Integrated Resource Management, Inc., 1997-SCA-14 (ALJ Aug. 5, 1999)

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Integrated Resource Management, Inc., 1997-SCA-14 (ALJ Aug. 5, 1999)

U.S. Department of Labor Office of Administrative Law Judges
50 Fremont Street, Suite 2100
San Francisco, CA 94105
(415) 744-6577
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DATE: August 5, 1999

CASE NO. 1997-SCA-14

In the Matter of:

INTEGRATED RESOURCE
MANAGEMENT, INC., a corporation,

and

MARC D. BARNES, an individual,
Respondents

Appearances:
Kasia Quillinan, Esq.
    1191 Capitol St., N.E.
    Salem, Oregon 97301
       For the Respondents

Matthew Vadnal, Esq.
    U. S. Department of Labor
    Office of the Solicitor
    1111 3rd Ave., Suite 945
    Seattle, Washington 98012-5736
       For the Secretary of Labor

Before: ALFRED LINDEMAN
Administrative Law Judge

DECISION AND ORDER

This is a matter under the McNamara-O'Hara Service Contract Act of 1965 as amended (herein "SCA"), 41 U.S.C. §§ 351-358, and the Contract Work Hours

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and Safety Standards Act as amended (herein "CWHSSA"), 40 U.S.C. §§ 327- 333, and applicable regulations published at 29 C.F.R. Parts 4-6. A hearing was held in Portland, Oregon, on May 18, 1999. The administrative complaint, dated February 14, 1997, alleges that respondents, Marc Barnes and Integrated Resource Management, Inc. ("IRM"), failed to pay service employees the minimum wages and benefits required by SCA, overtime pay mandated by CWHSSA, that respondents' record-keeping failed to satisfy the requirements set forth at 29 C.F.R. § 4.6(g), and that respondents are thereby subject to the three-year debarment provisions of SCA. See February 14, 1997, "Complaint" at 1-4. Respondents and the U. S. Department of Labor ("DOL") having agreed, prior to the hearing, that the sums alleged by the government to be due to certain named employees were to be fully paid by release from the contracting agency, the sole contested issue presented for adjudication is whether respondents should be debarred from further receipt of federal government contracts pursuant to the provisions of 41 U.S.C. §354 and 29 C.F.R. §§4.188 and 5.12(b).

Findings of Fact and Conclusions of Law

I accept the parties' stipulations: that the United States Forest Services awarded respondents Contract #53-05M6-5-006, in the amount of $444,030.43, to perform biological inventories; that the contract is subject to both SCA and CWHSSA; that respondents failed to pay service employees minimum monetary wages, fringe benefits and holiday pay, as required by the contract's wage determination clause, SCA and applicable regulations, and failed also to pay overtime as required by CWHSSA, which sums amounting to a total of $22,000.00, were agreed to be fully repaid by release from the contracting agency and distribution to the effected employees by DOL's Wage & Hour Division . See April 13, 1999 "Stipulations" at 2-3.

Respondent Marc D. Barnes, who has a bachelor's degree in environmental science and a master's degree in forest management, is the sole proprietor of IRM, Inc., which is engaged in the business of assisting public and private landowners in the management of their forest lands, and obtained its first federal contract on May 25, 1996, to complete a current vegetation survey on two million acres of forest wilderness for the U.S. Forest Service. TR 108, 110, 147; see "Complaint" at 2.¹ Prior to 1996, respondent Barnes worked in non- management positions for Mason Bruce and Girard, a large federal forestry contractor, TR 109, and as owner of IRM, Inc., he also worked on private and state lands. TR 110. He hired the crews that began work on the instant contract, after a brief training period, in late April of 1996, TR 116, and they were initially paid on a piece-rate basis, i.e., per plot completed, and were not authorized to work overtime. TR 120; RX-F.

In June of 1996, respondent Barnes was notified for the first time of a wage complaint by one of his workers, TR 137, GX-E, and in response he immediately raised the pay rates of all workers to

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meet the wage determination rate and began paying and back-paying workers for holidays. TR 117-119, 133, 137, 185. Also as a result of the complaint, DOL conducted an investigation into respondents' payment of wages, including overtime, travel time and fringe benefits, as well as record-keeping. In late July of 1996, DOL requested all of IRM's pertinent payroll records, which respondent turned over within two weeks. TR 140-141, 166; GX-C, D. At the completion of its investigation, DOL made findings of back wages owed in the amount of $2,639.08 for overtime and $23,727.88 for substandard wages, TR 175, and of various record-keeping violations (i.e., there were no daily or weekly records of hours worked, workers were paid monthly and not semi-monthly as required, and fringe benefits were not separately recorded, considered or paid as required). TR 171. Respondent Barnes testified, very credibly, that the (stipulated) violations were attributable to his unfamiliarity with the law, inexperience with federal contracts, and his failure to read the contract verbatim, TR 68, 71, 149, and that since the filing of the complaint at issue herein, IRM, Inc. has entered into four additional federal contracts for services in various forests in the states of Oregon and Washington, and there have been no further complaints or investigations of any SCA or CWHSSA violations. TR 138; RX-J, L, M.

SCA Debarment

Under section 5 of SCA, persons found to have violated the provisions of the Act shall be barred from receiving contracts from the federal government for a period of three years, unless due to "unusual circumstances" the Secretary of Labor recommends otherwise. 41 U.S.C. §354(a). A finding of "unusual circumstances" and thus an exemption from debarment is warranted if a three-part test is satisfied. 29 C.F.R. §4.188; Viligantes, Inc. v. Administrator, 968 F. 2d 1412, 1418 (1st Cir. 1992); Quality Maintenance Co., Decision of the Assistant Secretary, SCA 119 (Jan. 11, 1974); Washington Moving & Storage Co., Decision of the Assistant Secretary, SCA 68 (Aug. 16, 1973), Decision of the Secretary (March 12, 1974). First, a contractor's violation of SCA must not have been willful, deliberate, of an aggravated nature, or the result of culpable conduct. 29 C.F.R. §4.188(b)(3)(i). Second, relief from debarment normally requires a good compliance history, cooperation in the investigation, repayment of monies due and sufficient assurance of future compliance. 29 C.F.R. §4.188(b)(3)(ii). And third, if the first two requirements have been met, consideration must be given to such factors as whether there have been previous investigations of the contractor, whether the contractor has committed record-keeping violations that have impeded the investigation, whether liability was dependent upon resolution of a bona fide legal issue of doubtful certainty, the contractor's efforts to ensure compliance, the nature, extent and seriousness of past or present violations, and whether the sums due were promptly paid. 29 C.F.R. §4.188(b)(3)(i-ii). The relevant regulations further provide that negligence does not constitute an unusual circumstance per se and that a contractor cannot avoid debarment by remaining ignorant of its legal responsibilities or by shifting responsibility for compliance to subordinate employees. 29 C.F.R. §4.188(b)(4), (5) and (6). Moreover, it has been held that the particular circumstances of the business under review may also be considered. Federal Food Service, Inc. v. Donovan, 658 F.2d 830, 833-834 (D.C. Cir. 1981).

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Regarding the first part of the test, it is well-established that "culpable conduct" goes beyond mere negligence but falls short of gross carelessness or specific intent.² 29 C.F.R. §4.188(b)(3)(I). In the instant case, I find that respondent Barnes committed the violations, not willfully or deliberately, but rather inadvertently, due to his ignorance of the law. TR 114, 144. Moreover, the record establishes that respondents' employees having begun working in late April of 1996, TR 116, when respondent Barnes was informed of an employee complaint about compensation in June of 1996, TR 153, at which time he became aware of the wage determination rate, TR 118, he immediately thereafter raised his employees' wages to meet that rate. TR 118- 119, 153-156, 158; GX-E at p. 64.³ In my judgment, therefore, the record facts do not support a finding that his error was of an aggravated nature, and although respondent Barnes should have become familiar with the law and the contract at its inception, the period of his ignorance was brief and his response was prompt. TR 118-119, 153-156. In sum, I find that his actions, which led to the violations, were not willful, deliberate or of an aggravated nature, and they do not amount to culpable conduct.

With respect to the second part of the three-part "unusual circumstances" test, I consider it significant that respondent Barnes changed the pay schedule immediately upon discovering the violation, TR 118-119, 153-156, that he made back-payments for holidays as soon as he became aware of the violations, that he sent all records requested by DOL compliance officer, Karen Murphy, within two weeks of her request, and that he stipulated to the violations. TR 140. I also consider it significant that this was respondents' first federal contract and that four federal contracts were obtained subsequent to the one here at issue, and there have been no further complaints about compensation, nor any further government audits or investigations. TR 156; RX J-M. I find this evidence, coupled with respondent Barnes's credible testimony that he is presently in full compliance with the law to be sufficient assurance of future compliance; therefore, the weight of the evidence relevant to the second part of the three-part test favors relieving respondents from debarment.

Regarding the third part of the test, I note that this investigation was not impeded by any record-keeping violations, and that because respondents stipulated to the violations, there was no protracted and unnecessary litigation. Moreover, respondent Barnes authored the "piece work" pay schedule under the belief that it was acceptable, knowing it to be an industry standard, TR 152, 161,⁴ he did not oppose the complaint and, as set forth above, he immediately made a good faith compliance effort. Finally, I have considered and find that debarment would have a devastating impact on respondents' business,⁵ and that although the total amount of back-wages repaid was not insignificant, it was a relatively small fraction of the total value of the contract. TR 146-147. Based on the totality of the record, therefore, I find that all three criteria for establishing "unusual circumstances" have been met, and that respondents should thus be relieved from the debarment provision of section 5 of SCA. 29 C.F.R. §6.19(b)(2).

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CWHSSA Debarment

CWHSSA provides that any contractor found to be in aggravated or willful violation of the Act shall be ineligible to receive federal contracts for a period not to exceed three years. 29 C.F.R. §5.12(a)(1). The Wage Appeals Board, adopting the standard applied by the Supreme Court, has held "willful" conduct to be when an employer either knew its conduct was prohibited by the statute or showed reckless disregard for the matter. See Wayne J. Griffin Electric, Inc., WAB Case No. 93-05, slip op. at 5 (1993) (quoting McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988); see also Griffin v. Reich, 954 F. Supp. 98 (D.R.I. 1997). Here, I find that the record reflects a clear absence of such evidence; rather, it establishes, as recited above, that respondent Barnes at all times expressed a desire to comply with the law, that the contract, which was respondents' first federal contract, was underway for only one and a half months before he became aware of any wage complaints, that he took immediate remedial actions, and there have been no subsequent violations. In light of this record, I find that the violations were neither aggravated nor willful, and accordingly, it is concluded that respondents should not be subject to the ineligible list as provided in 29 C.F.R. §5.12(a)(1). 29 C.F.R. §6.19(b)(2).

ORDER

It is therefore ordered that:

1. The Secretary of Labor shall take appropriate action to relieve respondents from the ineligible list provision of 41 U.S.C. §354(a) and 29 C.F.R. §6.19(b)(2) .

2. The request pursuant to 29 C.F.R. §5.12(a)(1) that respondents be debarred and found ineligible to receive any contract or subcontract subject to the statutes listed at 29 C.F.R. §5.1 is DENIED.

ALFRED LINDEMAN
Administrative Law Judge

San Francisco, California
AL:aj

NOTICE: Within 40 days after the date of this Decision and Order, any aggrieved party may file a petition for review with the Administrative Review Board, United States Department of Labor, Suite R-4309, 200 Constitution Avenue, N.W., Washington, D.C. 20210. See 29 C.F.R. § 6.20 and 61 Fed. Reg. 19982 (May 3, 1996). A copy of any such petition must also be provided to the Chief Administrative

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Law Judge, Office of Administrative Law Judges, 800 K Street, N.W., Washington, D.C., 20001-8002.

[ENDNOTES]

¹ "TR," "RX" and "GX" refer, respectively, to the transcript of the hearing, respondents' exhibits [F-N] and the government's exhibits [A-E].

² "Examples of 'culpable conduct' include culpable neglect to ascertain whether practices are in violation, culpable disregard of whether they were in violation or not, or culpable failure to comply with record keeping requirements (such as falsification of records)." See In the Matter of United International Investigative Services, Inc., ARB Case No. 95-40A (Jan. 10, 1997), slip opinion at 4.

³ Although the (undated) handwritten notes of the contracting official, Bill Whitson, reflect that "we had discussed them [SCA wages] at the prework meeting," those notes also state: "He [Marc Barnes ] mentioned piece rate. I reiterated that piece rate was fine but that he still had to track hours to ensure his employees at least earn the minimum." Id.

⁴ It is also noted that there were some bona fide reasons for respondent Barnes believing that the "piece work" pay schedule compensated for time spent traveling to and from plots, TR 33, for holidays and fringe benefits, TR 40, and for believing that he was not obligated to pay wages for work completed off-site, TR 123- 125, or for overtime, TR 68, 86, 120; GX-E at p. 64.

⁵ Per respondent Barnes's testimony, at least 50 percent of IRM's work is with the federal government and, in the event of respondents' debarment, four years of marketing efforts would be wasted and at least three or four employees would be laid off. TR 139-140.