Nagan Construction: Daily Work Reports Versus Certified Payroll

Nagan Construction agreed to a $435,000 civil settlement over skilled work it misclassified as laborer work in its certified payroll and paid at the lower rate. The company admitted underpaying employees and misclassifying their work on two federal renovation projects. The government’s complaint described the contradiction inside the business: supervisors recorded the skilled tasks employees performed, while the certified payroll sent to federal agencies called that same work laborer work.

Nagan Construction, Inc., based in Inwood, New York, was the prime contractor on renovations at the United States Merchant Marine Academy and the Department of Labor’s South Bronx Job Corps Center. The Justice Department announced the settlement on August 5, 2019. A former employee brought the whistleblower case, and the government joined it. The Department of Labor’s Wage and Hour Division investigated and assisted the case.

What Nagan’s Daily Work Reports Said

Nagan’s daily reports described skilled work that its certified payroll classified as laborer work, according to the government’s complaint. The government alleged underpayment and false payroll reporting from September 2012 through February 2018 across the two projects.

The Merchant Marine Academy hired Nagan in 2012 to renovate Delano Hall, a dining facility in Kings Point, New York. The complaint describes interior renovations, a new roof, replacement windows, new food service equipment, and mechanical, electrical and plumbing work. The Department of Labor hired Nagan in 2014 for the South Bronx Job Corps Center renovation. That project included repointing brick and stone, replacing steel lintels and window frames, and installing new roofing and heating, ventilation and air conditioning equipment.

These were jobs with different trades and different wage classifications. Nagan’s supervisors recorded the work at that level of detail, the government alleged:

We see skilled work in the daily reports and cheaper work on the payroll. Skilled on site. Laborer on paper.

What Is a False Certification?

A false certification misstates whether a contractor met a requirement. In Nagan’s case, the government alleged that certified payroll falsely described employees’ work and claimed they had received the required wages. Those reports accompanied requests for federal payment.

According to the complaint, Nagan submitted monthly reports describing the work and requesting payment from the federal agencies. Attached were weekly certified payrolls showing the employees, their hours, pay rates, gross and net wages, and work classifications. The payroll reports represented that the classifications would “conform with the work he performed” and that wage rates met the applicable contract wage determination.

The daily report and certified payroll therefore answered different questions about the same work. One described the task. The other assigned its wage classification and represented that the worker had received the required pay. The monthly payment request took that representation to the agency paying for the renovation.

The government alleged that Nagan received payment despite failing to meet the wage requirements, and that knowing about the underpayment and false classifications would have influenced the agencies’ payment decisions. That is the connection between the workers’ pay and the government’s False Claims Act case: the company used the payroll account when asking the government for money.

Skilled Work at the Laborer Rate

Nagan admitted underpaying twenty employees and misclassifying thousands of hours of their work. It paid the laborer rate for carpentry, bricklayer tasks and other skilled work that entitled employees to higher prevailing wages.

The Davis-Bacon Act wage determination incorporated into each contract supplied the benchmark. As the Justice Department explained, the Department of Labor sets local prevailing wages for different work classifications, and the contractor must report the classification of the work performed along with the hours and pay. On these projects, the skilled-work rates were substantially higher than the laborer rate, which typically covered tasks such as cleaning and transporting materials or equipment.

The difference follows the task. The complaint described employees performing both laborer tasks and skilled work.

Nagan’s contracts required it to certify payment of the applicable wages and fringe benefits or cash equivalents for the work classification.

The loss reaches beyond the individual paycheck. The Wage and Hour Division explained that paying workers less than the required rates also puts employers that pay correctly at a competitive disadvantage. The contractor honoring the wage determination carries labor costs that the underpaying contractor avoids.

What Nagan Admitted About Management

Nagan admitted that its president and CEO and other senior managers knew the prevailing-wage requirements. It also admitted failing to train supervisors and managers adequately on work classification and failing to put effective systems in place to verify classifications and pay.

The government also alleged that employees on the Delano Hall project complained about underpayment, but Nagan continued paying them as laborers. The complaint therefore describes employees raising the wage issue while the work was underway, as well as supervisors documenting the tasks that carried the higher rates.

The Settlement Included Money for Workers

The court-approved settlement designated $242,376 for underpaid current and former Nagan employees, out of the total the company agreed to pay the United States. That allocation addressed the workers’ unpaid wages.

Nagan also agreed to periodic internal compliance audits and to ensure supervisors were fully trained on federal labor standards. Those commitments addressed the same failures the company admitted: inadequate training and ineffective checks on classification and pay.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What Proof Do You Need as a Whistleblower?

In Nagan’s case, daily reports supplied the task descriptions that contradicted the payroll classifications sent with payment requests. We work with the insider who knows what those records mean to build the case around that contradiction.

The Nagan complaint connects daily reports, weekly payrolls and monthly requests for federal payment. Each records a different part of the same work. We examine those connections with the insider, including what management knew about the work and the wages.

A similar classification problem reached a judgment in Farfield’s certified-payroll case. Workers classified as groundmen and laborers performed higher-paid lineman work on a transit project partly reimbursed by the Federal Transit Administration. The court found civil False Claims Act liability for false payroll certifications.

Farfield shows the same practical issue in another trade: the classification on the payroll can understate the work actually performed. Nagan supplies the direct comparison with daily supervisor reports and the company’s admissions about its pay practices. A worker, supervisor or payroll employee may recognize that split because their ordinary work gives them a view of one side of it.

You Know What the Crew Actually Did

If the work you performed, supervised or entered into payroll differs from what the contractor certified, speak to one of our Whistleblower Experts about what the crew actually did. We build your strongest prevailing-wage whistleblower case with you around the work, the pay and the company’s decisions, and bring in construction payroll fraud whistleblower lawyers who understand prevailing-wage contracts. We stay beside you from that first conversation through the pursuit of a recovery.