Clarifying DOL Enforcement: Timeliness, Due Process, and Inclusion of “Substantially Owned-Affiliated Entities” under New York’s Prevailing Wage Law

Introduction

Matter of National Building & Restoration Corp. v. New York State Department of Labor (2025 NY Slip Op 02247) arises from an action by the New York State Department of Labor (DOL) to enforce prevailing-wage requirements against National Building & Restoration Corp. (“NBRC”), its principals Joseph K. Salerno and Joseph K. Salerno II, and a later-added entity, National Construction Services, Inc. (“NCS”). The proceeding was initiated by a laborer’s complaint in 2009 and culminated in a hearing that spanned from 2016 to 2021. The key issues before the Appellate Division, Third Department, were:

Whether DOL’s addition of NCS as a respondent—more than a decade after the original complaint—was untimely or barred by a statute of limitations;
Whether due process was violated by the delayed notice adding NCS;
Whether substantial evidence supported findings of willful prevailing-wage underpayments, falsification of payroll records, illegal kickbacks, and the characterization of NCS as a “substantially owned-affiliated entity” of NBRC;
The propriety of imposing interest, penalties, and five-year debarment under Labor Law §§ 220 and 220-b.

Summary of the Judgment

The Third Department unanimously confirmed the Commissioner’s determination in all respects. It held that:

No statute of limitations in Labor Law article 8 precluded DOL from adding NCS late in the administrative process;
Procedural due process was satisfied because NCS’s principal had notice from the outset, the hearing was continued to afford adequate opportunity to defend, and no prejudice resulted;
There was substantial evidence of NBRC’s willful underpayment of prevailing wages on nine projects, of falsified payroll records, and of illegal wage-kickbacks;
NCS qualified as a “substantially owned-affiliated entity” under Labor Law § 220(5)(g) and thus could share liability and debarment;
A 25% penalty on the total underpayments, interest at 16% per annum (with a six-year toll due to delay), and five-year debarment of both NBRC and NCS were lawful and not “shocking” or disproportionate.

Analysis

1. Precedents Cited and Their Influence

Matter of RLI Ins. Co. v. New York State Dept. of Labor (97 NY2d 256 [2002]) established that §§ 220-b(2)(a)–(c) create a look-back period for investigations, not a hard limitations period for administrative charges.
Matter of Cayuga-Onondaga Counties Bd. of Coop. Educ. Servs. v. Sweeney (89 NY2d 395 [1996]) reaffirmed that the public interest in prevailing-wage enforcement may override a contractor’s interest in prompt notice.
Matter of Hull Corp. v. Hartnett (77 NY2d 475 [1991]) addressed repetitive violations for debarment under the pre-amendment statute; the Court here clarified that post-amendment § 220-b(3)(b)(1) debarment may rest on a single finding of falsification or kickbacks.
Matter of Central City Roofing Co., Inc. v. Musolino (136 AD3d 1186 [3d Dept 2016]) and Matter of Bistrian Materials v. Angello (296 AD2d 495 [2d Dept 2002]) illustrate factors relevant to determining “substantially owned-affiliated entities,” including shared management, financial entanglement, and overlapping personnel.
Matter of Nash v. New York State Dept. of Labor (34 AD3d 905 [3d Dept 2006]) and Matter of Marangos Constr. Corp. v. New York State Dept. of Labor (216 AD2d 758 [3d Dept 1995]) confirm that “willful” violations require only knowledge of non-compliance, not intent to defraud.
Matter of Scuderi v. Gardner (103 AD3d 645 [2d Dept 2013]) addresses the proper rejection of falsified payroll records where independent evidence of employee testimony and investigator observations support recalculation of underpayments.

2. Legal Reasoning

The Court’s reasoning can be divided into three interlocking strands:

Statutory Timeliness vs. Investigative Look-Back: The two- and three-year periods in § 220-b(2)(a)–(c) apply only to the period of labor covered by a complaint and the look-back of DOL’s investigation. No statute of limitations bars DOL’s subsequent service of charges on a party uncovered during that investigation.
Due Process in Prevailing-Wage Proceedings: Administrative enforcement under article 8 demands fair notice and opportunity to respond but does not impose criminal-level strictures. Here, Salerno II—as NCS’s sole owner—had notice when served with the original hearing notice in 2015, the hearing officer granted adjournments and opportunities for cross-examination, and no prejudice resulted from formal addition of NCS.
Substantial Evidence and Statutory Interpretation:
- “Willful” underpayment: Evidence of prior prevailing wage experience, a memo acknowledging “errors,” refusal of employees to keep independent records, and documented discrepancies sufficed to establish knowledge.
- Falsification and kickbacks: Employee testimony and record conflicts supported those findings.
- “Substantially owned-affiliated entity”: Section 220(5)(g) enumerates indicia—control over payroll, asset sharing, intercompany loans, indemnifications, shared management—which NCS exhibited.
- Debarment trigger: Post-amendment § 220-b(3)(b)(1) requires only one instance of payroll falsification or kickback, not repetitive offenses.

3. Impact on Future Cases and New York Labor Law

This decision clarifies and cements several principles:

The absence of a formal statute of limitations for DOL to add parties discovered mid-investigation prevents contractors from hiding behind delay to avoid enforcement.
Because due process balances public interest and administrative efficiency, DOL may—so long as no prejudice is shown—give late notice of additional parties if they had constructive or actual notice from the outset.
“Substantially owned-affiliated entity” will be interpreted broadly; any corporate affiliate that shares management, financing, payroll functions or other indicia of control risks joint liability and debarment.
Debarment may follow a single instance of falsification or kickback, heightening the stakes for contractors in complying with certified payroll and benefit requirements.

Complex Concepts Simplified

Prevailing Wage: A legally prescribed minimum hourly rate (including benefits) that contractors must pay laborers on public works.
Debarment: A prohibition on bidding for public contracts for up to five years when employers commit serious prevailing-wage violations such as willfulness, falsification, or kickbacks.
CPLR Article 78: A procedure for judicial review of state administrative agency determinations, akin to certiorari.
Substantially Owned-Affiliated Entity: A corporate affiliate—regardless of equity ownership—over which the violating contractor exerts control, or that exerts control over the contractor, in areas such as payroll, financing, contracts, equipment, or executive decisions.
Directory vs. Mandatory Statutory Provisions: “Directory” timeframes guide prompt agency action but do not deprive an agency of jurisdiction if missed; “mandatory” deadlines create forfeiture if unmet.

Conclusion

The Third Department’s opinion in Matter of National Building & Restoration Corp. v. New York State Dept. of Labor establishes a robust framework for prevailing-wage enforcement in New York. It confirms that DOL’s investigative look-back periods do not constrain the timing of charging additional entities, underscores the broad reach of due process standards in administrative hearings, and interprets “substantially owned-affiliated entity” expansively to prevent contractors from evading liability through corporate restructuring. Finally, it reinforces the seriousness of willful underpayments, falsified payrolls, and kickbacks by upholding significant civil penalties, interest, and debarment. As a result, contractors and their affiliates must exercise vigilant compliance with certified payroll rules and benefit schedules to avoid severe financial and operational consequences.