CAMILO A. PADREDA GENERAL CONTRACTOR,
INC., 1984-DBA-77 (ALJ Nov. 20, 1986)
CCASE:
CAMILO A. PADREDA GENERAL CONTRACTOR
DDATE:
19861120
TTEXT:
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[1] -- [87-01.WAB ATTACHMENT]
U.S. Department of Labor Office of Administrative Law Judges
1111 20th Street, N..W.
Washington, D.C. 20036
In the Matter of
Proposed debarment for labor standards
violations by Respondents
CAMILO A. PADREDA GENERAL CONTRACTOR,
INC., Contractor
Case No. 84-DBA-77
CAMILO A. PADREDA, President
With respect to laborers and mechanics
employed by them under U. S. Department
of Housing and Urban Development Contract
No. FL29-0028-006, Riverside Apartments,
Miami, FL.
DECISION AND ORDER
On September 8, 1984 an Order of Reference was issued by the
Administrator, Wage and Hour Division, Employment Standards
Administration, which authorized a hearing on the proposed
debarment of Camilo A. Padreda. The hearing was held April 11,
1985 in Miami, Florida. Each of the parties was afforded the
opportunity to present evidence and argument. Each side submitted
post-hearing briefs and reply briefs.
I. Statement of the Case
This proceeding has arisen under the labor standards
provisions of the U. S. Housing Act of 1937, 42 U.S.C. [sec] 1437j,
a Davis-Bacon Related Act, the Contract Work Hours and Safety
Standards Act ("CWHSSA"), 40 U.S.C. [sec] 327 et seq., and the
regulations issued thereunder at 29 C.F.R. Part 5.
Two investigations of the Respondent corporation were
conducted by Mr. Jorge M. Diez Oriate, Compliance Officer, Wage and
Hour Division, Employment Standards Administration, in connection
with the Respondents' performance as general contractor on the
Riverside Apartments Project (U.S. Department of Housing and
Urban Development Contract No. FL 29-0028-006), a senior citizens
housing project located in Miami, Florida.
The Compliance Officer's investigations resulted in an
assessment by him that the following amounts were owed by the
Respondent with respect to underpayment of the employees.
Failure to Pay Prevailing Wage $14,236.83
Overtime Compensation Violations $1,344.27
Liquidated Damages for Overtime Violations + $770.00
$16,351.10 [1]
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[2] While not acknowledging that these violations occurred, the
Respondents submitted funds in restitution of the amounts found
owing. The Compliance Officer's investigation led him to conclude,
however, that in addition to underpaying employees, pay records had
been falsified in an attempt to conceal that fact. These alleged
violations formed the basis of the Deputy Administrator's
reasonable cause to believe that the Respondents committed "willful
or aggravated violations" of the labor standards provisions of the
U. S. Housing Act of 1937 sufficient to warrant debarment under the
regulations at 29 C.F.R. [sec] 5.12.
II. Issue: Have Respondents committed willful or aggravated
violations of the labor standards provisions of the U. S. Housing
Act of 1937, as amended, 42 U.S.C. [sec] 1437j and the CWHSSA, 40
U.S.C. [sec] 327 et seq., which warrant debarment?
III. Findings of Fact and Conclusions of Law
The Metropolitan Dade County Department of Housing and Urban
Development awarded a contract for the construction of Riverside
Apartments Project, a 75-unit housing project for the elderly
designated as "Dade 8-6," on March 7, 1978 to O.S.B. Construction
Inc. ("OSB"). OSB encountered financing problems and eventually
one of its owners, Mario Rodriguez, approached Camilo Padreda,
President and co-owner of Camilo Padreda General Contractor, Inc.
with the proposal that Padreda and Oscar Benitez, another OSB
owner and architect, form a joint venture for performance of the
project.
The joint venture was formed and Padreda attempted to obtain
the $2.1 million required for the project from the Florida National
Bank. The Bank responded with a willingness to finance $1,820,000
and suggested that the group locate another entity to put up the
remainder of the money and deposit it with the bank. In order to
accomplish this, a new joint venture was formed between the General
Contractors Group ("GCG") (composed of the first joint venture
members: Rodriguez, Padreda and Benitez) and the Investors Group
("IG") (consisting of a group of Nicaraguan businessmen residing in
the United States and led by A. J. Sacasa). IG and GCG were to
split the profits 50-50 under the terms of the new joint venture.
This reduced Padreda's interest in the overall venture to 16.6%.
The parties apportioned management of the project in the following
manner: Camilo Padreda was to provide the necessary general
contractor's license and his company was responsible for dealing
with the suppliers on the project, Mr. Benitez was the architect
and superintendent of the project Mr. Sacasa was put in charge of
the payroll and bookkeeping aspects of the venture to ass[ua]ge any
concerns over expenditure of funds supplied by the Nicaraguan
investors. (Tr. P. 268). [2]
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[3] Essentially, Mr. Padreda's involvement with the project
enabled the group to benefit from lines of credit he had
established with suppliers. He negotiated with all subcontractors
on behalf of the joint venture and acted in an overall supervisory
capacity. (Tr. 217-18).
A final contract of sale was entered into between the joint
venture and HUD on July 25, 1980 and construction began in
September 1980. (Tr. 215) As work on the project began, Mr.
Sacasa hired Alejandro Gutierrez as bookkeeper and accountant
for the project and Alfredo Osorio as general supervisor for the
project. In February 1981 Kamyl Savany was hired to assume Mr.
Benitez' responsibilities as superintendent of the project.
Difficulties arose for the joint venture when Futuro
Construction Co., a primary subcontractor, defaulted on its
contract in March 1981. That contract involved, among other tasks,
the general formation of the building, specifically carpentry work
and pouring concrete. (Tr. 216). After the default Mr. Savany
and Mr. Osano hired workers to complete the project. These
workers were paid from the account set up for the joint venture.
The DOL Compliance Officer Diez began his investigation of
Camilo A. Padreda General Contractor, Inc. in July 1981. In the
course of his investigation, Mr. Diez reviewed payroll forms
bearing information about hours worked, hourly rate and the
amount of pay received for the period between March and July
1981. After reviewing these documents and speaking with employees
Mr. Diez concluded that certain laborers were being paid between
$5.00 and $6.00 per hour instead of the $8.07 required by the
contract. Mr. Diez also testified that he was told by employee
Norberto Gonzalez that the change in rates of pay was announced by
Kamyl Savany in a manner which suggested that if the employees did
not accept the change their jobs would be lost. (Tr. 162 and RX
11). Mr. Diez concluded that approximately $7,000 in back wages
were owed and supported his conclusion that violations occurred by
reference to worksheets which indicated that after June 1981 the
employees no longer worked 40-hour weeks. It was Mr. Diez'
contention that the employees continued to work the 40-hour week
but were not paid amounts which corresponded to the proper rate of
pay multiplied by 40 hours.
Mr. Padreda testified that aside from his initial conference
with Diez he was not involved in the investigation other than to
insure that appropriate payments were made to the employees after
receipt of the DOL's summary of unpaid wages. (Tr. 227-8). Padreda
further testified that he was not apprised of the fact that the
initial investigation revealed any falsification of records. (TR
227-8). [3]
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[4] Construction of the housing project was completed in early
September 1981 (RX l) and final inspection and purchase of the
project took place in early November of that year. Id.
In December 1981 Inspector Diez received complaints from
two former employees at the project but they had not received
back wages and were still being paid $5.00 per hour. Diez chose
to re-investigate for the period following the first investigation,
July 28, 1981, through November 1981. Apparently, all the payroll
records indicated that appropriate wage rates, hours worked and
gross weekly pay figures were being recorded. However, Diez
concluded, based on interviews with several employees and their
written statements, that the project had paid wages below the wage
determination rate, and had failed to provide appropriate overtime
compensation under the CWHSSA. These violations totaled
approximately $8,300.00 (Tr. 149). The second investigation had
been handled at Camilo A. Padreda General Contractor, Inc. by Mr.
Osavio. Padreda testified that he was in Brownsville, Texas during
most of the winter of 1981-82, engaged in a large scale
construction project, and did not receive any DOL correspondence
concerning the investigation.
Diez' second investigation ended February 26, 1982 and
employees received all back wages by April 1982. (Tr. 154-5). Diez
testified that he had not recommended debarment at the conclusion
of the investigation and that he had not inquired into who all of
the investors in the housing project were and had assumed that only
Padreda, Benitez and Rodriguez were principals involved. (Tr. 201,
186-7, 189-90) Mr. Diez further testified that he was without any
knowledge as to Padreda's participation in record keeping and had
assumed that Padreda had hired and paid employees personally
because the name Camilo A. Padreda, Inc. appeared on payroll
records. (Tr. 183, 189).
Twenty-two months after the conclusion of Diez' second
investigation, Padreda was informed of a determination by the
Deputy Administrator of the Wage and Hour Division of the DOL
that reasonable cause existed to believe that he and his
corporation had committed willful or aggravated violations of the
labor standards provisions of 42 U.S.C. [sec] 1437.
The Department of Labor regulations at 29 C.F.R. [sec] 5.12
(a)(l) provide that the Secretary may impose debarment on a
contractor who is found "to be in aggravated or willful violation
of the labor standards" set out in 29 C.F.R. [sec] 5.1. The
U. S. Housing Act of 1937 is among those statutes listed at
[sec] 5.1. [4]
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[5] It is clear from the testimony elicited at the hearing
that underpayments of wages were made resulting in violations of
the Housing Act. In view of the fact that Respondents have paid all
back wages owed the only question remaining for resolution by this
office is the propriety of the debarment sanction under the
circumstances.
Where "aggravated and willful" violations of one of the
statutes is found by the Secretary of Labor, debarment for
3 years is generally the outcome. 29 C.F.R. [sec] 5.12(a)(1)./FN1/
Under 29 C.F.R. [secs] 5.12(b) and 6.33(b)(2) after a hearing,
the Administrative Law Judge must issue an order as to whether
the Respondents are subject to placement on the ineligible list,
including any findings of aggravated or willful violations.
The regulations pertaining to the Housing Act and CWHSSA
do not define aggravated or willful violations or exact
circumstances warranting relief. However, analogy to the criteria
used under the Service Contract Act at 29 C.F.R. [sec] 4.188(b)(3)
(i) and (ii) suggests that in assessing whether aggravated or
willful violations exist and placement on the ineligible list
is warranted, a variety of factors must be considered, including
compliance history, cooperation, culpable neglect, contractor
efforts to assure compliance, and others.
In the instant case, Camilo Padreda and his corporation
stepped in to bail out a floundering contractor incapable of
fulfilling its obligations to HUD. Padreda helped organize a
joint venture to adequately capitalize the programs. However,
his involvement had more to do with lending his name, license and
available lines of credit and monitoring the overall progress of
the project than in day-to-day involvement in the business
decisions made. Padreda and his fellow joint venturers apportioned
tasks with the responsibility for employment-related decisions
and record-keeping going to Mr. Sacasa who ultimately employed
Mr. Savany.
There is no question but that wage violations occurred,
apparently as a result of the efforts of Mr. Sacasa and Mr.
Savany. There is no evidence concerning Padreda's knowledge of
any impropriety in the record keeping or payment of wages. Also,
while this case involves two investigations for violations, as a
practical matter the first investigation involved a time period [5]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ But see, 29 C.F.R. [sec] 5.12(c). [5]
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[6] ending in late July 1981 and resulted in payments being made
in October after the completion of the project. Mr. Diez also
testified that for the most part, record-keeping was standardized
and made facially correct, despite his conclusion that based upon
employee statements, that inappropriate wages were being paid.
Absent any evidence concerning Mr. Padreda's actual knowledge of
wrongdoing or that he was active in the day-to-day operations of
the project it is reasonable to conclude that he relied upon the
apparent compliance for the brief remainder of the contract. It
should also be noted that while any undercompensation to workers is
unacceptable and a violation of the Housing Act (and CWHSSA with
respect to overtime) the violations in this case involved a
relatively short time period and amounted to a comparatively small
figure.
In addition, I find no evidence of culpable neglect on the
part of the Respondents. In a joint venture the apportionment of
tasks reflected a rational business decision. In particular,
Padreda's testimony suggested that retention of control of the
accounting for the venture might have been a precondition to the
infusion of additional funds into the venture by the IG.
Under joint venture and partnership law, as well as
administrative decision, partners are often found monetarily liable
for the wrongdoing or errors of a particular partner. In the
instant case, it appears that Padreda and his corporation have
borne the brunt of this DOL investigation with no attempt made to
investigate the existence of other joint ventures or to prosecute
them. In any case, Padreda and his corporation have accepted the
financial liability of a joint venturer/partner in this
circumstance, for the violations committed by other partners. I
find that under the circumstances of this case, the imposition of
additional liability in the form of debarment is unwarranted.
While it is evident that serious violations of the Housing
Act and CWHSSA occurred resulting in an appropriate assessment
of back pay awards for which Padreda and his company were
liable, I find that with respect to these Respondents, such
violations were not aggravated or willful. There was simply no
evidence presented concerning evidence of Padreda's negligence.
In fact, evidence was presented concerning Padreda's generally
good business reputation and reputation for integrity (Tr. 37),
his good performance on other HUD projects (8-3 and 8-11), and
his willingness to comply in the future, including representations
that in all future ventures involving government contracts he would
personally monitor the record keeping. [6]
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[7] While this Office is mindful of the imposition of liability,
including debarment upon partners in P. J. Stella Construction
Corp. & My Glass Co., WAB Case No. 80-13 (Transfer Binder)
Wages-Hours Administrative Rulings (CCH) [par] 31,345 (March 1,
1984), it believes this case to be distinguishable based upon
the lack of knowledge as to any wrongdoing, the absence of day-
to-day involvement in the business which was likely to give rise
to such knowledge, and the absence of neglect. In addition, I
find Respondent's arguments to be compelling concerning the
extent to which vicarious liability may appropriately be used
where violation of labor standards is involved, as set out in
Respondent's Post Hearing Brief at 21. Debarment would also
be particularly inappropriate in this case, due to the delay
of almost 2 years between the violations and notification that
debarment proceedings were being initiated. Tilo Company, Inc.,
W.A.B., Case No. 76-1 CCH Wages-Hours [par] 31,114 (June 6, 1977).
For the above-stated reasons, this Office finds that with
respect to Padreda and his corporation, the violations which
occurred were not willful or aggravated and relief from debarment
is ORDERED.
E. EARL THOMAS
Deputy Chief Judge
Dated: 20 NOV 1986
Washington, D. C.
EET/tt [7]
