Wednesday, November 7, 2012

New State Policy on Contractors Filing Prevailing Wage Form on Behalf of Subcontractors

The Washington State Department of Labor and Industries has issued a revised policy memorandum explaining the procedure for a contractor to file an Affidavit of Wages Paid form on behalf of a subcontractor who has refused to complete the form or who is no longer in business.

Background:  Before a public agency may release retainage to the contractor, the agency must have on file an Affidavit of Wages Paid, approved by L&I, for the contractor and every subcontractor of any tier.  For a number of years, L&I has had a policy addressing how a contractor may file an Affidavit on behalf of a subcontractor.  On October 29, 2012, L&I revised their policy memorandum to be consistent with the provisions of a new law approved by the Legislature in 2012.

New state law:  During the 2012 legislative session, the Legislature approved SSB 6421 which, for the first time, addressed in state law the concept of filing an Affidavit of Wages Paid on behalf of a subcontractor.  Here's the language that was added to RCW 39.12.040 (1)(b):
If a subcontractor performing work on a public works project fails to submit an "affidavit of wages paid" form, the contractor or subcontractor with whom the subcontractor had a contractual relationship for the project may file the forms on behalf of the nonresponsive subcontractor. Affidavit forms may only be filed on behalf of a nonresponsive subcontractor who has ceased operations or failed to file as required by this section. Filings made on behalf of a subcontractor may not be accepted sooner than thirty-one days after the acceptance date of the public works project and the contractor filing the affidavit must accept responsibility for payment of prevailing wages unpaid by the subcontractor on the project pursuant to RCW 39.12.020 and 39.12.065. Intentionally filing a false affidavit on behalf of a subcontractor subjects the filer to the same penalties as are provided in RCW 39.12.050.
Key points of procedure:  The following summarizes some of the key features of L&I's procedure for a contractor to file an Affidavit of Wages Paid on behalf of a subcontractor:
  1. Contractual Relationship Required:  There must be a contractual relationship between the contractor and subcontractor.
  2. Reasons for Filing:  Permitted only when the subcontractor has ceased operations or failed to file the form.
  3. Timing:  Contractor may not file on behalf of subcontractor sooner than 31 days after final acceptance of the project by the public agency.
  4. Affidavit Only:  Applies only to filing the Affidavit of Wages Paid, not the Statement of Intent to Pay Prevailing Wages.
  5. Hard Copy Required:  Contractor must file with L&I a paper hard copy of the Affidavit on behalf of the subcontractor.
  6. Supporting Documentation Required:  Specific documentation must be filed with the Affidavit demonstrating either the subcontractor's non-responsiveness, or evidence of the subcontractor having ceased operations.
  7. Filling out Form:  Specific instructions for contractors in completing the Affidavit on behalf of a subcontractor.
  8. Assumption of Liability by Contractor:  Contractor must file with L&I a separate "Assumption of Liability Statement" on company letterhead with the Affidavit.
Missing Affidavit from the prime contractor:  Neither the state law nor L&I's policy addresses what happens if it is the prime or general contractor who fails to file an Affidavit of Wages Paid.  The logical answer would be that the bonding company should be required to file the Affidavit on behalf of the contractor, a procedure that is supported by L&I.

Resources:  The following links relate to this subject:
  • Policy Memorandum:  L&I's October 29, 2012 Prevailing Wage Policy Memorandum on "Filing an Affidavit Form 'On Behalf Of' a Subcontractor"
  • Law:  RCW 39.12.040 (1)(b) describes requirements associated with contractor filing Affidavit on behalf of subcontractor.
  • Bill:  Substitute Senate Bill 6421 adopted in 2012 added procedure to state law.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

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