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<![CDATA[
CCASE:
CLARKIE'S INC. & M. CLARK
DDATE:
19900802
TTEXT:
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[1] U.S. DEPARTMENT OF LABOR
DEPUTY SECRETARY OF LABOR
WASHINGTON, D.C.
20210
DATE: August 2, 1990
CASE NO. SCA-1176
IN THE MATTER OF:
CLARKIE'S, INC., A CORPORATION, AND MILTON
CLARK, INDIVIDUALLY AND AS A RESPONSIBLE
OFFICER OF THE CORPORATE RESPONDENT,
RESPONDENTS.
BEFORE: THE DEPUTY SECRETARY OF LABOR
FINAL DECISION AND ORDER
This is a proceeding under the McNamara-O'Hara Service
Contract Act of 1965, as amended (MOSCA or the Act), 41 U.S.C.
[secs] 351-358 (1982), and regulations issued thereunder at 29
C.F.R. Parts 4, 6, and 8 (1989). /FN1/ The matter was commenced by
the filing of a complaint on October 22, 1979, by the United States
Department of Labor (DOL) alleging violations of the MOSCA by
Respondents (hereafter Respondent) in the performance of janitorial
services on a government contract at the Naval Aviation Supply
Office in Philadelphia, Pennsylvania.
Following a hearing before Administrative Law Judge (ALJ)
Arthur C. White on April 23-24, 1980, the parties entered into
stipulations resolving all issues of monetary liability involving [1]
/FN1/ The Deputy Secretary has been designated by the Secretary to
perform the functions of the Board of Service Contract Appeals
pending the appointment of a duly constituted Board. 29 C.F.R. 8.0
(1989). [1]
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[2] violations of the MOSCA. In his Decision and Order issued on
September 19, 1980, the ALJ found, pursuant to the stipulations,
that Respondent failed to pay its employees minimum monetary wages
and fringe benefits under 41 U.S.C. [sec] 351(a)(1), (a)(2), and
(b)(1) and under 29 C.F.R. [sec] 4.6. In particular, some
employees were not fully compensated for holiday, vacation and sick
leave because fringe benefits were paid based on a four-hour
workday where the employees were actually working five to seven
hours per day. A liability of $944.69 was found due to 28
employees. Several temporarily assigned employees were under-
compensated a total of $114.92. Other underpayments of
compensation to regular employees totalled $1,770.39. Underpayment
of health and welfare benefits amounted to $1,622.00 and the
failure to pay 14 employees holiday pay for certain holidays in
1979 totaled $430.53. The total monetary liability Respondent
accordingly was ordered to pay was $4,882.53. Respondent's total
payroll for the 20-month period in which these violations occurred
was approximately $1,150,000.00.
With the issues of monetary liability resolved by stipulation,
the only remaining issue in the case for resolution by the ALJ was
debarment. Under Section 5(a) of the MOSCA, 41 U.S.C. [sec]
354(a), persons found to have violated the MOSCA are ineligible to
be awarded government contracts for a period of three years unless
the Secretary recommends otherwise because of "unusual
circumstances." Finding that Respondent's performance under its
contract had improved since it was first obtained in [2]
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[3] April 1978 due to improved management, the ALJ nevertheless
found that the underpayments under the MOSCA resulted from
decisions of management for which the Respondent is accountable.
Accordingly, the ALJ found that no unusual circumstances existed
and recommended that the Secretary take no action to relieve
Respondents of the ineligibility list sanctions.
Respondent excepted to the ALJ's decision and, thereafter, on
June 27, 1984, the Administrator, Wage and Hour Division, issued
his decision also recommending that no unusual circumstances
existed which would relieve Respondent from being placed on the
ineligible list. The Administrator interpreted the ALJ's
conclusion that the underpayments were due to management decisions
as establishing the willfulness of Respondent with respect to at
least some of the violations. Respondent excepted from the
Decision of the Administrator and the matter is presently before
the Deputy Secretary for review. /FN2/
DISCUSSION
The criteria applicable for determining whether unusual
circumstances exist in the present case, relied upon by the ALJ and
the Administrator, are set forth in Washington Moving and Storage
Co., Case No. SCA-168, Sec. Decision, March 12, 1974. The factors
set forth in that case are:
1) Whether there was a history of repeated
violations of the Act; [3]
/FN2/ While Respondent has filed a brief setting out the unusual
circumstances it believes are present in this case, the Solicitor
of Labor has not participated on review before the Deputy
Secretary. [3]
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[4] 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 in the 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.
Applying these criteria, the ALJ first concluded that
Respondent's past violations of the Fair Labor Standards Act of
1938, 29 U.S.C. [sec] 201-250 (1982), during the period 1967 to
1969, constituted repeat violations. This conclusion must be
reversed. The applicable criterion in Washington Moving and
Storage Co. by its terms contemplates repeat violations of the
MOSCA. Indeed, the ALJ found that Respondent's violations in the
1960's did not even involve a contract with the United States
Government.
As to the nature, extent and seriousness of the violations,
the ALJ found that Respondent had become more efficient in the
performance of its contract since first obtained in April 1978,
resulting in a reduction in the number of employees' pay
complaints. This conclusion is supported by a preponderance of the
evidence and will not be disturbed. See 29 C.F.R. [sec] 6.10(b)
(1983); Hearing Transcript (H.T.) at 78-79, 86-87, 289, 373,
419. [4]
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[5] On this issue I note further that the violations in this case
total $4,882.53 out of a total payroll, for the 20-month period of
investigation (April 1978 through December 1979), of $1,150,000.00.
As the monetary violations therefore constitute only 0.4% of
payroll, I deem them de minim[i]s. See, e.g., Federal Food
Service, Inc. v. Donovan, 658 F.2d 830, 833-834 (D.C. Cir. 1981)
(underpayments of 0.2% of contract values are de minim[i]s);
Associated Cleaning Consultants and Services Inc., Case No. 83-
SCA-77, Dep. Sec. Order, December 10, 1987 (underpayments of 0.47%
of payroll deemed small in value). On the issue of willfulness or
the degree of culpability on Respondent's part, the ALJ concluded:
None-the-less, the underpayment of the employees during
the period in question did not result from an inefficient
operation, but primarily was due to decisions of the
management personnel that the workers would be paid at a
specific hourly rate or would not be paid holiday or sick
pay. Mr. Clark was either personally involved in the
decisions or he was accountable for the decisions on the
pay matters being made by his subordinates.
ALJ Decision and Order at 5. The Decision of the Administrator
concluded from the above-quoted language that the ALJ found that
Respondent's willfulness was established with respect to at least
some of the violations. I disagree. I interpret the ALJ's
conclusion as stating only that Respondent's violations were the
result of improper management decisions for which Respondent is
accountable. Accountability is distinguished from culpability,
which was not specifically found by the ALJ. Had the present case
involved violations of more significant [5]
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[6] monetary value, I might well have followed the ALJ's
recommendation to find no unusual circumstances on the grounds
he cites. However, where, as here, the ALJ has made an inference
of improper management in a case involving only de minim[i]s
underpayments, I will consider also the particular circumstances
of the business under review before implementing the debarment
provision. Federal Food Service, Inc. v. Donovan, 658 F.2d 830,
834 (D.C. Cir. 1981). I find that, based on the business
circumstances which are present on the particular facts of this
case, relief from the ineligible list is warranted.
The record shows that Respondent Milton Clark is a minority
business contractor who was awarded the MOSCA contract with the
help of the Small Business Administration (SBA) under the Section
8(a) set-aside program. See Small Business Administration Act of
1953 (SBAA), as amended, 15 U.S.C. [sec] 637(a)(2) (1982); H.T.
263. See also H.T. 19-20. Although Respondent had attempted for
some time to obtain such a contract, he had been unable to do so.
H.T. 368. Respondent secured the present contract only
fortuitously, when the preceding contractor violated the rules and
forfeited his rights under the contract, thereby requiring his
immediate replacement. H.T. 368-369. At all times prior to the
award of the contract, Respondent's janitorial services operation
consisted of, at most, 30-35 employees and an annual payroll of no
more than $600,000. H.T. 377. The award of the MOSCA contract
tripled Respondent's annual payroll and number of employees
overnight. Id. Although both [6]
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[7] the Respondent and the Navy (for whom the services were
rendered) requested management assistance from the SBA for this
contract, and such assistance is authorized to be provided under
the SBAA, it was never forthcoming. H.T. 411-412.
Respondent's chief problem in providing services under the
contract stemmed from the difficulty in finding experienced
management personnel familiar with payroll and accounting matters
and with government contracts. H.T. 284-285; 381-382; 389; 392.
Many people were hired and fired. H.T. 389. Six months prior to
the hearing, in October of 1979, Respondent was finally able to
hire a Vice President/General Manager with good experience in
payroll matters, resulting thereafter in fewer pay complaints and
better overall management. H.T. 284; 374; 419. Still, by the date
of the hearing, Respondent had been unable to locate and hire a
manager experienced in government contracts, despite much
persistent effort on Respondent's part. H.T. 392.
Consideration of all of the foregoing business circumstances
leads me to believe that relief from the ineligibility list is
warranted on the facts of this case. I again emphasize that the
underpayments in this case are de minim[i]s, that application of
the criteria set out in Washington Moving and Storage presents no
material impediment to relief, and that full consideration of all
of Respondent's particular business circumstances reveals that [7]
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[8] this is not a case where relief ought to be denied.
Accordingly, the names of Respondents Clarkie's, Inc., and Milton
Clark will not be referred for placement on the list of ineligible
bidders.
SO ORDERED.
[Roderick DeArment]
Deputy Secretary of Labor
Washington, D.C. [8]
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