With Infrastructure Investments, Whistleblowers Needed to Combat Potential Wage Theft
The Infrastructure Investment and Jobs Act authorizes $1.2 trillion in new infrastructure spending. It was passed to deliver high-quality infrastructure projects, and create hundreds of thousands of well-paying jobs for American workers. To ensure that this spending delivers the results, the government will rely on two sets of laws. First, the government will look to “prevailing wage” laws, in particular the Davis-Bacon Act, to protect workers from being cheated out of their wages. Second, it will rely on whistleblower laws, in particular the False Claims Act, to prevent fraud.
It turns out that these problems are related and enforcing prevailing wage laws is a good way to fight fraud. A recent study found that contractors who flout prevailing wage laws often continue to obtain government contracts and deliver poor performance on the contracts as well. Therefore, enforcing Davis-Bacon wage laws through the False Claims Act not only protects workers, but taxpayers as well.
The Davis-Bacon Act was initially passed in 1931 as construction wages plummeted in the Great Depression. The law requires that workers on government construction projects be paid the “prevailing wages” and fringe benefits of similar occupations in the same local markets. Prevailing wage laws like Davis-Bacon assure that government contractors do not undercut each other by reducing their workers’ wages to below-market rates, and encourage high quality work by paying competitive wages.[1]
The Department of Labor, which sets the prevailing wages that government contractors must pay, is also in charge of investigating whether those contractors have misclassified their workers. Under Davis-Bacon, government contractors must keep exact records classifying their workers under the appropriate prevailing wage categories. That way, the Department of Labor can see that the contractor is paying each worker what they ought to receive for the job the government has paid for.
The government can penalize contractors that misclassify their workers, including by withholding payment on the contract, and suspending or permanently debarring the employer from contracting with the government.
Whistleblowers can and should play a role in exposing contractors that fail to meet their wage obligations, both to protect workers and to protect the taxpayer. Companies that obtain contracts covered by prevailing wage laws make a promise to the government that they will pay the right wages to their workers.
If an employer agrees to pay prevailing wages and then fails to do so, it could be committing fraud on the government, and violating the False Claims Act. Whistleblowers can file qui tam lawsuits against contractors who falsely claim that they are meeting these wage obligations.
Recently, the federal Third Circuit Court of Appeals[2] approved a False Claims lawsuit against a contractor for Davis-Bacon wage fraud. The defendant falsely certified to the government that it was in compliance with Davis-Bacon prevailing wage requirements.[3] The whistleblower who filed the lawsuit was not an individual, but a union: IBEW Local 98, the union that had uncovered the contractor’s fraud.[4]
The trial court in the case had found that the contractor intentionally misclassified high-skilled electrical work—installing electrical conduit and pulling wires—that should have been performed by trained “linemen” and thus paid at a higher rate. The contractor did so in order to avoid paying the higher wages it was required to pay linemen under Davis-Bacon.
The appeals court made several rulings in favor of the union whistleblower, upholding the trial court’s findings. Among the Third Circuit’s rulings was that the contractor’s false statements about its wage classifications were material to the government’s decision to pay the contractor. This means the court held that the government could have refused to pay if it had known the contractor was lying about following Davis-Bacon wage requirements.
The case is an encouraging development for potential whistleblowers with knowledge of wage fraud on the government, and will help the government make certain that the new infrastructure law creates good jobs and does not enrich fraudsters.
By Nicolas Mendoza of Murphy Anderson PLLC
[1] Other prevailing wage laws include the McNamara-O’Hara Service Contract Act, which covers service work contracts, and the Walsh-Healey Public Contracts Act, which covers contracts for the manufacturing of materials, supplies, articles, or equipment for the government.
[2] The federal appeals court that covers New Jersey, Pennsylvania, and Delaware.
[3] The case is United States ex rel. International Brotherhood of Electrical Workers Local Union No. 98 v. The Farfield Company, 5 F.4th 315 (3d Cir. 2021).
[4] Taxpayers Against Fraud filed a brief in support of the whistleblower.
