Date: February 29, 1996
Case No.: 95-SCA-45
In the Matter of:
PONY EXPRESS COURIER CORPORATION,
Respondent.
Before: DANIEL A. SARNO, JR., Administrative Law Judge
DECISION AND ORDER GRANTING RESPONDENT'S MOTION FOR
SUMMARY DECISION AND DISMISSING COMPLAINT
Respondent, Pony Express Courier Corporation, submitted a
motion for summary decision dated December 8, 1995. Complainant,
the U.S. Department of Labor, submitted a pleading in opposition
as well as a counter-motion for summary decision dated February
8, 1996. Respondent filed a pleading dated February 22, 1996 in
opposition to Complainant's counter-motion.
In support of its motion for summary decision, Respondent
maintains that it is entitled to a judgment as a matter of law
that it is exempt from coverage under the Service Contract Act,
41 U.S.C. § 351, et seq. Specifically, Respondent avers
that it has not violated the Act in its pay practices for work on
a government contract with the Federal Reserve Bank of Richmond,
Charlotte Branch (FRB, Charlotte Branch), because work by its
employees is exempt from compliance with the Act pursuant to
Section 7(3) of the Act, 41 U.S.C. § 56(3). Section 7(3)
of the Act provides that for "any contract for the carriage of
freight ... by truck [or] express. . . where published tariff
rates are in effect," the instant contract is exempt from the
provisions of the Act. 41 U.S.C. § 356(3). Respondent
claims that it has submitted documentation which establishes
that: 1) Respondent has a contract for carriage of freight with
the U.S. Government; 2) Respondent is both an express service and
utilizes trucks to provide service to the Federal Reserve Bank;
and 3) Respondent has "published tariff rates in effect."
FINDINGS OF FACT
Contract for the Carriage of Freight[1]
1. Respondent submitted a contract dated March 1, 1993
between Pony Express Courier Corporation and the Federal Reserve
Bank of Richmond, a United States Government Corporation. (See
Nero Aff. Exhib. 1; see also Respondent's memorandum in support
[PAGE 2]
of summary decision Exhib. A).
2. That contract is the subject of the present
proceeding., (Nero Aff. Para. 4).
3. That contract between Respondent and the Federal
Reserve Bank of Richmond, Charlotte Branch, expires in February
1996. (Hess Aff. Para. 4).
4. That contract provides in pertinent part:
I. On the days and at the time or times shown on
Schedule (or Schedules) (annexed hereto), Carrier
will call for and pick up at those locations
designated certain non-negotiable cash letters,
letters of transmittal, checks, drafts, notes, money
orders, travelers' checks, and other media for the
exchange and transmittal of credit, but not
including food stamps, all of which will have one or
more restrictive endorsements, together with
accompanying records or forms and other documents
incidental to the operation of the Federal Reserve
System (all of which may be hereinafter referred to
as Items) and deliver them to the consignee
Federal Reserve office in accordance with said
Schedule. Packages are to be securely sealed
and clearly marked or tagged with the name
and locations of the sender and the consignee to
which they are to be delivered. Carrier will
receipt for Items accepted from Customer at its
premises for transportation and delivery hereunder.
Timely and safe pick up and delivery of the
Items are of the essence of this Agreement.
5. Respondent has transported these items for the
Federal Reserve Bank of Richmond, Charlotte Branch, continuously
between March 1993 and February 1996. (Nero Aff. Para. 14).
A Transportation Company Within the Meaning of the Exemption[2]
6. Respondent specializes in the pickup and delivery of
time sensitive commodities. (Nero Aff. Para. 11).
7. Respondent conducts transportation service in 37
states through a series of branch and satellite facilities. Each
such facility, for the most part, does business using a hub and
spoke method for making speedy deliveries throughout the
geographical area serviced by said facility. All such
transportation is provided by Respondent as an expedited service,
much of same resulting in deliveries being made on the same day
as the pickup, with the balance being delivered on the following
day. (Nero Aff. Para. 12).
8. Respondent has thousands of customers, in addition to
the Federal Reserve Bank, that it services on an ongoing basis.
[PAGE 3]
Federal Reserve Bank shipments are commonly commingled with
non-Federal Reserve Bank shipments on the same delivery route.
(Nero Aff. Para. 13).
9. Transportation service provided by Respondent to the
Federal Reserve Bank of Richmond, Charlotte Branch, is a
dedicated service consisting of same day delivery of cancelled or
returned checks, non-negotiable cash letters and other media for
the exchange and transmittal of credit. Normally, each such
shipment includes at least one bag of cancelled checks, drawn on
banking institutions located in multiple different states.
Respondent has in fact transported these items continuously
between March 1993 and the present. (Nero Aff. Para. 14).
10. In its operations, Respondent routinely handles
hundreds of non-banking commodities, including, without
limitation, pharmaceuticals, automobile and tractor repair parts,
hospital, laboratory and medical specimens and supplies, film,
electronic and computer parts, time sensitive printed matter,
flowers, veterinary supplies, paperwork of all kinds and
perishable commodities. Respondent is the largest distributor of
repair parts for John Deere Company in the United States. (Nero
Aff. Para. 18).
11. Respondent's vehicles display Respondent's name and
its "Horse and Rider" trademark. Respondent routinely engages in
Commercial For Hire transportation services without
discrimination against any potential customer. (Nero Aff. Para.
19).
12. In providing transportation service to the Federal
Reserve Bank of Richmond, Charlotte Branch, and in its
transportation operations generally, Respondent uses vehicles of
various sizes, including cargo vans, single axle straight trucks,
double axle straight trucks and tractor-trailer combinations.
All such vehicles, irrespective of size, used in operations
within the State of North Carolina, bear a "Commercial For Hire"
license plate purchased from the state. (Nero Aff. Para. 10).
13. That each operating facility maintained by Respondent
has established routes (pickup and delivery schedules) upon which
shipments of its customers are routinely carried. While the size
of vehicles being utilized will vary from route to route, all
such vehicles, irrespective of size, are enclosed and provide for
the secure transportation of customer shipments. (Nero Aff. Para.
21).
Published Tariff Rates in Effect?[3]
14. Under a Certificate of Public Convenience and
Necessity issued by the Interstate Commerce Commission on June
13, 1983, in MC-14230 (Sub No. 16)i Respondent holds a 48 state
general commodity authority to operate as a motor common carrier.
[PAGE 4]
(Nero Aff. Para. 5; Nero Aff. Exhib. 2).
15. At all times material hereto Respondent has had
published interstate tariffs. At all times material hereto and
prior to August 26, 1994, Respondent filed its published
interstate tariff with the Interstate Commerce Commission as ICC
PEXC 200-C. (Nero Aff. Para. 6; Nero Aff. Exhib. 3).
16. Item 485 of ICC PEXC 200-C, contained on pages 35-38
thereof, pertained to Dedicated Service. Item 485 contained a
rate formula for determining transportation charges for service
rendered pursuant to the dedicated services tariff. (Nero
Aff.Para. 7; Nero Aff. Exhib. 3, pp. 35-38).
17. At all times subsequent to August 26, 1994,
Respondent has had a published interstate tariff identified as
PEXC FED RES TARIFF 1. At all times since January 1, 1994,
Respondent has had a published interstate tariff identified as
PEXC FED RES TARIFF 2. Item 350 of PEXC FED RES TARIFF 2
pertains to rates and charges for the account of the Charlotte
Branch of the Federal Reserve Bank. (Nero Aff. Para. 7,Para. 8;
Nero Aff. Exhib. 4).
18. Item 100 contained on page 4 of PEXC FED RES TARIFF
2, pertaining to Scope of Operations, identifies this tariff as
being applicable to service performed for the Federal Reserve
Bank within specified states, including North Carolina. (Nero
Aff. Para. 9; Nero Aff. Exhib 4).
19. Respondent's published tariffs contain rate schedules
which are predicated generally upon the nature of the commodity
being shipped, its weight, and the distance between the point of
origin and point of destination. In some instances, the
transportation rate is determined by the size (cubic feet) of a
shipment rather than its weight. Determination of the
appropriate transportation rate for any particular shipment is a
simple process and, upon information and belief, is routinely
understood by members of the shipping public. (Nero Aff. Para.
20).
20. Respondent has provided a copy of the Request for
Proposal (RFP) applicable to Respondent's contract with the FRB
Richmond, Charlotte Branch, which is the subject of the present
action. (Nero Aff. Para. 23; Nero Aff. Exhib. 5).[4]
21. In calculating the rate to be utilized as the bid for
the work for the FRB Richmond, Charlotte Branch, which is the
subject of the present action, Mr. Nero, Respondent's
Vice-President for Operations, utilized the rate formula for
determining charges for service rendered pursuant to the
dedicated service tariff contained in Nero Aff. Exhib. 3, pp.
35-38. The rate charged under Respondent's contract with the
FRB Richmond, Charlotte Branch, was not negotiated but was
calculated using the attached tariff and submitted to the FRB as
[PAGE 5]
a sealed bid. (Nero Aff. Para. 24).
22. Respondent has no bills of lading citing the
applicable published tariff rates. (Complainant's Exhib. F).
DISCUSSION
Respondent's Motion for Summary Decision is based on the
premise that it has no liability in this matter because of its
entitlement to the exemption found at Section 7(3).
The SCA was specifically designed to prevent the channeling
of government service contract business to those whose
competition is based on paying the lowest wages. An exemption
was provided to "regulated industries" subject to published
tariff rates because there did not exist the competitive
situation faced in service contract cases generally. S.Rep. No.
798, 89th Cong., lst Sess. 1, reprinted in [1965] U.S. Code Cong.
and Ad News 3737; H.R- Rep No. 948, 89th Cong., 1st Sess. 1
(1965); Congressional Record, Vol. III, 24387 (Sept. 20, 1965).
Under published tariff rates, contractors must offer
services to the general public at a uniform rate. Because of the
nature of the published tariff, contractors are not motivated to
reduce their employees' wages in order to undercut bidders and
obtain business.
A court may grant summary judgment "if there is no genuine
issue as to any material fact and if the moving party is entitled
to judgment as a matter of law." Anderson v. Liberty Lobby
Inc., 477 U.S. 242, 250 (1986). However, "the movant has the
burden of showing that there is no genuine issue of fact."
Id. at 256. Respondent has met this burden, and therefore
summary decision should be granted.
It is well-established that "exemptions from remedial
legislation such as the Service Contract Act should be narrowly
construed against the party asserting the applicability of the
exemption." Williams v. United States Department of
Labor, 697 F.2d 842, 844 (8th Cir. 1983).
Complainant maintains that Respondent has failed to meet its
burden of establishing that work done under the contract at issue
is exempt from the Act under Section 7(3) which applies to "any
contract for the carriage of freight or personnel by vessel,
airplane, bus, truck, express, railway line or oil or gas
pipeline where published tariff rates are in effect." 41 U.S.C.
§ 356(3). Moreover, Complainant insists that Respondent
failed to satisfy the implementing regulations which provide that
"a contract for transportation services does not come within this
exemption unless the service contracted for is actually governed
by published tariff rates in effect . . . applicable to the
transportation involved . . . ." (See 29 C.F.R. §
4.118). Furthermore, Complainant maintains that Respondent has
failed to provide the requisite bills of lading which cite the
published
[PAGE 6]
tariff rate. (29 C.F.R. § 4.118). Complainant further
asserts that Respondent's contract with the FRB, Charlotte
Branch, was not actually governed by published tariff rates, as
required by the regulations, but rather by the rate negotiated
between the Respondent and the FRB, Charlotte Branch.
At the outset, I must point out that only with its most
recent pleading did Respondent submit sufficient documentation to
meet its burden of proof regarding the actual merits of the
exemption issue. Until that submission, Complainant had a
persuasive argument that Respondent had failed to meet its burden
of proof on the exemption issue. Moreover, Complainant did
identify documents which, until Respondent's latest submission
seriously questioned whether Respondent had tariff rates in
effect applicable to the transportation involved in the FRB
contract.[5]
Respondent's most recent documentary submission is
sufficient to finally establish that there is no genuine issue of
material fact on the exemption issue.
First, it is undisputed that Respondent has a contract for
the carriage of freight with the Government. Respondent has
provided the specific contract dated March 1, 1993, between
Respondent and FRB, Charlotte Branch. That contract expires in
February, 1996. Respondent has transported these items for the
FRB, Charlotte Branch, continuously between March 1993 and
February 1996. Complainant has submitted no contrary evidence.
(Findings 1-5). Thus, I conclude that Respondent has shown a
valid contract for the carriage of freight.
Next I conclude that Respondent has shown that it is a
transportation company within the meaning of the exemption by
establishing that it is both an express service and utilizes
trucks to provide service to the Federal Reserve Bank.
Respondent has satisfied the five pronged "express service test"
outline in Transportation Activities of Arrowhead
Freightlines, Ltd., 63 M.C.C. 573 (1955). A bona fide
express service is required:
1) to provide a bona fide holding out together with the
ability to transport any commodity which may be safely
transported in ordinary van-type equipment, including
those requiring a maximum degree of care or security or
both,
2) to provide such care or security or both as the
inherent characteristics of the commodities making up the
shipments which are accepted may require,
3) to provide equally expeditious transportation and
careful handling for all accepted shipments, regardless
of their volume, special demands, or value, from the
point of pick up to the point of delivery,
[PAGE 7]
4) to perform actual operations between all authorized
points upon firmly established schedules allowing minimum
practicable highway transit time and providing fixed
delivery times which are available to actual and
potential shippers at authorized origins and which in
practice are not changed except after substantial notice
to the general public, and,
5) to use relatively simple billing, rate structures, and
rate publications whereby the rates and charges may be
easily determined with a minimum of delay.
63 M.C.C. at 581.
The documentation submitted by Respondent on this question
convinces me that Respondent has met its burden on the question
of whether or not it constitutes a bona fide express service set
out in Arrowhead Freightlines. (Findings 4-13, 19). Complainant
has offered no contrary evidence. Respondent has shown that it
provides a service to the general public, utilizing a regular
rate schedule, and utilizing a hub and spoke method for making
speedy daily deliveries throughout 37 states. Thus, I conclude
that Respondent constitutes a bona fide express service.
Moreover, Respondent has established that it utilizes trucks to
perform its contract with the FRB, Charlotte Branch. (Finding
12). Again, Complainant has offered no contrary evidence. Since
Respondent has shown that it is an express service and utilizes
trucks in its FRB contract, I conclude that for two separate
reasons Respondent has shown that it is a transportation company
within the meaning of the exemption.
Finally, Respondent has established that it has published
tariff rates in effect which were applicable to the
transportation involved. Respondent has shown that since 1983,
it has held a 48 state general commodity operating authority from
the ICC. (Finding 14). It has shown that during all time periods
relevant to this proceeding, it had on file with the ICC
published interstate tariff rates applicable to its contract with
FRB, Charlotte Branch. Respondent submitted the relevant
published tariff rates. (Findings 15-18). Moreover, Respondent
has shown that in bidding for the contract with the FRB Richmond,
Charlotte Branch, Respondent's Vice-President for Operations
calculated the bid based upon the applicable tariff rate.
(Finding 2 1). Complainant has not submitted any persuasive
contrary evidence. Complainant's assertion that prior pleadings
by Respondent showed that Respondent did not have any applicable
tariff rates in effect have been disproven by Respondent's most
recent evidentiary submission. Respondent acknowledged prior
misstatements which tended to indicate that published applicable
[PAGE 8]
tariff rates were not on file with the ICC. However,
Complainant's most recent submission clarified that this was not
the case and that Respondent indeed has published tariff rates on
file with the ICC which were applicable to the transportation
involved. Complainant also argues that pursuant to 29 C.F.R-
§ 4.118, Respondent must produce bills of lading citing the
published applicable tariff rate in order to establish
entitlement to exemption. While Respondent did not file any
bills of lading (Finding 22), Respondent did produce other
compelling evidence of the existence of published tariff rates on
file with the ICC applicable to the transportation involved.
While bills of lading can evidence the use of published tariff
rates, there is no indication in the rule that this is the only
way to evidence entitlement to the exemption. Nor has
Complainant cited any authority in support of this assertion.
I conclude based upon the foregoing that Respondent is
exempt from the provisions of the Service Contract Act pursuant
to Section 7(3).
ORDER
IT IS ORDERED that Pony Express Courier Corporation is
exempt from the provisions of the Service Contract Act.
IT IS FURTHER ORDERED that the complaint alleging
violation of the Act is hereby dismissed with prejudice.
DANIEL A. SARNO, JR.
Administrative Law Judge
[ENDNOTES]
[1] Complainant does not appear to dispute that a valid contract
for the carriage of freight existed between Respondent and FRB,
Charlotte Branch.
[2] Complainant submitted no contrary evidence to refute
Respondent's assertions. Complainant simply questions whether
Respondent has met its burden of proof.
[3] In its reply to Respondent's motion for summary decision,
Complainant insists that notwithstanding the existence of
published tariff rates, Respondent must show that they are
"applicable to the transportation involved." See 29 C.F.R.
§ 4.118. Complainant maintains that all documentation
submitted by Respondent up to that time indicates that among the
various tariff rates it had on file with the State of North
Carolina and with the Interstate Commerce Commission (ICC), none
were specifically applicable to the transportation services
provided by Respondent to the FRB, Charlotte Branch.
(Complainant's Exhib. C, p. 3; D, p. 3; E, pp. 5-6). In its
latest responsive pleading, Respondent conceded that statements
made by Respondent in previous pleadings led Complainant to this
reasonable, yet erroneous, conclusion. However, Respondent
points to its November 6, 1995, reply to the prehearing order in
which it had attempted to clarify that its published ICC tariff
rates were applicable to the contract. Moreover, Respondent has
now submitted further clarification in the form of the affidavit
of George J. Nero.
[4] Respondent's contract with the FRB of Richmond, Charlotte
Branch, provides: "The Request for Proposal ("RFP") is
incorporated into and shall be a part of this Agreement to the
extent that it is not inconsistent herewith." (See Nero Aff.
Exhib. 1, Para. XVI). The Federal Reserve Barks RFP specifically
provides: "Carriers operating...when service is subject to rates
covered under Section 22 of the Interstate Commerce Act are
exempt from the provisions of the Service Contract Act of
1965 and, therefore do not have to comply with the wage
determination shown in Attachment VIII." (See Nero Aff. Para.
23, Exhib. 5 at 12) (emphasis in original).
[5] Respondent, in the alternative, relied upon the doctrine of
collateral estoppel to preclude the U.S. Department of Labor from
challenging the applicability of the Section 7(3) exemption in
this proceeding. According to Respondent, the facts in this case
are virtually indistinguishable from those in U.S. Department
of Labor v. Lanter Courier Corporation, No. 91-SCA-52 (CCH)
Para. 32,247 (April 23, 1993). According to Respondent, the
failure to appeal the Lanter decision would now preclude
Complainant from challenging the applicability of the Section
7(3) exemption in this case. However, Complainant pointed out
that in Lanter, unlike here, Complainant did not contest
the applicability of various published tariff rates which were
claimed by the respondent in Lanter. In Lanter,
the parties simply did not litigate an issue central to this
case. Here, Complainant did contest the applicability of the
claimed tariff rates. Complainant's argument is compelling.
Respondent's reliance on the doctrine of collateral estoppel is
misplaced.
