Owl Construction Co., Inc., 1982-SCA-137 (Under Sec'y July 5, 1985)
CCASE:
J. Marshall Brown
DDATE:
19850705
TTEXT:
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[1] THE UNDER SECRETARY OF LABOR
WASHINGTON, D.C.
20210
In the Matter of
J. Marshall Brown, an
Individual, and Owl
Construction Company, Case No. 82-SCA-137
Inc., a Corporation,
Respondents
DECISION OF THE UNDER SECRETARY
Statement of the Case
After a hearing before an Administrative Law Judge (ALJ), the
ALJ found that the respondent in this case had violated the
McNamara-O'Hara Service Contract Act of 1965, as amended (SCA or
the Act) (41 U.S.C. [secs] 351 et seq.). He ordered that backpay
be paid to the employees. The ALJ also found that there were no
"unusual circumstances" justifying removing the respondent from the
ineligible list sanction of Section 5(a) of the Act. As such, he
recommended that relief not be granted.
Respondent appealed the ALJ's decision. The government
responded to the appeal, and respondent then replied to the
government's response.
Respondent is a second-tier subcontractor performing work
under a government contract to demolish damaged wharf sections at
the United States Navy Support Activity at New [1]
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[2] Orleans, Louisiana. He admits to not having paid his employees the
proper wages under the SCA . He claims, however, that he should not be
faulted, as he did not know that he had entered into a contract with the
federal government. Once notified of the violations, he has been fully
cooperative and has complied with the Act.
I now turn to the points made in Respondent's Reply to the
Government's Response to Respondent' s Petition for Review of the
Decision of the Administrative Law Judge. Respondent replies that
the Government's request for debarment is "an abuse of discretion,"
citing Federal Food Service, Inc. v. Donovan, 658 F.2d 830 (D.C .
Cir. 1981). He states that the SCA violation in Federal Food was
more serious than his own -- but still, that court denied
debarment. The court in Federal Food held that
[W]here, as here, the ALJ has made an inference of
improper management sole]y on the basis of virtually de
minimus [sic] underpayments, the Secretary must consider
the particular circumstances of the business under review
-- for example, the actual problems it has faced, the
precautions normally taken by well-managed companies in
the field, the likelihood that it could have avoided its
violations with proper management -- before implementing
the severe debarment provision [supra at 834].
The de minimis amount owed in Federal Food was "$3,328.35 --
an amount less than one-fifth of [one] per cent of the contract
values... " (supra at 833). [2]
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[3] In contrast, in the case at bar respondent admitted that he
owed his employees $9,740.89 out of a contract worth $43,000. As
respondent's underpayments are relatively substantial, and clearly
not de minimis, there is no need to consider "the particular
circumstances of the business under review...."
Next respondent replies effectively that he should be relieved
of the debarment list sanction due to the fact that he was a
sub-subcontractor. But the C.F.R. makes it clear that the
provisions of the Act apply to a party such as respondent. For
example:
-- 29 C.F.R. [sec] 4.1(b)(4)(1981) says that "'contract'
includes ... any subcontract of [*] any tier thereunder
[*];"
-- 29 CFR [sec] 4.1(b)(5)(1981) says that "'contractor'
includes a subcontractor whose subcontract is subject to
provisions of the Act;" and
-- 29 C.F.R. [sec] 4.114(a)(1981) says that
"'contractor'... shall be deemed to refer to the
subcontractor, or, if in a subcontract entered into by
such a subcontractor, shall be deemed to refer to the [*]
lower level subcontractor" [*] [*](all my emphasis.)[*] [3]
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[4] Thus it is abundantly clear that the SCA would apply to a
sub-subcontractor such as respondent.
Respondent replies that the Government has refused to act
against either the prime contractor or the subcontractor. This
point is irrelevant. Respondent as a subcontractor has his own
obligations to meet. The Government is not required to seek legal
redress against the contractor and the subcontractor.
Respondent also replies in essence that he could not have
known that his employees were working at a government facility
because ownership of river fronts is never clear. I find this
argument to be specious. Evidence in the record contradicts it.
For example, as the ALJ has pointed out, respondent admitted that
he was working at a naval station (tr. 46-47); and signed certified
U.S. Department of Labor, Wage and Hour Division forms (Exhibit 7).
Further, the contract signed by subcontractor C. McGhee and
respondent clearly states that he agrees to remove wood pilings at
the U.S. Naval Station at Algiers, La. (Respondent's exhibit no.
1) . Moreover, it is not in the least bit extreme to expect
respondent, as a former state legislator and Democratic National
Committeeman, to read a form signed on numerous occasions, and to
realize that he was entering into a contract with the federal
government (tr. 17). [4]
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[5] Next, in respondent's Appeal of the ALJ's decision, he
states that unusual circumstances are present in the case. His
reasons:
a). There is no history of repeat violations of the Act;
b). This was his first contract subject to the Act;
c). He immediately acted to comply with the Act, and
repair any damage caused by any violations;
d). He fully cooperated with DOL;
e). He expressed a desire and intent to comply with the
Act;
f). He repeatedly requested DOL to pay all the affected
employees with the money withheld from him;
g). As a sub-[subcontractor], he was ignorant of the
provisions of the Act;
h). The violation was not serious or willful;
i). He lost money on the contract; and
j). There was no culpable neglect of the SCA.
I disagree with respondent's statement that there are unusual
circumstances in this case. While certainly some of respondent's
statements are true, they are not sufficient to relieve him from
the ineligible list sanction. The court in Braxton B. Walker d/b/a
Walker's Express said:
It is recognized that several of the factors set forth in
the leading cases warranting a finding of "unusual
circumstances" exist in this case. There is however, no
indication in the decided [5]
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[6] cases that a first violator who promptly pays the
underpayment due, fully cooperates and evidences a good
faith desire and intent to comply in the future with the
Act's requirements thereby establishes "unusual circumstances"
so as to escape debarment. The underpayments in this case
resulted from reasons common to most violations of the Act
[:] ignorance and misunderstanding of the requirements, as
well as inattentiveness to both payment and recordkeeping
responsibilities. Accordingly, I cannot conclude that
unusual circumstances exist warranting relief from the
debarment sanction of the Act. [No. SCA-981, 2 Lab. L.
Rep. (CCH), 31,264, 31,265, (1979), affirmed by the
Assistant Secretary (1980)]
In addition, and as the ALJ has correctly pointed out,
Washington Moving and Storage Co., the seminal case on the
definition of unusual circumstances, states in pertinent part:
'It is clear that the mere payment of sums found due
employees after an administrative proceeding, coupled
with an assurance of future compliance, is not in itself
sufficient to constitute "unusual circumstances"
warranting relief from the ineligible list sanction.'
[No. SCA-168, March 12, 1974, Decision of the Secretary,
pp. 3-4.]
Thus, respondent's reasons (a) through (f), supra, are
insufficient to relieve him of the ineligible list sanction.
Reason (g), that respondent was a sub-subcontractor, has
already been treated, supra at page three, and can be [dismissed].
Reason (h), that the violation was not serious or willful, alone is
not sufficient for relief. Reason (i), that respondent lost money
on the contract, is immaterial. Finally, reason (j), that there
was no culpable neglect of the Act, is a false statement.
Respondent indeed did show "culpable neglect [6]
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[7] to ascertain whether certain practices were in compliance or
culpable disregard of whether they were or not, or other culpable
conduct (such as deliberate falsification of records)," Washington
Moving and Storage Co., supra. Respondent knew that he was performing
work for the federal government. See, page four. He admitted to
neglect twice: "... I was very neglectful in my duty ..." (tr. 77);
and "... I was neglectful there" (tr. 78). In addition, the employees'
wages and hours were juggled so that the wage determination in the
contract would be met. The government raised this point in its response
to respondent's appeal. Respondent had an opportunity in his subsequent
reply to refute it but did not. I credit the 'uncontroverted testimony
of Darlene Pitre, respondent's bookkeeper, who testified that she was
told to back into the gross:
He (Sam Lafleur, the general contractor] said take, the
gross payroll, put it in this column. Take the tax
deductions, put them in subsequent columns, put your net
pay, take the total hours and put them in -- back into
the gross because this is the rate of pay that had to be
put down on that column [tr. 33].
She also stated that the total number of hours worked shown on
government payroll forms was not correct (tr. 33, re Government's
Exhibit No. 4).
Finally, I must note Congress' original intent in 1965 when it
gave the Secretary of Labor discretion to recommend [7]
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[8] relieving contractors from the ineligible list. During the debate
on the 1972 amendment, Representative James G. O'Hara, sponsor of
the Act, stated that:
The Act also contains ... a provision allowing the
Secretary of Labor to relieve employers from that
penalty. The authority was intended to be used in
situations where the violation was a minor one, or an
inadvertent one, or one on which [sic] debarment from
bidding on government contracts would have been wholly
disproportionate to the offense. We did not intend in
1965 that relief from the penalties of the Act should be
given automatically, or lightly. We intended then, and
we intend now that the full vigor of the law should be
felt by those who repeatedly and callously violate it.
The rights of government contractors are important and
deserve full procedural safeguards. The rights of the
workers performing these contract services are no less
important, and deserve no less vigorous protection.
[Hearings on H.R. 6244 and H.R. 6245, before the Special
Subcommittee on Labor of the House Committee on Education
and Labor, 92nd Congress, First Session (1971), p. 3].
Wherefore, upon consideration of the entire record, I hereby
adopt the decision and recommendation of the ALJ in all respects.
Accordingly, I shall advise the Comptroller General to place
respondents on the debarment list.
[Ford B. Ford]
Under Secretary of Labor
Dated: July 5, 1985
Washington, D.C. [8]
