A recent California appellate court decision held that an employee of a subcontractor on a public works project has no right to recover a prevailing wage underpayment from the prime contractor. (See Violante v. Communities Southwest Development and Construction Company, (April 17, 2006, E037333) ___ Cal.App.4th ___ [06 C.D.O.S. 3209].) In Violante, the plaintiffs were employed by a subcontractor on a master planned community development with 2000 residences and many public improvements. Plaintiffs’ alleged that they were not paid prevailing wages for their work by their direct employer, the subcontractor, and brought suit against the general contractor.
The court held that this was an “untenable interpretation” of the Labor Code which merely provides that “a contractor and subcontractor must pay prevailing wages to their respective employees on a public works project, not that a contractor must pay prevailing wages to a subcontractor’s employees.” The court held that the general contractor was not responsible for the prevailing wage underpayment under any theory presented by the plaintiffs, including Labor Code violation, Business and Professions Code violation and breach of contract.
Note, however, that the general contractor could have been liable for monetary penalties assessed by the Department of Industrial Relations if it knew the subcontractor failed to pay prevailing wages, and failed to do all of the following: 1) contractually require its subcontractor to pay prevailing wages; 2) review certified payroll records from the subcontractor; 3) withhold payments to subcontractor based on the subcontractor’s underpayment; and 4) obtain an affidavit from the subcontractor asserting payment was made. (See Labor Code section 1775(b).) These circumstances were not present in the Violante case.