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Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Monday, August 5, 2019

Manhattan U.S. Attorney Announces Settlement With Construction Company For Underpaying Workers And Submitting False Payroll Reports On Two Federally Funded Projects

Nagan Construction, Inc., Admits Submitting Certified Payroll Records that Misrepresented the Type of Work Performed by Employees and Agrees to Pay Workers Back Wages

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Mark H. Watson Jr., U.S. Department of Labor (“DOL”) Wage and Hour Division Northeast Regional Administrator, announced today a settlement of a civil fraud lawsuit against NAGAN CONSTRUCTION, INC. (“NAGAN”), a construction contractor based in Inwood, New York, for underpaying workers on two federally funded construction projects and submitting false certified payroll reports that misclassified thousands of hours of work performed by these workers.  The United States’ Complaint alleges that NAGAN violated federal prevailing wage requirements by paying 20 employees the wage rate applicable to “laborer” work – which typically involves unskilled tasks such as cleaning and transporting materials and equipment – when the employees had performed skilled work, such as carpentry and bricklayer tasks, which entitled them to a substantially higher wage rate. 

As part of the settlement approved by U.S. District Judge Analisa Torres, NAGAN has agreed to pay the United States a sum of $435,000, $242,375.60 of which will be distributed to the current and former NAGAN employees who were underpaid.  In addition, NAGAN admitted and accepted responsibility for conduct alleged in the Complaint, including underpaying its employees and improperly misclassifying thousands of hours of work they performed.  NAGAN also agreed to implement specific measures designed to ensure future compliance with applicable federal prevailing wage laws, including conducting periodic internal compliance audits and ensuring that supervisors are fully trained on federal labor standards. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “On two large construction projects funded by the government, Nagan Construction violated federal labor laws – as well as its contracts – by failing to pay skilled employees the wages they were owed and then falsely describing the nature of the employees’ work in reports submitted to the government.  This office will hold companies accountable when they cheat workers out of the wages they rightfully earn and then submit false reports to the government to justify the lower wage rate.”   

DOL Wage and Hour Division Regional Administrator Mark H. Watson Jr. said: “Federal contractors must properly classify their employees and pay them the correct required rates and benefits.  Not doing so not only denies workers their hard-earned wages, it also places law-abiding employers at a competitive disadvantage.  The U.S. Department of Labor will utilize all available legal options and work cooperatively with our fellow law enforcement agencies to hold those who commit violations accountable.  We encourage all employers to reach out to us for guidance, and to use the wide variety of tools we provide to help them comply with the law and avoid violations like those found in this case.”         

The Davis-Bacon Act (the “DBA”) requires workers on federally funded construction projects in excess of $2,000 to be paid the local “prevailing wage.”  The DOL issues wage determinations setting forth the applicable local prevailing wages for different work classifications on a project.  The DBA requirements and applicable wage determinations are incorporated into project contracts.  The construction contractor must submit certified payroll records to the federal contracting agency reflecting the employees who worked on a project each day, the hours each employee worked, the classification of the work performed, and the rate and total amount each employee was paid.

As alleged in the Complaint filed in Manhattan federal court:

In 2012, NAGAN entered into a contract with the United States Merchant Marine Academy (“USMMA”) to renovate a dining facility called Delano Hall located in Kings Point, New York (the “Delano Hall Project”).  In 2014, NAGAN entered into a contract with the DOL to renovate the South Bronx Job Corps Center located in Bronx, New York (the “Job Corps Center Project”).  NAGAN served as the prime contractor on the Delano Hall Project and the Job Corps Center Project, which were completed in or about March 2015 and February 2018, respectively.

During the course of the projects, NAGAN submitted monthly reports to the USMMA and the DOL requesting payment and describing the work performed during the month.  NAGAN regularly submitted false certified payroll reports that misclassified thousands of hours of skilled work as “laborer” work.

NAGAN knowingly underpaid 20 employees working on the two projects and failed to pay them the prevailing wages they were entitled to based on the nature of the work the employees performed.  NAGAN routinely paid its employees the wage rate applicable to “laborer” work – which typically involves unskilled tasks such as cleaning and transporting materials and equipment – when in fact the employees had performed skilled work, such as carpentry and bricklayer tasks.  The prevailing wage rates for carpentry, bricklayer, and other skilled work were substantially higher than the wage rate for laborer work on both projects.

In the settlement agreement, NAGAN admits, acknowledges, and accepts responsibility for the following conduct:

  • NAGAN’s president and CEO, as well as other senior NAGAN managers, were aware of the requirement to pay workers the prevailing wage rates listed in the applicable wage determinations.
  • NAGAN underpaid 20 employees who worked on the Delano Hall Project and the Job Corps Center Project.  NAGAN improperly misclassified thousands of hours of the work these employees performed on the two projects.  NAGAN paid these employees for this work using the prevailing laborer wage, instead of the higher prevailing wage to which they were entitled for the carpentry, bricklayer, and other skilled work the employees had actually performed.
  • NAGAN failed to adequately train its supervisors and managers on how to properly classify work in order to comply with DBA requirements.
  • NAGAN failed to implement effective systems and mechanisms to verify that the company properly classified its employees and consistently paid them the correct prevailing wage as required by federal law.

In connection with the filing of the lawsuit and settlement, the Government intervened in a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act.

Mr. Berman thanked DOL’s Wage and Hour Division for its investigative efforts and significant assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.

Updated August 5, 2019