Under a new Minnesota law, contractors with even a single violation of wage, labor, or contracting laws can be banned from performing public contracts for three years, and can even lose existing contracts.
Ben Franklin said that an ounce of prevention is worth a pound of cure. What if there is no cure? In this case, prevention—through strict compliance—is the only medicine, unless you are prepared to take a three-year vacation from public work.
New Verification Requirements in Minnesota
Effective January 1, 2015, contractors and subcontractors on public construction contracts in Minnesota will be required to verify that they are “responsible contractors.”
The law applies to all projects over $50,000 let by state agencies (including MnDOT), the Met Council, the Metropolitan Airports Commission, Minnesota State Colleges and Universities, the University of Minnesota, and municipalities.
At the time of the bid, contractors must submit to the contracting authority a signed statement, under oath, verifying compliance with several minimum requirements, including:
- Workers’ compensation and unemployment insurance;
- Department of Revenue registration;
- Department of Employment and Economic Development registration;
- Valid federal tax identification number;
- Certificate of authority to transact business in Minnesota;
- None of the following for at least three years*:
- Underpayment of wages or penalties totaling $25,000 or more;
- Department of Labor and Industry final order to comply;
- Department of Transportation finding of underpayment to employees (more than once);
- Department of Labor and Industry finding of repeated or willful violation of the Minnesota Prevailing Wage Act;
- United States Department of Labor (Wage and Hour Division) final finding of underpayment;
- Liability in court for underpayment of wages or for misrepresenting a construction worker as an independent contractor;
- Violations of Minnesota laws governing independent contractors, construction codes, and licensing;
- Certificate of compliance for public contracts revoked or suspended (more than twice); or
- Monetary sanctions for failure to meet targeted business goals assessed by the Department of Administration or Transportation (more than once);
- No suspension or debarment by the federal government, State of Minnesota (including any of its departments, commissions or agencies), or political subdivisions;
- All subcontractors verified to the contractor through a signed statement, under oath, that they meet the “responsible contractor” criteria; and
- Any other criteria established by the contracting authority for defining a “responsible contractor.”
*Any violations of item (6) that occurred during the last three years but before July 1, 2014 will not be considered in determining “responsible contractor” status.
Verification of Subcontractor Compliance
The verification of compliance must include a list of all first-tier subcontractors. If a prime contractor or subcontractor hires a new subcontractor after submitting the initial verification, a supplemental verification for the new subcontractor must be submitted within 14 days.
Under the new law, prime contractors and subcontractors are responsible for false statements by first-tier subcontractors if they accept a subcontractor’s verification of compliance with actual knowledge that it contains a false statement.
Failure to comply with wage, labor, or contracting laws—and the corresponding inability to verify compliance—has harsh consequences, including ineligibility for public contracts and termination from existing contracts. Because the verification requirements go back three years, a violation on your record will effectively result in a three-year ban on performing public work.
If you hope to perform public work in Minnesota, take all necessary steps to assure strict compliance with wage, labor, and contracting laws, and be ready to verify compliance (including for subcontractors) on future projects. Obviously, knowing and following the rules is critical. It is also important to defend against any unwarranted charges of violations through a contested case hearing or other administrative or court appeal if necessary.
Ben Franklin believed industry was a fundamental virtue. Certainly, he would allow more than a few ounces of prevention to avoid a three-year ban from performing public work.
Build it right. Keep it real.
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