Wage Law

A recent Court of Appeal ruling in a case called Violante v. Communities Southwest Development and Construction Co. holds that employees on public works projects who claim prevailing wage violations may not sue the prime contractor directly for claims arising under Labor Code § 1774, and must limit those claims to causes of action alleged against their own employer.

Our review of the statutory scheme governing prevailing wages finds no private right of action for enforcement by a subcontractor’s employee against other parties than the subcontractor. In addition, we reject plaintiffs’ theories of recovery based on principles of third-party breach of contract and unfair competition.

In Violante, three construction workers on a public works project in Yucaipa filed a class action lawsuit over a subcontractor's failure to pay prevailing wages. They sought to bring claims against the general contractor, including causes of action for statutory violation of Labor Code § 1774, breach of contract, and unfair business practices. The general contractor filed a demurrer to these three causes of action. The trial court sustained the demurrer without leave to amend. Two other causes of action against other defendants, for conversion and on a payment bond, were not subject to the same challenges. The Court of Appeal affirmed, based entirely upon its interpretation of the Labor Code.

Some defense firms are proclaiming that workers no longer have any remedy against general contractors for subcontractor wage violations. We don't quite agree. While a statutory claim under the Labor Code might not apply, one need not necessarily rely upon the solvency of a worker's employer, who might have been cheating on prevailing wages because it was not solvent enough to make payroll in the first place. A timely filed stop notice or Civil Code § 3247 payment bond claim (both of which are causes of action which can properly include the general contractor) can be asserted directly by workers who perform labor on a public work of improvement. The value of the stop notice and bond claims is, under those circumstances, not less than the minimum required prevailing wage. If there are enough funds still held by the public agency funding the project, or if there is a solvent bond surety on the project, as the law requires, those workers can still get paid.

In Violante, there is a payment bond claim, which apparently survived the pleading stage. If so, the general contractor is not out of the woods yet, because it undoubtedly will be required to indemnify the payment bond surety if the plaintiffs prevail against the bond. Battle? Yes. War? You can't tell by reading the opinion. But you can try. You can download the full text of Violante here in pdf or MS Word format.