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CCASE:
THE GRIFFITH COMPANY
DDATE:
19650702
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[1] UNITED STATES OF AMERICA
DEPARTMENT OF LABOR
DECISIONS AND ORDERS OF THE WAGE APPEALS BOARD
In the Matter of
WAB Case
The Griffith Company, Prime No. 64-03
Contractor on Interstate Highway
Project I-015-2(8)104, San Dated
Bernardino County, California July 2, 1965
THE GRIFFITH COMPANY
Petitioner.
Before: Oscar S. Smith, Chairman, Clarence D. Barker and Stuart
Rothman, Members.
DECISION OF THE BOARD
STATEMENT OF CASE
This is a proceeding under Order No. 32-63 of the Secretary of
Labor, as amended, following a petition for review filed on
November 16, 1964, by the Griffith Company pursuant to Wage Appeals
Board Rules of Procedure, Part 7 (29 CFR, Subtitle A). The
petition requested review of an opinion issued by the Solicitor of
Labor to the Bureau of Public Roads concerning the application of
the prevailing wage provisions of the Federal-Aid Highway Act of
1956 (23 U.S.C. 113).
On the initial appeal, the Board in a decision issued April
22, 1965, referred the case back to the Solicitor to obtain information, [1]
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[2] among other things, as to how lessors of
equipment are viewed in the construction industry, what has been
the administrative experience with respect to this problem in the
Office of the Solicitor, and to report thereon with an analysis in
45 days. Interested parties who wished to amplify their statements
were asked to submit their material to the Office of the Solicitor.
On referral back, the Office of the Solicitor received
submissions from the International Union of Operating Engineers,
the Associated General Contractors of America, and the Associated
Equipment Distributors based on surveys made by them and from the
Building and Construction Trades Department, AFL-CIO, and the
National Electrical Contractors Association and the International
Brotherhood of Electrical Workers. All parties were given an
additional ten days to comment upon the submissions other than
their own, including the Solicitor's statement.
BACKGROUND
The pertinent facts concerning this case are more fully set
forth in the Board's April 22 decision and are summarized here.
The Griffith Company rented six or seven tractors from the
Hawthorne Equipment Rental Company which were used on Interstate
Highway Project I-015-2(8)104. It hired the tractor operators and
paid them the rates prescribed by the applicable wage
determination. Under the rental agreement employees of the
Hawthorne Company performed major repairs on the tractors on the
project site. [2]
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[3] Upon inquiry by the Bureau of Public Roads as to whether such
repairmen were entitled to the protection of the prevailing wage
requirements contained in the prime contract, the Solicitor advised
that equipment firms are subcontractors where substantial and
recurring repair work is entailed, defining "substantial" as work
exceeding 20 percent of a person's time in any workweek.
On the basis of the Solicitor's opinion, the California
Division of Highways withheld $118.71 because three Hawthorne
employees had agent more than 20 percent of their working time in
certain workweeks on the highway project in question. In its
petition of November 16, 1964, the Griffith Company requested the
Wage Appeals Board to reverse the Solicitor of Labor's opinion.
ISSUES AND CONCLUSIONS
The question before us is whether employees of equipment
dealers who go on the construction sites to repair equipment
pursuant to lease arrangements are covered by the Davis-Bacon Act,
and whether equipment rental dealers doing on-site repair work on
leased equipment are subcontractors. /FN1/ [3]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ . . . and every contract based upon these specifications
shall contain a stipulation that the contractor or his
subcontractor shall pay all mechanics and laborers employed
directly upon the site of the work, unconditionally and not less
often than once a week . . . wage rates not less than those stated
in the advertised specifications, regardless of any contractual
relationship which may be alleged to exist . . . the scale of wages
to be posted . . . at the site of the work; and the further
stipulation that there may be withheld from the contractor so much
of accrued payments as may be considered necessary by the
contracting officer to pay to laborers and mechanics employed by
the contractor or any subcontractor on the work the difference
between the rates of wages required by the contract to be paid
laborers and mechanics on the work and the rates of wages received
by such laborers and mechanics not refunded to the contractor,
subcontractors, or their agents. (40 U.S.C. 276a et. seq.) [3]
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[4] This case is concerned with the situation in which an
equipment lessor services equipment or makes well defined equipment
repairs on the site with his field employees pursuant to a rental
agreement. It does not deal with lease arrangements whereby
operators of leased equipment are furnished. Such work appears
clearly covered under construction wage rates. The matter of
manufacturers' warranties is not involved is this case.
The Court of Claims recently had to grapple with the exquisite
distinctions that can arise between "subcontractors" and others.
See Zachry v. United States, 51 CCH Labor Cases, 16 WH Cases 926
(Ct. Cl. No. 332-61, April 16, 1965). We suspect that the term has
a generic aspect as well as a specific one and that its application
to unique circumstances will continue to be a source of
disagreement and ambiguity. The term subcontractor does not appear
to have as exact a definition as might be expected in an industry
whose organizational structure is dependent upon it.
In most situations, the administering agency will have no
particular problem in determining whether or not a contractor
engaged upon the site of the work is a subcontractor for
Davis-Bacon Act purposes. If it is convinced that the particular
employer is a subcontractor, it will issue a determination based on
coverage. Conversely if it is convinced that a particular employer
is a materialman, a supplier, or otherwise not a subcontractor, it
will refuse to find coverage. In a very limited number of
situations, the matter is less normal and less clear. Equipment
rental arrangements are such a situation. [4]
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[5] The Board wishes to thank the Associated General Contractors,
the Association of Equipment Distributors, and the International
Union of Operating Engineers for the supplemental material which
they submitted. The material conflicts sharply on the question of
whether equipment rental dealers are recognized in the industry as
subcontractors.
Contractors and equipment rental dealers, in reply to
questionnaires sent out by the Associated General Contractors and
Association of Equipment Distributors, stated uniformly that
equipment rental dealers servicing equipment on sites are not
considered to be subcontractors in the construction industry. They
do not control the equipment or prosecute the project work pursuant
to the project specifications. The leased equipment is used and is
subject to the direction of one-site contractors.
On the other hand, the responses of the local operating
engineer unions to the International's questionnaire are equally
clear that arrangements with equipment rental dealers are subject
to on-site subcontracting clauses in negotiated agreements, and
that equipment rental dealers are considered subcontractors in the
industry.
Beauty it is said is in the eyes of the beholder. Both sides
to this controversial question may be partially right but not
wholly so. The difference of view between labor organizations and
employers in the industry fortifies the conclusion we have reached
that it does not pay to give the baby a name before it is
determined whose baby it is. [5]
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[6] Like many other problems of getting to the bottom of a legal
definition, the matter can usually be resolved by looking at
relationships in terms of substance and the objectives and purposes
to be accomplished by a statute. As a matter of fact, we think
that this is what the parties, in their briefs, have attempted to
do; to define the term subcontractor as applied to equipment rental
dealers, not so much in terms of technical legal concepts, but in
terms of whether it makes sense under the policies and purposes of
the statute to apply it in this case. On the one hand, the
employers point out that equipment rental dealers' employees are
more or less assured permanent work and receive benefits and
fringes under an employer-employee relationship different from
other parts of the construction industry. Vacations are a good
example of such differences. On the other hand, unions point out
that employees servicing equipment are laborers and mechanics
working on the site alongside laborers and mechanics doing the same
or similar work. The matter is the subject of bargaining in labor
agreements concerning "contracting and subcontracting" on-site
work.
That there is justification for all that is said in the
surveys on both sides of this difficult issue is illustrated by the
fact that the Office of the Solicitor, when the case has come up
over the years, has adopted a "20% rule" (discussed further below)
which imports into administration some degree of flexibility. The
Building and Construction Trades Department has well pointed out in
its supplemental brief of June 21 that if the employees are
covered, there could be no justification for a 20% test if a hard
and fast rule is applied. Yet, the Building Trades Department in
its brief immediately [6]
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[7] recognizes that there may be a need for flexibility in cases which
may even more or even less than meet the 20% rule test.
We look at the facts before us in the light of the purposes
and objectives of the Act. Fortunately, in this case, the Act has
one illuminating guidepost. Whatever the other purpose may have
been for including the provision in the statute, whether by way of
limitation of coverage or to assure the protections of the Act it
is clear that work of laborers and mechanics performed upon the
site of a project is the kind of work it is the purpose of the
statute to protect.
We believe that when a laborer or mechanic comes upon the site
of the work to perform services directly related to the prosecution
of the work to be performed under contracts with the owner and
necessary for its completion, such employees are entitled to the
protections of the Act.
There are a number of limitations and exceptions to this
principle by reason of the terms of the statute, and by reason of
practice and administration over the years. We are not concerned
with such exceptions in this decision.
Equipment rental dealers are sufficiently a part of the
structural organization of the construction industry to be
considered with it with respect to employee protection under the
Davis-Bacon Act for on-site work. The equipment rental dealer has
a contract to perform work on the project site and when his
laborers and mechanics are so engaged, they are covered by the Act.
We do not have to decide whether they are subcontractors,
independent contractors, or some other kind of contractor obligated
pursuant to an equipment lease arrangement. [7]
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[8] As we stated in our preliminary decision in this matter
dated April 22, 1965, we have no qualms in concluding that laborers
or mechanics employed by equipment rental dealers who, pursuant to
a lessor-lessee arrangement with contractors, may be required to go
upon the site of construction otherwise covered under the Act to
repair leased equipment are entitled to the benefits of the Act.
Having so concluded, we must face the question at what rate of
pay should such employees be paid. Here just as realistically, we
must come to the conclusion that the appropriate rate of pay for
the employees in question need not necessarily be the same rate of
pay as building and construction trades employees engaged upon the
site. Here, we are compelled to the conclusion that there is no
nationwide rule for the sameness of rate for the building and
construction trade employees and for employees of equipment rental
dealers operating pursuant to "shop standards" or "shop agreements"
when in the "field". Such employers may have a recognized on-site
or field construction rate of their own recognized in the industry.
The survey material submitted through the Office of the
Solicitor informs us clearly that in a number of localities the
practice within the industry, whether it is based upon labor
agreements or otherwise, is that shop employees when in the field
do work on construction sites at wage rates different from the
building and construction trade wage rates. New York, Detroit, and
northern California are such areas according to the information on
hand. In other areas it seems equally clear that field rates for
shop employees also apply, but that the field rate and the building
construction rate may be the [8]
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[9] same, so that in practice there
is no difference. In other areas of the country the practice is
not so clear. However, the conclusion is inescapable that the
practice does and can vary from locality to locality.
It has been frequently said that the Davis-Bacon Act is in the
nature of a "mirror" of locality wages and working conditions. The
Act does not make the rates, it reflects the existing rates, and
this is done on a locality by locality basis. This being the case,
we must turn to a determination of what is the practice in the
place where this matter arose, i.e., San Bernardino County,
California, which is subject to the Los Angeles area agreement.
Local 12, Operating Engineers, has in excess of 20,000 members
in the Los Angeles area. We take cognizance of the fact that the
local union is strong. The area is well, if not totally,
organized. We accept, based upon common knowledge in the
construction industry, that the practices of Local 12, under
contract or otherwise, reflect the predominant practice in this
locality.
The agreement for this area to which the Griffith Company is
a party contains the following provisions:
G. 1. Repairs necessitated by defects of material,
workmanship or adjustment of new equipment or machinery
covered by a manufacturer's or dealer's written guarantee
and/or warranty may be performed on the job-site by
employees of the manufacturer, or his dealer, for a
period not to exceed 120 calendar days from the date of
physical delivery of the equipment to the Contractor.
G. 2. On re-manufactured or restored equipment, a
dealer's written guarantee and/or warranty shall cover
such repairs by the dealer's employees on the job-site
for a period of thirty calendar days from the date of
physical delivery of the equipment to the Contractor. [9]
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[10] G. 3. After said 120-calendar-day period for new
equipment and after said 30-calendar-day period for
re-manufactured or restored equipment, all such repairs
and/or servicing of said equipment at the job-site, shall
be performed by employees covered by this Agreement or by
Employees of employers having an appropriate agreement
with the International Union of Operating Engineers,
Local Union No. 12.
The usual or standard form or counterpart provision in shop
agreements entered into by Local 12 for this area contains the
following provisions:
B. Employees of the EMPLOYER assigned to a contractor's
job or project for a period of thirty (30) days or more,
shall after the thirty (30) days, receive the wage scales
of the classifications as identified in the current
Master Labor Agreement between the Southern California
General Contractors and the International Union of
Operating Engineers Local Union No. 12.
We do not say that negotiated clauses in labor agreements
constitute the basis of Davis-Bacon administration. We do say that
it is relevant and appropriate in this instance to take such
clauses into consideration when the question is "What is the area
practice?"
Nor are we, for purposes of disposition of the instant matter,
concerned with the application of any other statutes or rules of
law concerning the validity of industry recognized and accepted
practices. It is sufficient for our purpose that employers and the
unions enter into and recognize such clauses. Moreover, in view of
inconsistency of statements by both sides we place greater
credibility upon the contract provisions themselves as reflecting
the area practices in an area such as Los Angeles.
It is clear that Local 12 permits field employees of
contractors other than on-site contractors to come upon the site to repair
leased equipment and to do so at rates lower than the building and [10]
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[11] construction wage rate. This may be done in
three instances: repairs of new equipment (120-day warranty),
repaired or rebuilt equipment (30-day warranty), and if a field
employee works more than 30 days on the site, his wage rates must
be converted to the building and on-site construction rates.
We are concerned primarily with the third item as evidencing
an area practice that field men work on sites for less than
construction rates. In view of this, we cannot say that the
administration of the Davis-Bacon Act would be holding a mirror up
to local situations to reflect and to preserve them against
denigration by contractors who pay less. If we were to do so, we
would in effect be saying that there will be two standards in a
locality; a standard for federal or federally financed construction
subject to the Act and for other construction.
The fact that area practice may also impose time limitations
or other qualifications, in our view does not for purposes of wage
determinations affect the basic principle that field men are
permitted to work on construction projects at lower rates. Such
time or other qualifications may be matters of collective
bargaining with which we are not here concerned. We are concerned
with what is permissible area practice.
We note that during the time relevant to this decision the
construction mechanic's wage rate was $4.56 and the field rate for
shop mechanics was $4.00 in union agreements. We do not in this
decision undertake to compute the proper wage rates allowable in this
case for field men. The prevailing wage rate may be the same as that [11]
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[12] negotiated by the operating engineers. It may be
different. This is a matter for determination by the Solicitor.
This case will be remanded to the Office of the Solicitor for
further processing in the light of the guidelines and principles
herein discussed.
The Building and Construction Trades Department, in its brief,
suggests that the Wage Appeals Board has processed the instant
appeal without regard to the timeliness of the petition. The
Department refers to the expedition with which one of the earlier
Board cases, Carters Dam, WAB Case No. 65-01, decided March 1,
1965, was handled.
Carters Dam involved a review on appeal of a wage
predetermination which was required for a bid opening scheduled
within thirty days. The Board could best serve its functions by an
immediate review and determination consistent with allowing all
sides reasonable time to prepare written statements and for oral
argument. The Board believes that it has a mandate to proceed with
an appeal and to dispose of it with all the expedition that the
criticalness of an appeal bears to the timely prosecution of
government and government financed construction programs. The
instant case arises from an enforcement proceeding testing the
question whether employees have been properly paid $118.71 back pay
that accumulated over a 14-month period in 1963 and 1964. The
question which the petitioner has brought to a head has been a
chronic one never precisely resolved. Under the circumstances of
this case the Board considers it desirable to proceed only as
expeditiously as the nature of the problem and the cooperation of
the parties justify. [12]
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[13] The petition was filed on November 16, 1964. In the ensuing
weeks an attempt was made by the Board to obtain information to
assist it in making a proper disposition of the case. It was set
for hearing on February 25, 1965. The hearing did not produce
sufficient elucidating material. It was necessary to refer the
matter back to the Solicitor with instruction to secure additional
information along certain lines by surveys or in other ways, and to
resubmit with analysis. The additional submissions were completed
on June 21, 1965.
The question may be raised whether the resolution to the
instant problem, based on appraisal of what goes on in the
particular geographical area to which a particular wage
predetermination applies, will not raise problems in the
administration of the Davis-Bacon Act for the Solicitor. We do not
think that this is necessarily so. The statute is not moribund and
to maintain its vitality it must be realistically and practically
administered in the light of its objectives. The values and
benefits of the Davis-Bacon Act are such that in a limited number
of troublesome areas of administration and compliance, agencies
concerned with, and employers who work on, government or government
financed construction must try a little harder to make it work.
The scheme of the statute is based upon administration oriented to
local conditions. Considerable flexibility in administration
remains available to the Solicitor.
We see no reason to disturb the administrative practice of the
Solicitor in applying a 20% substantiality test. The matter is not
directly before us. It is an imperfect rule operating in an imperfect
world. The industry is struggling with wags to fairly deal [13]
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[14] with this type of problem. /FN2/ We do not see why
the Solicitor of Labor should not be able to do likewise. [14]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ In reply to a survey question, a state chapter of the
operating engineers reported: "This is and has been a hotly
contested subject. Our new agreement with the A.G.C. presently up
for ratification by the membership, holds work done by shop
mechanics on leased or purchased equipment to an absolute minimum
and to the warranty period of that particular piece of equipment.
During the warranty period, shop rate is paid. On repair work
other than that covered by warranty, field rate is paid." [14]
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[15] ORDER
Pursuant to Section 8(a) of the Board's Rules and Regulations
the case is remanded to the Office of the Solicitor for further
processing and disposition in accordance with the guidelines and
principles established herein.
Dated at Washington, D.C.
this 2nd day of July, 1965.
Oscar S. Smith, Chairman
Stuart Rothman, Member
Clarence D. Barker, Member
WAGE APPEALS BOARD [15]
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