Potential Delays in Release of Retainage to Contractors

The Washington State Department of Labor and Industries, under legislation approved in the spring of 2009 through SHB 1555, is now required to provide a release to public agencies prior to the public agency releasing retainage to the contractor on public works projects.

The purpose of L&I's release is for them to verify that the contractor and subcontractors have paid industrial insurance (workers compensation) premiums as appropriate. L&I has instituted a process to not provide the release until the prevailing wage section of L&I has received Affidavits of Wages Paid from the contractor and all subcontractors reporting hours, classifications, and hourly wages paid to workers.

L&I's reason for waiting for the Affidavits before they provide their workers compensation release is so they can check to see if the contractor and subcontractors have reported the hours on the Affidavits consistent with how they have reported hours for workers compensation premiums. In addition, L&I is checking to validate that the prevailing wage classifications listed on the Affidavits are consistent classifications reported for workers compensation premiums.

While there is no direct correlation between the classifications for prevailing wages and workers compensation, L&I is reviewing this information for reasonableness. If they have questions about whether the workers compensation hours and classifications have been reported correctly, they will contact the contractor or subcontractor.

If L&I finds that a contractor is missing Affidavits of Wages Paid on a project, they will put the request for release from the public agency aside until all the Affidavits have been received. Public agencies and contractors interested in expediting obtaining L&I's release may want to monitor the filing of the Affidavits of Wages Paid and notify L&I when they are all on file to ensure that L&I reviews the complete file in a timely manner.

It will be interesting to see whether these additional review steps by L&I will increase the amount of time before a public agency may release retainage to contractors.

I will be teaching a class on November 4, 2009 dealing with the new requirements of SHB 1555 and other issues related to close-out of public works projects, including bonding, retainage, and claims.

For more information about the class and to register, visit either http://mpurdy.com/class.pdf or http://www.mpurdy.eventbrite.com. Registration closes on Monday, November 2, 2009.