Important Legal Victory in False Claims Act Case Regarding Federal Contractors’ Underpayment of Davis Bacon Act Prevailing Wages

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Goodley McCarthy Obtains Important Legal Victory in False Claims Act Case Regarding Federal Contractors’ Underpayment of Davis Bacon Act Prevailing Wages

Case: Int’l Brotherhood of Elect. Workers, Local Union No. 126 et al. v. J.D. Eckman, Inc. et al., No. 21-2980 (E.D. Pa. May 23, 2023)

On May 23, 2023, a federal court in the Eastern District of Pennsylvania ruled that two general contractors on federally funded highway construction projects may be held liable under the federal False Claims Act for their subcontractor’s willful failure to pay the appropriate prevailing wages required by the Davis Bacon Act. The decision stands as a warning to general contractors that they may not sub out work to subcontractors on federal projects and “bury their heads in the sand” when their subcontractors willfully violate federal prevailing wage laws. If they do, general contractors may risk substantial liability for the unpaid prevailing wages and penalties under the False Claims Act.

The False Claims Act was enacted to protect federal government funds from fraudulent claims by imposing significant monetary penalties on government contractors who submit “false claims” to the government for payment for providing services or goods. The False Claims Act imposes liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”

The Davis Bacon Act is a minimum wage law designed to protect construction workers who labor on federally funded construction projects. The Davis Bacon Act was intended to protect local wage standards by preventing contractors from basing their bids for public work on wages lower than those “prevailing” in the area, so that local labor and contractors would have a fair opportunity to bid on lucrative federal contracts. To that end, the Davis Bacon Act requires that workers on federally funded projects be paid in accordance with the type or classification of work they perform (e.g., electrician, plumber, carpenter), as determined in a “Wage Determination” issued by the Secretary of Labor. Furthermore, the Davis Bacon Act requires that contracts for construction on federal projects include stipulations stating that all workers on the project will be classified and paid in accordance with the type of work they perform and that federal contractors shall submit payrolls certifying to the government that all workers on the project were properly classified and paid.

Whistleblowers International Brotherhood of Electrical Workers, Local Union No. 126 and Christopher Levan (together, the “Union”), represented by Goodley McCarthy, alleged in the lawsuit that in 2012-2018, Herr Signal and Lighting Company, Inc. (“Herr”) was contracted by general contractors JD Eckman, Inc. (“JDE”) and Kinsley Construction, Inc. (“Kinsley,” and together with JDE, the “General Contractors”) to perform electrical work on various highway improvement projects which were funded, in part, by the federal government. The Union alleged that, although Herr was contracted to perform electrical work on the various projects, which was known to fall within the electric “Lineman” worker classification, Herr willfully misclassified and underpaid many of its Lineman employees at the lower-paid “Laborer” classification, in violation of the Davis Bacon Act. The Union further alleged that Herr submitted willfully false payrolls certifying that the workers on the projects were all paid in accordance with their proper Davis Bacon classification.

As to the General Contractors, the Union alleged that they either knew or showed reckless disregard for the falsity of Herr’s payrolls, and yet, they certified to the government that all employees on the projects, including Herr’s employees, were properly classified and paid in accordance with the Davis Bacon Act. The Union alleged this constituted a False Claims Act violation because the General Contractors submitted the false certified payrolls, which were material to their claim for payment from the government.

In their motions to dismiss, the General Contractors argued, among other things, the Union’s Complaint should be dismissed because the Union failed to allege the General Contractors acted with the specific intent required to impose False Claims Act liability, or in other words, that the Union failed to sufficiently allege the General Contractors either knew Herr’s certified payrolls were false or that they acted with “reckless disregard” as to the truth or falsity of Herr’s payrolls

The Court disagreed, and held that the Union sufficiently alleged the General Contractors’ knowledge of Herr’s Davis Bacon Act violations and false certifications in its payrolls because the Union alleged, among other things, that the General Contractors: subcontracted out discrete Electrical Work to Herr; knew Herr was an electrical construction contractor; knew Electrical Work needed to be classified and paid at the Lineman classification, not the lower-paying Laborer classification; knew the Davis-Bacon Act requirements; received Herr’s false payrolls; and did nothing to correct Herr’s glaring falsifications and underpayments.

The case is now moving forward while the U.S. Department of Labor weighs in on whether Herr misclassified and underpaid its employees.

Goodley McCarthy LLC represents labor unions and workers in all types of disputes concerning unpaid prevailing wages, and has recovered millions of dollars in unpaid wages on behalf of its clients. If you are aware of prevailing wage violations or believe you may be owed prevailing wages, do not hesitate to contact our office.

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