Construction compliance, though well-intentioned, can be a nightmare for subcontractors to keep up with due to myriad rules and regulations from dozens of agencies. Regardless of the complexity, staying on top of compliance requirements for every construction project is an absolute necessity. Mistakes in this area can have severe consequences, including injuries, project delays, payment delays, fines, and even jail time.
So, we put together this guide to help you get a grip on construction compliance. In it, you’ll find:
- An explanation of why compliance is so challenging
- Specific construction compliance requirements that affect subcontractors
- Three tips to help subcontractors improve compliance
- Tracking compliance across all your projects
Why Compliance in Construction is So Challenging
Compliance is complicated, no matter the industry. But it’s particularly challenging in construction due to the industry’s fragmented nature and ever-changing regulations from various federal, state, and local authorities. Also, subcontractors must abide by owners’ and GCs’ project-specific contract guidelines, which can contradict the legal requirements.
The sheer volume of rules, coupled with the necessity to monitor regulations across multiple states and contract terms, creates a compliance landscape that feels more like an obstacle course than a support system. However, these regulations help:
- Keep people safe;
- Ensure structures last;
- Preserve our natural environment; and
- Provide financial protection for everyone involved in construction projects.
Therefore, adhering to these regulations is crucial for subcontractors to maintain safe and profitable operations, along with a stellar reputation.
Construction Compliance Requirements that Affect Subcontractors
From the field to the back office, compliance regulations cover every facet of your business—what workers wear, the equipment they use, how they execute their work, and even when you invoice your GCs. Let’s look at some safety, building, environmental, labor, and payment compliance issues that govern your world.
Safety Regulations
The Occupational Safety and Health Administration (OSHA) has a long list of construction safety regulations that everyone on a job site must follow. They include wearing specialized gear like hard hats, safety goggles, and protective clothing. They also mandate using supportive equipment like guardrails, harnesses, and safety nets.
Site managers must keep meticulous logs to show they’re following all the safety rules. They must document all issues, no matter how small, with detailed incident reports.
Violating safety regulations can result in fines, and willful violations can rack up hundreds of thousands of dollars. But the most severe consequence is the risk of serious injuries and deaths, with more than 1,000 construction worker fatalities reported on construction sites in 2021 alone. Following safety regulations to the T will help protect your business and your workers.
Building Regulations
Contractors and subcontractors must adhere to building codes to ensure the structures they build are safe and resilient. These codes are formed at the state and local levels. They’re why our buildings:
- Have smoke alarms and emergency escapes;
- No longer use asbestos or lead paint; and
- Are increasingly more accessible for people with disabilities.
They’re also why you need to keep records of approved submittals, calculations, and shop drawings.
No matter what trade you’re in—electrical, plumbing, mechanical, etc.—there are building regulations that affect you. Failure to meet these standards can initiate a range of penalties, from monetary fines to criminal charges.
Environmental Regulations
The US Environmental Protection Agency (EPA) has established a series of environmental regulations for the construction sector to minimize the negative impact construction projects have on our natural world. These laws protect our land, water, and air.
When it comes to environmental compliance, subcontractors must:
- Pay particular attention to how they dispose of construction waste, as improper practices can lead to soil and groundwater contamination.
- Implement effective erosion and sediment control measures to prevent polluted runoff from entering waterways during construction activities.
- Follow stringent guidelines for the safe handling, storage, and transportation of hazardous materials frequently used in construction, such as solvents, paints, and asbestos-containing materials.
Penalties for environmental regulation violations can range up to $250,000 in fines and 15 years in prison.
Labor and Payroll Requirements
Everyone from the US Department of Labor and state labor departments to the Equal Employment Opportunity Commission (EEOC) and Federal Trade Commission (FTC) plays a role in defining labor and payroll requirements. There’s an array of laws designed to make sure that workers are paid fairly and employers exercise fair hiring practices.
Prevailing wage laws—covered under the Davis-Bacon Act—fall into this category. The Davis-Bacon Act mandates that contractors and subcontractors performing work on federal contracts for public buildings or public works over $2,000 be paid a minimum wage (different from the state minimum wage). In addition to the federal law, 32 states have implemented related prevailing wage laws.
Paying workers less than the prevailing wage triggers consequences like:
- liability for unpaid wages
- liquidated damages
- inability to secure future public jobs
- fines
- imprisonment
Contracts for public projects will require you to submit certified payroll reports proving that you paid workers at or above the prevailing wage. Other contracts may require you to submit logs of hours worked, wages paid, or benefits provided.
Payment Compliance
Simply put, payment compliance in construction is a mess. Payment parameters originate from a diverse array of sources, including state and municipal authorities, property owners, and GCs. Therefore, each project typically has its own set of unique requirements governing aspects like:
- Lien requirements
- Change orders
- Retainage and release regulations
- Payment terms
- Pay app requirements (timeline, submission guidelines, documentation, etc.)
- Licenses and certificates
- Proof of insurance and liability coverage
These requirements aim to ensure that all parties involved in a construction project receive fair compensation for their work. However, if you don’t abide by them, you risk not getting paid at all. As subcontractors, it’s important to thoroughly familiarize yourself with the payment compliance terms for each project you undertake to ensure you receive fair and timely compensation for your work.
3 Tips to Help Subcontractors Manage Compliance
While it may feel like an endless uphill battle, there are a few things you can do to manage compliance, starting with these three tips.
1. Put Someone in Charge of Compliance
Assign someone to be in charge of compliance (a.k.a. a compliance officer). This person’s responsibilities should include:
- Staying current with all the regulatory requirements that affect your company
- Conducting regular risk assessments
- Monitoring contractual requirements for every project
- Communicating those requirements to everyone involved
- Collecting and tracking all compliance documentation
- Making sure permits and certificates are renewed on time
- Knowing when and how to take action for non-compliance
2. Document Your Processes
Clearly defined processes will go a long way toward keeping your company compliant. It’s a good idea to create a policies and procedures manual that meticulously documents:
- Everyone’s roles and responsibilities when it comes to compliance
- All safety procedures
- Instructions for reporting incidents
- Guidelines for keeping and submitting records
- Directions for storing and auditing compliance documents
- Processes for submitting payment applications and closing out projects
3. Educate and Train Your Team
Project managers, field supervisors, laborers, leadership, and accounting and HR personnel all play a role in keeping your construction business compliant. To do this, they need ongoing education, tools, and training.
Your compliance training program should include things like:
- Regular safety workshops for people working in the field
- Reminders about safety protocols posted on the job site
- Annual refreshers on compliance laws
- Company-wide announcements when new regulations go into effect
- Project kickoff meetings that cover specific project requirements
- Checklists to help accounting adhere to each project’s payment processes
A proactive training approach will go a long way toward infusing compliance into your company culture.
Tracking Compliance Across All Construction Projects
Adhering to each project’s compliance requirements will help you close projects out successfully, get paid on time, and maintain a strong cash position. However, as we’ve mentioned, achieving this is often easier said than done.
Siteline offers a powerful solution to streamline compliance management and mitigate the risk of missing an expired document that can delay payments. Specifically, Siteline provides a centralized system that:
- Keeps all compliance-related documents in one place, eliminating the need for scattered file storage and manual tracking
- Digitizes all required compliance documents, like affidavits and safety logs, eliminating lengthy paper trails for faster processing
- Provides real-time visibility into the status of compliance requirements across your entire project portfolio, ensuring that no payment is held up due to an expired document
- Notifies you when the status of any document changes so that no expired requirement catches you off guard again and jeopardizes your payment timelines
"Siteline’s compliance feature has proven crucial in managing critical documents—like contracts, Certificates of Insurance (COIs), certified payrolls, and bond requirements—ensuring swift payments and instilling confidence that no document delays our pay applications." —Joshua W., VP of Operations at Acme Erectors
If missing, expired, inaccurate, or incomplete compliance documents are causing issues for your business, get a demo of Siteline today.
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