Comptroller v
Comptroller v. Uddin USA Corp.
OATH Index No. 741/07 (Mar. 19, 2007)
Prevailing wage case in which contractor defaulted. ALJ found that contractor violated Labor Law by failing to pay prevailing wages and supplemental benefits to four employees on public works contracts and is liable for underpayment plus interest. Based upon willful nature of underpayment and deliberate falsification of payroll records, 10% civil penalty and five-year debarment recommended. ALJ also found that agreements executed by workers shortly before trial waiving rights to prevailing wages were void as against public policy.
___________________________________________________
NEW YORK CITY OFFICE OF
ADMINISTRATIVE TRIALS AND HEARINGS
In the Matter of
OFFICE OF THE COMPTROLLER
Petitioner
-against-
UDDIN USA CORP.
Respondent
______________________________________________
REPORT AND RECOMMENDATION
TYNIA D. RICHARD, Administrative Law Judge
This is a prevailing wage enforcement proceeding brought by petitioner, the Comptroller of the City of New York, pursuant to sections 220(8) and 220-b(2) of the Labor Law. Petitioner alleges that from September 1998 through September 2000, respondent Uddin USA Corp. (“Uddin”) failed to pay four employees prevailing wages and supplemental benefits for work performed on contracts entered into with the New York City Department of Design and Construction (“DDC”), and that Uddin submitted falsified certified payroll reports to DDC that concealed the underpayments. The Comptroller seeks $592,290.64 in monetary relief for the employees, including interest, and civil penalties.
A hearing was held before me on January 8, 2007. The record was held open until January 22, 2007, for petitioner to submit argument on the issue of whether two employees waived their entitlement to a monetary award in this proceeding by executing releases in favor of Uddin. At the trial, the Comptroller presented the testimony of four witnesses, including two of the four employees. Respondent failed to appear.
Upon respondent's failure to appear, petitioner presented proof of service of the notice of hearing (Pet. Ex. 1). Jennifer Caroleo, a claims specialist with the Comptroller’s Office, testified that the charges and notice of hearing were served on respondent by regular and by certified mail (Tr. 7), as required by statute and the Comptroller's regulations. See Labor Law § 220 (8); 44 RCNY § 2-02(b)(1) (Lexis 2007). Petitioner also produced copies of certified mail records and signed receipts (Pet. Exs. 2A, 2B, & 2C). I find that service was legally sufficient. 48 RCNY § 1-23; see Comptroller v. Central Absorption, Inc., OATH Index No. 1138/96, Comptroller's Decision (Apr. 30, 1996).
Moreover, there was proof of respondent’s actual notice of the hearing. Respondent appeared in this proceeding by the filing of a notice of appearance on November 30, 2006. Petitioner’s counsel represented that he spoke with respondent’s counsel the week before trial and was informed that respondent would not be appearing (Tr. 4). Thus, the evidence also proves that Uddin had actual knowledge of this proceeding and of the hearing date. See Dep’t of Correction v. Davis, OATH Index No. 309/86 (Nov. 3, 1986).
ANALYSIS
The Comptroller seeks by this proceeding to enforce section 220 of the Labor Law, which provides that entities who contract with the City under public works contracts must pay their employees “not less than the prevailing rate of wages.” Labor Law § 220(3). See Matter of Erie County Industrial Development Agency v. Roberts, 94 A.D.2d 532, 465 N.Y.S.2d 301 (4th Dep't 1983), aff'd, 63 N.Y.2d 810, 482 N.Y.S.2d 267 (1984); Office of the Comptroller v. Picone, OATH Index No. 976-78/97 (Apr. 21, 1997), rev. and remanded, Comptroller's Dec. (June 17, 1997). The New York State Constitution requires contractors and subcontractors on public works projects to pay their workers, laborers and mechanics no less than the rate of wages and supplements prevailing for the applicable trade or occupation in the locality where the project is located. N.Y. Const., art. I, § 17. The Labor Law implements the constitutional requirement and the Comptroller sets the prevailing rates. To establish a claim under Labor Law section 220, the Comptroller must prove by a preponderance of the credible evidence that the contractor failed to pay its employees prevailing wages and benefit supplements for work performed under the contracts at issue here. See Comptroller v. Kolsch, Inc., OATH Index No. 674/06 (May 10, 2006).
Respondent Uddin is a contractor whose bids were accepted to perform three public works projects under City contract. Annexed to those contracts was the Comptroller's schedule of prevailing wage and supplements rates (“Prevailing Wage Schedule”), which makes the contractor’s wage obligation clear. To receive progress payments under the public works contracts, Uddin was required to submit certified payroll reports to its City contracting agency, DDC. Petitioner alleges not only that Uddin underpaid its employees but also that Uddin falsified certified payroll reports by indicating that workers were paid prevailing rates and manipulating the hours to under represent the number of days these workers worked on the job site.
Based upon complaints filed by four Uddin employees, Leroy Duberry, Tadeusz Kozak, Cyril Peter, and Jozef Wiecek, the Comptroller commenced an investigation. The four worked on three public works projects for Uddin: rehabilitation and renovations to the Schomberg Cultural Center, the Chelsea Health Center, and Rod Rodger’s Dance Company Studio, which included the construction and demolition of new offices, medical rooms, clinic space, cellars, roofs and handicapped facilities (Pet. Exs. 7, 8, & 9; Tr. 14). The complaints state that the four workers performed carpentry and demolition work on these projects from September 1998 to September 2000 and were paid an average of $15 per hour, instead of the $38 to $50 per hour they were entitled to under the Prevailing Wage Schedule (Pet. Exs. 3, 4, 5, & 6).
During the Comptroller’s investigation, Uddin produced its certified payroll records for each of the three contracts (Pet. Exs. 11, 12 & 13), and W-2 forms for two of the four employees (Pet. Ex. 15). The employees submitted to the Comptroller copies of their paychecks (Pet. Ex. 14).
I find that petitioner established by a preponderance of the evidence that Uddin failed to pay all four employees the prevailing wage.
According to the complaints, Mr. Wiecek and Mr. Kozak earned $15 per hour for their work as carpenters, for a total of $600 per week (Pet. Exs. 3 & 4). Mr. Peter worked as a carpenter and received $500 to $750 per week (Pet. Ex. 5). Mr. Duberry received $500 per week; he said he worked as a carpenter and did demolition, although he was listed as a mason tender (i.e., demolition worker) on the payroll reports (Pet. Ex. 6). Two complainants stated they were paid by check only, and two reported they were also paid in cash. The paychecks the workers submitted were consistent with their representations about how much they were paid, and contradicted the certified payroll reports submitted by Uddin.
For example, a cancelled paycheck dated March 8, 2000, indicated that Mr. Wiecek was paid $400.00 for the week (Pet. Ex. 14), while the certified payroll report for the same week indicated he received net pay of $721.24 (Pet. Ex. 16). According to Ms. Caroleo, these documents should match exactly (Tr. 42). A copy of a paycheck dated September 20, 1999, indicated that Mr. Kozak was paid $340.00 for the week (Pet. Ex. 14), while the certified payroll report for the same week indicated that he received net pay of $1,036.05 (Pet. Ex. 16). Rather than a consistent five-day, 35- to 40-hour workweek, which Uddin’s employees stated they worked, the payroll reports indicated these employees sometimes worked only two or three days per week, for two to six hours per day. The evidence credibly demonstrated that the payroll reports were intentionally falsified.
Mr. Kozak testified at the trial pursuant to subpoena (Pet. Ex. 21). He stated that he worked for Uddin as a carpenter from September 1999 to November 2000 at three sites, the Schomberg, Rod Rodgers Dance studio, and the Chelsea clinic, and he described the work he did at each location (Tr. 61-63). He was paid $600 per week for 40 hours of work, which included a half hour lunch. He said he regularly worked 40-hour weeks (Tr. 76), and he was paid by check and received no pay stub with his check. He received no medical benefits. Although he worked some overtime, he received the same rate of pay as for regular time. He also did private work at Mr. Uddin’s house for three weeks during the winter of 2000 (Tr. 63). He learned he was being underpaid when an electrician told him about the prevailing wage law. He then decided to seek help and complained to the Comptroller’s office.
A few weeks prior to trial, Mr. Kozak was approached by Uddin and offered a $6,000 payment to settle his claim for wages (Tr. 80-81). He accepted the offer, signed a settlement agreement, and received a bank check for $6,000 (Pet. Ex. 20).
Mr. Wiecek also testified at the trial pursuant to subpoena (Pet. Ex. 23). He said that he worked for Uddin as a carpenter on all three public works projects from 1999 to 2000 (Tr. 85-86). He regularly worked a 40-hour week (with a half-hour lunch) and was paid $600 for the week, receiving a $50 raise several months after he started. He received no medical or other benefits. He also did some private work at Mr. Uddin’s house (Tr. 86).
A few weeks prior to trial, Mr. Wiecek was approached by Uddin and offered a $6,000 payment to settle his claim for wages (Tr. 91). He accepted the offer, signed a settlement agreement, and received a bank check for $6,000 (Pet. Ex. 22).
The Comptroller conducted an audit of the records received, which was prepared by its auditor William Ierps. Based upon these records, the auditor concluded that the employees were significantly underpaid. The audit was condensed into a summary that reflects the total underpayment for each of the four employees based upon the Prevailing Wage Schedule, which is updated by the Comptroller approximately every six months (Pet. Ex. 17).[1] The auditor did not use the payroll reports to calculate the underpayment because they were deemed fraudulent; instead, he used the documents and representations of the complainants to arrive at his figures. Office of the Comptroller v. Integrity Construction & Consulting Services, Inc., OATH Index No. 1606/06, at 7-8 (Jan. 4, 2007) (auditor relied on signed complaints and other documentation, not crediting respondent’s certified payroll records). The auditor also based his calculations upon certain assumptions. For example, the workers stated in their complaints that they worked from 8:00 a.m. to 4:00 p.m., with half an hour for lunch. Although the workers submitted only a few cancelled checks and copies of paychecks for purposes of calculating the underpayment, the auditor accepted their statements about how much they received in pay each week. Also, the auditor concluded that Mr. Duberry worked as a mason tender and that the others worked as carpenters.
I find that the Comptroller presented ample evidence that the four complainants were underpaid and that its audit reasonably calculated the extent of that underpayment.
As to employee Leroy Duberry, the audit concluded that he was underpaid a total of $47,256.45 (Pet. Ex. 17). During the period September 24, 1998 to September 29, 1999, Mr. Duberry worked 1,935 regular hours. His Prevailing Wage Rate during the period was approximately $25 and his Supplemental Benefits Rate was approximately $13. After subtracting the amount he was paid, the audit found that Mr. Duberry is owed wages and benefits in the amount of $47,256.45 before interest and civil penalties.
As to employee Tadeusz Kozak, the audit concluded that he was underpaid a total of $74,175.40 (Pet. Ex. 17). During the period September 9, 1999 to September 27, 2000, Mr. Kozak worked 1,971.25 regular hours. His Prevailing Wage Rate for regular work hours during the period was approximately $31 and his Supplemental Benefits Rate was approximately $22. After subtracting the amount he was paid by Uddin and adding the overtime hours that he worked, the audit found that Mr. Kozak is owed wages and benefits in the amount of $74,175.40. Subtracting the three weeks Mr. Kozak testified that he spent working privately for Mr. Uddin in 2000, $4,267.14, and the $6,000 settlement payment from Uddin, the total amount of the violation before interest and penalties is $63,908.26.
As to employee Cyril Peter, the audit concluded that he was underpaid a total of $20,814.57 (Pet. Ex. 17). During the period January 11, 2000 to June 20, 2000, Mr. Peter worked 496.50 regular hours. His Prevailing Wage Rate for regular work hours during the period was approximately $31 and his Supplemental Benefits Rate was approximately $23. After subtracting the amount he was paid and adding the overtime hours he worked, the audit found that Mr. Peter is owed wages and benefits in the amount of $20,814.57 before interest and civil penalties.
As to employee Jozef Wiecek, the audit concluded that he was underpaid a total of $85,118.09 (Pet. Ex. 17). During the period August 7, 1999 to September 22, 2000, Mr. Wiecek worked 2,238.75 regular hours. His Prevailing Wage Rate for regular work hours during the period was approximately $31 and his Supplemental Benefits Rate was approximately $22. After subtracting the amount he was paid by Uddin and adding the overtime hours he worked, the audit found that Mr. Wiecek is owed wages and benefits in the amount of $85,118.09. Further reducing that amount by $4,267.14 for three weeks of private work in 2000 and the $6,000 payment from Uddin, the total violation due is $74,850.95 before interest and civil penalties.
Interest on the amounts due these employees was calculated at the rate of 16% on a daily basis from the day the evidence reveals that the work was actually performed until October 11, 2006. That calculation should be updated to include interest that will accrue until payment is tendered. Labor Law § 220(8) (“Such order shall direct payment of wages or supplements found to be due, including interest at the rate of interest then in effect as prescribed by the superintendent of banks pursuant to section fourteen-a of the banking law per annum from the date of the underpayment to the date of the payment.”).
Petitioner contends that Uddin’s conduct was demonstrably willful because the company submitted falsified certified payroll reports, thus demonstrating the intent to conceal the underpayments made to the workers. I agree.
Petitioner also argues that Uddin’s conduct is deserving of an additional penalty. A civil penalty of up to 25% of the total underpayment may also be imposed for prevailing wage violations. Labor Law § 220(8). The factors to consider are “the size of the employer's business, the good faith of the employer, the gravity of the violation, the history of previous violations and the failure to comply with record-keeping or other non-wage requirements.” Labor Law § 220(8). There was no evidence at trial of the size of Uddin’s business or whether it had any previous violations. The fact that Uddin intentionally fabricated its certified payroll records to create the false impression that it had paid prevailing wages is a serious violation, however, that invokes bad faith. And this tribunal has found such falsification to credibly establish willful underpayment. See Integrity Construction & Consulting Services, Inc., OATH 1606/06, at 10 (willfulness proved by contractor’s initial practice of paying workers in cash, submitting fabricated certified payrolls, and its failure to maintain reliable records); Office of the Comptroller v. A & R Paterno Construction, Inc., OATH Index No. 2248/00, at 8 (Oct. 19, 2000) (“There can be little doubt that [the contractor] was aware or should have been aware that it was violating section 220 of the Labor Law. All public works contractors and subcontractors are charged with knowledge of the prevailing rates of wages and benefits.”). Such conduct has also served as the basis for a finding that the maximum civil penalty should be imposed. See, e.g., Integrity Construction & Consulting Services, Inc., OATH 1606/06, at 10; Office of the Comptroller v. Causeway Construction Corp., OATH Index No. 1694/02 (Aug. 21, 2002) (contractor’s blatant violations and subsequent failure to cooperate with petitioner's investigation, or to appear for trial, merited imposition of the maximum 25% civil penalty); A & R Paterno Construction, Inc., OATH 2248/00, at 10; Office of the Comptroller v. Carlin Construction and Development Corp., OATH Index Nos. 782-83/92, at 16 (July 17, 1992) (contractor's non-cooperation alone justified imposition of maximum penalty).
Although respondent failed to appear to defend against the charges, the record (which included respondent’s recent notice to petitioner that it would not appear at trial) suggested that Uddin’s absence was precipitated by its bankruptcy. Accordingly, I draw no negative inference from its failure to appear. Although I decline to impose the maximum penalty, I find that Uddin’s falsification of the payrolls and its substantial underpayments justify imposing a civil penalty. I have set that penalty at ten percent of the total underpayment.
In addition, due to its underpayment and falsification of its payroll records for three public works projects, Uddin should also be debarred from bidding on future public works contracts within the State of New York for a period of five years. Labor Law § 220-b(3)(b); Causeway Construction Corp., OATH 1694/02 (where Labor Law section 220-b requires automatic five-year debarment for any contractor who has two or more final determinations of prevailing wage rate violations, violation is found even if the two determinations are made simultaneously); A & R Paterno Construction, Inc., OATH 2248/00 (willful violations on two contracts plus deliberate falsification of payroll records demands debarment for five-year period).
Release of claims to prevailing wages
The two workers who testified at trial, Mr. Kozak and Mr. Wiecek, admitted they signed agreements with Uddin pursuant to which they accepted payments of $6,000 each in satisfaction of any wages due them and released Uddin from all such claims (Pet. Exs. 20 & 22). The question is whether these agreements effected a valid waiver of the workers’ rights to the prevailing wage.
I allowed the Comptroller to submit papers in support of its contention that such waivers were void. Although respondent failed to appear at trial, after receiving the Comptroller’s papers, it submitted papers arguing that a valid waiver of all claims was effected by the agreements.
I find that there was no valid waiver. This tribunal has ruled on this issue in a definitive analysis written in Office of the Comptroller v. BQE Contracting Corp., OATH Index No. 1046/93 (June 28, 1994), in which Judge Fraser found such releases “void as a matter of law and public policy” and held that contract workers could not compromise their rights to be paid a prevailing wage without the approval of the Comptroller. Id. at 9, 11. Judge Fraser’s analysis was guided by the structure and language of section 220 which seeks to preserve a broader set of interests than those of the employee alone and “therefore cannot be compromised or yielded by the laborer alone.” Id. at 12. The court in John F. Cadwallader, Inc. v. New York State Dep’t of Labor, 112 A.D.2d 577, 578, 579, 491 N.Y.S.2d 511, 513 (3d Dep’t 1985), similarly recognized that “the protection of the wage rate is a legitimate State concern” and held that agreements compromising workers rights to the prevailing wage “are contrary to both the legislative intent [of section 220] and public policy.” 112 A.D.2d at 578, 491 N.Y.S.2d at 513.
In a case involving a federal prevailing wage statute, United States ex rel. Johnson v. Morley Constr. Co., 98 F.2d 781, 788-89 (2d Cir. 1938), the Second Circuit also rejected the notion that unskilled workers employed to work on public works contracts at rates lower than the prevailing wage could release their rights to prevailing wages, because the statute “was passed to protect them against the economic pressure it was assumed they would be unable to resist, if offered a job,” therefore, it was “necessary to deny [the workers] the power to bargain away their privilege.” Morley Constr. Co., 98 F.2d at 788-89, citing Wright v. State of New York, 223 N.Y. 44, 48, 119 N.E. 83, 85 (1918) (where the state had “expressed its intention as to the rate of compensation” by statute, the fact that claimant had “accepted a reduced compensation does not estop him from recovering the residue fixed by law.”). In addition, the huge disparity between the amounts accepted ($6,000 each) in exchange for the prevailing wages due ($63,908.26 and $74,850.95) would be unconscionable. See Canarsie Plumbing and Heating Corp. v. Goldin, 151 A.D.2d 331, 333, 542 N.Y.S.2d 588, 590 (1st Dep’t 1989) (appropriate for hearing officer to find that release signed for $600 in exchange for a prevailing wage claim in excess of $7,000 was unconscionable).
Although there is caselaw that supports the argument that a waiver of the right to a prevailing wage is permissible, the cases are distinguishable on the facts. See Manning v. Joseph, 304 N.Y. 278, 107 N.E.2d 446 (1952); Ryan v. City of New York, 177 N.Y. 271, 69 N.E. 599 (1904); Evadan Realty Corp. v. Patterson, 192 Misc. 850, 78 N.Y.S.2d 114 (Sup. Ct. N.Y. Co. 1948), aff’d without op., 276 A.D. 751, 92 N.Y.S.2d 504 (1st Dep’t 1949). All of these cases involve New York City employees who compromised their wage claims against their city employer, not workers hired to perform municipally let public works projects, as here.
Accordingly, I find, consistent with the holding in Comptroller v. BQE Contracting Corp., that the Comptroller’s exclusive authority to enforce the prevailing wage requirements for city public works contracts precludes any release or waiver agreement to which the Comptroller is not a party. The Comptroller unequivocally denied approving the waivers here. Thus, they are void. Nevertheless, the workers who accepted these payments may not collect twice; the amounts calculated as owing to them in this proceeding will be reduced by the $6,000 previously collected from Uddin.
FINDINGS AND CONCLUSIONS
1. Contractor violated section 220 of the Labor Law by failing to pay prevailing wages and supplemental benefits to four employees on public works contracts from September 1998 to September 2000 and is liable for underpayment in the amount of $208,830.23.
2. The complainants are entitled to additional interest, at the annual rate of 16 percent, until payment is tendered.
3. Based upon willful nature of underpayment and deliberate falsification of payroll records, a 10% civil penalty was assessed and five-year debarment recommended.
4. Workers on public works contracts may not release or waive their rights to prevailing wages without the Comptroller’s approval, thus any such agreements are unenforceable. Such amounts paid by employer to two employees will be set off against the judgment awarded here.
RECOMMENDATION
Pursuant to the foregoing analysis, I recommend an award against Uddin in amounts set forth in the chart below, which is consistent with the Comptroller’s audit except for the adjustments made for private work performed by two workers and the payments they received for Uddin in exchange for the releases.
|Employees |Wages and Benefits, as per|Adjustment for private |Adjustment for payment|Total Violation (before |
| |audit |work* |from Uddin** |interest and civil penalty) |
|Leroy Duberry |$47,256.45 | | |$47,256.45 |
|Tadeusz Kozak |$74,175.40 |4,267.14 |6,000.00 |$63,908.26 |
|Cyril Peter |$20,814.57 | | |$20,814.57 |
|Jozef Wiecek |$85,118.09 |4,267.14 |6,000.00 |$74,850.95 |
| | | | |$206,830.23 |
|*Wages and benefits for Mr. Kozak were reduced from the amount set forth in the audit to account for three weeks in January 2000,|
|when he indicated he worked privately on Mr. Uddin’s home. For the same reason, wages and benefits for Mr. Wiecek were adjusted |
|downward in the same amount. |
|**Wages and benefits for Mssrs. Kozak and Wiecek also were reduced by $6,000, the payment received from Uddin purportedly in |
|settlement of these claims. |
The audit should also be adjusted for the recommended civil penalty, which I have set at 10% of the underpayment, and the interest calculation must be updated to include interest that will accrue until payment is tendered pursuant to Labor Law § 220(8).
Tynia D. Richard
Administrative Law Judge
March 19, 2007
SUBMITTED TO:
WILLIAM C. THOMPSON, JR.
Comptroller
APPEARANCES:
CONSTANTINE KOKKORIS, ESQ.
Attorney for Petitioner
No Appearance by Respondent
-----------------------
[1] The Prevailing Wage Schedule sets forth the hourly rates for workers on public works projects (see Pet. Ex. 10). The Total Prevailing Wage Rate for each employee is the Wage Rate per hour plus the Supplemental Benefits Rate per hour, as set forth in the Prevailing Wage Schedule (Tr. 25). The Supplemental Benefits Rate is paid to the employee if the employer does not provide health and other benefits (Tr. 27).
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