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CCASE:
MAINTENANCE PACE SETTERS
DDATE:
19930526
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[1] BOARD OF SERVICE CONTRACT APPEALS
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
MAINTENANCE PACE SETTERS, INC. BSCA Case No. 92-24
BEFORE: Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Anna Maria Farias, Member
DATED: May 26, 1993
DECISION OF THE BOARD OF SERVICE CONTRACT APPEALS
This case is before the Board of Service Contract Appeals on
the petition of the Acting Administrator, Wage and Hour Division
("Acting Administrator" or "Petitioner"), seeking review of the
October 1, 1987 Decision and Order ("ALJD") issued pursuant to the
McNamara-O'Hara Service Contract Act of 1965, as amended (41 U.S.C.
[sec] 351 et seq.; "SCA") by Administrative Law Judge ("ALJ")
Edward J. Murty. Petitioner has filed exceptions to the ALJ's
rulings that: 1) there was insufficient evidence to order the award
of back wages to certain employees; 2) back wage reimbursement for
the purchase of cleaning supplies was not appropriate; 3) amendment
of the complaint to increase the claim for back wages allegedly due
two employees was not in order; and 4) there existed "unusual
circumstances" to warrant relief from debarment for the
Respondents. For the reasons stated below, the ALJ's decision is
affirmed in part and reversed in part and this case is remanded to
the ALJ for additional proceedings consistent with this opinion.
I. BACKGROUND
The present disputes arose under a contract subject to the
labor standards provisions of the SCA. Contract No. F30635-81-
C-0038 required Maintenance Pace Setters, Inc. and the firm's
president, Samuel Lewis ("Respondents") to furnish janitorial
services at Griffiss Air Force Base in Rome, New York for the [1]
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[2] period April 1, 1981 through September 30, 1981. The
original term of the contract was extended for two additional one
year option periods and an extension of a single month to October
31, 1983.
Respondents' SCA compliance under the contract was
investigated by a Wage and Hour Division compliance officer ("CO").
That investigation alleged that Respondents had committed the
following violations: 1) failure to pay 32 employees holiday pay
and vacation benefits; 2) failure to pay 27 employees for all hours
worked as a result of paying predetermined amounts of hours to
complete designated tasks, regardless of actual hours worked; 3)
failure to pay for all overtime hours worked /FN1/; and 4) failure
to reimburse employees for the purchase of supplies and equipment
used in the course of their work for Respondents. At the
conclusion of the investigation, Respondents agreed with the first
finding and paid $2,038.02 to affected employees as back wages for
that violation. Respondents did not concur with the remaining
three findings but, instead, forwarded to Wage and Hour a payment
of $11,324.51 to be held in escrow pending resolution of the
allegations.
A complaint charging violations of the SCA and CWHSSA was
filed on December 27, 1984 by the Regional Solicitor of the
Department of Labor. In its allegations of liability for back
wages, the complaint charged violations of the SCA's minimum wage
provisions and of the CWHSSA's overtime wage requirements. The
Department also charged that by virtue of the provisions "of
section 5(a) of the Service Contract Act . . . respondents . . .
may be denied the award of any contract with the United States
until three years have elapsed . . . ." No mention or charge
concerning the possibility of debarment for violations of the
CWHSSA's overtime provisions was stated in the complaint. /FN2/
II. DISCUSSION
A. Failure to pay for all hours worked
ALJ Murty denied back wage awards to eleven employees for whom
Wage and Hour had sought SCA and/or overtime wages based on their
out-of-court statements (employee interviews conducted by the CO).
The ALJ characterized all eleven as not testifying at the
hearing./FN3/ The ALJ rejected these eleven [2]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Overtime wages are due employees working on SCA contracts,
pursuant to the provisions of the Contract Work Hours and Safety
Standards Act (40 U.S.C. [sec] 327 et seq.; "CWHSSA").
/FN2/ CWHSSA is a Davis-Bacon [*] Related [*] Act (see 29 C.F.R.
5.1) and debarment for a term not to exceed three years may be
imposed for "willful" or "aggravated" violations of that statute.
/FN3/ The Acting Administrator correctly notes that three of these
employees -- Johnna DiMaggio, Helen Jackson, and William Snyder --
actually did testify at the hearing. [2]
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[3] claims, giving the interview statements no weight, "both
because to do so would unfairly deprive Respondents of an
opportunity to disprove the claim and because [the ALJ was] unable
to evaluate the credibility of the person whose testimony is
actually being given." ALJD at 4.
The Acting Administrator argues that the ALJ committed
reversible error and should have awarded back wages to these eleven
employees based on the "clear pattern of SCA and CWHSSA violations
[which] emerges from the testimony of the CO and those employees
testifying. . . ." Petition for Review, p. 10. It is further
argued that the ALJ erred in denying back wage awards to three
employees (who testified at hearing) because the ALJ incorrectly
analyzed the hearing testimony of Craig Beers, Joan Williams and
George Sterpka. A "fair reading of the record," argues the Acting
Administrator, "shows the testimony of these employees to be
concise, coherent, and to the point." Id. at 8.
Upon review of the record, the Board concludes the ALJ was not
clearly erroneous in his credibility determinations concerning
employees Beers, Williams and Sterpka -- all of whom testified at
the hearing. The ALJ could reasonably view these employees'
testimony as indefinite, equivocal or unreliable. ALJD at 6, 11,
12. The Board, as an appellate body, is reluctant to set aside
credibility resolutions of an ALJ absent clear error. James Bishop
d/b/a Safeway Moving & Storage, BSCA Case No. 92-12 (Nov. 30,
1992); see, Apollo Mechanical, Inc., WAB Case No. 90-42 (Mar. 13,
1991).
The other testifying employees -- including the three who were
incorrectly characterized by the ALJ as not testifying (see n.3.,
supra) -- did present evidence of working more hours (SCA straight
time and/or CWHSSA overtime) than those for which they were paid.
Some testified to few such hours, e.g. Patricia Koenig -- eight SCA
hours with no overtime; Glenn Misurda -- six SCA hours with no
overtime. Some testified to many uncompensated hours, e.g. Gerald
Winters -- 67.5 overtime hours and 24 holiday (SCA) hours). Other
employees (for example, Craig Beers, Paul Jaco, Joan Williams)
testified at hearing, but this evidence conflicted directly with
their employee interview statements given to the CO during his
investigation. One employee who testified at hearing (Hedrington),
did not testify to any underpayments and no back wages were found
due.
In short, there were great disparities in the practices
described by the testifying employees (some of whose testimony was
at odds with their own interview statements), and the Board
concludes that there were no patterns established which could
provide the ALJ with necessary reasonable inferences to be drawn
concerning the weight to be given the employee interview statements
for those employees who did not testify. See Anderson v. Mt.
Clemens Pottery, [3]
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[4] 328 U.S. 680 (1946); Donovan v. New Floridian Hotel, Inc.,
676 F.2d 468 (11th Cir. 1982).
B. Amendment of the complaint
The complaint initiating the ALJ proceeding was filed on
December 27, 1984. In response to an ALJ's February 11, 1985
prehearing order, the Regional Solicitor -- on April 11, 1985 --
submitted (among others) the names of employees Carl Everhart and
Glen Misurda, alleged in the prehearing response to be due $87.97
and $238.38, respectively. On December 12, 1985, the Regional
Solicitor mailed and filed a letter with ALJ Murty. That letter
(with a copy to Respondents' counsel) stated that the government
intended to prove at hearing that the two employees were in fact
due $1,687.51 (Everhart) and $1,984.65 (Misurda). The hearing in
this case commenced seven days later on December 19, 1985.
Respondents moved to strike the revised wage computations and the
ALJ reserved ruling on the motion. In his decision, the ALJ
granted the motion to strike. The Acting Administrator petitions
for review of this ruling, arguing that the amendment to the
complaint should have been permitted under SCA regulations and
"other authority."
In pertinent part, the regulation at 29 C.F.R. 6.17 governs
SCA hearing procedures and permits amendment of an SCA complaint
"when justice and the presentation of the merits are served
thereby." But the regulation does not address only justice for
employees or the presentation of the government's merits. On the
facts of this case, the Board concludes that there was insufficient
time provided by the letter notification on December 12 until
commencement of the hearing on December 19 to afford Respondents a
reasonable opportunity to address and prepare for the merits of
proposed amendment to the complaint.
The Acting Administrator argues that counsel for Respondents
never specified how his clients would be prejudiced. However,
regarding the government's letter of December 12, Respondents'
counsel did state -- during Glen Misurda's testimony -- that:
even if I knew what the total was that [the government]
was going to ask for last week, I didn't know if it was
holiday pay, vacation pay, unpaid dollars or what it was.
And now I'm getting the basis for this computation. I
don't think any of this should be admitted.
(Transcript, p. 173). Mr. Misurda was not called back as a witness
when the hearing reconvened some months later in April 1986. Also
significant regarding this issue is the fact that counsel for the
government conceded that she never provided Respondents' counsel
with a copy of the revised transcriptions: [4]
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[5] Mr. Sawicki's indication is I did not give a copy of the
new computations. I would have thought that I did, but
I evidently didn't. I certainly didn't mail him one,
that's correct.
Transcript pp. 342-343. Mr. Everhart had testified during December
1985 and it is clear on the record that counsel for Respondents had
not been provided with the revised computations at that time. That
a copy of the government's December 12, 1985 letter to the ALJ
advising of the amount of revised wages was forwarded to opposing
counsel does not detract from the government's failure to provide
the revised wage transcriptions and a specific basis for the
allegations prior to the time Mr. Everhart testified. Even if the
substance of the allegations may have remained the same, these two
proposed amended claims represent approximate a third of the total
back wages sought in this case. Under the total circumstances of
this issue, the Board cannot conclude that the ALJ abused his
discretion in ruling against Petitioner's request to amend the
complaint or that "the objecting party fail[ed] to satisfy the
court that the admission of such evidence would prejudice him in
maintaining his action or defense upon the merits." F.R.C.P.
15(b).
C. Purchase of supplies by employees
The ALJ denied the Acting Administrator's claim for back wages
allegedly due because certain employees' purchases of cleaning
supplies reduced their SCA wages below the required hourly minimum
rates. This claim was apparently applicable to seven employees in
the total amount of $193.00. The ALJ found the respective amounts
(ranging from $2.00 to $100.00) "were reasonably established as
expended . . . on supplies used in the course of employment...."
ALJD at p. 3, n.2. At hearing, Petitioner's claim was predicated
on SCA regulations requiring a contractor to make "free and clear
payments" and prohibiting "kickbacks." On these facts, however,
the Board concludes that the ALJ was correct in looking to a
similar regulation, explaining these principles in greater detail
concerning situations which arise under the Fair Labor Standards
Act, as amended (29 U.S.C. [sec] 201 et seq.; "FLSA"):
. . . [*] if it is a requirement of the employer [*] that
the employee must provide tools of the trade which will
be used in or are specifically required for the
performance of the employer's particular work, [*] there
would be a violation [*] of the Act in any workweek when
the cost of such tools purchased by the employee cuts
into the minimum or overtime wages required to be paid
him under the Act.
29 C.F.R. 531.35; [*] emphasis supplied [*]. [5]
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[6] As noted by the ALJ, no evidence at hearing indicated that
the employees were required as a condition of employment to furnish
their own supplies. ALJD at p. 3. If there had been such a policy
or practice, the amount claimed as back wages for this alleged
violation would have probably far exceeded the $193.00 which was at
issue. Nor was there consistent or clear evidence that there was
a pattern of supervisory knowledge of this extremely limited
practice occurring under the contract.
The Board disagrees with Petitioner that the ALJ read the FLSA
regulation too narrowly. The selective portion of this regulation
cited to the Board by the Acting Administrator -- on the other hand
-- presents too broad an interpretation. In fact, the Acting
Administrator's quoted version of the regulation (Petition for
Review, p. 13) completely eliminates the "requirement of the
employer" language from 29 C.F.R. 531.35. Moreover, the Board does
not see the regulation at 29 C.F.R. 4.171(e) -- making employee
expenses reimbursable when "required by . . . the nature of the
work" -- as varying this analysis. As noted above, there was no
evidence in the record that the nature of the work required
employees to make these expenditures. The record only demonstrated
that very few employees spent very little money on cleaning
supplies, given the numbers of employees, the length of the
contract and option periods, and the extensive amounts of cleaning
services (and, therefore, supplies) which were used under
Respondents' SCA contract.
D. Debarment
1. Debarment under the CWHSSA
As noted, the complaint against Respondents in this matter
(see page 2, supra), charged that back wages were due under the
CWHSSA but there was no notice charging potential debarment
liability under the CWHSSA. The parties litigated this issue. The
ALJ analyzed the CWHSSA's "willful or aggravated" standard for
debarment and ruled that debarment under the overtime statute was
not in order, given that "Respondents['] conduct did not meet the
far less stringent standard for disbarment [sic] under the SCA, .
. . disbarment [sic] under the CWHSSA is also inappropriate." ALJD
at 17.
The Acting Administrator argues that "reversal of the ALJ
would be required under [Wage Appeals Board] authorities, since the
evidence demonstrates that respondents' conduct constitutes
`aggravated or willful violations' within the meaning of CWHSSA."
Petition for Review, page 22, n.4. [6]
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/FN4/ The Wage Appeals Board has jurisdiction to hear and decide
appeals under the CWHSSA, which is a Davis-Bacon Related Act, where
overtime violations are alleged under a federal or federally-
assisted construction contract. See 29 C.F.R. 5.32; 6.34; 7.1. [6]
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[7] The Board declines to reach the merits of this issue, and
rules instead that it was error for the ALJ to consider the
question of debarment liability under the CWHSSA. The complaint,
as noted, contained no charge that CWHSSA debarment was at issue in
the proceeding below. This may have been inadvertence on the part
of the drafter, given that back wage liability was sought under the
CWHSSA overtime provisions. However, it is established that an ALJ
has authority and jurisdiction to consider and decide only those
issues specifically referred to him or her for hearing. E. B.
Fitzpatrick, Jr. Construction Corp., WAB Case No. 87-17 (July 9,
1987); see also Industrial Maintenance Service, Inc., BSCA Case No.
92-22 (Apr. 5, 1993) (an ALJ's decision and order may not exceed
granted authority).
2. Debarment under the SCA
ALJ Murty concluded that there were demonstrated "unusual
circumstances" within the meaning of the SCA and recommended that
Respondents be relieved from the sanction of a three-year
debarment. ALJD at 14-16. The Acting Administrator argues that
the recommendation against debarment should be reversed, since the
ALJ: 1) did not apply SCA regulations governing the "unusual
circumstances" test (29 C.F.R. 4.188); and 2) did not weigh the
evidence on this issue correctly. The Acting Administrator's
argument before the Board on the debarment issue is analyzed under
the framework of the applicable SCA regulations, which establish a
three-part test under which the facts of each case must be
analyzed. However, the Board notes that the Regional Solicitor's
post-hearing brief to the ALJ on the debarment issue was structured
by an analysis of case law -- Washington Moving and Storage Co.,
No. SCA 168 (Dec. of the Secretary)(Mar. 12, 1974) -- which
governed SCA debarment questions prior to final publication of 29
C.F.R. 4.188. 48 Fed. Reg. 49,762 (Oct. 27, 1983).
The Board concludes -- without reaching the merits of the
parties' contentions concerning debarment -- that it is not
appropriate to consider this question on the basis of the briefs,
record, and ALJ decision before it. The parties did not brief this
issue before the ALJ with an eye to applying the facts to the law
as established under the three-part regulatory test, which was
clearly applicable to consideration of the SCA debarment issue for
almost four years prior to the ALJ's decision. The ALJ did not
have the benefit of examining the record under the proper legal
standards for evidence and findings of fact which could have been
determinative of the issue. Accordingly, the Board will not review
this question at this time. [7]
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[8] III. ORDER
For the forgoing reasons, the decision of the ALJ is affirmed
in part and reversed in part and it is hereby
Ordered, that this case be remanded to the ALJ for additional
proceedings and findings of fact. It is first directed that the
ALJ shall make specific findings concerning back wages --if any --
due the three employees erroneously found to have not testified at
the hearing. The ALJ shall reopen the proceeding and the parties
shall have the opportunity to brief the question of SCA debarment
in light of the appropriate legal standards at 29 C.F.R. 4.188.
The ALJ may, in his discretion, reopen the record for the taking of
additional evidence. Finally, it is further
Ordered, that Respondents' funds currently held in escrow by
the Wage and Hour Division shall be disbursed to the affected
employees for whose back wages there is a final decision or
released to Respondents, as appropriate, as soon as possible.
BY ORDER OF THE BOARD:
Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Anna Maria Farias, Member
Gerald F. Krizan, Esq.
Executive Secretary [8]
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