prevailing wages – Duane Morris Construction Law

The New York Appellate Division, First Department’s decision in Santana v. San Mateo Construction Corp., entered on January 16, 2025, reinforces the enforceability of prevailing wage claims under Administrative Code of City of N.Y. § 19-142. The court clarified that section 19-142 applies to any permit issued “to use or open a street,” not just public works projects. It reaffirmed that flagging work qualifies for prevailing wages, and that laborers can enforce agreements related to this provision as third-party beneficiaries.

San Mateo Construction Corp.’s flagging contracts obligated compliance with all laws, making putative class members third-party beneficiaries despite contractual disclaimers, which the court deemed void as against public policy. The ruling also affirmed that prevailing wage rights under Administrative Code § 19-142 extend to private projects, rejecting the contractual forfeiture of such rights as contrary to public policy.

Jose A. Aquino (@JoseAquinoEsq on X) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Cuba Business Group. Mr. Aquino focuses his practice on construction law, lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

Failing to pay prevailing wages on a public works project can have consequences beyond labor code penalties and claims for unpaid wages. Contractors who “unlawfully deflate their labor costs” by intentionally violating prevailing wage laws in order to win contracts are also subject to tort claims by the second lowest bidder for interference with prospective economic advantage. Traditionally, the disappointed second bidder’s only recourse has been to challenge the bid process or the bid itself for irregularities via a bid protest. But under the tort theory of interference, the runner-up can seek tort damages from the winning bidder if it can establish that the winning bid was the result of the contractor’s manipulation of the bidding process.

The recent case of Roy Allan Slurry Seal, et al. v American Asphalt South, Inc. (2/20/2015) 2015 Cal App Lexis 164, illustrates this point. In Roy Allan, two slurry seal contractors brought five separate actions against a third contractor after finishing second on 23 public works road sealing projects involving almost $15 million in contract work in five counties in Southern California. Plaintiffs filed complaints in each county, alleging that they would have been awarded the contract as the lowest bidder in each instance had the defendant’s bids included labor costs based on paying the prevailing wage. They asserted a tort cause of action for intentional interference with prospective economic advantage, as well as claims for defendant’s alleged violations of California’s Unfair Practices Act (“”UPA”) and Unfair Competition Law (“UCL”).

Continue reading “Prevailing Wage Violation Invites Unsuccessful Bidder’s Tort Claim”