Subcontract Is Enforceable Even Though Too Low To Pay Prevailing Wage Rates

A subcontractor agreed to perform site clearing work for $5,000, and only later learned it was a public project requiring payment of prevailing wages. Instead of paying workers $13 and $14 per hour, the sub would have to pay $36 and $43 for a chainsaw operator and bucket truck operator, respectively. Was the sub entitled to more money, on the theory of an invalid contract, or alternatively in quantum meruit? A Massachusetts appellate court has said no. The project paper trail left much to be desired. The original oral agreement, not disputed, was $5,000 to clear two sites. Only after starting work did the sub learn that he would have to pay prevailing wages. He sought an increased price, but nothing was agreed upon. He also sought money for extra work; again, there was no documentation and no agreement. It appears from the decision that the workers were paid properly and the $5,000 estimate was inadequate to cover the labor cost for the original scope. The trial court found the sub to be entitled to more money based on signed invoices, and under the theory of quantum meruit. But the appellate court reversed. The appellate court noted that the law requiring prevailing wages to be explicitly stated applied to prime contracts but not to subcontracts. Thus, the lack of any reference to prevailing wages in the original estimate did not trouble the court. There was no consideration for the signed invoices, and so they were not enforceable against the contractor. The court also had no problem with the fact that the $5,000 quote was inadequate to cover the anticipated wage costs at prevailing rates. Its comments included:

• “courts are reluctant to protect someone from the effects of having made an unwise choice or a bad bargain.”
• “[the sub]’s failure to consider the consequences of his entering into a prevailing wage contract at a price well below the actual value of the work should not excuse his compliance with the law.”
• “It is entirely possible that [the sub] elected to take a loss on the initial $5,000 contract as a ‘loss leader’ in an attempt to secure an advantage over his competitors on future public contracts.”

With comments like these, is it any surprise that the court ruled against the sub? Lesson learned. The case is Cocchi v. Morais Concrete Service, Inc., 2015 Mass. App. Div. 50, 2015 Mass. App. Div. LEXIS 14 (Mar. 17, 2015).