In United States ex rel. IBEW Local Union No. 98 v. The Farfield Company, the U.S. District Court for the Eastern District of Pennsylvania reviewed allegations brought under the False Claims Act (FCA) concerning labor classifications and payroll reporting on federally funded construction projects. The case focused on whether Farfield knowingly misclassified electrical workers to avoid paying prevailing wages as required under the Davis-Bacon Act.
The Davis-Bacon Act mandates that workers on certain federally funded construction projects be paid no less than the local prevailing wages and fringe benefits for corresponding work on similar projects in the area. Contractors are required to submit weekly certified payroll reports detailing the classification and wages of each employee.
Farfield was awarded contracts by the Southeastern Pennsylvania Transportation Authority (SEPTA) for electrical work funded in part by federal grants. IBEW Local Union No. 98 alleged that Farfield willfully misclassified certain workers as laborers rather than electricians, resulting in underpayment in violation of the Davis-Bacon Act and thereby submitting false claims for payment to the government.
The court analyzed whether the FCA claim could proceed based on the alleged misclassification. It considered whether the classification of workers was false, whether Farfield knew it was false, and whether the misclassification was material to the government’s decision to pay under the contract.
The court found that while disputes about worker classifications can involve interpretation, evidence showed that some of the tasks performed were consistent with journeyman electrical work rather than laborer duties. The classification had a direct impact on the wages reported and paid.
Materiality was a key issue. The court examined whether the government’s payment decision would have changed had it known about the classification. The court held that evidence existed showing that the Department of Labor may not tolerate misclassifications and that such conduct could influence payment decisions. As a result, the case survived summary judgment on this basis.
To proceed under the FCA, the relator needed to show that Farfield acted with knowledge of the falsity. The court looked at internal communications and practices regarding worker classifications. There was sufficient evidence from which a jury could find that Farfield knew or should have known that its classifications were inaccurate.
Farfield argued that it relied on classifications accepted in prior contracts and did not intentionally misclassify workers. However, the court emphasized that recurring issues in prior audits and the company's awareness of Department of Labor guidance could allow a jury to infer deliberate disregard or reckless conduct.
The court denied summary judgment for Farfield, allowing the case to proceed to trial on claims under the FCA. The court determined that material factual disputes existed regarding whether the workers were misclassified, whether the misclassifications were knowing, and whether they were material to the government’s payment decision.
If your company is navigating federal construction contracts, understanding labor classification requirements is essential to avoid liability under the Davis-Bacon Act and the False Claims Act. Our attorneys at Whitcomb, Selinsky PC assist clients with Davis-Bacon Act compliance, prevailing wage audits, and defense against FCA allegations. Learn how we can support your business.