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November 23, 2010
Was Subcontractor Liable for Failure to Pay Prevailing Wage?

A private developer, which received public funds to build an industrial complex, entered into a contract with a contractor, which subsequently entered into a subcontract with a construction company to provide laborers for the project. During construction of the project, the Illinois Department of Labor (DOL) received a complaint that the subcontractor had failed to pay its laborers the prevailing wage. DOL filed a complaint against the subcontractor alleging a violation of Illinois’ Prevailing Wage Act. But the subcontractor cried foul.

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What happened. The subcontractor, Sackville Construction, claimed that it had no knowledge that the private developer, Rock Island Industrial Partners (RIIP), had an agreement with the city of Rock Island, in which the city agreed to contribute $150,000 for use in the project. DOL calculated that Sackville owed over $19,000 in unpaid back wages and also sought damages.

A trial court found for Sackville, on the basis that it had no knowledge of the agreement between the city and RIIP. While noting that the Act applied, it concluded that it was “unfair to require payment of prevailing wages when [Sackville] had no reason to believe the project was covered” by the law. DOL appealed.

What the court said. The Illinois Court of Appeals explained that the purpose of the Act (820 ILCS 130/1 et seq.) is to “encourage the efficient and expeditious completion of public works by public bodies by ensuring that workers receive a decent wage.”

The Act’s definition of a “public body” included “any institution supported in whole or in part by public funds.” (Emphasis supplied by court.) The court stressed that RIIP met this definition, even as a private developer, since it was supported in part by public funds. The Act defines “public works” as “all fixed works constructed by any public body.” So, since RIIP was a public body, the project was a public work, and the Act applied to the project.

Finally, the court had to determine whether notice to Sackville of the prevailing wage contract was required. It determined that neither the public body nor DOL are required to notify subcontractors that the Act applies to their project. It reversed the ruling and remanded the lower court to calculate penalties Sackville owed under the Act. People ex rel. Department of Labor v. Sackville Construction, Inc., Appellate Court of Illinois, No. 3-09-0006 (2010).

Point to remember: The court explained that although the Act “requires a public body to include the prevailing rate in the project specifications and the contract, the statute does not place a condition precedent on the contractor’s or subcontractor’s duty to pay the proper wage. The contractors and subcontractors are still liable to the laborers to pay the prevailing wage.”

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