2014

Underpaid Hardhats Can Seek Whistleblower Payouts, Court Says Ruling clarifies that fraudulent payroll certifications are covered by the False Claims Act, so employers working on federal building projects should redouble efforts to obey the law, says LeClairRyan attorney.

ALEXANDRIA, Va., Oct. 22, 2012 /PRNewswire/ -- When cheated out of their legally mandated wages on federal building projects, construction workers can use the False Claims Act (FCA) to go after their employers for back pay and damages, according to an October 1 ruling by a federal appeals court. The case (U.S. ex rel. Brian Wall v. Circle C Construction LLC) is significant because it could lead to the kinds of whistleblower payouts that have become commonplace in healthcare and other sectors, said LeClairRyan employment attorney Michael E. Barnsback

"This ruling underscores the need for government contractors everywhere to do all they can to ensure that they—and their subcontractors—are in full compliance with all guidelines on prevailing wages for federal construction projects, as required by the Davis-Bacon Act," advised Barnsback, an Alexandria, Va.-based partner in the national law firm, who was not involved with this particular case. "Fortunately, the court in this case gave some clear guidance on what contractors need to do to steer clear of FCA violations."

Under the Davis-Bacon Act, federal contractors are required to pay set wages for various job classifications established by the U.S. Department of Labor. "The prime contractor has to submit payroll certifications each week, stating that all of the laborers were paid the proper wages and hours," Barnsback explained. "Prior to this ruling, failure to pay the amount established by the wage determination had widely been considered the exclusive jurisdiction of the Department of Labor. The argument made was that only DOL could sort out details such as whether a worker should be classified as, say, a 'general laborer' or a 'concrete/cement laborer' and determine the amount each should be paid. But as the court saw it, submitting false payroll certifications falls outside of classification issues and is properly considered by the courts under the FCA."

While Davis-Bacon does not allow individuals to file a suit with the courts to seek back wages, Barnsback added, the FCA actually encourages individuals to blow the whistle on contractor fraud against the government. "Under FCA, the whistle blower can receive triple damages, which creates a strong incentive to make a claim," he said.

In the Oct. 1 ruling by the Cincinnati-based U.S. Court of Appeals for the Sixth Circuit, the government said a prime contractor's subcontractor paid nine electricians $16 or less per hour, but then filed employment certifications claiming those electricians were paid the prevailing wage determination of $19 per hour. "For the first two years of the contract, in fact, no payroll certifications were filed at all for these employees, according to the government," Barnsback noted. "The certifications that were eventually made were falsified."

The court called attention to some of the mistakes made by the prime contractor in not ensuring compliance by its subcontractor, Barnsback noted. "The prime contractor had no written contract with his subcontractors, so there was no written obligation for the electrical subcontractor to turn in weekly payroll certifications for his own employees. That is a cautionary tale for other prime contractors."

While the prime contractor gave the subcontractor the proper DOL paperwork, he did not discuss this with him, the court noted in the ruling. "The prime contractor just handed the wage-designation sheet to his sub without any further discussion," Barnsback related. "Then, when the certifications finally came in from the sub, the prime contractor did nothing to verify them. He just passed them on to the government. But, the prime contractor remains ultimately responsible for the certifications."

Amid today's robust enforcement of FCA, government contractors and subs should maintain protocols and procedures designed to help them avoid costly FCA violations, Barnsback said. "Even if the prime did not specifically intend to defraud the government, failure to monitor and verify the submissions of subcontracts can lead to a finding of reckless disregard of your responsibilities under federal law," he noted. "And in this case, that was sufficient to establish liability for the prime contractor under the FCA."

About LeClairRyan
As a trusted advisor, LeClairRyan provides business counsel and client representation in corporate law and litigation. In this role, the firm applies its knowledge, insight and skill to help clients achieve their business objectives while managing and minimizing their legal risks, difficulties and expenses.  With offices in California, Connecticut, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Virginia and Washington, D.C., the firm has approximately 350 attorneys representing a wide variety of clients throughout the nation.  For more information about LeClairRyan, visit www.leclairryan.com.

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