3.08.2010

Supreme Court of Ohio Rules that Statutory Penalties for Employer’s Violation of Prevailing Wage Laws are Mandatory

On March 2, 2010, the Supreme Court of Ohio ruled that statutory penalties for an employer’s violation of Ohio’s prevailing wage statute are mandatory. In Bergman v. Monarch Constr. Co., Slip Op. 2010 Ohio 622, the Court considered an employee-initiated lawsuit against a contractor for failure to pay prevailing wages on a public improvement project for Miami University. The Court held that when judgment is rendered in favor of employees, courts must assess damages for the amount of unpaid or underpaid wages and also the financial penalties set forth in Ohio Revised Code § 4115.10(A). The Supreme Court’s decision reversed the ruling of the 12th District Court of Appeals.

Ohio’s prevailing wage laws generally require that workers employed on public improvement construction projects must be paid according to a wage scale approximating the hourly rates received by union workers performing similar work in that particular area of the state. In the case before the Supreme Court, the workers filed a private lawsuit. Ohio’s statute also permits workers to file claims with the Ohio Department of Commerce, which has investigatory powers.

The lawsuit considered by the Supreme Court was brought by masonry workers and named Miami University, Monarch (the general contractor), and the subcontractor that employed the masons as defendants. The trial court found in favor of the masons and awarded an amount of underpaid wages. The trial court did not assess penalties against Monarch in an amount equal to 25 percent of the underpaid wages pursuant to Ohio Revised Code 4115.10(A) or a penalty equal to 75 percent of the underpaid wages payable to the Ohio Department of Commerce. The workers appealed, and the 12th District Court of Appeals upheld the trial court’s decision and determined that court’s are granted discretion whether to assess the penalties set forth in Ohio Revised Code 4115.10(A).

The Supreme Court determined that courts do not have discretion to assess penalties; rather, the penalty provision of the statute is mandatory. The Supreme Court stated:
“To deny an underpaid employee the additional 25 percent penalty is contrary to the language of R.C. 4115.10(A). ... The statute is also clear in its direction with regard to the 75 percent penalty: it shall be paid to the director of commerce, and it is used for enforcement of the prevailing-wage laws. ... In this case, the 'clear and unequivocal legislative intent' as expressed in the statute is that the 75 percent penalty is to be paid whenever the director of commerce determines that there has been a prevailing-wage underpayment and the determination becomes final.”

Based on this decision, employers and contractors generally cannot avoid the penalty provisions of Ohio Revised Code 4115.10(A), which drastically increases monetary liability for violations of prevailing wage laws. There is, however, one exception to the mandatory nature of the assessment of penalties. Pursuant to Ohio Revised Code § 4115.13(C), if the Director of the Department of Commerce finds that an underpayment of wages was the result of a misinterpretation of the prevailing-wage statutes or an erroneous preparation of the payroll documents, no further proceedings will occur and no penalties are assessed if the employer also makes restitution in the amount of the underpaid wages.

Author: Jon Secrest
            614.723.2029
            jsecrest@ralaw.com

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