ON APPEAL from the United States District Court for the Southern District of
Ohio
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Decided and Filed February 13, 1997
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Before: MARTIN, Chief Judge; KEITH and BATCHELDER,
Circuit Judges.
BOYCE F. MARTIN, JR., Chief Judge. The United States
Department of Labor appeals the district courts reversal of its decision to bar
Elaines Cleaning Service from bidding on future government contracts for a period of
three years.
In March of 1986, Elaines Cleaning Service entered into a contract with
the federal government to provide custodial services at Area B of the Wright
Patterson Air Force Base in Dayton, Ohio. Under the McNamara-OHara
Service Contract Act of 1965, 41 U.S.C. § 351 et seq., those who
contract for the provision of services to the United States must pay their
employees minimum wages and fringe benefits, as designated by the Secretary of
Labor. 41 U.S.C. § 351(a)(1)-(2). On three occasions during the
performance of the contract, Elaines failed to pay benefits to its
employees as required by the contract. In two out of the three instances,
Elaines failed to pay fringe benefits. The other transgression occurred
when Elaines did not disburse holiday pay to its employees who did not
report to work the day before or the day after a particular holiday. Although
upon notification Elaines promptly rectified its errors, the Department
of Labor charged Elaines with violating the Service Contract Act and the
regulations promulgated under that statute.
Under the Service Contract Act, a contractor who violates the
provisions of the Act faces a three-year ban on accepting further government contracts. The
only exception to the three-year ban arises if unusual
circumstances surround the violation. Because Elaines admitted its
violations, the only issue before the ALJ was whether Elaines qualified
for the unusual circumstances exception.
Finding culpable conduct and no facts that suggested unusual
circumstances, the ALJ refused to extend the unusual circumstances exception to the facts of
this case. The Board of Service Contract Appeals affirmed the ALJs
opinion. Elaines appealed the decision of the Board to the district
court. The district court granted summary judgment to Elaines because it
found that the Boards decision to debar Elaines was not supported
by a preponderance of the evidence. The district court perused the facts of this
case and found that the governments argument against extending the
exception to Elaines was both arbitrary and capricious. The Department
of Labor now argues that its characterization of the case was neither arbitrary
nor capricious and that the district court improperly substituted its judgment
for the reasonable interpretation of the Secretary of Labor.
We review the district courts grant of summary judgment
de novo. Terry Barr Sales Agency, Inc. v. All-Lock Co., Inc., 96 F.3d 174 (6th
Cir. 1996). Here, we are mindful of the same constraints which bound the
district courts review of the Department of Labors decision. The
findings of fact underlying the Departments determination shall be
conclusive if supported by a preponderance of the evidence, and we must sustain
that determination in all other respects unless it is arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with the law. ASG
Industries, Inc. v. U.S., 548 F.2d 147, 151 (6th Cir. 1977).
Section 5(a) of the Service Contract Act provides that a service
contractor
who violates the Act shall be debarred except in unusual
circumstances. Although the Act does not define what constitutes
unusual circumstances, the regulations at 29 C.F.R. § 4.188(b) allude to
criteria that may indicate when unusual circumstances exist. Compliance
history, cooperation, repayment status and chances of future compliance are all
factors in this subjective, fact-based determination. Certainly neither
willful nor culpable conduct may fall within the unusual circumstances
exception.
Elaines claims that its first fringe benefit infraction was the
result of an oversight. The critical provision was detailed in a footnote, and
Elaines explained that it was not on the lookout for such a mandate. The
Board rejected Elaines plea of innocent negligence, declared
Elaines conduct culpable, and affirmed the three-year disbarment.
Elaines second fringe benefit violation resulted from a lack
of funds. Elaines knew that it was obligated to pay its employees an increase in
fringe benefits financed by the Air Force, but the unexpected increase caught
Elaines short of assets. As a result, Elaines disbursement of the
increase depended completely upon the arrival of the Air Force payments. The
Air Force was late in sending the payments to Elaines so Elaines
was late in supplying the benefits to its employees. The Board did not accept
Elaines explanation.
Elaines final violation of the Service Contract Act arose
from
Elaines reliance on the advice of its bookkeeper regarding holiday pay.
Because Elaines thought that it need not disburse holiday pay to those of
its employees who did not work the day before or the day after a holiday,
Elaines mistakenly withheld a total of $600 earned by sixteen of its
employees. Although the Board acknowledged that the violation was minor, it
still found that Elaines reliance on its bookkeepers advice was
culpably negligent.
This Court must give the Department of Labors
interpretation of its own
regulation controlling weight unless plainly erroneous or inconsistent
with the regulation. Thomas Jefferson Univ. v. Shalala, 114 S. Ct.
2381, 2386 (1994) (internal quotes omitted). Here, the Departments
interpretation was entirely unreasonable.
The ALJ refused to extend the unusual circumstances exception to
the facts of
this case because he found that Elaines violations were the result of
culpable conduct. Although the most uniform interpretation of culpability
includes an element of reckless disregard or wilful blindness, because the ALJ
did not allege facts from the record to justify its decision, his most vital
determination-- what constitutes culpability --is unintelligible.
The debarment order before us is neither supported by the rationale
asserted by the Board nor the preponderance of the evidence. The Board arbitrarily
misapplied its own standards, and the district court thus correctly reversed the order of the
Board.
For the reasons stated above we AFFIRM the order of the district
court.