CYCLE BUILDING MAINTENANCE, INC., 1983-SCA-90 (Dep. Sec'y Nov. 2, 1988)
CCASE:
CYCLE BUILDING MAINTENANCE & J.J. DILLON
DDATE:
19881102
TTEXT:
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[1] U.S. DEPARTMENT OF LABOR
DEPUTY SECRETARY OF LABOR
WASHINGTON, D.C.
20210
DATE: November 2, 1988
CASE NO. 83-SCA-90
IN THE MATTER OF
CYCLE BUILDING MAINTENANCE,
INC., AND JOHN J. DILLON,
RESPONDENTS.
BEFORE: THE DEPUTY SECRETARY OF LABOR
FINAL DECISION AND ORDER
This case is before me /FN1/ pursuant to a Petition for Review
filed by Respondents Cycle Building Maintenance, Inc., and John J.
Dillon under the Service Contract Act of 1965, as amended (the
Act), 41 U.S.C. [secs] 351-358 (1982), and the rules and
regulations thereunder, 29 C.F.R. Parts 4, 6 and 8 (1987).
Respondents had been charged with violations of the Act and the
regulations at 29 C.F.R. Part 4 in providing janitorial services at
Islip/MacArthur Airport, Ronkonkoma, New York, a facility of the
Federal Aviation Administration (FAA).
Specifically, Respondents were charged with failing to pay
fringe benefits (FB) as required by Section 2(a)(2) of the Act and
Section 4.6(b) of Title 29 of the regulations and with failing to
keep adequate and accurate records. The complaint [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 (1987); Department of Labor Executive Level Conforming
Amendments of 1986, Pub. L. No. 99-619 (November 6, 1986). [1]
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[2] alleged that the fringe benefits had been paid in full and that
Respondents were subject to the provisions of Section 5(a) of the
Act, 41 U.S.C. [sec] 354(a).
In response to a prehearing order the Government set forth the
names of those employees alleged to have been unpaid or underpaid
with the amounts due each of those employees, noting that these
amounts, which totalled $2,083.73, had been paid, and that the only
issue remaining was the debarment question.
Respondents denied the allegations that they failed to pay
fringe benefits as required by the Act, alleging that any
deficiencies that may have existed were the result of unusual
circumstances or inadvertence, "and were of minimal amount in
comparison to the total contract value." It was further alleged
that any deficiencies that may have occurred were not the result of
Respondents' willful or deliberate actions.
Respondents also denied the charge of failing to keep adequate
and accurate records alleging that they maintained full and
complete records as required by the Act and the regulations.
Finally, Respondents denied that they were subject to Section
5(a), the debarment provision of the Act.
In a Decision and Order (D. and O.) dated February 21, 1985,
Administrative Law Judge (ALJ) Reno E. Bonfanti found that
Respondents had violated the contract, the Act and the regulations
by failing to pay the proper health and welfare benefits and that
Respondents violated the recordkeeping provisions of the contract,
the Act and section 4.6(g) of the [2]
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[3] Regulations by failing to maintain adequate and accurate records.
The ALJ also found that there were no unusual circumstances or mitigating
factors such as would warrant relief from debarment.
Respondents appealed the ALJ's decision, arguing primarily
that the violations found by the ALJ were erroneous because they
were supported only by the hearsay testimony of the Department of
Labor's investigators. Respondents also argue that violations
relating to late health and welfare payments to the union, as
opposed to nonpayments, are not violations of the Act and that, at
worst, such late payments were de minimis. Finally, Respondents
argue that the ALJ erred in failing to find the existence of
"unusual circumstances" to relieve Respondents from the debarment
provisions of the Act. The Department of Labor's Associate
Solicitor for Fair Labor Standards filed a detailed Reply to
Respondents' Exceptions.
Respondents' Violations
Compliance Officer (C.O.) Martin Murray, of the Department of
Labor's Wage and Hour Division, conducted an investigation in this
case during February and March of 1982. C.O. Murray determined
that employees were working more hours than were actually shown on
Respondents' payroll records and that health and welfare payments
were not made to a number of eligible employees. D. and O. at 2.
Mr. Dillon prepared checks for payment of back wages to the
employees and these checks were distributed to the employees by the
Wage and Hour Division. [3]
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[4] Mr. Dillon then sent letters to these employees advising them not
to cash the checks. The letter to Bob Coelho, for example, from John
J. Dillon dated June 3, 1982, stated the following:
The Wage and Hour Department of the U.S. Government
picked your name off our Sign In sheets and processed a
Health & Welfare amount to you of $66.81. Please return
this check to me immediately upon receipt. DO NOT CASH
the check.
Exh. C-16(c). This is a clear demonstration of Mr. Dillon's
disregard for fulfilling his commitment to pay the back wages as he
agreed to do.
During C.O. Murray's investigation, Mr. Dillon referred to a
previous SCA proceeding in the Philadelphia, Pennsylvania, area.
It was disclosed that Department of Labor Administrative Law Judge
Julius Johnson issued a decision dated March 4, 1980, recommending
that John Dillon, individually, and his company which was named
Dillon Total Maintenance, Inc., be debarred from future contracts.
That decision became final when no appeal was taken and Mr.
Dillon's name appeared on the Comptroller General's list of
ineligible bidders from July 15, 1980, until July 15, 1983. Mr.
Dillon has maintained that he was not aware of his debarred status
because he says he did not receive a copy of the ALJ's decision nor
any notification of his debarment due to the documents being sent
to a wrong address. Mr. Dillon moved to Garden City, New York,
during the first quarter of 1980, Hearing Transcript (T.) at 392,
and changed the company's name to Cycle Building Maintenance, Inc.
Apparently the FAA was unaware of Dillon's ineligibility and
awarded him contracts. [4]
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[5] ALJ Johnson's decision, Exh. C-11(A), found that violations
included paying less than the rates required by the Wage
Determination, failure to pay fringe benefits, and failure to
maintain required records. The ALJ also found that "[R]espondents
have had at least three Service Contracts prior to the current
investigation. Investigations under these earlier contracts
revealed at least two instances of SCA violations (Tr. 48-52)."
Exh. C-11(A) at 6.
Subsequent to C.O. Murray's investigation in February and
March of 1982, a second Compliance Officer, Horace Jackson,
conducted an investigation initiated on the basis of a complaint
that certain employees of Respondents were fired for refusing to
return to Cycle, the checks distributed by the Department of Labor
as a result of Mr. Murray's investigation. D. and O. at 4; T. at
156. Although the investigation was not sufficient to link the
discharge of two employees to the company's request that they
return the checks, C.O. Jackson found that Mr. Dillon did not come
into compliance as he had promised during Mr. Murray's
investigation, but had continued his violative practices. /FN2/
Specifically, for example, Frank Cox was a full time employee of
Cycle who was entitled to $90.00 per month health and welfare
benefits. C.O. Jackson testified as follows: [5]
/FN2/ Under a consent judgment entered by the United States
District Court for the Eastern District of New York Respondents
paid back wages of $700 to Robert Coelho and $300 to Eric Ammon and
were permanently enjoined from violating Section 15(a)(3) of the
Fair Labor Standards Act. Exh. C-20. [5]
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[6] Q With the exhibit in front of you, if that
helps you in anyway, would you describe to the
Court the discrepancies that you found?
A There were several different discrepancies.
One, Frank Cox was an employee of the firm at
the Islip MacArthur Airport. The -- both the
sign-in sheets and the employee testimony
indicated that he worked a 40 hour week, for
which he was entitled to $90 per month health
and welfare benefits. The health and welfare
benefits that were paid into the Union for him
were for a part-timer at the rate of $17 per
month.
This is the same violation that was found in
the previous investigation that was conducted
by Martin Murray and this was directed to the
attention of the firm and some seven months
later, this violation still existed. That was
one.
T. at 179, 180.
C.O. Jackson's investigation disclosed continuing violations
with regard to Robert Coelho despite Mr. Dillon's agreement to
comply at the conclusion of C.O. Murray's investigation. T. at 74.
Mr. Dillon stated that he had an "accommodation" with Mr. and Mrs.
Coelho wherein Mrs. Coelho would be shown on the payroll as a full
time employee so that she would be eligible for full medical
benefits while both she and Mr. Coelho actually worked part time.
/FN3/ See also Exh. C-10(A). [6]
/FN3/ Respondents' claim that this "accommodation" was necessary
so that Mrs. Coelho could appear to be a full time employee and,
thus, eligible for full medical benefits. It is noted, however,
that Mr. Zigfried Zimmerman was employed by Respondents on a part
time basis and according to a letter from Mr. Dillon to the Wage
and Hour Division, Zimmerman was paid full time benefits. In
referring to Mr. Zimmerman's status, Mr. Dillon states "[A]lthough
he was employed part time CYCLE agreed to pay full time benefits
for his Health & Welfare to the Union." Thus, it appears that Mr.
Dillon could have paid full time benefits to a part time employee
such as Mrs. Coelho. Exh. C-10(c). [6]
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[7] Mr. and Mrs. Coelho both were employed by Respondents
during the period November 26, 1981, through October 28, 1982. It
was not until October 28, 1982, that Mr. Coelho was put on the
payroll, T. at 319, 320, several months after C.O. Murray advised
Mr. Dillon of the Act's requirements and after C.O. Jackson made
his first contact with Mr. Dillon on September 28, 1982. T. at
484. This was a clear violation of the Act's wage, fringe benefit
and recordkeeping provisions. Mr. Dillon ignored the Department of
Labor's determination that a violation existed with regard to Mr.
Coelho. It is apparent that Mr. Dillon's response was to make no
serious attempt to comply. Instead, he proceeded to retrieve the
back-wage monies which he had agreed to pay for the violations
found by C.O. Murray, by coercing his employees. Exh. C-16(a)(b)
and (c).
The ALJ cites further examples of Respondents['] continuing
violations in his decision such as failing to pay employees Donald
Kolb, William Pritchard, and Arthur Smith health and welfare
payments, T. at 363, 365, 370, and failing to pay health and
welfare benefit payments into the union fund on a timely basis. T.
at 361; Exh. C-3.
Respondents' Exceptions
I reject Respondents' argument that hearsay testimony is
insufficient to support the ALJ's findings. As the Associate
Solicitor's reply to Respondents' exceptions explains, it is a
well-settled principle that hearsay evidence is admissible in [7]
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[8] administrative proceedings as long as the evidence upon
which the decision is ultimately based is both substantial and has
probative value. Carter-Wallace. Inc. v. Gardner, 417 F.2d 1086
(4th Cir. 1969); Ernest Roman, individually and Contract
Maintenance, Inc., SCA-275, November 6, 1974, affirmed by Decision
of the Assistant Secretary, August 13, 1975. Testimony by two
experienced Wage and Hour Compliance Officers, T. at 33, 34, 179,
180, in addition to payroll records and other documentary evidence,
see especially Exhs. C-4(b), C-8(A-5, A-7), C-10(A), C-13, clearly
meet these criteria.
Respondents' argument that a failure to pay fringe benefits
promptly does not constitute a violation or is, at most, a de
minimis violation, is without merit. ALJ Bonfanti found that ten
Cycle employees were due health and welfare benefits during October
and November of 1982. Respondents did not pay these benefits into
the fund until January 13, 1983, even though the contract expired
November 21, 1982. This was one of numerous findings of failure to
pay fringe benefits. A failure to pay either a monetary wage or a
FB wage promptly must constitute a current violation until it is
ultimately paid. 29 C.F.R. [sec] 4.165(b). Respondents were in
violation of the FB provision of the Act from the time the FB
payments were due until they were paid. Late payment may rectify
the situation but it does not void the violation. Respondents have
a history of failing to pay fringe benefits, Exh. C-11(a) at 6.
When taken as a whole, the fringe benefit violations are not de
minimis. [8]
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[9] Turning to Respondents' argument that the ALJ erred in
failing to find the existence of "unusual circumstances" to grant
relief from debarment, guidelines for determining what constitutes
"unusual circumstances" have been set forth in Washington Moving
and Storage Co., SCA-168, Decision of the Assistant Secretary,
affirmed by the Secretary (March 12, 1974), as follows:
Whether unusual circumstances are present in a case
within the meaning of the Act must be determined on the
basis of the facts and circumstances of the particular
case. Some of the principal factors which must be
considered in making this determination are whether there
is a history of repeated violations the Act; the nature,
extent, and seriousness of past violations; whether the
violations were willful or the circumstances show there
was culpable neglect to ascertain whether certain
practices were in compliance or culpable disregard to
whether they were or not, or other culpable conduct (such
as deliberate falsification of records); whether the
Respondent's liability turned on bona fide legal issues
of doubtful certainty; whether the Respondent has
demonstrated good faith, cooperation in the resolution of
the issues, and the desire and intention to comply with
the requirements of the Acts; and the promptness with
which employees were paid the sums determined to be due
them. It is clear that the mere payment of sums found
due employees after an Administrative proceeding, coupled
with an assurance of further compliance, is not in itself
sufficient to constitute unusual circumstances warranting
relief from the ineligible list sanction. It is also
clear a history of recurrent violations of identical
minimum wage or recordkeeping provisions does not permit
a finding of "unusual circumstances." On the other hand
where a bona fide legal question of doubtful certainty
exists, and an employer reasonably chooses to litigate
such question in order to resolve it, this should not
prevent a finding of "unusual circumstances."
Further explanation and codification to the consideration of the
existence of unusual circumstances as set forth in that case is
found in 29 C.F.R. [sec] 4.188(b). [9]
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[10] Upon review and consideration of the record and applying
the guidelines in Washington Moving and Storage and the above
referenced regulations, I find that Respondents have failed to
carry their burden of demonstrating the existence of "unusual
circumstances." Respondents' history of recurrent violations
prevents such a finding. Two previous instances of SCA violations
referenced by ALJ Johnson, ALJ Johnson's decision finding a third
instance of violations, violations found by ALJ Bonfanti to have
occurred in both C.O. Murray's investigation and continuing
violations reported by C.O. Jackson identify a long history of
violations. Respondents argue that since they did not receive the
prior debarment decision, such decision is a legal nullity. The
fact is that Respondents never challenged that debarment, even when
they became aware of it. Moreover, as ALJ Bonfanti recognized
"[t]hose violations are part of the relevant history in this case."
D. and O. at 7. Therefore, there exists a clear history of
multiple violations which preceded this proceeding, violations
which were the basis for a hearing in 1979, and two instances of
violations previous to that.
While the dollar amount of these violations may be less than
most violations wherein debarment is imposed, the recurrent nature
of the violations and Respondents' refusal to comply despite
assurances of compliance, do not permit a finding of unusual
circumstances. Where an employer has a history of repeated
violations, a finding of unusual circumstances is not [10]
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[11] in order, even when the dollar value of the violations is
relatively small. See Dynamic Enterprises, Inc., SCA-157, Decision
of Administrative Law Judge, July 19, 1974, affirmed, Decision of the
Assistant Secretary, January 6, 1976. See also Aarid Van Lines.
Inc., 33 WH 1196, June 14, 1976, where there were no monetary
violations but repeated violations of the recordkeeping provisions.
Cf. Handyman Building Maintenance Co., etc., 85-SCA-22, Final
Decision and Order adopting ALJ's Decision and Order, September 27,
1988, where ALJ finds violations "extensive in the sense that many
employees ... were affected, even though the dollar amounts were
not that high compared to the total amount of the contracts ...."
ALJ's D. and O. at 4.
In support of his conclusion that the test for "unusual
circumstances" was not met, ALJ Bonfanti noted Mr. Dillon's
testimony that he would breach the contract in certain areas to
save money. D. and O. at 7. Respondents take exception to that
conclusion, arguing that Mr. Dillon's statement was taken out of
context. A review of the transcript indicates that the ALJ
reasonably interpreted Mr. Dillon's testimony as a willingness to
breach a contract if it saved him money.
The ALJ's reference was to pages 454 and 455 of the transcript
which involved the cross examination of Mr. Dillon by the attorney
for the Solicitor's Office.
A I had no way of knowing when that man was
needed. He could have slept all night. And
finally -- you have no way of knowing. It's
just a ghost shift. [11]
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[12] It's not a job, okay. I didn't even have to
have the man there, technically, you follow
me?
Q You didn't have to have a man there? I
thought your contract required that you have
the facility covered 24 hours.
A It did, but if he wasn't there, they would
make a deduction out of my pay at $5.85 an
hour, which is less than what it cost me to
pay him that $5.85 an hour. Do you
understand. It cost me more money -- it cost
me less money not to have a man there than it
did to put a man there. Do you understand
that?
Q So you would breach the contract if it cost
you less?
A In certain areas, yes, sir. Wouldn't you as a
businessman?
T. at 454-455.
Dillon has consistently demonstrated this philosophy by
neglecting or delaying timely payments to the union, by paying less
in fringe benefits than required, by not showing employees on his
payroll record and by requiring employees to return back wages
after ostensibly agreeing to pay them. The record bears out the
ALJ's observation that "Respondent demonstrated a failure to
appreciate due regard to the law designed to protect employees."
D. and O. at 7. Moreover, this refusal by Respondents to comply
with the various requirements which were well-known to Dillon
constitutes the very "willful" and "other culpable conduct (such as
deliberate falsification of records)," Washington Moving and
Storage, which raise an insurmountable bar to finding "unusual
circumstances". In summary, I find that Respondents have not
demonstrated the existence of unusual circumstances as required to
warrant [12]
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[13] relief from the debarment provisions of Section 5(a). The
findings of fact contained in the ALJ's decision are supported by
a preponderance of the evidence and the conclusions of law and order
contained in the D. and O. are proper and in accordance with applicable
law.
Accordingly, I affirm the ALJ's decision that the Secretary of
Labor take no affirmative action to relieve the Respondents, Cycle
Building Maintenance, Inc., and John J. Dillon, individually, from
the ineligible list sanction provided for by Section 5(a) of the
Service Contract Act. 41 U.S.C. [sec] 354(a). Respondents' names
shall be placed on the list of ineligible bidders in accordance
with that provision of the Act and the Comptroller General will be
notified accordingly.
SO ORDERED.
[Dennis E. Whitfield]
Deputy Secretary of Labor
Washington, D.C. [13]
