Tuesday, April 15, 2008

"But, I Was Told The Project Wasn't Public Work!"

I hear about this a lot, so please pay close attention.

In considering submitting a bid, a contractor inquires of the Owner as to whether the project is "public work." Public work requires the payment of statutory prevailing wages and supplemental benefits to those working on the project. Typically, the prevailing rate of wages is the union rate in the locality in which the work is being performed, and is usually much higher than the regular, private wage rate paid by the contractor.

Generally, in determining whether a construction project is public work, two conditions must be fulfilled in order for the provisions of New York Labor Law Section 220 to apply: (1) a public entity must be a party to a contract involving the employment of laborers, workers or mechanics; and (2) the contract must concern a project which has the primary objective of benefiting the public.

Back to our story. The contractor is told by the Owner that the job is not public work, and obtains written confirmation of that fact from the Owner. The contractor proceeds with the work and is eventually informed by the New York State Department of Labor that the project is a public job. The contractor is further informed that it has underpaid its workers since the higher, prevailing wages and benefits should have been provided. In response, the contractor confidently produces the Owner's written confirmation as to the private nature of the work. Guess what? If the project is, indeed, "public work" as defined by statute, the contractor must pay the differential between what it actually paid and the prevailing wage (together with supplemental benefits), despite the Owner's written representation to the contrary. Penalties and interest may be imposed as well.

It's not always clear whether a project is public or private work. Bottom line ... be very careful out there.

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