Superior Masonry, Inc., 1994-DBA-19 (ALJ Oct. 13, 1994)

U.S. Department of Labor

Office of Administrative Law Judges Heritage Plaza Bldg. - Suite 530 111 Veterans Memorial Blvd Metairie, LA 70005 (504) 589-6201 (504) 589-6268 (FAX)

Date: October 13, 1994
Case No. 94-DBA-19

In the Matter of:

SUPERIOR MASONRY, INC. AND
FRANK SELTZER, Individually and
as President

Appearances:

Michael A. Figures, Esq.
       For the Respondents

John A. Black, Esq.
       For the Department of Labor

BEFORE: C. RICHARD AVERY
    Administrative Law Judge

   These proceedings arise under the Davis-Bacon Act, Reorganization Plan Number 14 of 1950, The Contract Work Hours and Safety Standards Act and the applicable regulations promulgated thereunder at 29 C.F.R. Part 5.

   On February 4, 1994, an Order of Reference was filed by the Administrator, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, alleging that Respondents, Superior Masonry, Inc. (Masonry) and Frank Seltzer (Seltzer), individually and as President, violated provisions of the Contract Work Hours and Safety Standards Act (CWHSSA), within the meaning of 29 C.F.R. §5.12(a)(1), and that Respondents therefore should be debarred. (ALJ EX 1).

   By certified letter dated June 16, 1993 (ALJ EX 1), Respondents were advised by the Administrator, Wage and Hour Division, of the investigation findings, the specific violations and the conclusion that the violations were willful and aggravated within the meaning of 29 C.F.R. §5.12(a)(1).

   By letter dated July 15, 1993, Respondents requested a hearing concerning these allegations. (ALJ EX 1).

   A formal hearing was held on August 13, 1994, at Mobile, Alabama, at which all parties were given an opportunity to present evidence and make oral arguments. The Department of Labor contends that Respondent Masonry was a subcontractor on a contract at Tallahassee Regional Airport which was covered by CWHSSA and that Respondent Masonry violated that Act by failing to pay employees overtime wages of time and one half and that both Respondents prepared false certified payrolls to conceal that fact. While agreeing that the prime contract under which Respondents' worked was subject to CWHSSA, the Respondents deny owing any back wages or falsification of any records.

   The unresolved issues to be determined by me are (1) whether or not back wages are owed, and if so, (2) whether Respondents' failure to pay overtime and the submission of falsified payrolls constituted willful or aggravated violations of the Acts and regulations, so as to justify placing Respondents on the list of debarred bidders as provided for in 29 C.F.R. §5.12.

   The following findings are based upon my observation of the appearance and demeanor of the witnesses who testified at the hearing and upon an analysis of the entire record in light of the arguments of the parties, applicable statutory provisions, regulations, and pertinent case law.

   At the hearing, the Department of Labor (DOL) produced five witnesses all of whom were employees of Respondent Masonry at the airport job in question during the years 1989 and 1990. To a man, each testified that they received no overtime wages but often worked in excess of 40 hours per week.

   In essence the testimony of the five employees was that they were paid straight wages regardless of the hours worked. They agreed they were not forced to work overtime, and that they had understood when they accepted the job that time and a half would not be paid for overtime. Basically, they simply described a situation where they were living away from home and toward the end of the regular work week were offered the opportunity to work on weekends at regular hourly wages if they chose to do so. There was apparently no penalty attached to their refusal, and on occasion the employees testified they opted to return home rather than work the extra time.

   Kenneth Gaines, Sr., testified he was the brick mason foreman and worked for Respondent Masonry in 1989 and 1990. He worked the airport project and stated he kept the time sheets on each employee. Once a week ~he would call Masonry's bookkeeper, Lureen Spencer, and report all hours worked. In turn checks issued to each employee once a week. Mr. Gaines testified that no overtime was ever paid.

   In addition to the five employees who testified, DOL also offered the testimony of Jere McWinn. He testified he was an investigator for the United States Department of Labor, Wage and Hour Division, and that he investigated businesses concerning their compliance with Davis Bacon and related Acts.

   Mr. McWinn testified he investigated the Respondent Masonry's payroll records in 1989 and 1990, and he reviewed the original certified payrolls concerning the Tallahassee airport job. He also testified he talked both with Respondent Seltzer and Ms. Spencer.

   Mr. McWinn testified that Ms. Spencer told him she received the weekly number of hours from Mr. Gaines by telephone and then she prepared payroll records

. . . at the direction of Mr. Seltzer, who signed them, and she said that he -- he told her that the men were to get paid straight time but she was to put it down on the payrolls as time and a half pay by reducing the number of overtime hours by roughly onethird and showing it as overtime when it was, in reality, only straight time pay. (Tr. 62).

   Mr. McWinn explained Ms. Spencer's testimony further by giving the example that if an employee worked 46 hours Ms. Spencer would reduce the actual time reflected on the records to 44 hours and show time and a half paid for four hours. This adjustment was designed to give the appearance that the wages paid included overtime rather than simply straight time for the actual hours worked. (Tr. 62). The amount paid was accurately reported, the incorrect information concerned the hours worked. (Tr. 64).

   Using the payroll records (DOL EX 2), Mr. McWinn then pointed to specific examples where false reporting occurred. He also explained how in the instances where overtime was paid he added the third back to arrive at exactly how much overtime a particular employee worked. (Tr. 69). He did not do this in instances where an employee worked no more than 40 hours per week (Tr. 69). His computations are contained at DOL Exhibit 3. A summary of all Mr. McWinn's computations can be found at DOL Exhibit 4 and reflect total back wages of $9,029.70 owed to 19 employees. (Tr. 73).

   The only rebuttal offered by Respondents was the testimony of Respondent Seltzer. He stated he was the president and co-owner of Superior Masonry and hash been since its inception in 1978.

   Mr. Seltzer acknowledged that Mr. Gaines was the supervisor of the Tallahassee airport job and that he called once a week with the weekly hours worked by each employee on that job. Mr. Seltzer acknowledged overtime was worked on occasions, but stated no employee ever complained to him about the wages he paid. He testified that Lureen Spencer prepared the certified payrolls which issued from Masonry's office, and that he never told her to reduce the figures concerning overtime worked. On cross examination, Mr. Seltzer denied paying straight time over 40 hours per week and stated any employee who said otherwise was lying.

   Ms. Spencer was not called to testify. She was subpoenaed by DOL but failed to appear. At the onset of the hearing, Respondents' attorney acknowledged she still worked for the company, that he had spoken to her that day and she was accessible. (Tr. 13) .

   Regarding the first issue, under the terms of the prime contract no contractor or subcontractor was to permit a worker to work in excess of 40 hours per week unless the worker was paid a wage of one and one half times the basic rate of pay for all hours in excess of 40. (DOL EX 1, pg. 20). Therefore, Respondent Masonry was obligated to comply with the wage requirements by terms of the master contract, and the initial issue is whether or not Respondent Masonry complied with its obligations. From the evidence produced at the hearing, I do not find that it did.

   As previously outlined, five employees testified without hesitation that they were never paid overtime on the subject job, and Mr. McWinn explained that the bookkeeper, Ms. Spencer, told him about falsifying the records at Mr. Seltzer's direction to reflect that overtime was paid. The only testimony to the contrary was that of Mr. Seltzer. Consequently, given the overwhelming weight of the evidence and the fact that Ms. Spencer was not called upon by Respondents to testify in their behalf even though she still remains in their employment, I really can arrive at no other conclusion except that overtime was not paid and that back wages are owed.

   Regarding the amount of back wages owed and to whom they are owed, I find no flaw in Mr. McWinn's approach and adopt his findings as reflected by DOL Exhibit 4 attached hereto. In other words, I find that 19 employees are owed a total of $9,029.70 in back wages.

   In arriving at this figure, Mr. McWinn used only the occasions that overtime was paid and then in reliance upon Ms. Spencer's statements to him simply increased the overtime shown by one third to reflect the overtime hours actually worked. No better method than this has been suggested, and I find it fairly and accurately represents a reconstruction of the overtime worked inasmuch as the employees themselves have no independent records or recollections

to the contrary. To disallow this method of reconstruction would in essence to allow the Respondents to avoid payment of the back wages due, since Respondents maintained no accurate and correct records themselves.

   Turning next to the issue of debarment, 29 C.F.R. §5.12(a)(1) sets forth the standards of conduct which may result in debarment proceedings. In cases arising under the labor standards provisions of acts such as the CWHSSA, debarment is appropriate when any contractor or subcontractor is found to be in aggravated or willful violation of the labor standards provided by statute.

   In this instance, I find that Respondents I conduct constituted willful and aggravated violations of the Acts and that debarment is required. Falsification of payroll records to simulate prevailing wage compliance is prima facie evidence of a willful violation and itself a debarrable act, and I find in this instance that the submission of the falsified records indicates that Respondents knew of the prevailing wage requirements and willfully chose to violate their obligations and in the absence of contrary or mitigating evidence the corporation and responsible officer ¹ should be debarred.

¹ While not defined by the Act, as president and owner of the corporate Respondent, Frank Seltzer, has "substantial interest" sufficient to require his debarment individually. By his own admission, he controlled and managed the operations of Superior Masonry, Inc., and it was he, according to his bookkeeper, who directed the falsification of the records.