Three tiers of contractors on a state university project are facing penalties for infractions committed by one of them—a decision that holds implications for painting and decorating companies and other contractors on federally funded projects.
California State Labor Commissioner Angela Bradstreet has ordered framing contractor Russell/Thompson Inc. to pay $1.3 million in wages and $200,000 in fines for failure to pay 74 employees the proper wage for their work at Tercero Housing Project at the University of California, Davis. The assessments were imposed in an effort to collect the money owed to the workers.
But the state has also penalized Brown Construction Inc. and 84 Lumber Inc., the general contractor and top subcontractor, respectively, in the case.
"Our investigation uncovered serious wage violations in this case," said Labor Commissioner Angela Bradstreet. "We believe the employer intentionally underpaid its workers. This not only robs those employees of the money they earned; it also hurts other contractors who chose to do the right thing and comply with the law.”
Russell/Thompson willfully violated the law by failing to pay proper prevailing wages on the public works project, a state investigation determined.
The company failed to pay overtime and misclassified workers by identifying them as lower-paying positions, rather than the higher-rate skilled positions that they worked. It also falsified payroll records, concluded the probe by the California Department of Industrial Relations (DIR) Division of Labor.
Although Russell/Thompson was deemed the worst offender in the case, the state also found liability up the contractor chain.
UC Davis had hired Brown Construction as the general contractor. Brown, in turn, contracted with 84 Lumber to perform the framing work on the project. 84 Lumber then subcontracted the job to Russell/Thompson, which actually performed the framing work.
Because of the contractual connection, both Brown Construction and 84 Lumber also were hit with wage and penalty assessments from the state Labor Commissioner.
"Prime contractors cannot plead ignorance when their subcontractors fail to follow California's labor law," said DIR director John C. Duncan.
"The state holds seminars and outreach events to make sure contractors across California are aware of the specific requirements involving public works projects,” Duncan said. “These requirements are designed to ensure that public money is being spent properly. Our enforcement efforts are intended to help fight California's underground economy and help compliant businesses compete fairly."
The federal Davis-Bacon Act (revised April 2009) requires payment of locally "prevailing wages," including the "anticipated cost of prevailing benefits," in construction contracts over $2,000 that receive any federal funding, notes Fringe Benefit Group (FBG), an Austin, Texas-based provider of benefits. That includes contracts for construction, alteration or repair, including painting and decorating, of public buildings and public works.
The Department of Labor issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies, according to FBG. These determinations are incorporated into the contract.
Subcontractors working with primes are subject to all the same Davis-Bacon and prevailing wage rules as the primes, FBG notes. There is no minimum contract size for projects funded by the American Recovery and Reinvestment Act, FBG reports. All ARRA projects fall under Davis-Bacon, whether the awarding government agency is federal, state or local.