A recent Massachusetts Superior Court case serves as an important reminder that contractors working on public projects must ensure that their subcontractors comply with prevailing wage laws. A failure to do so can put the contractor at risk under the Massachusetts False Claims Act (the “False Claims Act”) and expose the contractor to potential multiple damages far in excess of the underlying unpaid wages.
The False Claims Act is modeled after the similar federal statute and is designed to eliminate fraud and waste in public contracting. In addition to allowing individuals to file whistleblower claims, the False Claims Act tasks enforcement to the Massachusetts attorney general. In furtherance of its enforcement authority, the Attorney General’s Office established a False Claims Division in 2015 and has aggressively pursued the commonwealth’s interests through enforcement actions.
Recently, in Commonwealth v. BPI Construction Management, Inc., the attorney general asserted claims for violation of the False Claims Act against BPI Construction Management, Inc. (“BPI”), a framing contactor that was awarded two separate public construction projects. The attorney general alleged that BPI’s subcontractor, Superior Carpentry, Inc. (“Superior”), submitted false weekly certified payroll reports to BPI for both projects stating that Superior paid all carpenters working on the projects the prevailing wage rate.
For one project, Superior submitted 22 false certified payroll records, and for the other, Superior submitted 10 false certified payroll reports. While the reports stated that Superior paid its carpenters the applicable prevailing wage of $66.68 per hour, Superior in fact only paid its carpenters $25-30 per hour in violation of the prevailing wage applicable to the projects. BPI submitted Superior’s false certified payroll records to the general contractor for the projects, which then submitted the records to the awarding authorities in connection with applications for payment for project work. The awarding authorities relied on the representations in the false certified payroll records in making payment to the general contractor.
In the attorney general’s action against BPI, the Superior Court found that BPI “knowingly” submitted false records to the awarding authorities to obtain payment it was not entitled to receive. While BPI did not prepare the certified payroll records at issue, the court found that BPI acted with deliberate indifference to the truth of falsity of the certifications and “forwarded thirty-two false [records] to the prime contractors without any review or effort to ensure their accuracy.” The court further found that “[a]t best, BPI passively disregarded the truth of falsity of the [certified payroll records], failed to make a minimum examination, and ignored obvious warning signs.” As such, BPI could not shift its responsibility and the blame to Superior.
Pursuant to the False Claims Act, the court awarded the commonwealth multiple damages and attorney’s fees for a judgment totaling nearly $1 million for claims arising out of unpaid wages of $226,752. This case serves as a warning to public contractors that the Attorney General’s Office takes the False Claims Act seriously and will pursue contractors that violate its terms, particularly with respect to the prevailing wage laws.
Based on this case, contractors cannot blindly accept representations from their subcontractors and have an affirmative obligation to ensure that their subcontractors follow the law. From a risk management perspective, all public contractors that utilize subcontractors should include some mechanism to ensure the accuracy of subcontractor-certified payroll records before submission to any awarding authority.
Anthony Fioravanti is a partner at Kenney & Sams PC. Fioravanti advises developers, general contractors and subcontractors on a broad range of construction disputes on projects of various sizes. He also represents clients in complex commercial matters, including close corporation disputes.