Public works contracts usually require the contractor and its subcontractors to pay their workers the “prevailing” local wages, as determined by administrative labor officials. The federal Davis-Bacon Act was the prototype and most states followed suit. Elaborate statutory and regulatory enforcement structures stand behind these contract clauses. Two cases in this issue involve the ramifications of wage underpayment.
A federal appeals court heard an appeal of criminal convictions for wire fraud. The owners of a construction company had represented they would not use subcontractors and would pay their employees Davis-Bacon wages. They then awarded fixed-price subcontracts, some to individuals, that ignored hourly compensation. They also certified pay applications that misrepresented individual subcontractors as employees. The Court of Appeals was not sympathetic.
In the second case, the Illinois Supreme Court addressed available remedies for underpaid workers under that state’s prevailing wage law. The statutory remedy of wage underpayment, punitive damages, interest and attorney fees—recovered from the contractor/employer—was not available when the public works construction contract failed to stipulate specific wage rates. The workers’ only remedy was to sue the public project owner for wage underpayment alone.
The third case in this issue involved a contractor’s loss of bonding capacity, which resulted in the default termination of a construction contract. The bonding problem had been caused by the criminal conduct of the contractor’s corporate officers regarding HUBZone eligibility. The default was not excusable.
