While this column often deals with issues relating to the construction industry, it is sometimes overlooked that construction contractors are, more generally, employers, just like those outside the construction industry. Those generally applicable rules, however, can be just as easy to run afoul as those which are uniquely applicable to the construction industry. In the recent case of Shevlin v Wonder Works Construction & Development Corp., a Court reminds us that New York’s generally applicable whistleblower protection statute (Labor Law §740) is also applicable to construction contractors.
Prior to 2013, Wonder Works Construction Corp. entered into a contract with 421 Kent Development, LLC for Wonder Works to be the construction manager for a construction project at 421 Kent Avenue in Brooklyn. The contract between Wonder Works and 421 Kent provided that “[421 Kent] reserves the right to direct the removal of any of [Wonder Works’] staff for cause (at [421 Kent’s] sole discretion) including Key Personnel, and [Wonder Works] shall promptly replace such individuals with competent substitutes acceptable to [421 Kent]”.
In 2013, Scott Shevlin was hired by Wonder Works to be a site superintendent at the 421 Kent Avenue project. At the commencement of the project, the 421 Kent Avenue site was surrounded by a fence around three sides, which had been left by the previous owner. The site was divided by a private street, which was guarded by rolling gates that were supposed to have been closed when not in use. The New York City Department of Buildings required that Wonder Works both build an interior fence on the fourth side of the site, and keep the rolling gates closed when not in use, in order to safeguard the site as a condition of lifting a previous stop-work order. If the gates were left open, the public would use the private street as a shortcut between two local thoroughfares.
A problem arose with the site’s neighbor, who preferred to leave the rolling gates open for his own convenience. As DOB continued to warn Wonder Works about leaving the gates open, Shevlin would close them. Both Wonder Works’ vice president and 421 Kent Development’s site representative would tell Shevlin he should leave the gates well enough alone, and that they did not care about whether the gates were open or closed. This indifference was communicated to Shevlin several more times prior to his termination, and Shevlin, pursuant to both DOB’s and his immediate supervisor’s instructions, would insist on keeping the gates closed.
In January of 2014, Wonder Works received a letter from 421 Kent Development’s site representative directing Wonder Works to replace Shevlin with “alternative competent personnel for cause”, claiming that “Shevlin has demonstrated a lack of fiduciary responsibility and a retaliatory approach in dealing with daily issues”. In response, Wonder Works terminated Shevlin’s employment. In subsequent correspondence between Shevlin and another Wonder Works principal, Shevlin was advised that the termination was the owner’s decision, and that Shevlin did nothing wrong.
Shevlin commenced a lawsuit under New York’s Whistleblower Protection Statute, Section 740 of the Labor Law, against both Wonder Works and 421 Kent Development, alleging that he was terminated for insisting on keeping the gates closed, even though it caused consternation with the neighbor. Wonder Works and 421 Kent Development both claimed that the termination had nothing to do with the rolling gates issue. Wonder Works also claimed that in light of its contract with 421 Kent Development, it was required to terminate Shevlin and had no discretion in the matter; 421 Kent Development also claimed that it could not be held liable because it was not Shevlin’s employer.
A non-jury trial was held on Shevlin’s claim, and the court credited the testimony that there were no complaints about Shevlin’s employment other than his insistence on keeping the gates closed, and discredited the testimony that his firing was unrelated to the access issue. In order to find a violation of the version of Section 740 in effect at the time, the court also had to find that there was, in fact a violation of a statute, code, etc. The court found such a violation of Section 3307.3.4 of the Building Code, which requires that openings in fences, sidewalk sheds, barriers, and railings be closed at all times except during actual loading and unloading operations, and the court linked Shevlin’s termination to his insistence on keeping these gates closed. (The current version of the statute only requires that the employee have a reasonable belief about the violation of a statute, code, etc., not that the violation actually exist).
The court found that Wonder Works’ defense of just following the contract was unconvincing, holding that while the contract did give 421 Kent Development the right to remove Wonder Works’ employees “for cause”, as determined to exist in the sole determination of 421 Kent Development, it could not require Wonder Works to violate applicable law in doing so. As to 421 Kent Development, even though it was the root cause of Shevlin’s termination, it was not liable because the statute was specifically made applicable to employers, and 421 Kent Development was not Shevlin’s employer. Based on these findings, the court dismissed the case against 421 Kent Development, and it directed Wonder Works to pay Shevlin $227,000 in back pay, plus his attorney’s fees.
In dealing with contractual provisions between parties, this column has routinely cautioned that obligations should be made consistent both upstream and downstream (e.g.: if a GC’s contract with the owner requires arbitration, the GC should require arbitration of its subcontractors). As the Shevlin court reminds us, those obligations must also be consistent with state law, including generally applicable employment law. As Wonder Works learned here, the defense of “just following the contract” was not sufficient to save it from a significant lost wages claim—plus potentially over $50,000 in attorney’s fees.
About the author: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the Construction Industry Council of Westchester and the Hudson Valley, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State/Greater Metropolitan Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series with Mr. Welby.