Stampco Const. Co., Inc. v. Guffey

37 Cont. Cas. Fed. 76,176, 572 N.E.2d 510, 30 Wage & Hour Cas. (BNA) 694, 1991 Ind. App. LEXIS 908, 1991 WL 90300

• Court: Indiana Court of Appeals
• Decided: May 30, 1991
• Docket: 18A02-8911-CV-584.1
• Status: Published

Opinions

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Stampeo Construction Co., Inc. and Eiver-ett Stamper (collectively "Stampeo") appeal an adverse judgment in an action for damages resulting from payment of less than the prevailing seale of wages for performance of public works. We affirm.

ISSUES ²

We restate the issues presented upon appeal as:

1. Whether a private cause of action exists under the federal or Indiana prevailing wage statutes.

2. Whether an employee may waive the benefit of the prevailing wage statutes by an agreement for wages less than the prevailing wage rate or by a release.

3. Whether liquidated damages under IND.CODE § 22-2-5-2 were appropriate and whether the awards were excessive.

FACTS

W. Keith Guffey (Keith) and Wendell Guffey (Wendell) were both employees of Stampeo between July 1984 and October 1985, who performed work under contracts for the construction of public works. At that time, IND.CODE § 5-16-7-1 et seq. and the federal Davis Bacon Act³ mandated payment of prevailing wages for workers employed on public works projects. Keith worked on the Muncie Sanitary District and Community Development projects and was compensated $18.00 per hour. He also worked on the Blair's Green Acres project ("Blair's project") for $850 per week from June-October 1985. Wendell was employed on the Blair's project and received $8.00 per hour for regular hours and $12.00 per hour for overtime.

Keith signed an affidavit of release on October 30, 1985, in exchange for $500 cash and a $1,500 1.0.U. The affidavit released Stampeo from payment of minimum wages and prevailing wages for work performed on public works projects.

After Keith and Wendell were terminated from employment, both filed suit seeking compensation for the difference between the wages paid and those to which they were entitled under the prevailing scale of wages. The trial court awarded Keith $8,146.74 unpaid wages differential and Wendell, $2,502.11. The awards were trebled in accordance with I.C. §§ 22-2-5-1 and 2.

DISCUSSION AND DECISION

Issue One

Stampceo does not argue on appeal that the wages paid to Keith and Wendell complied with the prevailing wage statute. I.C. § 5-16-7-1 et seq. Stampceo argues that Keith's claim regarding unpaid wages on the Muncie Community Development project is not governed by the Indiana statute, but by the Federal Davis Bacon Act, which Stampeo alleges does not provide a private right of action. We agree the federal statute supplants the Indiana prevail ing wage statute in regard to the Muncie Community Development project. The federal statute regulates the method of and time for payment of wages. The federal statute requires a provision for payment of prevailing wages in all contracts for federal public works in exeess of $2,000. Keith's claim for damages on the Muncie Community Development project, which received federal financial assistance, must be viewed in consideration of the federal statute.

Stampeo argues no private action is authorized by the federal statute. McDaniel v. University of Chicago (Tth Cir.1977), 548 F.2d 689, 695, holds otherwise. Al though other federal courts have not found an implied private cause of action, see Weber v. Heat Control Co. (3d Cir.1984), 728 F.2d 599, 600 and U.S. v. Capeletti Brothers, Inc., (5th Cir.1980), 621 F.2d 1309, 1317, we elect to follow the Seventh Circuit's decision in McDaniel.⁴ In McDaniel, the court utilized the analysis in Cort v. Ash, (1975), 422 U.S. 66, 95 S.Ct. 2080, 45 L Ed.2d 26, to determine whether an employee has an implied private right of action. McDamiel, 548 F.2d at 692. The first step of the four step analysis of Cort is to determine if the plaintiff is the special beneficiary of the act. Id. The court stated, "On its face, the [Davis-Bacon] Act is a minimum wage law designed for the benefit of construction workers." McDaniel, 548 F.2d at 693 (quoting US. v. Bin-ghampton Constr. Co. (1954), 847 U.S. 171, 74 S.Ct. 438, 98 L.Ed. 594). The court then determined that employees are the special beneficiaries of the Davis-Bacon Act. After the MeDaniel court considered the remaining steps of the Cort analysis, the court found an implied private right of action for the employee. MeDantiel, 548 F.2d at 695. Therefore, we find Keith does have a valid cause of action under the federal statute for unpaid wages on the Muncie Community Development project.

In regard to the other public works project, Stampceo contends that the Indiana statute is a criminal statute and does not provide a private cause of action for Keith or Wendell. Although no provision explicitly authorizes a civil suit for violation of the Indiana statute, we adopt the Seventh Circuit's analysis of the federal statute and find an implied right of action in the Indiana statute. See MeDamiel, 548 F.2d at 695. Our ruling is consistent with the Indiana cases recognizing the right of employees of public contractors to sue as third party beneficiaries for wages on a contract between the contractor and the public. Indiana State Building and Constr. Trades Council v. Warsaw Community School Corp. (1986), Ind.App., 493 N.E.2d 800, 805.

We find Keith and Wendell have valid causes of action against Stampeco under the prevailing wage statutes.

Issue Two

Next, Stampceo argues that Keith and Wendell waived any benefits under the statutes by agreeing to lower wages. See Bell v. Town of Sullivan (1902), 158 Ind. 199, 63 N.E. 209 (employee may waive benefit of minimum wage statute where no rule of public policy is being violated). We find the decision in Bell to be inapposite, because we find Stampeo's employment agreements with Keith and Wendell violate public policy.

"Whether or not a contract is against public policy is a question of law for the court to determine from all of the circumstances in a particular case." Ross Clinic, Inc. v. Tabion (1981), Ind. App., 419 N.E.2d 219, 223, trams. denied. We keep in mind that it is in the public's best interest that the freedom of contract should not be restricted unnecessarily and that agreements are not to be held void as against public policy unless they are clearly contrary to what the legislature has declared to be public policy, or unless they clearly tend to injure the public in some way. Id.

Indiana's prevailing wage statute has been held constitutional. Board of Commissioners of the County of Allen v. Jones (1988), Ind.App., 457 N.E.2d 580, 585-87. In Jones, the court held the prevailing wage statute does not infringe upon the liberty to contract. Id. Prevailing wage statutes are enacted to protect public works employees from substandard wages. See McDaniel, 548 F.2d at 693; see also Ames Constr. Co. v. Dole (D.Minn.1989), 727 F.Supp. 502, 508. Stampeo's employment agreements with Keith and Wendell violated the Davis Bacon Act and I.C. § 5-16-7-1 et seq. which require payment of wages at the prevailing rate. As a general rule, a contract made in violation of a statute is presumed void. Tolliver v. Mathas (1989), Ind.App., 538 N.E.2d 971, 974, trans. denied. Public policy would be violated if we were to condone Stampeo's failure to follow the law. Allowing settlement or release of a claim would permit unscrupulous contractors to force employees to submit to economic pressures and accept lower wages. We find the employment agreements are void as against public policy and refuse to enforce the agreements which would subvert the federal and state legislatures' intentions.

Stampeo further contends Keith's release waives any claim for unpaid wages against Stampco. Because we have found an employee cannot waive the benefits of the prevailing wage statutes by an employment agreement to lower compensation, we also find an employee cannot release his right to receive prevailing wages. For the reasons articulated in regard to the employment agreement, we find the release to be void as against public policy.

Issue Three

Stampeo next contends the court erroneously awarded damages and attorneys' fees. Stampco initially argues IND.CODE § 22-2-5-2 is not applicable because the salary was paid, Keith and Wendell failed to request the unpaid wages while they were employed, and the Blair's project was a Barrett Law ⁵ project. The argument that the salary was paid so .C. § 22-2-5-2 does not apply is without merit. Stampeo does not contend that the prevailing wage was paid. Stampco only presents arguments that no penalty should be levied for underpayment in this case. Consequently, his arguments concede that the wages were not paid in accordance with I.C. § 5-16-7-1. The trial court did not err in invoking LC. § 22-2-5-2.

Next, Stampeo argues liquidated damages may not be sought because no demand was made "prior to or concurrent with the employment" as required by I.C. § 22-2-5-2. See City of Hommond v. Conley (1986), Ind.App., 498 N.E.2d 48, 52. However, our supreme court has decided recently that no demand is required where the employee was terminated from employment. Osler Institute, Inc. v. Inglert (1991), Ind., 569 N.E.2d 636, offing, 558 N.E.2d 901, 905. "To hold otherwise would allow employers owing wages to their employees to terminate the employees, avoid the payment of wages, and then be shielded from the application of the penalty statute." Osler Institute, 558 N.E.2d at 905.

Stampeo alleges the Blair's project, which was a Barrett Law project, was not publicly funded. Therefore, Stampceo concludes liquidated damages cannot be awarded because I.C. § 22-2-5-2 applies only to publicly funded projects. We disagree with Stampeo's allegation that the Blair's project was not a publicly funded public works project. The contract for the Blair's project was made by the city of Anderson, and the contractors were paid by the city from a public fund created by assessments levied against property owners. See I.C. §§ 36-9-18-1 et seq. and 36-9-19-1 et seq. We conclude the court did not err in relying on I.C. § 22-2-5-2 when it determined the damage awards.

The remainder of Stampeo's arguments is that the damage awards were excessive. The court determined Keith was paid $8,146.74 below the prevailing wage rate. The court awarded liquidated damages and increased the award to $25,-426.62.⁶ Wendell was underpaid $2,502.11, which amount was tripled to $7,506.22⁷ as liquidated damages. Stampco contends the court erred and gave Keith and Wendell triple the amount of unpaid wages, instead of double as prescribed by .C. § 22-2-5-2. We have interpreted .C. § 22-2-5-2 to provide a penalty equal to double the unpaid wages in addition to the unpaid wages. Fardy v. Physicians Health Rehab. Serv. (1988), Ind.App., 529 N.E.2d 879, 882. The total maximum award may amount to three times the wages due. Id. Therefore, we find no error in the court's treble awards pursuant to I.C. § 22-2-5-2.

Affirmed.

ROBERTSON, J., concurs. BUCHANAN, J., dissents with separate opinion.

2 . Other issues mentioned in the appellant's brief were not accompanied by cogent argument or citation to authority. Review of such issues is waived. Captain & Co. v. Stenberg (1987), Ind. App., 505 N.E.2d 88, 95, trans. denied; Ind. Appellate Rule 8.3(A)(7).

3 . 40 U.S.C. § 2762.

4 . We acknowledge the Seventh Circuit's statement in Simpson v. Reynolds Metals Co. (7th Cir.1980), 629 F.2d 1226, 1240, fn. 27, that McDaniel was decided without the guidance of Cannon v. University of Chicago, (1979), 441 U.S. 677, 99 S.Ct. 1946, 60 L.Ed.2d 560. However, we note Simpson did not involve the Davis Bacon Act and that the Simpson court did not overrule McDaniel: therefore, we infer the McDaniel decision is still valid precedent. Al though the United States Supreme Court dealt with a related issue regarding the Davis Bacon Act in Universities Research Ass'n v. Coutu (1981), 450 U.S. 754, 101 S.Ct. 1451, 67 L.Ed.2d 662, the Supreme Court clearly stated that the issue presented in McDaniel differed from the issue in Coutu. Id. at 768-69, n. 17, 101 S.Ct. at 1460, n. 17. The Supreme Court concluded in Coutu that Congress did not create a private right of action for an employee under a contract that did not contain prevailing wage stipulations. Id. at 770, 101 S.Ct. at 1461. The Supreme Court expressly refused to decide whether the act created an implied private right of action to enforce a contract that contained specific Davis Bacon stipulations. Id. at 769, 101 S.Ct. at 1460.

5 . - A Barrett Law project is one which is a city or county improvement authorized pursuant to IND.CODE § 36-9-18-1 et seq.

6 . This amount was the result of a modification by the court when it granted a portion of Stamp-co's motion to correct errors.

7 . We note that the trial court erred when figuring the triple of $2,502.11 as $7,506.22, instead of $7,506.33. However, the judgment need not be corrected because the discrepancy is de min-imis.