OIG Audit Finds City Prime Contractors and Subcontractors Are Out of Compliance with the Chicago Base Wage Ordinance

IMMEDIATE RELEASE: November 30, 2017
PRESS CONTACT: Natalie A. Kuriata, (773) 478-8417

OIG Audit Finds City Prime Contractors and Subcontractors Are Out of Compliance with the Chicago Base Wage Ordinance

The Office of the Inspector General (OIG) has completed an audit to determine if contractors and subcontractors complied with the Chicago Base Wage Ordinance. OIG concluded that the City did not implement sufficient controls to provide reasonable assurance that prime contractors and subcontractors comply with the Chicago Base Wage Ordinance. OIG recommends that DPS adopt a more proactive approach to promoting wage rate compliance.

Similar to living wage laws adopted by cities nationwide, the purpose of the Ordinance is to ensure that City contractors and related subcontractors pay their employees in excess of poverty-level wages, both as a matter of principle and as a means of stimulating the local economy. We specifically reviewed wages paid by four security guard and janitorial service prime contractors identified by the Department of Procurement Services (DPS), as well as those contractors’ subcontractors. OIG found that while the four prime contractors consistently paid their employees the hourly base wage rate required by the Municipal Code of Chicago (MCC), three of the four subcontractors paid between $0.02 and $3.04 less per hour. These three subcontractors underpaid 150 employees a total of $22,664 in the four- to six-week periods reviewed each year, resulting in an estimated $291,816 underpayment to the employees over the course of 3 years. OIG also found several smaller wage discrepancies resulting from misapplication of state law or the MCC to overtime and training hours.

OIG recommends that DPS exercise its existing audit authority and require the contractors and subcontractors reviewed in this audit to identify the total underpayment related to base, overtime, and training wages, and to pay the covered employees any back pay owed. If the contractors and subcontractors do not cooperate, OIG recommends that DPS pursue contractual remedies, if any, and ensure that the City does no further business with these entities for up to three years, as allowed by the Ordinance. OIG recommends that DPS take steps to promote compliance among contractors and subcontractors and provide guidance on monitoring wage rate compliance to all departments that manage contracts with wage requirements

In response to our audit finding and recommendations, DPS stated that it issued default notices and requests to cure to the two prime contractors involved, requesting proof that their subcontractors have paid the correct base wages to all of their employees throughout the life of the contracts. Additionally, to prevent and detect future wage violations and to provide guidance on monitoring wage rate compliance, DPS stated that the Mayor’s Office will convene meetings with Department of Finance, Department of Law, and user departments to develop methods for actively monitoring contractors’ wage rate compliance.

The full report, and DPS’ response to the findings, can be found online at OIG’s website: http://bit.ly/DPSBaseWage

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