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Foundation for Fair Contracting v. New Jersey State Department of Labor

December 02, 1998


Before Judges Stern, Braithwaite and Wecker.

The opinion of the court was delivered by: Wecker, J.A.D.

[9]    Argued: October 7, 1998

On appeal from the Superior Court of New Jersey, Law Division, Mercer County.

Plaintiffs Foundation for Fair Contracting, Ltd. (FFC) and Miguel Mattei appeal from a summary judgment dismissing their complaint against defendants New Jersey State Department o1f Labor (DOL), City of Trenton, Lutheran Senior Services, Inc., Circle F Urban Renewal Limited Partnership, and Costanza Contracting Company, Inc. Plaintiffs' complaint sought a declaration that the Prevailing Wage Act, N.J.S.A. 34:11-56.25 et seq. (the Act), applies to a construction contract between defendants Circle F and Costanza for construction of a senior citizens housing project funded in part by a grant from the State and to be operated under an agreement between the City and Circle F, in which Lutheran Senior Services is a general partner.

In their motions for summary judgment and/or to dismiss the complaint, the several defendants challenged plaintiffs' standing to maintain this action; the jurisdiction of the Law Division to entertain the action; and the applicability of the Act to this construction contract. The Law Division Judge concluded that he had jurisdiction to hear the matter and that neither plaintiff had standing to bring this action, but that if either plaintiff did have standing, the Act did not apply. Because we agree that the Act does not apply to this construction contract, we affirm. In light of our Disposition on the merits, we need not address the standing issues raised by defendants, and will only briefly address the jurisdictional issue raised by the DOL.

The background facts are not in dispute. The City of Trenton received a grant of over $1.3 million from the Department of Community Affairs under the Neighborhood Preservation Program, N.J.S.A. 52:27D-320, *fn1 part of the Fair Housing Act, N.J.S.A. 52:27D-301 et seq., enacted in 1985. The grant was to finance the conversion of the Circle F factory building in Trenton into seventy affordable housing units for senior citizens with low to moderate incomes. The grant agreement between the Department of Community Affairs and the City provides for the City to comply with all "applicable" laws, expressly including but not limited to several federal and state financial audit requirements, as well as affirmative action and non-discrimination laws. The grant agreement does not specifically mention the Prevailing Wage Act.

Lutheran Senior Services, Inc., as general partner, along with several limited partners, formed Circle F Urban Renewal Limited Partnership *fn2 as an "urban renewal entity" pursuant to the Long Term Tax Exemption Law, N.J.S.A. 40A:20-1 et seq. That law, enacted in 1991, consolidated the various statutes under which municipalities may agree with private entities for the private entities to undertake redevelopment projects in return for tax exemptions.

This bill is part of a package of bills that provides a new partnership between the public and private sectors to redevelop and rehabilitate New Jersey's urban centers, older suburbs, and other communities that are in need of redevelopment. The bills encourage the maximum participation of the private sector in the redevelopment of the State's distressed communities.

[Senate County and Municipal Govt. Comm. Statement to Senate No. 291, L. 1991, c. 431.]

The legislation's express purpose is in large part "to encourage private capital and participation by private enterprise" in the construction, renovation and rehabilitation of low and moderate income housing. N.J.S.A. 40A:20-2, citing the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq., and expressing the intention that these two acts be construed together.

The City entered into a developer's agreement with Circle F for the construction of the project, with Circle F undertaking to "develop, market, and rent" to senior citizens at substantially less than market rates, ranging from $275 per month for an efficiency apartment to $450 for certain two-bedroom apartments. Circle F contracted with Costanza to perform as the general contractor on the Circle F project.

FFC holds itself out as a nonprofit corporation whose stated "sole and exclusive purpose is to monitor public works projects for compliance with the New Jersey Prevailing Wage Act . . . and other relevant state and federal statutes, thereby protecting the workers employed on such projects and the taxpayers whose money is used to finance such projects." Mattei describes himself as a "citizen" and "taxpayer" of the State of New Jersey, who resides in Trenton. FFC sent an investigator to the Circle F project to inquire into Costanza's compliance with the Act. Although FFC's investigator apparently was unable to determine whether Costanza was paying the workers employed on the Circle F project the prevailing wage under the Act, it is undisputed that Costanza has not paid all of its employees on this project in accordance with the Act. Costanza maintains that the project "was let as a non-Prevailing Wage Act project."

FFC's investigator then contacted the DOL "regarding defendant Costanza's obligation to pay prevailing wages to its employees working on the project." Michael McCarthy, Chief of Enforcement for the DOL's Wage and Hour Compliance Division, responded by letter, stating that the DOL had been advised by the Attorney General's office that the Prevailing Wage Act did not apply in the absence of an agreement between a public body and a contractor, and the Act therefore did not apply to the Circle F Project. The Attorney General's letter opinion cited a prior letter opinion to the DOL in 1990 to the same effect, stating that the Act did not apply to situations where developers received public funds and then entered into separate contracts with developers, notwithstanding the fact that public funds were used to pay for the work. The City of Trenton also had been advised by DOL that the Act did not apply to the project. Counsel to FFC wrote to McCarthy asking the DOL to reconsider its position, and McCarthy declined to do so "absent a declaratory judgment from a court of competent jurisdiction . . . ."

The Prevailing Wage Act provides in pertinent part:

"Every contract in excess of the prevailing wage contract threshold amount for any public work to which any public body is a party or for public work to be done on property or premises leased or to be leased by a public body shall contain a provision stating the prevailing wage rate which can be paid (as shall be designated by the commissioner) to the workers employed in the performance of the contract and the contract shall contain a stipulation ...

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