New Jersey Contractor Pays $4M+ in False Claims Act Settlement

In September 2026, Bayonne Drydock and Repair Corporation, a New Jersey government contractor, agreed to pay over $4 million to settle allegations of violating the False Claims Act. The company was accused of using subcontractors that hired individuals not authorized to work in the United States on Navy ship repair projects. This case highlights the critical importance of compliance when working on government contracts—knowledge that's essential for contractors seeking federal work.

The Allegations

The False Claims Act case alleged that Bayonne Drydock knowingly used subcontractors who employed unauthorized workers on Navy ship repair projects. The government claimed the contractor:

• Failed to verify subcontractor compliance with employment laws
• Submitted false claims for payment
• Violated contract terms requiring authorized workers
• Failed to maintain proper oversight of subcontractors

This case demonstrates why contractors must understand government contract requirements—topics covered on contractor licensing exams.

Understanding the False Claims Act

The False Claims Act (FCA) is a federal law that imposes liability on persons and companies who defraud government programs. For contractors, this means:

1. False Claims

Contractors violate the FCA by:

• Submitting false invoices for payment
• Claiming work was performed when it wasn't
• Billing for unauthorized expenses
• Falsifying certifications or compliance documents
• Using unauthorized workers on government projects

2. Qui Tam Provisions

The FCA allows private citizens (whistleblowers) to file lawsuits on behalf of the government:

• Whistleblowers can receive 15-30% of recovered amounts
• Creates strong incentive for reporting violations
• Means contractors face scrutiny from multiple sources
• Requires strict compliance at all times

3. Penalties

FCA violations carry severe penalties:

• Civil penalties: $13,508 to $27,018 per false claim
• Treble damages (3x the amount of damages)
• Attorney fees and costs
• Potential debarment from government contracts
• Criminal prosecution for willful violations

Government Contract Requirements

Government contracts include strict compliance requirements that contractors must understand:

1. Employment Verification

Government contracts typically require:

• E-Verify for all employees
• I-9 verification compliance
• Certification of authorized workers
• Subcontractor compliance verification

2. Subcontractor Oversight

Prime contractors are responsible for:

• Verifying subcontractor compliance
• Monitoring subcontractor practices
• Ensuring contract requirements are met
• Reporting violations promptly

3. Certification Requirements

Contractors must certify:

• Compliance with all contract terms
• Use of authorized workers only
• Accurate billing and invoicing
• Proper documentation and record-keeping

Why Government Contract Compliance Matters

The New Jersey case demonstrates why compliance is critical:

Financial Consequences

• Multi-million dollar settlements
• Treble damages
• Attorney fees
• Loss of future contract opportunities

Business Consequences

• Debarment from government contracts
• Damage to business reputation
• Loss of bonding capacity
• Increased scrutiny from federal agencies

Legal Consequences

• Criminal prosecution for willful violations
• Civil liability
• Personal liability for company officers
• Permanent record of violations

Preventing False Claims Act Violations

Contractors can protect themselves by implementing compliance programs:

1. Establish Compliance Procedures

• Create written compliance policies
• Train employees on requirements
• Conduct regular compliance audits
• Maintain proper documentation

2. Verify Subcontractor Compliance

• Require subcontractor certifications
• Conduct due diligence on subcontractors
• Monitor subcontractor practices
• Include compliance requirements in contracts

3. Maintain Accurate Records

• Document all work performed
• Maintain employment verification records
• Keep accurate billing documentation
• Preserve records for required retention periods

4. Implement Internal Controls

• Review invoices before submission
• Verify compliance before certifying
• Conduct internal audits
• Report violations promptly

Why This Matters for Contractor Licensing Exams

Government contract compliance and business law are significant components of contractor licensing exams. Our practice exams cover:

• Business Law: Contracts, liens, compliance
• Employment Law: I-9, E-Verify, authorized workers
• Government Contracts: Requirements and compliance
• Risk Management: Avoiding violations and penalties

New Jersey-Specific Requirements

If you're preparing for your New Jersey contractor license exam, understand that New Jersey contractors working on government projects must:

• Comply with federal employment verification requirements
• Verify subcontractor compliance
• Maintain proper documentation
• Understand False Claims Act implications

Lessons for Contractors

The New Jersey case teaches critical lessons:

The Bottom Line

The New Jersey contractor's $4+ million settlement serves as a powerful reminder that government contract compliance isn't optional—it's a legal requirement with severe consequences for violations. Contractors working on federal projects must understand False Claims Act requirements, maintain strict compliance, and properly oversee subcontractors.

When preparing for your contractor license exam, don't skip the business law sections covering government contracts and compliance. These topics aren't just test material—they're essential knowledge that protects your business and enables you to compete for government work. Our comprehensive practice exams ensure you're prepared for both the exam and real-world compliance requirements.

Remember: government contracts offer significant opportunities, but they come with strict compliance requirements. By understanding these requirements, implementing proper compliance programs, and maintaining oversight of subcontractors, you protect your business and position yourself for success in government contracting.