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N.J. DEPARTMENT OF LABOR
REVISES CONTRACTOR SUSPENSION REGULATIONS:
ARE THEY COMING AFTER YOU?
By Thomas S. Cosma
In 1982, three officers and shareholders of Titan Construction Co. decided not to pay themselves prevailing wages on a public school construction project. The Commissioner of Labor took issue with that decision - claiming that the Prevailing Wage Act precluded an owner from paying himself less than prevailing wages on a public works contract. As a result, the DOL debarred the individuals from engaging in public construction contracts.
The ensuing litigation found its way to the New Jersey Supreme Court. In 1985, the Court ruled that the Commissioner was within his power to cite a business owner for paying himself less than prevailing wages. But the Court reversed the debarment order because the owners had not been afforded fundamental procedural due process rights: notice, a hearing, the right to present evidence and the right to cross-examine adverse witnesses. New Jersey Department of Labor v. Titan Construction Co., 102 N.J. 1 (1985).
The Titan case led to the first generation of administrative regulations addressing the debarment of government contractors for Prevailing Wage Act violations. N.J.A.C. 12:60-8.3.
Essentially, the existing regulations provide that the Commissioner may, but need not, debar a contractor if, after investigating, he finds that prevailing wages have not been paid on a public contract. Among the factors the Commissioner weighs are: the number and frequency of previous violations and prior debarments, the significance or scale of the alleged violation, the existence of outstanding audits or arrearages, and either the falsification of records or failure to produce records.
Typically, the DOL would receive a prevailing wage complaint from a worker or a union representative. Disputes were resolved informally, or administratively by notifying the contractor that the DOL proposed to debar it. A contractor could contest the citation and a hearing would follow in the Office of Administrative Law ("OAL"). An Administrative Law Judge ("ALJ") would render an initial decision which the Commissioner would either adopt or reverse. Appeal from the Commissioner's final decision lay with the Appellate Division of the Superior Court.
But what about suspensions pending debarment proceedings? A suspension of sufficient duration is a death sentence to a construction company that engages primarily in public work.
The debarment regulations stated merely that the Commissioner, with approval of the Attorney General, "may suspend" a contractor pending debarment. N.J.A.C. 12:60-8.3(d). Other than providing notice and the suspension's effective date, the regulations don't even mandate that the reasons be disclosed.
On July 1, 2002, the DOL published new proposed regulations (which will be published as adopted shortly) addressing suspensions. These regulations expand the circumstances for suspending contractors pending debarment. In addition to prevailing wage violations, the new regulations allow suspension for violating the Public Works Contractor Registration Act ("PWCRA"), N.J.S.A. 34:11-56.48 to 57. The PWCRA was enacted in 2000 to raise funds for more field audits and require contractors on projects involving "public buildings" to register with the DOL.
More importantly, however, the proposed suspension regulations adopt the same factors that apply to debarments, and add some. Two additional bases to suspend are created: whether there are any contested matters pending against the contractor for previous wage or PWCRA registration and whether certain "aggravating factors" are present. The aggravating factors are intimidation of workers, evading investigators, filing false statements, dishonoring payment obligations under settlement agreements with the DOL, and a history of hiring subcontractors who are unregistered or don't pay prevailing wages.
Many questions are raised by the amendments, not the least of which involve procedural safeguards similar to those raised by Titan. Within 72 hours of receiving the suspension notice, the contractor may request a hearing. The DOL then has 7 days to hold a Departmental hearing as to why suspension should not be imposed. The Director of Wage and Hour Compliance must render a decision within 5 days of the hearing. The contractor may then appeal the decision to the OAL. So approximately 15 days is contemplated for the Departmental hearing process. Do these satisfy the constitutional guarantee to procedural due process?
Just as interesting, there already exists a state statute which (a) places no 72-hour limit on the right to demand a hearing; (b) requires a hearing and a decision within 48 hours of a demand for a hearing; and (c) allows the contractor to seek an injunction in Superior Court from an adverse determination to list a contractor as violating the Prevailing Wage Act. N.J.S.A. 34:11-56.37. What effect does this statute have on the proposed regulations?
As the number of suspensions pending debarment increase, these and many other legal questions and conflicts raised by the amendments will no doubt be litigated. Should you become the target of the new suspension regulations, please give one of us a call.
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