Misclassifying Workers on Davis-Bacon Projects Can Lead to False Claims Act Liability
Published Date: August 19, 2019
The Wage Rate Requirements (Construction) statute (aka the Davis-Bacon Act) requires contractors and subcontractors on federal and federally funded construction projects to pay onsite laborers and mechanics no less than the applicable prevailing wage. Wage determinations contain wage classifications and descriptions of the type of work that falls within that wage classification. Workers must be paid based on the wage classification for the work they are performing and may perform work in more than one wage classification. For example, if on one day a worker performs carpentry work for two hours, then the worker must be paid at the carpenter’s wage rate for those two hours.
One way in which contractors can violate the Davis-Bacon Act is by misclassifying their workers. This often is done by classifying a worker as a laborer when the worker is performing skilled work. In the example above, the contractor would be violating the Davis-Bacon Act by not classifying and paying the worker as a carpenter for the two hours she did carpentry work. Some contractors intentionally misclassify workers as laborers to avoid paying higher wages since the skilled labor wage rates generally are significantly higher than the laborer wage rate. Doing so, however, not only violates the Davis-Bacon Act but also may be a violation of the False Claims Act (“FCA”). A recent FCA settlement involving Nagan Construction provides another example of this.
Nagan was sued under the FCA for allegedly underpaying workers on two Davis-Bacon Act projects. The qui tam relator alleged that Nagan underpaid 20 workers who performed skilled work by misclassifying them as laborers. The qui tam relator asserted that, although these workers performed some work that was properly classified as laborer work, they performed thousands of hours of skilled work that Nagan misclassified as laborer work on its certified payrolls.
Nagan ultimately settled the FCA action for $435,000 plus interest. Of the $435,000, over $242,000 was restitution for the underpaid workers. In the settlement agreement, Naga agreed to comply with the Davis-Bacon Act on all projects subject to federal prevailing wage laws and to take measure to ensure compliance. These measures include having a dedicated supervisor whose responsibility includes making sure workers are properly classified and having a Davis-Bacon Compliance Officer to ensure that classifications are appropriate and that workers are paid in accordance with the wage determination. The Davis-Bacon Compliance Officer will also have to conduct bi-annual audits of Davis-Bacon projects and submit reports to the Department of Labor’s Wage and Hour Division through 2022.
This case is another example of what can happen when a contractor fails to comply with federal prevailing wage requirements. Not only will the contractor have to pay restitution, it may be subject to double or treble damages under the FCA and may be required to implement measures to ensure future compliance.