The construction industry faces strict labor regulations to ensure fair treatment, safety, and accurate compensation for all workers. Construction companies that fail to comply with the regulations can face costly penalties, legal disputes, and project delays.
Staying in compliance is becoming more challenging thanks to new and updated labor laws coming into effect in 2025. It’s critical that construction companies stay ahead of these new changes, which is why we’re guiding you through what to expect and offering strategies to help ensure your compliance.
In order to stay in compliance, you first need to know which laws are affected. Here’s an overview of the major changes to expect in 2025 and how they each impact compliance.
What’s changing: Revisions to the Fair Labor Standard Act (FLSA) and potential increases of salary thresholds and overtime pay for exempt and non-exempt employees.
How it impacts construction: The updated law requires accurate tracking of hours worked, even for traditional salaried roles, impacting foremen, project managers, and other salaried construction employees.
What’s changing: Companies can expect expanded enforcement of Davis-Bacon Act requirements for federal projects. Additionally, there are new state-level updates to prevailing wage thresholds and reporting requirements.
How it impacts construction: Greater importance of certified payroll reporting, requiring accurate payroll and compliance with minimum pay rates for federally funded projects.
What’s changing: Expect stricter regulations on classifying independent contractors vs. employees, with increasing penalties for misclassification under IRS and state-level rules.
How it impacts construction: Companies will need clear policies to ensure the correct classification of subcontractors to avoid fines or back taxes of misclassified workers.
What’s changing: Increased union activity within the construction industry bolstered by new legislation supporting worker organizing, including updated collective bargaining rules and union contract compliance.
How it impacts construction: If you work with organized labor, you’ll need to stay up-to-date on contract terms and obligations.
What’s changing: Updates to Occupational Safety and Health Administration’s (OSHA’s) safety guidelines, particularly around construction site hazards such as fall protection and heat exposure, with strict penalties for violations.
How it impacts construction: Construction companies will need to invest in updated safety training, along with documentation and enforcement of the new regulations.
Construction companies handle many different moving parts, making it easier for compliance-related elements to fall through the cracks. Be aware of the most common risks to compliance so you can stay ahead of any problems. They include:
or a failure to calculate overtime hours correctly could leave you non-compliant with industry regulations. You’re at increased risk of errors if you’re still relying on paper timesheets or manual data entry.
Misclassification of Workers: Some construction companies may be tempted to treat employees as independent contractors to reduce operating costs, but it could result in legal action.
Failure to File Certified Payroll Reports: Delayed or inaccurate payroll reporting for public works projects can result in your contract funds being withheld. Your construction company may also be deemed ineligible for future federally funded projects.
Ignoring State-Specific Laws: Focusing solely on federal regulations while neglecting state-specific requirements could land you in trouble. Be mindful of varying overtime and prevailing wage rates for each state where you operate. For example, California’s daily overtime rule, requires employees be paid 1.5 times their hourly rate for hours worked beyond 8 hours in a single day, and 2 times their hourly rate for more than 12 hours in a day.
Lack of Training on Safety Standards: Employees who aren’t up-to-date on workplace safety guidelines
risk non-compliance and can potentially create hazards on-site. It’s important to ensure good communication on evolving OSHA standards with on-site teams and proper training to ensure compliance.
To ensure you stay compliant despite the new changes, consider implementing the five strategies below.
Manual processes are prone to errors and take longer to conduct, putting you at increased risk of being non-compliant. Payroll and compliance tools reduce this risk, automating payroll calculations, tracking, and reporting. Take hh2’s Remote Payroll for example. It automates certified payroll reports and tracks labor hours to ensure compliance and even offers mobile time tracking tools for accurate job costing and overtime compliance.
Stay ahead of the changes by creating a checklist for your team to follow. Include the updated safety protocols from OSHA, any changes to your state and the federal prevailing wage laws, and be sure to review updates to worker classifications and overtime laws. You may even want to consider assigning a dedicated compliance officer or partnering with a labor law expert to develop and maintain your compliance checklist.
To stay compliant, your employees need to be well-versed in any new laws. Key areas to focus on in training include new wage and hour laws, proper workforce classifications, and reporting. You’ll also want to cover OSHA updates and site-specific protocols that will change. Consider hosting quarterly compliance workshops to cover the changes, or offer training through online platforms to ensure field and office staff can stay up-to-date on their schedule.
It’s essential to find compliance gaps or errors before regulators do by conducting internal audits. For an effective audit, you’ll want to first review your payroll records for accuracy. This step includes checking your overtime calculations and adherence to prevailing wage laws. You’ll also need to ensure your certified payroll records are accurate and submitted on time, as well as verify classifications for all your independent contractors.
Access to legal and HR experts help ensure you stay compliant and prepare for any updates in regulations. Your company may also want to consider retaining a construction labor law specialist who can provide ongoing guidance and assist you in preparing for any legal challenges that may arise.
Staying on top of compliance is easier than ever, thanks to the following tools and technology:
Payroll and Compliance Software: Construction-specific software offers features that help you stay compliant, including automated time tracking, certified payroll reporting, and overtime calculations. Consider hh2 Remote Payroll, Sage Intacct, or ProCore integrations.
Safety Management Tools: Apps like ProCore Safety and iAuditor help you document and manage construction safety compliance in real time.
Workforce Management Solutions:
Streamline worker classification, scheduling, and contract management with tools like BambooHR or ADP Workforce Now.
If your construction company struggles with compliance, you could face serious consequences, including:
Non-compliance can lead to significant financial penalties for construction companies, reaching thousands or even millions of dollars depending on the number and severity of violations. Wage violations, worker misclassification, and OSHA non-compliance can all result in construction companies paying fines for each violation or covering back pay for workers. Depending on the violation, your company may also face civil or criminal penalties.
Losing public projects due to compliance failures or audits hurts more than your bottom line, it also damages your construction company’s reputation with employees, clients, vendors, and the general public. You may have a harder time retaining or attracting skilled workers and building trust with existing or new business partners. The negative publicity can also impact future project bids.
Investigation and legal challenges caused by non-compliance can lead to project delays and disruptions. Funds may be withheld from your construction company during an investigation, leading to cash flow problems or an inability to pay vendors or employees. Non-compliant companies may even be disqualified from future federally-funded projects, impacting your long-term profitability and growth.
Fortunately, your company can take steps to ensure compliance. We’ve outlined three essential areas below.
Your construction company will fall behind if you are complacent, Instead, actively monitor new labor laws and developments into 2025 and beyond. Be mindful of outside changes that may impact construction labor laws, such as environmental sustainability regulations.
Construction industry-specific tools offer integration and automation features that simplify compliance. Consider adopting a scalable, cloud-based compliance tool that can grow with your construction company’s needs.
It’s easier to stay compliant when your company’s culture is focused on the same goals. Build a culture of compliance through workplace policies that prioritize fairness, safety, accuracy, and accountability.
Compliance is about more than just avoiding fines. Staying compliant also helps you build a safe work environment to attract top talent and develop greater trust with your clients. It also acts as a selling point when bidding on government contracts, positioning your construction company for growth. Learn how hh2’s construction-specific solutions can help you automate compliance and stay ahead of evolving labor laws — schedule a demo today.