DATE: December 2, 1991
CASE NO. 90-SCA-OM-1
IN THE MATTER OF
NEEB-KEARNEY AND COMPANY, INC.,
and
ADMINISTRATOR, WAGE AND HOUR DIVISION,
EMPLOYMENT STANDARDS ADMINISTRATION,
UNITED STATES DEPARTMENT OF LABOR.
BEFORE: THE DEPUTY SECRETARY OF LABOR [1]
FINAL DECISION AND ORDER
This case is before me pursuant to the McNamara-O'Hara
Service Contract Act of 1965, as amended (MOSCA or the Act),
41 U.S.C. §§ 351-358 (1988), and implementing
regulations,
29 C.F.R. Parts 4, 6, and 8 (1991). At issue is whether the
Acting Administrator, [2] Wage and Hour Division, Employment
Standards Administration, reasonably denied a request for a
hearing under Section 4(c) of the Act, 41 U.S.C. § 353(c),
and
29 C.F.R. § 4.10.
STATEMENT
Under the MOSCA, successor service contractors are obligated
to pay wages and furnish fringe benefits not less than those
provided under a predecessor contract subject to a collective
bargaining agreement unless the Secretary finds that the wages
and benefits "are substantially at variance with those which
prevail for services of a character similar in the locality."
Section 4(c), 41 U.S.C. § 353(c). [3] A finding of
substantial variance may be entered "after a hearing in
accordance with regulations adopted by the Secretary . . . ."
Id. Although the contracting agency or other "affected or
interested" persons, such as contractors or prospective
contractors, may request that the Administrator refer a matter
for a hearing, 29 C.F.R. § 4.10(b)(1)(i),
[n]o hearing will be provided . . . unless the
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Administrator determines from information available or submitted
with a [hearing] request . . . that there may be a substantial
variance between some or all of the wage rates and/or fringe
benefits provided for in a collective bargaining agreement to
which the service employees would otherwise be entitled by virtue
of the provisions of section 4(c) of the Act, and those which
prevail for services of a character similar in the locality.
29 C.F.R. § 4.10(b)(ii)(2). Here, the Administrator denied
a hearing request by Neeb-Kearney and Company, Inc. (Neeb-
Kearney), citing the absence of convincing evidence that a
variance existed. Administrative Record (R.), Tab A at 2.
A. Statutory Framework
MOSCA Section 2 requires every Federal government service
contract to contain a provision specifying minimum monetary wages
to be paid and fringe benefits to be furnished to the various
classes of service employees engaged in performing the contract.
The wages are "determined by the Secretary . . . in
accordance with prevailing rates for such employees in the
locality . . . ." The benefits specified are those
determined by the Secretary "to be prevailing . . . ." 41 U.S.C.
§ 351(a)(1) and (2). In addition, the contract must state,
inter alia, the Federal wage board rates which would be paid to
the classes of employees under the Prevailing Rate Systems Act, 5
U.S.C. §§ 5341-5349 (1988), and the Secretary must
"give due consideration to [these] rates in making the wage and
fringe benefit determinations specified in this section." 41
U.S.C. § 351(a)(5). However, in the event that the service
employees performing the contract are covered by an arm's-length
collective bargaining agreement, this "prevailing rate" procedure
does not apply. Instead, the wage determination would specify
the negotiated wages and fringe benefits, including any
prospective increases, provided by the collective bargaining
agreement. 41 U.S.C. § 351(1)(1) and (2).
MOSCA Section 4(c), 41 U.S.C. § 353(c), imposes on
successor contracts an obligatory floor for wages and
fringe benefits in the event that the predecessor contract has
specified collectively-bargained rates. Wages paid and benefits
furnished under a successor contract must be greater than or
equal to those provided under the predecessor contract. The
employer obligation reads:
No contractor or subcontractor under a contract, which
succeeds a contract subject to this chapter and under
which substantially the same services are furnished,
shall pay any service employee under such contract less
than the wages and fringe benefits, including accrued
wages and fringe benefits, and any prospective
increases in wages and fringe benefits provided for in
a collective-bargaining agreement as a result of arm's-
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length negotiations, to which such service employees would have
been entitled if they were employed under the predecessor
contract . . . .
Section 4(c) also contemplates circumstances in which the
obligation may be suspended. Its proviso specifies that the
successorship obligations do not apply "if the Secretary finds
after a hearing . . . that such wage and fringe benefits are
substantially at variance with those which prevail for
services of a character similar in the locality." (Emphasis
added.)
The collective-bargaining rate alternatives were
incorporated into Section 2(a)(1) and (2) through the MOSCA's
1972 amendment, and Section 4(c) also was enacted at that time.
The Senate Report explains:
Section 2(a)(1) and 2(a)(2) of the act have been
amended, and a new subsection (c) has been added to
section 4 to explicate the degree of recognition to be
accorded collective bargaining agreements covering
service employees, in the predetermination of
prevailing wages and fringe benefits for future such
contracts for services at the same location. . . .
The committee appreciates the importance of decasualizing
the service contract industry -- a labor intensive and
otherwise casual and transient industry.
S. Rep. No. 1131, 92nd Cong., 2d Sess., reprinted in 1972
U.S. Code Cong. & Admin. News (USCAN) at 3537 (emphasis omitted).
Thus wages and benefits in effect as the result of arm's-length
negotiation initially govern Section 2(a) wage predeterminations.
The Senate Report also makes clear that Congress intended
that the successorship obligation would attach in the usual
circumstance.
Ordinarily, where service employees are covered
by a collective bargaining agreement, a successor
contractor furnishing substantially the same services
at the same location will be obligated to pay to such
service employees no less than wages and fringe
benefits required by such agreement. This requirement
would likewise apply to prospective wages and fringe
benefits.
The term "accrued . . . fringe benefits" is interpreted
to mean those benefits, such as accrued vacation pay or
sick leave, to which an employee has become entitled by
virtue of employment on predecessor contracts . . . .
There are certain unusual circumstances where
predetermination of wages and fringe benefits contained
in such a collective agreement might not be in the best
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interest of the worker or the public.
Thus, service employees should be protected against
instances where the parties may not negotiate at arms
length.
Id. (Emphasis added.) The report thereafter cites
circumstances resulting from collusion or unequal bargaining
power and observes that predetermined rates possibly might tend
to deviate substantially from actual prevailing rates "over a
long period of time . . . ." It concludes by stating that the
dual objectives of protecting service contract workers and
safeguarding other legitimate government interests is best
achieved by requiring the Secretary to predetermine collectively-
bargained wage and fringe benefits, except where she
finds, after notice to interested parties and a hearing, a "clear
showing" of substantial variance. In the Matter of
Applicability of Wage Rates Collectively Bargained by Big Boy
Facilities, Inc., etc., Case No. 88-CBV-7, Dep. Sec. Dec.,
Jan. 3, 1989, slip op. at 3-10.
B. Facts
The instant case concerns the Military Traffic Management
Command (MTMC) [4] Solicitation No. DAHC24-89-R-0006 of a
contract for the provision of stevedoring and related terminal
services at the MTMC Gulf Outport, New Orleans, Louisiana, for
the period August 1, 1989, through July 31, 1990. Neeb-Kearney,
a prospective contractor, asserts that the collectively-bargained
wages and benefits for longshoremen incorporated in Wage
Determination No. 73-71 (Rev. 10) [5] are substantially at
variance with those prevailing for similar services in the
locality. Neeb-Kearney's evidence of comparative prevailing
wages consists of the Bureau of Labor Statistics (BLS) Area Wage
Survey for the New Orleans, Louisiana, Metropolitan Area. Neeb-
Kearney cites particularly to the BLS data for employment
classifications engaged in material movement. See R., Tab. I at
33-34.
1. The Contract Services
Longshoremen generally service either "conventional" or
"container" ships. Breakbulk (loose) cargo is loaded onto and
unloaded from conventional ships at the pier. In servicing
container ships, workers move large unopened containers, packed
with cargo, on and off ships at the pier. [6] "Stuffing"
(loading) and "stripping" (unloading) the containers may be
performed either at the pier or elsewhere. Containers may be
attached to a truck chassis or railcar for transport to and from
the pier. At the MTMC Gulf Outport, longshoremen perform the
container stuffing and stripping portions of the sequence. They
also load breakbulk cargo onto and unload breakbulk cargo from
trucks [7] and railcars.
The ILA explains the evolution of longshore work at the MTMC
[PAGE 5]
Gulf Outport as follows:
Originally, ships owned by the federal government would
dock at the MTMC waterfront pier, and cargo would be
unloaded, checked and warehoused by longshoremen. The
vessels would also be loaded by longshoremen . . . .
Trucks would be brought up to the ship, the cargo would
be removed from the trucks and placed onto pallets
. . . and then lifted on board the government ships for
placement in [the] hold. In . . . the late 1970's, the
federal government . . . began shipping . . . goods in
containers. [C]ontainer carriers are docked at the
France Road wharf in the Port of New Orleans, where the
containers are thereafter lifted to and from the ships
by ILA labor. The containers are transported to the
MTMC waterfront facility [where longshoremen] strip or
stuff the containers [and] check . . . and . . .
warehouse the goods.
R., Tab L at 4.
Materials loaded on and discharged from railcars and trucks
at the MTMC Gulf Outport include small arms and ammunition;
hazardous cargo; piling, poles and logs; lumber; metal products,
e.g., propellers, anchors, tank and tractor treads,
bulldozer blades, pontoons, revetments; household goods;
government vehicles including ambulances, tractors, construction
equipment, personnel carriers, boats, trailer-mounted machinery;
privately-owned vehicles (POVs); and cargo transporters,
e.g., SEAVANS, MILVANS. R., Tab C at B-1 through B-4.
Materials loaded into and unloaded from cargo transporters
include palletized and unitized cargo, government vehicles, POVs,
and household goods. R., Tab C at B-5. In loading and
discharging these materials, longshoremen employ trucks;
forklifts; tractors; toploaders, e.g., for SEAVANS and
MILVANS; and cranes. R., Tab C at 4-8.
Detailed performance and management criteria apply to
loading and unloading operations. See R., Tab C at C-52
through C-57 (railcars); C-58 through C-64 (trucks); C-65 through
C-75 (container freight station; distinct processes for SEAVAN,
MILVAN, CONEX, and MULTIWALL transporters). Vehicles are
processed according to specific criteria addressing security,
maintenance, time frames, recordkeeping, inspection, defueling,
depowering, and blocking. R., Tab C at C-76 through C-87 and
Figures 3 and 4. Handling and security restrictions apply to
arms, ammunition, and explosives, e.g., antitank and
antipersonnel landmines, hand grenades, grenade launchers,
demolition equipment, incendiary destroyers, fuel thickening
compound, missiles and rockets, rocket launchers, riot control
agent, mortars. R., Tab C at C-7 through C-12, C-15 through
[PAGE 6]
C-17. Longshoremen receive straight time hourly rates of $12.00,
$14.00, or $18.00, depending on the particular work performed.
Fringe benefits are paid at $6.615, $6.70, or $7.065. Tabs H
and M.
2. The BLS Data
Neeb-Kearney posits the October 1988 BLS Area Wage Survey
for the New Orleans, Louisiana, Metropolitan Area as evidence
that a substantial variance exists. The survey lists
descriptions for work performed by the following material
movement classifications: truckdriver, shipper/receiver,
warehouseman, order filler, shipping packer, material handling
laborer, and power-truck operator. R., Tab I at 33-34. Data are
obtained from a sampling of employers in six industry divisions:
"Manufacturing; transportation, communication, and other public
utilities; wholesale trade; retail trade; finance, insurance, and
real estate; and services. Government operations and the
construction and extractive industries are excluded." R., Tab I
at 17. Wage and benefit data from companies performing
stevedoring and related terminal services also are excluded from
consideration under the material movement classifications. R.,
Tab A at 2, Tab I at 34. The BLS data show that the mean hourly
wage rate for truckdrivers is $9.17; for receivers -- $6.82; for
warehousemen -- $9.56; for warehousemen in the manufacturing
industry -- $11.63; for order fillers -- $5.97; for material
handling labors -- $8.78; and for forklift operators -- $8.57.
ANALYSIS
The Administrator denied Neeb-Kearney's hearing request due
to its failure to show that a substantial variance may exist.
29 C.F.R. § 4.10(c). The Administrator found the BLS survey
unconvincing because it excluded data from companies performing
stevedoring and related terminal services. R., Tab A at 2.
Neeb-Kearney also failed to show that such services were
performed by nonunion and International Brotherhood of Teamsters
labor, a factor which similarly influenced the Administrator in
denying the hearing request. Id. In reviewing the
Administrator's determination not to refer the matter for
hearing, I "may affirm, modify or set aside, in whole or in part,
the decision under review . . . ." 29 C.F.R. § 8.9(b). I
may modify or set aside findings of fact only when they are not
supported by a preponderance of the evidence. Id. Upon
consideration, I am not persuaded that the Administrator acted
unreasonably.
MOSCA Section 4(c) requires a comparison of negotiated rates
with those which prevail in the locality for work of similar
character. No discrete comparison rate is conclusive. "Federal
wage board rates and surveys represent an important measure in
gauging whether a given variance is 'substantial,' as do the BLS
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surveys and other relevant data, including evidence of other
collectively-bargained wages and fringe benefits." United
Healthserv, slip op. at 19. [8] Here, Neeb-Kearney offered
only the BLS survey for purposes of comparison. That survey
expressly excluded data from employers performing the breakbulk
and container loading and unloading services comprising
"stevedoring and related terminal services." The record shows a
significant portion of these services to be provided by ILA
labor. Approximately 90 percent of all cargo in the Port of New
Orleans is handled by ILA Local 3000's longshoremen and related
ILA locals including clerks and checkers. R., Tab L at 2.
Moreover, Local 3000's members handle 90 percent of all cargo
containers at the Port. Id. Documentation is lacking
that nonILA labor performs significantly in supplying any portion
of the type of services required under the contract in the New
Orleans metropolitan area. As the party requesting that the
matter be referred to the Chief Administrative Law Judge for a
hearing, Neeb-Kearney assumed the burden of showing a possible
substantial variance. A mere piece of a frame of reference and
subject to shortcomings in the particular circumstances, the BLS
survey alone simply was inadequate to meet the requisite showing.
Accordingly, I decline to direct that the Administrator
refer the issue for a hearing. 29 C.F.R. § 4.10(c). Neeb-
Kearney's petition hereby IS DISMISSED.
SO ORDERED.
Deputy Secretary of Labor
Washington, D.C.
[ENDNOTES]
[1] 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 (1991).
[2] At the time of the challenged action, the position of
Administrator, Wage and Hour Division, was vacant, and Nancy M.
Flynn was the Acting Administrator.
[3] In enacting a successorship provision, Congress sought to
"decasualize" the service contract industry so that workers could
preserve gains previously achieved. In the Matter of Wage
Rates Collectively Bargained by United Healthserv, Inc., etc.
(United Healthserv), Case Nos. 89-CBV-1, et al., Dec.
and Remand Order, Feb. 4, 1991, slip op. at 9-10, 19, 21 (Section
4(c) was directed at achieving a degree of labor stability and
economic security for employees by maintaining bargained-for wage
levels in providing ongoing services in the peculiar circumstance
of successive contracts and employers).
[4] The MTMC constitutes "the single manager operating agency
for military traffic, land transportation, and common-user ocean
terminals." R., Tab C at C-21. "Military traffic" is Department
of Defense (DOD) "personnel and material to be transported."
Id.
[5] The wage determination incorporates the wages and benefits
negotiated in the collective bargaining agreement between the
International Longshoremen's Association (ILA) and Ryan-Walsh
Stevedoring, Inc. (Ryan-Walsh), the incumbent contractor. Since
1973, the contracting agency's request for services has been
submitted each year with reference to the ILA's collective
bargaining agreement, and Wage Determination 73-71 with revisions
has been issued each year in accordance with the successorship
provisions of Section 4(c). R., Tab A at 1.
[6] The ILA describes the processes as follows:
Containers are large, reusable metal receptacles . . .
capable of carrying upwards of thirty thousand pounds
of freight, which can be moved on and off an ocean
vessel unopened. Container ships are specially
designed and constructed to carry the containers, which
are affixed to the ship's hold . . . . Before the
introduction of container ships, and as is still the
case with conventional vessels, trucks delivered loose
. . . "break-bulk" cargo to the head of the pier. The
cargo was then transferred piece by piece from the
truck's tailgate to the ship by longshoremen [who]
checked the cargo, sorted it, placed it on pallets and
moved it by forklift to the side of the ship, and,
lifted it by means of a sling or hook into the ship's
hold. This process was reversed for cargo taken off
incoming ships.
R., Tab L at 2.
[7] For example, longshoremen may load and secure export
breakbulk cargo to be shipped on an ocean carrier's flatbed
trucks. R., Tab C at C-64, No. C.9.1.7.
[8] Seeid. at 2-3 n.3, 16-22 and n.9 for
discussion of the various rates.
