Stampco Const. Co., Inc. v. Guffey

• Decision Date: 30 May 1991
• Docket Number: No. 18A02-8911-CV-584,18A02-8911-CV-584
• Court: Indiana Appellate Court
• Parties: 30 Wage & Hour Cas. (BNA) 694, 119 Lab.Cas. P 35,540, 37 Cont.Cas.Fed. (CCH) P 76,176 STAMPCO CONSTRUCTION CO., INC., Everett Stamper, Appellants-Defendants, v. W. Keith GUFFEY, Wendell Guffey, Appellees-Plaintiffs. 1

Page 510

572 N.E.2d 510

30 Wage & Hour Cas. (BNA) 694, 119 Lab.Cas. P

35,540,

37 Cont.Cas.Fed. (CCH) P 76,176

STAMPCO CONSTRUCTION CO., INC., Everett Stamper, Appellants-Defendants, v. W. Keith GUFFEY, Wendell Guffey, Appellees-Plaintiffs.

No. 18A02-8911-CV-584. ¹

Court of Appeals of Indiana First District.

May 30, 1991.

Frank E. Spencer, Indianapolis, for appellants-defendants.

Michael H. Duckett, Public Defender's Office, Lafayette, for appellees-plaintiffs.

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Stampco Construction Co., Inc. and Everett Stamper (collectively "Stampco") appeal an adverse judgment in an action for damages resulting from payment of less than the prevailing scale 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 Sec. 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 Stampco between July 1984 and October 1985, who performed work under contracts for the construction of public works. At that time, IND.CODE Sec. 5-16-7-1 et seq. and the federal Davis Bacon Act ³ 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 $13.00 per hour. He also worked on the Blair's Green Acres project ("Blair's project") for $350 per week from June--October 1985. Wendell was employed on the Blair's project and Keith signed an affidavit of release on October 30, 1985, in exchange for $500 cash and a $1,500 I.O.U. The affidavit released Stampco from payment of minimum wages and prevailing wages for work performed on public works projects.

received $8.00 per hour for regular hours and $12.00 per hour for overtime.

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. Secs. 22-2-5-1 and 2.

DISCUSSION AND DECISION

Issue One

Stampco does not argue on appeal that the wages paid to Keith and Wendell complied with the prevailing wage statute. I.C. Sec. 5-16-7-1 et seq. Stampco 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 Stampco alleges does not provide a private right of action. We agree the federal statute supplants the Indiana prevailing 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 excess 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.

Stampco argues no private action is authorized by the federal statute. McDaniel v. University of Chicago (7th Cir.1977), 548 F.2d 689, 695, holds otherwise. Although 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. McDaniel, 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 U.S. v. Binghampton Constr. Co. (1954), 347 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 McDaniel court considered the remaining steps of the Cort analysis, the court found an implied private right of action for the employee. McDaniel, 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, Stampco 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 McDaniel, 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 Stampco under the prevailing wage statutes.

Issue Two

Next, Stampco 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 Stampco'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, trans. 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 (1983), 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. Stampco's employment agreements with Keith and Wendell violated the Davis Bacon Act and I.C. Sec. 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 Stampco'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.

Stampco 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

Stampco next contends the court erroneously awarded damages and attorneys' fees. Stampco initially argues IND.CODE Sec. 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 Next, Stampco argues liquidated damages may not be sought because no demand was made "prior to or concurrent with the employment" as required by I.C. Sec. 22-2-5-2. See City of Hammond 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, aff'ing, 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.

that the salary was paid so I.C. Sec. 22-2-5-2 does not apply is without merit. Stampco 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. Sec. 5-16-7-1. The trial court did not err in invoking I.C. Sec. 22-2-5-2.

Stampco alleges the Blair's project, which was a Barrett Law project, was not publicly funded. Therefore, Stampco concludes liquidated damages cannot be awarded because I.C....