Department of Labor v. Berlanti

• Decision Date: 08 June 1984
• Citation: 481 A.2d 830,196 N.J.Super. 122
• Parties: DEPARTMENT OF LABOR, Petitioner-Respondent, v. Samuel BERLANTI, Respondent-Appellant, and Suffolk County Contractors, Inc., Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 122

196 N.J.Super. 122

481 A.2d 830

DEPARTMENT OF LABOR, Petitioner-Respondent, v. Samuel BERLANTI, Respondent-Appellant and Suffolk County Contractors, Inc., Respondent.

Superior Court of New Jersey Appellate Division.

Argued May 7, 1984.

Decided June 8, 1984.

Patrick F. McAndrew, North Brunswick, for respondent-appellant (John J. Pribish, North Brunswick, attorney; Patrick F. McAndrew, North Brunswick, on the brief).

Lewis A. Scheindlin, Deputy Atty. Gen., for petitioner-respondent (Irwin I. Kimmelman, Atty. Gen., attorney; James J. Ciancia, Asst. Atty. Gen., of counsel; Lewis A. Scheindlin, Deputy Atty. Gen., on the brief).

Before Judges ARD, MORTON I. GREENBERG and TRAUTWEIN.

The opinion of the court was delivered by

TRAUTWEIN, J.A.D.

Appellant, Samuel Berlanti, president of Suffolk County Contractors, Inc., appeals from a final decision of the Commissioner of Labor placing him on a list of contractors and subcontractors (including Suffolk) debarred from bidding for public works contracts for a period of three years because he failed to pay his workers the prevailing wage pursuant to N.J.S.A. 34:11-56.37 and 34:11-56.38, while completing a public works contract for the construction of a sanitary sewer collector system for Wall Township.

The main question in this appeal is novel. Does the debarment provision of the New Jersey Prevailing Wage Act, N.J.S.A. 34:11-56.25, et seq., apply to individuals who are the corporate officers of the offending corporate contractor or subcontractor? In this connection appellant raises five issues: Whether there is statutory authority to support the debarment of corporate officials responsible for paying the prevailing wage; whether the commissioner's interpretation of the statute so as to permit corporate official debarment constitutes an improper amendment of the prevailing wage act; whether the commissioner's debarment of a corporate officer was invalid because no administrative regulations cover such a proceeding; whether Berlanti's right to due process was violated by the debarment procedure and whether the "proven facts" support Berlanti's debarment.

The facts in this case are undisputed.

On June 15, 1978 Newark Construction, Inc., was awarded a public works contract in the amount of nearly one and a half million dollars by the governing body of Wall Township for the purpose of constructing a sanitary sewer collector system. United States Fidelity and Guarantee Company (USFG) was the surety on the contract and it executed a performance bond for the contract amount. Respondent Suffolk County Contractors, Inc. (Suffolk) was a subcontractor of Newark Construction, Inc. which worked on the project in January 1980. When Newark Construction defaulted on the contract, USFG was required to complete the job. Suffolk completed the project acting as USFG's subcontractor. Suffolk's employees worked on the project in June and July 1980. USFG paid Suffolk on a time and material basis, plus 20%.

An investigation of Suffolk's payment practices was instigated by a complaint made by one of Suffolk's employees to the public contracts section of the office of wage and hour compliance of the New Jersey Department of Labor. Michael McCarthy, a field representative with the public contract section, asked Suffolk for its payroll records on the Wall Township sewer collector system project. He compared the wage rates listed on the payroll records with the prevailing wage rate determinations for Monmouth County as of March 1, 1979, issued by the Department of Labor, and found that twenty workers were underpaid. According to McCarthy's calculations, Suffolk owed these employees a total of $5,418.43 in unpaid wages. On January 9, 1981 Suffolk was sent a "Statement of Amounts Indicated as Due Employees" which reflected McCarthy's calculation.

On February 25, 1982 Rodger Bodman, New Jersey Commissioner of Labor, filed a complaint against Suffolk and USFG on behalf of Suffolk's employees in the Superior Court, Law Division, seeking payment of the unpaid prevailing wages due those employees with respect to the Wall Township project. Samuel Berlanti was not individually named as a defendant in the commissioner's suit. Cross-motions for summary judgment were made by the parties. Based on the pleadings, briefs and affidavits submitted to the court, Judge Yaccarino entered an order for summary judgment in petitioner's favor on February 14, 1983 finding Suffolk and USFG jointly liable to the commissioner in the amount of $5,418.43; denied USFG's cross-motion for summary judgment and directed that USFG indemnify Suffolk for any and all payments made with respect to this action.

Both USFG and Suffolk appealed to the Appellate Division. These separate appeals were consolidated and by decision dated October 18, 1983 we affirmed Judge Yaccarino's order as set forth above. Roger Bodman, Commissioner of Labor v. Suffolk County Contractors, Inc. and United States Fidelity & Guaranty Company; Roger Bodman, Commissioner of Labor, State of New Jersey v. Suffolk County Contractors, Inc. and United States Fidelity & Guaranty Company; Appellate Division Docket Nos. A-3192-82T3' A-3355-82T3 (Consolidated).

In the meantime, in a letter dated August 18, 1982, Leonard Katz, supervisor of the public contract section, informed Berlanti that the investigation revealed that Suffolk had failed to pay prevailing wages to employees who performed work on six different public works projects, one of which was the Wall Township sewer collector system. Katz informed Berlanti that both his name and Suffolk's name would be placed on a list of debarred contractors and subcontractors pursuant to N.J.S.A. 34:11-56.38 but that Berlanti and Suffolk had the right to apply to the commissioner for a hearing (under N.J.S.A. 34:11-56.37) if they denied that a failure to pay the prevailing wage had occurred.

Berlanti requested a hearing. On August 27, 1982 the matter was transferred as a contested case to the Office of Administrative Law. The department moved for a summary decision and oral argument was held before Administrative Law Judge Joseph Fidler on March 18, 1983. Judge Fidler rendered a written decision on April 29, 1983 wherein he found that appellant had raised no material fact issues and thus summary decision was appropriate. He rejected appellant's contention that there was no privity of contract between Suffolk and the township and that no public funds had been expended to complete the construction of the sewer collector system. The judge found that even though USFG may have only received retainages from the township which had already been earned by Newark Construction Company, the fact remained that public funds were expended by the township on a sewer construction job, thus bringing the project within the purview of the prevailing wage act. He further found that the lack of privity of contract between Suffolk and the township was immaterial since it was undisputed that Suffolk's employees were hired to complete a public works project and thus were entitled to receive prevailing wages according to the statute. Since Suffolk had not denied that incorrect prevailing wages were paid, the administrative law judge concluded that the Department of Labor's motion for summary decision should be granted and that respondents should be debarred from public works contracts for three years as required by N.J.S.A. 34:11-56.38.

There was no formal decision from the Commissioner of Labor accepting the administrative law judge's finding and conclusion. The final decision was embodied in a letter dated June 17, 1983 from Leonard Katz to Berlanti which recited that, "in accordance with the Order of Judge Joseph F. Fidler," he had been placed on a list of contractors and subcontractors who had failed to pay the prevailing wage and thus he was ineligible for an award of a public works contract as was any firm corporation or partnership in which he had an interest for the next three years. This appeal followed.

We note that Suffolk is not disputing the determination that it should be placed on the debarment list. The focus of this appeal is upon the debarment of the corporate president, Berlanti. Berlanti argues that there is no statutory authority for the commissioner's action and that there were no facts adduced at an appropriate proceeding to justify imposition of liability upon Berlanti for the corporation's dereliction.

It is a basic tenet of corporate law that a corporation is an entity separate and distinct from its stockholders. Only upon proof of fraud or injustice will the corporate veil be pierced to impose liability on the corporate principals. Lyon v. Barrett, 89 N.J. 294, 300, 445 A.2d 1153 (1982); Frank v. Frank's, Inc., 9 N.J. 218, 224, 87 A.2d 724 (1952). The party seeking an exception from the fundamental principle that a corporation is a separate entity bears the burden of proof and must demonstrate the misuse of the corporate form and the necessity of disregarding it in order to do equity. Kugler v. Koscot Interplanetary, Inc., 120 N.J.Super. 216, 254-255, 293 A.2d 682 (Ch.Div.1972).

There is no question that a court of law may, in the appropriate case, apply the doctrine of piercing the corporate veil in order to reach a fair and just result. Our research, however, has failed to disclose any reported decisions permitting an administrative agency to apply the same doctrine to matters before it. Our research of decisions in sister states reveals that only Florida has squarely faced this question. In Roberts' Fish Farm v. Spencer, 153 So.2d 718 (Fla.Sup.Ct.1963), involving a claim for workmen's compensation benefits, the Florida Industrial Commission awarded compensation not only against Tropical Fish Inc. for whom the claimant actually worked as an employee, but also against Florida Fish Farm and Roberts' Fish Farm, all three corporations having common officers and stockholders. On appeal, the...