CAN AN EMPLOYEE OF A SUBCONTRACTOR SUE?
by Sam K. Abdulaziz

Under the ruling in Violante v. Community Southwest Development and Construction Co., the answer was no. An employee of a subcontractor who has not been paid prevailing wages cannot sue the prime contractor to obtain the prevailing wages.

In Violante, three plaintiffs (workers/employees of a subcontractor), sued the prime contractor, the developer, and a limited liability company, as well as various other parties for failure to pay prevailing wages. The project was a public works project and therefore, by statute, required the payment of prevailing wages to employees of the general contractor and all subcontractors on the project as set forth under section 1774 of the Labor Code.

The trial court sustained (agreed with) a demurrer (a motion that determined plaintiffs did not have sufficient facts to constitute a cause of action against the developer or the prime contractor). In other words, the trial court found these plaintiffs did not have any facts to support the causes of action for alleged violation of the prevailing wage statute against the general contractor and developers. It is interesting there was never any issue that the subcontractor failed to pay prevailing wages since that fact was admitted. Rather, the issue was whether the plaintiffs had a right to sue the prime contractor and the developers for the prevailing wage. The trial court said there was no such right and the Court of Appeal agreed.

The Court of Appeal determined its task was to decide whether the three plaintiffs could state a cause of action for a statutory violation of section 1774 of the Labor Code. The Court of Appeal determined the requirement under Labor Code Section 1774 to be that the contractor (prime contractor) pay its employees the prevailing wage and that the subcontractors pay their workers the prevailing wage. The Court of Appeal, however, found no authority whatsoever for broadening Labor Code Section 1774, to require the prime contractor to pay the subcontractor's employees prevailing wage. Therefore, the Court of Appeal found no authority that the prime contractor should be held liable to the plaintiffs when the employer of these employees (the subcontractor) did not pay the prevailing wages.

The workers argued that the defendants (developer and prime contractor) violated Labor Code Section 1774 because plaintiffs were not paid prevailing wages by their direct employer, a subcontractor. The plaintiffs based their position on Section 1772 of the Labor Code, which states, "Workers employed by contractors or subcontractors in the execution of any contract for public work are deemed to be employed upon public work." The plaintiffs also relied upon Labor Code Section 1774 which states, "The contractor to whom the contract is awarded, and any subcontractor under him, shall pay not less than the specified prevailing rates of wages to all workmen employed in the execution of the contract." They argued that this would require the developer and prime contractor to pay prevailing wages to the subcontractor's employees.

The Court of Appeal held that Labor Code Section 1774 cannot be interpreted to mean that the prime contractor must pay the subcontractor's employees the prevailing wage if that subcontractor fails to do so. The Labor Code provides that a contractor and a subcontractor must pay prevailing wages to their respective employees on public works projects, not that a prime contractor must pay prevailing wages to a subcontractor's employees

Attorney Sam Abdulaziz of Abdulaziz, Grossbart & Rudman has been practicing construction law for 30 years. He has written a book called "California Construction Law" which is updated annually. He represents numerous construction trade associations and contractors. He appears at Contractors State License Board meetings and has argued a number of cases before the appellate courts, including the California Supreme Court dealing with the "Pay-If-Paid Clause." Abdulaziz, Grossbart & Rudman provides this information as a service to its friends & clients. The documents are of a general nature and are intended to highlight areas of the subject matter and should not be used as a substitute for specific legal advice. You should seek the aid and advice of a competent attorney and/or accountant instead of relying on the presentation and/or documents. Sam Abdulaziz can be reached at Abdulaziz, Grossbart & Rudman, P.O. Box 15458, North Hollywood, CA 91615-5458; (818) 760-2000, Facsimile (818) 760-3908; or by E-Mail at info@aglaw.net .
On the Internet, visit our Website at www.aglaw.net

Violante v. Community Southwest Development and Construction Co., CA 4th No. E037333, April 17, 2006, 138 Cal App 4th 972.