Farfield Co. Liable for Misclassifying Workers on Federal Project

The case of United States ex rel. IBEW Local Union No. 98 v. Farfield Co. involved allegations of worker misclassification and prevailing wage violations under the Davis-Bacon Act. The International Brotherhood of Electrical Workers (IBEW) Local Union No. 98 filed a False Claims Act (FCA) lawsuit against The Farfield Company, claiming that the company falsely certified compliance with prevailing wage requirements on a federally funded transportation project. The United States Court of Appeals for the Third Circuit upheld the lower court’s ruling that Farfield misclassified workers and submitted false payroll certifications, affirming liability under the FCA.

Background and Legal Issues

Farfield was contracted by the Southeastern Pennsylvania Transportation Authority (SEPTA) for a track and signal improvement project. The federal government partially funded the project, making it subject to the Davis-Bacon Act, which mandates that contractors pay workers at least the prevailing wages determined by the Department of Labor (DOL) for their respective job classifications.

IBEW Local 98 alleged that Farfield deliberately misclassified lower-paid groundmen and laborers as performing work typically reserved for higher-paid linemen, which resulted in underpayment of wages. The allegations centered on whether:

• Farfield’s workers were improperly classified in violation of the Davis-Bacon Act.
• The false payroll certifications constituted material misrepresentations under the FCA.
• The district court properly shifted the burden of proof to Farfield regarding damages.

Court’s Analysis and Findings

The Third Circuit upheld the lower court’s decision, finding that:

• Worker misclassification constituted an FCA violation. The court determined that Farfield’s groundmen and laborers performed tasks that, under industry standards and local labor practices, should have been classified as linemen work, entitling those workers to higher wages.
• False certifications were material to government payment decisions. The court ruled that Farfield’s certified payrolls, which inaccurately stated that workers were paid prevailing wages according to their actual work, were false claims material to government payments.
• The burden of proof on damages was properly shifted. Given Farfield’s incomplete and inaccurate payroll records, the court applied a burden-shifting framework, requiring Farfield to disprove the damages estimated by the plaintiffs.
• The FCA’s retroactivity did not violate constitutional protections. The court rejected Farfield’s argument that the retroactive application of the FCA amendments imposed unlawful penalties, affirming that civil penalties did not violate the Ex Post Facto Clause.

The court emphasized that Davis-Bacon compliance is fundamental to federally funded projects and that material misrepresentations about wage compliance could justify withholding payments or debarring contractors from future projects.

Conclusion and Ruling

The Third Circuit affirmed the district court’s ruling, holding Farfield liable for FCA violations due to worker misclassification and false payroll certifications. The decision underscores the importance of accurate worker classification and compliance with prevailing wage laws in federally funded contracts.

Legal Guidance for Government Contractors

Understanding and complying with prevailing wage laws is essential for contractors on government-funded projects. Our team at Whitcomb, Selinsky, PC assists clients in navigating compliance requirements, defending against wage disputes, and addressing government contracting issues.