A contractor on a public works project is required to deduct a specific amount from each employee's prevailing wage for health and welfare benefits, which are subsequently paid to a trust fund. If an employee is not enrolled in the health and welfare benefit plan but still has the deduction made, what is the correct action the contractor must take regarding these deducted funds?
- AThe contractor must hold the funds in escrow until the employee enrolls in a benefit plan or leaves employment.
- BThe contractor must pay the full deducted amount directly to the employee as cash wages.
- CThe contractor may retain the deducted funds as a reimbursement for administrative costs.
- DThe contractor must return the deducted funds to the employee, less any actual administrative fees incurred.
Show answer & explanationAnswer & explanation
Correct answer: B. The contractor must pay the full deducted amount directly to the employee as cash wages.
If a contractor deducts amounts for fringe benefits from an employee's prevailing wage, but the employee does not actually receive those benefits (e.g., not enrolled in a plan), the contractor must pay the cash equivalent of those benefits directly to the employee. The contractor cannot retain these funds or use them for other purposes.
Why the other options are wrong
- A. Holding funds in escrow is not the legal remedy; immediate payment of the cash equivalent is required.
- C. Retaining deducted funds for unprovided benefits is a violation of prevailing wage law.
- D. Deductions for unprovided benefits cannot be offset by administrative fees; the full amount must be paid.
Unpaid Prevailing Wage Fringe Benefits
If a contractor on a public works project deducts amounts for fringe benefits from an employee's prevailing wage but the employee does not actually receive those benefits, the contractor must pay the full cash equivalent of those benefits directly to the employee.
- Fringe benefits are part of prevailing wage.
- If not provided, must be paid as cash.
- Contractor cannot retain or redirect funds.
Memory trick: Benefits not given? Cash must be driven!