General Contractor Recovers Final Payment on Public Contract, Even Though Subcontractor Violated Prevailing Wage Act

Worth & Co., Inc. v. Dept. of Labor & Ind., 938 A. 2d 239 (Pa. 2007)

In this case, the Supreme Court of Pennsylvania decided the appeal of a general contractor, whose final payment was being withheld by a public school district on account of the GC’s subcontractor’s failure to pay prevailing wages to its workers.  Under the authority of regulations issued by the Department of Labor & Industry’s prevailing wage division, the Department had instructed the school district to withhold final payment from the general contractor, because workers of the subcontractor remainied unpaid following the subcontractor’s default and eventual bankruptcy.

The general contractor pointed to Section 10(a) of the Prevailing Wage Act itself, which specified that nothing in the Act was intended to impair the right of a contractor to receive final payment because of its subcontractor’s failure to make prevailing wage payments to its workers.  The GC contended that the Labor & Industry regulations exceeded the bounds of the statute.

Notwithstanding the clarity of the Act, both the intermediate appellate court and the Supreme Court issued split votes as the case worked its way up the appellate ladder, demonstrating the volatility of this ruling.  The majority opinion of the Supreme Court stated that it had no power to avoid the clear language of the Act, and the state and the unpaid workers had other remedies available to pursue the unpaid wage claims.