Chattanooga’s Industrial Development Board approved payments Tuesday of more than $225,000 for back wages to Volkswagen contractors after it was discovered that contrary to state law, some workers had not received prevailing union wages for their work at the site of Volkswagen North America’s plant.
Steve Leach, administrator of the Department of Public Works, said because parts of the Volkswagen project were constructed with state money, state prevailing wage laws applied to all laborers working at the paint building, training center and media building.
“Everybody thought that the contracts did not require a prevailing wage, but state projects do require a prevailing wage,” Leach said.
The law requires that workers in Hamilton County receive from just under $11 per hour for common laborers up to about $26 an hour for electricians, according to the Tennessee Department of Labor and Workforce Development.
That was not being done, according to City Attorney Mike McMahan, because when the contracts were originally inked, money for the site work was coming out of state economic development grants, “which do not have prevailing wage provisions.”
The state later issued bonds to pay for portions of the project, he said, but that money came with strings attached.
“We had to go back to all the contractors, then have the contractors and subs pay employees the difference, then we paid for the cost of the difference and the cost of the audit,” McMahan said. “It’s been an arduous process, but we’re finally coming to the end.”
The change orders affected less than a dozen contracts, he said, and all new contracts will obey the law.
The change bumped up cost to the city board to about $3.5 million, which only leaves about $65,000 left out of the original amount approved by the city, Leach said.
The charges were offset by some cost savings in the Volkswagen training center to the tune of $33,145, where engineers were able to substitute cheaper equipment to save money, he added.
Efforts are under way to save the city from additional headaches in the future, however, officials said.
With much of the VW project moving into the final phase, checklists are being distributed to contractors so the city can verify that work is complete “before we pay them,” Leach said.
“We want to make sure everything is in place,” he said.
James Williams, a supervisor for EMJ Corp., who will oversee the final stages of construction, said he is looking forward to closing out the “myriad of contracts.”
“We’re hoping to have everything closed up, boxed up, by the time they start making cars,” he said.