Employment Law Daily Implied false certification not found in alleged prevailing wage claim
Tuesday, August 30, 2016

Implied false certification not found in alleged prevailing wage claim

By Dave Strausfeld, J.D. Employees of a company that installed and monitored electronic security systems survived summary judgment on their claim that they were denied prevailing wages when they performed work for public entities in violation of the New Jersey Prevailing Wage Act (NJPWA), held a federal district court in New Jersey. But their qui tam claim under the New Jersey False Claims Act (NJFCA) was dismissed because they could not show that their employer made an implied false certification of compliance with the prevailing-wage requirement given that no contractual or statutory requirement existed to submit certified payrolls with claims for payment (New Jersey ex rel. Santiago v. Haig’s Service Corp., August 24, 2016, Martini, W.). The electronic security company conducts work for both private and public entities. Employees were told they would be paid the prevailing wage rate for all hours that fell under the NJPWA, and the state minimum wage for all other hours. One employee, a field service supervisor, noticed he allegedly was not being paid prevailing wages in full, and he told other employees, leading to this lawsuit. New Jersey Prevailing Wage Act. The NJPWA is intended to "establish a prevailing wage level for workmen engaged in public works in order to safeguard their efficiency and general well-being and to protect them as well as their employers from the effects of serious and unfair competition resulting from wage levels detrimental to efficiency and well-being," in the words of the statute. On summary judgment, the question facing the court was whether the evidence showed that the employees had been paid the prevailing wages to which they were entitled. The company appeared to make a "tacit acknowledgement" that, at times, it did not fully pay employees for prevailing-wage work as part of their salary. But it insisted it undertook a review and reconciliation on a quarterly basis to ensure that any unpaid amounts were compensated and that employees were paid prevailing wages in full. Employees and their expert witness, who analyzed the company’s records and found a number of instances when prevailing wages were not completely paid and continued to remain unpaid, disagreed. Although the company disputed the expert witness’s calculations and conclusions, a genuine factual dispute existed sufficient to deny summary judgment on the employees’ prevailing-wage claim. New Jersey False Claims Act. The court then considered whether the company violated the NJFCA by falsely certifying it had paid prevailing wages on these public projects. According to the employees, an "implied false certification" took place when the company presented claims for payment without an accompanying certified payroll record. New Jersey state courts apparently have not yet applied the implied false certification theory of liability to NJFCA claims, the court noted. But the similarity of language between the federal False Claims Act and the NJFCA allowed for the conclusion that the theory also applied under the state statute. The U.S. Supreme Court adopted the implied false certification theory of liability under the FCA in Universal Health Servs., Inc. v. U.S. ex rel Escobar, decided in June 2016. The Court held that such liability can attach when, among other things, "the defendant’s failure to disclose noncompliance with material legal requirements makes those representations misleading half-truths." Though such noncompliance need not be based on an express statutory, regulatory, or contractual condition of payment, the misrepresentation "must be material to the Government’s payment decision"—a "demanding" standard. Implied false certification. Here, the court found that the employees’ NJFCA claim—applying the rubric set forth by the Supreme Court—failed as a matter of law because they were unable to show an omission that resulted in an implied false certification. According to the employees, the company violated the NJPWA, and thus the NJFCA, when it submitted claims not accompanied by a certified payroll record. But the company had no contract signed with a public entity that required submission of a certified payroll with a claim for payment, and the employees failed to demonstrate a statutory or regulatory requirement to submit certified payrolls with claims for payment. The company was not guilty of any implied false certification, the court held. Other claims. The employees also alleged the company began retaliating against them because of their lawsuit (originally filed under seal but the after seal was lifted), culminating in an allegedly retaliatory firing. Their retaliation claims under the NJFCA and New Jersey Conscientious Employee Protection Act survived summary judgment, with the exception of certain retaliation claims brought individually against company officials.

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