January 2002
By ALEXANDER A. MIUCCIO, CIC Legal Counsel
New York Labor Law Section 220, known as the state's "prevailing wage law," provides that all laborers, workers and mechanics working on public work projects must be paid not less than the wages and supplements or fringe benefits prevailing on such projects. Without such a law, contractors who did not provide prevailing wages and supplements would enjoy an unfair advantage in bidding on government-funded projects.
The prevailing wage rate and level of benefits are determined by the Department of Labor and are based on the wages and fringe benefits paid under collective bargaining agreements, provided they cover at least 30 percent of the workers in the same trade or occupation in the locality where the work is to be performed.
Penalties
Where a contractor has violated the prevailing wage law, the Commissioner of Labor will order a restitution of the underpayments to the employees with interest at the rate of 16 percent from the date the wages were due.
In addition, a civil penalty can be assessed up to a maximum amount of 25 percent of the underpayments and interest. The factors to be considered in assessing a penalty are: the size of the contractor's business, the good faith of the contractor, the gravity of the violation, the history of previous violations, and the failure to comply with record keeping or other non-wage requirements.
A violation can be found to be willful if the contractor knew or should have known that it was underpaying by not following the prevailing wage schedule for the project. When the Labor Commissioner, after hearings, renders two final determinations of willfulness against a contractor or subcontractor within any six-year period, the contractor or subcontractor will be barred from bidding on or being awarded any public works contract or subcontract for a period of five years.
Additionally, pursuant to Penal Law Section 175.35, it is a felony to file false documents, such as false payrolls, with state or local government agencies or public authorities.
In Emes Heating & Plumbing Contractors, Inc. v. McGowen, a prime contractor was found to have willfully failed to pay prevailing wages and supplements.
Background
A prime contractor, Emes Heating & Plumbing Contractors, Inc., entered into a public works contract with the Town of Clarkstown, Rockland County, to construct a new road drainage system on the Christian Herald Road Project. Emes and Rolf Greibesland, the owner of 4R Construction, had originally submitted a proposal to conduct the project as a joint venture, but the town insisted that Emes' corporate officer, Julius Behrend, be the sole signatory to the contract. Consistent with that request, Mr. Behrend wrote to the town asserting that Mr. Greibesland would only be a subcontractor while Mr. Emes would be "responsible for supervisory and financial obligations" with respect to the project.
Nevertheless, Messrs. Behrend and Greibesland acted throughout the course of the project pursuant to their earlier oral agreement to obtain and perform the contract similar to a joint venture. Their agreement called for Mr. Emes to finance the project while Mr. Greibesland supervised personnel and completed the actual work. All profits were to be split equally. Although Mr. Behrend claimed he assigned the contract to Mr. Greibesland, this claim was disputed by Mr. Greibesland and the assignment was prohibited under the contract without the town's approval.
Prior to the completion of the project, the Department of Labor received a complaint that Mr. Emes was paying project employees less than the wages and supplements specified in the prevailing wage schedule for the project. The department initiated an investigation and formally requested that Mr. Emes provide documentation of the hours worked by the employees and the wages paid to them. Mr. Emes failed to provide any payroll records and the department thereafter conducted an audit in an attempt to compile the missing information using wage claim forms and time logs maintained by a project employee and the Town Engineer. The audit concluded that several project employees had been underpaid wages and supplements.
After a five-day hearing, the Department's Hearing Officer issued a report concluding that Mr. Emes and Mr. Greibesland "were partners or acted as a joint venture" and were aware of the prevailing wage schedule but willfully failed to pay the project employees in violation of the prevailing wage law. The Department of Labor confirmed and adopted the report and ordered Mr. Emes to pay $37,751.81, the additional unpaid wages, plus 16 percent interest from the date the wages were due. The department also determined that Mr. Emes' failure to comply with the prevailing wage schedule was willful and assessed a 25 percent civil penalty. Mr. Emes commenced an Article 78 proceeding to appeal the determination.
Decision
The Supreme Court held that there was substantial evidence to support the department's finding the Mr. Emes willfully violated the prevailing wage schedule for the project. The proof established that Mr. Emes had previously worked on numerous public works projects and been cited by the department for failing to post a prevailing wage schedule for one of the projects.
According to the court, it was reasonable to conclude that Mr. Emes was aware of the prevailing wage schedule when it entered into the contract but did not take steps to ensure that the prevailing wage schedule was followed. The Court concluded that the department's determination of willfulness was based upon substantial evidence of a pattern of underpayments that extended over many months in violation of contractual and statutory requirements of which Mr. Emes was aware.
Conclusion
Governor George Pataki has pledged an all-out effort to ensure that contractors pay their employees the prevailing rate of pay on public projects. The Department of Labor has collected $27.4 million in wages and supplements for about 16,000 workers who were not paid the prevailing wage on public works projects over the past five years. In addition, 250 contractors were barred from bidding on public works projects as a result of prevailing wage violations. The monitoring of the payroll practices of contractors on public projects should be encouraged because it enhances the ability of honest contractors to compete successfully.
About the author: Mr. Miuccio is a partner in the New York City-based law firm Altieri, Kushner, Miuccio & Frind, P.C. and legal counsel to the Construction Industry Council of Westchester and the Hudson Valley, Inc.