Monday, July 22, 2013

Using the False Claims Act to Police Wages on Public Works Contracts: US ex rel International Brotherhood of Electrical Workers v. The Farfield Company

Dear Readers:

The broad scope of the False Claims Act and its creative use by relators continues to surprise me. For example, I recently came across a case where the relator was a labor union that brought a False Claims Act case against an employer who it claimed failed to pay the prevailing wage to certain union employees on jobs that were funded by federal grants. U.S. ex rel International Brotherhood of Electrical Workers, Local Union No. 98 v. The Farfield Company, 2013 WL 3327505 (E.D. Pa. July 2, 2013). In that case, the union claimed that the employer, an electrical contractor, had intentionally and methodically misclassified workers in violation of the Davis-Bacon Act, 40 U.S.C. 276a et seq. ("DBA"). The DBA requires that an "appropriate wage" be paid to workers on construction contracts funded by the federal government and that contractors on such jobs must certify that their "payroll information is correct  . . . and workers have been paid not less than the applicable wage rates . . . for the classification of work performed."  

The union claimed that the employer violated the False Claims Act in three different ways. First, the union charged the contractor obtained an advantage in bidding for the contract by manipulating the worker classifications, whereby workers that should have been classified (and paid more) as electricians due to the work they were performing were instead classified as less expensive laborers and groundsmen. By doing so, alleged the union, the contractor was able to "underestimate its labor costs and underbid competitors" for the job contract. Second, the union alleged that the employer in fact underpaid workers by misclassifying them to positions that received lower wages. And third, the union claimed that the employer had "falsely certified" its compliance with the DBA.

The Court rejected the employer's argument that it was without subject matter jurisdiction and that the matter was committed to the discretion of the Secretary of Labor, who alone determines the prevailing wage for particular classifications. Though it acknowledged that there may be instances where a court must first defer to the primary jurisdiction of the Secretary of Labor for a determination as to a job classification, the Court did not find any "complex Davis-Bacon classification regulations in this action" and it refused to defer the matter. Additionally, the Court found that even though the employer did not present a false claim for payment to the government, nevertheless the employer faced possible liability under 31 U.S.C. 3729(a)(2), which applies to anyone using a false record or statement to get a false or fraudulent claim paid by the government. Finally, even though the employer had been subject to a Department of Labor audit, the Court denied the employer's claim that such an audit qualified as an "administrative civil money penalty proceeding in which the government is already a party" that also could have led to a loss of subject matter jurisdiction. See 31 U.S.C. 3730(e)(3).

In short, the Farfield case illustrates the breadth of the False Claims Act, and its creative use by relators; in this instance, to police the wages paid to workers on construction and other public works contracts funded by the federal government.

A. Brian Albritton
July 22, 2013

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