The Commonwealth’s Secretary of Labor (previously the Commonwealth’s Chief Workforce Advisor to the Governor) is submitting this report pursuant to Chapter 56 of the 2020 Acts of Assembly and Chapter 552 of the 2021 Acts of Assembly. The 2020 legislative mandate directed the Secretary to convene a workgroup to review the Commonwealth’s public works payment process to contractor employees to determine whether misclassification, payroll fraud, and other forms of wage theft are prevalent problems on Virginia public works contracts. In finding that they were, the workgroup was also tasked with identifying potential policies and process improvements to correct such issues.

The Secretary is required to submit the final report on potential strategies to combat labor law violations on state contracts to the Chairs of the House Appropriations Committee and Senate Finance and Appropriations Committee no later than October 1, 2021.

The workgroup was composed of representatives from the House Appropriations and Senate Finance and Appropriations Committees, Virginia public colleges and universities, labor organizations representing affected workers, the general contractor and subcontractor business community, and the relevant state regulatory and enforcement agencies. Additional subject matter experts were consulted as needed. The group met four times in total to review the Commonwealth’s public works payment process, analyze strategies for potential implementation, and discuss their impacts on relevant stakeholders.

The Secretary also solicited public comment through an online survey that received 57 responses on behalf of relevant state regulatory and enforcement agencies, industry associations, and worker advocacy organizations. A summary of the responses is provided in Appendix C.

In addition, the Secretary commissioned a study from George Mason University (GMU) of applicable labor laws across 11 states to identify statutes in both law and regulation that could inform this report’s recommendations. A summary of the findings are outlined in Section III, and the full multi-state survey is provided in Appendix D.

The following recommendations were developed based on feedback from the workgroup, public comment, and external research. Each is associated with several policies that the Virginia Governor and General Assembly may consider to prevent the violation of labor laws related to wage theft and misclassification on state public works projects. Implementation considerations and budgetary implications are outlined where applicable.

Recommendations

1. The Commonwealth should take full advantage of debarment as a tool for preventing individuals or firms that willfully and repeatedly violate state labor laws from participating on future public works projects. Policies for consideration include: A) expanded grounds for debarment, B) federal debarment reciprocity, and C) the extension of debarment to other relevant entities.

2. The Commonwealth should establish processes and mechanisms for more strategic enforcement of labor law violations on state public works projects. Policies for consideration include: A) an interagency advisory council, B) enhanced data sharing, C) enforcement of Virginia’s labor laws through the Virginia Fraud Against Taxpayers Act, D) a centralized repository for subcontractor information, and E) proactive auditing of contractor data.

3. The Commonwealth should require firms to certify compliance with relevant labor laws as a minimum standard for contracting with the state. Policies for consideration include: A) a monthly certified payroll requirement, and B) required compliance with state and federal labor laws.

4. The Commonwealth should bolster its complaint-based enforcement model by ensuring that workers know their rights and are more easily able to submit a complaint. Policies for consideration include: A) an online reporting method for worker complaints, and B) an outreach campaign to workers and employers.

5. The Commonwealth should develop standards for the use of independent contractors on state job sites to prevent misclassification before it occurs. Policies for consideration include: A) an independent contractor waiver requirement and B) an independent contractor registration requirement.

6. Policies requiring further research and consideration are outlined at the conclusion of Section IV.