At the same time, federal budget challenges and extra funding from the Obama Administration put more eyes at the US Department of Labor on prevailing wage violations.

The result is that many folks found themselves in the middle of a prevailing wage investigation, and learning about how frustrating and unfair these investigations can be.

This post gives you a glimpse at how these investigations work, and why an investigation – even without underlying wrongdoing – can really ruin the year (or more) for your company.

The Investigation Is Confidential

The first thing you’ll learn about a US Department of Labor Prevailing Wage investigation is that it is confidential. You will probably learn this at your first sit down with the investigator, as he or she explains to you all of the alleged violations. You’ll likely ask to see what the investigator is using to reach his or her conclusions, and that’s when you’ll be hit with the bombshell: you can’t see a thing.

The Department of Labor typically begins an investigation into a company or project after receiving a complaint. Any requests to see this complaint will be denied, as it is confidential to protect the rights of the complainant and to encourage complaints.

Then, the department will request you provide wage documentation and certified payroll, and will begin to interview laborers on the project. If you ask the department to identify who they interviewed or what was discussed, all of this will not be disclosed, as it is confidential.

The Complaint Against You Can Be Completely Meritless And Still Cause Problems

I was recently involved in a prevailing wage investigation where the Department of Labor was requiring a construction company to pay back wages on employees whose names were not even fully known, and who the department had no contact information on whatsoever. These partially named parties even appeared to be relatives of other laborers on the project.

So, for example, there would be an Alex Rodriquez on the project, and then a list of two or three other laborers like B. Rodriquez, C. Rodriquez and D. Rodriquez, all without any address or contact information, and with the department claiming these laborers were entitled to 10k – 20k each in back wages!

In other instances, I’ve seen the department of labor find laborers were working 60-80 hours per week when no one on the job was working those hours, or finding that folks who performed lower classified work (i.e. pure laborers) getting classified as plumbers or electricians.

And while these allegations may be completely meritless they are impossible to fight at the investigation level because the investigations are under seal, and an investigation you can’t see is an investigation you can’t fight.

So What Are Your Options?

This whole thing may seem a bit unfair, and from my perspective, it is unfair. Really unfair. However, courts have sided with these type of “under seal” investigations in the past, ruling that they protect the integrity of the investigation and the interests of complaints.

The reason these investigations have passed constitutional muster in the past is because a company can appeal the department’s findings to a federal court. Upon filing an appeal, the investigation materials become more of an open book.

This sounds fair from a theoretical viewpoint, it has practical challenges in reality.

First, the cost of appealing an investigation is quite high, as you will be hiring an attorney and paying a retainer of at least $10k – $20k.

Second, and more importantly, you’ll have lots of pressure on other folks on the construction project to resolve the issue. If you don’t resolve it, the investigator will go up the contact chain, all the way to the owner, with all parties being required to pay the back wages. This results in your money getting held up, and making it very difficult for you to continue on with work or a legal fight.

So, what do you do?

You can pay the back charges and try to learn from the experience, or you can lawyer up and fight the investigation findings tooth and nail…fight the good fight.

From a prevention standpoint, you’ll want to keep meticulous records and be extra careful to comply with wage determinations on these projects. Hire a construction attorney to advise you on how to comply with these requirements, and follow the regulations to the letter, keeping records you can use to prove your case in the event of an investigation…and, hope for a little bit of luck.

[The program will provide] tax breaks and other proposal aimed at getting commerical-building owners to retrofit their structures to be more energy efficient, an initiate [the President] hopes to fund with higher taxes on oil and gas companies.

President Obama introduced the program with this statement:

[O]ur homes and businesses consume 40 percent of the energy we use…So the good news is we can change all that. Making our buildings more energy-efficient is one of the fastest, easiset and cheapest ways to save money, combat pollution and create jobs right herein the United States of America.

The plan for Better Buildings is outlined in a White House “Fact Sheet,” which you can view online here.  There is a lot of fluff in this fact sheet on the initiative’s ideas, and even more fluff on the White House’s Energy and Environment blog. I count 5 blog posts from February 3rd (the day the program was announced) touting this “Better Buildings” program. Administration officials, however, have yet to identify a cost for the program, or any specifics as to how anyone can utilize the program.

Obama says that all this information is forthcoming…can it be an important benefit to the green building industry?  We’ll soon see.  Here is a clip from the speech at Penn State when Obama announced the program:

The concept is simple:  cities loan money to property owners to install clean energy equipment.   The loans are then repaid to the city through annual property tax assessments.

As originally conceived, it’s a win/win/win situation really.   Property owners get funds to improve their property, paying back the loan with money saved in the the property’s reduced operating expenses.   Cities and communities benefit by upgrading its overall energy efficiency.   Businesses and efficient energy investors benefit because the market grows for its products.

All was going very well for PACE Financing.  PACE legislation was passing across the country, and President Obama’s administration wholeheartedly supported PACE programs.

This progress came to an abrupt halt in June 2010, when the Federal Housing Financing Authority (FHFA) dropped this news:   Properties with PACE loans cannot be purchased by mortgage giants Fannie Mae and Freddie Mac.

Why not?

Well, PACE loans create a lien against properties similar to a tax lien, meaning that the lien has priority over all other debts (including mortgages).   The value of these loans can be between $10,000 and $100,000, and sometimes more.   The problem for these mortgage holders is obvious, as they are losing priority on their collateral.

The news from the FHFA caused more than $150m in funding to get yanked by the US Department of Energy, and has some predicting the demise of PACE Financing as we know it.  And they may be right.

Can PACE Be Saved?

The question now is whether these PACE Programs can be saved.   While I believe they can be, I don’t think the programs will be unaffected by the FHFA determination.   Here is a few things that are happening to help PACE stage a comeback, and a glimpse at how this might affect the PACE Programs:

1)   California is Fighting It:   First, Sonoma County and the California Attorney General have both separately filed suit against the FHFA claiming that the determination is wrong, or that FHFA lacks jurisdiction to make the determination on behalf of states and counties.

2)  Legislation is Being Proposed:   The US Congress (as well as local reps and senators) are introducing bills aiming to protect PACE financing programs.   One such bill is the PACE Assessment Protection Act of 2010.

3)  Re-Thinking PACE: States may be ready to re-think the way they structure these PACE programs, and provide some protections for mortgage companies.   While not passed in response to the FHFA announcement, Louisiana’s new PACE egislation may have predicted these problems, as it greatly accommodated mortgage holders.   The PACE legislation from the 2010 session, for example, requires enough equity in the house to support the loan, and requires permission from the mortgage holder for commercial loans greater than $100k (talked about in this post)

4)  Commercial Focus:   The FHFA restriction really affects the residential markets only.  As such, many states and municipalities may be re-focusing their PACE programs on the commercial market.  One example of this is New Orleans, who anticipated launching a PACE district with the help of funding from the US Department of Energy’s America’s Solar Cities program.   The city says they plan on moving forward with the district, except it will only be for commercial PACE loans.

Hey, What Does This Have To Do With Construction?

The PACE Financing Programs has a lot to do with construction and construction law.   You may or may not know, but our firm publishes two blogs that focuses on green building laws:   The Louisiana Green Building Law Blog and the Northwest Green Building Law Blog.   I am also a LEEP AP, and focus part of my practice on green building issues.

I recently wrote a blog post called:  Think Green Building is Irrelevant?  Think Again. The post discussed a report published by NPR saying that green building accounts for 33% of new construction in the United States.  That’s a remarkable number.   And if these PACE Programs get off the ground, the existing construction green building numbers will be driven up significantly.

Stay tuned.

Related articles by Zemanta

• Green Legislation from the Louisiana 2010 Session (constructionlawmonitor.com)
• Freddie, Fannie reject energy retrofit loans (news.cnet.com)
• CA Sues FHFA Over Efficiency Program (environmentalleader.com)
• Will PACE Financing Damage the Mortgage Market? (cleanenergywonk.com)
• FHFA not so green, sees red: – The agency objects to the… (sf.curbed.com)
• Sonoma County resists feds on home energy loans (sfgate.com)
• What Mortgage Underwriters are Missing about PACE (triplepundit.com)

Interested in more articles and blog posts around the web on construction law?   You can check out other articles I’ve shared over the past week on my Google Reader Shared Items Feed.

Originally a George W Bush executive order, E-Verify was slated to become mandatory for federal contractors beginning January 15, 2009.   The change in executive administrations and a handful of lawsuits, however, pushed the requirement back indefinitely.

This week, the Obama administration chimed in on the subject, and announced that it would support the E-Verify requirement, and that it would take effect across the country starting September 8, 2009.   Appropriately, the day after Labor Day.

Any federal projects or businesses receiving money under the federal stimulus program will be subject to the rule, and required to register and use the E-Verify system.

Differences Between Obama E-Verify and Bush E-Verify

When comparing the Obama E-Verify requirement and the Bush E-Verify requirement, one difference stands out:   Obama has ditched the “No-Match” system.

As a result, for better or worse, the requirement going into effect this September will have substantially less teeth.

Ditching the “No-Match” component of the E-Verify requirement will benefit employers because they will not be required to terminate (on such a tight time-line) employees whose social security numbers do not match with the system.

It will benefit workers, too, because Obama will not allow the federal government to use mismatched SSN data to find illegal immigrants in the workplace.

Is It Really Going To Happen This Time?

The short answer:  Yes.

While it has been delayed repeatedly in the past year, and there’s always a possibility for more delay, it looks like the latest effective date will stick.

The Obama administration has reviewed the requirement, and is now standing behind it, and by ditching the most controversial aspects of the rule, there will be fewer legal and political challenges.

Beginning September 8, 2009, therefore, the government will award contracts only to companies in compliance.

Who Needs to Be Prepared?

A lot of people need to be prepared for this E-Verify requirement.

While the controversial components of the requirement have been removed by Obama, the scope of the rules applicability has actually gotten broader.   The requirement will not only apply to contractors and subcontractors on federal projects, but it will also apply to any business receiving money under the federal stimulus project.

With the influx in federal and state spending on construction projects, and the decrease in private work available, more and more contractors are being forced into bidding and working on public works.  And with the now wider reach of the E-Verify program, contractors and subcontractors need to prepare themselves.

In February 2009, we wrote a post here at the Construction Law Monitor titled “The Stimulus Package and Your Construction Business.”

The post discussed the differences between private and public works, and addressed some of the issues private contractors face when working on its first public project.

Add the new E-Verify requirement to the list, and the article is still a good read.

Is this Still Controversial?

Even with Obama’s backing of the system and some tweaks to its enforcement power, the E-Verify program definitely still has its detractors.

The San Bernardino Sun News just ran an article about how the E-Verify system puts Obama at odds with some democrats.

Despite the controversy, the E-Verify requirement will take effect on September 8th, and construction companies around the country must be prepared.

Louisiana is expected to get $122.3 million in federal economic recovery money to improve the energy efficiency of homes, government buildings and public transportation over the next three years and to jump-start renewable energy projects for electricity generation.

The money should create scores of new jobs for tradesmen willing to learn green building practices. It also will help moderate-income households around the state improve the energy-efficiency of their homes and lower their utility bills.

Over the next three years, authorties estimate that over 6,000 homes will be weatherized under the program.

In addition to this, President Obama has recently come out to designate New Orleans as the “U.S. Blueprint” for green construction and environmental protection, invigorating urban centers and stressing volunteerism.

Perhaps the promise of the Global Green USA’s Build It Back Green program, Brad Pitt’s Make It Right Foundation and other similar programs are finally making its impression, and the New Orleans area will see real investment in green building over the next few years.

Related articles

• 2010 “Green” Legislation Briefing Presentation (constructionlawmonitor.com)
• What is PACE Financing and Is It Doomed? (constructionlawmonitor.com)
• Must You Fight For Your Right To Build Green? (constructionlawmonitor.com)
• Movers & Shakers in New Orleans Solar Market (constructionlawmonitor.com)

“Project labor agreements” (“PLA”) are similar to collective-bargaining agreements but they are issued prior to the initiation of work on a project. The Associated Builders and Contractors, Inc., states that a typical PLA requires that all contractors become bound to:

• recognize unions as the representatives of their employees on that job
• use the union hiring hall to obtain workers
• obtain apprentices exclusively from union apprenticeship programs
• pay into underfunded and mismanaged union benefit plans
• obey costly, restrictive and inefficient union work rules

In the end, the alleged benefit to the federal government, and to the contractors down the chain, is that labor rates are set, benefits are provided, and strikes are prevented.

Duane Morris LLP, a San Francisco multi-purpose firm, first reported the effect of the order against large construction firms:

“……many construction firms may be compelled to agree to PLAs on federally-funded construction projects for the first time. Not only will these firms face likely difficulties in navigating the uncharted waters of participating in the negotiations for a PLA, but they may also be forced to pay higher, union-level wages and benefits to their workers than they are otherwise accustomed to paying on projects. Many construction firms may be compelled to agree to PLAs on federally-funded construction projects for the first time. Not only will these firms face likely difficulties in navigating the uncharted waters of participating in the negotiations for a PLA, but they may also be forced to pay higher, union-level wages and benefits to their workers than they are otherwise accustomed to paying on projects.”

Duane Morris also finds that the order will only promote the use of PLAs on projects over $25 Million. However, the order opens the gate for the use of PLAs on lesser projects, where they are no longer prohibited.

While several organized units are certainly thrilled at the reinstatement of PLAs on federal projects, construction companies raise considerable concern. The Associated Builders and Contractors states:

“ABC strongly opposes union-only PLAs on construction projects. These agreements not only exclude merit shop contractors from bidding on projects paid for by their own tax dollars, but also drive up the cost of construction by reducing competition for the work.”

Construction companies who engage in federal projects should be keen to new changes in labor law. One thing is for certain, President Obama aims to bring swift changes to the way the U.S.A. does business with private interests.

“Greening the economy” sounds like the US government is trimming hedges, planting bulbs and whacking weeds.  In all seriousness, the focus is on improving the current economic situation while simultaneously reversing the damage done to the environment. Genius! Obama’s goal is to create 2.5 million new jobs in the green sector of the economy by 2011.

Obama’s green stimulus package will also likely include tax breaks for clean tech projects like solar panels, wind farms, biofuels, and carbon capture and sequestration.  Therefore employment opportunities that are categorized as “green- collard jobs” such as green building, LEED certified construction professionals, wind turbine mechanics and jobs pertaining to energy efficiency and production will be in high demand.

All over the world from London to Hong Kong, governments are coming to the realization that “going green” is a necessity for creating jobs and saving the economy. You can read more about the world wide efforts to “go green” at the UN News Centre.

Right here in the the United States of America, states are adopting laws that provide individuals and developers with tax incentives to incorporate Green Building standards into their homes and/or commercial properties. The more emphasis placed on Green Building in the near future, construction professionals with knowledge and certification in Green Building will find themselves at the forefront of an upturned economy.

There are many opportunities for former construction workers in the green sector. In fact, the number of jobs in “renewable or energy efficient” industries is climbing at a fast rate and government support is only going to boost the speed!  Going green on a construction job encompasses using both renewable resources and energy efficient methods. Wolfe Law Group published a series of blog articles relating to Green Building for contractors. To read the Green Building article series click here.

Business calls it “Armageddon.” Labor says it’s “a modest step.”

The article discusses one of the hot topics in labor law these days, the Employee Free Choice Act.  Around the blogosphere and news agencies, discussion of the EFCA is on fire.   A Google Video search of the topic yields propaganda from both sides, and on Chris Hill’s Construction Law Musings, I recently published a guest post summarizing argument from both proponents and opponents of the bill.

While the EFCA is certainly on the forefront of the labor law debate, its clear that its not the only argument in town.

To the contrary, since the recent inauguration of President Obama, there has been a substantial shift in labor law issues facing the construction industry, and it’s expected that more is on the way.

One of the most controversial actions by President Obama in the construction industry is the repeal of Executive Order 13502, which prohibited project labor agreements (PLAs) on federal and federally funded construction.   ABC issued a press release specifically directed at this action, contending that it opposes PLAs because they “eliminate merit shop contractors from competing for and winning construction projects.” The ACG also came out against the repeal of 13502 here.

Another labor-law related act already performed by President Obama is the signing of the Lilly Ledbetter Fair Pay Act of 2009.  The act was signed by the President on January 29, 2009, and extends the time period allowed for employees to seek compensation for unequal pay practices.  The act is retroactive to May 28, 2007, and applies to all claims of pay discrimination on or after that date.  Read more about the act at the AGC website here, or on CNN, which covered the Act as “Obama’s First Law.”

From the perspective of the construction industry, it’s a love/hate relationship with President Obama thus far, just one-month into his tenure.

On the one hand, as the Wall-Street Journal reported in mid-January, the construction industry has counted on Obama to put together a strong stimulus package that invested in federal contracting projects (and he pulled through).

On the other hand, however, President Obama is leading a potentially historic shift in employment and labor law matters that will seriously impact construction businesses.

Time will tell how the relationship between President Obama and the construction industry will fare.  So far, however, it’s been a mixed bag.