By: Michael Irwin Silverstein Published: July 2018

Labor Law Section 220 Provides a Direct Right of Action to Workers to Assert Claims Against Contractors for Payment of Prevailing Wage and Benefit Rates

In Agolli v. PS Contracting of NJ Inc. (Supreme Court, N.Y. County, Nov. 29, 2017), plaintiffs, two laborers employed by defendant PS Contracting of NJ, Inc. (“PS Contracting”) brought a class action lawsuit for breach of contract on behalf of themselves and all other similarly situated persons who furnished labor to defendants PS Contracting and two other contractors, Zoria Housing, LLC (“Zoria Housing”), and Technico Construction Services Inc. (“Technico Construction”) on three different projects.  The plaintiffs alleged that these defendants breached their public work contracts with the New York City Housing Authority (“NYCHA”) when they failed to pay the plaintiffs prevailing wage rates, supplemental benefits, and overtime wages as required by Section 220 of New York’s Labor Law. The plaintiffs specifically alleged that Zoria Housing and Technico Construction Services entered contracts with NYCHA around 2009 to manage and perform construction projects at various sites owned by NYCHA. The two named plaintiffs performed construction work for PS Contracting, a subcontractor for Zoria Housing and Technico Construction Services, on these public work projects. The purported class included workers of any one of these three defendants. The plaintiffs claimed that Labor Law Section 220 required Zoria Housing and Technico Construction Services, either themselves or through their subcontractor PS Contracting, to pay laborers working on these projects “not less than the prevailing rate of wages,” supplemental benefits, and prevailing “premium wages” for “overtime work.” Each contract for the projects included a schedule of prevailing wage and benefit rates.

The defendants, including Zoria Housing’s payment bond surety, unsuccessfully moved to dismiss the workers’ lawsuit. On the motion to dismiss, the defendants first argued that the complaint lacked the specificity required to state a claim for breach of contract. The  the Court disagreed, finding that the complaint identified the parties and projects covered by the contracts under which the plaintiffs made their claim. The complaint further alleged that those contracts obligated defendants to pay the plaintiffs prevailing wages and benefits according to Labor Law Section 220, as third party beneficiaries of the defendants’ contracts with NYCHA.  Finally, the plaintiffs alleged that the defendants violated those contracts by failing to pay them the statutorily required wages and benefits. The Court found these allegations were sufficient to sustain plaintiffs’ breach of contract claims. In doing so, the Court observed that at the pleading stage of litigation, the plaintiffs need not specifically identify the contracts under which they claimed payment, and it was sufficient that they have identified the construction projects that the contracts cover, and that they have specified that the complaint refers to the contracts requiring defendants to pay plaintiffs prevailing wages according to Labor Law Section 220.  

The defendants’ second ground for dismissal was equally unavailing.  Here, the defendants relied a provision of their contracts with NYCHA, which read, as follows:

Disputes arising out of the labor standards provisions of this Contract shall not be  subject to the general disputes clause of this Contract. Such disputes shall, be resolved in accordance with the procedures of the Department of Labor set forth in 29 C.F.R. parts 5, 6, 7. Disputes within the meaning of this clause include disputes between the Contractor (or any of its subcontractors) and the Authority, the U.S. Department of Labor, or the employees or their representatives.

The defendants maintained that this section of the contract required the plaintiffs to resolve their dispute over prevailing wage rates, supplemental benefits, and overtime wages under the procedures set forth in 29 C.F.R. Parts 5-7, the application of which would have divested the Court of jurisdiction to hear plaintiffs’ claims. The Court, however, did not agree, noting that the cited sections of the C.F.R. only applied to challenges in the prevailing wage rates, and that the plaintiffs were not challenging the prevailing wage and benefit rate schedules in the public work project contracts but, rather, the defendants’ failure to pay those wage and benefit rates, as defined in those schedules, in the first place.

The lesson to be gleaned from the Court’s holding is a reminder that Section 220 of the Labor Law not only provides the Department of Labor with an administrative remedy against the contractor, but it also provides the workers with a direct right of action. This direct right not only includes the worker’s employer, but contractors upstream from the worker’s employer. Accordingly, contractors on public works projects would be cautioned to not only ensure that they are paying their workers proper prevailing wage and benefit rates, but to ensure that their subcontractors are as well.

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