Construction Contractor to Pay $656,646 and to be Debarred for Three Years from Federal Contracts for Failure to Pay Required Prevailing Wage Rate and Other Violations

Wednesday, May 28, 2014

Enviro & Demo Masters Inc. and Gladiators Contracting Corp., along with the companies' owner Jover Naranjo and foreman Luperio Naranjo Sr., have been ordered to pay a total of $656,646 to 37 workers after failing to pay them the required prevailing wage rates and fringe benefits on a federally funded construction project in New York City. Due to the extent and willful nature of the violations, all parties have been ordered to be debarred from seeking and obtaining federal contracts for a three-year period. In a separate proceeding, the owner and foreman were found guilty in federal court in November 2013 of criminal charges related to the project, including the submission of fraudulent certified payrolls to the New York City Department of Housing Preservation and Development. They were sentenced to six and four years in prison, respectively, on April 9, 2014. They are scheduled to surrender on June 2, 2014.

Enviro & Demo Masters Inc. and Gladiators Contracting Corp. were subcontractors performing demolition work on the construction of Hobbs Court and Ciena, two federally funded affordable housing developments in East Harlem. The Hobbs and Ciena projects were part of the Metro North Rehabilitation and Redevelopment Program, which was funded in part by the U.S. Department of Housing and Urban Development under the American Recovery and Reinvestment Act of 2009 through the New York State Division of Housing and Community Renewal and the New York City Department of Housing Preservation and Development.

An investigation by the Wage and Hour Division found that Enviro & Demo Masters falsified certified payroll records by deliberately omitting employees from the payroll, instead listing family members who performed no work on the project and listing wage rates that were not paid to workers. The company also failed to pay 37 workers the prevailing wage rates for their particular job classifications and failed to pay the workers one-and-a-half times their basic hourly rates for all hours worked above 40 in a workweek.

The subcontractors disputed the Wage and Hour Division's findings, which resulted in a hearing before a Labor Department administrative law judge in June 2012. On April 23, 2014, Administrative Law Judge Lystra A. Harris issued a decision and order affirming the Wage and Hour Division's findings and instructing the New York City Department of Housing Preservation and Development, which withheld the funds, to release the monies to the Wage and Hour Division for payment to the workers. The decision and order will become final 40 days after issuance if no appeal is filed.

Judge Harris also found the project's prime contractor, Hobbs Ciena Associates LP and Hobbs Ciena Housing Development Corp., jointly and severally liable for payment of the back wages by its subcontractor Enviro & Demo Masters. On a Davis-Bacon Act covered project, the prime contractor is responsible for the compliance of all subcontractors.

The Davis-Bacon Act requires that all contractors and subcontractors performing work on federal and certain federally funded projects pay their laborers and mechanics the proper prevailing wage rates and fringe benefits, as determined by the secretary of labor. The Contract Work Hours and Safety Standards Act applies to contractors and subcontractors with federal service contracts and federally funded and assisted construction contracts exceeding $100,000. It requires contractors and subcontractors on covered contracts to pay laborers and mechanics employed in the performance of the contracts one and one-half times their basic rate of pay for all hours worked over 40 in a workweek.

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