February 2, 2021

Determining if a private entity is required to pay its employees assigned to provide services to a public entity "prevailing wages and supplements"

Executive Cleaning Services Corporation [Cleaning] employed six individuals to perform cleaning services at the Ossining Public Library [Library] pursuant to a agreement between the parties. Library, however, "did not represent that it was a public agency or that the prevailing wage law applied" until a Cleaning employee told Library that "Cleaning had failed to provide compensation for the work performed under the contract."*  

Library then notified Cleaning that it, as a public employer subject to Article 9 of the New York State Labor Law, would withhold final payment under the agreement until the prevailing wage issue was resolved. Library also advised the Department of Labor [Department] of the employee's complaint. This resulted in the Department's Bureau of Public Work investigating the matter and concluding that the service Cleaning was providing Library was subject to the prevailing wage provisions of Article 9.

Ultimately the Commissioner of Labor affirmed, in full, its hearing officer's findings and recommendations that:

1. Assessed Cleaning for an underpayment of $16,671.57 in wages and supplements;

2. Determined that Cleaning's underpayment was non-willful "[g]iven [Cleaning's] inexperience, and [Library's] failure to provide a written contract and prevailing wage-rate schedules;" and

3. Cleaning be assessed interest at the rate of 6% per year on its underpayment, as well as a civil penalty in the amount of 5% of the underpayment and interest.

Cleaning filed a CPLR Article 78 challenging the Commissioner's decision coupled with a petition for declaratory judgment seeking, among other things, a court determination that its employees were not subject to the prevailing wage provisions of Labor Law Article 9 for services provided Library because [1] Library was not a public agency within the meaning of Labor Law §230(3) and [2] the work performed was not "construction-like" labor.

The Appellate Division agreed with Cleaning that the work performed for Library by its employees was not subject to the prevailing wage provisions of Labor Law Article 9, explaining that:

1. §17 of Article I, of the New York State Constitution provides, in pertinent part, that "[n]o laborer, worker or mechanic, in the employ of a contractor or sub-contractor engaged in the performance of any public work ... shall ... be paid less than the rate of wages prevailing in the same trade or occupation in the locality within the state where such public work is to be situated, erected or used;"

2. This constitutional mandate is implemented by Labor Law Article 8, which, in pertinent part, requires the payment of prevailing wages to "laborers, work[ers] or mechanics" performing construction-like labor in connection with certain public work contracts, citing Labor Law §220[3][a]; and

3. Article 9 of the Labor Law extended such prevailing wage protections to certain types of service contracts and, in particular, Labor Law §231[1] provides that "[e]very contractor shall pay a service employee under a contract for building service work a wage of not less than the prevailing wage in the locality for the craft, trade or occupation of the service employee" and  Labor Law §230[2] provides that "any person performing work in connection with the care or maintenance of an existing building ... for a contractor under a contract with a public agency** which is in excess of [$1,500]" and expressly encompasses "building cleaner[s]."

The Appellate Division, citing Matter of M.G.M. Insulation, Inc. v Gardner, 20 NY3d at 475, opined that the Court of Appeals rejected the proposition that "an entity may be considered the 'functional equivalent' of a public agency for prevailing wage purposes"***and held that "Executive Cleaning's contract with [Library] is not subject to the prevailing wage provisions of Labor Law Article 9," and annulled the Commissioner's determination.****

In the words of the court as Cleaning's agreement with Library was "not subject to the prevailing wage provisions of Labor Law Article 9, the Commissioner's determination must be annulled" and "in light of our determination, [Cleaning's] remaining contentions are academic." 

However, citing  Matter of Paladino v Board of Educ. for the City of Buffalo Pub. Sch. Dist., 183 AD3d 1043, the Appellate Division, noting that Cleaning's request for declaratory relief is not authorized in a proceeding transferred to it pursuant to CPLR 7804 (g), severed that part of its action and remitted the issue to Supreme Court "for entry of an appropriate judgment."

* The Appellate Division noted that "a payroll issue delayed the employee's payment, but the employee was eventually compensated."

** Labor Law §230 [3] defines a public agency as "the state, any of its political subdivisions, a public benefit corporation, a public authority or commission or special purpose district board appointed pursuant to law, and a board of education."

*** The Appellate Division, in a footnote in its opinion, confirmed "the existence of authority holding that, as education corporations, public libraries are generally considered to be "separate and distinct from the municipalit[ies] that created [them]."

**** Citing  Matter of Paladino v Board of Educ. for the City of Buffalo Pub. Sch. Dist., 183 AD3d 1043, the Appellate Division noted that as Cleaning's request for declaratory relief is not authorized in a proceeding transferred pursuant to CPLR 7804(g), it severed  that part of this action and remitted it to Supreme Court for entry of an appropriate judgment.

Click HERE to access the Appellate Division's decision.

 

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