Construction employers track two sets of rules at once: the federal labor statutes that set a national floor and the state laws that move faster and pay more. When Washington stalls, the states fill the gap, and the result is a patchwork that a contractor working in two or three states has to manage line by line. The pattern shows up across the industry, from how federal relief for state DOTs reaches infrastructure projects to how payroll rules land on a small crew. A contractor who waits for a single national answer on wages, leave, or overtime will fall behind, because most of the real changes now arrive from state capitols.
Why Federal Labor Law Stalled in 2018
Congress passed fewer employment-related laws in 2018 than in a typical year. Attention shifted to other priorities, and political gridlock stalled most labor bills, so the federal docket for construction employers came down to a handful of measures. That does not mean nothing changed: two pieces of legislation touch payroll directly, and both deserve attention before the next hiring season.
The Tip Rules and Tax Changes That Passed
The Consolidated Appropriations Act changed how employers may treat tips. Employers cannot keep tips received by employees for any reason, and managers and supervisors cannot take a portion of pooled tips. The same law repealed the previous ban on tip pooling, so tipped employees can be required to share tips with non-tipped employees, as long as the employer does not take a tip credit. For contractors who run catering, event crews, or other tipped positions, the practical question is whether the business claims a tip credit. If it does, the pooling restrictions still apply.
The Tax Cuts and Jobs Act of December 2017 eliminated several business-related deductions employers had relied on. Employer-paid relocation, transportation, and entertainment expenses can no longer be deducted, and payments made under non-disclosure agreements for sexual harassment settlements lost their deduction status as well. Policy changes that shape infrastructure construction moved in parallel, with federal transportation funding reform rewriting how projects get paid for.
| 2018 Federal Change | What It Means for Employers |
|---|---|
| Tip ownership | Employers cannot keep employee tips for any reason |
| Tip pooling | Allowed with non-tipped staff when no tip credit is taken |
| Relocation and transportation expenses | Business deductions eliminated |
| Entertainment expenses | Business deductions eliminated |
| Sexual harassment settlement payments | No deduction for non-disclosure agreements |
Compliance Areas Construction Employers Should Watch
With few federal statutes moving, the action shifted to agencies and the courts. Construction industry forecasters have sketched out five major changes coming to the construction industry, and several of them land squarely in employment policy: stepped-up enforcement, board rulings, overtime rules, and civil rights coverage.
Immigration Enforcement and I-9 Compliance
No immigration statute became law in 2018, and few expect one in the next year or two. DACA protections remain in place for now, but enforcement is a different story. Employers can expect more ICE activity and more USCIS initiatives tied to the administration’s immigration focus. For contractors, that means I-9 files and E-Verify records need to be current before an audit, not after. A single mismatch can trigger fines and back-pay exposure.
NLRB Direction and Union Relations
With Republicans controlling the National Labor Relations Board, rulings shifted in an employer-friendly direction. The Board reversed the previous joint employment standard and restricted the rights of unions, union representatives, and employees in several decisions. The NLRB also expanded its Alternative Dispute Resolution program to push quicker settlements. Contractors working under union agreements or with subcontractors should watch how the joint employment definition changes wage and hour liability.
Overtime Rules and Regular Rate Calculations
The Department of Labor’s Wage and Hour Division spent 2018 revamping the white-collar overtime rules, with new regulations expected in 2019. The same package is expected to clarify how the regular rate of pay is calculated for overtime. For construction employers the stakes are concrete: a foreman classified as exempt today may be nonexempt tomorrow, and the regular rate calculation affects every premium hour worked.
LGBTQ Protections Left to State and Local Law
The Supreme Court declined to take up cases challenging lower court decisions on LGBTQ discrimination, leaving federal workplace protections in limbo. Until the Court or Congress resolves the question, employers should defer to state and local laws, many of which already bar discrimination based on sexual orientation and gender identity. A contractor with offices in multiple states may face different obligations under the same company policy.
State Laws Now Set the Pace on Wages and Leave
While federal bills stalled, state legislatures passed and enacted laws affecting wage rates, sexual harassment prevention, sick time, and more, with many changes taking effect January 1, 2019. The same federal-state dynamic shapes other markets: federal and state housing policies move prices and supply in ways that contractors see in their own bid pipeline.
Minimum Wage Increases Taking Effect
The federal minimum wage has held at $7.25 an hour since 2009. Twenty-nine states now have, or soon will have, rates above that level. Twenty states plus the District of Columbia scheduled increases effective January 1, 2019: Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont, and Washington.
How the 2019 Increases Roll Out
Some of those increases came from ballot measures, others from annual inflation indexing, and still others from scheduled phase-ins. The practical effect for a contractor is the same: labor rates on the books change on a specific date, and bid prices written before that date need an adjustment clause or a re-estimate.
| Status | Detail |
|---|---|
| Federal minimum wage | $7.25 per hour, unchanged since 2009 |
| States above the federal rate | 29 |
| States with January 1, 2019 increases | 20 states plus the District of Columbia |
| Increase mechanisms | Ballot measures, inflation indexing, scheduled phase-ins |
Paid Sick Leave and Harassment Prevention Laws
State-level sick leave laws expanded in 2018, and sexual harassment prevention requirements multiplied after the national conversation around workplace conduct. Several states now require annual training with specific content, supervisor obligations, and posting requirements. For a contractor with field crews spread across projects, compliance means scheduling training for every supervisor, including those who rarely visit the office.
Practical Compliance Steps for Construction Employers
None of these changes require a compliance department, but they do require a routine. The steps below take a few hours per quarter and close most of the gaps that trigger audits.
- Audit wage and hour classifications for every foreman, lead, and field supervisor.
- Confirm tip handling and pooling practices if any crew earns tips.
- Review I-9 forms and E-Verify records for completeness and timestamps.
- Check the current minimum wage in every state where you bid work.
- Schedule harassment prevention training for all supervisors.
- Set a calendar reminder for DOL rule releases and state effective dates.
Payroll and Classification Audits
Start with the payroll register, not the policy manual. Pull every hourly worker’s rate, every salaried worker’s exemption status, and every per diem or allowance that might count toward the regular rate. Reclassify anyone whose duties no longer match the exemption test before an auditor does it for you.
Documentation and Training
Record retention matters more when enforcement rises. Keep I-9s, time records, and training sign-in sheets where a field office manager can find them. Training should repeat annually, with content updated whenever a state law changes. Overhead control matters too: with business deductions for relocation and transportation gone, the same logic that sends homeowners toward changes that cut costs and waste applies to contractors reviewing travel, vehicle, and job-site spending.
Estimating the Cost Impact and Planning Ahead
Minimum wage increases and overtime reclassification change the labor burden baked into every bid. A one-dollar wage increase on a ten-person crew at 2,000 hours each is $20,000 of direct cost before payroll taxes and workers’ compensation premiums, which often track payroll directly. The side effects of a rule change can be as hard to predict as the physical changes on a building: a homeowner who ignores humidity changes after sealing a crawlspace discovers that one fix creates a new problem, and a contractor who ignores a pay rule creates a new liability.
Bidding With a Higher Labor Burden
Quote labor rates from the state where the work happens, not the state where the office sits. Add the effective date of each increase to the bid calendar, and include an escalation clause when the project timeline crosses a known wage change. Public work adds another layer because prevailing wage determinations move with the same data.
Multistate Operations
A contractor with projects in three states may face three minimum wages, three sick leave laws, and three training requirements. Build a one-page matrix per state that covers the basics:
- Minimum wage and its effective date
- Sick leave accrual rate
- Harassment training requirement
- Posting obligations
Tracking Each State’s Calendar
Review the matrix twice a year or whenever a state budget passes. Assign one person to own the list and to flag any state where the legislature is debating wage or leave bills, because the difference between a 90-day notice and a 30-day notice is often a re-priced bid.
Monitoring these rules works best as a routine rather than a reaction. Just as structural engineers use methods to monitor crack width changes in structures, catching small movements before they become failures, employers need a way to catch regulatory movements before they become compliance failures. A quarterly review of federal agency announcements and state labor department pages, tied to the payroll calendar, keeps a contractor ahead of the next change instead of paying for the last one.