740 F.3d 852
2d Cir.2014Background
- Plaintiffs are SimplexGrinnell employees who performed installation, maintenance, repair, testing, and inspection of fire alarm and suppression systems on public works in New York and sued for unpaid prevailing wages under NYLL §220 (third-party breach of contract claims).
- Plaintiffs filed in state court in 2007; case was removed to federal court and litigated in the Eastern District of New York. Plaintiffs pursued common-law breach claims as intended third-party beneficiaries of public-works contracts.
- During the litigation Simplex independently sought guidance from the New York Department of Labor (DOL). Simplex provided matrices excluding testing and inspection work; the DOL removed the matrices from its website and issued an opinion letter on Dec. 31, 2009, concluding that testing and inspection are "maintenance" work covered by §220.
- The DOL’s opinion letter expressly stated it would apply its construction prospectively only (effective Jan. 1, 2010) because of prior confusion about the agency’s position.
- The district court granted summary judgment for Simplex on the testing-and-inspection claims, deferring both to the DOL’s substantive interpretation and to its decision to apply that interpretation prospectively; it also held that, absent contract language explicitly referencing testing/inspection, Simplex could not reasonably have expected to pay prevailing wages for that work.
- The Second Circuit found New York law unsettled on (1) whether courts must defer to an agency’s choice to apply its statutory construction prospectively only when a court must decide the statute’s scope for an earlier period, and (2) whether a general contractual promise to pay prevailing wages binds the contractor to pay for work later adjudged covered; it certified both questions to the New York Court of Appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a court must defer to an agency’s decision to construe §220 prospectively only when the court must decide the statute’s meaning for an earlier period | Deference should apply to the DOL’s substantive interpretation but not necessarily to its choice to limit enforcement prospectively; court adjudication may reach back to 2001 | Agency’s prospective enforcement decision is entitled to deference in litigation, so plaintiffs’ pre-2010 testing/inspection claims should be barred | Issue certified to NY Court of Appeals because state law unsettled on scope of deference to agency prospective-enforcement decisions |
| Whether a contractor’s general contractual commitment to pay prevailing wages under §220 binds it for work types only if those were clearly understood to be covered when contracting, or for all work later held covered | A general promise to comply with §220 binds the contractor to pay prevailing wages for all work that the statute is ultimately held to cover, even if scope was unclear at signing | Where work coverage was unclear, contractor could not reasonably have agreed to pay prevailing wages for testing/inspection absent explicit contract language | Issue certified to NY Court of Appeals because state precedent unclear whether general §220 commitments cover subsequently adjudicated categories |
Key Cases Cited
- Samiento v. World Yacht Inc., 10 N.Y.3d 70 (2008) (agency interpretation of statute it enforces is entitled to deference even when issued apart from the litigation)
- Barenboim v. Starbucks Corp., 21 N.Y.3d 460 (2013) (deference to DOL interpretation when agency proceeding ran parallel to litigation)
- Fata v. S.A. Healy Co., 289 N.Y. 401 (1943) (workers may bring third-party breach of contract actions as intended beneficiaries under statutes requiring prevailing wages)
- Resolution Trust Corp. v. Diamond, 45 F.3d 665 (2d Cir. 1995) (parties are presumed to accept rights and obligations imposed by state law when contracting)