USDOL v. Loss Prevention, Inc., 2003-SCA-2 (ALJ Jan. 28, 2004)

U.S. Department of Labor

Office of Administrative Law Judges Seven Parkway Center - Room 290 Pittsburgh, PA 15220 (412) 644-5754 (412) 644-5005 (FAX)

Issue Date: 28 January 2004

CASE NO.: 2003-SCA-2

In the Matter of:

U.S. DEPARTMENT OF LABOR
CHICAGO, ILLINOIS
    Plaintiff

    v.

LOSS PREVENTION, INC., ET AL
    Respondent

APPEARANCES:

Leonard A. Grossman, Esquire
For the Plaintiff

Anthony Cairo and
Michelle Cairo, Pro se
For the Respondent

BEFORE: The Honorable Gerald M. Tierney

Procedural History

   This proceeding arises under the McNamara Service Contract Act (41 U.S.C. § 351, et seq.) (hereinafter the "SCA"), and the regulations promulgated thereunder (29 CFR Part 4). On November 12, 2002, the United States Department of Labor (hereinafter the "DOL") filed a Complaint with the Office of Administrative Law Judges against the Respondent, Loss Prevention, Inc. In the Complaint, the DOL alleges that the Respondent failed and refused to pay service employees the minimum monetary wages and fringe benefits. The alleged infractions resulted in breaches of contracts with the United States Government.

   A Notice of Docketing was issued on March 22, 2002, requiring the Respondent to answer the Complaint. On December 6, 2002, the Respondent filed an Answer and Notice of Appearance, naming Bradley J. Axel, Esquire and Robert J. Slobig, Esquire as counsel representatives.

   The case was scheduled for hearing on June 23, 2003, in Chicago, Illinois before Administrative Law Judge Robert Lesnick. On June 11, 2003, the parties submitted a Joint Motion to Vacate Hearing Dates and to Reschedule the Matter. By order dated June 16, 2003, the case was continued.

   The case was reassigned to the undersigned on July 3, 2003. On October 2, 2002, counsel for the Respondent filed a Motion to Withdraw as Counsel for Loss Prevention, Inc. which was subsequently granted.

   A formal hearing was held on November 4, 2003, in Chicago, Illinois. At the hearing, the parties offered Stipulations.

   The Respondent, Loss Prevention Inc., provided security guards, switch board operators/ receptionists and similar personal services to the United States pursuant to government contracts.¹ The Wage and Hour Division, United States Department of Labor conducted investigations concerning alleged violations of these contracts from May 17, 2000 to May 10 2002. By written stipulation, the Respondent admits that they breached the contracts and the SCA by failing to pay service employees the minimum monetary wages and fringe benefits as required by § 2(a)(1) of the SCA (41 U.S.C. § 351(a)(1)-(2) and 29 C.F.R. § 4.6). See Stipulations of the Parties.

   Because the Respondent admits that they are in violation of the said provisions, the only issue to be decided is whether they should be debarred for three years from entering into further government contracts. A contractor is able to avoid debarment is if he shows that "unusual circumstances" surround the violation. What constitutes unusual circumstances is not specifically defined by the SCA. The regulations provide criteria to determine when unusual circumstances exist. 29 C.F.R. § 4.188.

   Unusual Circumstances may be based on compliance history, cooperation, the nature of the violation, repayment status, and chances of future compliance. If a contractor's conduct is willful and culpable such as "culpable disregard of whether they were in violation or not, or culpable failure to comply with recordkeeping requirements," the unusual circumstances exception may not be applied. Elaine's Cleaning Serv. v. United States Department of Labor,106 F.3d 726 (6th Cir. 1997); Commercial Laundry and Dry Cleaning, Inc., ARB No. 96-136 (ARB Nov. 13, 1996).

   It is the Respondent's burden of proof to show that unusual circumstances existed. 29 C.F.R. § 4.188(a) and (b). Ventilation and Cleaning Eng'rs., Inc., Case No. SCA-176 (Sec'y., Sept. 27, 1974). The record demonstrates, however, by a preponderance of the evidence, that no such circumstances were present. In attempt to show unusual circumstances, Mr. Cairo said that every time that he and his wife were informed of a specific violation, they immediately corrected it (Tr. 14). He also explained that they hired a consultant to review contracts in order to avoid future violations (Tr. 19).

   In this case, the Wage and Hour Division, United States Department of Labor conducted several investigations of the Respondent. All found multiple violations. See Stipulations of the Parties. This history shows that the Respondent has failed to correct the problem causing the violation despite multiple opportunities. The only evidence the Respondent submitted in an attempt to prove unusual circumstances is that they have hired a consultant to help them bring their practices in conformity with the regulations. The Respondent's actions are too little and too late. A history of repeated violations outweighs the potential impact of the Respondent's actions. There are no unusual circumstances proved.

   These actions do not justify relief from debarment. In Federal Food Service, Inc. v. Marshall, 481 F. Supp. 816 (D.C.D.C. 1979), the court held that, because of the respondent's history of repeated violations of the SCA over the years and its continuing violations, the Respondent was culpable and debarment was proper. See also Hugo Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB Apr. 30, 2001) (Respondents were notified of the SCA pay requirements but repeatedly violated the Act). Accordingly,

   IT IS HEREBY ORDERED that pursuant to Section 5(a) of the SCA, the above-captioned Respondent be debarred and ineligible to receive any contracts or subcontracts with the United States for a period of three years from the date of publication by the Comptroller General of their names on the ineligible list.

      GERALD M. TIERNEY
      Administrative Law Judge

APPEALS:

Within 40 days after the date of the decision of the Administrative Law Judge (or such additional time as is granted by the Administrative Review Board), any party aggrieved thereby who desires review thereof shall file a petition for review of the decision with supporting reasons. Such party shall transmit the petition in writing to the Administrative Review Board pursuant to 29 C.F.R. Part 8, with a copy thereof to the Chief Administrative Law Judge. (6.20)

¹ Michelle Cairo, vice-president of the corporate respondent, and Anthony Cairo, General Manager of the corporate respondent, acted directly or indirectly in the interest of the Respondent in relation to its employees and were responsible for the day-to day employment policies and practices of the firm. As such, they are the individuals responsible within the meaning of Section 3 of the SCA.