From Construction Executive
By Michael J. Schrier, Husch Blackwell
The civil and potential criminal consequences of a failure to comply with the Davis-Bacon Act are very real and very serious. Every once in a while, a case comes along that drives those points home. One such recent case involved criminal convictions for wire fraud and conspiracy to commit wire fraud in connection with what appears to be a blatant failure to comply with Davis-Bacon Act requirements.
The contractor was owned by two brothers. Its business included bidding on and winning contracts to perform repair work in vacant public housing units. The repair work was partially funded by the federal government. As a result, both the Requests for Price Quotes (RPQ) and invitations to bid contained express Davis-Bacon Act requirements.
The contractor won three RPQs from the client starting in 2014. In the winning bids, the contractor expressly “acknowledged the Act’s wage requirements and represented that [it] did not expect to use subcontractors.” In reality, there were more than fifty subcontractor agreements in which the contractor paid subcontractors a flat rate regardless of the actual hours expended. The contractor prepared certified payrolls for some of the subcontractors, claiming the subcontractors worked as the contractor’s employees and making up the number of hours each “employee” allegedly worked. Some of the certified payrolls substituted names of “employees” to cover up the fact that the workers who actually performed work did not have authorization to work in the United States.
The construction company owners were convicted in the United States District Court for the Southern District of Florida on federal charges of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349 and wire fraud, and violation of 18 U.S.C. § 1343 in connection with their demonstrated failures to comply with the Davis-Bacon Act. Their original sentences—before being modified to home confinement due to the COVID-19 pandemic—each included nearly four years in federal prison followed by three years of supervised release.
As this case demonstrates, people can and will be criminally prosecuted by the federal government for Davis-Bacon Act violations. One usually sees federal False Claims Act charges when the federal government is the one purchasing construction services. In this case, because there were federal funds involved and a state/local government was the actual contracting party, the U.S. attorney instead charged the contractor with wire fraud and conspiracy to commit wire fraud. Either way, as this case demonstrates, contractors can face federal prison for egregious Davis-Bacon Act violations. This is a very important lesson to keep in mind in the event the Biden Administration passes an infrastructure bill and billions in federal funds—the receipt of which trigger Davis-Bacon Act requirements—are made available to fund a variety of federal, state and local construction projects. Contractors should take Davis-Bacon Act requirements seriously or else be prepared to face the consequences.
Michael J. Schrier is a Washington, D.C.-based partner with the law firm Husch Blackwell LLP, and is currently a member of the ABA Public Contract Law Section Council, formerly a Co-Chair of the ABA Public Contract Law Section’s Employment Safety and Labor Committee.