DATE: June 13, 1994
CASE NO. 93-SCA-49
IN THE MATTER OF
J & J MERRICK'S ENTERPRISES, INC.
and JOHNNIE E. MERRICK,
individually and jointly,
RESPONDENTS
BEFORE: C. RICHARD AVERY
Administrative Law Judge
DECISION AND ORDERBackground
This is a proceeding under the McNamara-O'Hara Service
Contract Act of 1965, as amended (MOSCA or the Act), 41 U.S.C.
§§ 351-358 (1982), and the regulations issued thereunder.
29 C.F.R. Parts 4, 5 (1983). The matter was commenced by the
filing of a complaint on July 2, 1993, by the United States
Department of Labor (DOL) alleging violations of the MOSCA by
Respondents in the performance of mail hauling services on a
government contract at Baton Rouge, Louisiana. Specifically, the
complaint alleged that Respondents failed to pay certain employees
the required minimum wage and also failed to maintain adequate
records. The relief sought was under payments of $15,764.23 and
debarment for three years pursuant to §5(a) of the Act.
Following receipt of the file, a formal hearing was scheduled
for June 2, 1994. Prior to that time, however, the parties entered
into stipulations resolving all issues of monetary liability, and
by Consent Order dated April 2, 1994, I found, pursuant to the
stipulations, that the $15,764.23 withheld by the Department of
Labor was to be paid to the seven employees identified by the
parties.
Findings of Fact and Conclusions of Law[PAGE 2]
Having resolved the monetary liability of the Respondents, the
only remaining issue is debarment under Section 5(a) of the Act.
Specifically, under the Act persons violating the Act are
ineligible for the award of government contracts for a period of
three years unless the penalty is relieved due to "unusual
circumstances."
The Respondents have the burden of establishing the existence
of unusual circumstances sufficient to warrant relief from
debarment. In this instance the parties have agreed no formal
hearing was necessary on this single issue. The Respondents have
filed an affidavit and brief in support of the relief they seek,
and the Department of Labor has filed no response. My decision is
based upon an application of the law to the facts related by the
Respondents.
Respondent, Johnnie E. Merrick, filed his affidavit stating he
is the president and principal share holder of the corporate
Respondent, J & J Merrick's Enterprises, Inc. (hereinafter J & J).
He acknowledges that J & J was awarded postal contracts from June
1987 through June 1991, and that as early as 1987 J & J was
investigated by the Department of Labor and told their record
keeping was inadequate. Despite that fact, however, and despite
the fact J & J began maintaining a computer ledger, Mr. Merrick
agrees that when again investigated in March, 1991, J & J "could
not present any records showing the employees were paid for all
hours worked." (Affidavit pg. 3).
In his affidavit, Mr. Merrick blames his inability to
challenge the $15,764.23 found owing on the fact that he had
misunderstood the earlier investigation in 1987 and that his
"efforts at compliance were inadequate." He also maintains he has
now corrected the deficiency by the use of time sheets and will do
so in the future. Additionally, Mr. Merrick points out that J & J
never failed to pay the proper hourly wages, that the Department of
Labor only challenges that the employees were not paid for the time
worked.
The affidavit goes on to explain that the subject employees
were drivers and that their wages were determined by surveys
performed both by the postal service as well as independently by
Mr. Merrick himself. In other words "each driver's daily pay was
determined by the amount of time that these surveys indicated the
route should take." (Affidavit pg. 5). The only record of hours
paid was simply the payroll check register, but according to Mr.
Merrick no employee complained, and he really thought it took less
time to run the route than J & J had allocated from the surveys.
[PAGE 3]
Mr. Merrick also suggests that due to personal illness in 1989
and 1990 that these employees were unsupervised because only his
daughter was left to manage J & J's postal contracts. In fact, Mr.
Merrick voices suspicion that the employees took advantage of the
situation during this period and are claiming excess time. To
prove this point, he compared average hours per payroll after J &
J started using time sheets with hours claimed by employees under
the old systems and maintains his beliefs are confirmed.
While not defined by the Act, as recited in 29 C.F.R.
§4.188(b)(3)(i) the criteria developed for determining whether
unusual circumstances exist was outlined in Washington Moving
and Storage Co., Case No. SCA-168, Dec. Decision, March 12,
1974. The factors set forth in that case are:
(1) Whether there as a history of repeated
violations of the Act;
(2) The nature, extent and seriousness of the
past or present violations;
(3) Whether the violations were willful or
the circumstances show that there was a
culpable disregard by the respondent to
ascertain whether certain practices were in
compliance, or culpable disregard of whether
they were or not, or other culpable conduct
(e.g. deliberate record falsification);
(4) Whether respondent's liability turned on
bona fide legal issues of doubtful certainty;
(5) Whether respondent has demonstrated good
faith cooperation int he resolution of issues
and a desire and intention to comply with the
requirements of the Act; and
(6) The promptness with which employees were
paid the sums determined to be due them.
In employing these factors, however, the Secretary has further
spelled out in §4.188 that the discretion in relieving
violators is limited and a plea of ignorance or negligence, later
payment of the amounts owed, promises to comply in the future with
the terms of the Act or fault of subordinate employees are not
sufficient reasons to relieve a contractor from debarment. In
other words:
[PAGE 4]
A contractor has an affirmative obligation to
ensure that its pay practices are in
compliance with the Act and cannot itself
resolve questions which arise, but rather must
seek advice.
While I am sympathetic with the Respondents' arguments, in
face of the regulatory language I do not see how I can recommend
relief from debarment in this instance. Really, there is a history
of repeated violations in that Respondents concede they were told
of record keeping problems as early as 1987 and still had not
corrected the same by 1991. Neither does there appear to be any
bona fide legal issues in dispute nor did Respondents promptly pay
the sums determined to be due in 1991.
In essence, the Respondents have chosen to rely on the very
excuses that the Secretary specifically warns against in
§4.188. They have pleaded ignorance of their non-compliance,
eventually paid the monies and promised future compliance and
faulted subordinates for the failure to supervisor the subject
employees. Consequently, while I would like to reach a different
conclusion, and had the early investigation of 1987 not occurred
perhaps I could, because the contractor has the affirmative
obligation to make certain the pay practices are correct and in
compliance with the Act, I fault Respondents for not seeking advice
on the correct procedures. Also, the argument that their omission
was only related to time worked and not wage rate paid is not
totally correct. If an employee is not paid for hours worked, have
you not effectively reduced his wage rate? Also, I do not find
$15,764.23 owed to seven employees to be deminimus.
Lastly, while not defined by the Act, clearly as president and
principal stockholder of the corporate Respondent, Mr. Merrick has
"substantial interest" sufficient to require his debarment
individually. By his own admission, he controlled and managed the
operations of J & J. Consequently, I find that the Respondents'
pleas are insufficient to allow the Secretary to relieve either
from the debarment list.
ORDER
It is my finding that the Respondents should not be relieved
of debarment.
SO ORDERED this ___ day of June, 1994, at Metairie, Louisiana.
_____________________________
C. RICHARD AVERY
Administrative Law Judge
CRA:kw
