HILLSIDE GARDENS, INC., 1989-DBA-83 (ALJ July 6, 1990)
CCASE:
HILLSIDE GARDENS, INC.
DDATE:
19900706
TTEXT:
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[1] [90-32.WAB ATTACHMENT]
U.S. Department of Labor Office of Administrative Law Judges
Heritage Plaza, Suite 530
111 Veterans Memorial Blvd.
Metairie, LA 70005
DATE JUL 6 1990
CASE NO.: 89-DBA-83
In the Matter of:
Proposed debarment for labor
standards violations by:
HILLSIDE GARDENS, INC.
Subcontractor
CHARLES TALBOT, President
JOHN MITCHELL, Vice-President
WAYNE MARKS, Treasurer
With respect to laborers and mechanics
employed by the subcontractor on Contract
No. F-11623-83-C0088 (grading and
landscaping work at Scott Air Force Base,
Illinois
APPEARANCES:
William C. Posternack, Esq.
For the Office of the Solicitor
Donald L. Rohl, Esq.
For the Respondents
HEARD BEFORE: RICHARD D. MILLS
Administrative Law Judge
DECISION AND ORDER OF DEBARMENT
This is a proceeding arising pursuant to an Order of Reference
dated May 12, 1989 which was filed by the Administrator, Wage and
Hour Division, Employment Standards Administration, United States
Department of Labor (hereinafter referred to as Complainant). It
is alleged in that document and its attached charging letter, that
Hillside Gardens, Inc. and its officers violated the Davis-Bacon
Act, as amended, 40 U.S.C. Section 276a, et seq., and the
regulations found at 29 C.F.R. Part 5, by failing to pay workers
classified as laborers, the Wage Determination rate and
misclassification of employee job classification as well as other
violations. [1]
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[2] The Respondents contested the allegations raised in the
Order of Reference and requested a formal hearing.
The hearing was held at St. Louis, Missouri, on March 15,
1990, and all parties were afforded the opportunity to submit
documentary evidence and the testimony of witnesses. Post-hearing
briefs were submitted by the parties. The findings of fact and
conclusions of law set forth in this decision are based on a
thorough review of the evidentiary record and careful consideration
of the arguments advanced by the parties.
Issues
A. Did respondents disregard their obligations under the
Davis-Bacon Act?
B. Should the Secretary of Labor issue a recommendation
of debarment?
C. Can the Administrative Law Judge or the Secretary of
Labor recommend debarment for a period less than three
years under the Davis-Bacon Act?
D. Should the Secretary of Labor be estopped because of
the Department's delay in investigating Hillside Gardens,
Inc.?
FINDINGS OF FACT AND CONCLUSIONS OF LAW
At the commencement of the hearing, the parties stipulated
to the following facts:
On or about September 23, 1983, the Triax Company, also
known as Triax Scott Air Force Base Venture, entered into
Contract No. F-11623-83-C-0088, with the United States Air Force
at Scott Air Force Base, Illinois, to perform improvements and
repairs to Wherry Military Family Housing, hereinafter referred
to as Wherry. Said contract was in excess of 12 million dollars.
The parties stipulate to a copy of the aforesaid contract as
a business record.
On or about September 10, 1984, Hillside Gardens, Inc.
(Hillside) entered into a subcontract with Triax Scott Air Force
Venture (Triax) to perform grading and landscaping of unpaved
areas of this project at the Wherry Military Family Housing. Said
subcontract was for the stated amount $224,716. A copy of the
subcontract may be entered in evidence as Exhibit C-2. During the
performance of Hillside subcontract at Wherry, Charles Talbot was
the president of Hillside Gardens, Inc.; John Mitchell its vice
president; and, Wayne Marks, the corporation secretary-treasurer.
[2]
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[3] Mr. Talbot, Mr. Mitchell and Mr. Marks each owned one-third
of the stock of said corporation and shared equally in its assets.
During the performance of the aforesaid subcontract, Hillside
Gardens, Inc. employed workers performing landscape labor. During
the period from September 15, 1984, to November 24, 1985, Hillside
Gardens, Inc. paid its laborers who were engaged in the performance
of landscape activities at Wherry, wage rates of $7.00 per hour.
Wayne M. Marks executed payroll records in which he certified the
amount of wages and fringe benefits paid to employees working on
the Wherry Project. Copies of these payrolls, including the
certification and execution, may be introduced in evidence as
Exhibits C-6 and C-7 . The certified payrolls for the period of
September 15, 1984, through September 21, 1985, contained a rate of
$16.15 for each laborer listed. The certified payrolls were signed
by Wayne Marks and submitted to the prime contractor, Scott Air
Force Base Venture. Triax submitted the certified payrolls of
Hillside's to the Air Force Contracting Officer and the
Administrators.
The Hillside Gardens, Inc., by Wayne Marks, informed the
United States Department of Labor Compliance Officer, Ted Martin,
of the $7.00 per hour wage rate paid by Hillside Gardens. Hillside
Gardens, by Wayne Marks, provided full and complete access to their
records and cooperated fully with the compliance officer's request.
With the exception of the certified payrolls, Hillside Gardens
always stated that the wages paid were $7.00. During the period
from work week ending April 13, 1985, through work week ending
April 13, 1985, Hillside Gardens, Inc. employed Mr. Jeff Blake to
perform landscaping activities under its subcontract with Triax at
the Wherry Project. Included in Mr. Blake's duties, was the
operation of a "Mustang" diesel. Mr. Blake acted as the foreman on
the job and was responsible for supervision of the labor being
performed.
On or before October 1985, Wayne Marks, of behalf of Hillside
Gardens, Inc., sent an official written request to Triax Scott Air
Force Base Venture, requesting that Hillside employees be
considered landscape laborers rather than construction laborers and
that the rate prevailing in the area be recognized as $7.75 per
hour. This request was forwarded to the Air Force Contracting
Officer by Triax on October 2, 1985, and forwarded by Triax and
Hillside to the United States Department of Labor on October 1,
1985, on Form DD-1565. The request was denied on or about December
30, 1985, and appeal is taken thereafter, seeking reconsideration.
On November 13, 1986, the request was granted, permitting a
classification of landscape laborer at a rate of $7.75 per hour.
[3]
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[4] During the period the conforming rate request was pending,
the Air Force did not request an adjustment of the rate paid by
Hillside. Upon receipt of the landscape laborer rate of $7.75,
the Wage and Hour Division Compliance Officer, Teddy Martin,
recomputed the Davis-Bacon and CWHSSA back wages claimed to the
amount of $13,183.19. Said recomputed amount was then paid by
Hillside Gardens, Inc.
In addition to the above stipulated facts, I find the
following additional facts proven.
Laborers under the Wage Determination were to receive $14.70
an hour in wages and $1.45 in fringe benefits. Power equipment
operators were to receive $16.67 an hour in wages plus $2.48 in
fringe benefits. (Tr. 48-50).
In August 1984, Wayne Marks was told by Allen Squires, Triax
representative, that Triax would take care of filing a wage
conformance whereby the actual prevailing wage of $7.00 was to be
obtained in place of the wage determination rate of $16.15 plus
fringes. (Tr. 119). Mr. Marks testified that Mr. Squires said
the job "is a nonunion job, you will be able to use your own
people and you will be able to use your rate." (Tr. 121). Mr.
Marks denied that he was aware that when he began the project, in
September 1984, that he did not have a conformance rate of $7.00.
Mr. Marks commenced paying his laborers $7.00 an hour and submitted
payroll records showing $7.00. Approximately one month later, Mr.
Squires handed Mr. Marks a "whole folder of payroll submission back
to me and said they were no longer required" and that "everything
was taken care of." (Tr. 122).
It was in June of 1985 that Mr. Squires['] replacement at
Triax, Mr. Vollett, requested certified payrolls with the $16.15
rate for laborers. Mr. Marks first objected to furnishing this
false record but then agreed after Mr. Vollett stated that Hillside
would not be paid unless the $16.15 rate was on their certified
payrolls. Mr. Marks prepared and signed certified payroll records
dating from September 1984 to June or July 1985. (Tr. 128).
In October 1985, Mr. Marks prepared and filed the
application for a conforming rate of $7.75 per hour for their
laborers. (Tr. 129).
He testified that the delay between June or July 1985 until
the October filing was because "I was busy. I had a lot of
problems going on." (Tr. 129).
The certified payroll records submitted by Hillside from
October 5, 1985, through November 16, 1985, reflect that the
$7.00 per hour rate for laborers was paid. (CX 6 and CX 7). [4]
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[5] DISCUSSION
The Respondents do not contest the fact that they prepared and
filed false certified payroll records. They contend that they did
not violate the Davis-Bacon Act because there was no disregard for
their employees. Hillside argues that its employees felt so
strongly that $7.00 was a fair wage that the contract administrator
warned them that criminal action could result if they attempted to
return the excess wages to Hillside. (Tr. 135).
The Wage Appeals Board has held that the appropriate standard
is set forth in the Act, at 40 U.S.C. Section 272-2(a), which reads
in pertinent part as follows:
. . . and the Comptroller General of the United States is
further authorized and is directed to distribute a list
. . . of persons and firms whom he has found to have
[*]disregarded their obligations to employees [*] and
subcontractors. [*](Emphasis added.)[*]
Therefore, debarment is appropriate in this case if it is
determined that Hillside disregarded its obligations to employees.
Hillside argues that it has not harmed its own employees since they
were receiving a wage rate of $7.00 which was satisfactory to them.
I find this argument spurious. Employees do not have the right to
release, waive or contract away their right to the correct wage.
Under the Davis-Bacon Act, the correct wage is the wage
determination rate. See H. G. Toll Co./Atlantic Electric Inc., 79
DBA 210 (Oct. 19, 1979).
Hillside also argues that the Davis-Bacon Act is intended to
prevent government work from lowering the area's wage rates or a
contractor from "importing" cheaper labor into the area. I find
this argument helpful to the government's case. The purpose of a
wage determination is to set a proper prevailing wage for that
particular project in its geographical area. If that wage
determination needs amending, it is the duty of the contractor to
request a change prior to the commencement of the work on the
project. In the instant case, Hillside negligently relied on
Triax. I find that the evidence is clear that Hillside's officers
had extensive prior experience working on government contracts.
Mr. Marks and Talb[ot] admitted his experience with the Davis-Bacon
Act and its requirement on previous jobs. (Tr. 116, 159 and 160).
Mr. Marks testified that he delayed filing an application for
conforming rate until October 1985 because he was "busy." This
inaction is inexcusable and is further evidence of Hillside's
disregard to its employees. Hillside did take action [5]
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[6] to file the conformance application shortly after the Air Force Labor
interview took place on September 25, 1985. (Tr. 86). It was also
at this time that Hillside ceased filing false certified payroll
records and on September 28, 1985 filed a payroll showing the true
$7.00 per hour wage rate. I further find that Respondents[']
attempt to blame Triax for Hillside's falsification of payroll
records is without merit. Mr. Talbot admitted that other than
Triax's treat to not pay Hillside no other action by Triax was
threatened in the event Hillside had refused to falsify their
payrolls. Mr. Talbot further stated "We were anxious to get the
money which we were due which we sorely needed." (CX-9, pages 16
and 17). I find that Hillside's excuse for said falsification
is not a reasonable or valid explanation for a serious violation
of the Act.
Respondents have also admitted that for a period of over six
months in 1985, an employee, Jeff Blake, performed job duties which
included operation of a "Mustang" diesel. Compliance Officer
Martin testified that such equipment comes under the contract
classification of "power-equipment operator Groups." None of
Hillside's payroll records identified any of the hours that Mr.
Blake spent in operating this power equipment.
However, the government stipulated that Mr. Blake was a
"foreman." Under the definition of the term "laborer" or
"mechanic" in the regulations it states:
The term does not apply to workers whose duties are
primarily administrative, executive, or clerical, rather
than manual. Persons employed in a bona fide executive,
administrative, or professional capacity as defined in
Part 541 of this title are not deemed to be laborers or
mechanics. Working foremen who devote more than 20
percent of their time during a workweek to mechanic or
laborer duties, and who do not meet the criteria of Part
541, are laborers and mechanics for the time so spent.
29 C.F.R. Section 5.2(m).
I therefore find that the government has failed to sustain its
burden of proving that Mr. Blake was a "laborer" or "mechanic" as
defined in the regulations. I therefore find no violation of the
Act for the failure of Respondents to pay the power equipment
operation rate for those hours Jeff Blake spent performing duties
as "Bobcat" operator, since Jeff Blake was a "foreman" and exempt
under the regulations. [6]
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[7] The next issue raised by Respondent is the issue of
estoppel. Hillside argues that the government failed to
investigate compliance under the contract until September 1985,
a year after Hillside commenced the job. Respondent further
asserts that had the agency checked earlier, Hillside would have
been made aware of the non-conformance and acted earlier.
I find no merit in Respondents position. The Davis-Bacon
Act is a statute designed to protect the public. To invoke a
defense of estoppel under the facts of this case would defeat the
effective operation of policies enacted by Congress to protect
employees and the public interest. Respondent has failed to cite
any authority to support its position on this point.
The final issue to decide is whether the period of debarment
may be for less than three years. As the Solicitor has asserted,
unlike the related acts listed in 29 C.F.R. Section 5.1, the
Davis-Bacon Act only provides for three years debarment. Bobs
Construction Company, Inc., WAB 87-25 (May 11, 1989).
I thus find that under the facts of this case Hillside
Gardens, Inc.; Charles Talbot, president; John Mitchell,
vice-president; and, Wayne Marks, treasurer, have disregarded
their obligation to employees under the Davis-Bacon act by failing
to pay prevailing wage rates and by falsifying payrolls. Thus,
the findings of the order of reference must be sustained and
R[es]pondents must be debarred from bidding on federal contracts
for a period of three years.
ORDER
Hillside Gardens, Inc., Charles Talbot, John Mitchell, and
Wayne Marks shall be debarred in accordance with Paragraph (a)(1)
of 29 C.F.R. Section 5.12 for a period of three years and shall be
ineligible to receive any contract or subcontract subject to any
of the statutes listed in 29 C.F.R. Section 5.1 during such period
of debarment.
RICHARD D. MILLS
Administrative Law Judge
Dated: JuL 6 1990
Metairie, Louisiana
RDM/clh [7]
