U.S. FLOORS, INC., 1990-DBA-15 (ALJ Aug. 29, 1991)
CCASE:
U.S. FLOORS, INC.
DDATE:
19910829
TTEXT:
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[1] U.S. Department of Labor Office of Administrative Law Judges
525 Vine Street, Suite 900
Cincinnati, Ohio 45202
DATE ISSUED: August 29, 1991
CASE NO.: 90-DBA-15
IN THE MATTER OF:
Proposed debarment for labor standards violations by:
U.S. FLOORS, INC.
90-DBA-15
Prime Contractor
PETER COLEMAN, Individually and as President
VALENTINA COLEMAN, Individually and as Vice-President
With respect to laborers and mechanics employed by the
contractor under Contract No. F33601-85-C0370 (Floor Renovation,
Bldg. 5) at Wright-Patterson AFB, Ohio
APPEARANCES:
Phil B. Hammond, Esq.
Hammond & Tellier, P.C.
Phoenix, Arizona
For the Prime Contractor and the Officers
Benjamin T. Chinni, Esq.
U.S. Department of Labor
Office of the Solicitor
Cleveland, Ohio
For the Secretary
BEFORE: RUDOLF L. JANSEN
Administrative Law Judge
DECISION AND ORDER
This case arises under the Davis-Bacon Act, as amended, (40
U.S.C. Section 276a et seq.), the Contract Work Hours and Safety
Standards Act (40 U.S.C. Section 327 et seq.), and the
regulations issued pursuant thereto at 29 C.F.R. Parts 5 and 6.
The Administrator of the Wage and Hour Division, U.S. Department
of Labor, Employment Standards Administration, (hereinafter DOL),
issued an Order of Reference on November 1, 1989 which determined
that U.S. Floors, Inc., its President, Peter Coleman, and its
Vice President, Valentina Coleman, disregarded their obligations
to employees within the meaning of the Davis-Bacon Act and, [1]
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[2] therefore, should be debarred. Attached to the Order of
Reference was the Administrator's charging letter which itemized
underpayments and compensation to various classes of laborers and
carpenters employed on the project.
The charging letter determined that the contractor had
failed to pay prevailing wage rates, failed to pay the correct
overtime rate for hours worked in excess of 40 per week, and had
submitted falsified payroll records. The Wage and Hour Division
Investigator determined that nine employees of the contractor had
been underpaid $45,034.97 in basic wages and $2,145.90 in overtime
compensation. The total back wages amounted to $47,180.87. It was
determined that some carpenters who were required to be paid $19.90
per hour were paid between $7.50 and $12.50 per hour and that
laborers who were to be compensated at the rate of $16.24 per hour
were paid between $6.00 and $9.50 per hour.
Following the investigation by the Wage and Hour Division,
$33,525.96 was withheld from the unpaid balance due the contractor
which was later distributed to the underpaid employees.
Additionally, the contractor also paid the difference between the
withheld amount and the amount due for distribution to the
employees so that at the time of the hearing of this case, all of
the underpaid amounts of back wages had been satisfied.
The hearing in this case was held on January 17, 1991 in
Dayton, Ohio. Each of the parties had full opportunity to
present evidence /FN1/ and argument. /FN2/ The Findings of Fact
and Conclusions of Law which follow are based upon my observation
of the appearance and demeanor of the witnesses who testified at
the hearing and upon my analysis of the entire record, arguments of
the parties, and applicable regulations, statutes and case law.
Any exhibit or document admitted as evidence of record has been
fully considered in arriving at the decision herein. The parties
were directed to file simultaneous post-hearing original briefs
on April 30, 1991 and simultaneous reply briefs by May 15, 1991.
Each of the parties complied with those filing deadlines.
ISSUE
The single issue is whether U.S. Floors, Inc., Peter Coleman,
President, and Valentina Coleman, Vice-President, should be placed
on the Comptroller General's ineligible list for receiving federal
government contracts for a period not exceeding three years from
the date of publication.
FINDINGS OF FACT
U.S. Floors, Inc. is a corporation having its main office
located in Phoenix, Arizona. The company engages in the
installation and repair of primarily hardwood flooring. Peter
Coleman is the President of the corporation and Valentina Coleman [2]
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[3] who is his wife, is the Vice-president. On August 30, 1985,
Valentina Coleman executed a contract for the repair/refinish of
wood flooring in a building located at Wright Patterson Air Force
Base, Ohio. The agreed initial contract price was $195,748.00. (PX
4) Two subsequent contract modifications agreed to by Peter J.
Coleman as President raised the total contract price to
$320,858.58. (PX 4) The contract and amendments included a Wage
Determination which provided the wages to be paid various classes
of employees including carpenters and laborers. The contract also
contained provisions specifying overtime compensation as provided
by the Contract Work Hours and Safety Standards Act.
Robert A. Kunz who is a Compliance Officer with the Respondent
testified concerning his investigation of the contractor. He
commenced his investigation in the middle of April of 1987 and
contacted Peter J. Coleman, in the middle of May 1987. (Tr. 31-34)
Mr. Coleman initially advised Mr. Kunz that he had not paid his
employees hourly rates but that they were paid on "group
piece-rates". The rate was based upon the amount of square footage
which had been completed upon a weekly basis. (Tr. 35) He also
indicated that two sets of records were maintained, one in his
office in Phoenix, Arizona and another set of completed records
were provided to the U.S. Air Force which indicated that he had
paid wages which were consistent with the amounts shown in the wage
determination. (Tr. 35)
In his initial contact with Mr. Coleman, Mr. Kunz requested
that he produce the records demonstrating the actual wages paid to
his employees. Mr. Coleman refused to produce the records and
withheld production until November 4, 1987. (Tr. 36-43) Following
receipt of Mr. Coleman's records, Mr. Kunz prepared his summary of
unpaid wages for the nine individuals involved. That summary
determined underpayments in the amount of $45,034.97. (Tr. 45; PX
6) A summary was also prepared for overtime work which determined
underpayments in the amount of $2,145.90. (PX 8) Mr. Kunz also
obtained copies of the certified payrolls which had been submitted
by the contractor to the U.S. Air Force and he concluded following
his investigation that the certified payrolls were, in fact, not
accurate. (Tr. 61, 62) The certified payrolls simply did not
reflect the rates of compensation actually paid to the employees
noted. (PX 9) The payrolls were signed by Valentina Coleman, as
Vice-president of the contractor.
Mr. Kunz concluded that the employees who used tools of the
trade such as devices to pry up the flooring, devices to fit the
wooden block, devices to lay down the flooring and other tools,
were considered to be carpenters. The employees who did not use
tools, in other words, those who were carriers of equipment or
supplies, or those who cleaned up the premises were considered to
be Group 2 Laborers. (Tr. 65, 66) He was not aware of a wage
classification for a hardwood floor layer or hardwood floor
mechanic. (Tr. 66) [3]
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[4] The Respondent produced the testimony of Donald Perkins who
was a supervisor with the company on the Wright Patterson job.
(Tr. 94, 95) Mr. Perkins has sixteen years experience within the
construction industry practically all of which was spent in
installing flooring. (Tr. 95) He testified at length concerning
the job at Wright Patterson AFB. It consisted of two parts. The
initial part consisted in sanding and refinishing existing
tongue and groove hardwood flooring in one area of the building.
The second part of the job was the removal of existing industrial
wood block which was approximately two by five inches each. (Tr.
95, 96) The building involved was approximately three hundred
thousand square feet of which a portion of the space was used for
office cubicles for management personnel. A few areas had dust
sensitive equipment which had to be environmentally controlled, and
another part of the building was used for manufacturing parts
either for existing aircraft or for prototypes to be used in areas
such as the shuttle missions. Some of that activity was under very
high security. (Tr. 96, 97) The contract did not cover
refinishing the entire area under roof but rather two hundred
thousand to two hundred and fifty thousand square feet of the
entire structure. A portion of the job dealt with tearing off and
replacing and a part of the job was refinishing existing flooring.
Mr. Perkins testified that the wage determination carried no
designation for the wood finishers' position. (Tr. 99) The
removal of existing flooring was simply a labor function which was
performed primarily by use of a crowbar. (Tr. 100) That was not
a skilled position. The finishing of the existing flooring
included the operation of a scarifier which was used to remove
approximately the top quarter inch of the floor in order to
eliminate any metal chips or other debris which had lodged itself
in the wood and to remove any grease that was on the floor. (Tr.
100) Following the removal of the top quarter inch of the existing
flooring, a belt driven drum sander was used to achieve a
smoothness of the wood over which was applied a polyurethane. The
polyurethane is a varnish-like finish. Approximately three coats
had to be applied. (Tr. 101) In the areas of the building where
the old flooring was removed and replaced with new flooring, the
surface area would then have to be prepared in order to receive the
new flooring. All of the old adhesive had to be removed and the
concrete roughed-up in order to get a good bond with the new
flooring. Once the flooring was installed, it also had to be
sanded and polyurethane applied.
Mr. Perkins also described problems which they had with the
Air Force in that they were not permitted to work upon larger areas
of the flooring at a single time. Smaller areas were designated
which took more time to complete. (Tr. 102) He also described
problems with vapors from the polyurethane which caused employees
within the building to become dizzy or experience headaches which
affected their performance. (Tr. 103) The [4]
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[5] contract called for working hours to be from Monday through Friday
between the hours of 7:30 a.m. and 5:00 p.m. (RX 23) Mr. Perkins
testified that the Air Force requested that they apply the polyurethane
after 5:00 p.m. during the week or possibly on Saturday when there was
nobody in the building. (Tr. 104) Arrangements had to be made with the
proper authorities to work outside of normal working hours. (Tr. 105)
Working outside of normal hours caused a delay in the time when the
entire job could be completed. (Tr. 106)
Peter Coleman requested an extension of the work period for
the contract from the Contract Administrator on September 22, 1986.
(RX 2) He noted the reason for the delay was that they were unable
to realize anticipated production because allowable work areas had
been reduced. That contention was consistent with the testimony of
Mr. Perkins.
On September 19, 1986, Peter J. Coleman requested permission
from the Contract Administrator to work outside of regular work
week hours on all of the remaining Saturdays of the contract. (RX
1) As a basis for the request, Mr. Coleman indicated that the
number of shop workers that would normally be exposed to the fumes
of the polyurethane finish would be reduced. On October 7, 1986,
the Contract Administrator requested that the polyurethane floor
sealant only be applied during non-duty hours. (RX 3) Apparently
a temporary arrangement was worked out on October 7, 1986, whereby
the hours were altered for the application of the polyurethane
finish, but in a letter from Mr. Coleman, he indicated that his
production would fall by an approximate twenty-five to thirty
percent. (RX 4) By letter dated October 17, 1986, Mr. Coleman
requested relief from the change in work hours either in the form
of increases in available work areas or additional compensation for
the loss in production that they had experienced. (RX 5) On
October 27, 1986, Mr. Coleman made a request for compensation for
the additional cost of approximately thirty-one thousand dollars
plus ten percent overhead and ten percent profit adjustment for a
total of $37,510.00 because of the adjustment to the original
contract. (RX 6)
A February 2, 1987 memorandum indicates that telephone
agreement was made between Peter Coleman and the Contract
Administrator to install flooring in one area of the building at no
additional charge to the government and to work on Saturdays. The
Saturday work was also to be at no additional cost to the
government. (RX 7) A February 6, 1987 memorandum from the Air
Force extended the period for completing the job, but also denied
additional compensation due to the loss of efficiency as a result
of the work hour change. The memorandum indicated that the Air
Force could not verify the estimated twenty five percent loss
figure nor could they justify the one thousand dollar per week
additional cost which was quoted by Mr. Coleman. The memorandum
indicated that no increase could be approved based upon the [5]
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[6] earlier October 27, 1986 letter. (RX 8) This memorandum would
seem to allow for the later submission of data establishing the
basis for both the estimated twenty-five percent loss and the one
thousand dollar additional weekly cost. In subsequent letters of
March 18, 1987 and April 22, 1987, Peter J. Coleman attempted to
work out some arrangement with the Air Force to establish the
losses which they incurred due to the change in work hours. (RX
10, 11) The Air Force, finally on September 9, 1987, denied the
request for additional compensation. (RX 16) Only approximately
ten to fifteen percent of the total work performed on this
contract was done outside of normal working hours. (Tr. 122)
The contractor also took the deposition of Kenneth R. Goodman.
Mr. Goodman had worked on the project at Wright Patterson from July
1986 until June 1987. (RPHX 1) Mr. Goodman began as a floor
mechanic and later became superintendent of that project. He was
requested by the contractor to make a wage survey of the hourly
rates that were paid in the Dayton, Ohio area. He surveyed five
different employers in the Dayton, Ohio area who did hardwood
flooring by contract and determined basic wages for the flooring
employees in non-union contracts.
CONCLUSIONS OF LAW
The standard for debarment in a Davis-Bacon Act proceeding is
set forth in the regulations at 29 C.F.R. Section 5.12(a)(2), which
reads in part as follows:
In cases arising under contracts covered by the
Davis-Bacon Act, the Administrator shall transmit to the
Comptroller General the names of the contractors or
subcontractors and their responsible officers, if any
(and any firms in which the contractors or subcontractors
are known to have an interest), who have been found to
have disregarded their obligations to employees, and the
recommendation of the Secretary of Labor or authorized
representative regarding debarment. . . .
This standard is applicable to the present case since the wages
were paid under a Davis-Bacon Act contract.
In an administrative hearing, the proponent of the Order of
Reference, in this case the DOL bears the burden of going forward
with the evidence. If DOL meets the initial burden of presenting
a prima facie case, the respondent then bears the ultimate burden
of proof. Old Ben Coal Corp. v. Interior Bd. of Mine Op. App.,
523 F.2d 25 (7th Cir. 1975). In an administrative hearing, the
required standard of proof is a showing by a preponderance of the
evidence. Sea Island Broadcasting Corp. of S.C. v. F.C.C., 627
F.2d 240 (D.C. Cir. 1980), cert. denied, 449 U.S. 834 (1980);
Bender v. Clark, 744 F.2d 1424 (10th Cir. 1984). [6]
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[7] The appropriate standard in a Davis-Bacon Act case is to
determine whether those sought to be debarred have disregarded
their obligations to employees. This record evidences the fact
that prevailing wage rates were not paid to nine employees of the
company. Acknowledgment has been made of that fact since the
company paid $45,034.97 in underpayments as determined by the
Compliance Officer. The record also discloses that the certified
payrolls were falsified in order to give the appearance that
prevailing rates of compensation had been paid. The Compliance
Officer testified that the company also did not pay proper fringe
benefits as required by the wage determination. Standing alone,
the submission of falsified payroll records and the failing to
pay the predetermined wage rate is a disregard of the company's
obligations to their employees within the meaning of Section
(3)(a) of the Act. Marvin E. Hirchert dba M. & H. Construction
Company, WAB Case No. 77-17 (Oct. 16, 1978), C.M. Bone, WAB Case
No. 78-4 (June 7, 1978). I find the circumstances of this case
to be aggravated in that a duplicate set of books and records was
maintained by Peter Coleman. Those records lend substance to the
argument that the underpayments were clearly willful in nature
and support a contention that the "death penalty" should be
administered. I also note that Peter Coleman had refused initially
to cooperate with the Compliance Officer by providing his own books
and records which established the actual compensation paid. Those
records were withheld approximately six months and I suspect tended
to slow the investigation. The records were ultimately used in the
Compliance Officer's computation of wage underpayments. The record
also establishes that this company and the Colemans had
considerable experience in performing on Davis-Bacon Act jobs and
were well aware of the wage rate requirements. In other words,
they knew what they were doing.
Valentina Coleman signed the original contract with the U.S.
Air Force and Peter Coleman signed the two amendments to the
contract. Additionally, Valentina Coleman also signed all the
certified payrolls. It is well established that underpayment of
employees, coupled with falsified payrolls, constitutes disregard
of obligations to employees under Section (3)(a) of the Davis-Bacon
Act. G & O General Contractors, WAB Case No. 90-35 (Feb. 19,
1991). I have no discretion to preclude debarment upon finding
underpayments and falsified payrolls in violation of the
Davis-Bacon Act. Congress employed a bright line test which I have
no legal authority to supercede. Trademark Construction Company,
WAB Case No. 89-02 (Mar. 29, 1991). Additionally, under the
Davis-Bacon Act provision is made for only a debarment period of
three years. Bob's Construction Company, Inc., WAB Case No. 87-25
(May 11, 1989).
The contractor offers a variety of arguments as to why
debarment is not appropriate in this case. It is contended that
several factors exist which would tend to mitigate the application
of the debarment penalty. A contention is made that the Compliance
Officer had placed the company employees in an [7]
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[8] improper category for determining back wages. It was suggested that
the wage rates applied were not the prevailing wages for the type of
work involved in this contract.
DOL does not contend that the contract involved here contained
a wage determination for hardwood floor mechanics or hardwood floor
mechanic helpers. However, this record contains no evidence that
the company made any effort to challenge the existing wage
determination at the time that the contract was executed or at its
implementation. It is too late to challenge wage determination
once the contract has been executed. 29 C.F.R. Section 1.6(c).
Regardless of that, in arriving at his computations, the Compliance
Officer merely computed back wages based upon representations
contained within the certified payrolls offered by the company.
The payrolls classified the employees and it was those
classifications which were used by the Compliance Officer.
The company contends that the Federal Acquisition Regulations
(FAR) found at 48 C.F.R. Part 1, Sections 1 - 52 are applicable to
this debarment proceeding. Those regulations allow for the
consideration of mitigation factors prior to a determination on the
debarment decision. DOL contends that the regulations simply do
not apply to these cases. Following a review of the FAR
regulations and also the regulations relating to Davis-Bacon Act
cases, I find no authority for the application of the FAR
regulations to these matters. Therefore, I summarily reject based
upon the application of the law as noted above any contention by
the company that mitigating factors can be considered in applying
either the full or a reduced penalty in debarment proceedings under
this Act.
The company also argues that an accord and satisfaction was
entered into by DOL which now prevents the imposition of the
debarment sanction. No legal authority has been cited for that
proposition. The legal concept of accord and satisfaction is
clearly contractual in nature. Under that concept there is an
agreement between parties by which one accepts an agreed
performance by the other in discharge of a contested obligation of
that party.
An accord is an agreement by one party to supply or
perform and by the other to accept, in settlement or
satisfaction of an existing claim, something other than
what was actually due.
Chesapeake & Potomac Tel. Co. v. United States, 654 F.2d 711 (Ct.
Cl., 1981). The parties must arrive at a meeting of the minds and
the consideration must be stated. The party asserting [8]
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[9] an accord and satisfaction as a defense must establish every
element. Harmonay, Inc. v. Bink's Manufacturing Co., 597 F.Supp. 1014
(S.D.N.Y. 1984), aff'd, 762 F.2d 990 (2nd Cir. 1985).
This record contains no agreement evidencing an
understanding between DOL and the company concerning the company's
satisfaction of the underpayments in wages. That in itself should
serve to defeat the application of the doctrine in this case. The
record contains a statement from company's counsel indicating that
the company is satisfying the underpaid wage obligation upon its
own volition and in order to give impetus to DOL's concluding that
debarment is not applicable in this case. However, the record
offers no evidence that any type of agreement was reached between
the two parties which evidenced an understanding that the full
amount of back wages would be paid in exchange for some type of
favorable treatment by DOL. The doctrine of accord and
satisfaction is not applicable under these circumstances.
Finally, the company contends that if debarment is found to
be applicable, then it should only relate to U.S. Floors and to
Valentina Coleman and not to Peter Coleman. I summarily reject
that contention. The evidence shows that Valentina Coleman signed
the certified payrolls and that Peter Coleman was a signatory to
the two amendments to the original contracts. Peter Coleman also
maintained a second set of books and records which properly
evidenced the compensation paid to the underpaid employees. The
second set of books and records was not provided to the Compliance
Officer until approximately six months following the initial
request. This company had been in business for a period of years
prior to the execution of the contracts in this case and they were
involved and had, in fact, completed numerous government contracts
similar to the one in question here prior to the problems which
have given rise to this proceeding. Mr. Coleman was apparently the
President of the company during that entire time. Therefore, his
experience was significant, and I believe he knew exactly what he
was doing when he decided that certain employees should be
underpaid on this job.
Based upon the foregoing, I find that U.S. Floors, Inc.,
Peter Coleman, individually and Valentina Coleman, individually,
knowingly violated the provisions of the Davis-Bacon Act and
attempted to conceal the underpayment of wages through
falsification of records and other means. These acts clearly
constitute a "disregard of obligations" under Section (3)(a) of the
Act warranting a debarment of three years. [9]
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[10] RECOMMENDATION
IT IS HEREBY RECOMMENDED that U.S. Floors, Inc., Peter
Coleman and Valentina Coleman, be subject to the ineligibility of
Section (3) (a) of the Davis-Bacon Act for a period of three years.
RUDOLF L. JANSEN
Administrative Law Judge [10]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ The record of this case was left open to receive the
deposition of Kenneth R. Goodman. (Tr. 15) It was submitted on
June 28, 1991 as an attachment to the company's original brief. The
deposition is received as Respondent Post Hearing Exhibit 1. (RPHX
1)
/FN2/ In this Decision, Plaintiff (PX) refers to the exhibits of
U.S. Department of Labor, Respondent (RX) refers to the exhibits of
U.S. Floors, Inc. and Peter and Valentina Coleman, and "Tr." refers
to the Transcript of the hearing. [10]
