Question. Prime Contractor worked on public improvement under a contract with the U.S. General Services Administration. Under the Davis-Bacon Act, the contract required Prime Contractor and its subcontractors to pay laborers wages and benefits at the prevailing rate. As required by the Miller Act, Prime Contractor obtained a payment bond from Surety. Prime Contractor allegedly did not pay purported bricklayer Mr. X wages and benefits under the prevailing rate. The principal dispute is whether Mr. X was properly classified as a "laborer" and "cement mixer". Can Mr. X simply sue the Surety on the Miller Act bond to recover prevailing wages due under the Davis-Bacon Act?
For the reasons discussed below, Mr. X cannot maintain his claim unless (1) there has been an administrative determination that his employer failed to pay the prevailing wage rates required by the Davis-Bacon Act, and (2) any funds administratively withheld by the government are insufficient to reimburse him.
The Contract called for Prime Contractor to perform construction work on the Project, including "bricklaying, masonry, stone setting and other construction trades." Pursuant to the Davis-Bacon Act, 40 U.S.C. §§3141 et seq., the Contract contained a provision requiring Prime Contractor, and any subcontractors of Prime Contractor, to pay laborers who worked on the Project wages and benefits at the prevailing rates for the type of labor performed. In addition, the Contract included a schedule of prevailing rates (the "Prevailing Rate Schedule") for various job classifications. As required by the Miller Act, 40 U.S.C. §§3131 et seq., Prime Contractor obtained a payment bond, issued by Surety, to guarantee payment to laborers and suppliers.
Plaintiff Mr. X performed labor at the Project and alleges Prime Contractor failed to pay the prevailing wages and benefits they were due under the classifications of labor they performed.
Mr. X seeks to sue, on behalf of himself and a putative class of all laborers who worked for Prime Contractor on the Project, to recover prevailing wages due under the Davis-Bacon Act, on the Miller Act bond issued by Surety. The issue is whether Mr. X may maintain this claim at all, unless (1) the U.S. Department of Labor (the "DOL") or the contracting federal agency — here, the GSA — has made an administrative determination that Mr. X's employer — here, Prime Contractor — failed to pay prevailing wages due under the Davis-Bacon Act, and (2) any funds withheld from the employer by the federal government are insufficient to pay Mr. X the owed wages. Surety argues that because the Davis-Bacon Act is enforced administratively, the above requirements are prerequisites to suit. Without disputing this characterization of the Davis-Bacon Act, Mr. X argues that because his suit is brought under the Miller Act, any limitations on Davis-Bacon Act suits are inapplicable.
The Davis-Bacon Act requires federal contracts "in excess of $2,000, to which the Federal Government…is a party, for construction, alteration, or repair…of public buildings and public works of the Government" to contain a provision requiring contractors and subcontractors to pay their laborers and mechanics minimum wages that are "based on the wages the Secretary of Labor determines to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in [the relevant locality]." 40 U.S.C. §§3142(a)-(b). The Act further requires covered contracts to include a provision permitting the federal agency to withhold accrued payments from noncompliant contractors and subcontractors and to use those withheld payments to pay laborers and mechanics the wages they are due. Id. §3142(c)(3). The Comptroller General must pay laborers directly from such withheld funds. Id. §3144(a)(1). Covered contracts must also include a provision allowing the federal agency to terminate the right of any noncompliant contractor or subcontractor to continue work on the contract. Id. §3143.
The Davis-Bacon Act is enforced administratively by the contracting federal agency and the DOL. The DOL issues both general and project-specific wage determinations for use by contracting agencies. 29 C.F.R. §§1.5, 1.6. Disputes between the contracting agency and contractors "concerning payment of prevailing wage rates, overtime pay, or proper classification" are resolved, in the first instance, by the Administrator of the Wage and Hour Division of the DOL's Employment Standard Administration ("Administrator"), with a right of appeal to an administrative law judge or administrative review board. Id. §§5.11(a)-(d). Contracting agencies and the DOL are jointly responsible for ensuring that prevailing wages are paid. Contracting agencies "shall cause such investigations to be made as may be necessary to assure compliance with [the Davis-Bacon Act]," id. §5.6(a)(3), and the DOL may conduct its own investigations, id. §5.6(b).
Although the Davis-Bacon Act exists for the benefit of laborers who perform work on federal contracts, the ability of laborers to bring suit under the Act is limited in that it does not include a general, implied right of action for laborers, even if the contract is covered by the Act, and, moreover, that laborers cannot recover Davis-Bacon Act wages by bringing state law contract claims or claims under the federal Fair Labor Standards Act ("FLSA").
Laborers who perform under contracts governed by the Davis-Bacon Act are not entirely without remedy, however. Section 3 of the Act ("section 3") provides that:
If the accrued payments withheld [by the federal agency] under the terms of the contract are insufficient to reimburse all the laborers and mechanics who have not been paid the wages required under this subchapter, the laborers and mechanics have the same right to bring a civil action and intervene against the contractor and the contractor's sureties as is conferred by law on persons furnishing labor or materials.
40 U.S.C. §3144(a)(2).
The Miller Act requires any contractor performing on a "contract of more than $100,000…for the construction, alteration, or repair of any public building or public work of the Federal Government" to furnish a "payment bond with a surety satisfactory to the [contracting federal] officer for the protection of all persons supplying labor and material in carrying out the work provided for in the contract." 40 U.S.C. §§3131(a)-(b). The Miller Act confers on "[e]very person that has furnished labor or material in carrying out work provided for in a contract for which a payment bond is furnished" a right to "bring a civil action on the payment bond for the amount unpaid at the time the civil action is brought" if that person has not been fully paid within 90 days of the date on which work was last performed or materials furnished. Id. §3133(b)(1).
A laborer may sue to recover prevailing wages due under the Davis-Bacon Act by bringing a claim against the surety of a Miller Act bond. However, a claim on a Miller Act bond to recover Davis-Bacon Act wages must comply with section 3, regardless of whether the cause of action arises under section 3 itself or the Miller Act. That makes sense, since the Miller Act itself creates no liability for failure to pay prevailing wages. The source of such liability is the Davis-Bacon Act. The requirements of the Davis-Bacon Act would be meaningless if a party could bring a suit based on Davis-Bacon Act violations while bypassing the extensive administrative regime enforcing that statute simply by pleading a cause of action under the Miller Act.
A “section 3” claim must meet two requirements. First, as the text expressly states, laborers may bring a claim only if funds withheld by the agency are insufficient to fully reimburse all laborers who are entitled to prevailing wages. Second, a laborer may bring a claim only if the federal government — that is, either the contracting agency or the DOL — has administratively determined that the contractor or subcontractor has failed to pay prevailing wages. Although this second requirement is not expressly stated, it is strongly implied by both the text and the structure of the statute.
Mr. X cannot bring a “section 3” claim because he does not allege that (1) the contracting agency or the DOL made an administrative determination that his employer, Prime Contractor, failed to pay prevailing wages, and (2) any withheld funds are insufficient to reimburse him.
If you would like more information regarding this topic please contact Thomas S. Tripodianos at TTripodianos@wbgllp.com, or call him at 914-607-6440.
Please understand that this column provides the information only, and should not be construed as legal advice to anyone under any circumstances. The author reserves the right to modify any questions submitted so as to broaden their appeal. While we encourage you to contact us, you should not disclose to us any information that you consider confidential unless and until we have formally established an attorney-client relationship, and agreed to represent you in your particular matter. The opinions expressed in this column are of the individual author, and not necessarily those of the Hudson Valley Builders and Remodeler’s Association. Citations to legal authority have been omitted.