Chapter 16: Violations

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• 16-1 Introduction
• 16-2 Violations - Delinquent and Inadequate Payroll Records
• 16-3 Types of Violations
  • 16-3-1 Delinquent
  • 16-3-2 Inadequate
  • 16-3-3 Discrepant
• 16-4 Violation Review and Research
  • 16-4-1 Preliminary Research
  • 16-4-2 Violation Review and Resolution
• 16-5 Withholding Requirements
  • 16-5-1 Project Pay Estimate-based Payroll Projects
  • 16-5-2 Receiver or Invoice-based Payroll Projects

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16-1 Introduction

This section covers procedures for identifying payroll violations. Violations may result from late submission, failure to provide complete reports, or entering incorrect information. Violations apply to certified payroll reports, and all ancillary documents, such as fringe benefit statements, and apprentice forms, that are not in accordance with Section 7-1.02K(3), “Certified Payroll Records (Labor Code § 1776),” of the Standard Specifications, or for service, Minor B, or emergency contracts, the appropriate provisions related to payment and reporting requirements for prevailing wages.

16-2 Violations - Delinquent and Inadequate Payroll Records

Certified payroll records and fringe benefit statements are considered inadequate if there are missing California Labor Code 1776 data elements identified during the review process including:

• Contractor or subcontractor name and address
• Name, address, Social Security number of each worker
• Caltrans contract number
• DIR recognized work classification
• Straight time and overtime hours worked each day and week
• Actual per diem wages paid to each journeyperson, apprentice, or other worker employed in connection with the public work
• Unidentified deductions
  • All non-standard deductions, other than taxes, must be explained by the contractor and verified or authorized by the worker. Non-standard or unidentified deductions display on the payroll report as “Other.” Failure by the contractor provide sufficient information to explain the deduction and show it is authorized by the worker is considered a violation.
• On Division of Construction-administered contracts, when a delinquency or inadequacy occurs, the Labor Compliance officer must notify the resident engineer and the contractor of missing or inadequate information.
• For other division-administered contracts: when a delinquency or inadequacy occurs, the contract manager notifies the contractor through the notification process described in the previous section. The contract manager then disputes the invoice through the invoice dispute notification and withholds the entire payment until the contractor complies.

16-3 Types of Violations

16-3-1 Delinquent

Payroll and related documents that are not submitted or submitted late and not in accordance with statutory or contractual requirements are delinquent.

16-3-2 Inadequate

Documents are received but are inadequate if missing required labor code elements, including:

• Caltrans contract number
• Worker personal information
• DIR or federally recognized worker classification or trade
• Payroll week beginning and ending period
• Hours, rate of pay, gross and net wages, and deductions
• Check or direct deposit transaction numbers
• Signatures

16-3-3 Discrepant

Documents are received, but upon review are found to have an error or discrepancy in the information provided when cross-referenced with other source records. This includes:

• Misclassification of worker
• Prevailing wage or fringe benefit underpayment
• Hours and dates worked
• Calculation errors

16-4 Violation Review and Research

16-4-1 Preliminary Research

When discrepancies are found during payroll review and confirmation, the following actions must be taken by the district Labor Compliance representative or contract manager:

• Gather all supporting, related documents and organize chronologically. Obtain relevant names, dates, places, and whatever else is pertinent to the issue.
• Obtain information from the resident engineer, review daily reports, if applicable.
• Review job site interviews, if available.
• Document your resolution efforts and create a work history that forms a narrative.

16-4-2 Violation Review and Resolution

When the issue is discovered while reviewing, issue the proper Notice of Delinquent or Inadequate Payroll. 

• It is important to only use templates and notices that are pre-approved for the following reasons:
  • Specific regulations must be referenced when issuing notices for prevailing wage violations
  • Templates and notices are updated with approved changes and the most current Caltrans letterhead LETTER TEMPLATES | Division of Construction (ca.gov)
• Create and enter the invoice dispute note to “stop the clock” for contracts paid in arrears such as Minor B, emergency, service or maintenance, and A&E contracts.
• Depending on the type of violation, request that the contractor submit a supplemental payroll correcting the discrepancy.

NOTE: Under no circumstances should the incorrect or incomplete certified payrolls be returned to the contractor for revision. However, the contractor may make corrections to certified payrolls if those corrections are written in ink, initials each correction, and submits the corrected document to Caltrans.

• If a supplemental payroll is created for an underpayment, obtain proof of wage restitution for all affected employees in the form of canceled checks, copied both front and back and corresponding check stubs.
  • Use a tabulation or summary sheet to record discrepancies and note when and how each error was corrected.
• Withholding of contractor payments
  • Certain violations require withholding payment from the contractor. Reference Section 16-5, “Withholding Requirements,” of this manual for specific withholding requirements.

16-5 Withholding Requirements

16-5-1 Project Pay Estimate-based Payroll Projects

Progress pay estimate projects are typically those that are construction, more than $333,000, or both. For such projects, the Labor Compliance officer withholds 10 percent of the monthly progress pay estimate, not less than $1,000 or more than $10,000, for non-submittal of payroll documents. This withhold is called a labor compliance violation and should not be confused with an actual labor compliance case withhold, which is held as an administrative deduction.

• Make withholds separately for each payment period in which a new delinquency or inadequacy appears. When all delinquencies or inadequacies for a period have been corrected, release the withhold covering that period on the next progress payment.
• Withholds can only be taken once and do not compound on each monthly estimate. District Labor Compliance offices will advise the resident engineer when funds should be withheld or returned during a payment period.

For more information on processes to withhold money refer to Section 8-103, “Certified Payroll Requirements,” of the Construction Manual.

16-5-2 Receiver or Invoice-based Payroll Projects

Receiver or Invoiced-based projects such as Minor B, emergency and service contracts are paid in arrears. The following sections outline withholding the entire invoice amount or withholding a portion of an invoice.

Withhold Entirety of Invoice Amount

When withholding the entire invoice amount, nothing is sent to accounting until all items are received and the total of the invoice can be processed. The receiver and invoice are held until all delinquent or inadequate payrolls are received.

Once all payroll items are received, update the bottom portion of Form STD 209, “Invoice Dispute Notification,” to show that the dispute has been resolved. Indicate the receiver is “Approved for Payment,” and date and sign the receiver.

Send an email “Contract Number, Contractor, Invoice Number” in the subject line and attach the receiver, contractor invoice, STD 209, and proof of delivery of the STD 209 to:

• The appropriate accounting personnel
• Other recipients for Division of Construction may include:
  • The resident engineer
  • The office engineer
  • The Labor Compliance manager

Update the database and tracking spreadsheet to reflect that the withheld amount has been paid.

Withhold a Portion of Invoice Amount

While partial withholds for labor compliance are rare and generally not performed, the process is as follows:

• On the invoice, indicate “Labor Compliance Withhold – $ Dollar Amount” under the invoice total and write in the new total.
• Change the total on the receiver to reflect the new total after the withhold.
• Notify the contractor with the Notice of Delinquent or Inadequate payrolls and send the STD 209.

For receiver or invoiced-based projects that are administered by the Division of Construction, the following process applies:

• Indicate the receiver is “Approved by Labor Compliance” then date and sign the receiver.

Note: Not all invoice withholds for service contracts need to be approved by the Labor Compliance unit. Contract managers may withhold invoice payment without contacting Labor Compliance.

• Send an email “Contract Number, Contractor, Invoice Number” in the subject line and attach the receiver, contractor invoice, STD 209, and proof of delivery of the STD 209 to:
  • The appropriate accounting personnel
  • The resident engineer
  • The office engineer
  • The Labor Compliance manager

STD 209s entered into the AMS Advantage system would not require submission to accounting. 

Labor Compliance is not responsible for signing off on received records that have no items for labor or wages.

Once the delinquent or inadequate payroll items are received from the contractor:

• Send up the original receiver, but replace the total amount on the receiver with the withheld amount. This indicates to accounting that the previous deduction has been released.
• Indicate on the invoice that the withhold is being released.
• Update the bottom portion of the STD 209 to show that the dispute has been resolved.
• Send an email with “Contract Number, Contractor, Invoice Number” in the subject line and attach the receiver, contractor invoice, STD 209, and proof of delivery of the STD 209 to:
  • The appropriate accounting personnel
  • The resident engineer
  • The office engineer
  • The Labor Compliance manager

Update the database and tracking spreadsheet to reflect that the withheld amount has been paid.