Goodley McCarthy Obtains Final Approval of $475,000 Class Action Settlement in “Innovative” Prevailing Wage Case

Woman working construction machine

February 20, 2024

Case: Chase v. Kriger Construction, Inc., No. 2021 CV 5174 (Lack. Comm. Pl. Feb. 9, 2024)

On February 9, 2024, the Court of Common Pleas of Lackawanna County, Pennsylvania issued a Memorandum and Order finally approving a $475,000 class action settlement on behalf of 190 construction workers who worked overtime for Kriger Construction, Inc. on publicly-financed construction projects subject to the Pennsylvania Prevailing Wage Act (PPWA) and Davis-Bacon Act. In doing so, the Court commented that attorneys Ryan McCarthy and James Goodley brought (and successfully settled) an “innovative” and “novel” suit concerning the overtime requirements of the Pennsylvania Minimum Wage Act (PMWA).

The legal theory Goodley McCarthy asserted was that Kriger Construction violated the PMWA when it excluded “cash wages paid in lieu of fringe benefits” (“CWILOF,” which were paid to Plaintiff because he worked on public projects subject to the PPWA) from Plaintiff and class members’ “regular rate” of pay for purposes of calculating overtime compensation. Goodley McCarthy argued that excluding the CWILOF from Plaintiff and class members’ “regular rate” of pay for calculating overtime resulted in a significant underpayment of overtime compensation due to Plaintiff and class members under the PMWA.

The Pennsylvania Minimum Wage Act requires that workers be paid time-and-half (150%) the employee’s “regular rate” of pay for each hour worked over forty (40) hours in a workweek. Regulations to the PMWA further define “regular rate” to “include all remuneration for employment paid to or on behalf of the employee,” subject to a list of specifically defined exceptions. 34 Pa. Code § 231.43(a).

The Pennsylvania Prevailing Wage Act requires that construction workers who labor on publicly-funded projects be paid the applicable “prevailing wage” rate for each hour worked on the public project, in accordance with the trade or classification of work the worker performs (e.g., operating engineer, plumber, bricklayer). Under the PPWA, the applicable prevailing wage rate is typically derived from both the wage and fringe benefit rates found in union collective bargaining agreements for the applicable craft or trade. Thus, the total prevailing wage rate required to be paid on Pennsylvania public projects is a combination of both the wage and fringe benefit rates.

However, the PPWA does not require a public works contractor to provide its employees any benefits. If a public works contractor does not provide its employees benefits or provides benefits equal to less than the fringe rate portion of the prevailing wage rate, the contractor may still comply with the PPWA by paying the fringe benefit portion of the prevailing wage rate directly to the workers as regular cash wages in lieu of fringes, or CWILOF. See 34 Pa. Code § 9.106(b).

The Plaintiff, represented by Goodley McCarthy, worked for Defendant Kriger Construction on PPWA-covered projects, and he received most of the fringe benefit portion of his prevailing wages in the form of CWILOF. The Plaintiff alleged that whenever he worked more than 40 hours in a workweek, Kriger Construction only paid overtime compensation based on the wage portion of the prevailing wage rate and unlawfully excluded the CWILOF paid to Plaintiff from his “regular rate” for purposes of calculating his overtime compensation, which resulted in an underpayment of overtime due to him under the PMWA.

More specifically, the Plaintiff argued that the only conceivable exception to the PMWA’s definition of what must be included in the “regular rate” for purposes of calculating overtime compensation was the provision permitting an employer to exclude “contributions irrevocably made by an employer to a trustee or third person under a bona fide plan for providing old-age, retirement, life, accident or health insurance or similar benefits for employees.” 34 Pa. Code § 231.43(a)(4) (emphasis added). However, the CWILOF were paid directly to Plaintiff and class members as wages, not to a trustee or third person under a bona fide plan, and therefore, Plaintiff argued the CWILOF could not lawfully be excluded from the “regular rate” for purposes of calculating overtime compensation. There is no provision in the PMWA or its regulations permitting an employer to exclude CWILOF paid directly to a worker by virtue of the PPWA or other prevailing wage law such as the Davis Bacon Act.

The arguments pressed by the Plaintiff and Goodley McCarthy were issues of first impression under Pennsylvania law. As recognized by the Court in its Memorandum and Order, “no Pennsylvania court has ever adopted the argument being advanced by [the Plaintiff] in this undisputed matter of first impression. Not unlike the plaintiffs in Fischer [v. Madway, 485 A.2d 809 (Pa. Super. 1984), the Plaintiff] was ‘attempting to break new ground’ with his theory.”

Following informal discovery, Plaintiff and Kriger Construction ultimately agreed to settle the class action case on behalf of 190 workers for $475,000.00.

The Court ruled that the settlement was “fair and reasonable and adequately protects the class members,” given the “novel” and “innovative” nature of the lawsuit, as well as the various defenses raised by Kriger Construction.

Goodley McCarthy is proud to have obtained this excellent recovery of unpaid overtime wages for the workers in the class.

Share To: