Massachusetts Attorney General Martha Coakley announced that her office has sued Universal Drywall LLC and its owner for violations of that state’s False Claims Act and consumer protection statute.  According to the lawsuit, the company repeatedly, and unlawfully, classified its workers as independent contractors rather than employees.  The Attorney General alleges that, by misclassifying its workers in this manner, Universal Drywall was able to cut costs and underbid its competitors in order to win state contracts.  The lawsuit further alleges that, after obtaining certain government contracts, Universal Drywall created and submitted false records relating to the misclassified workers, defrauding the state.

Generally, violations of state and federal wage laws can give rise to False Claims Act violations in a variety of ways.  For instance, construction companies and other type of businesses that contract with a state and/or the Federal government are often required to certify that they are in compliance with various wage laws in order to be awarded a government contract and to get paid for their government work.  Frequently, companies are required to file regular reports with the government related to how their workers were paid.  Making false statements, or creating and submitting false reports, about the payment of those wages can lead to False Claims Act liability.

The False Claim Act, which provides for treble damages as well as statutory penalties, is a forceful tool in combating fraud and ensuring compliance with wage laws.  False Claims Act cases involving wage law violations protect both the federal fisc and discourage companies from taking advantage of American workers.