CCASE:
HABITECH INC. & L.J. BLEVINS JR. & C.B. BLEVINS
DDATE:
19870918
TTEXT:
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[1] U.S. DEPARTMENT OF LABOR
DEPUTY SECRETARY OF LABOR
WASHINGTON, D.C.
20210
DATE: September 18, 1987
CASE NO. 82-SCA-106
IN THE MATTER OF
HABITECH, INC., LEAFORD J. BLEVINS, JR.,
AND CARLA BATES BLEVINS,
RESPONDENTS.
BEFORE: THE DEPUTY SECRETARY OF LABOR
DECISION AND ORDER
This is a proceeding under the Service Contract Act of 1965,
as amended (SCA), 41 U.S.C. [secs] 351-358 (1982), and the rules
and regulations thereunder, 29 C.F.R. Parts 4, 6 and 8 (1982).
/FN1/ This case is before me on a petition filed on behalf of the
Administrator, Wage and Hour Division, to review the Supplemental
Decision and Order (D. and O.) of the Administrative Law Judge
(ALJ) and to reject the ALJ's recommendation that Respondents be
relieved from the ineligibility list provisions of Section 5(a) of
the SCA.
The hearing before the ALJ initially involved the issue of back
wages resulting from underpayments to Respondents' employees
and [1]
/FN1/ Section 8.0 of 29 C.F.R. (1986) provides that the
Secretary's designee shall perform the functions of the Board of
Service Contract Appeals during the interim period prior to the
appointment of a duly constituted Board. On February 24, 1984, the
Secretary assigned this responsibility to the Under Secretary, now
Deputy Secretary. Department of Labor Executive Level Conforming
Amendments of 1986, Pub. L. No. 99-619 (November 6, 1986). [1]
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[2] the issue of debarment as a result of the wage violations.
During the proceeding the parties entered into an order by which
back wages in the amount of $13,491.58 which had been withheld by
the contracting agency would be disbursed to the employees. Thus,
the sole issue for decision before the ALJ was whether or not
Respondents should be placed on the list of ineligible bidders
under section 5(a) of the SCA.
Respondents Leaford Blevins and his wife, Carla Blevins, owned
and operated the firm of Habitech, Inc., which performed contracts
for change-of-occupancy maintenance ("COMS") at various military
facilities, inspecting the on-base housing and making any needed
repairs before new occupants moved into the units. The present
proceeding involved Respondents' contract to provide COMS at
Sheppard Air Force Base, Wichita Falls, Texas, from November 1,
1980, to September 30, 1981. Leaford Blevins lived in Denver,
Colorado, and would obtain COMS contracts at various locations. He
would then engage an on-site superintend[e]nt for day-to-day
supervision of performance of the contract.
The violations established under the Sheppard AFB contract
included failure to pay fringe benefits, failure to classify and
pay employees correctly, failure to pay overtime or holiday pay,
and failure to record accurate hours of work. During the period of
the contract Respondents adopted the practice of paying
employees on a "job" basis of a set amount per house, rather than
on an hourly basis. Houses which needed a great deal of work
resulted in the hourly rate for employees falling below the SCA
minimum. [2]
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[3] Section 5(a) of the SCA provides that any person or firm
found to have violated the Act shall be declared ineligible to
receive further Federal contracts unless the Secretary recommends
otherwise because of "unusual circumstances." The ALJ determined
that Respondents had shown "unusual circumstances" sufficient to
relieve them from the ineligibility list sanction, citing 29 C.F.R.
[sec] 4.188(b)(3). See Supplemental Decision and Order (Supp. D.
and O.) at 2-3. Section 4.188(b)(3) sets forth a three-part test
/FN2/ for determining when relief from debarment is appropriate.
First, it must be determined that no aggravated circumstances
exist. 29 C.F.R. [sec] 4.188(b)(3)(i). Next, the following
prerequisites generally must be met: a good compliance history,
cooperation in the investigation, repayment of moneys due, and
sufficient assurances of future compliance. 29 C.F.R. [sec]
4.188(b)(3)(ii). Where these prerequisites are present and none of
the aggravated circumstances exist, a variety of factors still must
be considered. Id. The ALJ found that three of the four usual
prerequisites to relief were present, that there were no
aggravating circumstances present and that there existed several
mitigating circumstances. Supp. D. and O. at 3.
The ALJ found that Respondents had a good compliance history,
had repaid the monies due and that there was no concern
regarding [3]
/FN2/ The basis for determining whether or not unusual
circumstances exist is derived primarily from the guidelines set
forth in Washington Moving & Storage Co., Decision of the Assistant
Secretary, SCA 168, August 16, 1973, Secretary, March 12, 1974. [3]
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[4] future compliance. As to the fourth prerequisite, the ALJ
stated that "[t]here is no evidence in the record concerning
whether or not respondents cooperated in the investigation of them
by the Department of Labor." Id. The record does not support this
conclusion. As the Administrator's petition notes, Respondent
Leaford Blevins was unwilling to discuss the investigation with the
investigator or his supervisor. Mr. Blevins cross-examined Robert
J. Fortman, Assistant Area Director for the Wage and Hour Division,
concerning procedures and contacting an employer in the following
exchange:
Q Whenever you interview these people and find
how many hours that they indicate that they
had worked during a particular period of time,
is it ordinary for you to check with the
employer and look at his payroll records, give
him an opportunity to debate the issue with
you or discuss it with you?
A Yes. Certainly.
Q Did you ever contact us in Denver and did you
ever review our records to see whethter [sic]
or not they were in compliance with the
requirements?
A Yes. Mr. Marvin Moon who was our compliance
officer, contacted you a number of times. My
supervisor, who is Area Director Curtis L.
Poer, contacted you by phone. I contacted You
[sic] on July 29 and asked you your position
on the back wages that Mr. Moon and I had
computed, so you were contacted a number of
times in regards to these back wages.
Hearing Transcript (T.) at 61-62.
* * * *
Q Uh - huh. Does the employer have an
opportunity to discuss your classification of
these people one way or the other - [4]
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[5] A Yes.
Q -- as a general rule? And is there any
explanation for your never contacting us with
regard to whether they were subcontractors or
employees?
A I, Mr. Moon, and Mr. Poer attempted to do
that. On the time I talked to you, in the
morning of the twenty-ninth of July, I called
you and attempted to discuss this. You said
you would get back to me that afternoon. You
never returned my call and never contacted me
again after that.
T. at 64. Therefore, not only is the ALJ's conclusion that there
is no evidence in the record concerning whether Respondents
cooperated in the investigation in error, the evidence shows to the
contrary, that Respondents did not cooperate. Thus, one of the
prerequisites for a finding of unusual circumstances has not been
met. /FN3/
The ALJ also found that there were no aggravating
circumstances. Supp. D. and O. at 3. The Administrator argues that
this conclusion was in error and that the record demonstrates that
Habitech was culpably negligent. The Assistant Area Director's
testimony described the wide range of violations as follows:
We found employees who were not paid the 21 cents an hour
fringe benefits. We found [5]
/FN3/ As to the prerequisite concerning future compliance, the ALJ
did not find that there were "sufficient assurances of future
compliance." 29 C.F.R. [sec] 4.188(b)(3)(ii). He noted that
Respondents were no longer in any independent business activity,
that the individual Respondents are no longer involved in any
managerial capacity and "[t]herefore, possible future violations
... are not a present concern." Supp. D. and O. at 4. Since
Respondents have failed to establish another of the prerequisites,
I make no finding as to whether abandonment of an active business
and business role may suffice to establish the prerequisite of
"sufficient assurances of future compliance." [5]
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[6] employees who didn't receive the correct wage rate for
the job they were doing. And we found employees who were
not paid overtime after eight hours in a day or 40 hours
in a week. And we found employees who were not paid for
holidays.
T. at 59. In other words, Respondents completely ignored the wage
requirements. When asked the reasons for the violations, Mr.
Blevins could offer no explanation. T. at 45, 47. His contention
that some of the workers may have been independent subcontractors
is unsupported by the record. Employees were simply changed from
an hourly to a piece rate system which resulted in reduced wages.
Respondents' failure to ascertain whether their pay practices were
in compliance with the Act represents culpable negligence and does
not permit a finding of unusual circumstances. 29 C.F.R. [sec]
4.188(b)(3)(i). The preponderance of the evidence does not support
the ALJ's finding that none of the aggravated circumstances in the
regulations exist.
In addition, the ALJ relied upon two mitigating circumstances,
the first being the fact that "liability was dependent upon ...[]
the correct interpretation of the legal effect of modification no.
6 [citation omitted], which purported in part to preclude the
Department of Labor from taking further action against
Respondents," and the second being that the sums due were
"promptly paid" via contract modification no. 6. Supp. D. and O.
at 4.
Contract modification no. 6 was entered into between
Respondents and the Air Force in July, 1982, one month after the
formal complaint was filed in this case. This modification was
apparently intended to close out the Sheppard contract. It
provided for a distribution [6]
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[7] of the funds still held by the Air Force which included $13,491.58
to the Department of Labor on Habitech's behalf. In return,
Respondents would withdraw various contract claims it was pursuing
through the Armed Services Board of Contract Appeals. Part (b) of
the agreement states:
This agreement constitutes a full and complete accord and
satisfaction of all claims (whether known or unknown)
arising out of or relating to this contract.
Since this agreement referred to the parties as "the
Government and Habitech, Inc.", Respondents claimed that it
foreclosed the Department of Labor from pursuing the sanction of
section 5(a) of the SCA and that proper interpretation of the
agreement constituted a "bona fide legal issue of doubtful
certainty", thus qualifying as a basis for a finding that unusual
circumstances exist.
The ALJ issued an Order Denying Motion for Summary Decision
and Directing Supplementation of Record on May 30, 1986. In that
order, he ruled that the Department of Labor cannot be bound by the
actions of the contracting agency since such actions were not
within the scope of the contracting officer's legal authority. The
Administrator argues that
The correct interpretation of modification no. 6 is not
the kind of "bona fide legal issue of doubtful certainty"
intended by section 4.188(b)(3)(ii), i.e., a genuine
difference between Wage and Hour and the contractor as to
whether certain conduct constitutes compliance. On the
contrary, Habitech has not denied that it violated the
Act. Contract modification no. 6 may have been intended
to satisfy Habitech's [7]
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[8] back wage obligations, but it does not absolve Habitech
of the responsibility for having violated the Act in the
first place. Modification no. 6 cannot in any way mitigate
or justify the commission of the violations, because it was
only entered into fourteen months subsequent to those actions
that violated the Act.
Petition for Review of Administrative Law Judge's Decision and
Order at 14.
I agree with the Administrator that the proper interpretation
of modification no. 6 is not the type of bona fide legal issue of
doubtful certainty contemplated in the regulations. The type of
issue contemplated is discussed in Burns Security Systems, Inc.,
SCA 150, Supplemental Decision of the Administrative Law Judge,
April 30, 1973, at 8:
When there is a bona fide litigable issue as to
interpretation of the contract provisions leading to an
alleged violation or the amount thereof, a respondent
should not be penalized or subjected to imposition of
sanction under section 5(a) of the Act merely because he
elected to litigate a matter of doubtful certainty.
There was no doubt surrounding the violations. They were of
numerous types and Respondents offered no explanation as to why the
violations were committed or arguments pertaining to the provisions
specifying the wage rates, fringe benefits, etc., contained in the
contract. I find that the proper interpretation of modification
no. 6 does not constitute a basis for a finding that unusual
circumstances exist in this case and the ALJ erred in ruling
otherwise. [8]
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[9] As for prompt payment of the sums found due, the
Administrator notes that payment was not prompt and that, in any
event, prompt payment is a prerequisite for relief from debarment
and, therefore, cannot also be used as a mitigating circumstance
and basis for relief from debarment. The Administrator is correct.
The regulations and case history are quite clear that the mere
payment of monies which a contractor was required to pay by the
terms of his contract is not a basis for relief from debarment.
See 29 C.F.R. [sec] 4.188(b)(2); Washington Moving & Storage Co.,
Slip op. of the Secretary at 3-4. Moreover, Habitech did not make
its payments "promptly" but delayed for over a year following the
investigation, and then agreed that the Air Force could release the
funds being withheld only after this case was filed. There is no
rationale for treating Respondents' conduct in finally making
repayment as a mitigating circumstance.
In summary, the preponderance of the evidence supports a
finding that unusual circumstances do not exist and that relief
from being placed on the list of ineligible bidders is not in order
for these Respondents. Accordingly, I reject the recommendation of
the ALJ. I find that Respondents should not be relieved from the
ineligible list sanction of Section 5(a) of the SCA. The
Comptroller General will be notified accordingly.
SO ORDERED.
[Dennis E. Whitfield]
Deputy Secretary of Labor
Washington, D.C. [9]
