In the case of Joseph Palmisano, et al. v. CrowderGulf, LLC, et al., the United States District Court for the District Court of New Jersey held that corporate officers are not individually liable for a failure to pay prevailing wages under New Jersey’s Prevailing Wage Act (the “PWA”).
In January 2013 Defendant CrowderGulf, LLC (“Contractor”) contracted with the State of New Jersey to perform “waterway debris removal services” from damage caused by Hurricane Sandy (the “Project”). In turn, Contractor subcontracted certain portions of the work to, among others, Defendant Bil-Jim Construction Co., Inc. (“Subcontractor”).
The Plaintiffs in the action brought suit individually and on behalf of others similarly situated, alleging that Contractor and Subcontractor failed to pay the prevailing wage for work performed on public projects, including without limitation full prevailing wages, shift differentials, overtime, and double-time for work performed on Sundays and Holidays. Importantly, Plaintiffs also named Subcontractor’s President, Vice President and Secretary/Treasurer (the “Individual Defendants”) in the action, claiming that, as “officers, principals, directors, supervisors, or managers”, the Individual Defendants are personally liable for Subcontractor’s failure to comply with the PWA. The Individual Defendants moved to dismiss the Complaint for failure to state a claim, contending that the PWA does not impute personal liability to corporate officers.
When considering a motion to dismiss, the Court is required to accept as true all allegations in the Complaint, and to view the same in the light most favorable to the non-moving party. Ultimately, a complaint should be dismissed only if the well-pleaded alleged facts, taken as true, fail to state a claim. While applying this legal standard, the Court granted the motion of the Individual Defendants, thereby dismissing the claims against them.
Plaintiffs argue that the PWA applies the New Jersey Wage Payment Law’s (“WPL”) definition of “employer”, which would result in the Individual Defendants being held personally liable. Plaintiff asks the Court to invoke the doctrine of in pari materia1. The Court, however, disagreed with Plaintiff, stating “the doctrine is not invoked to engraft the terms of one statute onto another merely because the general subject matters of the two enactments are similar.” The Court further noted that, unlike the Fair Labor Standards Act and the WPL, both of which impose individual liability on officers of a corporation, the PWA “employs the narrowest definition of employer, providing for no individual liability”. In further support of its holding, the Court noted the purpose of the PWA is “to establish a prevailing wage level for workmen engaged in public works in order to safeguard their efficiency and general well-being and to protect them as well as their employers from the effects of serious and unfair competition resulting from wage levels detrimental to efficiency and well-being”.
New Jersey’s PWA does not impute personal liability on principal officers of a corporation for a failure to pay prevailing wages. Though the PWA does not specifically define “employer”, the regulations promulgated under the authority of the PWA define “employer” as any natural person, company, firm, subcontractor or other entity engaged in public work”. Under this definition, an “employer” under the PWA is limited to the entity or individual that obtains and performs work under the contract, which is the actual contracting entity and not its individual officers.
In the event an employee of your corporation brings an action under the PWA and individually names the corporate officers as defendants, thereby seeking to impose personal liability upon them, such action should be immediately met with a motion to dismiss on behalf of the individually named defendants.
Note that, notwithstanding the case law discussed herein, there may be indirect personal liability pursuant to an indemnity agreement entered into in connection with the issuance of a payment bond on a public project, provided a successful claim is made against any such bond.
1The general principle of in pari materia, a rule of statutory interpretation, says that laws of the same matter and on the same subject must be construed with reference to each other. The intent behind applying this principle is to promote uniformity and predictability in the law.