Case No. 2001-SCA-0019 arises from a complaint filed by the U.S. Department of Labor (Complainant) alleging violations of the McNamara-O'Hara Service Contract Act (SCA), 41 U.S.C. § 351, et seq. and the regulations issued thereunder at 29 C.F.R. §§ 4.1 et seq.

   On November 28, 2001, an Order consolidating these cases was issued based upon a motion by Complainant which was agreed to by Respondents.

   A Notice of Hearing, dated November 7, 2002, was served on all parties setting a hearing on March 10, 2003 in Portland, Oregon. J.B.M. Services, Inc. (JBM) is the sole Respondent in the DBA case and a Respondent, along with Lee White, a named individual, in the SCA case. Initially, both Respondents were represented by Scott W. Horngren, Esquire and the law firm of Haglund, Kirtley, Kelley, Horngren & Jones. On February 26, 2003, counsel Horngren and the law firm filed a Motion to Withdraw as counsel for Lee White. Complainant did not object to the motion. The motion was granted on February 27, 2003. As indicated, Mr. White was served with the Notice of Hearing, but did not appear at the hearing and did not submit anything on his behalf.

   (3) The Government of the United States of America awarded to Respondent J.B.M. Services, Incorporated, hereinafter sometimes referred to as "Contractor," the following contract ("the Contract"), on the date, in the amount, and for the services set forth below:

   (4) The Contract was subject to and contained the representations and stipulations required by the SCA and the regulations issued thereunder.

   (5) The services specified in the aforesaid contract were furnished in the United States by the named Contractor to the Government of the United States through the use of service employees, as defined by Section 8(b) of the SCA (41 U.S.C. 357(b)).

   (6) During the period required for the performance of the contract, the Respondents failed and refused to pay service employees employed in the performance of work on the contract their minimum wages and fringe benefits as required by the contract, Section 2(a)(1) of the SCA (41 U.S.C. 351(a)(1)), and by Section 4.6 of the regulations promulgated by the Secretary of Labor (29 C.F.R. 4.6) thereunder as follows:

   Subsequently, all monies were paid.

   (7) By reason of the aforesaid breaches of the contract and the violations of the SCA and the regulations duly issued by the Secretary of Labor thereunder, the Respondents have become subject to Section 5(a) of the SCA (41 U.S.C. 354 (a)), whereby the Respondents and any firm, corporation, partnership or association in which any of the Respondents have a substantial interest may be denied the award of any contract with the Government of the United States (until three years have elapsed from the date of publication by the Comptroller General of the list containing the name of such Respondents as having been found to have violated the SCA), and the Respondents became liable for a sum equal to the amount of the aforesaid underpayments, as provided by Section 3(a) of the SCA (41 U.S.C. 352(a)).

   (8) The aforesaid sums have now been paid in full by Respondent corporation.

   I now consider whether debarment is appropriate in this case. It has been held that:

   Section 5(a) of the SCA provides that, "[u]nless the Secretary recommends otherwise because of unusual circumstances," the service contractor who violates the Act shall be debarred for three years. 41 U.S.C. § 354(a). Although the Act does not define "unusual circumstances," the regulations at 29 C.F.R. § 4.188(b) establish a three part test. Part I asks whether the contractor's violations were "willful, deliberate or of an aggravated nature" or the results of "culpable conduct such as culpable neglect to ascertain whether practices are [or were] in violation" or failure to comply with record keeping requirements. 29 C.F.R. § 4.188 (B)(3)(i). Part II calls for the following prerequisites to be present: a good compliance history, cooperation in the investigation, repayment of moneys due, and sufficient assurances of future compliance. Finally, if the conditions in Part I and II are met, a number of factors are considered to determine "unusual circumstances" are present, bearing on good faith.

Vigilantes, Inc. v. Adm'r, Wage and Hour Div., 968 F.2d 1412, 1418 (1st Cir. 1972).

   JBM's president, Joseph Adesida, testified on behalf of Respondent. He stated that it had been in business for 12 years. (Tr. 7) It received SBA Certification as a minority contractor in 1993. (Tr. 8). The contract at bench was awarded in 1995 and was renewable by the Complainant from year to year for its duration. (Tr. 12). After the contracting officer sent a letter indicating the contract would be renewed, there would usually be a second letter indicating modification in wage rates and fringe benefits. Id. The amounts here under consideration were fringe benefits. Id. Respondent had no incentive not to pay correct fringe benefits because there is a procedure for contract amendment whereby the Complainant reimburses Respondent for increases in fringe benefits. (Tr. 14-15). The underpayments occurred because Respondent did not receive information from Complainant about the changes in fringe benefits. (Tr. 13). Respondent fully cooperated with the investigation in this case and paid the amounts found to be due. (Tr. 15-16).

   Mr. Adesida also testified that JBM has approximately 32 employees, which increases to 45-50 employees during the summer. (Tr. 9). In 2000, JBM had gross revenues of $1.9 million dollars, of which 74 percent was due to federal government contracts; in 2001, it had a gross of $1.7 million dollars, of which 86 percent was due to federal government contracts and in 2002, it had a gross of $1.93 million dollars, of which 89 percent was due to federal government contracts. Id. If JBM were disbarred, it would go out of business. Id.

   After considering the entire record, I make the following additional findings of fact:

   (9) The violations here under consideration were not willful, deliberate or of an aggravated nature or the result of culpable conduct.

   (10) The violations here under consideration were not the result of Respondent's failure to comply with the record keeping requirements.

   (11) Respondent has a good compliance history, cooperated in the investigation, repaid all the monies due and has given sufficient assurances of future compliance.

   (12) Unusual circumstances present in this case and debarment is not warranted.

The DBA Case

   Based upon the stipulation of the parties, I make the following findings of fact:

   (1) JBM entered into Contract No. HA C992019 with the U.S. Department of Interior, Bureau of Land Management, to perform renovation work at the Hyatt Lake Restrooms at Medford, Oregon.

   (2) JBM entered into Contract No. DTCG 88000 C-623296 with the U.S. Coast Guard to construct the re-siding of housing units on U.S. Government property at Ferndale, California.

   (3) By virtue of the DBA, as amended, JBM was required to pay the various classes of laborers and mechanics employed on the two contracts the full amounts earned, computed at wage rates of not less than those determined by the Secretary of Labor and included in the contracts for these various classes of laborers and mechanics, including fringe benefits. In accordance with 29 C.F.R. § 5.5(a)(3)(I), JBM was required to maintain and preserve for a period of three years payroll and basic records for all laborers and mechanics working at the project sites. JBM was also required by 29 C.F.R. § 5.5(a)(3) to submit weekly a certified copy of all payrolls to the contracting agency with the certification to affirm that the payrolls were correct and complete, that the wage rates shown thereon were not less than those determined by the Secretary of Labor, and that the classification set forth for each laborer or mechanic conformed to the work performed. These requirements were included in the specifications of the contracts.

   (4) Specific underpayments and record keeping violations under the DBA occurred under the two contracts.

   (5) Respondent JBM has paid all outstanding monies, totaling $23,015.31, owed to its employees, resolving all of its monetary obligations as identified in the Order of Reference in this case.

   (6) Section 5.12(b)(1) of 29 C.F.R. provides that whenever, as a result of an investigation conducted by a Federal agency or the Department of Labor, the Administrator of the Wage and Hour Division finds reasonable cause to believe that a contractor or subcontractor has disregarded its obligations to employees under Section 3(a) of the DBA or has committed willful or aggravated violations of the labor standards provisions of any of the statutes listed in 29 C.F.R. § 5.2, he shall notify the contractor or subcontractor of the findings and afford them an opportunity to present such reasons or considerations as to why a debarment action should not be taken under 29 C.F.R. § 5.12.

   I now consider whether debarment is appropriate in this case. The standard for debarment in a DBA case is set forth in 29 C.F.R. § 5.12(a)(2), which provides that:

   (2) In cases arising under contracts covered by the Davis-Bacon Act, the Administrator shall transmit to the Comptroller General the names of the contractors or subcontractors and their responsible officers, if any (and any firms in which the contractors or subcontractors are known to have an interest), who have been found to have disregarded their obligations to employees, and the recommendation of the Secretary of Labor or authorized representative regarding debarment. The Comptroller General will distribute a list to all Federal agencies giving the names of such ineligible person or firms, who shall be ineligible to be awarded any contract or subcontract of the United States or the District of Columbia and any contract or subcontract subject to the labor standards provisions of the statutes listed in § 5.1.

   It has been held that:

   Debarment has consistently been found to be a remedial rather than punitive measure so as to encourage compliance and discourage employers from adopting business practices designed to maximize profits by underpaying employees in violation of the DBA. See, United States v. Bizzell, 921 F.2d 263, 267 (10th Cir. 1990); S.A. Healy Co. v. Occupational Safety & Health Review Comm'n, 96 F.3d 906, 911 (7th Cir. 1996); Minor Construction Co., 95-DBA-42 (ALJ June 12, 1997). Debarment is an appropriate compliance tool because it discourages attitudes that violations of the DBA will not be detected, and if they are, that said violations will be lightly treated by requiring only a confession of violation and restitution of back pay. Phoenix Paint Co., WAB Case No. 87-8 (May 5, 1989).

   Violations of the DBA do not per se constitute a disregard of an employer's obligations within the meaning of Section 5.12(a) so as to result in automatic debarment. This is apparent where an employer makes a valiant or good faith effort to comply. In the Matter of Mr. Paint, Inc., et al., 92-DBA-27 (ALJ Mar. 31, 1995). To support a debarment order, the evidence must establish a level of culpability beyond mere negligence. It is not necessary, however, to show that an employer's officers had direct knowledge of the misconduct. Allowing violations to persist can constitute evidence of an intent to evade or a purposeful lack of attention to a statutory responsibility in support of debarment. P & N Inc./Thermodyn Mechanical Contractors, Inc., ARB Case No. 96-116 (Oct. 25, 1996).

In the Matter of Berbice Corporation, et al, 98-DBA-9 (ALJ Apr. 16, 1999) at pp. 18-19.

   Adesida testified that the Ferndale contract involved painting and putting siding on a building. (Tr. 17). There was a question of whether those persons putting on the siding should be paid as carpenters or roofers. They were initially paid as roofers and the COR who came to the job said the classification was "okay." (Tr. 18). Thereafter, several employees raised the question of appropriate classification. An investigation resulted in which Respondent fully cooperated. Id. After the investigation, the employees were fully paid at the proper rate.

   Adesida also testified that the Hyatt Lake job involved the renovation of BLM washrooms. The job included some remodeling, demolition, plumbing, tile and bathroom fixtures. (Tr. 19). Persons scrubbing down tile were classified and paid as laborers, whereas they should have been classified and paid as tile setters. (Tr. 20-21). Thereafter, the employees were paid their proper wages. (CX 1).

   After considering the entire record, I make the following additional findings of fact:

   (7) Respondent made good faith efforts to comply with its obligations to its employees.

   (8) Under the facts herein presented, debarment is not warranted in this case.

   IT IS HEREBY ORDERED that:

   1. Debarment is not warranted in Case No. 2001-DBA-0013.

   2. Debarment is not warranted in Case No. 2001-SCA-0019.

      DONALD B. JARVIS
      Administrative Law Judge