Prevailing Wage Laws and the False Claims Act
Prevailing wage laws(1) require that contractors and subcontractors who obtain certain government construction and service contracts pay their employees a local minimum amount, commonly referred to as the “prevailing wage.” By: Joel M. Androphyi and Rachel L. Grier
The purpose of prevailing wage laws is to prevent contractors and subcontractors from bidding low in an effort to obtain lucrative government contracts, only to turn around and pay their employees less than what they would earn under non-government contracts. The federal government and numerous states have enacted prevailing wage legislation. Depending on the applicable law, the wage rates may be determined by collective bargaining agreements or various statistical data. For federally-contracted projects, the United States Department of Labor determines and enforces the applicable prevailing wage. Comparatively, on state-contracted projects, the various state labor departments usually determine and enforce the locally prevailing wage.
The seminal federal act in the context of prevailing wages is the Davis-Bacon and Related Acts, commonly referred to as the “Davis-Bacon Act.”(2) The Davis-Bacon Act applies to contractors and subcontractors performing federally-funded contracts in excess of $2,000 for the construction, alteration, or repair, including painting and decorating, of public buildings and public works.(3) Under the Davis-Bacon Act, contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the prevailing wages and benefits for corresponding work on similar projects in the area.(4) Furthermore, “in order to qualify for federal construction projects subject to the Davis-Bacon Act, contractors must ‘certify’ that ‘each laborer or mechanic has been paid not less than the applicable wage rates.”(5) Therefore, in the context of the False Claims Act (“FCA”), a contractor’s false certification that its workers were paid the prevailing wage pursuant to the Davis-Bacon Act can give rise to FCA liability.(6)
For example, in United States ex rel. Wall v. Circle Cons., LLC, the court held that Circle Construction (“Circle C”) violated the FCA when it falsely certified that prevailing wages were paid to subcontractor employees on a project for United States Army.(7) Pursuant to the contract, Circle C was to “pay electricians according to the wage determinations in the contract, to ensure that persons doing electrical work were paid as electricians, to submit payroll certifications to Fort Campbell as a condition of payment; and to ensure that its subcontractors complied with the Davis-Bacon Act and that the payroll certifications submitted to Fort Campbell were complete and accurate, including information on Circle C’s subcontractors.”(8) Circle C failed to list subcontractor employees for electric work in the payroll certifications for the first two years after the project commenced and failed to verify its subcontractor’s subsequent certifications for the years following.(9) The certifications contained a total of 62 non-complying hourly wages for laborers and electricians that fell below the amounts required under the Davis-Bacon Act.(10) In total, the United States paid Circle C $553,807.71 for the subcontractor’s electrical portion of the contract that “should have been paid to [the subcontractor]’s electric and other workers.”(11) The court held that because the Davis-Bacon Act and its regulations require payroll certifications for payment of federal funds(12) and because the prime contractor is responsible for both the submission of copies of payrolls by all subcontractors(13) and compliance by subcontractors to all provisions in the contract,(14) Circle C’s “wage certifications wrongly certified that the prevailing wages were paid on the Fort Campbell project in violation of the FCA.”(15) Because the Army paid out over $553,000 that it “would not have paid if the United States had known about Circle C’s false certifications,” the court assessed an award of three times the actual damages to the United States—$1,661,423.13.(16)
Of the fifty states, thirty-two(17) have enacted their own state prevailing wage laws, which vary considerably in their application and scope. The remaining eighteen states(18) without a prevailing wage law allow for the market to set the rates on state-sponsored construction. As in the federal FCA arena, the false certification of prevailing wages in those states with a prevailing wage law and a state equivalent of the FCA, could lead to liability for a state contractor.
Federal and State prevailing wage laws provide various threshold amounts for contract coverage.
See 40 U.S.C. § 3141 et seq.
40 U.S.C. § 3142(a).
40 U.S.C. § 3142(a)–(b). The locally prevailing wage and fringe benefits for each contract is determined by the United States Department of Labor
United States ex rel. Plumbers & Steamfitters Local Union No. 38 v. C.W. Roen Const. Co., 183 F.3d 1088, 1092 (9th Cir. 1999) (citing 29 C.F.R. § 5.5(a)(3)(B)(3)); See also 40 U.S.C. § 3145.
Id. (“[T]he FCA does indeed extend to false statements regarding the payment of prevailing wages”).
United States ex rel. Wall v. Circle Const., LLC, 700 F. Supp. 2d 926, 938–939 (M.D. Tenn. 2010).
Id. at 930–931.
Id. at 931–932.
Id. at 932.
See 40 U.S.C. § 3145; 29 C.F.R. § 5.5(a)(3)(I), (ii)(A)(B).
See 29 C.F.R. § 5.5(a)(3)(ii)(A).
See Id. at § 5.5(a)(6).
Circle Cons., 700 F. Supp. 2d at 939.
Id. at 940.
These states include: Alaska (Alaska Stat. § 36.05.010 et seq.), Arkansas (Ark. Code Ann. § 22-9-301 et seq.), California (Cal. Lab. Code § 1720 et seq.), Connecticut (Conn. Gen. Stat. Ann. § 31-53), Delaware (Del. Code Ann. tit. 29, § 6960), Hawaii (Haw. Rev. Stat. Ann. § 104 et seq.), Illinois (820 Ill. Comp. Stat. Ann. § 130/1 et seq.), Indiana (Ind. Code Ann. § 5-16-7-1 et seq.), Kentucky (Ky. Rev. Stat. Ann. § 337.505 et seq.), Maine (Me. Rev. Stat. Ann. tit. 26, § 1303 et seq.), Maryland (Md. Code Ann., State Fin. & Proc. § 17-201 et seq.), Massachusetts (Mass. Gen. Laws Ann. ch. 149, § 26 et seq.), Michigan (Mich. Comp. Laws Ann. § 408.551 et seq.), Minnesota (Minn. Stat. Ann. § 177.41 et seq.), Missouri (Mo. Ann. Stat. 290.210 et seq.), Montana (Mont. Code Ann. § 18-2-401 et seq.), Nebraska (Neb. Rev. Stat. § 73-101 et seq.), Nevada (Nev. Rev. Stat. Ann. § 338.010 et seq.), New Jersey (N.J. Stat. Ann. § 34:11-56.25 et seq.), New Mexico (N.M. Stat. Ann. § 13-4-11 et seq.), New York (New York Labor Law § 220(3)), Ohio (Ohio Rev. Code Ann. § 4115.03 et seq.), Oregon (Or. Rev. Stat. Ann. § 279C.800 et seq.), Pennsylvania (43 Pa. Stat. Ann. § 165-1 et seq.), Rhode Island (R.I. Gen. Laws § 37-13-1 et seq.), Tennessee (Tenn. Code Ann. § 12-4-401 et seq.), Texas (Tex. Gov’t Code Ann. § 2258.001 et seq.), Vermont (Vt. Stat. Ann. tit. 29, § 161 et seq.), Washington (Wash. Rev. Code Ann. § 39.12.010 et seq.), West Virginia (W. Va. Code Ann. § 21-5A-1 et seq.), Wisconsin (Wis. Stat. Ann. § 66.0901 et seq.), and Wyoming (Wyo. Stat. Ann. § 27-4-401 et seq.).
These states include: Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Utah, and Virginia.
iAuthor of treatise, Federal False Claims Act and Qui Tam Litigation, Law Journal Press (2010), research source of the issues discussed in this article.
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