Union Fund Uses NY False Claims Act to Blow Whistle on Prevailing Wage Violator and Recover $33,750

In the first reported case of its kind in New York, in February a union fund received a five-figure settlement payment from a Harlem-based general contractor that worked on a New York City affordable housing project after the fund blew the whistle on the contractor’s failure to pay prevailing wages. The fund filed a whistleblower complaint under the N.Y. False Claims Act, which allows a whistleblower to file a qui tam lawsuit if it knows of and reports violations of the Act. The Act makes liable entities that knowingly present to the state or local government false or fraudulent claims for payment or avoid their obligations to pay the state or a local government. State of New York v. A. Aleem Construction, Inc.

A whistleblower that files a successful claim under the Act can recover 15 to 25 percent of any recovery if the State intervenes in the matter and converts the qui tam action into an attorney general enforcement action. If no State intervention, the whistleblower can recover between 25 and 30 percent of the total recovery. New York is among 29 states, including New Jersey, plus D.C. that offer an incentive payment or “bounty” to persons who blow the whistle on prevailing wage violators. A whistleblower who plans or initiates the violation that is the basis of the action can recover but in a reduced amount.

The union fund’s whistleblower complaint caused the State to investigate and determine that the general contractor violated prevailing wage laws by failing to pay laborers working on the project the required prevailing wages and benefits and failing to maintain proper payroll records. Under the settlement, the general contractor agreed to pay $225,000 to resolve the Action, $33,750 of which, or 15%, was paid to the fund.

The bounty paid to the union fund for reporting to the State violations of prevailing wage laws serves as another wake-up call to the employer community that claims for violations of prevailing wage laws can come from various sources including even the unions and their funds that negotiate and benefit from the wages and benefits, and the added incentive of a bounty in exchange for blowing the whistle is likely to encourage more unions and their funds to follow suit. In addition, on February 21 the U.S. Supreme Court reversed the 2nd Circuit Court of Appeals’ dismissal of a 2011 suit brought under the federal False Claims Act by two former Wells Fargo employees who sought damages on behalf of taxpayers for fraud occurring during their employment with the bank. The Court vacated the dismissal of the lawsuit and in the process endorsed broader support for whistleblower claims at the federal level. Bishop v. Wells Fargo & Co. The federal False Claims Act provides similar encouragement, not limited to employees, to blow the whistle on violators of the Davis-Bacon Act.

If you have any questions or would like to discuss how these state and federal whistleblower protections apply to your employees and your business, please contact Patrick W. McGovern, Esq., Partner in the Firm’s Wage and Hour Compliance Practice Group and  at 973-535-7129 or at pmcgovern@nullgenovaburns.com.