LEANING OVER THE PRECIPICE: A PRIMER ON THE FUNDAMENTALS OF THE MASSACHUSETTS PREVAILING WAGE STATUTE
By Jonathan Sauer
(( January 6, 2005) We are very excited about our new website, which will have a number of features the old one didn’t. Essentially, we transferred over to the new website the articles which appeared on the old site without any updating. And, we have added some new articles which had not previously appeared on our website. The following is just such an article, which was both an article in SCRIBBLES and a hand-out at a seminar given for a trade association. The following information is very dated and should be taken with a lot of grains of salt, as this is an active area in the law with frequent modification. Still, it provides the basic ideas behind the Massachusetts prevailing wage law and may be of some benefit to our readers and surfers. Specifically, many contractors performing public work are not aware of the draconian punishments that may await prevailing wage violators, even innocent violators. Balancing the benefits of either adding in the article now for these limited purposes or waiting until it was updated, it made sense to us to add it in now for very general educational purposes with the very specific comment that this information is dated. Since we are only presently two attorneys – but, probably, not for long - with An extremely busy practice, it may take awhile to update the various articles. It is, however, on the agenda!)
And, now, the article . . . .
One of the scarier issues in performing construction work in the Peoples Republic of Massachusetts is living with the prevailing wage law applicable to public work.
An increasingly frequent pattern of (sometimes panicked) questions form a familiar pattern. A contractor calls us up and says: “I did this, this and this. Am I in trouble?” (Or, how much trouble am I in?) Because this is such a difficult area (and, unfortunately, an emerging area which shows every indication of only getting substantively worse and more complicated), the Scribbles Editorial Board decided to commission an article on this troublesome subject for this issue of Scribbles .
The Massachusetts prevailing wage statute is contained in Chapter 149, § 26 and 27 (and subsections) of the Massachusetts General Laws.
The basic prevailing wage statute is contained in Chapter 149, § 26, which provides, in pertinent part, as follows:
“. . .Each county, town or district in the construction of public works, or persons contracting or sub-contracting for such works, shall give preference to veterans and citizens who are residents of such county, town or district. The rate per hour of the wages paid to said mechanics and apprentices, teamsters, chauffeurs and laborers in the construction of public works shall not be less than the rate or rates of wages to be determined by the commissioner as hereinafter provided;. . . provided, further, that if, in any of the towns where the works are to be constructed, a wage rate or wage rates have been established in certain trades and occupations by collective agreements or understandings in the private construction industry between organized labor and employers, the rate or rates to be paid on said works shall not be less than the rates so established;. . .Payments by employers to health and welfare plans, pension plans and supplementary unemployment benefit plans under collective bargaining agreements or understandings between organized labor and employers shall be included for the purpose of establishing minimum wage rates as herein provided. . .”
The ‘beast’s’ teeth are contained in section 27 which in a summarized form appears as follows. Section 27 provides that the ‘commissioner’ - referencing the Commissioner of the Department of Labor and Industries - shall prepare for the use of public officials or public bodies a list of the several jobs usually performed on various types of public work upon which mechanics and apprentices, teamsters, chauffeurs and employees are employed, including the transportation of gravel or fill to the site of said public works or the removal of surplus gravel or fill from such sites. These jobs shall be classified and revised from time to time. Prior to going out for bids of a contract for the construction of public works, a public official or public body shall submit to the commissioner a list of the jobs upon which mechanics and apprentices, teamsters, chauffeurs and laborers are to be employed and to request the commissioner to determine the rate of wages to be paid for each trade. The commissioner shall proceed to determine the same and shall furnish said official or public body with a schedule of such rate or rates of wages as soon as such determination shall have been made. When advertising or calling for bids for public works the awarding official or public body shall incorporate such schedule into the advertisement or call for bids.
Any person engaged in the construction of a public work shall cause a legible copy of such schedule to be kept posted in a conspicuous place at the work site during the life of the contract. The rate of wages in the schedule shall include payments by employers to health and welfare plans, pension plans and supplementary unemployment benefit plans and such payments shall be considered as payments to persons under the section performing work.
For employers engaged in construction who do not make payments to a health and welfare plan, a pension plan or a supplementary unemployment benefit plan, and where those payments are to be included in the rate of wages, employers shall pay the amount of such payments directly to each employee engaged in the construction.
Whoever shall pay less than said rate or rates of wages and whoever, for himself, or as a representative, agent or officer of another, shall take or receive for his own use a rebate, refund or gratuity - in common parlance, a ‘kick-back’ - or in any guise any part or portion of the wages, including payments to benefit plans, shall be punished by a fine of not more than $10,000.
Section 27 C of Chapter 149 provides further sanctions for violations of the prevailing wage law. For example, where one ‘by himself or an agent, superintendent or forman (sic) for another” violates any provision of the prior sections and where no other penalty has been provided for, the punishment shall consist of a fine of not less than $500 nor more than $2000 for a first offense and for a second or subsequent offence by a fine of not less than $1000 nor more than $5000 or by imprisonment for more than three months or both by such fine and imprisonment.
It is part of the statutory scheme that offers of restitution or payment of restitution shall not be considered for the purposes of imposing such punishment. Moreover, any person convicted of a violation of any provision of section 26, 27 or 27B (the section which details both records which must be kept by a contractor for a period of three years and which details the statement of compliance which must be submitted by contractors and subcontractors within 15 days after completion of its portion of the work) shall be prohibited from contracting, directly or indirectly, with the Commonwealth or any of its agencies or political subdivisions for the construction of a public building or other public work for a period of six months from the date of such conviction. For a second violation occurring within three years from the date of the first conviction, the prohibition will exist for a period of three years from the date of such second conviction.
TRIPLE DAMAGE CLAIMS BY EMPLOYEES
To make life more interesting for those foolish enough to believe they can earn their living by being self-employed (and by employing others) the General Court in its infinite (and, undoubtedly, heavily union-influenced) wisdom added various triple damage provisions to the prevailing wage statute. These provisions were added in to various provisions by an act of 1993, effective July 1, 1993.
Now, as a part of the ‘police portion’ of the prevailing wage statutes - section 27 - when it is found by the Attorney General’s Office that a contractor or subcontractor has violated that section by failing to pay said rate or rates of wages or that a contractor or subcontractor has “for himself, or as representative, agent or officer of another” has taken or received a ‘rebate, refund or gratuity’, the Attorney General may upon written notice to the contractor or subcontractor and the sureties of the contractor or subcontractor order the work halted or that part of the contract in which the wage violation has occurred halted until the defaulting contractor or subcontractor has filed with the Attorney General’s Office a bond in the amount of such penal sum as the Attorney General shall determine, the condition of which bond is the payment of said rate or rates of wages including payments to the various health plans.
Moreover, any employee claiming to be aggrieved by a violation of section 27 may after ninety days has expired from the date of filing a complaint with the Attorney General to within three years of such violation institute and prosecute in his own name and on his own behalf a civil action for injunctive relief (to prevent further violations of the statute) and for damages incurred, including treble damages for any loss of wages and other benefits and any employee who prevails in such action shall be entitled to an award of the costs and reasonable attorneys’ fees.
The triple damage and attorneys’ fee provisions were also added in to several other sections of the prevailing wage statute.
For example, section 27 F of Chapter 149 - which relates to the lease, rental of trucks and other equipment for use on public works - also contains a similar provision, nearly identical to the new language added in to section 27: namely, within ninety days after the filing of a complaint with the Attorney General, one may file an action for injunctive relief, damages, including treble damages for any loss of wages and other benefits with a prevailing employee entitled to an award of costs and attorneys’ fees.
Section 27 G of Chapter 149, relating to contracts for the moving of office furniture and fixtures also now contains a similar procedure (and substantive right) as does section 27 H, which deals with contracts for maintenance of public buildings.
Members of the novitiates among our readers (meaning, those contractors who have not taken their final vows by being exposed to one or more cases in the superior court) might not be fully aware of the significance of either of the treble damage award or the reasonable attorneys’ fee provision.
Taking the latter first, a common misconception, which the Law Offices regretfully must often correct upon the commencement of a piece of legal activity, is an idea among customers that ‘to the winner belongs the spoils’. Meaning, that if one is able to last the two or three years or more required to get to trial in a superior court, if one wins, one becomes entitled to a reimbursement of one’s attorneys’ fees from the losing party. Such is usually not the case!
Generally speaking, Massachusetts follows the so-called ‘American rule’, which states that each side to a dispute must bear its own attorneys’ fees. At various times, different parties have attempted to amend the so-called American rule so that the losing party would bear all of the attorneys’ fees. One recent attempt in this direction was by then-Vice President, Dan Quayle. The trial lawyers oppose and have opposed that provision which opposition, on first glance, would appear to be surprising: after all, the people whose fees are being generated are looking for someone to pay them at some point (or so we have been told!).
However, the threat of having to pay all of the legal fees does tend to discourage litigation of both unpopular and novel complaints, which claims in the past have involved claims such as product liability for tobacco companies, asbestosis claims, novel medical claims (such as breast implants), et cetera.
Therefore, in Massachusetts the rule is clear that absent a statutory provision otherwise, each side to litigation bears its own attorneys’ fees. (Another exception to the general rule is where a contract provides for the attorneys’ fees be paid, such as indemnity contracts, loan contracts, and similar such documents. Always expect to find such a provision somewhere on any larger material suppliers purchase order.)
Therefore, in Massachusetts, an action on a general contractor’s public payment bond also carries sanctions of attorneys’ fees in the event that the plaintiff prevails as do other statutes, such as the indefatigable Chapter 93A, cases under which have blossomed and continue to blossom, world without end!
Therefore, this is a serious sanction in prevailing wage litigation in that the proof of any violation in most cases is going to be rather simple: what was the rate for any particular job; what did the employer in question pay (and can he prove it).
Similarly, triple damage awards are a fairly serious matter. They have grown greatly in the last dozen years or so in Massachusetts judicial actions but there are various prerequisite factual findings that have to be found before a triple damage award can enter. The common case law requirement is that the action in question has to show a degree of rascality that causes those used to the rough and tumble of the world of commerce to raise their nose (or eyebrows!). Also, there are other prerequisites to an action for triple damages. For example, both parties to the action (except where the plaintiff is a consumer) have to be engaged in trade or commerce in the Commonwealth. Various transactions are exempted from Chapter 93A liability. For example, there has been appellate case law recently which has held that a homeowner cannot be held liable for Chapter 93A damages inasmuch as one is not engaged in trade or commerce for the purposes of building one’s own home. And, traditionally, public owners (municipalities, for example) have been found not to be liable for triple damages inasmuch as they are not engaged in “trade and commerce”, although there have been some appellate cases which are nibbling away at this.
All of this is to say that an award of both attorneys’ fees and triple damage cases on cases with such a simple prima facie case gives an alarming weapon to be placed in the hands of one’s employees and, more frequently, ex-employees.
PERSONAL LIABILITY OF CORPORATE OFFICERS FOR PREVAILING WAGE VIOLATIONS
As a bottom line and as a general proposition, we can find nothing in the various subsections of sections 26 and 27 of Chapter 149 which gives any individual employee (and, remember, whether you own all of the stock or not, you are an employee of your own corporation) liability for any deficit in prevailing wages not paid by that company, unless that person was personally involved with taking kick-backs from his employees to defeat the purpose of the statute. That individual may be liable for fines or potential imprisonment (with second offences) for prevailing wage violations.
There have been and will be, however, attempts to pass what in 1994 was called House Bill 1579, which would have modified section 27 of Chapter 149 as follows:
“Any person or employer engaged in the construction of such works who engages another employer or subcontracts to another employer in the construction of such works shall be liable for the payment by said other employer of the rate or rates of wages required by section 26, including payments to health and welfare funds, pension funds or supplementary unemployment benefit plans or the equivalent payment in wages, and should be subject to the civil penalties set forth in section 27C for failure to pay said rate or rates.” (emphasis added)
General contractors would be liable for the prevailing wage rate violations of subcontractors; subcontractors will be liable for the prevailing wage violations to its subcontractor; and, ad infinitum (nauseum?).
Moreover, this section is troubling by the use of the word: “Any person or employer”. There were some proposed amendments to House 1579 which would have amended section 27C as follows:
“Any contractor, subcontractor, officer, agent, superintendent, foreman, or employee of same who violates any provision of the four preceding sections, where no other penalty has been provided, shall be punished by a fine of not less than ten thousand nor more than fifty thousand dollars, or by imprisonment for not more than two years, or both such fine and imprisonment. A conviction shall, in addition to any criminal penalty imposed, prohibit the contractor or subcontractor convicted from contracting, directly or indirectly with the commonwealth or any of its agencies or political subdivisions for the construction of any public building or other public works, or from performing any work on the same as a contractor or subcontractor, for a period of three years from the date of conviction.”
These “proposed amendments” to a law which, itself, would be a “proposed amendment” to the Massachusetts General Laws would posit responsibility for prevailing wage violations - if not for the actual amount of the lacking wages, at least for purposes of a penalty (and possible imprisonment) - on any ‘officer, agent, superintendent, foreman, or employee’ of any contractor or subcontractor violating these provisions. Therefore, while there may not be any personal exposure at the present time for deficits in the prevailing wages for an ongoing Massachusetts job, our heavily-union influenced General Court appears willing and interested in making such changes. Secondly, it appears that the law presently only provides that a contractor or subcontractor’s employees - officers, for example - might be liable personally where there has been the taking of a kick-back on wages but not otherwise.
Presently, and one of the leading forces towards the ‘brokering’ of work by a general contractor to subcontractors, a general contractor does not have liability for a subcontractor’s failure to pay appropriate wages, although there are strong forces pushing to change this.
We are aware of some superior court cases where people who made affidavits of compliance with the prevailing wage rate have at least gone to trial in cases where, for example, a general contractor stated it relied on an affidavit of compliance and then incurred some liability under, for example, its payment bond, when the affidavit proved false.
House Bill 1579 and its proposed amendments were not enacted into law in 1994.
The 1995 proposed bill, however, which Scribbles has received a working copy of, appears to be far worse than the proposed 1994 amendment. A violation of the law shall be punished by a fine of not more than fifty thousand dollars; the 1994 bill amendments provided that the fine not be less than ten thousand dollars. A conviction of willfully violating any section provides for a five year period of debarment. The failure to pay each employee properly under the statute may be deemed a separate violation. Where there is a citation for violating any such prevailing wage provision, the Attorney General’s Office may also order a bond in the amount that they may order be filed with that office, the penal sum of which will not exceed 80% of the total contract or subcontract amount conditioned upon payment of the appropriate level of wages. Moreover, these proposed amendments are seven and one-half pages long and would take one a couple of hours reading time to thoroughly understand them.
Notwithstanding a fiscally conservative and presumably business-oriented Governor, with a democratic Attorney General who relies heavily on union support seeking the Governor’s chair in four years, the issues pertaining to prevailing wages are not going to go away and are, quite likely, only going to get worse. Much like a dentist is supposed to tell us all to floss - knowing his advices will largely go unheeded - Scribbles strongly suggests that subcontractors and general contractors subject to the prevailing wage rate not take these matters as lightly as reportedly some contractors (many contractors) do. Where general contractors appear to be presently reasonably safe to broker the work and face no liability except in situations where they either participated in the fraud or accepted kick-backs, this situation could change as early as 1995 and practitioners of “leaning over the precipice” should keep their fingers to the pulse of our Legislature as frequently as possible.
This article is not intended to be specific legal advice and should not be taken as such. Rather, it is intended for general educational purposes only. Questions of your rights and obligations under the law are best addressed to legal professionals. Sauer & Associates sees as part of its mission the providing of information and education to the contractors it daily serves, which will hopefully assist them in the conduct of their business. Articles are available on a number of construction subjects (e.g. rights under payment bonds, how to present payment bond claims, the mechanics’ lien law, how to file a demand for direct payment) on this website.
Copyright, Jonathan Sauer, 1996