Breach of Contract; Third-Party Beneficiaries
By: Daniel Ishoo | Staff Writer
Defendant, a general contractor, contracted to conduct home repairs as a part of the New York City Rapid Repair Program (“RRP”). Plaintiffs were employees of PMJ Electrical Corp. (“PMJ”), one of Defendant’s subcontractors. The “Prime Contract” between Defendant and the New York City Department of Environmental Protection provided that Defendant comply with New York Labor Law § 220 to ensure that workers were paid a prevailing wage. Additionally, the Prime Contract provided that no right of action vested in a third-party beneficiary as a result of the contract. Plaintiffs commenced this breach of contract action alleging that they were paid less than a prevailing wage by PMJ while working on the RRP projects.
Defendant moved to dismiss Plaintiffs’ breach of contract claim. Defendant argued (a) the Prime Contract specifically precluded third parties from recovery. (b) it does not employ the Plaintiffs, and (c) Plaintiffs cannot recover from it as third-party beneficiaries to the Prime Contract between Defendant and the municipality.
The Court rejected the defense that the Prime Contract precluded third-party actions. New York public policy indicates the Labor Law should be construed liberally as its purpose is to protect workers. Thus, the Court viewed the provision within the Prime Contract precluding third-party actions as an attempt to circumvent New York public policy. Next, the Court rejected the defense that Plaintiffs were merely incidental beneficiaries, and thus unable to sue as third party beneficiaries, because: (1) allowing Defendant to delegate its duty to pay a prevailing wage to a subcontractor deprived the Labor Law of its intended force; (2) the Labor Law made clear that a subcontractor’s employees possessed the rights of third-party beneficiaries to the general contractor’s obligations; (3) the Labor Law dictated that the general contractors assumed the risk that its subcontractor would pay employees a prevailing wage. Accordingly, the Court denied Defendant’s motion to dismiss.
Wrobel v. Shaw Envtl. & Infrastructure Eng’g of N.Y, P.C., No. 652382/2015, 5/9/17 (Scarpulla, J.)