For decades the False Claims Act and its “qui tam” whistleblower provision has been used to fight contractors who overcharge the government and engage in other types of fraud. But a recent settlement under the New York False Claims Act shows that the law can be used to protect workers’ rights.
Earlier this month, a New York construction contractor and developer agreed to settle allegations that they falsely certified to the government that they were paying their workers the prevailing wage rates, according to a press release from New York Attorney General Eric Schneiderman, as required by statute and contract.
The $255,000 settlement marks the first time that the New York False Claims Act has been used to enforce prevailing wage laws and shows the potential of false claims statutes to combat wage theft.
Prevailing wage laws require that companies that are awarded certain government contracts pay their workers “prevailing” wages — as well as other fringe benefits — that typically exceed federal and state minimum wage rates.
Prevailing wage laws are intended to use the government contracting power to advance the public policy of ensuring that workers are paid appropriate wages, which can have beneficial effects throughout the economy and society.
In this case, the Laborers Eastern Region Organizing Fund (“LEROF”), which is associated with the LiUNA labor union, brought a “qui tam” (whistleblower) action under the New York False Claims Act. The suit alleged that A. Aleem Construction Inc.; its owner, Mervyn Frank; West 131st Street Development Corp., a developer; and its principals violated the New York False Claims Act by making claims for payment while acting in reckless disregard of their obligation to pay employees prevailing wages.
“With the announcement of this first ever prevailing wage case settlement under the New York False Claims Act, Attorney General Schneiderman has shown that wage theft can be combatted through partnerships with whistleblowers, such as the Laborers Eastern Region Organizing Fund,” said LiUna representative Robert Bonanza. “On a daily basis we see the effects of wage theft on workers and their families, and once again the Attorney General has shown his commitment to protecting working people.”
LEROF, as the relator in a qui tam action, will receive a share of the settlement funds, which it says it will use to continue its worker advocacy efforts.
Although this is the first time the New York False Claims Act has been used to enforce prevailing wage laws, relators have brought similar qui tam actions under the federal False Claims Act.