USDOL v. RUST CONSTRUCTION CO. INC., 1985-DBA-23 (ALJ Feb. 18, 1987)
CCASE:
DOL V. RUST CONSTRUCTION CO.
DDATE:
19870218
TTEXT:
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[1] [87-15.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
DATE: February 18, 1987
CASE NO. 85-DBA-23
IN THE MATTER OF
Proposed debarment for labor
standards violations by:
UNITED STATES DEPARTMENT OF LABOR,
Complainant,
v.
RUST CONSTRUCTION CO., INC.
Contractor
JERRY RUST, President,
SANDRA RUST, Vice-President,
Respondents.
With respect to laborers and mechanics
employed by the contractor under
Environmental Protection Agency Contract
No. C290835, Sewer System Construction,
Dixon, Missouri
APPEARANCES: Robert S. Bass, Esquire, Eliehue Brunson, Esquire
For the complainant
Ross A. Friedman, Esquire
For the respondents
BEFORE: Donald W. Mosser
Administrative Law Judge
DECISION AND ORDER
This proceeding arises pursuant to an Order of Reference
filed by the Administrator, Wage and Hour Division, Employment
Standards Administration, alleging the respondents violated the [1]
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[2] Federal Water Pollution Control Act, [hereinafter FWPCA], 33
U.S.C. Section 1372, by failing to pay the prevailing wage to its
employees at the time the wages were due, failing to maintain
required payroll records, and submitting inaccurate certified
payrolls. The prevailing wage is mandated by the Davis-Bacon Act,
40 U.S.C. Section 276, and applied to other labor statutes through
Reorganization Plan No. 14 of 1950, 5 U.S.C. Section 903 and 29
C.F.R. Section 5.1. The Order further alleges a violation of the
Contract Work Hours and Safety Standards Act [hereinafter CWHSSA],
40 U.S.C. Section 327 et seq., which sets standards for payment
for overtime work on federal contracts.
The Order of Reference indicates that these violations of
the Rust Construction Company are "aggravated and willful" within
the meaning of 29 C.F.R Section 5.12 [hereinafter cited by Section
number only] and therefore the Rust Construction Company and
Gerard Rust and Sandra Rust, its president and vice-president,
respectively, and owners, should be debarred from bidding on
government or government-sponsored contracts.
By certified mail dated April 12, 1984, the respondents were
advised by the Administrator, Wage and Hour Division, of the
findings of the specific violations and the conclusion that the
violations were aggravated and willful within the meaning of
Section 5.12(a)(1) of the regulations. Respondents were further
advised of their right to request a hearing within 30 days.
Respondents, by letter dated May 11, 1984, requested a
hearing and asserted that there were mitigating circumstances
that would make debarment inequitable.
As noted above, the Order of Reference was then filed on
September 27, 1984, and this case was transferred to the Office
of Administrative Law Judges for a formal hearing. A hearing was
held on June 11, 1986, in St. Louis, Missouri, at which time the
parties were given full opportunity to present evidence. Both
parties also submitted post-hearing briefs.
ISSUE
Whether Rust Construction Company, its president, Gerard
Rust, and its vice-president, Sandra Rust, should be placed on
the ineligible list for receiving federal government contracts
for a period not exceeding three years because of willful and
aggravated violations of the Davis-Bacon and related Acts.
FINDINGS OF FACT
The following facts essentially are not in dispute:
1. Rust Construction Company, Inc. [hereinafter Rust] is a
small family contracting business located in Warrenton, Missouri. [2]
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[3] It principally specialized in the construction of
residential homes, sewers and water lines. Rust's principal
stockholders and executive officers during the times pertinent to
this case were Gerard Rust, its president, and vice-president,
Sandra Rust.
2. On May 5, 1982, Rust entered into Contract No. C290835
with the City of Dixon, Missouri. The contract provided for
payment of the $170,649.66 to Rust for the construction of a new
scepter sewer and water main to Dixon's new treatment plant. The
contract was subject to the Davis-Bacon Act and the other federal
statutes hereinafter referred to. It also was subject to a
so-called "wage decision" which was incorporated into the contract
and which had been published in a 1981 volume of the Federal
Register.
3. Rust's work on the contract began around August of 1982
and was completed in the following summer. All of the work was
performed in Pulaski County, Missouri, which is approximately 100
miles from Rust's office in Warrenton, Missouri.
4. After the project had been completed, a compliance
officer of the Wage and Hour Division of the United States
Department of Labor conducted a labor standards investigation of
Rust's performance under its contract with Dixon. The compliance
officer concluded from his investigation that Rust had committed
certain violations of the labor standard provisions of the Federal
Water Pollution Control Act, the Contract Work Hours and Safety
Standards Act, and the regulations found in 29 C.F.R. Part 5. These
violations included Rust's failure to pay its employees the
applicable prevailing wage rates in accordance with the wage
decision of the contract, as well as the required rates for
overtime. The compliance officer also determined the corporation
had committed violations by submitting unsigned certified payrolls
which contained inaccurate and incomplete information and that
these records also failed to list payroll information regarding two
of Rust's employees. Rust also failed to retain all of the payroll
records that are required by the pertinent regulations.
5. The respondents cooperated during the compliance officer's
investigation and did not dispute his findings. As agreed with
the U.S. Department of Labor, Rust paid back wages and overtime
as computed by the compliance officer totalling $11,865.06 and
$3,127.03, respectively.
6. The Order of Reference involved in this case was issued
to the respondents on September 27, 1984. The complainant
charged in this document that the above described violations of
the respondents were aggravated and willful, and that the
respondents should be placed on the ineligible bidders list and
debarred from doing business with the federal government as a
contractor for a period not to exceed three years. [3]
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[4] At the hearing before me, Jerry Rust credibly testified, and
I so find, that during the time pertinent to this case he was
responsible for determining which of the prevailing wage figures
in the contract were to apply to Rust's employees; that the wrong
wage classifications were used in computing Rust's employees'
wages because he used the wrong page of the wage decision in the
contract; that he computed overtime for Rust's employees according
to a practice commonly used by contractors in that area of
Missouri, rather than in accordance with the contract that his wife
was responsible for the preparation of the certified weekly
payrolls under the contract; and, that he did not know that he was
supposed to sign the payrolls.
Sandra Rust credibly testified at the hearing, and I so
find, that during the time pertinent to this case she was
responsible for managing Rust's office and preparing its payrolls
with the assistance of a part-time employee; that she obtained
the hours used in computing the weekly payrolls by telephone from
one of the workers at the construction site; that she obtained
the applicable wage rates and overtime computation from Mr. Rust;
that she usually prepared the certified weekly payrolls to be
submitted under the contract to the City of Dixon, although she
did not fully understand how to accurately complete all of the
information required on the payrolls; that she was advised by
personnel of the City of Dixon to just complete those portions of
the certified weekly payrolls that she understood; that she did
not know that the certified weekly payrolls had to be signed; and
that she did not realize there were any problems with respect to
those weekly certified payrolls until the compliance officer
commenced his investigation.
Rust's contract with the City of Dixon apparently was the
respondents['] first experience with a construction project related
to a federal contract. Rust's only other experience with a
government contract was investigated by the state of Missouri and
no problems were reported concerning Rust's handling of that
project.
Conclusions of Law
The Department of Labor Regulations at 29 C.F.R. Section
5.6(b)(1) provide:
Whenever any contractor or subcontractor is
found by the Secretary of Labor ... to be in
aggravated or willful violation of the labor
standards provisions of any of the applicable
statutes ... such contractor or subcontractor
or any firm, corporation, partnership or
association in which such contractor or
subcontractor has a substantial interest shall
be ineligible for a period not to exceed 3 [4]
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[5] years ... to receive any contracts or
subcontracts subject to any of the statutes
listed in (Section) 5.1.
Since respondent, Rust Construction, has conceded that statutory
violations exist, the only question remaining is whether the
violations were "aggravated and willful", thereby making debarment
an appropriate penalty.
The complainant argues the officers of Rust Construction
knew when they signed the contract involved in this case that
they were required to follow the labor standards contained in the
contract. Since they failed to do so, their actions are argued
to be "aggravated and willful." Complainant contends that intent
can be inferred from actions and that falsified payrolls, omission
of employees from payroll records, failure to keep accurate
records, and failure to pay correct prevailing wages and overtime
in effect speak for themselves.
Complainant cites several Wage Appeals Board cases in support
of its position. These cases, however, are distinguishable from
the facts of this case since in each of them the actions of the
contractor indicated an intent to defraud its employees for the
company's personal gain. Such violations go to the heart of the
Davis-Bacon legislation. See Matter of Marvin Hirchert, [1978-1981
Transfer Binder] Lab. L. Rep. (CCH) [par] 31,353 (Wage Appeals Bd.,
Oct. 16, 1978); Matter of Ace Contracting, [1978-1981 Transfer
Binder] Lab. L. Rep. (CCH) [par] 31,357 (Wage Appeals Bd., May 30,
1980); and Thomas Moore, [1978-1981 Transfer Binder] Lab. L. Rep.
(CCH) [par] 31,351 (Wage Appeals Bd., Nov. 28, 1979). Moreover, in
all of the cases, the contractors were precluded from relying on an
unfamiliarity with the regulations because of a long history of
work on federal contracts. In the Hirchert case, the company had
previous violations and in Moore, the contractor actually falsified
employee statements to indicate the employees had been paid the
correct wages. One of the cases cited by the complainant involved
a contractor that made repeated errors even after the violations
were called to its attention . In Re Bone, 23 Wage & Hour Cas.
(BNA) 896 (Wage Appeals Bd., June 7, 1978). In another, the
contractor refused to make restitution after the violations had
been established. General Comptroller's Decision, [2 Wages-Hours]
Lab. L. Rep. (CCH) [par] 31,365 (Wage Appeals Bd., March 25, 1981).
Rust Construction argues that the decisions in two analogous
Service Contract Act cases should be followed. Federal Food
Service v. Donovan, 658 F.2d 830 (D.C. Cir. 1981); Mastercraft
Flooring v. Donovan, 589 F. Supp. 258 (D.D.C. 1984). In both of
these cases, the Courts applied the following multi-part test to
determine whether a contractor found to be in violation of
Department of Labor regulations should be debarred: [5]
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[6] 1. whether contractor had a prior history of violations;
2. whether current violations were serious or extensive;
3. whether the violations were willful or the circumstances
showed there was culpable neglect to ascertain whether
certain practices were in compliance;
4. whether the respondent's liability turned on bona
fide legal issues of doubtful certainty;
5. whether the contractor cooperated with the
investigation; and,
6. whether the contractor paid all amounts due to the
employees promptly.
These criteria indicate that an analysis of whether debarment
is appropriate concerns the extent to which the contractor
manifested a subjective intent to defraud employees of wage rights
that the statutes were designed to protect.
Decisions under Davis-Bacon related statutes have provided
conclusions similar to the conclusions of these Service Contract
Act decisions. In Tilo Company, Inc., [1973-1978 Transfer Binder]
Lab. L. Rep. (CCH) [par] 31,114 (Wage Appeals Bd., June 6, 1971),
debarment was not imposed where the government inexcusably delayed
informing Tilo that there was reasonable cause for debarment,
where the company reorganized its procedures for handling
government contracts and where subsequent compliance was evident.
In Steingass Mechanical Contracting, 83 DBA 47 (June 28, 1985), a
plumbing company was found to be in violation of regulations when
it improperly classified the temporary summer help and incorrectly
calculated payment for overtime work. The judge found in deciding
that case that debarment was inappropriate where:
... the Respondent had no prior Government
contracting experience; there was complete
cooperation with the investigating officials at
all times; the Respondent undertook to ensure
compliance with the regulations after being made
aware of the violations; an agreement to pay
back wages was promptly entered into and paid in
accordance with the payment schedule worked out
between the parties; and the Respondent had
entered into substantial Government contracting
in the five years subsequent to [these] projects
with no other violations. . . .
See also Paul Vitale Excavating, 83-DBA-61 (April 30, 1986);
Morris Excavating Company, 85-DBA-58 (August 29, 1986); McAndrews
Company, 86-DBA-44 (October 3, 1986). [6]
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[7] The factual pattern in the instant case is closer to the
Mastercraft and Steingass cases than to the cases cited by the
Department of Labor. It is clear from the record that Rust
Construction had no prior history of Davis-Bacon or CWHSSA
violations. The officers cooperated fully in the investigation
and promptly paid the sums which were found owing to Rust's
employees. There is no evidence of a purposeful intent to profit
under this contract at the expense of the employees' wage rights,
nor is there evidence that the Rusts intentionally failed to
ascertain whether their practices were in compliance with the
regulations.
The purpose of the Davis-Bacon legislation is to make sure
that government funds are not spent on projects where workers
would be exploited by being deprived of a fair wage for their
work. Perkins v. Lukens Steel Co., 310 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. As in the Steingass
case, I find that Rust's statutory violations clearly were due to
inexperience and "not out of a pre-conceived intent to defraud."
Mr. and Mrs. Rust apparently were overwhelmed with the complexity
of the contract that they had signed on behalf of Rust and were
incapable at that time of meeting its requirements. To debar
under the facts of this case, I find, would serve no constructive
purpose.
In conclusion, I find the complainant has failed to
demonstrate that the violations of Gerard Rust, Sandra Rust or Rust
Construction Company were either willful or aggravated. Moreover,
I find there existed circumstances mitigating the seriousness of
their violations of the Davis-Bacon and related acts. I therefore
reject the complainant's prayer for debarment.
ORDER
IT IS HEREBY ORDERED that the complainant's request to place
Rust Construction Company, Inc., and its officers, Jerry Rust and
Sandra Rust, on the ineligible bidders list from doing business
with federal government as a contractor or sub-contractor for a
period not to exceed three years is denied on the grounds the
evidence in this case fails to support the allegations that their
violations of the Davis-Bacon and related acts were aggravated or
willful.
DONALD W. MOSSER,
ADMINISTRATIVE LAW JUDGE [7]
