GENERAL SYSTEMS INTERNATIONAL, d/b/a
SIX RIVERS AIR SERVICE, 1981-SCA-1436 (Dep. Sec'y June 5, 1991)
CCASE:
GENERAL SYSTEMS INTERNATIONAL
DDATE:
19910605
TTEXT:
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[1] U.S. DEPARTMENT OF LABOR
DEPUTY SECRETARY OF LABOR
WASHINGTON, D.C.
20210
DATE: June 5, 1991
CASE NO. 81-SCA-1436
IN THE MATTER OF
GENERAL SYSTEMS INTERNATIONAL,
A CORPORATION, DOING BUSINESS AS
SIX RIVERS AIR SERVICE, AND
JOHN J. FLYNN, AN INDIVIDUAL,
RESPONDENTS.
BEFORE: THE DEPUTY SECRETARY OF LABOR /FN1/
FINAL DECISION AND ORDER
This matter is before me pursuant to the McNamara-O'Hara
Service Contract Act of 1965, as amended (MOSCA or the Act), 41
U.S.C. [secs] 351-358 (1988), and regulations promulgated
thereunder at 29 C.F.R. Parts 4, 6 and 8 (1990). The Associate
Solicitor for Fair Labor Standards excepted to the finding in the
Decision and Order (D. and O.) of Administrative Law Judge Alfred
Lindeman that Respondent John J. Flynn was not a "party
responsible." The facts giving rise to my review are as follows.
Respondent Flynn owned and operated Six Rivers Air Service. On
March 19, 1979, he signed and submitted an offer in response to the
U.S. Forest Service's solicitation for "air attack aircraft"
services under the Act. D. and O. at 2; Government [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.
[sec] 8.0 (1990). [1]
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[2] Exhibit (GX) 5. Flynn testified that shortly thereafter, he
received notification that he was the lowest responsive bidder.
Transcript (T.) 137.
The contract was awarded on March 27, 1979, GX-5, and the
announcement of the award was made by telegram to Six Rivers on
March 28, 1979. T. 155: GX-13. Flynn sold Six Rivers Air Service
to GSI on March 30, 1979. Respondent's Exhibit (RX) B. Flynn
worked briefly as a consultant to GSI until about June 1, 1979. T.
157.
The Solicitor of Labor filed a complaint against GSI and Flynn
on September 4, 1981, alleging that the Respondents failed to pay
the service employees minimum monetary and fringe benefits required
under the contract by the Act, 41 U.S.C. [sec] 351(a)(1) and (2),
and the regulations, 29 C.F.R. [sec] 4.6. The complaint claimed
that by reason of the alleged violations Respondents were subject
to debarment. 41 U.S.C. [sec] 354(a). A Motion for Default
Judgment against GSI was filed on August 12, 1983, alleging GSI's
failure to answer the complaint. Service on GSI of the notice of
hearing was unsuccessful, /FN2/ and, accordingly, the hearing was
limited to Flynn's liability. T. 4.
The ALJ, in finding that Flynn was not the party responsible
for violations under the Act, concluded that the sale of Six Rivers
Air Service to GSI was in no way an effort by Flynn to evade his
obligations under the Act. D. and O. at 2. He [2]
/FN2/ By letter dated September 12, 1983, the former Corporate
Secretary of GSI advised that GSI was in bankruptcy. [2]
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[3] credited Flynn's testimony that he had been told by Mr. Cadola,
a contracting officer's representative, that GSI could take over
the contract and that Flynn thought that whatever was necessary to
accomplish that would be done. Id.
The ALJ noted that all violations of the Act occurred after
Flynn's departure from Six Rivers. D. and O. at 2; GX-1. Further,
he found that the Forest Service's contracting officers dealt with
GSI's general manager, Doug Lane, beginning at least in June 1979,
GX-8; all insurance binders sent to the Forest Service, RX-A,
designated "GSI-Six Rivers Air Service" as the insured; all
performance was by the new owner; payments were made to the new
owner; and when the Forest Service renewed the contract, it
notified not Flynn, but Six Rivers Air Service, GX- 7. D; and O.
at 2. The ALJ found that there was only one occasion during the
contract period in which the Forest Service contacted Flynn, that
being on June 27, 1980, after Flynn caused one of GSI's airplanes
to be attached, /FN3/ at which point the contracting officer's
representative sent Flynn a letter advising that the contract was
in default. GX-9.
In rejecting the contention that Flynn remained liable, the
ALJ cited 29 C.F.R. [sec] 4.146 as authority for concluding that
the party bound by the Act is the one whose employees actually
perform the work, in this case GSI. D. and O. at 3. In view of
the involvement of GSI in the contract, the lack of involvement [3]
/FN3/ Apparently GSI had failed to complete payments to Flynn for
the purchase of Six Rivers Air Service. See T. 143-44. [3]
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[4] by Flynn, and the Forest Service's extensive dealings with GSI,
the ALJ concluded there was no violation of the Act or regulations
by Flynn. He determined that Flynn was not a party responsible
under the Act, 41 U.S.C. [sec] 352(a), and he granted default
judgment against GSI and ordered the payment of $5,518.04 to the
named employees. D. and O. at 3-4.
DISCUSSION
The Associate Solicitor contends that 29 C.F.R. [sec] 4.146
does not absolve Flynn from liability for the underpayments.
Exception to Decision of ALJ (Exception) at 5-6. At the time of
the hearing, Section 4.146 provided in pertinent part that "[a]
contractor's obligation to observe the provisions of the Act arises
on the date he is informed that he has received the award . . . .
However, he is required to comply with the provisions of the Act
and the regulations thereunder only while his employees are
performing on the contract . . . ." 29 C.F.R. [sec] 4.146 (1983).
Contrary to the contention, this regulation plainly provides that
a contractor is not bound by the Act unless his employees /FN4/ are
performing on the contract. No employees of Flynn performed work
on the contract after the sale of Six Rivers Air Service to GSI. [4]
/FN4/ The term "employees" includes employees of subcontractors
because "contractor" includes "subcontractor" for purposes of the
Act. 29 C.F.R. [sec] 4.114. This does not affect the outcome of
this case as the evidence shows that Flynn divested himself of
the business completely and, therefore, GSI was not a
subcontractor of Flynn. [4]
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[5] The Associate Solicitor also alleges that the Anti-
Assignment Act, 41 U.S.C. [sec] 15, prohibits Flynn from avoiding
his obligations under the MOSCA by transferring his business to
another party. Exception at 4. This contention is rejected
because Section 4.146, which implements the MOSCA, provides
contractors an exemption from MOSCA obligations when, as here,
their employees perform no work on the contract.
CONCLUSION AND ORDER
For the foregoing reasons, I conclude that John J. Flynn is
not a party responsible under the Act and affirm the ALJ's order
dismissing the complaint against Flynn. The ALJ recommended
debarment under Section 5(a) of the Act, 41 U.S.C. [sec] 354(a),
for General Systems International. D. and O. at 4. No exception
to this recommendation was taken and the record affords no basis
for relieving this Respondent from the sanction. Accordingly the
ALJ's order and recommendation as to General Systems International,
doing business as Six Rivers Air Service, are affirmed and the
Comptroller General will be notified to place the name of this
Respondent on the list of those ineligible to enter into contracts
with the Government.
SO ORDERED.
[Roderick DeArment]
Deputy Secretary of Labor
Washington, D.C. [5]
