CCASE:
McANDREWS COMPANY
DDATE:
19861003
TTEXT:
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[1] [86-32.WAB ATTACHMENT]
U.S. Department of Labor Office of Administrative Law Judges
304A U.S. Post Office and Courthouse
Cincinnati, Ohio 45202
(513) 684-3252
In the Matter of
Proposed debarment for labor
standards violations by Respondents:
McANDREWS COMPANY
Contractor
and Case No.: 86-DBA-44
ROBERT McANDREWS
Owner/President
With respect to laborers and
mechanics employed by McAndrews
Company under Veterans Administration
Project No. V-539C-384-82, Nursing Home
Care Unit, Ft. Thomas, Kentucky, and
under U.S. Housing and Urban Development
Project No. 046-35568-PM-L8-SR, YWCA,
Cincinnati, Ohio.
DECISION AND ORDER
This proceeding arises pursuant to the Order of Reference
filed by the Assistant Administrator, Wage and Hour Division,
Employment Standards Administration, charging that Respondents
committed aggravated and willful violations of the U.S. Housing Act
of 1937, as amended, 42 U.S.C. [SEC] 1437j, and the National
Housing Act, as amended, 42 U.S.C. [sec] 1715c (hereinafter the
Acts). The alleged violations consisted of failure to pay employees
the prevailing wage and falsification of payroll records. The
prevailing wage is mandated by the Davis-Bacon Act, 40 U.S.C. [sec]
276, and applied to other labor statutes through Reorganization
Plan No. 14 of 1950, 5 U.S.C. [sec] 903 and 29 C.F.R. [sec] 5.1.
The Order of Reference alleges that the violations are within the
meaning of 29 C.F.R. [sec] 5.12, and therefore, Respondents,
McAndrews Company and Robert McAndrews, should be debarred from
bidding on future contracts.
By certified mail dated February 28, 1985, Respondents were
advised by the Assistant Administrator, Wage and Hour Division, of
the specific allegations of violations and the conclusion that the
violations were aggravated and willful within the meaning of [sec]
5.12. Respondents were advised of their right to request a hearing
within 30 days. [1]
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[2] By letter dated March 28, 1985, Respondents requested a
hearing and asserted that there were mitigating circumstances that
would make debarment inequitable.
The Order of Reference was then filed on December 6, 1985, and
this case was transmitted to the Office of Administrative Law
Judges for a formal hearing. A hearing was held on May 28, 1986, in
Cincinnati, Ohio, at which time the parties were given full
opportunity to present evidence. Both parties also submitted
post-hearing briefs.
Prior to the hearing, the parties conferred and agreed on a
stipulation of most of the salient facts, except those in regard to
the alleged mitigating circumstances.
ISSUE
The parties have agreed that the sole issue in contest is
whether Respondent's failure to pay the prevailing wage rates and
submission of falsified payrolls constitutes a willful or
aggravated violation of the Acts which justifies placing
Respondents on the list of debarred bidders as provided for in 29
C.F.R. [sec] 5.12.
STIPULATIONS OF FACT
1. Respondent, McAndrews Company, is a sole proprietorship
under the laws of the State of Ohio having its principal place of
business at 1103 Alfred Street in Cincinnati, Ohio. Robert
McAndrews was and is the owner of McAndrews Company and is the
person responsible for the day-to-day business activities of the
corporation.
2. This proceeding is instituted pursuant to Complainant's
charging letter of February 28, 1985 and Respondent's March 28,
1985 request for a hearing. On December 6, 1985, Complainant found
reasonable cause to believe that Respondent's violation of certain
labor standards provisions warranted the imposition of
ineligibility sanctions and issued an Order of Reference to the
Chief Administrative Law Judge for the scheduling of a hearing to
determine whether debarment action should be taken pursuant to
Section 5.12(b) of the Regulations of the Department of Labor.
3. Respondents were issued a contract by the Veterans
Administration for installation of solar screens and storm windows.
The contract was numbered V539C-384-82 and was issued on March 31,
1982. The contract was in the amount of $45,724.00.
4. Respondents were issued a contract by the U.S. Department
of Housing and Urban Development for installation of windows for a
YWCA in Cincinnati, Ohio. This contract was numbered 046-35568-PM-
SR-8 and was issued on January 19, 1983. The amount of the contract
was $3,193,850.00.
5. Both the aforementioned contracts were for projects which
were federal or federally assisted construction projects within the
meaning of Department of Labor Regulations 5.1 and, as such, are
subject to and contain all required stipulations and conditions of[2]
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[3] the Davis-Bacon Act. Further, both contracts were subject to
and contained the regional stipulations of the Contract Work Hours
and Safety Standards Act.
6. The contract identified in Paragraph 3 hereof contained
Wage Determination KY 81-1291 which specified rates of pay and
fringe benefits for persons employed on that contract. The rate
required by the Wage Determination for glaziers was $14.10 plus
sixty-one cents in fringe benefits. In addition the contract
required time and one-half the regular rate of pay for all hours
worked over 8 in a day or 40 in a week.
7. The contract identified in Paragraph 4 hereof, contained
Wage Determination No. OH82-2036 which specified minimum rates of
pay and fringe benefits for persons employed on the said contracts.
The rates required by the wage determination for carpenters was
$15.80, plus $2.07 in fringe benefits.
8. Investigation by the Cincinnati Area Office of the Wage
and Hour Division revealed that Respondents had violated certain
labor standards provisions of the above-referenced acts.
Specifically, Respondents hereby acknowledge that they violated the
minimum wage provisions of the Davis-Bacon and related Acts by
failing to pay their employees employed on the contracts, during
the performance of the contracted services, the minimum wages and
fringe benefits required by the Wage Determination. During the
performance of the contracted services, Respondents paid glaziers
employed on the VA contract at a rate of $6.78 per hour with no
fringe benefits, and paid carpenters employed on the HUD contract
at rates between $5.00 and $10.00 per hour with no fringes.
Further Respondents acknowledge that they violated the terms
of the Contract Work Hours and Safety Standards Act by failing to
pay the persons employed as glaziers on the VA contract premium
overtime compensation for hours worked in excess of eight in a day
or forty in a week.
9. Respondents further acknowledge that they violated the
certified payroll requirements of the Davis-Bacon and related acts.
This violation occurred as a result of Respondents regularly
submitting certified payrolls on both contracts which certified
employees were receiving the specified minimum wages and fringe
benefits for all hours worked, when, in fact, such rates were not
being paid during the performance of the contracted services.
10. As a result of the underpayment of the minimum wages,
fringe benefits, and overtime compensation during the performance
of the contracted service, Respondents incurred backwages in the
amount of $11,189.27. These backwages have been paid in full by
Respondents.
11. It is agreed that the Complainant is not seeking debarment
as a result of the violations of the Davis-Bacon Act or the
Contract Work Hours and Safety Standards Act on the VA project
identified in Paragraph 3 hereof. [3]
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[4] 12. Complainant is seeking debarment of Respondents under the
U.S. Housing Act of 1957 and the National Housing Act for the
violation which occurred on the HUD project identified in Paragraph
4 hereof.
FINDINGS OF FACT
1. Mr. McAndrews founded the McAndrews company in January
1982. He was awarded the Veterans Administration contract three
months later at a time when he had little significant experience
with the requirement to pay the prevailing wage rate on government-
funded projects. (Tr. 25-26). Mr. McAndrews had formerly worked
for a company that did one job with the prevailing wage
requirement. Mr. McAndrews bid that job but did not handle the
payroll. (Tr. 25, 54).
2. Mr. McAndrews bid on the YWCA job in September 1982 and
was awarded the contract early in the next year. (Tr. 48). In the
course of investigating a complaint about the YWCA job, the
compliance officer from the Wage and Hour Division discovered the
violations committed during performance of the Veterans
Administration contract. (Tr. 30, 48).
3. Respondents committed two violations in performance of the
Veterans Administration contract. First, the company failed to pay
overtime for two days in which employees worked 10 hours. Mr.
McAndrews was unaware of the necessity to pay overtime since the
employees worked less than 40 hours that week. He was unaware that
the contract required overtime pay whenever employees worked more
than an eight-hour day. (Tr. 27-28).
Second, the company paid one employee at a rate that was about
half of the prevailing wage rate. Mr. McAndrews believed this was
permissible since the man had no experience and was similar to an
apprentice. He did not know that apprentice programs must be ap-
proved by the Department of Labor. (Tr. 28-29).
4. Respondents' foreman, Mr. French, hired the employees for
the YWCA job. (Tr. 32). With the full knowledge of Respondents,
Mr. French did not offer the employees the prevailing wage rate, as
required by the contract, but rather, offered them $35.00 for each
window they installed. (Tr. 13, 34) . The men were actually paid
about $5.00 to $10.00 an hour, and Respondents intended to pay them
the difference between their actual pay and what they should have
earned at the rate of $35.00 per window when the job was completed
in about September in the form of a bonus. (Tr. 33-36, 61, 70-71).
5. Respondents believed that paying the employees at the rate
of $35.00 per window would result in their earning more than the
prevailing wage rate. Mr. McAndrews said the employees would earn
about $23.00 to $24.00 an hour if the work went smoothly. (Tr. 35).
If, however, the men worked slowly, Respondents would nevertheless
pay them a bonus sufficient so that they would receive the
equivalent of the prevailing wage rate. (Tr. 58). Mr. McAndrews
bid the contract with a $5.00 per window cushion to be used in the
event the employees worked too slowly. (Tr. 34, 58). [4]
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6. At least one of Respondents' employees on the YWCA job,
Lester Bennett, believed that he would receive the promised bonus
at the completion of the job. (Tr. 74).
7. After an investigation was begun by the wage and Hour
Division, Respondents decided not to pay the bonus on the advice of
their attorney who instructed Mr. McAndrews to wait until the
Division told him how much the company owed. (Tr. 39).
8. Mr. McAndrews' reasons for wanting to pay his employees on
a per window basis at the end of the job were, first, that this was
the accepted manner of compensation within the industry. (Tr. 33,
52). Second, payment on a per window basis provided incentive for
the employees to finish the job quickly with less supervision.
(Tr. 33, 37, 47). Finally, payment of the bulk of the wages at the
completion of the job would save Respondents from having to borrow
each month for the payroll. (Tr. 49).
9. Respondents have had about seven government-funded con-
tracts since the YWCA contract. (Tr. 42). They now pay the
prevailing wage rate required by these contracts and use only
approved apprentice programs. (Tr. 40). Mr. McAndrews makes sure
that the employees know that they are entitled to and will receive
the prevailing wage rate. (Tr. 43).
CONCLUSIONS OF LAW
There can be no question that Respondents' "bonus" method of
compensating employees violated the Acts. The applicable
regulations make it clear that full compensation on a weekly basis
is required.
The contractor shall submit weekly for each
week in which any contract work is performed a
copy of all payrolls . . . . Each payroll
submitted . . . shall certify . . . that each
laborer or mechanic . . . employed on the
contract during the payroll period has been paid
the full weekly wages earned, without rebate,
either directly or indirectly, and that no
deductions have been made either directly or
indirectly from the full wages earned . . . .
29 C.F.R. [sec] 5.5(a)(3)(ii)(A) and (B), and (B)(2). Thus,
Respondents' payment of less than the prevailing wage rate and
knowing certification of false payrolls each week was impermissible
under the Act.
The regulations specify that when violations of the Acts are
aggravated or willful, the violator shall be ineligible for a
period not to exceed three years to receive any contracts or
subcontracts for government-funded projects. 29 C.F.R. [sec]
5.12(a)(1). Complainant, the Department of Labor, asserts that
Respondents' violation was done willfully and therefore warrants
debarment. Complainant cites the following cases of willful
violations that resulted in debarment in support of its argument:
Ace Contracting Co., [1978-81 Transfer [5]
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[6] Binder] Lab. L. Rep. (CCH) [par] 31,357 (May 30, 1980); Cosmic
Construction Co., [1978-81 Transfer Binder] Lab. L. Rep. (CCH) [par]
31,382 (September 2, 1980); Thomas L. Moore, [1978-81 Transfer Binder]
Lab. L. Rep. (CCH) [par] 31,351 (November 28, 1979); Marvin E.
Hirchert, [1978-81 Transfer Binder] Lab. L. Rep. (CCH) [par] 31,353
(October 16, 1978); and Marco Construction Co., [1973-78 Transfer
Binder] Lab. L. Rep. (CCH) [par] 31,190 (April 24, 1978). I find,
however, that all of the cases cited by Complainant are distinguishable
from the instant case. Most importantly, the employers in these cases
intended their employees to receive less than the prevailing wage rate.
In the instant case, Respondents intended their employees ultimately to
receive at least the prevailing wage rate, and probably more than the
prevailing rate. Respondents' violations consisted of the delayed
manner in which the employees were to be paid and the falsification of
the payrolls.
Another significant distinction between the cases cited by
Complainant and the instant case is that in most of Complainant's
cases, the employers were experienced in the handling of
government-funded contracts. Ace Contracting Co., supra; Thomas L.
Moore, supra; Marvin E. Hirchert, supra. In the instant case,
Respondents committed the violations in the performance of their
first two government contracts.
The Wage Appeals Board cautioned in Thomas L. Moore that it
has not "established an iron clad rule of law to be applied and
resulting in debarment each and every time an inaccurate payroll is
discovered . . . ." Lab. L. Rep. (CCH) [par] 31,351 at page 43,
485. Moreover, the Board has recognized that mitigating
circumstances make debarment inappropriate in some cases. In Tilo
Company, Inc., CCH Labor Law Reporter, Administrative Rulings,
[par] 31,114, debarment was not imposed where the employer paid all
back wages due, it changed its practices to assure compliance in
the future, subsequent compliance was apparent, and the government
inexcusably delayed in initiating debarment proceedings.
Mitigating circumstances that make debarment inappropriate
also have been recognized under the Service Contract Act, 41 U.S.C.
[sec] 351, et seq., which parallels the Davis-Bacon Act and sets
the prevailing wage standards for service contracts. See
Mastercraft v. Donovan, 589 F.Supp. 258, 262 (D.D.C. 1984) .
The unusual factual situation in this case presents ample
mitigating circumstances to make debarment inappropriate.
Respondents were inexperienced with government-funded contracts at
the time the violations occurred. They cooperated fully in the Wage
and Hour Division's investigation and readily made full restitution
as soon as they received payment for their work from the general
contractor. They have performed subsequent government contracts
without committing further violations.
The most significant mitigating factor is that Respondents
never willfully violated the purpose of the Acts. The purpose of
the Davis-Bacon legislation was to ensure that government funds
would not be spent on projects where workers would be exploited by
being deprived of fair wages. Perkins v. Lukens Steel Co., 310 [6]
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[7] U.S. 113, 128 (1940); Endicott Johnson Corporation v. Perkins,
317 U.S. 501, 507 (1943) and S. Rep. No. 798, 89th Cong., 1st
Sess., reprinted in 1965 U.S. Code Cong. and Adm. News, 1965, pp.
3737-3739. Since Respondents intended that their employees would
receive at least the prevailing wage rate, their violations do not
go to the heart of the Acts. Thus, I find that Respondents'
violations were not aggravated or willful and debarment would serve
no purpose.
ORDER
By reason of the foregoing, the motion to debar Respondents
from future contracts is denied.
DANIEL LEE STEWART
Administrative Law Judge
DATE ISSUED: October 3, 1986 [7]
