In their 2019 annual report to the General Assembly, the Connecticut Auditors of Public Accounts said that some third-party vendors are denying them access to information necessary to properly audit state and federal programs, despite being contractually obligated to do so. The auditors noted one instance in particular in which ...
The Fitch Files: Connecticut Dept. of Labor Oversight Spurs Lawsuit Against State Contractor
Ferguson Contractors is a large construction firm that has worked on major public works projects including the Buley Library at Southern Connecticut State University and the UConn Health Center Research Tower.
But Ferguson now faces a court battle against former employees who claim they were underpaid for their benefits while working on public works projects for various towns in Connecticut.
The 2018 class action lawsuit initiated after an investigation into the company by the Connecticut Department of Labor’s Wage and Workplace Standards Division determined the company had short-changed their employees’ benefit payments under Connecticut’s prevailing wage laws – an allegation, Ferguson disputes.
At issue is a third-party administrator fee Ferguson deducted from benefit payments – a deduction the Department of Labor allowed in 2011 and 2012 but then restricted in 2016.
But there’s a twist to the story: the CT DOL never updated its prevailing wage guidebook to reflect its policy change regarding third party administrator fees. Even the wage enforcement agent who investigated Ferguson testified she was unaware of any prevailing wage policy changes.
According to DOL attorney Stephen Lattanzio, who is involved in the case, a contractor following the state prevailing wage guidebook provided online by DOL would have had no way of knowing there were any changes to Connecticut’s prevailing wage policy.
There was no affirmative language on the website that stated language in the guidebook was no longer in effect. To the extent somebody was relying on the guidebook, this would have been news to them.DOL Attorney Stephen Lattanzio
“There was no affirmative language on the website that stated language in the guidebook was no longer in effect,” Lattanzio said. “To the extent somebody was relying on the guidebook, this would have been news to them.”
The 2016 investigation was not the first time DOL’s Wage and Workplace Standards Division had investigated Ferguson.
Wage Enforcement Agent Mary Toner investigated Ferguson in 2011 and 2012 and found the company in compliance with the state’s prevailing wage laws, including Ferguson’s practice of deducting a third-party administrator fee.
However, when she investigated Ferguson again in 2016, DOL reversed its previous conclusions and said the company was violating prevailing wage practices.
According to Lattanzio, DOL changed its policy in 2015 when Resa Spaziani took over as director of the Wage & Workplace Standards Division. The change of policy reversed years of prevailing wage practice in Connecticut in order to fall more in line with U.S. Department of Labor policies.
“Policy was to permit – on a case by case basis – credit toward administrative costs for benefits. That policy changed to fall in line with U.S. DOL which doesn’t allow administrative cost credit,” Lattanzio said.
But because the online prevailing wage guidebook was not updated, Ferguson had no way of knowing that their previously-approved practice could now leave them open to fines and legal action.
In fact, no one seemed to know about it — including DOL’s own wage enforcement agent assigned to the case.
The 2016 investigation was launched in response to a complaint by Richard Spencer, a former employee of Ferguson who had been let go from employment.
Toner – the wage enforcement agent assigned to investigate the complaint against Ferguson – testified that she was unaware of any relevant legislative or policy changes to prevailing wage law between the time she investigated Ferguson in 2012 and when she investigated them in 2016.
However, according to Toner’s work notes from her 2016 investigation, she labeled the size of the fee “absolutely unacceptable,” contradicting her 2011 and 2012 findings that the company was in compliance with state law.
Lattanzio said the prevailing wage guidebook allowed a deduction for “reasonable” third-party costs, which is open to interpretation.
According to court documents, Ferguson was deducting a per-hour credit from employees’ total benefits package to pay a 9 percent administrative fee. Lattanzio spit-balled a “reasonable” fee at .5 percent.
However, Ferguson had applied the 9 percent administrative fee in 2011 and 2012 when it was found in compliance by DOL, according to the evidence submitted to the court and emails from Toner, whose name at the time was Mary Brousseau.
After finding Ferguson Mechanical Co. in violation of the state’s prevailing wage laws in 2016 under its new policy change, CT DOL essentially washed their hands of the matter.
The Wage and Workplace Standards Division of the Department of Labor can, and does, recoup wages for employees who were bilked by employers and the DOL can levy hefty fines. This time, however, DOL chose not to pursue the case.
Lattanzio said DOL has referred the matter to federal authorities but could not say which agencies. Instead, DOL’s finding were used as the basis for a class-action lawsuit against Ferguson.
Understandably, Ferguson was taken aback by policy change and questioned why DOL did not try to settle the matter with them directly.
Defendants, understandably feeling completely blindsided by DOL’s reversal on its views of Defendants’ pay practices without any change in Connecticut law, contested the DOL’s 2016 conclusions. DOL did not institute suit against Defendants to collect any wages reportedly due. Instead, Plaintiffs brought this putative class action.David R. Golder and Sara R. Simeonidis, Jackson Lewis P.C.
According to the court documents filed by Ferguson, “Defendants, understandably feeling completely blindsided by DOL’s reversal on its views of Defendants’ pay practices without any change in Connecticut law, contested the DOL’s 2016 conclusions. DOL did not institute suit against Defendants to collect any wages reportedly due. Instead, Plaintiffs brought this putative class action.”
Prevailing wage law in Connecticut mandates the pay and benefits for employees engaged in public works projects. The rates and conditions of prevailing wage are set by statute under enormous political pressure from labor unions who vie for large public construction jobs.
Ferguson claims the lawsuit is the result of the company being targeted by a union – the Plumbers & Pipefitters Local 777 – which had been attempting to unionize Ferguson’s employees for years.
Under Connecticut law even non-union shops like Ferguson must adhere to prevailing wage practices when working on public projects.
But those projects can become hot-beds of strife when the job isn’t awarded to union contractors.
According to Ferguson’s defense, the United Association of Plumbers & Pipefitters Local 777 had frequently targeted the company, mailing flyers to Ferguson’s employees and unsuccessfully trying to organize.
But wasn’t until Ferguson terminated Richard Spencer, a long-time foreman, that they had a problem. Spencer joined with two other former Ferguson employees to file a complaint with DOL against the contractor.
While the unionization attempts continually failed, the results of DOL’s investigation left the company vulnerable to litigation for two years’ worth of benefit payments previously approved by DOL.
Spencer testified that he is friends with Local 777 organizer Jay Moore and that he had received mailers from Local 777 regarding pay and benefits at Ferguson.
Plaintiff Shawn Milano also testified that he heard about the pending lawsuit through a friend at Local 777 before signing on to the lawsuit.
The Connecticut Labor Management Cooperation Committee sent a mass mailing looking for anyone who worked for the company between 2014 and 2016, gaining 64 signatories for the class-action suit.
Ferguson’s attorneys claim the Labor Management Cooperation Committee is associated with the International Brotherhood of Electrical Workers Local 90 out of New Haven.
While there is little information about the Connecticut chapter of the Labor Management Cooperation Committee, the National Labor Management Cooperation Committee is tied to the International Brotherhood of Electrical Workers.
Ferguson’s attorneys point to these facts – and testimony from the lead plaintiffs which indicate they had no first-hand knowledge of some of the allegations made in the lawsuit – as evidence the suit is simply an attempt by the labor unions strike a blow against a non-union competitor.
To be sure, Ferguson Mechanical may not be squeaky clean on all the merits of the lawsuit against it. The third-party administrator fee is a large component of the suit, but the plaintiffs also allege similar prevailing wage credits toward vehicle usage by foremen and underpaid overtime.
However, the lead plaintiffs were apparently unaware of these transgressions until it was presented by their attorneys which could kill the class action lawsuit if a court determines the suit is, in reality, being brought by the labor unions rather than the plaintiffs.
That will all play out in court eventually. If it were cut and dry, the CT DOL would likely have imposed its own penalties on Ferguson as it has with other companies in the past. Instead, it has become a court case.
Whether or not this matter should have become a court case in the first place is ultimately the more troubling question.
Connecticut businesses have to navigate a complex state landscape of taxes, regulations and competing interests, but that can become increasingly difficult if regulatory and enforcement policy changes without notice.
Calls and emails to Ferguson Mechanical, Plumbers & Pipefitters Local 777 and the Connecticut Labor Management Cooperation Committee were not returned.
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