It is well-established that general contractors are responsible for their subcontractors’ compliance with Davis-Bacon. Nevertheless, we frequently encounter situations where the general contractor has failed to comply with this obligation. A recent settlement reached by Lettire Construction Corp. (Lettire) and the Wage and Hour Division of U.S. Department of Labor (DOL) is instructive.
Lettire was the general contractor at the “Hobbs-Ciena Project,” (the Project), a construction project of the City of New York (NYC) for the rehabilitation of several apartment buildings and the construction of new ones. The Project was funded, in part, with monies from the Tax Credit Assistance Program (TCAP) and was therefore subject to the American Recovery and Reinvestment Act of 2009 (ARRA), a Davis-Bacon Related Act, and the applicable regulations issued at 29 C.F.R. parts 1, 3 and 5 (the Regulations).
Employees from several of Lettire’s subcontractors complained to DOL that they were not receiving the appropriate wages and overtime pay. After an investigation, DOL concluded that Lettire had:
- failed to incorporate by reference the required Davis-Bacon and Related Acts (DBRA) labor standard clauses set forth in the Regulations in its subcontracts with various subcontractors;
- failed to receive certified payrolls from several of its subcontractors, including several second tiers;
- failed to post the applicable wage determination at the Project;
- failed to monitor the subcontractors to ensure payment of the required prevailing wages, fringe benefits and overtime wages to the proper job classifications for laborers and mechanics; and,
- submitted subcontractors’ certified payroll records to the state agency that had awarded the construction project (NYC Department of Housing Preservation and Development (HPD)), which failed to list certain laborers and mechanics who performed work at the Project.
In addition to paying backpay due to the employees of its subcontractors (first and second tier), in order to avoid debarment, Lettire entered into a settlement with DOL which, among other things, required it to:
- hire a federal monitor who will conduct regular compliance reviews of Lettire and its subcontractors for three years;
- investigate prospective subcontractors with respect to their ability to comply with Davis-Bacon;
- establish electronic type bookkeeping and certified payrolls to ensure their accuracy;
- assign supervisors to oversee compliance on Davis-Bacon jobs, and;
- advise employees on their job classifications, wage and fringe benefit rates and the right to submit complaints to DOL.
Labor Solicitor Patricia Smith stated that this settlement “should serve as a warning to other contractors that the Department’s Wage and Hour Division has many enforcement tools, including surveillance of workers moving on and off project sites, withholding of contract funds, litigation and debarment, to hold all parties from the top of the contract chain to the bottom accountable for compliance with the law.”