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Court Sets Strict Liability Precedence for Prevailing Wage Compliance

Under New York State’s Labor Law, government contractors and subcontractors have to pay the set prevailing wage and fringe benefits to workers. The exact rate, which is pre-determined, depends on the type of work and where it’s performed.

Willful violations of New York’s prevailing wage law by contractors can be met with severe penalties, including interest of 16 percent from the date of underpayments to the date of restitution and a penalty of up to 25 percent of the wages, supplements and interest.

Prime contractors can be held responsible for the non-compliance of subcontractors, so it’s important that companies be diligent in ensuring their pay structure is properly designed.

Recently in Massachusetts, the state supreme court issued a ruling in Lighthouse Masonry v. Division of Administrative Law Appeals that may further subject firms to liability for failing to adhere to prevailing wage requirements. While it doesn’t directly or immediately impact those operating in New York, it sets a strong precedent that other courts could follow if similar challenges arose.

Essentially what the court did was set a strict liability standard for prevailing wage violations. Strict liability is a standard that is applicable to other employment wage laws, and it allows for even unintentional violations to be harshly punished. This case is a cautionary tale for all contractors.

According to court records, the case stemmed from a masonry project at a local high school, where the subcontractor performed work in 2005 and 2006 for which it reportedly failed to pay workers the prevailing wage. The company received four citations.

One of those citations was reportedly the result of a clerical error that was caught and corrected by the subcontractor before the citation was ever even written.

For each violation – including that last one – the company was issued a $500 fine. That decision was appealed, but upheld by the state superior court.

Upon review by the state supreme court, the justices cited several instances of prior case law that point to the prevailing wage law being a strict liability statute, meaning civil penalties may be imposed even when a contractor or subcontractor had no intent to break the law. By this standard, the reason for the violation is irrelevant. The fact of the violation alone is sufficient enough for a penalty to be issued.

Wage schedules in New York state are issued on a county-by-county basis. In New York, willful violations of prevailing wage are dealt with severely. A violation is considered to be “willful” if the contractor:

  • Had actual knowledge that there was a violation of law;
  • Should have known that there was a violation of the law (for example, there is proof of receipt of a prevailing rate schedule);
  • Has a history of prior prevailing wage violations;
  • Perpetuated a substantial violation of the law, involving either a large sum or a large number of workers or both;
  • Failed to take corrective action once notified of a prevailing wage violation.

Still as the Lighthouse case suggests, it may not be enough for a firm to insinuate it didn’t know or didn’t intend to violate the law. Strict adherence to the law may be the only protection from civil and criminal sanctions.

The Law Offices of Ira S. Newman provides prevailing wage representation in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or send us an e-mail.

Additional Resources:
Lighthouse Masonry v. Division of Administrative Law Appeals, Dec. 31, 2013, Massachusetts Supreme Court
Additional Resources:
NYC Prevailing Wage Law Struck Down by State Supreme Court, April 16, 2013, New York City Prevailing Wage Lawyer Blog