Davis-Bacon Act

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For years, I have been blogging and speaking about the very real and very serious civil and potential criminal consequences of a failure to comply with the Davis Bacon Act.  Every once in a while, a case comes along that drives those points home.  One such case – involving criminal convictions for wire fraud and conspiracy to commit wire fraud in connection with what appears to be a blatant failure to comply with Davis Bacon Act requirements – is the recent decision in United States v. Estepa, No. 19-12272 (11th Cir. May 25, 2021).

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It’s coming. From all outward signs, it appears that the Biden Administration may be planning to use the “American Jobs Plan” – otherwise known as the proposed infrastructure plan – to expand the Davis Bacon Act (“DBA”) and require the use of prevailing wages on all projects funded by any infrastructure bill ultimately passed by Congress.

The Davis Bacon Act (40 U.S.C. §§ 3141-3148), requires employers performing construction work under contract with the federal or District of Columbia government valued at more than $2,000 to pay their laborers and mechanics a prevailing wage and fringe benefits, at levels set on a regional or local level by the U.S. Department of Labor. Noncompliance with the DBA can potentially lead to severe penalties, including suspension, debarment, and even False Claims Act civil and/or criminal liability.

After nearly a decade of litigation, justice was finally meted out in an extreme case of Government over-reach against a government contractor. The Government had sought to recover over $1.6 million from a government contractor whose subcontractor had underpaid a handful of employees by $9,900.

When all was said and done, a federal appellate court finally rejected the Government’s legal theory as essentially frivolous and ordered it to pay the contractor’s attorney fees, estimated at roughly $500,000.  When the Government expressed concern that this would have a “chilling effect” on its efforts to vigorously enforce the False Claims Act, the court stated: “One should hope so.”  The case is called U.S. ex rel. Wall v. Circle C Constr., LLC, No. 16-6169, (6th Cir. Aug. 18, 2017).

The story starts when the prime contractor, Circle C Construction, won a contract to construct buildings at the Fort Campbell military base. Circle C hired a subcontractor, Phase Tech, to perform the electrical work. The prime contract required compliance with the Davis-Bacon Act, which is similar to the Service Contract Act but applies to construction work. Like the Service Contract Act, the Davis Bacon Act requires the prime contractor and all subcontractors to pay construction workers the prevailing wages and benefits set by the Department of Labor. The Davis-Bacon Act also requires that the contractor submit certified payrolls as a condition of contract payment.

While Circle C did not have a written contract with its subcontractor Phase Tech, it did provide Phase Tech with the Wage Determinations from its prime contract. But Circle C did not verify whether Phase Tech was in compliance with the Davis Bacon Act. Phase Tech did not submit payroll certifications for two years after the project commenced, and later contended it was not aware it had to do so.

Eventually, one of Phase Tech’s employees brought a qui tam False Claims Act action against both Phase Tech and Circle C based on the under-payment of wages. Phase Tech settled the case by agreeing to pay $15,000, leaving Circle C as the remaining defendant. The Government agreed to take over the case from the employee and pursued the claim against Circle C.

Initially, the case did not go well for Circle C. The federal trial court hearing the case granted plaintiff’s motion for summary judgment and damages of $555,000 (the entire cost of the electrical scope of work on the project), which was trebled to a total award of $1.66 million against Circle C.

We have previously written about the Department of Labor’s effort to expand the scope of its regulatory and enforcement jurisdiction over government contractors against the wishes of Congress and even fellow federal agencies. The United States Court of Appeals for the District of Columbia struck down an attempt by the DOL to significantly expand the Davis-Bacon Act to apply to the construction of a Public-Private Partnership project. The Davis-Bacon Act requires that contractors on federal and DC government construction projects pay prevailing wages and fringe benefits to the workers on such projects. DOL sought to apply the Act to CityCenterDC, which is a mixed-use development on the site of the DC Convention Center. This project includes 60 retail stores, various private offices, approximately 700 residential units, and a 370-room luxury hotel.