 |
YELLOW SHEET Office of the State Auditor of Missouri |
February 27, 2002
Report No. 2002-16
Significant
noncompliance with state prevailing wage law shows need for effective
enforcement and legislative changes
This audit reviewed how well contractors and
public entities comply with the state�s prevailing wage law on public works
projects.� Auditors tested 35 projects
and found some contractors and public entities avoid the law and underpay
workers, without true consequence.�
Auditors also found Division of Labor Standards (division) officials,
charged with monitoring law compliance, could do more to increase awareness
about the law and consistently refer violators for prosecution.� In addition, strengthening parts of the law would
improve compliance.� The following items
highlight our results:
Wage law requirements unmet
Division staff did not receive any notification for
28 of the 35 projects tested by auditors, a basic wage law requirement.� Without proper notification, state officials
are less likely to determine compliance.�
In addition, public officials responsible for projects did not always include
wage law information in calls for bids or written contracts and often did not review
payroll records to assure contractors paid the correct wage.� (See page 3)
Some contractors underpaid workers
Incorrect wages went to workers in 7 of the 35 projects tested, including
underpayment by $4 to $6 an hour on two of these projects.� In two cases, school districts hired the
same contractor for their energy loan projects, but neither district could show
documentation proving workers received the correct wage.� Auditors and division officials determined
the contractor underpaid the workers as much as $4,200 at one district.� (See page 4)
Violating contractors not penalized
Division officials substantiated 11 of the 20 wage law complaints tested by auditors, but
only penalized contractors on eight of these complaints.� In one unpenalized case, a school district
solicited bids to build a gym and then rejected all bids.� Later, district officials hired workers as
district employees supervised by a contractor.�
Making the workers district employees allowed the district to avoid the
wage law.� Division officials found the
district underpaid seven workers by more than $46,000.� (See page 4)
Repeat violators not
always prosecuted
A debarment record, which lists contractors
convicted of violating the wage law and notifies public entities not to
contract with such businesses, only included four companies convicted in 1993 and 1997. �Division records show during fiscal years 1998
through 2001, 16 contractors had at least 4 violations each, including a
contractor
with 13 violations.� Division officials only referred five of these
contractors for prosecution.� (See page
6)
Penalties for violators not
increased since 1957
Insignificant fines of $10 for
each day a worker is underpaid do not deter noncompliance.� Division officials told auditors many
contractors consider this small penalty as just an additional business cost. �The penalty has not changed since state law
set it in 1957, while several other states have much higher fines.� (See page 8)
State staff cannot pursue back
wages for underpaid workers
A 1997 Missouri Supreme Court
ruling forced the state to stop suing violating contractors for back
wages.� As a result, workers can only
collect back wages by filing their own civil lawsuits against their
employer.� Division officials found
violations in fiscal year 2001 that totaled $1.3 million in wages due workers,
but about $376,000 has gone uncollected.�
Auditors found at least six other states can sue contractors for back
wages.� (See page 8)
Other needed legislative changes include setting a minimum dollar threshold for projects allowing regulation efforts to focus on significant projects and requiring contractors to retain payroll records for more than a year.� (See page 9)
