Date: April 27, 1995
Case No. 91-SCA-30
In the Matter of:
UNITED STATES DEPARTMENT OF LABOR,
Complainant,
v.
HOUSTON BUILDING SERVICE, INC.
and
JASON YOO,
Individually and Jointly,
Respondents.
APPEARANCES:
Robert A. Fitz, Esq.
Office of the Solicitor
U.S. Department of Labor
Dallas, Texas
For the Complainant
Thomas W. Moore, Esq.
Sugar Land, Texas
For the Respondent
BEFORE: DANIEL J. ROKETENETZ
Administrative Law Judge
DECISION AND ORDER
This proceeding arises under the McNamara-O'Hara Service
[PAGE 2]
Contract Act of 1965, as amended, 41 U.S.C. § 351,
et seq., (hereinafter referred to as "the Act"), and
the Contract Work Hours and Safety Standards Act, 40 U.S.C., §
327, et seq., and in accordance with the regulations
promulgated thereunder at 29 C.F.R. Part 4.
A formal hearing was held on January 12, 1993 in Austin, Texas
before Judge Charles W. Campbell.[1] All parties were afforded
full opportunity to present evidence. Testimony was adduced from
four witnesses and various exhibits were admitted into evidence.
The parties also were afforded the opportunity to file briefs.
The findings of fact and conclusions of law set forth in this
decision are based upon my analysis of the entire record. Each
exhibit and argument of the parties, although perhaps not specifi-
cally mentioned, has been carefully reviewed and thoughtfully
considered.
ISSUES
The following matters remain for resolution:
1. Whether Jason Yoo constitutes a "party responsible"
thereby being liable, both individually and jointly with Houston
Building Services, for any violations of the Act.
2. The value of the fringe benefits that the Respondents
failed to pay under the pertinent contract.
3. Whether unusual circumstances exist to relieve Jason Yoo
and Houston Building Services from the debarment provisions of
Section 5(a) of the Act.
FINDINGS OF FACT
Houston Building Service, Inc. (hereinafter referred to as
"HBS") was incorporated under the laws of the state of Texas, and
maintains its principal offices in Houston. (JX 1)[2] Respondent,
Jason Yoo, is the president of HBS. (JX 1) HBS applied for and was
awarded General Services Administration (GSA) Contract Number GS-
07-P-87-HT-C-0179 (hereinafter referred to as "the contract") to
provide janitorial and related services for three United States
Government buildings in Austin for the period from December 1, 1987
through November 30, 1988. (JX 1) HBS was awarded the contract on
November 10, 1987. (JX 1) Jason Yoo signed the contract for HBS to
service the three buildings for a total monthly fee of $24,391.81.
(JX 1; GX 1) The contract, which was dated September 30, 1987,
[PAGE 3]
included Wage Determination Number 80-288 which required certain
minimum hourly wage rates and fringe benefit payments to be made to
the service employees who were employed in its performance. (GX 1)
The minimum hourly wage ranged from $5.43 for a Janitor to
$8.07 for a non-shift Supervisor. (GX 1) In addition, section 6 of
the wage determination provided the following severance allowance:
Employee Completing Severance Allowance Due:
One (1) year service Three (3) weeks
Two (2) years service Six (6) weeks
Three (3) years service Eight (8) weeks
Four (4) years service Ten (10) weeks
Five (5) years service Twelve (12) weeks
Six (6) years service Fourteen (14) weeks
Seven (7) years service Sixteen (16) weeks
Eight (8) years service Eighteen (18) weeks
Nine (9) years service Twenty (20) weeks
Ten (10) years service Twenty-two (22) weeks
Mr. Yoo has resided in the United States since his arrival
from Korea in 1974. Yoo founded a cleaning service in 1980 and
changed the company's name to HBS in 1982. HBS largely employs
Korean immigrants. Mr. Yoo testified that he had no experience
with government contracts and, consequently, hired Major Thomas as
his contracting officer. Thomas represented to Yoo that he had
sufficient knowledge and expertise to oversee the bidding and
subsequent performance of the government service contract. Thomas
also informed Yoo that he intended to replace the employees of the
incumbent contractor, Housekeepers Maintenance and Supply Service
(hereinafter referred to as "Housekeepers"), with his own crew of
Korean laborers. (Tr. 86-90)
Housekeepers employed thirty unit employees and three
supervisors for the service contract which called for janitorial
services in the three federal buildings. (GX 96-98) The thirty
unit employees were members of Industrial, Technical and Profes-
sional Employees Division of the AFL-CIO (hereinafter referred to
as "the union"). (Tr. 20-21) J.T. Glass, the Contracting Officer's
Representative, testified that HBS requested neither a copy of the
seniority list nor the entry on duty (EOD) list for the Housekeep-
ers' employees during the contract bidding period. Glass also
testified that he would have furnished such a list upon request as
it represents part of the open record. (Tr. 59) H. Ralph Smith,
National Vice Chairman for the union, testified that he received a
telephone request for a copy of the seniority list of Housekeepers'
[PAGE 4]
employees from Major Thomas of HBS on November 19, 1988 and that he
subsequently mailed a copy of the list to HBS. (GX 98, p.4) Mr.
Glass also testified that during a pre-start-up conference he
explained the need for background checks on potential employees so
that security clearances could be obtained which would allow the
employees to enter the buildings to perform the contract. Glass
further testified that such clearances require a minimum of 72
hours to obtain and often the clearances require additional time
depending upon the location of an individual's references. (Tr. 65-
70) The HBS employees did not attempt to obtain security clearanc-
es before the contract start date of December 1, 1987. (Tr. 63-64)
No HBS employee obtained a security clearance to enter the
buildings until December 7, 1987, and Jason Yoo did not obtain his
clearance until January 19, 1988. (Tr. 66-67)
HBS hired the Housekeepers' staff to clean the three buildings
on December 1, 1987 and thus fulfil its contractual obligations.
During December 1987, January 1988, and February 1988, HBS
discharged nineteen former Housekeepers' employees without
severance pay and replaced them with HBS employees after they had
obtained their security clearances. (Tr. 16, GX 28-32, 39-55, 97)
Norma Adams, an investigator in the Wage and Hour Division of
United States Department of Labor, testified that during an
investigation of HBS, she made an initial determination that 22
employees were due estimated back wages and severance pay totalling
$46,757.60. (Tr. 76, GX 27) In addition, Ms. Adams testified she
also discovered deficiencies in minimum wage and fringe benefit
payments for HBS employees totalling $926.35. (Tr. 78-80, GX 77)
Pursuant to a request from the Department of Labor, the General
Services Administration withheld $14,011.50 due HBS under Contract
Number GS-07-P-87-HT-C-0179. (Tr. 110, 115-16) Additionally,
pursuant to another request from the Department of Labor, the
United States Air Force withheld payment in the amount of
$33,627.52 from funds due to HBS under contract F03602-88-C-0007
(hereinafter referred to as "Air Force contract").
The Respondents produced post-hearing records that indicate
the $926.36 in minimum wage and other deficiencies had been paid by
the end of contract period. I find that those deficiencies have,
in fact, been corrected.
I make the following factual findings concerning nineteen (19)
janitor/porter/cleaner service employees discharged by HBS without
severance pay: (Tr. 16, GX 28-32, 39-55, 96-97)
1. Clifton Bailey was discharged on December 11,
1987. His Entry on Duty date was August 17, 1979. He had
completed
[PAGE 5]
eight years of service, and worked an average of 17.26 hours per
week during the last 13 weeks of his employment.
2. Tommy Lee Clark was discharged on January 4,
1988. His Entry on Duty date was December 22, 1980. He had
completed seven years of service and worked an average of
24.46 hours per week during the last 13 weeks of his
employment.
3. Charles A. DeShay was discharged on February 12,
1988. His Entry on Duty date was February 27, 1985. He
completed two years of service and worked an average of
28.99 hours per week during the last 13 weeks of his
employment.
4. Milton Henderson was discharged on February 26,
1988. His Entry on Duty date was February 1, 1986. He complet-
ed two years of service and worked an average of 18.75
hours per week during the last 13 weeks of his employ-
ment.
5. Grady Kennie was discharged on December 11, 1987.
His Entry on Duty date was March 17, 1986. He completed one year
of service and averaged 29.00 hours per week during his last
13 weeks of employment.
6. Maria Menchaca was discharged on December 11,
1987. Her Entry on Duty date was July 21, 1986. She completed
one year of service and averaged 13.22 hours per week
during the last 13 weeks of her employment.
7. Jessie Irene Meyer was discharged on December 11,
1987. Her Entry on Duty date was February 18, 1986. She
completed one year of service and averaged 17.30 hours
per week during the last 13 weeks of her employment.
8. Ophelia Milicia was discharged on January 4, 1988.
Her Entry on Duty date was February 1, 1980. She completed seven
years of service and averaged 33.69 hours per week during the
last 13 weeks of her employment.
9. Rita C. Morales was discharged on December 11,
1987. Her Entry on Duty date was May 16, 1982. She completed
five years of service and averaged 17.27 hours per week
for the last 13 weeks of her employment.
10. Helen L. North was discharged on February 26,
1988. Her Entry on Duty date was May 7, 1981. She completed
six years of service and averaged 20.92 hours per week
for the last 13 weeks of her employment.
[PAGE 6]
11. Benny H. Pamplin was discharged on December 11,
1987. His Entry on Duty date was October 23, 1984. He complet-
ed three years of service and averaged 16.76 hours per
week for the last 13 weeks of his employment.
12. Mary Ann Pesina was discharged on February 26,
1988. Her Entry on Duty date was January 21, 1980. She
completed
eight years of service and averaged 20.92 hours per week for
the last 13 weeks of her employment.
13. Willie Belle Piper was discharged on December 11,
1987. His Entry on Duty date was December 17, 1984. He
completed two years of service and averaged 18.38 hours
per week for the last 13 weeks of his employment.
14. Eugene Porter was discharged on December 9, 1987.
His Entry on Duty date was July 1, 1981. He did not work for the
period from 1/6/85 through 10/1/87. He has completed five
years of service and averaged 33.09 hours per week for the
last 13 weeks of his employment.
15. Frances C. Ramirez was discharged on December 11,
1987. Her Entry on Duty date was July 1, 1980. She completed
seven years of service and averaged 15.66 hours per week
for the last 13 weeks of her employment.
16. Onnie Lee Walker was discharged on December 11,
1987. Her Entry on Duty date was November 2, 1984. She
completed three years of service and averaged 16.46 hours
per week for the last 13 weeks of her employment.
17. Joyce Marie Altum was discharged on December 11,
1987. Her Entry on Duty Date was September 28, 1987. She did
not complete a full year of service or 13 weeks of
employment.
18. Kim Du-Triem was discharged on December 11, 1987.
Her Entry on Duty date was October 1, 1987. She did not complete
a full year of service or 13 weeks of employment.
19. John L. Washington was discharged on December 4,
1987. His Entry on Duty date was May 1, 1987. He did not
complete a full year of service.
I also find that insufficient evidence was presented to
conclude that Brian Edwards, Howard Franklin, Larry Galloway,
Candelario Martinez, and Booker T. Washington were discharged from
[PAGE 7]
employment by HBS.
CONCLUSIONS OF LAWThe McNamara-O'Hara Service Contract Act of 1965 was
enacted "to provide much needed labor standards protection for
employees of contractors and subcontractors furnishing services to
or performing maintenance service for federal agencies." S.REP. NO.
978, 89th Cong., 1st Sess. 1 (1965); H.R. REP. NO. 948, 89TH Cong.,
1st Sess. 1 (1965). Statutory protection was considered necessary
in order to effectuate the "long standing policy of Congress that
the federal government shall not be a party to the depressing of
labor standards in any area of the Nation."[3] The Act provides
that any contract or bid specification in excess of $2500, the
principal purpose of which is to provide services to the federal
government through the use of "service employees", must contain
provisions requiring the contractor to pay its employees not less
than minimum monetary wages and fringe benefits to be determined in
accordance with the prevailing rates and fringe benefits for such
service workers in the locality in which the work is to be
performed. 41 U.S.C. § 352(a)(1-2).
Party Responsible
"The failure to perform a statutory public duty under the
Service Contract Act is not only a corporate liability, but also a
personal liability charged by reason of his or her corporate office
while performing that duty." 29 C.F.R § 4.187(e)(2).
"[I]ndividual liability attaches to the corporate official who is
responsible for, and therefore causes or permits, the violation of
the contract stipulations required by the Act, i.e.,
corporate officers who control the day-to-day operation and
management policy are personally liable for underpayment because
they cause or permit violations of the Act." 29 C.F.R. §
4.187(e)(3).
Jason Yoo testified that as President of HBS he signed the GSA
contract to clean the three federal buildings in Austin. (Tr. 104)
He also testified that he intended to hire a Korean crew to clean
the buildings and had no intention of retaining any of the
Housekeepers' employees. (Tr. 106-107) Mr. Yoo sought and obtained
a security clearance to enter the buildings in order to oversee the
performance of the contract. Furthermore, Mr. Yoo testified that
he did not understand the intricacies of government contracts and
allowed Major Thomas to handle it for him. (Tr. 106) I find that
Mr. Yoo controlled the day-to-day operations of HBS. He determined
which employees would be assigned to particular jobs including, but
not limited to, assigning Thomas to handle various aspects of the
[PAGE 8]
government contract. Even if the responsibility for contract
compliance were entirely handed to Major Thomas, as an employee of
HBS, Mr. Yoo would be responsible for his actions under the
doctrine of respondeat superior.
As a result, I find that Jason Yoo is a party responsible
under the Act and is therefore liable both individually and jointly
with HBS for any violations of the Act.
Severance PayThe service contract included Wage determination Number
80-288, dated September 30, 1987, which required minimum hourly and
fringe benefits including section 6, a severance provi-
sion.[4] (GX 1) Respondents contend that they were
unaware that they were required to provide severance pay to the
former Housekeepers' employees upon their discharge. (Tr. 107)
Nonetheless, a government contractor maintains both a duty to
clarify any uncertainties in a contract concerning wage determina-
tion made by the SCA, as well as a duty to consult with Department
of Labor if any doubts arise about interpreting the wage determina-
tion. Saavedra v. Donovan, 700 F.2d 496, 499 (9th Cir.
1983), cert. denied 464 U.S. 892 (1983). The
contract that Yoo signed clearly contained a wage determination
with the severance allowance information. Applicable law dictates
that a businessperson is presumed to assent to the terms of his
contract whether he knows of them or not. Id. at 500
(citing Restatement (Second) of Contracts § 23 comment
b, and § 157 comment b). Allowing a businessperson to avoid
contractual obligations because of failure to read or understand
such obligations would undermine reliance on written instruments
and disadvantage blameless employees. Id. Regardless, HBS
should have been aware of the seniority and severance consequences
of hiring former Housekeepers' employees because Thomas requested
a seniority list of those employees from the union on November 19,
1987, before the commencement of the contract on December 1, 1987.
(GX 98, p.4)
Respondents also contend that severance pay is not a "fringe
benefit" required under the SCA, and cite Trinity Services, Inc.
v. Marshall 593 F.2d 1250 (D.C. Cir. 1979), and Clark v.
Unified Services, Inc., 659 F.2d 49 (5th Cir. 1981) to support
its position. The SCA prohibits a successor contractor, who
furnishes substantially the same services as his predecessor, from
paying any service employee under such contract "less than the
wages and fringe benefits . . . to which such service employees
would have been entitled if they were employed under the predeces-
sor contract." 41 U.S.C. § 353(c). Severance pay is not
specifically included in the SCA's provision defining "fringe
benefits," however, that provision also contains the language "and
other bona
[PAGE 9]
fide fringe benefits not otherwise required by Federal, State, or
local law to be provided by the contractor or subcontractor." 41
U.S.C. § 351(a)(2). Therefore, I find that severance pay
falls within the Act's catch-all clause which includes "other
bona fide fringe benefits."
As noted above, the GSA contract clearly contained the wage
determination and severance provision. Respondents contention that
they are now required to provide less than the obligation they
contracted for is misplaced. Additionally, the Respondents
misconstrue Trinity Services and Clark. In
Trinity Services, Inc. v. Marshall, the D.C. Circuit
found that a collective bargaining agreement which required a
successor contractor to provide severance pay to employees of
predecessor contractor, who were not hired by
the successor contractor, violated the governing section of the
SCA. 593 F.2d at 1257. The court in Trinity specifically
stated that severance pay is the proper subject a wage determi-
nation and a successor employer must make severance payments to its
own employees should they be laid off. Id. at 1259, n. 34.
Once HBS hired the Housekeepers' employees, regardless of for what
duration, they became HBS employees due severance pay upon their
discharge. Thus, the Trinity holding stating that
severance pay to predecessor contractor's employees violates the
Act is valid only to the extent that the predecessor employees were
not hired by the successor contractor. As discussed, this is
clearly not the case.
In Clark v. United Services, Inc., the Fifth Circuit
held that the successor contractor's failure to hire all interested
former employees of the predecessor contractor and to grant those
employees seniority rights equal to those they previously enjoyed
did not violate the SCA. 659 F.2d at 53. Clark deals only
with seniority rights and does not involve severance pay, and thus
is inapplicable to this case. In the case sub judice, all thirty employees and two
supervisors of the predecessor contractor, Housekeepers,
were hired by HBS and thereby became HBS employees. HBS
never informed these employees that they were temporary workers or
were somehow accepting reduced benefits or severance protection by
working for HBS. N.L.R.B. v. Houston Bldg. Services, 936
F.2d 178, 1980 (5th Cir. 1991). It would be quite reasonable for
the employees to assume their employment was long-term because all
previous government contractors had maintained the same staff.
Id. at 179-80. Also, unlike the scenario in Trinity,
Respondents were only required to pay severance if they chose to
hire the predecessor employees and then subsequently subjected such
employees to discharge or lay-off. Furthermore, unlike the
Clark situation, the
[PAGE 10]
dispute before me concerns only severance pay under the terms of
the contract's wage determination and not seniority rights under a
collective bargaining agreement.
Respondents additionally argue the supposed unfairness
in requiring them to provide severance pay when the predecessor
contractor is not required to provide severance pay under the terms
of the collective bargaining agreement.[5] Respondents' voluntary
hiring of the predecessor employees, and its failure to consider
the severance allowance in the contract's wage determination, were
circumstances completely under the Respondents' control. If the
predecessor contractor had duplicated the actions of HBS by hiring
long-standing employees, who were later discharged and replaced,
the predecessor contractor likewise would be required to provide
severance pay to such employees. Conversely, if HBS had reached a
collective bargaining agreement with the same terms as the
predecessor contractor, HBS would not be required provide severance
pay if the discharge of employees occurred because of circumstances
beyond their control. Moreover, it would be quite unfair and
inconsistent with the intent of the Act to award a service contract
to the Respondents on the basis its lower bid and then not require
the Respondents' compliance with the terms of the contract.[6]
Respondents also claim that they would not have hired any
Housekeepers' employees but for the problems in acquiring
security clearances for its own employees, i.e., a circum-
stance beyond their control. The problems concerning the acquisi-
tion of security clearances was not beyond Respondents'
control. Knowledge of the responsibilities required by the
contract is the duty of the Respondents. Testimony from Mr. Glass
indicated that no HBS employee made any attempt to obtain a
security clearance until December 1, 1987, the day the contract
commenced. (Tr. 63-64) Glass also testified that the security
clearance requirement was discussed in a pre-start-up conference
with HBS. Respondents make reference to the fact that Mr. Glass
told them a security clearance normally could be obtained in 72
hours. This fact is of little consequence as none of Respondents'
employees even attempted to obtain such clearances until the date
of the commencement of the contract. Respondents also make
reference to the fact that no clearance was obtained by any HBS
employees until December 7, 1987 and Mr. Yoo's clearance was not
obtained until January 19, 1988, well beyond the estimate of 72
hours relayed by Mr. Glass. Even if Mr. Glass had somehow
misrepresented the requirements to the Respondents, reliance on
advice from contracting agency officials is not a defense to
liability under the SCA. 29 C.F.R. § 4.187(e)(5). Finally,
common sense mandates that HBS must have realized that security
clearances for employees who are Korean immigrants
[PAGE 11]
might require some additional time to obtain.[7]
Respondents also contend in their brief that if they had
realized the severance pay requirements for the Housekeepers'
employees, they would have chosen to delay start-up and suffer the
requisite GSA penalties, which would have been less than the
severance pay. This contention is irrelevant. The Government is
not required to determine the reasoning behind a contractor's
business decisions. As a first-time government contractor, it is
entirely possible that the Respondents did not want to make a
negative first impression by delaying start-up, or found the cost
of the severance pay was minimal when assessed against the overall
award of the contract ($292,737.92).
As a result of the foregoing, I conclude that the Respondents,
Houston Building Services and Jason Yoo, are individually and
jointly liable for $19,061.71 in severance pay under the terms of
the wage provision in the GSA contract to the following employees
in the following amounts:[8]
Name and Reg.Rate Avg. Hrs. Severance Amount
ClassificationOf Pay per weekAllow-
ance Due
1. Clifton Bailey $5.43/hr. 17.26 hrs 18 weeks ,686.99
Janitor
2. Tommy Lee Clark $5.43/hr. 24.46 hrs 16 weeks $2,125.12
Janitor
3. Charles Deshay $5.43/hr. 28.99 hrs 6 weeks $ 944.49
Janitor
4. Milton Henderson $5.43/hr. 18.75 hrs 6 weeks $ 610.88
Janitor
5. Grady Kennie $5.43/hr. 29.00 hrs 3 weeks $ 472.41
Janitor
6. Maria Menchaca $5.43/hr. 13.22 hrs 3 weeks $ 215.35
Janitor
7. Jessie Meyer $5.43/hr. 17.30 hrs 3 weeks $ 281.82
Janitor
8. Ophelia Milicia $5.43/hr. 33.69 hrs 16 weeks $2,926.99
Janitor
9. Rita Morales $5.43/hr. 17.27 hrs 12 weeks ,125.31
[PAGE 12]
Janitor
10. Helen North $5.43/hr. 20.92 hrs 14 weeks ,590.34
Janitor
11. Benny Pamplin $5.43/hr. 16.76 hrs 8 weeks $ 728.05
Janitor
12. Mary Ann Pesina $5.43/hr. 20.92 hrs 18 weeks $2,044.72
Janitor
13. Willie Piper $5.43/hr. 18.38 hrs 6 weeks $ 598.82
Janitor
14. Eugene Porter $5.43/hr. 23.09 hrs 12 weeks ,504.54
Janitor
15. Frances Ramirez $5.43/hr. 15.66 hrs 16 weeks ,360.54
Janitor
16. Onnie Walker $5.43/hr. 19.46 hrs 8 weeks $ 845.34
Janitor
Debarment
Congress has promulgated that any person found to have
violated the minimum wage and fringe benefit requirements of the
Act shall be placed on a list of contractors and subcontractors
ineligible to receive government contracts for the provision of
services. The violator shall be retained on the ineligible list
for three years and will be relieved of the debarment only upon a
showing that an "unusual circumstance" exists that dictates against
debarment. 41 U.S.C. § 354. Congress amended the Act in 1972
to add the "unusual circumstances" standard to relieve violators
from debarment, but clearly expressed their intent that it should
only be used to provide relief where debarment "would have been
wholly disproportionate to the offense." See 29
C.F.R. § 4.188(b)(2).
The factors that must be weighed in determining whether
"unusual circumstances" exist were set forth by the Secretary in
Washington Moving and Storage Co., No. SCA-168 (August 12,
1973) and In re Quality Maintenance Co., 21 WH cases 1094,
1100-1101 (December 28, 1973), [decision of the Assistant Secre-
tary]. The following factors have been approved by a panel of the
United States Court of Appeals for the District of Columbia in
Federal Food Service, Inc. v. Donovan, 658 F.2d 830, 831
(D.C. Cir. 1981) (summarized):
[PAGE 13]
1. whether a history of past violations of the Act exists;
2. the nature, extent and seriousness of the past or present
violations;
3. whether the violations were willful, or the circumstances
show there was culpable neglect to ascertain whether certain
practices were in compliance, or culpable disregard of whether they
were or not, or other culpable conduct;
4. whether the Respondent's liability turned on bona
fide legal issues of doubtful certainty;
5. whether the Respondent has demonstrated good faith,
cooperation in the resolution of issues and a desire and intention
to comply with the requirements of the Act;
6. the promptness with which the employees were paid the
sums due; and,
7. evidence of repeated violations.
Application of these factors to the circumstances of this case
favor a recommendation that unusual circumstances do not
exist to relieve the Respondents from the ineligible list.
The first factor is not relevant to this case as this matter
involves the first federal contract secured by the Respondents.
(Tr. 89) Considering the second factor, I find this case presents
a serious violation of the Act, as the Act's intent is to protect
service employees from precisely the kind of action as was taken by
the Respondents. Concerning the third factor, Respondents contend
that the severance violation was the result of its own ignorance of
the severance provisions in the contract. However, the facts
indicate that Respondents knew, or reasonably should have known, of
the severance requirement. The severance allowance is clearly
spelled out in the wage determination portion of the contract. Mr.
Glass testified that even though the "entry on duty" (EOD) list
stating the seniority and security clearances of all predecessor
employees was available to the respondents in the period when they
were bidding on the contract, they never requested such a list.
(Tr. 59) In addition, HBS requested a seniority list of the
predecessor employees from the union prior to the start-up date.
(GX 98, p.4) This evidence indicates that the Respondents knew, or
should have known, that the predecessor employees were entitled to
certain benefits as union members and long-standing employees.
The fourth factor declares that an unusual circumstance exists
[PAGE 14]
if liability turns on a bona fide question of law. However, the
Respondents' defenses lack merit and its use of supporting case law
is misconstrued. (See analysis above). Factor five
considers the Respondents efforts to bring their actions into
compliance with the Act. The evidence indicates that the Respon-
dents were untruthful about its intentions to discharge the
predecessor employees, and sought to force such employees to become
"temporary" independent contractors to avoid the severance
requirements. See N.L.R.B. v. Houston Bldg.
Services, Inc., Supra.
The sixth factor concerns the promptness with which the
employees were paid the sums due them. The Respondents did
eventually pay $926.36 in minimum wage and overtime violations at
the end of the contract period. However, $19,061.71 of severance
pay compensation had not been paid prior to the hearing. Factor
seven regards evidence of repeated violations of the Act. The
Respondents' compliance history under the Service Contract Act is
limited to the aforementioned Austin buildings, as well as a
subsequent contract with the U. S. Air Force in Little Rock,
Arkansas. The only evidence of the nature and extent of the Air
Force compliance proceeding is Mr. Yoo's testimony that it involved
a minor record keeping problem. Thus, due to the limited extent of
the Respondents' government contracts, factor seven is basically
inapplicable and will not be weighed against the Respondents.
In summary, after weighing all relevant factors, I find that
the totality of the evidence presents no unusual circumstances that
warrant relieving the Respondents from the ineligible list. The
evidence indicates that the Respondents were negligent in acquiring
security clearances and used the predecessor employees to cover
their contractual obligations. As the HBS employees gained
clearances, the predecessor employees were discharged without
severance pay in clear violation of the wage determination.
Allowing the Respondents to obtain the contract by under-bidding
all other contractors and then not holding the Respondents liable
for their failure to comply with the terms of that contract and
provide severance benefits to employees would be contrary to the
stated purpose of the Act.ORDER
IT IS HEREBY ORDERED that:
1. The United States Air Force shall forward to the United States
Department of Labor $5,050.21 from the amount of $33,627.52 which
it has withheld from Houston Building Services, Inc. under Contract
Number F03602-88-C-007 and shall forward the balance of $28,577.31
[PAGE 15]
to Houston Building Service, Inc.
2. The United States Department of Labor shall distribute the
amount of $19,061.71 (consisting of $5,050.21 from the Air Force
contract added to the $14,011.50 previously withheld by GSA) to the
sixteen (16) service employees named in this Decision and Order in
the individual amounts specified therein less deductions for social
security and applicable taxes.
3. Jason Yoo and Houston Building Services, Inc. be placed on the
list of ineligible bidders for service contracts by an agency of
the United States and that both remain on such list for three years
pursuant to 41 U.S.C. § 354.
__________________________
DANIEL J. ROKETENETZ
Administrative Law Judge
NOTICE OF APPEAL RIGHTS
Within 40 days after the date of this decision, any party
aggrieved thereby who desires review thereof may file a petition
for review of the decision with supporting reasons. Such petition
shall be submitted in writing to the Board of Service Contract
Appeals pursuant to 29 C.F.R. Part 8, with a copy thereof to the
Chief Administrative Law Judge. The petition shall refer to the
specific findings of fact, conclusions of law, or order at issue.
A petition concerning the decision on the ineligibility list shall
also state the unusual circumstances which warrant relief from the
ineligible list. The Board of Service Contract Appeals may be
served at: Board of Service Contract Appeals, U.S. Department of
Labor, 200 Constitution Avenue, N.W., Room 6507, Washington, DC
20210.
[ENDNOTES]
[1] Judge Campbell's retirement, prior to issuing a Decision in
this matter, has rendered him unavailable to this agency within
the meaning of the Administrative Procedure Act. 5 U.S.C. §
554(d). The matter has been transferred, without objection, to
the undersigned Administrative Law Judge.
[2]
In this decision, "GX" refers to Government Exhibits, "RX" refers
to the Respondent's Exhibits, "ALJX" refers to the Administrative
Law Judge's Exhibits, "JX" refers to the joint exhibit of the
parties, and "Tr." to the Transcript of the hearing.
[3] Statement of Congressman O'Hara, co-author of the Act, 111
CONG. REC 24337 (1965).
[4] The severance allowance contained a schedule relating the
employees completion of years of service to the number of weeks
of severance allowance due, and this notation, "A week of sever-
ance allowance shall be computed on the basis of an employee's
regular straight hourly rate of pay at the time of lay-off times
the average number of hours worked per week for the employee's
last thirteen (13) weeks of employment."
[5] Section C, Article XXII of the CBA provides that a sever-
ance allowance will not be paid if the layoff is a result of
"circumstances beyond the control of the Company." Such circum-
stances would include the awarding of the contract to another
company by the GSA.
[6] The highest bid was $46,650 from Sylvan Service Corpora-
tion, and the low bid was from HBS at $24, 394.81. Housekeepers
bid was $29,999. (Deposition of Katie L. Pope, GSA contracting
officer).
[7] A number of the HBS employees could not obtain security
clearances, which resulted in the continued employment of eleven
former Housekeepers employees. SeeN.L.R.B. v.
Houston Bldg. Service, Inc., 936 F.2d 178 (5th Cir. 1991).
[8] The violation is based on the average hours worked in the
by the employee in his or her last 13 weeks of employment on the
contract at the base rate of $5.43 per hour. The original
determination offered at the hearing by the Department of Labor
was based on an estimated number of hours per week, and at a base
rate of $7.55 per week, which incorrectly included pension,
holiday, vacation and sick leave payments.
