PERMIS CONSTRUCTION CORP., 1985-DBA-73 (ALJ Feb. 17, 1988)
CCASE:
PERMIS CONSTRUCTION
DDATE:
19980217
TTEXT:
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[1] [88-11.WAB ATTACHMENT]
U.S. Department of Labor Office of Administrative Law Judges
211 Main Street - Suite 600
San Francisco, California 94105
Date: FEB 17, 1988
Case No: 85-DBA-73
In the Matter of
Disputes concerning the payment of
prevailing wage rates and overtime by:
PERMIS CONSTRUCTION CORP.,
Prime Contractor
and
Proposed debarment for labor
standards violations by:
PERMIS CONSTRUCTION CORP.,
GIUSEPPE CAPAROTTA,
President,
With respect to laborers and mechanics
employed by the contractor under U.S.
Department of Transportation Contract Nos.
DTMA91-83-C-30047, DTMA95-83-C-3009
(Kings Point, New York) and U.S. Dept. of
the Army Contract Nos. DACA51-83-C-0250
and DACA51-83-C-0261 Fort Totten, New York
Bernard I. Weinstein, Esq.
For the Respondents
Percy S. Miller, Esq.
For the U.S. Department of Labor
Before: STEVEN E. HALPERN
Administrative Law Judge
DECISION AND ORDER
This is a proceeding under the Davis-Bacon Act, 40 U.S.C.
[sec] 276a, et seq., and its implementing regulations, 29 CFR Part
5 and 29 CFR Part 6.
Following trial, which took place in New York City on October
29 and October 31, 1986, the parties post trial briefing was
completed on October 14, 1987, with the filing of Respondent's
/FN1/ Response to [1]
/FN1/ For the sake of simplicity (and because, for all practical
purposes they are one and the same) respondents Permis Construction
Corporation and Giuseppe Caparotta its President are referred
to herein interchangeably as "respondent". [1]
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[2] the Secretary's Proposed Findings of Fact and Conclusions of
Law. Thereafter, on October 15, 1987, a closing conference was
conducted by telephone.
Respondent stands charged with having underpaid his employees
in an amount in excess of $67,000, and with having acted in
disregard of his obligations to his employees. The former charge,
if proven, requires appropriate restitution; and, the latter
charge, if proven, carries with it the sanction of debarment from
further government contracts for a period of three years.
Respondent Permis is engaged exclusively in government
contract work, and had 138 "federal construction jobs" from 1976 to
1983, when the four subject contracts were entered into. During
all of said time respondent Caparotta was president and chief
executive officer of respondent Permis. There is no doubt that
respondent was, at all relevant times, an experienced and
knowledgeable government contractor, and well aware of and
th[]oroughly versed in his obligations under the Act.
Although not the sole issue involved, it is the government's
principal contention that respondent underreported the number of
hours worked by his employees.
The nature of the government's evidence, in the main, is as
follows:
(a) A transcription (Sec. Ex. 2) of respondent's
in-house payroll book, which, inter alia, lists for each
of the 26 employe[e]s involved[,] the number of hours
worked per day and the gross pay per week. This is the
bookkeeping record used for tax purposes. The parties
agree that the amount shown by the in-house payroll to
have been paid to an employee for a given week was the
amount actually paid.
(b) A transcription (Sec. Ex. 2) of the weekly certified
payrolls, and photostatic copies of those payrolls.
(Sec. Ex. 4), as submitted by respondent to the
government in accordance with his contractual obligation.
Said certified payrolls list, inter alia, for each of the
26 employees involved, the number of hours worked per
day, the hourly rate of pay and the gross pay per week.
In most instances the weekly wages reported to the
government on the certified payroll as having been paid
is [*] less [*] than the amount [*] actually [*] paid as
shown on the in-house payroll. [*Emphasis in original*]
(c) The computations (Sec. Ex. 2) of the government's
sole witness, the compliance specialist who conducted the
investigation which culminated in the pending charges
against respondent. His calculations are based in part:
on personal observation of a limited extent at one of the
job sites; on statements allegedly taken from eight or
twelve of the 26 employees involved; on analysis of the
certified payroll figures vs. the in-house payroll
figures. [2]
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[3] The thrust of the government's case, as set forth in its
opening statement at trial, is as follows:
. . . Your Honor, the Secretary is here to prove that the
prime contractor, Permis Construction Corporation and its
principal, G[iu]sseppe Caparotta, president, set upon a
course of conduct when it undertook to fulfill four
Government contracts, two of which were with the New York
Department of Transportation, the Merchant Marine Academy
at Kings Point, and two contracts involving the United
States Army at Fort Totten, and in that course of
conduct, Permis Construction Corporation and its
principal falsified certified payrolls consistently,
continually, during a period that spanned approximately
from November 1983 through November 1984.
The alleged contracts (sic, violations) are that the
payrolls are false in that they do not reflect the hours
actually worked by employees, that they do not reflect,
in fact, in many cases, reflect the actual period of
employment by many employees. The payrolls are
inaccurate in that they do not, in fact, show the amount
paid hourly to the employees. (TR. 3 line 20, through
p.4 line 12)
It was respondent's stated position:
. . . that these payroll records, number one, are not
inaccurate; that the computations made by the compliance
officer and the conclusions which he drew from those
computations are inaccurate; that they are not based upon
facts, but they are based upon certain suppositions and
assumptions which the compliance officer made which are
not, in fact, accurate; and that therefore, the
conclusions which he drew from those computations are not
accurate and, beyond that, it would follow that the
payroll statements and other certifica[]tions made by the
prime contractor were not falsified.
In addition to that, I would respectfully submit to the
Court that if certain errors are found, those errors were
not willful, they were not malicious, they were not
deliberate, and they were not intentional. . . .[] (TR.
6 line 3 through 17)
The most important thing, of course, is that there was no
deliberate falsification of payroll records which were
submitted to the United States Government through the
various agencies.[] (TR. 7 line 10 through 13. [3]
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[4] The sole witness called by the government was Horace
R. Jackson who has been a compliance specialist with the U.S.
Department of Labor, Wage and Hour Division, for 20 years, in the
course of which he has conducted a 150 to 200 investigations in
which construction projects were involved; in approximately 3/4 of
said investigations construction was still in progress.
Additionally, Mr. Jackson has personal experience in construction
employment having worked fairly extensively as a brickmason tender
during college days. (TR.8-11)
There are four contracts involved in the subject litigation.
Two at the Merchant Marine Academy, one involving renovations/
remodeling of the dormitory facilities and one involving
renovations/remodeling of the kitchen; two at Fort Totten, one
involving fuel tanks and one, according to Mr. Jackson, involving
an office building. The investigation of the work at the Merchant
Marine Academy involved the period of about June 1984 through
August 1984; the investigation of the work at Fort Totten involved
the period from approximately May 1984 through August 1984. While
Mr. Jackson actually visited the worksite at the Merchant Marine
Academy he did not visit the Fort Totten site and concedes that
that he "didn't know that much detail about it." (TR. 11-13).
Given that admission I accept Mr. Caparotta's subsequent testimony
that the "office building" at Fort Totten was in reality a
kindergar[t]en.
Prior to the commencement of the aforesaid investigations
Mr. Jackson had an opening conference with respondent G[iu]ssepe
Caparotta at the office of respondent Permis Construction Corp., in
Brooklyn, New York, in April 1984. At that time Mr. Jackson
requested of Mr. Caparotta copies of respondents certified
payrolls, the subject contracts, the regular payroll journal (the
in-house payroll) that was kept for tax purposes, as well as "any
time records, if any were used . . ." He also reviewed with Mr.
Caparotta requirements of the Davis-Bacon Act including the payment
of the required hourly wage rate and fringe benefits. Evidently,
Mr. Jackson was then supplied with the requested payroll records,
was advised that the payroll records were prepared [by]
respondent's bookkeeper based on oral reports from respondent's
foreman on the job as to employee hours worked, and that there was
no basic time record as such. Specifically, he was led to believe
that no document which showed the hours worked existed;
consequently, in the course of his investigation the only
documentary evidence regarding who worked and when they worked
would be the certified payroll and the in-house payroll. (TR.
13-17) However, as is revealed hereinbelow, there was an
additional, earlier record.
At the conclusion of his investigation, in August 1984,
Jackson had a closing conference with Caparotta in the same office,
at which time he advised Caparotta that his "investigation had
disclosed that the hours that were reflected on the certified
payroll were not accurate hours; the rates that were supposedly
paid were not the rates that were paid; and that the gross wages
were not correct. And, not only that, that there were
inconsistencies between the certified payrolls and the regular
payroll for tax purposes. In fact, that there were a lot of
inconsistencies, and that as far as we were concerned, that the
prevailing wages had not been paid." (TR. 18) [4]
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[5] Caparotta took the position "that the certified payroll was
correct and if there were any discrepancies that it was more or
less because of bookkeeping errors." (TR. 17-19). As is seen
hereinbelow, Mr. Caparotta now has a more extensive explanation.
During the course of his investigation i.e., between the
opening conference and the closing conference, Jackson met with
Caparotta at the Permis office on several occasions, in the course
of which, inter alia, he requested or re-requested documentation
concerning the provision of hospital/health insurance for offset
purposes against respondent's fringe benefits liability; according
to him he was not then provided with any such documentation. It is
Mr. Jackson's recollection that in the course of their
conversations he was advised by Mr. Caparotta that the subject
contracts were his first government contracts. (TR. 19, 20)
Having transcribed from the in-house payroll book, for what he
describes as a "representative period", information which would
show for a given work week the names of the employees that worked
during that work week, the daily hours, the total hours, and the
wages that were paid, and being in possession of photostatic copies
of the certified payrolls, Mr. Jackson personally went to the
Merchant Marine Academy worksite. At that location, according to
his testimony, he interviewed 8 or 12 employees "in regards to work
that they were doing, when they first started working on the
project, the hours that they were working by the day, the total for
the week, the rate that was being paid and the gross wages that was
paid for the number of hours that they indicated that they had
worked."
It was his personal observation on the two occasions he
visited the Merchant Marine Academy job site that the outside
workers had started the mortar mixing machine at approximately 8:10
A.M., and "that they didn't begin to clean up of the, you know,
machine and put away whatever they had to put away until
approximately 4:15, P.M., 4:20 P.M.[]" Although he knew that he
had made several such observations during the period of his
investigation from April to August 1984, he was initially unable to
remember in what month said observations had been made and said
interviews conducted. (TR. 20-28).
With regard to the in-house payroll and certified payrolls
Mr. Jackson found inconsistencies between the two which in his
opinion should not have existed even assuming that bookkeeping
errors had been made.
Specifically, with regard to fringe benefits, the certified
payrolls did not indicate that such had been paid, and "the hourly
rate was not sufficient to cover the basic hourly rate plus the
hourly rate for the fringe benefits . . . with maybe one or two
exceptions . . .". According to the witness the reverse side of
the certified payroll contains an area on which it may be
indicated, by placing a check mark in the appropriate box, that
fringe benefits were paid in cash, and that box was checked off;
that testimony was clarified to mean that fringes were supposed to
have been paid in [5]
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[6] cash, rather than to certify that they were in fact paid in cash.
(See also Secretary's EX. 1, which is a representative sampling of
the employer's Statement of Compliance, DD form 879). In fact, on
on the forms used by respondent said document was a separate sheet.
During one of their meetings Mr. Caparotta indicated to
Mr. Jackson that fringe benefits had been provided in the form of
Blue Cross payments, although no documen[t]ation thereof was
supplied during the period of his investigation. (TR. 27-36)
Notwithstanding his earlier testimony that he did not remember
the month during which he visited the Merchant Marine Academy job
site Mr. Jackson (evidently having refreshed his recollection)
testified that it was on May 15, 1984 that he visited the dormitory
project and one at said worksite and interviewed Giuseppe Maione
and seven other employees; six were interviewed at the dormitory
project and one at the kitchen project. Of the eight said
employees who were interviewed by Mr. Jackson on May 15, 1984,
"only five of them appeared on the certified payroll as having
worked on that date. Three were not listed as having worked on the
project, even though I personally interviewed them at the job site
on that particular day." Specifically, the three individuals who
did not appear on the certified payroll were Mr. Armando, Mr.
Maione and Mr. Petito. (TR. 36-38)
As a result of his conversation with Mr. Maione, Mr. Jackson
concluded that he had worked on the project all of the prece[]ding
week as well as the several days of the work week prece[]ding the
date of the interview; however, the certified payroll showed only
three days worked the prece[]ding week and no days worked during
the work week which included the day of the interview. (TR. 38-40)
The compliance specialist's essential computations as a result
of which he arrived at the figure each employee is alleged to have
been underpaid are set forth on the Wage Transcription and
Computation sheets which comprise Secretary's Exhibit 2. On those
documents are set forth, for each individual, a comparison of
respondent's in-house payroll and certified payrolls. In addition,
said documents show the compliance officer's conclusion with regard
to the hourly rate that should have been paid, the hourly rate that
he believes was actually paid (as opposed to the hourly rate shown
on respondent's certified payroll), the number of hours which he
concluded the individual's actually worked and his computation of
the underpayments. Said computations consist of the difference
between the hourly rate he believes should have been paid and the
hourly rate he believes was actually paid multiplied by the number
of hours he believes the individuals actually worked. The wage
transcription and computation sheet for each individual shows each
of the projects on which he worked. According to Mr. Jackson his
computations on said sheets are based on his analysis of the
certified payroll and in-house payroll, the aforesaid employee
interviews and the aforesaid personal observations made by him at
the job site.
As an example of the manner in which Mr. Jackson computed [6]
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[7] the alleged underpayment: as shown on the wage transcription
and computation sheet for Mr. Alfeo respondent's certified payroll
for the work week ending April 22, 1984 indicates that he worked 7
hours per day on Tuesday, Wednesday and Thursday of that week for
a total of 21 hours at the kitchen project, and was paid at rate of
$14.76 per hour for a total $309.96. However, Mr. Jackson assumed
(evidently based on his observations at the job site and
conversations with the several employees) that Mr. Alfeo, as well
as all other employees, worked 8 hours per day 5 days per week for
a 40 hour work week. Accordingly, in order to compute the hourly
rate at which Mr. Alfeo was paid Mr. Jackson divided the weekly
amount which respondent's in-house payroll /FN2/ showed Mr. Alfeo
to have been regularly paid on an ongoing basis ($414) by 40 hours,
and arrived at an hourly rate of $10.35. In Mr. Jackson's judgment
Mr. Alfeo, whose occupation on the kitchen project was listed as
laborer, should have been paid an hourly rate of $17.31 according
to the wage determination. Thus, he determined that Mr. Alfeo had
been underpaid $6.96 for every hour of work ($17.31 - $10.35).
And, since Mr. Alfeo was not listed at all on respondent's in-house
payroll for the week ending April 22, 1984, Mr. Jackson determined
that he had been underpaid said hourly amount for each of the 3
days he was shown to have worked on the certified payroll. Since
Mr. Jackson, as aforesaid, had determined that 8 hours had been
worked a day rather than the 7 reported on the certified payroll he
multiplied $6.96 x 24 hours, which produced an underpayment of
$167.04; it is unclear why he did not multiply $36.96 by 40 hours.
Respondent contests Mr. Jackson's premise that 40 hours per
week were worked by the employees. Clearly, although there are
other issues in this case, the number of hours actually worked per
day and per week is the major issue. (TR. 42-49)
Although Mr. Alfeo was one of the 8 to 12 employees
interviewed by Mr. Jackson he was unable to recall "the sum and
substance" of their conversation. (TR. 52)
Mr. Alfeo did not appear as a witness on behalf of the
government, nor was his statement offered in evidence. Neither did
respondent produce him as a witness nor did it move to compel
production of his statement at trial (which motion I would have
granted since Mr. Jackson's testimony was based in part thereon).
Although the failure of the government to call employee witnesses
or produce their statements is bitterly complained of by
respondent's very competent counsel it is my distinct impression
that respondent was actually quite content not to have employee
testimony or statements in this record, since no meaningful
measures were taken to secure either.
Secretary's Exhibit 3 is a summary of allegedly unpaid wages
of respondent's employees which shows, for each of the projects,
the weeks worked and the underpayment alleged. Said work weeks
were [7]
/FN2/ The parties agree that the employees were actually paid the
amount shown on the in-house payroll. [7]
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[8] determined primarily from respondent's certified payrolls and
in-house payrolls, although in some instances, based on the
statements of the aforesaid employees, Mr. Jackson accepted that
the had worked during periods for which they were not listed in
respondent's records. (TR. 53-55)
Secretary's Exhibit 4 contains the photostatic copies of
respondent's certified payrolls which, for a given week at a given
project, lists the employees, their work classification, their
daily and weekly hours worked, their hourly rate, their gross
earnings, and five specific types of deductions including social
security, federal withholding, state, etc., and the net amount
paid. Having inspected each of said documents I note that only in
one instance, on February 10, 1984, are any employees indicated to
have worked more than 7 hours per day, on that day three
individuals are indicated to have worked 8 hours and only one
occasion was any individual reported to have worked a fractional
number of hours, that occurred on December 7, 1983 when an
individual is indicated to have worked 5 1/2 hours.
Secretary's Exhibit 5 (which I consider superfluous) is a
partial summary of other exhibits which shows, inter alia, for each
of the employee's involved a limited number of work weeks as shown
on respondent's certified payrolls and in-house payroll, as well as
the hourly rate calculated by Mr. Jackson to have been paid based
on the number of hours per week he believed the employees had
actually worked, as opposed to the number of hours per week shown
on respondent's records. (TR. 58-61)
By way of illustration of the discrepancies in respondent's
records Mr. Jackson cites the records for employee Delgreco for the
work week ending May 6, May 13, May 20, May 27 and March 11, 1984.
During those weeks, the number of hours worked as reported on the
certified payroll and as shown on the in-house payroll are in
agreement, but the amounts paid in those weeks as shown by said
records are not. Specifically, for the week ending May 6, the
certified payroll shows $210.28 and the in-house payroll shows
$460; for the week ending May 13, the certified payrolls shows
$450.60 and the in-house payroll shows $460; for the week ending
May 20, the certified payrolls shows $461.98 and the in-house
payroll shows $460; for the week ending May 27, the certified
payrolls shows $450.60 and the in-house payroll shows $460; for the
week ending March 11, the certified payrolls shows $331.24 and the
in-house payroll shows $368. Since the only work performed by
respondent's employees during the period at issue, by respondent's
own testimony, was on the subject contracts, the amount paid as
shown on the certified payroll and the in-house payroll should have
been the same. Furthermore, in the weeks in which the in-house
payroll reflects payments of $460 Mr. Delgreco is reported to have
worked 14 hours during one week, 30 hours during each of two other
weeks and 31 hours during another week; and, on the week in which
he was paid $368 he was reported as having worked 14 hours. Thus,
if the hours worked were as reported, Mr. Delgreco was paid at
hourly rates of between $26.29 and $32.86, whereas his hourly rate
as reported on the certified payroll ranges [8]
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[9] from $14.76 to $23.66, a circumstance which demands explanation.
And, in the absence of any reasonable explanation, I cannot say that Mr.
Jackson's method of determining the actual hourly rate paid was
unreasonable. Specifically, based on the premise (founded on his
personal observations as well as employee interviews) that 8 hours
per day were worked, Mr. Jackson postulated that during the week in
which Mr. Delgreco had been paid $460 he had actually worked 40
hours rather than the amounts reported by respondent, and by
dividing 40 into $460 arrived at an actual hourly rate paid of
$11.50. During the week in which Mr. Delgreco was paid $368 Mr.
Jackson postulated that he had w[or]ked 4 full days or 32 hours,
rather than the 14 hours reported by respondent, and by dividing 32
into $368 he arrived at the [*] same [*] hourly rate of $11.50.
[*Emphasis in original*] This appears to be a reasonable method of
resolving the conflict in respondent's books, absent some
reasonable explanation to the contrary. And, $11.40 is
significantly below the hourly rate Mr. Delgreco was required to
have been paid. (TR. 61-66)
Based on essentially the same types of discrepancies in
respondent's records, and essentially the same type of
reconstruction and calculation, Mr. Jackson arrived at the amount
allegedly underpaid the other employees involved in this matter.
While Mr. Jackson's computations do not prove out in all instances,
his method is reasonable, and under these circumstances the
government had no reasonable alternative other than to attempt to
make a reasonable reconciliation of the otherwise inadequately
explained discrepancies in respondent's own records. Respondent,
in short, has created this problem; and, in the absence of an
adequate explanation for the significant discrepancies in his own
records, or a showing of a more reasonable way of reconciling those
discrepancies than that employed by Mr. Jackson, there is little
alternative but to accept the less than perfect calculations made
by him.
By prior agreement, the government, in this case, accepts
not only that respondent's employees were paid the amounts shown
on respondent's in-house payroll (which in general is a greater
amount than that shown on the certified payrolls) but also that the
employees' job classifications, as determined by respondent, were
correct. That prior agreement of the parties, however, does not
foreclose the government from proving, as it contends, that the
hourly rate actually paid was below that required to be paid to an
employee in such classification. (TR. 77)
Another striking example which illustrates the reasonableness
of Mr. Jackson's calculations is employee Gassoso. An examination
of his records over a consecutive period of 5 work weeks reveals
that while, when the $14.76 hourly rate reported on the certified
payrolls is multiplied by the number of hours claimant is indicated
by the certified payroll to have worked the product is the total
wages as shown on the certified payroll, when the number of hours
claimant is reported to have worked on the certified payrolls is
divided into the wages he was actually paid as shown on the
in-house payroll varying an[d] inconsistent hourly rates are
produced; on the other hand, when the wages actually paid to
claimant as shown on [9]
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[10] the in-house payroll are divided in accordance with Mr. Jackson's
premise (i.e., work weeks of 24, 32 and 40 hours, based on multiples of
8 hour work days) the hourly rate produced is consistently $10.35.
Perhaps as clear an illustration as one needs to see, given
the uneven amounts paid, is employee Materia, for the work weeks
ending February 26, March 4, March 11, and March 18, 1984. During
those weeks he was actually paid, as shown by the in-house payroll,
$706.20 in three of said weeks and $565 in the other week. His
hourly rate as reported in the certified payroll was $23.66 and his
hours worked for the aforesaid weeks 21, 30, 21, and 28
respectively. While the amount actually paid,when divided by the
number of hours reported, produces hourly rates of $33.62, $22.54,
$26.90, and $25.22, said actual wages paid, when divided in
accordance with Mr. Jackson's premise, by 40 hours, 40 hours, 32
hours and 40 hours respectively, results in a uniform hourly rate
paid of $17.65. This clearly supports the theory that respondent
was underreporting on its certified payrolls the number of hours
actually worked so as to produce a fictitious hourly rate which was
higher than the hourly rate at which the employee was actually
paid.
Further illustrations of the gross discrepancies in
respondent's records are evidenced by the circumstance that
employee Colella, who is shown by the certified payroll to have had
significant earnings in April 1984, is not shown in the in-house
payroll for that period. Also, employee Fileccia in some instances
is shown to have had significantly greater earnings on the
certified payroll than on the in-house payroll, and in other
instances is shown to have had significantly greater earnings on
the in-house payroll than on the certified payroll. As Mr. Jackson
testified, the in-house payroll must always equal or exceed the
certified payroll in any situation, and it is noted that in this
case said records should have been identical in all situations
since the only contracts under which its employees worked were the
4 subject contracts. (TR. 84-86)
If not otherwise already clear, the manner in which Mr.
Jackson mathematically resolved the discrepancy in claimant's books
and records is set forth at Transcript 86-93, and his ability to
reconcile said divergent records on the basis of his underlying
premise, already explained hereinabove, supports his opinion that
"the hours, rates and the wages that were shown on the certified
payroll were not correct" (TR. 93) Although said premise does not
prove out universally, it does so in a sufficient number of
situations for it to be considered, in the absence of reasonable
explanation by respondent for the said discrepancies, or a better
method, to be a reasonable method under which to compute the actual
hourly rate paid by respondent to the subject employees. Moreover,
as I view it, it is not really dependant upon statements made by
employees, but stands on its own as an arithmetical premise which
produces identical hourly pay rates with much greater regularity
than can accounted for by coincidence.
Although respondent's in-house payroll establishes that [10]
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[11] employee Maione was paid $640 for the work week in which May
15, 1984 occurred, he does not appear at all on the certified
payroll for that week. It is noted that it was on May 15, 1984
that Mr. Jackson personally interviewed Mr. Maione at the job site.
(Secretary's Ex. 2 p.8-15; Secretary's Ex. 4 Melville Kitchen
Project Weekly Payroll No. 17; TR. 96, 97). This does not inspire
confidence in the accuracy of respondent's certified payroll.
At the outset of cross-examination counsel for respondent
established from Mr. Jackson that he had taken written statements
from several of the employees about whom he had earlier testified.
Whereupon the following colloquy took place counsel and Mr.
Jackson:
Q. Can I see those statements?
A. They are part of the case file.
Q. Well, where are they?
A. They are in the case file . . . . The legal department
. . . of the Department of Labor, has the case file. I do not
have the case file.
Q. You do not have the statements?
A. Right.
Q. And you are testifying stric[t]ly from memory?
A. The case file included what we call a narrative, on which
we summarize the information that we gathered as a result of
the investigation, and I made a photostat of that narrative,
and I have that narrative . . .
Q. In your possession?
A. Right.
Counsel for respondent, who from my observation is a well
seasoned trial attorney, did not then, or at any other time, move
to compel the production of said statements or the narrative
summary thereof. It is my belief that counsel purposefully did not
make such motion in order to preserve his ongoing complaint that
his client had been deprived of due process as a result of the
government's declination at any ea[r]lier time to produce said
employees statements (TR. 98-100). It is also noted that at no
time prior to trial did respondent move to compel such statements.
Had such motion been made I would have ordered the production of
redacted [11]
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[12] (sanitized) statements, as I have done in other
cases in similar situations.
According to Mr. Jackson he actually visited the Merchant
Marine Academy kitchen remodeling project and dormitory remodeling
project on 4 to 6 occasions and never visited the Fort Totten Fuel
Tank and Building 405 projects. On two occasions he arrived at the
job site at or before 8:00 A.M., remained for an unspecified period
of time and then left; he returned in the afternoon in time to
observe that employees were still working as late as 4:15 or 4:20
P.M. Specifically, his observation that work commenced at 8:00
A.M., was based on these circumstance that there was a cement mixer
operating at that time. (TR. 101-106)
It is Mr. Jackson's testimony that he conducted the employee
interviews in English and that although the individuals he
interviewed spoke with dialects (Italian) none indicated that they
did not understand what he was saying to them or asking of them.
According to Mr. Jackson he also interviewed some of the employees
at their homes although he does not remember who was so
interviewed.
According to testimony elicited from Mr. Jackson on cross-
examination, he was advised by some of the employees interviewed
by him that they were paid only for actual hours worked, not for
holidays; he is uncertain concerning whether or not he inquired
about vacation pay; it is his testimony that said employees advised
him that they were not the rec[i]pients of Blue Cross/Blue Shield
benefits. (TR. 106-113)
It is Mr. Jackson's testimony that when, in the course of his
investigation, he brought to Mr. Caparotta's attention the
discrepancies between in-house payroll and the certified payrolls
Mr. Caparotta's only response was "that the bookkeeper made
mistakes" (TR. 119), and Mr. Caparotta did not testify otherwise []
regarding their conversations.
Mr. Jackson agreed that debarment would not be appropriate in
a situation in which, notwithstanding that certified payrolls were
incorrect, the employees had in fact been paid all of the monies
due them for their Davis-Bacon work. (TR. 125-126)
Mr. Jackson testified that he had interviewed a total of 12
(although his earlier testing was 8) employees, either at the job
site, their homes, or at their subsequent places of employment. As
I understand his testimony, what some of those employees indicated
they believed they were being paid per hour is reflected on Item
No. 12 of Secretary's Ex. 5, the summary exhibit referred to
hereinabove.
Both the certified payrolls and the in-house payroll showed
hours worked and wages paid; but, although the information on the
certified payrolls worked out mathematically, i.e., the hours
worked multiplied by the hourly rate shown equalled the wages shown
to have been paid, the information on the in-house payroll did not
work out [12]
~13
[13] mathematically. For example, as indicated by Mr.
Jackson, and in summary of what has already been discussed at
length hereinabove, "the same gross wages would be shown (on the
in-house payroll) for various number of hours -- it could have been
fourteen, it could have been eighteen it could have been twenty-one
or whatever." (TR 137) It is Mr. Jackson's testimony that when he
inquired of Mr. Caparotta about this situation Mr. Caparotta
responded that "the foreman didn't do a good job of keeping the
time". (TR. 137, 138)
Mr. Jackson testified that Mr. Caparotta had indicated to him
that he had a hard time getting good help, but express[]ly denied
that Mr. Caparotta ever indicated that he was forced to pay or felt
compelled to pay employees for work they did not actually perform
on a given day. (TR. 138) While Mr. Caparotta later testified at
length that he paid in excess of what was earned he did not testify
that he had ever prior to trial given that explanation in
justification for his discrepant records.
In re-direct examination, Mr. Jackson reiterated that although
he had specifically requested basic time records none were
provided, and that the only records indicated by Mr. Caparotta to
have been available regarding hours and wages were the certified
payrolls and the in-house payroll, "nothing else". (TR. 142), and
Caparotta did not deny that he had so advised Jackson.
Although he advised Mr. Caparotta that credit would be given
for fringe benefits provided upon receipt of documentation, no such
documentation was provided during the course of his investigation
(TR. 142, 143).
In the course of my examination (TR. 153 et seq.), which was
undertaken for the purpose of recapitulating Mr. Jackson's
essential testimony concerning the manner in which his calculations
were arrived at, it became clear that he had concluded that the
employees were employed by respondent in work under the subject
contracts 8 hours per day for each of the days for which any hours
under the subject contract were reported on the certified payrolls,
and (erroneously) that said employees were employed by respondent
in other work which when added to the work under the subject
contracts made up a 40 hour work week. (TR. 168) Mr. Jackson did
not testify that he was advised by any of the employees he
interviewed that they worked both on the subject contract and on
other work; and, it is the essential testimony of Mr. Caparotta,
which I credit, that for all practical pur[p]oses the only work in
which Permis was engaged during the period at issue was on the
subject contracts.
That Mr. Jackson assumed that the employees worked on both
the subject contracts and non Davis-Bacon contracts rather than on
Davis-Bacon contracts only does not effect the extent to which his
calculations prove to be mathematically valid in determining the
hourly rate actually paid; indeed, the government's case is even
stronger under Mr. Caparotta's testimony that all of Permis['] work
during the period at issue was on the subject Davis-Bacon
contracts.
[13] It is Mr. Jackson's testimony, in essence, that he did not
~14
[14] believe everything he was told by the employees
interviewed; he weighed the employees statements against each other
and considered them in the light of the figures shown on
respondent's records. (TR. 178-192)
It is the government's contention that on the Fort Totten
Building 405 and Fuel Tank Contracts the following wage rates were
applicable (in all instances the first figure represents the basic
hourly rate, the second figure the fringe benefits and the third
figure the total amount required to be paid per hour): bricklayers
$15.22 plus $6.17 = $21.39; carpenters $17.37 plus $6.50 = $23.87;
mason tenders $14.15 plus $3.505 = $17.655; plumbers $19.33 plus
$5.31 = $24.64. (Secretary's Ex. 6). On the Merchant Marine
Academy Kitchen and Dormitory Contracts the government contends
that the following hourly rates were required to be paid:
bricklayers $17.22 plus $6.17 = $22.39; carpenters $17.37 plus
$6.01 = $23.38; laborers $12.74 plus $4.57 = $17.31; plumbers
$16.13 plus $4.97 = $21.10. (Secretary's Ex. 7)
In their own defense respondents adduced the testimony of only
one witness, G[iu]seppe Caparotta, who during the period at issue
owned 50% of the stock in Permis, presently is sole stockholder,
and at all relevant times was president and chief executive officer
of Permis. There seems little doubt that he was in charge of the
overall operation since 1976, when Permis came into being; prior to
that time he was similarly engaged for Permis' predecessor company.
Mr. Caparotta was born in Egypt of an American mother and an
Italian father, earned an Engineering degree in Italy, has been a
resident of the United States since 1972, since which time he has
been engaged full-time in the construction industry, speaks English
less than fluently with an Italian accent, and from my observation
is a bright intelligent gentleman who is well versed in the
intricacies of government contract work. (TR. 317-321)
According to Mr. Caparotta the individual who owned the
other 50% of the stock in Permis during the period at issue, Bruno
Frustaci, a bricklayer by trade, personally worked on all of the
projects at issue except the Fort Totten Building 405 project.
Mr. Caparotta did not personally work on any of said projects
although he performed plumbing, electrical, concrete brick, etc.,
work prior to 1976 for the predecessor to Permis. (TR. 321-322)
Mr. Frustaci did not testify at trial.
Regarding the procedures involved in the preparation of the
certified payrolls submitted by Permis to the government it is
Mr. Caparotta's testimony that "the office receives the information
of who's working that particular project and the hours worked. And
the office, when I say the office, can be a secretary, can be a
bookkeeper, can be an engineer in the office, and they fill out the
weekly payroll and then they hand it over to me and I sign." (TR.
324, 325). The receipt by the "office" of information concerning
the number of hours worked by the given employee is transmitted
either over the telephone, or at the end of the work week in person
[14]
~15
[15] by respondent's on site supervisor. The job
classification of a given individual evidently was determined by
the individual in charge at the job site; the wage rate to be paid
for such classification was determined by Mr. Caparotta in
accordance with his interpretation of the applicable wage decision
(Secretary's Ex. 6 and 7). It is his testimony that the hourly
rate shown on the certified payrolls is the sum of the basic hourly
rate and the fringe benefits in cash. (TR. 324-327)
According to Mr. Caparotta, contrary to the testimony of Mr.
Jackson, he did advise him that some fringe benefits had been paid
in the form of Blue Cross/Blue Shield premiums, and that the bills
from Blue Cross/Blue Shield were shown to Mr. Jackson (Respondent's
Ex. A and B; TR. 348). I consider that unlikely.
While it is the contention of the government that Carlo Alfeo
who performed worked at the Merchant Marine Academy kitchen site
was entitled to be paid at the rate of $17.31 per hour ($12.74 plus
$4.57) for his work as a laborer, Mr. Caparotta determined that he
was entitled to $14.76 per hour ($10.67 plus fringes). The
applicable wage decision is in evidence as Secretary's Ex. 7. The
wage rate contended for by the government is for "LABORERS
(BUILDING)". The rate contended for by respondent is set forth in
the wage decision under the heading "LABORS (HEAVY AND HIGHWAY):"
the specific category being "all other unskilled laborers". It is
to be noted that the construction contracts under which said
employees worked were for the renovation of a dormitory building
and kitchen at the Merchant Marine Academy. The "Description of
Work" which is covered by the applicable wage decision is stated to
be "Building, Residential (includes single family homes and
apartments up to and including 4 stories), Heavy & Highway
Construction Projects." Accordingly, I consider it reasonably
clear from the face of the wage decision that laborers who are
involved in a contract for work on a building are to be paid at the
rate of $12.74 plus fringe benefits of $4.57 for a total of $17.31,
as the government contends, without any distinction based on skill
level, and that the lesser pay scale chosen by respondent applies
only to unskilled laborers involved in heavy and highway
construction. (TR. 349-356).
In testimony which evidently was intended explain why
Mr. Alfeo, who is shown on respondent's certified payroll to have
worked 21 hours for the work week ending April 22, 1984, with gross
earnings of $309.96, is not shown on respondent's in-house payroll
for that week, Mr. Caparotta testified that Alfeo did not actually
begin working for Permis until several weeks after the work week
ending April 22; and, in explanation of why he appeared on the
certified payroll for that week Mr. Caparotta testified "it seems
ridiculous but evidently these sheets they were prepared a couple
of weeks after the actual week by the men in the office. The entry
was behind in submittal of this payroll and it happened his name
appear in other papers and submit his name on this one." (TR. 385)
I find that testimony inherently improbable and do not credit it;
in any event, that testimony, if believed, would confirm what is
already obvious, that respondent's bookkeeping practices were such
as warrant close scrutiny. [15]
~16
[16] With regard to employee Armando, who was also paid on the
basis of being an unskilled laborer on the kitchen and dormitory
renovation projects, while I understand Mr. Caparotta's strong
feeling that Mr. Armando, who had never worked in the construction
industry before, should be compensated as an unskilled laborer, I
am unable to find that the applicable wage decision provides for
any distinction between laborers involved in "Building" projects
based on skill levels. (TR. 359, 360).
Employee Maione was classified by respondent as a mason, and,
as aforesaid, the government has stipulated in this case that the
classifications made by respondent is not at issue (although the
appropriate rate to be paid for a given classification is at
issue); also, employee Colella, was classified by respondent as a
mason in connection with his work on the kitchen and dormitory
project. Notwithstanding the aforesaid stipulation the government
contends that the appropriate hourly rate for employees Maione and
Colella was $23.39 ($17.22 plus $6.17), which is the rate provided
for a bricklayer by the applicable wage decision; the rate provided
for a mason (specifically cement mason, which is the only mason
listed as such on the wage decision) is $17.86 ($14.15 plus $3.71),
which is the rate of pay for which respondent contends, I consider
the government bound by its stipulation and find that employees
Maione and Colella were entitled to a total of $17.86 per hour.
(TR. 360-366)
Respondents appear to contend that transportation provided to
the employees at their request should be taken account in the
computation of fringe benefits; however, no figures are supplied
such as would enable a calculation, even assuming such contention
were valid. Additionally, Mr. Caparotta's testimony with regard to
such transportation obviously is intended to suggest late starting
times for work because of traffic conditions, but the assertion
lacks specificity. (TR. 362, 363)
For his work as carpenter on the kitchen renovation project
employe Delgreco is contended by respondent to have been entitled
to pay at the rate of $15.02 per hour ($12.67 plus $2.35) based on
that portion of the wage decision which provides for carpenters
working on "Residential (under 2 stories)" projects. The
government contends that carpenters on the kitchen renovation
project were entitled to pay at the hourly rate of $23.38 ($17.37
plus $6.01) based on that portion of the wage determination that
provides pay for carpenters working on "Building" projects. As
aforesaid, the wage decision, under description of work, lists
"Building" and "Residential (includes single family homes and
apartments up to and including 4 stories)". There is no reasonable
basis, in my opinion, on which it can be contended that renovation
of the kitchen, which prepared food for the Merchant Marine Academy
mess hall constituted a residential work project. And, I consider
Mr. Caparotta's strained explanation of how he arrived at his
conclusion that it was a residential project (TR. 366-370) not only
to be disingenuous, but to be in gross contradiction of his
subsequent testimony (hereinbelow summarized) that he undertook to
pay employees higher wages than they had actually earned,
essentially as an incentive for them [16]
~17
[17] to remain in his employ nec[]essitated by the circumstance that
their Davis-Bacon wages were [*] inadequate [*]. [*Emphasis in original*]
Mr. Delgreco also worked as a laborer on the [B]uilding 405
project, for which respondent contends he was entitled to pay at
the hourly rate of $15.45 ($11.50 plus $3.25), which is the rate
provided by the wage decision for that project (Secretary's Ex. 6)
for "Laborers Unskilled". The government contends that Mr.
Delgreco [w]as entitled to an hourly rate of $17.65 (which is the
rate for "Laborers Mason Tenders["]). (TR. 373-376) In the absence
of convincing evidence that Mr. Delgreco was in fact a Mason Tender
I accept respondent's "unskilled" sub-classification.
Employee DiBenedetto was employed on the dormitory project
as a laborer (Secretary's Ex. 4 Dormitory Weekly Payroll No. 5
p.2). Notwithstanding its stipulation to accept respondent's
classification the government has mischaracterized Mr. DiBenedetto
as having been a plumber (Secretary's Ex. 2 p.A-6), and has
calculated the hourly amount due him to be $21.10, whereas
respondent contends for an hourly rate of $14.76, which is the rate
the applicable wage decision provides for an unskilled laborer in
Heavy and Highway construction projects as previously discussed.
The government, being bound by its aforesaid stipulation, is
foreclosed from contending that Mr. DiBenedetto was a plumber
rather than a laborer, and respondent is incorrect so far as the
rate of pay is concerned since Mr. DiBenedetto was not involved in
a Building project. (TR. 376-380 ) . Accordingly, I find that his
correct hourly rate of pay was $17.31 ($12.74 plus $4.57) and I
make the same finding regarding the rate of pay to which he was
entitled for his work as a laborer on the kitchen project. (TR.
376-380).
For his work as laborer on the kitchen project and on the
dormitory project respondent contends that employee Dimaggio is
entitled to an hourly rate of $14.76 and the government contends
for an hourly rate of $17.31. For the reasons above stated in
connection with other similarly situated employees I find the
government's contention to be correct. (TR. 380-381).
It is stipulated that if Mr. Caparotta were asked the same
questions with regard to the remainder of employees as he was asked
with regard to the employees referred to hereinabove, his testimony
would be similar. Accordingly, the findings made hereinabove with
regard to the applicable wage rates are also made with regard to
the remainder of the similarly situated employees involved. (TR.
383, 384).
There is no dispute that plumbers on the [B]uilding 405
project were entitled to pay at the hourly rate of $24.64. (TR.
384, 385).
In explanation of how an employee could be at a job site on
a given day and yet not be reported on the certified payroll for
that day (see Mr. Jackson's testimony hereinabove) Mr. Caparotta
explained that it "could be . . . he is doing that particular job
to learn something -- so it's not pertaining to that job." He also
testified that it was not unusual for an employee to go from one
job site to another to pick up tools or to make a delivery and that
"also he can go to another place, he can (come) back to the office,
he can go [17]
~18
[18] to the warehouse . . . to load material, to
unload material." It is unclear why, if such activities were
performed in connection with a Davis-Bacon contract, Mr. Caparotta
believes said employee would not be entitled to be paid, and at the
appropriate rate. And, in any event, whether the specific employee
whom Mr. Jackson observed at the job site but who did not appear on
the payroll was engaged in such activity as described by Mr.
Caparotta is not established. (TR. 385-387)
Respondents have offered a series of documents (Respondent's
Ex. F through I) for the purpose of demonstrating that there has
been no "willful, deliberate, intentional, illegal manipulation of
the prevailing wage rate." Said documents represent modifications
to the subject contracts and are comprised of respondent's
submissions to the contracting agency, including estimates based on
numbers of hours to be worked and at the hourly rates paid; said
modification proposals were amended and approved by the contracting
officer for the agency involved. There is no contention, and if
there were I would reject it, that the contracting agency had any
authority to alter the Secretary of Labor's wage determined rates.
And, the circumstance that the contracting agency agreed to a
modification of the contracts based, in part, on hourly rates which
respondents represented employees were paid, does not establish
either that those rates were indeed paid or that those rates were
appropriate under the governing wage determination. Additionally,
it is noted that the modifications evidenced by respondent's
Exhibit F through H are after the fact and that only respondent's
Exhibit I, which is a modification of the building 405 project, is
relevant in connection with the debarment issue. So far as the
appropriate hourly rate is concerned the only rate in dispute which
is involved in respondent's Exhibit I is that of laborer, which
therein is listed as $14.45 per hour. It is noted that said
figure, which was supplied by respondent, and evidently accepted by
the contracting agency, is $1 per hour below the lowest rate for
laborers set forth on the applicable wage determination, which is
the rate respondent's now contend was appropriate. At the very
least, this is yet another example of respondent's gross
carelessness. (TR. 388-397)
Respondents adduced documentary evidence at trial which
establishes that Blue Cross/Blue Shield benefits were indeed
provided to some employees (Respondent's Ex. A, B, E; TR. 398-399),
and as indicated hereinbelow are credited therewith.
Mr. Caparotta, on direct examination, was asked what is
perhaps the crucial question in this case: "Now, can you tell the
court why there are differences between what appears on the payroll
sheets, the certified payroll sheets and what Mr. Jackson has
referred to as the in-house payroll book?" His response to that
question was in several parts. In his opinion, the Secretary's
wage determinations, which set different rates for similar work
performed in different areas which are relatively close to each
other, are arbitrary and politically motivated; those questions
however are not before me in this proceeding. It is his testimony
that these variances in [18]
~19
[19] rates from location to location created problems with his
employees, which, as best I am able to determine, he claims to have
solved by paying employees more than was actually due them under
Davis-Bacon scale for the amount of time they actually worked;
characteristically, the testimony was of a general nature and was
not specifically directed to any given employee for any particular
period of time. As indicated elsewhere herein, I find it difficult
to reconcile this testimony with respondent's selection, through strained
interpretations of the wage determination, of as low an hourly rate for a
given classification as possible. (TR. 400-406)
It is Mr. Caparotta's testimony that his employees have never,
at any of the job sites in question, worked more than 7 hours per
day. (TR. 405). Earlier in his testimony, however he testified to
minimal direct contract with any of the job sites.
It is respondent's testimony that of the 26 allegedly
underpaid employees only one spoke English fluently; and, that even
he (Caparotta), who is fluent in Italian, had difficulty
communicating with the other employees, who also were principally
Italian speaking, because of differences in dialect. The thrust of
this testimony, obviously is that the ability of Mr. Jackson, who
does not speak Italian, to have communicated with them meaningfully
is questionable. (TR. 406, 407)
Although he denies that they would be competent to state what
kind of work they did, the thrust of which testimony is that they
tended to over estimate their abilities (TR. 439, 441), with regard
to the abilities of the subject employees to communicate in English
Mr. Caparotta concedes that they do have some degree of language
ability in English. Mr. Jackson evidently believes he was able to
communicate with said employees. I have no way of resolving the
question.
On cross-examination Mr. Caparotta testified that from 1976
until the subject contracts were awarded Permis had engaged in 138
federal construction contracts. Clearly, respondent was an
experienced government contractor prior to the award of the subject
contracts. (TR. 437)
Notwithstanding the large number of prior contracts which
Mr. Caparotta administered on behalf of Permis, and his testimony
that "I have all the Federal regulations in my office because I
have educated myself on what I'm doing and plus you don't have to
go far away, you have the prevailing wages here on the chart . . ."
(TR. 438), he professed, in testimony which I consider to be less
than candid, not to understand the meaning, on the wage
determination for the Merchant Marine Academy contracts following
the category "Laborers", of the words "(Heavy & Highway):", as
opposed to the meaning, after the other category of "Laborers", of
the word ("Building"). ([TR]. 447-449)
With regard to Mr. Delgreco, whose rate of pay Mr. Caparotta
determined to be $15.02 per hour ($12.67 plus $2.35) for his work
as a carpenter on the kitchen project Mr. Caparotta testified that
he interpreted the wage determination to provide that rate because
[19]
~20
[20 the kitchen was under 2 stories. In fact, the wage
determination provides for 3 categories of carpenters: "Heavy and
Highway", "Building", and "Residential (under two stories)". The
description of work which the wage determination governs, as stated
hereinabove is "Building", "Residential (includes single family
homes and apartments up to and including 4 stories), Heavy and
Highway Construction Projects." Although Mr. Caparotta's ability
to express himself in English is apparently limited he is an
intelligent man with considerable experience in government
con[s]truction contracts. The wage determination makes a clear
distinction between "Building" projects and "Residential" projects,
and Mr. Caparotta's interpretation that the kitchen project was
residential because the kitchen was under 2 stories borders on the
absurd; and, I additionally note that his original explanation,
given earlier and summarized herein[]above, was that he chose said
rate because the kitchen was a residence in the sense that it
prepared the food for individuals who were housed on the base. I
do not believe that the selection of the Residential rate of $15.02
for carpenters rather than the Building rate of $23.38 was made
because Mr. Caparotta in fact believed, or could reasonably have
believed, that it was the appropriate rate, but rather because it
was the lower rate. (Secretary's Ex. 7; TR. 449-452) In re-cross
examination Mr. Caparotta again indicated that he considers a
kitchen to be residential in nature bec[au]se only people who are
in residence are serviced by that kitchen. While I might accept
such explanation from a novice government contractor I do not
accept it from an individual of Mr. Caparotta's experience and
intelligence. (TR. 456)
It is Mr. Caparotta's express testimony that during the period
at issue Permis was not also involved in non-government contracts,
and he furthermore agrees that the allegedly underpaid employees,
worked on only the subject contracts during the time at issue. (TR.
453-455)
Mr. Jackson, on rebuttal, testified that he had advised
Mr. Caparotta, on either his first or second visit to respondent's
office "that a residential building was a building where private
families lived . . . . that even though people lived in the
dormitory that was not a residential building"; Mr. Caparotta took
the position that the dormitory was a residential building by
virtue of the fact that cadets lived there. So far as the wage
decision is concerned (Secretary's Ex. 7), which is controlling in
this situation, "Residential" includes single family homes and
apartments up to and including 4 stories, and so far as carpenters
are concerned it includes such structures only if they are "under
two stories" that is clear from the face of said document. Since
the dormitory was 3 stories high carpenters working on it could not
be paid at the Residential rate of $15.02 as contended by
respondent, but were required to be paid at the "Building" rate of
$23.38 as contended by the government. (TR. 460, 461) So far as
the question of whether the dormitory involved in this proceeding
is or is not a residence, I find that it would be quite reasonable,
were this situation not governed by contractual definitions, to
consider a dormitory in which Merchant Marine Academy cadets
resided to be their residence; [20]
~21
[21] however, in this situation, in which the express terms of the
contract control and were required to be complied with by respondents,
I do not find Mr. Caparotta's conclusion that the dormitory was residential
within the meaning of the wage determination for purposes of calculating
the hourly wage to be paid a carpenter, was reasonable.
With regard to the aforementioned Blue Cross/Blue Shield
payments I accept Mr. Jackson's computations with regard to the
extent to which they should be credited as fringe benefits in the
absence of any contrary contention on behalf of respondents. (TR.
467-475).
In clarification of the method used by him to compute the
alleged underpayments Mr. Jackson further explained that he did not
use the assumption that in all instances employees worked 40 hours
on the subject contracts in a given week. Rather it is his
testimony that: "I used the days that the firm indicated as days
that were worked on the covered project, in all cases except where
I had received testimony" to the contrary. If the -- whatever
number of days that was shown, I either multiplied that number of
days times seven hours or either by eight hours to arrive at the
actual hours that were worked on the project. In those instances
where I had information to the contrary, where an employee said
that I worked all five days the previous week and he was not shown
on the certified payroll as having worked that previous week, then
I added on those days but that would have been the only exception."
(TR. 475, 476).
In final explanation of his bookkeeping procedure Mr.
Caparotta testified that the information regarding the number of
hours worked by a given employee was given orally by the onsite
foreman or superintendent to someone in the Permis office, and that
individual reduced it to writing on "a sheet of paper of payroll
reports on the desk and she or he will write down the amount of
hours worked on that particular contract." That document was
further described as "a piece of paper . . . with all boxes. And
one is with four or five boxes. One box is pertaining to each
job." From that document, according to Mr. Caparotta a given
individual's hours worked in the prior work week was transcribed
"every Monday" onto the inhouse payroll book. Subsequently, the
information was transcribed from the source document to the
certified payrolls which were filed with the government. It is his
testimony that the certified payrolls are correct with regard to
the number of hours actually worked, but since employees were paid
more than they were required to have been paid under Davis-Bacon,
essentially as an incentive bonus so that they did not seek higher
paying work elsewhere, the certified payroll understates the amount
actually paid, which amount is accurately reflected on the in-house
payroll. So far as this record shows, Mr. Caparotta had not prior
to trial offered to anyone on behalf of the government this
explanation, to explain the gross discrepancies between the
in-house payroll and certified payrolls as to amounts paid. Any
variation in the described situation, according to Mr. Caparotta,
results from "mistakes". In testimony which I found rather
startling, in view of the circumstance [21]
~22
[22] that the principal issue in this case is the number of hours actually
worked by his employees, Mr. Caparotta, a few moments before the evidentiary
record closed (p.492 of the 494 page transcript), disclosed that he
still has the aforesaid source document i.e., the time sheet
referred to, which he had not shown to Mr. Jackson, and so far as
this entire proce[e]ding is concerned the existence of which had
never before been disclosed. So far as Mr. Jackson's investigation
was concerned, in Mr. Caparotta's word "he asked me for time
records, I show him my payroll book."
In addition to the findings made herein I adopt such of the
494 findings proposed on behalf of the Department as are not
inco[n]sistent therewith.
Summary and Additional Discussion
As a government contractor respondent was obligated to pay
his employees the required hourly rate plus fringe benefits, and
to keep accurate records reflecting inter alia the number of hours
worked, the rate paid and the total amount paid.
So far as hours worked are concerned it was respondent's
practice to have its on site superintendents telephone each
employee's hours worked into its main office, and to have them
recorded on some sort of timekeeping document.
That document became the source document from which the hours
worked were transcribed on to respondent's in-house payroll book;
said document was also the source document from which hours worked
were transcribed to the weekly certified payrolls which respondent
was required to submit to the government in connection with the
subject contracts.
Since, according to respondent's president, of all its
business was in government contracts, and that during the period at
issue it was engaged only in the four subject contracts, one could
reasonably expect the certified payroll and the in-house payroll to
be identical vis a vis number of hours worked and total pay. That,
however, is not the case.
Respondent's in-house payroll and the certified payrolls
submitted by it are not in agreement in a number of particulars.
There are, for example, numerous instances in which the recorded
number of hours worked do not agree, sometimes showing more hours
on the certified payroll than the in-house payroll and sometimes
showing more hours on the in-house payroll than the certified
payroll.
Respondent explains the differences in the recorded hours
worked as inadvertent mistakes; if that is so, it reflects gross
careless[ness] and evidences a dis[regard] toward respondent's
record keeping obligations, accurate record keeping being crucial
to the government's ability to monitor the wage and hour compliance
of its contractors. Respondent gives no greater explanation for
those instances [22]
~23
[23] in which more wages are shown to have been paid in
the certified payroll than are reflected in the in-house
payroll.
With regard to the great many instances in which the in-house
payroll reflects more wages paid than does the certified payroll it
is respondent's assertion that he paid at least some of the
employees more than that required by the applicable wage
determination because, had he paid only what was required, the
earnings of the employees would have been below the level at which
they would have been willing to continue in respondent's employ.
Why, respondent did not simply certify the amount actually
paid as shown on the in-house payroll (which amount the government
concedes was in fact paid), rather than certifying that a lesser
amount was paid and going to the trouble of computing fictitious
with[h]olding etc., amounts based on said fictitious amount, when
the in-house payroll already contained detailed withholding, etc.,
information computed on the wages actually paid, is unexplained.
I am persuaded, as the government urges, that many of
respondent's employees worked more hours per week than are shown on
the certified payrolls, and even at the higher wages shown on the
in-house payroll were compensated at an hourly rate lower than that
required by the wage determination, thus producing less wages paid
per week than should have been paid for the hours actually been
worked; and, to have reported higher wages than warranted by the
number of hours shown on the certified payroll might have raised
suspicions.
At the heart of the matter is the number of hours per week
actually worked by respondent's employees. Although respondent
Caparotta, who actually visited the job site infrequently,
testified unequivocally that his employees did not work more than
7 hours per day, that testimony is offset by that of the compliance
specialist, who, on the few occasions on which he actually visited
a job site, observed beginning and ending hours which would have
resulted in approximately an 8 hour work day.
More importantly, there being no doubt that the crucial issue
in this case would be the number of hours actually worked by his
employees, respondent at no time produced the aforementioned
underlying source document. Indeed, not until virtually the last
moment of the two day trial conducted in this matter did respondent
reveal that he was in possession of said source document. Under
these circumstances, respondent can hardly expect other than that
an adverse inference will be drawn from his failure to have
furnished said crucial document to the compliance specialist (who
I have no doubt made it clear during his investigation that he
wished to see time records), or to have furnished said document as
part of respondents' case, or even to have revealed its existence
[23]
~24
[24] until virtually the conclusion of the evidentiary
proceeding.
Well in advance of trial respondent was in possession, as a
result of materials furnished by the government, of the compliance
specialist's transcription of the certified payroll and in-house
payroll for each of the allegedly underpaid 26 employees, on the
face of which appears his calculation of the underpayment,
including the number of hours per week concluded by him to have
actually been worked. It is beyond reasonable belief that
respondent would not long since have produced the said underlying
source document if it supported its position and refuted the number
of hours calculated by the compliance specialist, and it is
unimaginable that it would not have been produced at trial.
Respondents, however, address a matter over which I have had
no little concern. The government called not a single employee
witness in this matter, nor, having taken written stat[e]ments from
a number of said employees did it produce any such statement, nor
did the compliance specialist testify as to what said employees
actually said to him (hearsay being admiss[i]ble in this
proceeding); rather, with regard to those interviews, the
compliance specialist simply testified to the conclusions he drew
therefrom. On the other hand, respondents, as a result of
information furnished by the government were well aware of the
names and addresses of the employees alle[]ge[d]ly underpaid, the
period during which they were allegedly underpaid and the amount
they were alle[]gedly underpaid and were supplied with the wage
transcription and computation sheets which show in detail the
compliance specialist's computation of the [] underpaym[en]t for
each employee well in advance of trial. While the government,
pursuant to a policy of protecting informants in matters of this
nature, does not furnish employees statements prior to trial, it
does not have the right to, nor did it, prohibit respondent from
obtaining its own stat[e]ments from said employees, from deposing
said employees, or from producing said employees at trial.
Had the government produced any of the witnesses at trial from
whom statements had been taken it would have been required, on
appropriate motion, to produce those statements at the time the
witnesses were called, and said statements could have been used in
cross-examination; thus, when the compliance specialist testified
as to his conclusions based on what such witness had told him, the
validity of his conclusion could have been tested. Since, while
none of the employees were called, the compliance specialist
testified as to his conclusions based on statements made by them,
I would have granted a motion to compel the production of the
statement of any employee on the basis of which he formulated his
opinion as to the underpayment of said employee, had such motion
been made at trial; and, had the government declined to produce
said statements I would, on motion, have stricken the testimony of
the compliance specialist to the extent that it depended upon
conclusions drawn from statements made by said employees. However,
no such motion having been made respondent cannot now be heard to
complain. [24]
~25
[25] Certainly the ultimate burden of persuasion that the Act has
been violated in this matter rests on the Department of Labor.
And, in my view, that burden has been met on the basis of the
inadequately explained gross discrepancies in respondent's own
books and records independent of any statements made by employees.
Those discrepancies not having adequately been explained at any
time prior to trial the Department, which is charged with the
responsibility of enforcing the Wage and Hour provisions of the
Act, made its calculation of the underpayments, which, as
aforesaid, were furnished to respondent. Thereafter, with regard
to the crucial issue, respondent has done nothing more than nakedly
assert that he voluntarily paid his employees more (and often
significantly more) than they actually earned in order to boost
their wages, while at the same time, through stilted
interpretations of the wage determinations, placing them at the
lowest possible pay scale.
Although I would have preferred to have heard employee
testimony, the government was able to make out a prima facie case
from respondent's own records; while the compliance specialist's
computations are not unflawed I cannot say they are unreasonable
under the circumstances, and except to the extent indicated
hereinabove they are accepted.
It can hardly be believed, that with full fore-knowle[d]ge of
the calculations on which the government intended to rely, and
being faced with the spect[er] of debarment, respondent would not
have made appropriate motions to compel, conducted employee
interviews of its own, deposed the employees or produced them at
trial, under subpoena if necessary, if it had been considered even
remotely likely that such would have helped respondent's case.
It seems to me that respondent was more interested in
preserving the capacity to argue deprivation of due process because
of the failure of the government to produce employee testimony or
statements, than in act[ua]lly ex[]ercising the process available.
Respondents have not been deprived of due process[;] they
either slept on their rights or tactically chose not to exercise
them.
Given the state of this record the choice largely is between
the less than perfect although relatively reasonable arithmetical
computations of the compliance specialist on the one hand, and on
the other hand the sweeping assertion of respondent that employees
were deliberately paid more than their Davis-Bacon earnings because
such earnings were inadequate. That assertion: is unsupported by
any specific details (such, for example as how the alleged extra
amounts were determined, in view of the non whole dollar amounts
actually paid); surfaced for the first time at trial, although
respondent had ample opportunity to make it as far back as the time
of the compliance specialist's inve[s]tigation; is incompat[i]ble
with respondent's selection of the lowest possible wage scales;
stands uncorroborated by any means whatsoever; and, is entirely
self serving.
On balance, I am unable to credit respondent's said naked
[25]
~26
[26] exculpatory assertion, and except to the extent indicated
hereinabove I accept the compliance specialist's computations in
reconcil[i]ation of the gross inconsistencies patent on the face of
respondent's records.
Finally, I note that the following explanation, evidently
intended to explain the gross discrepancies between the certified
and in-house payrolls, given by respondent through counsel, by
letter of October 3, 1985, is hopelessly incompatible with his
sworn testimony at trial that (for all practical purposes) Permis
was only engaged in the subject contracts during the period at
issue:
. . . When employees worked off the site, they were paid,
but the number of hours that they worked off the site are
not shown on the weekly payroll certifications, because
they did not put in the total number of working hours on
the site, that is, they worked both on and off the site
and the payroll records show those hours which they
worked on the site.
In consideration of the entire record I find and conclude that
the named respondents have committed violations of the Davis-Bacon
Act which constitute a disregard of their obligations to their
employees.
ORDER
So far as the specific amount of the underpayment is concerned
the Department shall prepare an Order for my signature, computed in
a manner consistent with the findings made hereinabove, employee by
employee; and, shall submit the same within 20 days after the date
hereof.
Said Order will be assumed consistent with the findings and
conclusions set forth hereinabove unless objection thereto is made,
with specificity and particularity, within 10 days after service.
No such objection will be considered unless accompanied by a
specific computation consistent with the findings and conclusions
reached hereinabove.
IT IS RECOMMENDED that Permis Construction Corporation
and G[iu]seppe Caparotta be debarred under Section 3(a) of the Act
(40 U.S.C. [sec] 276a-2).
STEVEN E. HALPERN
Administrative Law Judge
SEH:mf [26]
