Quick Hits<\/p>\n
The New York Court of Appeals clarified that, pursuant to New York Labor Law \u00a7 220, contractors on public projects in New York must pay prevailing wages even if the contract does not promise to pay prevailing wages.<\/p>\n
The court found that any agreement in a public works contract to shorten the statute of limitations governing third-party claims for prevailing wages is not enforceable.<\/p>\n
Prevailing wages may apply to work performed on state-funded projects and federally funded projects.<\/p>\n
Background on the Case<\/p>\n
In this case, a company employed technicians who install, maintain, inspect, test, repair, and replace fire alarms, fire sprinklers, and security system equipment. The company entered contracts for fire alarm testing and inspection services with various New York public works projects.\u00a0The contracts included a clause stipulating that no lawsuits could be brought against the company more than one year after accrual of the cause of action. Some contracts indicated that prevailing wages were not required, and some contracts indicated that a revised agreement would be needed if prevailing wages applied. Other contracts were silent on the matter of prevailing wages.<\/p>\n
A group of technicians brought a class action against the company, claiming failure to pay prevailing wages and required overtime pay under the Fair Labor Standards Act (FLSA) and New York law.\u00a0This included a third-party beneficiary breach of contract claim.<\/p>\n
The company argued that the contracts did not explicitly confirm that the plaintiffs were entitled to prevailing wages. It also argued that the claims were time-barred due to the shortening of the statute of limitations in the contract, and the plaintiffs\u2019 testing and inspection work is not subject to the prevailing wage requirements under New York Labor Law \u00a7 220<\/a> (NYLL).<\/p>\n Court Rulings<\/p>\n In February 2020, the U.S. District Court for the Northern District of New York granted the company\u2019s motion for partial summary judgment on the prevailing-wage-related claims. However, in September 2025, the U.S. Court of Appeals for the Second Circuit held that the plaintiffs were entitled to prevailing wages in part because their work qualified as construction, maintenance, or repair work.<\/p>\n The Second Circuit then certified two questions to the New York Court of Appeals for review and determination. First, whether \u201cthe promise to pay prevailing wages is implicit in every public works contract so that individuals employed on public works projects may sue their employers for breach of contract to enforce the prevailing wage requirement under [Labor Law] \u00a7 220 even if the employer\u2019s written contract does not include the statutorily required promise to pay prevailing wages.\u201d Second, whether \u201cagreements to shorten the statute of limitations in public works contracts to one year [are] enforceable against works bringing third-party beneficiary breach of contract claims to enforce the prevailing wage law,\u201d which is governed by a three-year statute limitation. The answer from the New York Court of Appeals was yes to the former and no to the latter.<\/p>\n As to the first question, the court held that Labor Law \u00a7 220 requires that all public work contracts contain a provision that a worker shall be paid \u201cnot less than the prevailing rate for a day\u2019s work in the same trade or occupation in the [relevant] locality within the state.\u201d Thus, the \u201cthe statute\u2019s promise to pay prevailing wages is inserted into every covered public works contract by operation of law for covered workers\u2019 benefit,\u201d regardless of the actual language contained in the contract. The court held that because this promise was for the benefit of covered workers, individuals employed on public works projects were third-party beneficiaries who could sue their employers for prevailing wages.<\/p>\n The New York Court of Appeals noted that, \u201cunder normal circumstances,\u201d parties may prescribe a shorter statute of limitations by written agreement. \u201cHowever, in the unique context of third-party claims to enforce Labor Law \u00a7 220\u2019s prevailing wage requirements, the contractual benefit flows from a statutory comment.\u201d The court reasoned that \u201cto allow contracting parties to limit workers\u2019 ability to recover prevailing wages would be plainly inconsistent with the statute\u2019s purpose.\u201d Accordingly, any agreement to shorten the three-year statute of limitation governing third-party prevailing wage claims is not enforceable.<\/p>\n Key Takeaways<\/p>\n Contractors that work on public projects in New York may wish to carefully review the language concerning prevailing wages in their contracts. Going forward, public works contracts in New York will be presumed to provide prevailing wages, and any provisions attempting to shorten the limitation period for claims over prevailing wages will not be enforceable.<\/p>\n Ogletree Deakins\u2019 Wage and Hour Practice Group<\/a> will continue to monitor developments and will post updates on the Construction<\/a>, Government Contracting and Compliance<\/a>, New York<\/a>, and Wage and Hour<\/a> blogs as additional information becomes available.<\/p>\n Leslie A. Lajewski<\/a> is a shareholder in Ogletree Deakins\u2019 Morristown<\/a> office.<\/p>\n Steven J. Luckner<\/a> is a shareholder in Ogletree Deakins\u2019 Morristown<\/a> office.<\/p>\n This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins\u2019 Washington, D.C., office<\/a>.<\/p>\n Follow and Subscribe
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