Monday, September 5, 2011

Government Contractors Who Fail to Pay Davis-Bacon Prevailing Wages are Liable Under the False Claims Act

The Davis-Bacon Act requires that companies with contracts with the federal government pay workers the prevailing wage of the area in which the work is performed. The Department of Labor is responsible for determining the prevailing wage. Federal regulations provide that contractors submit weekly payroll certifications, including certifications for all their subcontractors. Additionally, Davis-Bacon and federal regulations provide that government contractors are responsible for ensuring that subcontractors pay Davis-Bacon wages.  

Cases against contractors have been brought under the False Claims Act. United States ex rel. Wall v. Circle C., 700 F.Supp.2d 926 (M.D.Tenn. 2010) is an important case for both its holdings in regards to subcontractors and for its holding in regards to calculating damages. In this case the defendant, Circle C, was awarded a contract at Fort Campbell, an Army base in Kentucky. An employee who worked for a subcontractor of Circle C alleged that Circle C violated the False Claims Act by submitting false certifications to the government that it complied with Davis-Bacon when the subcontractor was not paying prevailing wages. The employee brought a whistleblower action on behalf of the United States in the Middle District of Tennessee. The United States brought a motion for summary judgment and Circle C moved to dismiss and for a judgment on the record.  

Ultimately, the court ruled in favor of the United States and awarded treble damages. According to the Court, Circle C did not take measures to ensure that its subcontractor, Phase Tech, was paying prevailing wages to its electricians. The Court found that Circle C submitted false payroll certifications by failing to list that Phase Tech had performed the vast majority of the electrical work on the contract. Additionally, Circle C’s certifications did not match Phase Tech records. At the time that Circle C submitted its certifications the prevailing wage for an electrical worker in Kentucky was $19.19 an hour with $3.94 in fringe benefits. Instead of this prevailing wage, Circle C’s subcontractor had paid some of its electrical workers $12-$16 an hour. The United States paid Circle C a total of $553,807.71 for the electrical work on the project that was performed by its subcontractor. Although Circle C argued that its damages should be the difference between the prevailing wage and the wages it subcontractors actually paid, the court refused to discount the damages in this way. The court entered a judgment of $1,661,423.13 against Circle C, which included treble damages but no statutory penalties.  

The decision against Circle C is important for several reasons. It affirms that contractors have a duty to ensure that subcontractors pay Davis-Bacon wages. In its decision the court noted that defendant did not have a contract with their subcontractor that provided that the subcontractor would comply with Davis-Bacon and did not attempt to inform the subcontractor of their duty to comply with Davis-Bacon. The court affirmed that defendants will not escape False Claims Act liability by willfully remaining ignorant of whether their subcontractors comply with Davis-Bacon. Most importantly, it provides that the measure of damages is not just the difference between wages actually paid and prevailing wage. Instead, damages are calculated by the total amount of prevailing wages that should have been paid. This is important because if defendants were not held accountable for the entire amount of their fraud, there would be a greater temptation to risk paying less than Davis-Bacon wages. Given that contractors may also be responsible for paying treble damages and other statutory penalties for their fraud, the False Claims Act is a powerful tool for ensuring that contractors pay Davis-Bacon wages on federal contracts.    


********************
Jennifer L. McIntosh is an attorney at Waters & Kraus, LLP, in the firm’s West Coast practice Waters, Kraus & Paul. Her practice focuses on class action cases, qui tam (whistleblower), and commercial litigation.

No comments:

Post a Comment