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Federal Court Upholds Federal Contractor Minimum Wage Increase

Posted by National Alliance for Fair Contracting on

JD Supra – Jan. 18, 2023

On Jan. 6, 2023, the U.S. District Court for the District of Arizona upheld President Joe Biden’s authority to issue an Executive Order (EO) increasing the minimum wage for federal contractors and subcontractors to $15 per hour.

As McGuireWoods previously reported, on April 27, 2021, President Biden signed an (EO) requiring federal contractors performing service, construction or concession contracts to pay a $15 minimum hourly wage to employees working on such contracts. Subsequently, the U.S. Department of Labor issued a Final Rule implementing the EO.

The EO invited litigation, and on Jan. 6, 2023, an Arizona federal court ruled in favor of the Biden Administration, dismissing a challenge brought by attorneys general for Arizona and four other states. The states argued that the EO and Final Rule violated the Federal Property and Administrative Service Act (FPASA), the Administrative Procedures Act and the Spending Clause of the U.S. Constitution, among other things. In response, the federal government argued the EO and Final Rule were “unremarkable,” noting that the past three presidents had altered the minimum wage for federal contractors pursuant to the FPASA.

The court found the wage increase had a sufficiently close nexus to the FPASA’s purposes of promoting economy and efficiency in federal contracting. In so holding, the court credited the President’s rational determination that improvements to productivity and quality of work from a wage increase would outweigh any cost increases in federal procurement.

The court further found the application of the wage increase to subcontractors was valid, and noted their inclusion was necessary to close potential loopholes.

The administration continues to defend the wage increase in other venues, including in a similar suit in Texas, and a narrower challenge in Colorado to its application to recreational contractors on public lands. In the Colorado case, the U.S. Court of Appeals for the Tenth Circuit preliminarily blocked the hike on recreational contractors pending substantive review. However, the wage increase otherwise has gone into effect for government contractors and subcontractors, so any bids for government contracts should take it into account.

(See Article)

New York Construction Wage Theft Law: Prime Contractors Responsible for Subcontractor’s Failures

Posted by National Alliance for Fair Contracting on

Friday,  July 1,  2022

The scope for liability related to employee wage claims has changed dramatically for contractors and subcontractors operating in New York under a new law that shifts wage payment obligations to prime contractors.

New York Governor Kathy Hochul signed into law NY State Senate Bill S2766C, which is intended to reduce wage theft claims and amend wage theft prevention and enforcement in the construction industry within the state, on January 25, 2022, and the new law is effective retroactively to January 4, 2022.

The Legislature proposed this amendment to existing wage theft law to increase the likelihood that allegedly exploited workers in the construction industry will be able to secure payment and collect unpaid wages and benefits for work already performed by shifting the ultimate payment obligation to prime contractors.

Prior to the new law, a worker could only bring a private lawsuit for alleged unpaid wages (including overtime and fringe benefits) against their direct employer. The New York State Assembly asserted that this was a major issue in the construction industry and that subcontractors hid assets, changed their corporate identities, or took part in other alleged unscrupulous practices to avoid liability and make themselves judgment-proof from a potential wage theft action.

The New Standards
There are two sections to the new law. Section one pertains to construction industry wage theft and is codified under NY CLS Labor § 198-e. Pursuant to this new section, a construction contractor, as defined within, would assume liability for any unpaid wages, benefits, damages, and attorney’s fees related to a civil or administrative action by a wage claimant or the Department of Labor against a lower tier subcontractor.

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Construction firms owe $1.1 million in back pay (IL)

Posted by National Alliance for Fair Contracting on

State decision on prevailing wage follows complaint by carpenters council.

By David Roeder
Feb 24, 2020

The Chicago Regional Council of Carpenters said Monday the developer and subcontractors that built a senior living center in Northbrook have been ordered to pay $1.1 million to employees for violating state law on prevailing wages and benefits.

The Illinois Department of Labor, responding to charges the council filed, ordered the back pay for employees who constructed the Lodge of Northbrook, a 164-unit facility at 2150 Founders Drive, Northbrook. The project benefited from bonds issued by the Illinois Finance Authority, making it subject to the state’s Prevailing Wage Act. …

Executive Secretary-Treasurer Gary Perinar of the carpenters council said the back pay award is the largest in its history. He said many workers will receive thousands of dollars paid out over a year.

“We have a new department dedicated to combating wage theft and are putting unscrupulous contractors on notice that cheating workers and taxpayers will not be tolerated,” he said. The council is a part owner of Sun-Times Media. …

“Wage theft and the loss of tax revenue affects everyone,” Perinar said. “It takes advantage of workers, many of whom are unaware of their right to receive fair wages and benefits for themselves and their families. It puts signatory union contractors at a disadvantage for competitively bid projects. And it cheats communities out of tax dollars to increase future growth, new projects and public services. Thanks to our research team for discovering this injustice and to the Department of Labor for enforcing the law.”

(Read More)

Roseville adds labor standards to subsidies after union criticizes developer’s use of subcontractors (MN)

Posted by National Alliance for Fair Contracting on

By J.D. DUGGAN
PUBLISHED: September 20, 2019 at 6:58 pm

Roseville has begun adding labor standards to development tax break deals after union officials raised concerns about how developers are using subcontractors.

Earlier this week, prompted by a dispute over a $29.4 million Fairview Avenue apartment building, the city required developers to obey all environmental, labor, health and zoning laws and restrictions, as well as to pay all contractors, subcontractors and laborers before requesting a Certificate of Completion. If a developer is found guilty of wage theft, the city can withhold payments.

“How are we going to make sure people are treated fairly and paid fairly and not given these promises?” said Roseville City Council member Wayne Groff. “I don’t know how much this will affect this exact development.”

The requirements will become standard language in all future agreements where the Roseville Economic Development Authority provides financial assistance.

Roseville’s move comes after members of the North Central States Regional Council of Carpenters told members of the Roseville Economic Development Authority at a meeting that some developers use subcontractors who allegedly break labor laws such as using child labor, stealing wages and exploiting workers.

DEVELOPER IN THE CROSSHAIRS

Minneapolis-based Reuter Walton is planning an apartment building in the 2700 block of Fairview Avenue in Roseville. A $3.5 million tax increment financing deal would be part of the package.

As the project neared its final approval stages, members of the carpenters union jammed an Economic Development Authority meeting and objected to Reuter Walton’s use of subcontractors. One of those past subcontractors – Ricardo Batres – was charged with labor trafficking, theft by swindle and insurance fraud.

The union has taken its criticisms to other cities where Reuter Walton is considering projects, including St. Paul, where an apartment complex was approved last month.

“Reuter Walton continues to profit off of these (subcontractors) that are engaging these violations repeatedly,” said Richard Kolodziejski, spokesperson for the carpenters union.

(Read More)

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Are General Contractors Liable For Their Subcontractors’ Actions Or Inactions?

Posted by National Alliance for Fair Contracting on

JD Supra
June 26, 2019

A general contractor in Southern California found itself on the hook for its subcontractor’s failure to pay wages to its workers, even though the general contractor had no knowledge of it. The case illustrates an important reminder for general contractors. The general contractor was fined close to $600,000 under a 2017 California law, A.B. 1701, which holds general contractors liable for their subcontractor’s failure to pay wages owed to workers.

Holding a general contractor responsible is not new or limited to state law. Under most federal employment laws, a general contractor could be found to be a joint employer with its subcontractor, or a temporary staffing agency, when certain conditions are met. In determining if the general contractor is jointly employing workers with its subcontractors, courts will look at the level of control exercised by the general contractor over these workers, as well as intermingling of operations, common ownership, supervision of work, pooling of employees, sharing of clients or customers, and agreements between the companies.

Unexpected and significant consequences for a general contractor may result from its subcontractor’s noncompliance with the law. For example, under the Fair Labor Standards Act, a general contractor found to be a joint employer could be liable for a subcontractor’s failing to pay wages or overtime and misclassifying a worker as exempt or as an independent contractor, among other things.

In addition, more and more courts are looking at whether general contractors should be held accountable for a subcontractor’s alleged harassing or discriminatory conduct under Title VII of the Civil Rights Act.

State and federal agencies and workers may go after a general contractor for joint-employment liability when the subcontractor cannot cover the liability on its own or it is no longer operating, and the general contractor has deeper pockets.

Accordingly, to reduce risk, general contractors should consider carefully who they choose to do business with and take steps to ensure that their business partners are compliant with federal and state laws.

(See Article)

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Nevada Gov. Steve Sisolak signs bill restoring prevailing wages (NV)

Posted by National Alliance for Fair Contracting on

May 28, 2019
Geoff Dornan

Gov. Steve Sisolak on Tuesday signed legislation repealing changes made by the Republican dominated 2015 Legislature that weakened Nevada’s prevailing wage laws.

The GOP raised the threshold for projects to require contractors pay prevailing wage from $100,000 to $250,000. They also directed the Labor Commissioner to set prevailing wages for public school and higher education construction projects at 90 percent of what would be required for other public works projects.

AB136 repeals both of those changes, restoring the law to what it was before 2015.
In addition, he signed SB231 which repealed language basically prohibiting contractors and subcontractors from entering into or adhering to any agreement with labor organizations when working on public projects. SB231 eliminates language that strongly discouraged public bodies from hiring contractors who have agreements with unions and prohibits public bodies from awarding grants, tax abatements credits or exemptions to contractors that enter agreements with labor organizations.

Sisolak said he was keeping his campaign promise to “return prevailing wage to public construction projects.”

He said that will help guarantee public construction projects are built by highly qualified workers and increase competition among those contractors.

(Read More)

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Public Work Contractors Should Check Their Payroll, Then Check it Twice… (MD)

Posted by National Alliance for Fair Contracting on

JD Supra
April 10, 2019

Maryland “public work” contractors and subcontractors better be checking their payroll, and then checking it twice, because Senate Bill (“SB”) 300 just came to town! Of course, this level of payroll diligence should already be the norm, but effective October 1, 2019, the stakes for certain public work contractors and subcontractors are just a little bit higher for those that fail to pay the appropriate Maryland prevailing wage rates. As a result, the legal process for their underpaid employees could move much faster.

For those less familiar with Maryland public work contracts, pursuant to Section 17-201(j)(1), “‘public work’ means a structure or work, including a bridge, building, ditch, road, alley, waterwork, or sewage disposal plant, that: (i) is constructed for public use or benefit; or (ii) is paid for wholly or partly by public money.” Notably, however, Maryland prevailing wage laws and the new changes for public work contracts do not apply to: (i) projects performed by a public service company under order of the Public Service Commission; (ii) certain elementary or secondary school projects for which less than 25% of the money used for construction is State money; (iii) certain other public work projects for which less than 50% of the money used for construction is State money; (iv) certain contracts where the contractor is already required to pay prevailing wage rates determined by the federal government; or (v) public works contracts valued at less than $500,000.00.

On March 28, 2019, the General Assembly of Maryland enacted certain new provisions in Section 17-224 of the State Finance and Procurement Article. These provisions allow employees of contractors and subcontractors working on eligible “public works” projects in Maryland, to the extent those employees are not paid the prevailing wage rate established by the Commissioner of Labor and Industry (the “Commissioner”), to immediately sue their employers for the difference between the prevailing wage rate and the amount actually received by the employees. Additionally, to the extent the employer is a subcontractor, both the contractor and subcontractor shall be jointly and severally liable for any violation of the subcontractor’s obligations under Section 17-224.

Under the old Section 17-224, employees were first required to file a complaint with the Commissioner to secure an order of restitution. Only after the employer failed to comply with the order could the Commissioner or the employee bring a civil action in circuit court to enforce the order. Further, the allegedly underpaid employee only had recourse against his or her employer, without an express right to recovery against upstream contractors.

(Read More)

DC Suit of Florida Company is a Primer on Misclassification (DC)

Posted by National Alliance for Fair Contracting on

by Jim Kollaer | January 18, 2019

The recent lawsuit filed by the District of Colombia attorney general against Florida Company Power Design, Inc., labor brokers JVA Services, LLC and DDK Electric Inc., that alleges 535 workers were misclassified as Independent Contractors, or 1099 workers, provides a primer on the way that some construction companies create vehicles to avoid taxes, the payment of overtime, the provision of worker’s compensation, or medical benefits. The lawsuit demands a jury trial where the defendants will have the chance to defend themselves, but the charges detailed give a full picture of how to set up and execute a plan to use independent contractors to act as subcontractors on specific projects for a specific company.

Generally, the process that the attorney general alleges representatives of Power Design used to set up the labor brokers in business and then use those labor brokers to provide manpower for their projects, specifically in the DC area, is being repeated across the country every day. This happens specifically in the construction industry, but it also is being used in various iterations by companies in a broad range of other industries and services as well.

The details of the lawsuit are very specific in how the companies were set up, legalized on a Friday and working on Power Design projects on a Monday. Companies were allegedly set up under names and with owners who had no experience in running a company but who were coached and given contracts and employment documents allegedly by Power Design. They, in turn, provided workers who allegedly worked for Power Design as independent contractors for sub-par wages and with none of the protections provided to Power Design’s jobsite superintendents and foreman on the same jobs.

(Read More)

Wage Theft in Downtown Worcester AGAIN! (MA)

Posted by National Alliance for Fair Contracting on

15 Jan, 2019
in Uncategorized by Kevin

This just isn’t right. Why are we seeing wage theft in downtown Worcester AGAIN! Worcester is in a renaissance we’re told, but many of the carpenters who are building the new Worcester continue to be victims of illegal business practices on high profile projects.

The stolen wages occurred at the historic Central Building at 332 Main St. This is a publicly supported project that has millions of dollars in public assistance. A partial listing of funding as recorded by the Worcester Telegram and Gazette begins, “MassHousing is providing a $3.7 million permanent loan and $1.4 million in workforce housing funding from the agency’s $100 million Workforce Housing Initiative. The project also received approximately $12 million through an allocation of federal and state low-income housing tax credits by the Massachusetts Department of Housing and Community Development, more than $3 million in direct affordable housing funding from DHCD, $1.2 million in HOME funds from Worcester, and approximately $5.3 million through allocations of federal and state historic tax credits.” (Worcester T&G – $5.1M financing deal for Central Building in Worcester 5/7/2016)

With this much public resources and taxpayer dollars you would expect this to be an exemplary project.

Sadly, Dellbrook Construction hired Nayelie Drywall, which is registered both as a Hartford, CT or Holyoke, MA subcontractor. Nayelie then stole wages from two non-union carpenters. After not receiving the money they were owed, these two Latino non-union carpenters came forward to the Carpenters Union for help.

“Worcester needs to stay vigilant in efforts to prevent wage theft. We’re willing to take on the Dellbrooks and Nayelie Drywall, but we’re hoping the Worcester City Council can pass a wage theft ordinance to help end the exploitation of workers in our City.”
Dave Minasian, Business Agent – Carpenters Local 336

(Read More)

New Maryland Law Makes General Contractors Liable for Paying Their Subcontractors’ Employees (MD)

Posted by National Alliance for Fair Contracting on

May 25, 2018
JD Supra

At the tail-end of the 2018 legislative session, the Maryland General Assembly passed Senate Bill 853, making construction general contractors jointly and severally liable for the failure of their subcontractors to pay their employees in compliance with Maryland’s wage and hour laws. This new law will become effective October 1, 2018. California recently passed a similar measure, AB 1701, which is applicable to construction contracts entered into in that state on or after January 1, 2018.

This controversial new Maryland law contains both a multiplier and an attorneys’ fees provision, dramatically increasing its impact. Under existing law, an employer that fails to pay an employee in accordance with Maryland’s wage and hour laws may be liable to the employee for up to three times the wages owed, plus reasonable attorneys’ fees and other costs. Until now, this liability has largely been confined to the direct employer-employee relationship. SB 853 expands the reach of Maryland’s wage and hour law, making a general contractor on a construction services project jointly and severally liable for a subcontractor’s failure to properly pay its employees. The term “construction services” is broadly defined to include “building, reconstructing, improving, enlarging, painting, altering, and repairing” in connection with real property. Notably, the liability imposed by this new law is not limited to first-tier subcontractors; rather, it expressly applies “regardless of whether the subcontractor is in a direct contractual relationship with the general contractor.” So, a general contractor is now liable for every wage and hour law violation occurring on a construction project, including those committed by subcontractors far down the construction chain. The time frame for this liability is also expansive. A claimant may make a claim against both the general contractor and the non-paying party as soon as two weeks after a violation occurs, and as late as three years after the occurrence.

For balance, the new law requires subcontractors to indemnify the general contractor for “any wages, damages, interest, penalties, or attorney’s fees owed as a result of the subcontractor’s violation.” This protection, however, is only as strong as the subcontractor’s ability to pay such damages and costs. SB 853 increases the likelihood that employees will sue both the general contractor and their direct employer when they believe they have not been properly paid. Because general contractors are now a target for additional litigation, the potential costs subject to indemnification by subcontractors will be increased by the general contractor’s costs of defense. Additionally, because the general contractor will not always be the direct employer of the plaintiff bringing such a claim, it may not have in its possession the employee-related documents necessary to defend a claim, including a potentially fraudulent claim. Notably, the law outlines two express exceptions to indemnification: (1) when indemnification is provided for in a contract between the general contractor and the subcontractor; or (2) when a violation arose due to the general contractor’s failure to make timely payments to the subcontractor.

(Read More)