electronically. WASH. ADMIN. CODE § 296-126-040(3). The employer is also required to create
and keep employee records that mimic the paystub information. WASH. REV. CODE ANN. §
49.46.070; see also WASH. A DMIN. CODE § 296-126-040(1).
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2. Claim Administration
The Department investigates and pursues claims that the wage statement requirement has
been violated. WASH. A DMIN. CODE 296-126-226.
3. Statute of Limitations and Remedies
A violation of the wage statement requirement is a misdemeanor. WASH. REV. CODE ANN.
§ 49.12.170. The Washington state code does not specify civil remedies applicable to the wage
statement requirement.
F. Interagency Information Sharing
In legislation enacted just this year, Washington has provided that:
(1) Any power or powers, privileges or authority exercised or capable of exercise
by a public agency of this state may be exercised and enjoyed jointly with any
other public agency of this state with similar powers so long as laws of such other
state or of the United States permit such joint exercise or enjoyment.
(2) Any agency of the state government when acting jointly with any public
agency may exercise and enjoy all of the powers, privileges and authority
conferred by this chapter upon a public agency; and
(3) With certain limitations and prerequisites applicable to education service
districts and/or school districts, any two or more public agencies may enter into an
agreement with one another for joint or cooperative action, so long as they are
authorized by the “governing bodies of the participating public agencies.”
WA LEGIS 176 (2021), 2021 Wash. Legis. Serv. Ch. 176 (S.S.B. 5034). Otherwise, Washington
does not have an information sharing scheme applicable to violations of wage and hour laws.
II. Employee Misclassification
A. Independent Contractor/Employee Classification
1. Normative Standards
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Washington law has no overarching test for determining whether a worker is an
independent contractor or an employee; rather, Washington has certain context-specific tests.
For example, under the Industrial Insurance Act (IIA) (which covers worker’s compensation),
individuals working under an “independent contract” are sometimes covered. WASH. REV. CODE
ANN. § 51.08.180; WASH. REV. CODE ANN. § 51.08.195. Specifically, an individual’s services will
not be considered “employment” for worker’s compensation purposes if it is shown that:
(1) The individual has been and will continue to be free from control or direction
over the performance of the service, both under the contract of service and in fact;
(2) The service is either outside the usual course of business for which the service
is performed, or the service is performed outside all of the places of business of
the enterprise for which the service is performed, or the individual is responsible,
both under the contract and in fact, for the costs of the principal place of business
from which the service is performed;
(3) The individual is customarily engaged in an independently established trade,
occupation, profession, or business, of the same nature as that involved in the
contract of service, or the individual has a principal place of business for the
business the individual is conducting that is eligible for a business deduction for
federal income tax purposes;
(4) On the effective date of the contract of service, the individual is responsible
for filing at the next applicable filing period, both under the contract of service
and in fact, a schedule of expenses with the internal revenue service for the type
of business the individual is conducting;
(5) On the effective date of the contract of service, or within a reasonable period
after the effective date of the contract, the individual has established an account
with the department of revenue, and other state agencies as required by the
particular case, for the business the individual is conducting for the payment of all
state taxes normally paid by employers and businesses and has registered for and
received a unified business identifier number from the state of Washington; and
(6) On the effective date of the contract of service, the individual is maintaining a
separate set of books or records that reflect all items of income and expenses of
the business which the individual is conducting.
WASH. REV. CODE. ANN. § 51.08.195. For purposes of unemployment compensation benefits, the
Employment Security Act (ESA) uses a slightly different multi-factor test to determine whether a
worker is an independent contractor. WASH. REV. CODE ANN. § 50.04.140(2); WASH. ADMIN.
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CODE § 296-126-002(2)(c). The statute provides two slightly different tests, each of which
indicate that services performed by an individual for remuneration are not employment if it is
shown that:
(1) The individual providing the services has been and will continue to be free
from control or direction over the performance of such service, both under his or
her contract of service and in fact; and
(2) The service provided is either outside the usual course of business for which
such service is performed, or that such service is performed outside of all the
places of business of the enterprises for which such service is performed; and
(3) The individual is customarily engaged in an independently established trade,
occupation, profession, or business, of the same nature as that involved in the
contract of service.
WASH. REV. CODE ANN. § 50.04.140. A similar, but more condensed version of this test is used
for determining independent contractor status in determining eligibility for family and medical
leave. WASH. REV. CODE ANN. § 50A.05.010(8)(b)(iii)(A)-(B).
Yet another slightly altered version of the IIA test set out above is employed to determine
when an individual on a public works project is an independent contractor for prevailing wage
purposes (also discussed infra). WASH. REV. CODE ANN. § 39.12.100. For those purposes, the
test adds the requirements that the contractor register with the state as such and maintain separate
accounting books. WASH. REV. CODE ANN. § 39.12.100(5)-(6).
2. Claim Administration
Wage claims based on misclassification would be administered according to the same
scheme discussed supra at I.A.2 for minimum wage violations. With respect to workers’
compensation and prevailing wage, the Department has the power to inspect any pertinent books,
records, and payrolls to determine the correctness of the payroll, the person employed, and any
other information necessary to ensure compliance with the IIA. WASH. REV. CODE ANN. §
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51.48.040(1). There is an investigation unit within the Department tasked with detecting,
investigating, and prosecuting any acts prohibited by the IIA. WASH. REV. CODE ANN. §
51.04.024(1). This unit and the director are authorized to receive criminal history information
for the purposes of investigating violations of the IIA. Id. at (2). There is no private cause of
action.
With respect to the unemployment compensation and family and medical leave, claims
can be brought to the Commissioner of the Employment Security Office, who administers the
ESA by adopting, amending, and rescinding rules and regulations as he or she deems necessary
to administer the ESA. WASH. REV. CODE ANN. § 50.12.010(1). Within the Employment
Security Office, there is a unit created to detect and investigate fraud. Id. at (2). The
commissioner is authorized to receive criminal history information for the purpose of
investigating fraud. Id. at (3). The commissioner or his or her authorized representative has the
power to inspect and copy any employer’s work records at any reasonable time. WASH. REV.
CODE ANN. § 50.12.070. The Employment Security Department can also audit employers to
ensure compliance with unemployment law. WASH. ADMIN. CODE § 192-340-010. Disputes
regarding unemployment compensation are conducted within the department. Members of the
department have the power to administer oaths, take depositions, certify official acts, and issue
subpoenas. WASH. REV. CODE ANN. § 50.12.130(1). Employers can appeal an order or notice of
assessment by filing a petition in writing within thirty days. WASH. REV. CODE. ANN. §
50.32.030.
For a violation to be charged, prevailing wage, public works claims must be filed with the
Department within sixty days from the acceptance of the public works project. WASH. REV.
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CODE. ANN. § 39.12.065(1). An investigation may be conducted within two years of the
acceptance of a public works contract. Id.
3. Statute of Limitations
The limitations for wage-related claims is discussed supra at section I.A.3.
The IIA does not specify its own statute of limitations. The residual state of limitations is
based on the type of offense. For a gross misdemeanor, the statute of limitations is two years.
WASH. REV. CODE ANN. § 9A.04.080(1)(j). For a misdemeanor, the statute of limitations is one
year. Id. at (1)(k). Felonies must generally be brought within three years. Id. at (1)(i). Civil
actions based on statutes involving forfeiture or penalty to the state, like civil actions brought
under the IIA, have a statute of limitations of two years. WASH. REV. CODE ANN. § 4.16.100(b).
The ESA specifies that actions for the collection of contributions, interest, penalties, and
benefit overpayments must be commenced within three years. WASH. REV. CODE ANN. §
50.24.190. Claims involving false or fraudulent returns with intent to evade contributions may
be commenced at any time. Id.
4. Remedies
The civil remedies available for wage claims based on misclassification are the same as
those discussed supra at section I.A.4 for minimum wage claims.
Under either the IIA or ESA, misclassification does not in and of itself carry a penalty.
With respect to the IIA, misclassification may result in a failure to pay workers’ compensations
premiums, which is punishable by a maximum penalty of one thousand dollars or double the
amount of unpaid premiums, whichever is greater, going to the medical aid fund. WASH. REV.
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CODE ANN. § 51.48.010. Additionally, if misclassification involves an employer knowingly or
intentionally providing false information or concealing facts material to workers’ compensation
claims, it is a class C felony, punishable by a fine of up to twenty-five thousand dollars. WASH.
REV. CODE ANN. § 51.48.270. Alternatively, if recommended by the prosecutor and agreed to by
the offender, the court may order such an employer to pay double the value gained by the
employer because of his or her deceit to the victim, though it is unclear whether the victim would
be the misclassified employee or the insurer. WASH. REV. CODE ANN. § 9A.20.030
Under the ESA, misclassification can result in a failure to provide complete and correct
unemployment tax reports or a misrepresentation of the amount of payroll used to calculate
unemployment taxes, both of which result in civil penalties. Failure to provide complete and
correct unemployment tax reports first results in a warning. WASH. REV. CODE ANN. §
50.12.220(2). When contributions are due, the second failure gives a penalty of ten percent, but
this amount must be between $75 and $250. A third failure has a penalty of ten percent, but this
amount must be between $150 and $250. A fourth failure and any further failures give a penalty
of $250. Id. at (2)(a). If contributions are not due, a second failure has a penalty of $75, a third
failure has a penalty of $150, and a fourth failure and subsequent failures give a penalty of $250.
Id. at (2)(b). Knowingly misrepresenting payroll values makes an employer liable for ten times
the amount of unpaid contributions. Id. at (3).
Knowingly giving false information or knowingly withholding information relevant to
unemployment compensation is a misdemeanor, punishable by a fine between $20 and $250, or
by imprisonment for up to ninety days. WASH. REV. CODE ANN. § 50.26.010(1)-(2). Falsifying
books, documents, or records, making a false statement relating to unemployment compensation
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while under oath, or willfully attempting to evade or defeat unemployment contribution
requirements is a gross misdemeanor, punishable by a fine of up to $5,000, imprisonment for up
to 364 days, or both. Id. at (3).
B. Exempt/Non-Exempt Classification
1. Normative Standards
The general rule in Washington is that employees are entitled to “no less than one and
one-half times the regular rate at which he or she is employed.” WASH. REV. CODE ANN. §
49.46.130. Washington, however, classifies certain employees as exempt from the state’s
overtime pay requirements. Those exemptions largely follow the federal pattern, for example
exempting employees working in an executive, administrative, or professional capacity. WASH.
REV. CODE ANN. § 49.46.010(3)(c); see also WASH. ADMIN. CODE § 296-128-500(2). If an
individual meets the requirements of one of these exemptions and is paid on a salary basis, the
individual is an exempt employee. See WASH. ADMIN. CODE § 296-128-532(1). Most of the
statutory exemptions identify narrow slices of the economy for special treatment (for example,
seasonal employees employed at concessions and recreational establishments at agricultural
fairs). WASH. REV. CODE ANN. § 49.46.130. In May of this year, Washington eliminated the
exemption for certain previously exempt agricultural workers paid on a piece-work basis. See
Wash. SB 5172 – 2021-22.
Even if an employee otherwise meets the duties-related requirements of an exemption, he
or she must still be compensated on a salary basis at a specified level above the minimum wage;
the amount of the required pay depends on the size of the employer’s workforce and adjusts each
year. See WASH. A DMIN. CODE § 296-128-545.
2. Claim Administration, Statute of Limitations, and Remedies
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The state’s overtime requirements are part of the Minimum Wage Act and claims for
overtime pay follow the same administrative and judicial procedures and remedies for that Act,
discussed supra at section I.A.2-3.
III. Payroll Fraud on State Government by Government Contractors
A. Normative Standards
Outside the Medicaid fraud arena, Washington has no statute that specifically addresses
fraud against the state government or its agencies by government contractors. It does, however,
have statutes that address fraud more generally, making it unlawful to “[e]mploy any device,
scheme, or artifice to defraud” or “engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person.” WASH. REV. CODE ANN. §
19.110.120(1)(b)-(c).
B. Claim Administration
This type of fraud leads to criminal prosecution in the ordinary course. A common law
civil tort remedy for fraud may be available as well.
C. Statute of Limitations
No felony indictment may be brought “more than five years after the alleged violation.”
WASH. REV. CODE ANN. § 19.110.075(3).
IV. Certification by Government Contractors of Prevailing Wage Compliance
A. Normative Standards
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Washington requires that employees engaged in “all public works and under all public
building service maintenance contracts of the state or any county, municipality or political
subdivision created by its laws [must receive] not less than the prevailing rate of wage for an
hour’s work in the same trade or occupation in the locality within the state where such labor is
performed.” WASH. REV. CODE ANN. § 39.12.020. This requirement must be part of every
contract for the construction, reconstruction, maintenance, or repair of any public work of the
state or its political subdivisions. WASH. REV. CODE ANN. § 39.12.030.
Before any payment is made on such a contract, the officer or person charged with the
disbursement of public funds must require the contractor and every subcontractor to submit a
“Statement of Intent to Pay Prevailing Wages.” WASH. REV. CODE ANN. § 39.12.040. Moreover,
following the final acceptance of a public works project, the officer has to require the contractor
and its subcontractor to submit an affidavit searing that the prevailing wages were actually paid
before the funds retained for the project are released. WASH. REV. CODE ANN. § 39.12.040. If
there are no retained funds on the project, the affidavit of wages paid must be submitted prior to
final acceptance of the public works project.
Intentionally filing a false affidavit subjects the filer to the same penalties as are provided
in WASH. REV. CODE ANN. 39.12.050. Each affidavit of wages paid must be certified by the
industrial statistician of the Department before it is submitted to the disbursing officer.
Contractors must also keep payroll records and may be asked to file a certified copy for review.
WASH. A DMIN. CODE § 296-127-320.
B. Claim Administration, Statute of Limitations, and Remedies
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If a dispute arises about a contractor’s compliance, the matter is referred to the
Department director for arbitration. WASH. REV. CODE ANN. § 39.12.060; see also WASH. ADMIN.
CODE § 296-127-060. Complaints to the Department director also start an investigation into
whether there is a violation. WASH. REV. CODE ANN. § 39.12.065(1). A complaint of
nonpayment of prevailing wage must be filed with the Department no later than sixty days from
when the public works project was accepted. WASH. REV. CODE ANN. § 2939.12.065(1). The
Department may not charge a contractor with a violation when a complaint is received after this
sixty-day period concludes, but the Department may investigate and recover unpaid wages
within two years from the acceptance of the public work. WASH. REV. CODE ANN. §
39.12.065(1).
A violation may result in a civil penalty and the contractor is not permitted to bid on
public works until the penalty is paid. WASH. REV. CODE ANN. § 39.12.050(1). If there is a
second violation within five years, the contractor may not bid on public works for two years.
WASH. REV. CODE ANN. § 39.12.065(3). Civil penalties shall not be less than five thousand
dollars or an amount equal to fifty percent of the wage violation. WASH. REV. CODE ANN. §
39.12.065(3). The Department director may waive the penalty if the Department concludes there
was a reporting error. WASH. REV. CODE ANN. § 39.12.065(4).
The most draconian penalty for non-compliance is found at WASH. REV. CODE ANN. §
49.28.050. That statute provides that
All contracts for work for the state of Washington, or any political subdivision
created by its laws, shall provide that they may be canceled by the officers or
agents authorized to contract for or supervise the execution of such work, in case
such work is not performed in accordance with the policy of the state relating to
such work .
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Courts instead appear simply to require the payment of the prevailing wage. See Superior
Asphalt v. Labor & Indus., 112 Wash. App. 291, 303, 49 P.3d 135, 142 (Wash. Ct. App. 2002);
Heller v. McClure & Sons, Inc., 92 Wash. App. 333, 342, 963 P.2d 923, 928 (Wash. Ct. App.
1998).
In addition to cancelation, violators can be debarred for a period of up to three years,
based on consideration of a lengthy list of aggravating and mitigating circumstances. WASH.
REV. CODE ANN. § 39.26.200.
Finally, Washington law provides that if a contractor or a subcontractor doing public
work uses employee withholdings for personal use, the contractor or subcontractor is guilty of a
gross misdemeanor. WASH. REV. CODE ANN. § 49.52.090. Furthermore, if an employer willfully
fails to record deductions, an employer or agent of the employer is guilty of a misdemeanor.
WASH. REV. CODE ANN. § 49.52.050(4). If an employer does not record deductions, there is a
presumption that the violation is willful. WASH. REV. CODE ANN. § 49.52.080.
V. Labor Trafficking
A. Normative Standards
Washington has established a state clearinghouse on human trafficking to coordinate
efforts against the trafficking of persons, including labor trafficking. WASH. REV. CODE ANN. §
7.68.370(2). The statute creates an “office of crime victims advocacy” in addition to the
clearinghouse, requires the clearinghouse to publish findings and legislative reports of statewide
task forces relating to the trafficking of persons; to provide a comprehensive directory of
resources for victims of trafficking; and collect and disseminate up-to-date information regarding
the trafficking of persons, including news and legislative efforts, both state and federal.
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Washington also has a statutory framework for addressing “human trafficking,” which
includes “forced labor,” i.e., “all work exacted from a person under the threat of penalty and to
which the person has not voluntarily offered to perform.” WASH. REV. CODE ANN. §
19.320.010(3). The scheme requires employers of “domestic employers of foreign workers and
international labor recruitment agencies” to provide statements to workers, in their first language,
disclosing, among other things, that they are protected by Washington’s employment and wage
and hour laws, specifying permissible deductions from their pay, that they are entitled to control
their own identification and travel documents, and providing a “hot line” number for the
employee to use. WASH. REV. CODE ANN. § 19.320.010(3).
B. Claim Administration, Statute of Limitations, and Remedies
Employees who succeed in a claim under the statutory scheme are entitled to actual
damages or between $250 and $500, whichever is greater, as well as fees and court costs. WASH.
REV. CODE. A NN. § 19.320.040.
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