Office of the Comptroller v. Jetstream Maintenance Corp. OATH Index No. 997/11 (Jan. 24, 2011), adopted, Comptroller s Dec. (Apr. 28, 2011), appended

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1 Office of the Comptroller v. Jetstream Maintenance Corp. OATH Index No. 997/11 (Jan. 24, 2011), adopted, Comptroller s Dec. (Apr. 28, 2011), appended Following respondents default, petitioner proved violation of the Labor Law, where respondents failed to pay prevailing wages and supplemental benefits to three employees on public works contracts. Respondents are liable for underpayment plus 16% interest. Based upon the willful nature of underpayment and deliberate falsification of payroll records, 25% civil penalty and five-year debarment also recommended. NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS In the Matter of OFFICE OF THE COMPTROLLER Petitioner - against - JETSTREAM MAINTENANCE CORP. & SAE KEON WON Respondents REPORT AND RECOMMENDATION ALESSANDRA F. ZORGNIOTTI, Administrative Law Judge Petitioner, the Office of the Comptroller, brought this proceeding, pursuant to sections 220 et seq. and 231 et seq. of the Labor Law and Title 44, Chapter 2 of the Rules of the City of New York ( RCNY ). Petitioner alleged that respondents, Jetstream Maintenance Corp. ( Jetstream ) and Sae Kon Won, the president and sole owner of Jetstream (Pet. Ex. 4), failed to pay the prevailing rate of wages and benefits to three employees who worked on three contracts with New York City Human Resources Administration ( HRA ). At a hearing scheduled for January 4, 2011, respondents failed to appear. Petitioner presented proof of service of the petition and notice of hearing, by regular and certified mail, at respondents last known business addresses of record, as required by statute and the Comptroller s regulations (Pet. Exs. 1A). See Labor Law ' 220(8) (Lexis 2009); 44 RCNY ' 2-02(b)(1) (Lexis 2009). Petitioner also served respondents at another business address as well

2 - 2 - as at Mr. Won s home address (Pet. Exs. 1B-C; Tr ). Based on the proof submitted, I found that service to respondents last known business address of record was reasonably calculated to achieve actual notice of the proceedings. Service was thus sufficient to entitle petitioner to proceed in respondents absence. 48 RCNY ' 1-23 (Lexis 2009); see Office of the Comptroller v. Central Absorption, Inc., OATH Index Nos. 1138/96 & 1146/96 (Mar. 21, 1996), adopted in part, rejected in part, Comptroller s Dec. (Apr. 30, 1996). At the hearing petitioner relied on the testimony of two of the complaining employees and the Comptroller s investigator, as well as documentary evidence. For the reasons below, the petition should be granted and respondents found liable for failing to pay the prevailing rate of wages and benefits. Because the underpayment was willful and payroll records were deliberately falsified, I recommend imposition of a 25% civil penalty, 16% interest, and debarment of respondents for five years. ANALYSIS Labor Law section 230 was enacted in 1971 to extend the prevailing wage requirements of section 220 to include building service employees who perform care or maintenance work for public buildings. Labor Law 230(1) and 231 (Lexis 2009). To prevail, petitioner must prove by a preponderance of the evidence that respondents failed to pay its employees prevailing wages and benefits for work performed on the public works contracts at issue. See Office of the Comptroller v. Excalibur Protective Services, OATH Index No. 1647/95 (Aug. 29, 1995). Petitioner has met that burden. In 2003 Won, on behalf of Jetstream, entered into three public works contracts with HRA to perform janitorial services at locations in New York City including 250 Church Street, 305 Rider Avenue, and 30 Thornton Street (Pet. Exs. 3A-C). From June 2003 through December 2004, Jetstream employed building service employees to perform janitorial work required by these contracts. Section 231 of the Labor Law obligated respondents to pay its employees prevailing wages and benefits. Excalibur, OATH 1647/95. The contracts also set forth this requirement (Pet. Exs. 3A-C).

3 - 3 - Effective July 1, 2003, the prevailing rate of wages for workers classified as cleaners/porters was $17.92 per hour and effective January 1, 2004, $18.50 per hour. Supplemental benefits were set at $4.52 per hour effective July 1, 2003, $4.84 per hour effective January 1, 2004, and $4.83 per hour effective July 1, 2004 (Pet. Exs. 3A-C). Pursuant to the contracts, respondents submitted certified payroll records to HRA. These records indicate that respondents paid its cleaners the prevailing rate of wages and benefits (Pet. Ex. 6A-C). Petitioner alleged that the respondents payroll records, signed by Mr. Won, were falsified. According to petitioner, between August 2003 and December 2004, respondents paid the complainants less than the prevailing rate of wages and failed to pay them the required supplemental benefits. Verified complaints signed in 2004 by Francisco Fernandez, Teodoro Fernandez, and Maria Adams, three of respondents employees, were submitted into evidence (Pet. Ex. 2A-D). The complaints include descriptions of the cleaning work performed, the locations where they worked, the hours worked, and the hourly rates paid by respondents. In addition, Francisco Fernandez and Teodoro Fernandez testified and provided consistent information. Francisco Fernandez testified that in 2004 he cleaned at 250 Church Street and was paid $8.00 an hour (Tr , 35; Pet. Ex. 2B). Sign-in sheets from 250 Church Street support this claim (Pet. Ex. 5A). However, the certified payroll records for this location do not list Francisco Fernandez as an employee (Pet. Ex. 6A). When his paystubs (Pet. Ex. 7A) are compared with sign-in sheets showing the actual time worked, it is evident that Francisco Fernandez was paid less then the prevailing rate of wages and benefits. Petitioner argued that Mr. Won falsified the payroll records to indicate that Jetstream did not employ Mr. Fernandez to hide the fact that it was paying him less than the prevailing wage (Tr. 122). Teodoro Fernandez testified that he cleaned various locations for Jetstream including 30 Thornton Street and was paid $8.50 an hour (Tr. 40, 43-45; Pet. Ex. 2C-D). Sign-in sheets for 30 Thornton Street support this claim (Pet. Ex. 5A). The certified payroll records for this location indicate that Teodoro Fernandez was an employee and was paid the prevailing wage and rate (Pet. Ex. 6C). However, the paystubs for Teodoro Fernandez (Pet. Ex. 7C) indicate that he was

4 - 4 - paid less. Teodoro Fernandez testified that when he complained to Jetstream about not receiving vacation pay, he was fired (Tr ). Petitioner s investigator contended that Mr. Won falsified the payroll records for August 9, 2004, to indicate that Jetstream had paid Mr. Fernandez $ when it fact it had paid him $175 (Tr ). The complaint signed and notarized by Maria Adames indicates that she worked as a cleaner at 305 Rider Avenue and was paid $8.00 an hour (Pet. Ex. 2A). Sign-in sheets from 305 Rider Avenue indicate that she worked at this location from July through December 2004 (Pet. Ex. 5B). However, the payroll records for this location do not list Ms. Adames as an employee for the month of July (Pet. Ex. 6B; Tr. 84). Petitioner argued that Mr. Won falsified the payroll records to indicate that Jetstream did not employ Ms. Adames in July 2004 when it was paying her less than the prevailing wage (Tr. 122). Moreover, when Ms. Adames s paystubs (Pet. Ex. 7A) are compared with the actual payroll records (Pet. Ex. 6B) it is evident that she was paid less then the prevailing rate of wages and benefits. Petitioner s auditors reviewed the sign-in sheets, the certified payroll records, and the pay stubs for each complainant to determine: the number of hours worked each week, the amount to be paid at the prevailing rate of wages and benefits, the amount actually paid, the difference between what should have been paid and what was paid, and the total amount of the underpayment with interest (Tr ). In the case of Teodoro Fernandez, the auditors did not count his work at non-prevailing wage locations (Tr ). I find that the audit (Pet. Ex. 9A), which took into account the available information as well as the complainants statements, provides a reasonable estimate of the amounts due to the three complainants. Office of the Comptroller v. Cappry Contracting Management Corp., OATH Index No. 1721/05 at 3 (Aug. 19, 2005); see also Office of the Comptroller v. Kallo Building Construction Co., Inc., OATH Index No. 868/97, at 5 (Mar. 11, 1997) (statements from workers were best available evidence of underpayment). Specifically, the auditor determined underpayments as follows: Francisco Fernandez by $9,583.25, Teodoro Fernandez by $19,225.85, and Ms. Adames by $7, Petitioner included a 16% interest charge in the calculation, the maximum allowed by section 235(5) of the Labor Law. Excalibur, OATH No. 1647/95 at 5. Petitioner also requested

5 - 5 - a 25% civil penalty. Section 235(5) of the Labor Law permits a civil penalty of up to 25% of the total underpayments, plus interest between 6 and 16%, to be imposed for prevailing wage violations. The factors to be considered when determining a civil penalty and interest are: the size of the employer s business, the good faith of the employer, the gravity of the violation, the history of previous violations of the employer... and the failure to comply with recordkeeping or other non-wage requirement. Labor Law 235(5)(b), (c) (Lexis 2010). Here, there is no evidence concerning any previous violations. At the time of respondents filing of a Vendex Questionnaire in 1999 (Pet. Ex. 4), the company employed 20 to 49 people and had annual gross revenue of $1,500,000 to $1,999,999. It is unclear from the record whether these numbers have changed in the interim. However, the remaining factors weigh heavily against respondents. Based upon the contracts and certified payroll records, respondents were obviously aware of the prevailing rates of wages and benefits for cleaners. Yet they failed to pay those rates. As evidenced by the sign-in sheets and the paystubs, respondents deliberately fabricated payroll records and falsely claimed that they had paid the prevailing rates. The financial impact on the complainants, who were paid much less than what they were entitled to, was substantial. Also, while it appears that respondents provided petitioner with some of the documents used in the audit (Tr , 78-79, 87), their failure to appear for the hearing is an aggravating factor when considering the civil penalty and interest. Office of the Comptroller v. Carlin Construction & Development Corp., OATH Index Nos /92, at 16 (July 17, 1992) (contractor s non-cooperation alone justified imposition of maximum penalty). Based on the severity of the violation, the maximum 25% civil penalty and 16% interest are appropriate. Cappry, OATH 1721/05 at 5. Moreover, the complainants are entitled to the interest that will accrue until payment is tendered. Kallo, OATH 868/97 at 5. Petitioner also requested a finding that respondents underpayments were willful, pursuant to section 235(7) of the Labor Law. As discussed above, the evidence established that respondents knew that they were failing to pay complainants at the rates mandated by law. Thus, I find that respondents violations were willful. See Office of the Comptroller v. A & R Paterno Construction, Inc., OATH Index No. 2248/00 (Oct. 19, 2000); see also Hull-Hazard, Inc. v.

6 - 6 - Roberts, 129 A.D.2d 348, 352 (3 rd Dep t 1987), aff d 72 N.Y.2d 900 (1988) (violation of Labor Law deemed willful where employer knew or should have known of violation). Finally, pursuant to section 235(7) of the Labor Law, petitioner seeks a finding that respondents should be debarred from bidding on future public building service work contracts within New York State for five years. The Labor Law allows for debarment of a contractor as well as the five largest shareholders of the company when two final determinations of willful prevailing wage violations have been rendered against a contractor or when there is a finding that a contractor submitted falsified payroll records. The first requirement is met when there are simultaneous final determinations on two or more separate public works projects. Labor Law 235(7) (Lexis 2010); see Office of the Comptroller v. Causeway Construction Corp., OATH Index No. 1694/02 at 7-8 (Aug. 21, 2002). Here, petitioner established that Jetstream and Mr. Won, as president and sole owner of the company, willfully violated the prevailing wage law on three separate contracts and deliberating falsified payroll records. Thus, respondents should be debarred from bidding or being awarded any public building service work contracts or subcontracts within the state for five years. FINDINGS AND CONCLUSIONS 1. Respondents were properly served with the petition and notice of hearing in this matter. 2. Respondents violated Labor Law section 230 by willfully failing to pay three of its workers the prevailing rate of wages and benefits on three public works contracts between August 2003 and December 2004 as set forth in petitioner s audit (Pet. Ex. 9A). 3. The complainants are entitled to maximum interest, at the annual rate of 16%, until payment is tendered. 4. Respondents should be assessed the maximum civil penalty of 25% of the total violation. 5. For their deliberate falsification of payroll records and willful prevailing wage violations on three public works contracts, respondents should be debarred from all governmental contracts within New York State for five years.

7 - 7 - RECOMMENDATION I recommend that the petition be granted. January 24, 2011 Alessandra F. Zorgniotti Administrative Law Judge SUBMITTED TO: JOHN C. LIU Comptroller APPEARANCES: CONSTANTINE P. KOKKORIS, ESQ. Attorney for Petitioner No Appearance for Respondents

8 - 8 - Comptroller s Decision (Apr. 28, 2011) ORDER AND DETERMINATION WHEREAS: The Comptroller s Bureau of Labor Law ( Petitioner ) brought proceedings, pursuant to Labor Law 230, et seq. to determine whether respondent Jetstream Maintenance Corp. & Sae Keon Won ( Respondents ) paid the prevailing rate of wages to three (3) employees, Francisco Fernandez, Teodoro Fernandez and Maria Adams, who worked at the New York City Human Resources Administration ("HRA ), providing cleaning and maintenance services at three locations, 250 Church Street, 305 Rider Avenue and 30 Thorton Street. Honorable Alessandra F. Zorgniotti, Administrative Law Judge ( ALJ ) of the Office of Administrative Trials and Hearings conducted an inquest on January 4, 2011 after Respondents failed to appear. The ALJ made a finding that service was sufficient to give the Respondents actual notice of the proceedings. ALJ Zorgniotti issued a Report and Recommendation dated January 24, NOW: After reviewing the ALJ s Report and Recommendation and relevant portions of the record and exhibits thereto, and due deliberation having been had thereon, pursuant to the powers and duties vested in me by the Comptroller under Labor Law 230, et seq., I adopt, as the Comptroller s Order and Determination, the ALJ s Report and Recommendation, which is annexed hereto, in full. The amount owed to each employee, including interest at 16% per annum through February 28, 2006 is listed in the Summary of Underpayment, Petitioner's Exhibit 9A at the hearing, a copy of which is attached hereto. Interest will continue to accrue at 16% per annum from February 28, 2006 until the date of payment.

9 - 9 - If any of the employees fail to claim their awards within six (6) years from the date of this Order and Determination, the unclaimed awards shall be retained by the City of New York as revenue. Pursuant to Labor Law 235(7), respondents Jetstream Maintenance Corp. and Sae Keon Won, having falsified its payroll records and willfully violated the prevailing wage laws, shall be ineligible to bid on or be awarded any public work contract for five (5) years from the date hereof, and pursuant to Labor Law 235(5), the maximum fine of 25% of the total violations is hereby imposed. Finally, Sae Keon Won, as the sole shareholder and as an officer of Jetsteam Maintenance Corp. is financially responsible pursuant to Labor Law 235(6) for the underpayments, interest and civil penalty assessed against the contractor, Jetstream. Order this 28 th day of April 2011 PhilIip Hom Deputy General Counsel