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Plaintiffs Establish FCA Liability for Construction Contractor’s Violations

Supreme-Court-Pillars-150x150 3The Sixth Circuit has held that a construction contractor’s violation of the Davis-Bacon Act can also create liability under the False Claims Act (FCA). U.S District Judge Kevin H. Sharp issued a judgment ordering Circle C Construction, LLC to pay the United States a total of $762,894 for violation of the FCA. These Davis-Bacon Act and FCA violations were connected to Circle C’s construction project on the Fort Campbell military base.

Created in the midst of the Great Depression, the Davis-Bacon Act requires laborers and mechanics to receive just as much pay as local workers when a contractor is performing work on a federal construction project. Congress intended to prevent falling wages caused by cheap outside labor displacing local workers; the Act prevented exploitation of workers and encouraged the hiring of local labor. Today the Act applies to contractors and subcontractors who are performing construction, alteration, or repair on either federally funded or federally assisted contracts. Nearly all work on public buildings or projects of public works fall under the Act. When working on projects like these, contractors and subcontractors must pay their laborers and mechanics no less that the local prevailing wages and fringe benefits for similar work performed in the area. Contracts that exceed $100,000 force contractors and subcontractors to pay their laborers and mechanics time and a half for all hours worked over 40 in a workweek. Under the Act, an employee’s only form of redress is reporting the violation to the Department of Labor, but since the 2012 decision in United States ex rel. Wall v. Circle C Construction, LLC, employees may now pursue a claim on their own through the False Claims Act.

Circle C violated the Davis-Bacon Act by submitting false wage and payroll certifications. Circle C had created a contract with the United States Army to construct buildings at Fort Campbell military base. Under this agreement, and in compliance with the Davis-Bacon Act, Circle C agreed to pay its electricians $19.19 an hour plus fringe benefits of $3.94 an hour. As a condition of payment from the government, Circle C agreed to pay electricians these wages, to ensure people doing electrical work were paid as electricians, and to submit complete and accurate payroll certifications ensuring compliance with Davis-Bacon Act.

Phase Tech was a subcontractor of Circle C on nearly 98 percent of the electrical work performed during the Fort Campbell project. Whistleblower Brian Wall was one of eight employees of Phase Tech who worked as an electrician. During the duration of the project, Phase Tech paid its electricians an hourly wage ranging from $12 to $16 an hour, far below the Davis-Bacon Act requirements. Circle C was aware that Phase Tech was submitting false payroll certifications and failing to list its employees as electricians. Circle C received from the government $565,109 for the electrical portion of the project with $553,807 of that amount being paid by Circle C to its subcontractor Phase Tech. Circle C in affect billed the government for $19.19 an hour while only paying its subcontractors at a rate of $12 to $16 an hour.

The U.S District Court entered summary judgment against Circle C on both damages and liability. Circle C appealed the decision, arguing that the Davis-Bacon Act didn’t allow prosecution under the FCA because the Department of Labor maintained primary jurisdiction over the issue. The Sixth Circuit Court of Appeals upheld the District Court’s decision, finding that the submission of false payroll certifications was actionable under the FCA. The court found that the amount of fraud suffered by the government was $259,298, but unlike the Davis-Bacon Act, the FCA triples damages resulting in total damages in this case of $762,894. Whistleblowers under the FCA are entitled to as much as 30 percent of the final damages if they are the first person to pursue a claim of alleged fraud.

The extension of FCA liability to the field of federally funded contractor construction opens new paths for whistleblowers to bring claims forward. Before the extension of this FCA liability, a whistleblower’s only course of action was filing a report. The decision of the Sixth Circuit will provide employees of contractors with even greater incentives to prevent fraud committed by their employers.

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