Worth & Co. v. Department of Labor & Industry

938 A.2d 239, 595 Pa. 69
CourtSupreme Court of Pennsylvania
DecidedDecember 27, 2007
Docket117 MAP 2005
StatusPublished
Cited by5 cases

This text of 938 A.2d 239 (Worth & Co. v. Department of Labor & Industry) is published on Counsel Stack Legal Research, covering Supreme Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Worth & Co. v. Department of Labor & Industry, 938 A.2d 239, 595 Pa. 69 (Pa. 2007).

Opinions

OPINION

Justice EAKIN.

In September, 1998, Lower Merion School District awarded a contract to appellee, Worth & Company, Inc., to perform construction work. Appellee subcontracted sprinkler work to First Choice Fire Protection, Inc. The Department of Labor and Industry subsequently investigated allegations that First [72]*72Choice failed to pay certain workers on the project the prevailing minimum wage, as required by the Prevailing Wage Act.1 In a letter dated September 7, 1999, the Department requested appellee withhold $41,324.46 in contract payments to First Choice pending its investigation.2 The letter, borrowing language from § 10(a) of the Act,3 further stated “because [the withholding request was] directed toward a subcontractor, nothing in [the] request shall be deemed to impair the right of the prime contractor to receive final payment due to the failure of any of the subcontractors to comply with the provisions in the Act.” Department Letter, 9/7/99, Trial Exhibit 1.

On September 14, 1999, the School District informed appellee it would not approve its application for payment until the Department resolved First Choice’s underpayment of workers. Two days later, the Department wrote a letter to the School District reiterating its position that First Choice’s failure to comply with the Act’s provisions would not impair appellee’s [73]*73right to receive final payment, again referring to § 10(a). Notwithstanding the September 16 letter, in June, 2000, the School District paid appellee $67,824.43, but withheld $32,890.28, representing appellee’s contract retainage on the project.4

In December, 2000, appellee sent a letter to the Department, again objecting to the School District withholding money owed under the contract. In response, the School District informed the Department it intended to continue withholding the money until the Department substantiated appellee’s legal right to disbursement. In an attempt to resolve the conflict, the Department informed the School District and appellee it had reached a proposed settlement with First Choice, whereby First Choice agreed it underpaid employees by $25,797.19. The Department also informed the School District the Act limits any School District withholding to the amount owed to First Choice under the contract. Accordingly, the School District requested from appellee the amount owed to First Choice on the subcontract. Appellee complied by providing an itemization showing a negative balance due to First Choice.5

On January 31, 2001, the School District informed the Department that as First Choice was not entitled to any further payment, it agreed it was no longer necessary to withhold funds. However, on February 6, 2001, the Department responded appellee could not claim it owed First Choice a negative balance based on replacement costs and other business expenses; since, without those costs, appellee owed First Choice $206,562.50 on the contract, the School District remained required to withhold the $32,890.28. See Department Letter, 2/6/01, Trial Exhibit 17.

[74]*74Appellee filed a grievance with the Prevailing Wage Appeal Board, but the Board deadlocked 2-2 and therefore affirmed the Department’s position as stated in its September 7, 1999 letter, that the School District was required to withhold the funds.

Appellee appealed. The Commonwealth Court, en banc, reversed the Board. The court agreed that the Department erred in authorizing the School District to withhold payment, when appellee owed no further payment to First Choice. Worth & Co., Inc. v. Dept. of Labor & Industry, 857 A.2d 727, 731-32 (Pa.Cmwlth.2004). The court emphasized § 10(a)’s plain language, which states “nothing herein shall impair the right of a contractor to receive final payment because of the failure of any subcontractor to comply with provisions of this act.” Id., at 730 n. 7 (quoting 43 P.S. § 165-10(a)). The court explained § 10(b),6 which the Department relied on, only comes into play when a workman files a protest and objects to the payment of a contractor, which the record does not show to have been the case here. Id., at 731. Moreover, the court noted § 10(b) would only permit the School District to withhold money appellee owed to First Choice. As appellee owed no money to First Choice, the Commonwealth Court concluded § 10(b) was irrelevant to the dispute and under § 10(a)’s [75]*75plain language, the Department erred in directing the School District to withhold payment from appellee.7

Judge Smith-Ribner dissented, opining the majority erred in failing to defer to the Department’s regulations, which authorize the withholding of payment under the circumstances here and which, she believed, “are consistent with the Act and fall squarely within [the Department’s] statutory authority.” Worth, at 734 (Smith-Ribner, J., dissenting). In Judge Smith-Ribner’s view, these regulations were consistent with “the overriding purpose of the Act ... to protect workers employed on public projects by ensuring that they receive at least the prevailing minimum wage,” and thus, she opined the Department’s regulations represented an “entirely permissible exercise of its administrative rulemaking power” to which the majority should have deferred. Id.

Judge Pellegrini also filed a dissent, which Judge Simpson joined. Like Judge Smith-Ribner, Judge Pellegrini opined the Act “does not intend that the prime contractor on a public work project receive final payment that includes wages that should have been paid to the subcontractor’s employees.” Worth, at 735 (Pellegrini, J., dissenting). Judge Pellegrini pointed out §§ 10(a) and (b) aside, § 11(f) gives the Commonwealth its own right to seek payment of wages.8 Judge Pellegrini stated § 10(a) must be interpreted as providing “the failure of the subcontractor to provide such a statement means that the general contractor receives final payment for the work, less any funds retained for work performed by one of its [76]*76subcontractors.” Id., at 736. He noted, however, it was not clear whether appellee actually owed First Choice any more money for the work it had performed under the contract, and it was only these amounts that could properly be withheld. Judge Pellegrini believed the court should have remanded the case for a determination of whether “any of the amounts withheld by the School District are for work performed by First Choice, for which it was not paid before it defaulted on the project....” Id., at 737.

We granted allowance of appeal to determine whether the Act limits the Department’s ability to withhold payment to the primary contractor of the wages of employees who are working for subcontractors on public works projects. Since the interpretation of a statute is a question of law, our standard of review is de novo, and our scope of review is plenary. In re Milton Hershey School, 590 Pa. 35, 911 A.2d 1258, 1261 (2006).

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Worth & Co. v. Department of Labor & Industry
938 A.2d 239 (Supreme Court of Pennsylvania, 2007)

Cite This Page — Counsel Stack

Bluebook (online)
938 A.2d 239, 595 Pa. 69, Counsel Stack Legal Research, https://law.counselstack.com/opinion/worth-co-v-department-of-labor-industry-pa-2007.