Wolff and Samson

Prevailing wage compliance is now a hypertechnical concern. Effective February 24, 2008, the New York prevailing wage laws were significantly changed by expanding the types of projects on which payment of prevailing wage is mandated and by significantly increasing the burden on contractors to notify workers of the wages that they must be paid. This article is merely an introduction to some of the changes to the preexisting requirements that are now the law in New York.

The definition of public works has been changed to include a requirement that prevailing wages must be paid on jobs where the work is performed by a third party under a lease, permit or other agreement where prevailing wages and benefits would have been required if the public agency, department or jurisdiction benefited by the project had entered into a direct contract or where the public entity is the end user of the improvement. This change potentially creates prevailing wage responsibility for construction managers on projects for private developers where the end user is a public entity such as a school district or a governmental entity renting space in a private building.. This change negates a New York Appellate Division decision in a 1996 case, Pyramid Company v. New York State Department of Labor that had held prevailing wage requirements inapplicable where the publicagency was not a party to the contract even though the contract concerned a public works project. Now, the public agency need not be a party to the contract. Prevailing wage requirements now apply to such projects as work for private developers who are building schools or offices where a public agency might be the tenant.

The notification changes are even more significant. On every public works project a notice must be posted in a conspicuous place informing the workers that any worker, laborer or mechanic employed on this project is entitled to receive the prevailing wage and supplements rate for the classification of labor that the worker is performing. A legible statement "of all wage rates and supplements" for the classifications of labor specified in the contract must be posted in "a prominent and accessible place on the site where the work is performed." The schedule - which is often thick - must be "constructed of materials capable of withstanding adverse weather conditions" and be titled PREVAILING RATE OF WAGES "in letters no smaller than two inches by two inches."

Every subcontractor should receive a copy of the schedule of wages and supplements specified in the contract along with any updates that might be issued during the course of performance of the contract. The pay stub that each worker entitled to payment of prevailing wages must include a statement of what the prevailing wage is for the job classification of the work performed by that worker. Many companies have taken to using stickers or some other form of notice that is affixed to the pay stub setting forth the wage. In some situations this includes multiple stickers where the worker is entitled to different wages because the work performed is entitled to different rates of wage, e.g., operating engineers who operate different pieces of equipment.

The failure to post the notice, or set forth the prevailing wage on the pay stub, or the willfully posting of the incorrect wage or willfully setting forth the incorrect wage on the pay stub subjects the violator to a fine. The first violation is up to a $50 fine, the second violation is up to $250 and each subsequent violation is up to $500. Factors such as the size of the business, good faith of the employer and gravity of the violation may be evaluated in determining the amount of the fine.

At the beginning of the project and with the first paycheck after July 1st of each year, "the contractor and every subcontractor must notify all laborers, workers and mechanics in their employ in writing." on a form that has been approved by the appropriate department of labor of the telephone number and address for that department and of his/her right to contact that department if he or she does not receive the proper prevailing wage or supplement for the classification of work being performed.

The governing department of labor varies. In the areas of New York where most of CMAA's members are located, it is usually either New York State Department of Labor or the Comptroller of the City of New York. Subject to some exceptions, the Comptroller has jurisdiction over all public work in the City of New York whether under contract
with the City or a City agency or public authority when the work is done in the city - e.g. NYC School Construction Authority and the MTA subway and bus projects. The State DOL has jurisdiction over virtually everything else.

Construction manager protection from liability for non-payment by subcontractors is a key concern. A few suggestions that might reduce the size of fines for noncompliance include:

(1) having someone on staff responsible for policing the subcontractors, reviewing job signin sheets and matching them against certified payrolls;

(2) Requiring the subcontractors to inform you of the job classification of each worker on the job;

(3) Requiring subcontractors to sign receipts of prevailing wage schedules; and

(4) Including clauses in the subcontracts that give the construction manager the right to terminate a subcontractor for noncompliance.

Clearly, this is an evolving area of the law. The pendulum has swung to stricter enforcement. Consultation with your company's risk-management, compliance department or legal professional as to the methods of compliance that
are most cost-effective for your company is strongly recommended.

David E. Wolff is Of Counsel at the law firm of Wolff & Samson PC of West Orange. Mr. Wolff is also General Counsel to the Metro NY/NJ Chapter of CMAA. He can be reached at (973)325-2059, or via email at: dwolff@wolffsamson.com.

Reprinted from Metro NY/NJ Chapter CMAA, Metro News, Volume 1, Issue 4, April 2008.

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