Contractors Face Big Risks for Prevailing Wage Violations

A recent lawsuit in the U.S. District Court for the Eastern District of Pennsylvania is serving as a stark warning to contractors and subcontractors working on publicly funded projects. In Lipinski and Taboola v. North-East Deck & Steel Supply (Civ Action No. 5:25-cv-1467), two crane operators filed a class action against their employer, alleging violations of both federal and state wage laws.

The plaintiffs claim their employer misclassified workers to avoid paying required prevailing wages. The suit also alleges that fringe benefits were improperly paid as if the workers were independent contractors, which allowed the employer to dodge payroll tax obligations. Additionally, the complaint accuses the company of failing to pay employees for time spent on mandatory pre-shift safety inspections, a violation of the Fair Labor Standards Act (FLSA), 29 USC §201 et seq.

This case underscores the importance of understanding and complying with prevailing wage laws, especially for public works contracts funded by federal, state, or local government entities. These laws, including the federal Davis-Bacon Act and state-specific statutes like the Pennsylvania Prevailing Wage Act (43 P.S. § 165-1, et seq.), mandate that workers be properly classified based on their actual job duties and be paid corresponding prevailing wage rates, including fringe benefits.

In Pennsylvania, for example, affected employees can file lawsuits directly against employers to recover unpaid wages. They may also seek additional damages such as liquidated damages, attorney’s fees, and interest, often through class action litigation. While the federal Davis-Bacon Act doesn’t offer the same direct legal path for employees, it allows for claims to be filed through the U.S. Department of Labor. Some workers have also pursued claims under the False Claims Act when certified payroll records were allegedly falsified.

Employers that misclassify workers or mismanage payroll risk substantial liabilities, including backpay, penalties, pre-judgment interest, legal costs, and reputational damage.

“All of this means that employers who work on publicly funded projects must pay particular attention to employee classification and pay issues,” the article notes. “Given that an employer can potentially be liable for significant damages, including backpay, penalties, pre-judgment interest, reasonable attorneys’ fees and costs, it is critical to properly classify workers to ensure that they are paid required prevailing wages under federal or state law.”

Additionally, mislabeling employees as independent contractors without careful review of their actual duties can be a costly mistake. Employers must also ensure workers are paid for all compensable time, including pre- and post-shift duties, and that certified payroll reports submitted to government agencies are complete and accurate.

As enforcement and litigation around wage issues intensify, this case stands as a reminder that compliance with prevailing wage laws is not just a regulatory obligation—it’s essential to protect against serious legal and financial consequences.

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Originally reported by JDSUPRA.