Court Upholds Subcontractor's Willful Violation of Prevailing Wage Laws
New York State's prevailing wage laws require construction workers on public works projects to be paid the prevailing wages in the area. This requires that the contractors and/or subcontractors pay the workers no less than what the Department of Labor determines to be the prevailing wage rate and supplemental fringe benefits, such as employee retirement plans and health insurance. The DOL determines that the prevailing rate for a given job is the same as the union wage and benefit rates in the local area. By linking the prevailing wage to the union wage and benefit rates in the local area, the prevailing wage laws prevent non-union contractors from gaining an unfair advantage by basing their bids on wages lower than those prevailing in the area.
The penalty for those who willfully fail to pay the prevailing wage to their employees are severe, as demonstrated in the case of Matter of A. Uliano & Son, Ltd. v New York State Department of Labor.
Uliano was a site work subcontractor on a construction project at Syosset High School. During the course of its work, the Department of Labor's "Strike Force"-a designated unit within the DOL which initiates investigations into public work projects without the need for an underlying complaint-visited the work site and interviewed several of Uliano's employees. Based on these interviews, the DOL requested Uliano's payroll records for the project. When provided to the DOL, investigators discovered discrepancies within Uliano's various payroll records, and that these records varied from what the workers told the DOL's investigators. The investigators prepared an audit based primarily on the information obtained from the workers and the prime contractor's records, which showed an underpayment of wages.
After a hearing, the DOL found that Uliano's workers had, in fact, been underpaid, and found that the investigator's methodology of determining the amount of the underpayment was credible. Further, based on the inaccuracies in Uliano's certified payroll reports, the contractor's prior experience with public works projects, and his admitted recording of additional time for himself for which he did not work, the DOL found that the failure to pay the prevailing wage was willful.
Uliano challenged the DOL's determination in an Article 78 proceeding, arguing that the DOL's computations were refuted by the evidence it presented at the hearing. The Court dismissed that argument, finding that where the employer fails to keep accurate payroll records, the DOL is permitted to calculate the actual hours worked and wages owed using the best available evidence. It then becomes the employer's burden to negate the DOL's computations.
The Court found that the evidence supporting Uliano's claim that the workers in question only worked on a single day (which happened to be the day that the "Strike Force" visited the worksite), was not credible, and that the DOL's calculations, although approximate, were supported by substantial evidence in the record. Further, the Court found that, based upon Uliano's familiarity with public works projects and its prior history of prevailing wage underpayments, the underpayment here was willful. Accordingly, the Court upheld the imposition of both the 25% penalty on the underpayment, as well as interest at the rate of 16% from the date of the underpayment.
Once there is evidence of an underpayment of wages, the Department of Labor has broad powers to use the "best available evidence"-including evidence gleaned from interviews with the affected employees-to determine the amount of the underpayment. Further, if the underpayment is determined to be willful, the sanctions for such an underpayment are severe. The prime contractor was also found to be liable for the underpayment, including the civil penalty and interest, under the Labor Law, which makes prime contractors vicariously liable for its subcontractors' failures to pay prevailing wage, regardless of whether the contractor knew of the subcontractor's violation.
It is insufficient for the prime contractor to simply rely on the subcontractor's certified payroll to assure the subcontractor's compliance with the prevailing wage requirements. The prime contractor should require the subcontractor to provide all documents and information needed to make sure that the subcontractor is paying the appropriate prevailing wage rates. One method is for the prime contractor to compare the subcontractor's certified payroll with what is reflected in the prime contractor's daily activity logs or daily reports. The prime contractor may also require the subcontractor to produce copies of the subcontractor's paychecks or paystubs to ensure that the payments match the subcontractor's certified payroll.
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