Late, missing or wrong certified payroll: withholding, damages and debarment

The consequences for certified payroll problems run from a held payment to a 3-year ban from federal and federally assisted work. Each one below comes with the rule behind it.

What happens if certified payroll is late or missing?

Payments stop. The withholding clause in every covered contract, 29 CFR 5.5(a)(2)(i), says that when a contractor fails to submit the required records, the agency "may on its own initiative and after written notice" to the contractor or other entity "take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds until such violations have ceased." Section 5.5(a)(3)(iv)(B) repeats the sanction for records that are not submitted or made available, and 29 CFR 5.9 gives the agency the same power for any failure to comply with the labor standards clauses.

On a subcontracted job, the payment that stops is the prime's. The prime is responsible for submitting every sub's payroll, so a missing sub payroll can hold up the prime's progress payment, and the prime will look to your subcontract for what it can hold from yours. Who is responsible for what.

Suspension ends when the violation does. File the missing weeks, in sequence, and payments can resume. When payroll is due.

What happens if the payroll shows workers were underpaid?

You owe the difference to the workers. Under 29 CFR 5.10(a), the agency or DOL asks for restitution of the underpaid wages, or payment into the fringe benefit plans, "including interest from the date of the underpayment." Interest uses the IRS underpayment rate and compounds daily. Working out and paying back wages.

If the money isn't paid, the agency can take it from contract payments. Section 5.5(a)(2)(i) lets the agency withhold "so much of the accrued payments or advances as may be considered necessary" to cover the wages and interest owed by the prime or any sub. The agency may do this on its own and must do it when DOL asks in writing. It can also withhold from other federal or federally assisted contracts held by the same prime, even ones awarded by a different agency (29 CFR 5.9(b)).

DOL has priority to those withheld funds over the contractor's sureties, its assignees, a bankruptcy trustee, and Prompt Payment Act claims (29 CFR 5.5(a)(2)(ii)).

What are liquidated damages for overtime?

On contracts over $100,000, the Contract Work Hours and Safety Standards Act (CWHSSA) clause requires time and a half after 40 hours in a workweek. When a contractor doesn't pay it, 29 CFR 5.5(b)(2) makes the contractor and any responsible subcontractor liable for the unpaid overtime with interest, plus liquidated damages payable to the United States of $33 per worker for each calendar day on which that worker worked over 40 hours in the week without the required overtime pay.

The $33 figure is current. The Department of Labor's 2026 inflation adjustment notice, published May 27, 2026, cancelled the 2026 adjustment for its civil penalties, including those in 29 CFR part 5, because the October 2025 price data it is required to use was never published.

Example: 3 workers each worked 10 hours a day, Monday to Thursday, plus 6 hours on Friday, for 46 hours, and were paid straight time for all of it. Each crossed 40 hours on Friday, so that is 1 calendar day per worker: 3 × $33 = $99 in liquidated damages, on top of 6 overtime hours per worker at the half-time premium, with interest. Repeat that over 20 weeks and it is $1,980 in damages alone.

The agency can withhold for these damages too (29 CFR 5.5(b)(3)). Under 29 CFR 5.8, a contractor can appeal a withholding of liquidated damages to the head of the agency, and where the violation was inadvertent despite due care and the damages exceed $500, the agency head may recommend to the Secretary of Labor that they be reduced or waived. Overtime on prevailing wage jobs.

Can the contract be terminated?

Yes. The contract clause at 29 CFR 5.5(a)(7) says "a breach of the contract clauses in 29 CFR 5.5 may be grounds for termination of the contract, and for debarment." The certified payroll requirement is one of those clauses.

What is debarment, and how long does it last?

Debarment makes a contractor ineligible for federal and covered contracts. Under 29 CFR 5.12(a)(1), a contractor or subcontractor the Secretary of Labor finds "to have disregarded their obligations to workers or subcontractors" is ineligible for 3 years to receive any contract or subcontract of the United States or the District of Columbia, or any contract subject to Davis-Bacon labor standards.

It reaches past the company. The same paragraph covers the contractor's responsible officers and any firm in which the contractor or those officers have an interest, so opening a new company does not get around it. Debarred names are published on SAM.

Failing to submit required records on request, or refusing to make them available, "may be grounds for debarment action" (29 CFR 5.5(a)(3)(iv)(B)). A contractor that doesn't produce records to the Wage and Hour Division in the time it asks for also cannot use those records as evidence in a later hearing.

You get notice first. Under 5.12(b), the Administrator notifies the contractor of the findings, and the contractor has 30 days from that notice to request a hearing.

What happens if the payroll is false?

The Statement of Compliance on page 2 is a signed certification. Section 5.5(a)(3)(ii)(F) says falsifying it "may subject the contractor or subcontractor to civil or criminal prosecution under 18 U.S.C. 1001 and 31 U.S.C. 3729." The WH-347 prints the same warning in capitals above the signature, and adds debarment.

18 U.S.C. 1001 covers knowingly and willfully false statements to the government, with a fine, up to 5 years in prison, or both. 31 U.S.C. 3729, the False Claims Act, makes a person who knowingly presents a false claim for payment, or makes a false record material to one, liable for a civil penalty per claim plus 3 times the government's damages. Under 29 CFR 5.10(b), violations that look willful and criminal are referred to the Attorney General.

Both statutes turn on knowledge, though the False Claims Act defines "knowingly" to include deliberate ignorance and reckless disregard of the truth, with no need to prove intent to defraud. An honest arithmetic error fixed with a corrected payroll is a different situation from a payroll that certifies rates nobody was paid. What page 2 certifies.

Keeping payments moving

• File every week, in sequence, by the prime's cutoff, including no-work weeks if the prime asks for them.
• Fix errors the week you find them, with a corrected payroll and back pay to the worker. Correcting a payroll.
• Split overtime at 40 hours on every payroll, whatever the daily schedule.
• Produce records promptly when the agency, the prime or DOL asks.