Posts Tagged ‘Prevailing Wage’

Earlier this year in Sheet Metal Workers’ Int’l Ass’n Local 19 v. Main Line Mech. Inc., the Eastern District of Pennsylvania decided a case that is important to members of the construction industry who own multiple companies.  In the aforementioned case, two HVAC firms shared common ownership and a union that had a contract with one of the HVAC firms was trying to piece the corporate veil of the other HVAC firm based upon the common ownership.  The court ruled against the union, holding that although the HVAC firms shared common ownership, the corporate veil of the HVAC firm that never entered into a contract with the union could not be pierced because the companies did not share employees and the companies targeted different types of HVAC work.  The facts of the case, which I discuss in greater detail below, are quite interesting.

  1. HVAC Company No. 1 Enters Into Collective Bargaining Agreement With Union

Main Line Mech. Inc. was a Pennsylvania based HVAC firm.  Several years after its incorporation, Main Line entered into a collective bargaining agreement with Sheet Metal Contractors Association, which contract contained a number of provisions that required Main Line to perform sheet metal work using only union-represented workers.  The contract also forbid Main Line from setting up another business to evade contract obligations.  Leonard Santos served as the president of Main Line and was a minority shareholder in the firm while the majority of the stock was owned by his wife.

  1. HVAC Company No. 2 Does Business Outside of the Union’s Jurisdiction

Santos and his wife also owned another HVAC firm referred to as “Sands.”  Sands and Main Line maintained an office at the same location.  Santos formed Sands to seek business in Northern New Jersey outside the union’s jurisdiction.  Santos and his wife performed work at Sands that was similar to their activities at Main Line, but the court said other than the couple, no one worked for both companies at the same time.

  1. Separation of the HVAC Businesses

Despite the common ownership, Sand and Main Line kept separate unconnected offices and equipment, along with separate finances and corporate records.  Sands competed for public projects in New Jersey requiring payment of prevailing wages, and the court found that the nonunion firm never undertook any contracts within the union’s jurisdiction while Main Line was an active HVAC installation business.

  1. The Nature of HVAC Company No. 1 Changes

Unfortunately, Main Line lost a job in Pennsylvania and was sued for poor performance.  Subsequently, the company gave up HVAC work and limited itself to buying and reselling equipment.

  1. Union officials spot HVAC Company No. 1’s equipment being used by HVAC Company No. 2

Thereafter, Sands was awarded a contract to do HVAC work in New Jersey where union officials spotted the company using several gang boxes and ladders that were labeled Main Line property.  The union filed a grievance against Main Line alleging the company used Sands to perform bargaining unit work, bypassing the union’s contract.  The union-management adjustment board sustained the grievance and assessed more than $202,000 against the firm. Thereafter, the union filed a lawsuit under Section 301 of the Labor-Management Relations Act seeking confirmation of the arbitration award.  The district judge confirmed the award against Main Line, but rejected the union’s request to hold Sands jointly and several liable as the alter ego of Main Line.

  1. The Legal Analysis

In rejecting the request to hold HVAC Company No 2 liable for HVAC Company No. 1, the court examined whether the two organizations had substantially identical supervision, business purpose, operations, equipment or customers.

Although Santos ran both companies, the daily operations were handled by supervisors who differed from one company to the other.  Moreover, Main Line installed large rooftop heating and cooling units on top of hotels, schools, and other large buildings while Sands installed small HVAC units in multifamily residential complexes.  Significantly, apart from Mr. and Mrs. Santos, the companies at no time shared the same employees.

Lessons Learned:  Members of the construction industry who operate multiple construction related businesses need to be vigilant in their efforts to separate the entities.  Here, it was the presence of the Main Line equipment spotted on a Sands job that raised suspicions.  Fortunately,  there was evidence that Main Line had formally sold at least some of the equipment to Sands, but it would have been best for Sands to have removed Main Line’s name from the equipment before using it.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

 

 

 

 

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
Posted in Business Law | No Comments »

A New York City contractor recently agreed to pay nearly $1 million dollars to settle a prevailing wage investigation into complaints that one of its subcontractors on a public housing project underpaid 31 masonry workers and bricklayers.  The contractor also agreed to pay $100,000 in back wages to four of its laborers, plus $50,000 in costs and fees to the state.

The New York Attorney General’s prevailing wage investigation revealed that for over a year, the contractor’s subcontractor paid masonry workers and bricklayers between $16 to $22 dollars per hour, with no overtime premium, for work that should have been paid at a prevailing wage rate of between $53.55 to  $72.44, plus supplemental benefits.  The investigation further revealed two instances where the contractor failed to classify or list employees in its certified wage payroll reports and two other instances where employees were misclassified at pay rates below what they should have been paid.

The New York Attorney General’s office said that in addition to requiring government contractors to pay wages and benefits comparable to local norms for a given trade, federal and state prevailing wage laws also hold general contractors responsible for underpayments by their subcontractors.

The settlement mandated that the contractor’s contracts with any subcontractor on public or private construction projects state that compliance with labor laws is a material term of the contract and that the subcontractor may be terminated if it does not fix labor law violations brought to its attention.

According to New York’s Attorney General, his office will hold contractors accountable for their prevailing wage violations and for their lax oversight of subcontractor’s practices.

Lesson:  Contractors need to pay attention to their subcontractor’s payment practices.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
Posted in Public Works | No Comments »

Referring to the failure to comply with prevailing wage requirements as “wage theft,” the California Labor Commissioner recently cracked down on two public works construction contractors for their alleged failure to comply with California’s prevailing wage laws by  assessing wage and penalty assessments in excess of $1 million dollars.

The employers were cited for some of the following violations: (1) unlawfully charging fees for fringe benefits; (2) intentionally paying workers less than the prevailing wage for work performed on the project; (3) failing to pay daily overtime; (4) failing to make employer payments to a benefit program; (5) failing to pay Saturday and Sunday premium rates; and (6) failing to pay into a state-approved training program for the California Apprenticeship Counsel.

One of the construction contractors cited for violations claims that it hired a prevailing wage consulting company to ensure that it met all regulations and properly trained its staff to comply with prevailing wage rates and fringe benefits.  This company believes that it has the back-up to prove that the fine is inaccurate and that it can demonstrate why its payroll records are correct.

Lesson for Contractors:  Employers should strive to ensure that they are fully complying with their state’s prevailing wage laws.  The attorneys at Harmon & Davies are here to assist Pennsylvania employers with prevailing wage compliance issues.

 

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

Tags: , , , , , , , , , , , , ,
Posted in Construction, Prevailing Wage | No Comments »