CCASE:
COX ENTERPRISES, INC.
DDATE:
19730129
TTEXT:
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[1] UNITED STATES OF AMERICA
UNITED STATES DEPARTMENT OF LABOR
WAGE APPEALS BOARD
WASHINGTON, D. C.
IN THE MATTER OF
WAGE APPEALS BOARD
Applicability of Davis-Bacon and
Related Acts to Work Performed by Case No. 72-10
Cox Enterprises, Inc., under Utah
State Highway Department Projects Dated: January 29, 1973
F-02803(10), FFG-027-5(6), and
S-037(10)
Cox Enterprises, Inc.,
Manti, Utah,
PETITIONER
APPEARANCES:
Robert C. Liljenquist, Esquire,
Salt Lake City, Utah
for the Petitioner;
George E. Rivers, Esquire,
Counsel for Contract Wage Standards,
Office of the Solicitor and
Counsel for the Assistant Administrator,
Employment Standards Administration,
Wage and Hour Division, USDL [1]
* * *
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[2] Also Appearing:
Norman S. MacPhee, Esquire,
Federal Highway Administration,
Washington, D. C.;
Mr. A. Elden Ball,
Internal Auditor,
Utah State Department of Highways,
Salt Lake City, Utah
BEFORE: Oscar S. Smith, Chairman,
Wage Appeals Board; and
Stuart Rothman and
Clarence D. Barker, Members
DECISION AND ORDER
The Cox Construction Company, Inc., of Manti, Utah, was the
prime contractor on three highway projects involving a total of
$3,227,980. These projects were subject to the labor standards
provisions of the Davis-Bacon and related Acts, including the
Contract Work Hours and Safety Standards Act.
The Petitioner, Cox Enterprises, Inc., maintains its office
with Cox Construction Company at one location in Manti, Utah. The
Petitioner operates a coal yard, a ready-mixed concrete plant, and
two gasoline pumps at the Cox Construction Company yard in Manti,
and it operates a gypsum quarry near Levan, Utah. All payroll and
accounting records for the two companies are maintained by the same
employees in the one office.
The corporation officers of the two companies are identical.
Cecil Cox is President and General Manager of both companies, lives
in Manti, Utah and owns approximately one-half of the businesses.
He actively [2]
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[3] manages both company operations with Max Cox,
Vice President and Manager of both companies. Zella R. Barton,
Secretary-Treasurer, owns one share of stock of Cox Enterprises,
Inc., and works as the bookkeeper for both companies.
Cox Enterprises was organized primarily to provide year-round
employment for Mr. Cox's key employees and, in good weather, such
as the summer, the Cox Enterprise employees will work on the Cox
Construction Company projects. The primary source of sale for the
bulk of Cox Enterprises' materials and service functions is Cox
Construction Company.
In the investigation report (developed by the Wage and Hour
Division of the Department of Labor) it is noted that:
Separate payroll and accounting records are kept for each
company, but employees are interchanged as needed.
Company equipment is utilized in all company operations
and is maintained and repaired in the Cox Construction
Company shop by employees carried on the Cox Enterprises
payroll. During the summer months, from about March
through October each year, most of the employees and the
equipment are used in the construction activity.
Beginning in November, the regular construction employees
are transferred to the Cox Enterprises payroll. These
employees [in the winter months] repair equipment, haul
coal and work in the gypsum mining operation. [3]
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[4] Because of the common ownership, the integrated
operation, and the interchange of employees, the two
corporate units were considered as one for the purpose of
this investigation. [During the December 22 hearing, the
Internal Auditor for the Utah Department of Highways
advised that he had gone to Manti on July 30, 1970 to
check the Cox payrolls. He found that the same basic
time cards were used by both firms. On a review of the
payroll records, he concluded that Cox Construction and
Cox Enterprises were one and the same company for the
purposes of his investigation.].
The three highway contracts were awarded by the Federal
Highway Administration (FHA) and the Utah State Department of
Highways (USDH) and contained the appropriate labor standards
requirements and a schedule of classifications and corresponding
wage rates as predetermined by the Department of Labor. /FN1/ The
rates in issue are those paid truck drivers. The contracts
specified $4.63 to $6.08 per hour, plus fringe benefits of $0.52
per hour. The Petitioner paid $2.00 to $3.00 per hour. The
contracting agency found that additional wages of $8,775.05 were
due 27 truck drivers when they worked in connection with the three
highway jobs during periods in 1967 to 1969. Although these 27
truck drivers were paid daily and weekly overtime on the basis of
the Cox Enterprises, Inc., rate, straight-time and overtime
violations were charged since this rate was found to have been less
than the contract rate found applicable. This resulted [4]
????????????????????????????
/FN1/ 23 U.S.C. 113 [;] 40 U.S.C. 276a [4]
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[5] in the $8,775.05 restitution total and in $1,990.00 in
liquidated damages under the provisions of the Contract Work Hours
and Safety Standards Act.
Although the record before the Board, including the data
submitted by the Petitioner, is not as detailed as the Board would
prefer, the following is well established.
No contract labor standards irregularities involving on-site
employees on the Cox Construction Company payrolls (including
on-site truck drivers) are charged to either firm. The alleged
violations involve 27 truck drivers who hauled fuel oil, road oil,
and construction equipment to the three sites from the Manti, Utah
headquarters location of both companies. These 27 truck drivers
are shown, during the 1967-1969 period when the three projects were
under construction on both Cox Construction and Cox Enterprises
payrolls because they operated trucks or other power equipment on
the job sites and hauled oil and equipment from Manti to the sites.
Some of the 27 truck drivers are shown on the payroll sheets for
the same day as having worked a number of hours for Cox
Construction Company charged at the appropriate contract wage rates,
and additional hours for Cox Enterprises charged at rates considerably
less than the Davis-Bacon contract rates for truck drivers. [5]
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[6] Following a 1969 investigation by the Wage and Hour Division,
Department of Labor, Mr. Cecil Cox was advised by the investigator
that the truck drivers in question were entitled to be paid at the
Davis-Bacon contract rates. Mr. Cox referred the matter to his
attorney in Salt Lake City who stated that he had defended a
company in a similar situation in a court case previously, and had
proceeded far enough here to determine that the truck drivers
should be receiving the Davis-Bacon rates and the corresponding
overtime. On this basis, counsel stated that he would advise the
company to pay the equipment, fuel oil, and road oil delivery
drivers the predetermined rates in the future.
Petitioner, Cox Enterprises, Inc., claims that it was advised
by a letter in June, 1967 from its insurance broker who had
contracted the FHA that truck drivers hauling road oil, fuel oil
and equipment from Manti to the job sites were not entitled to the
contract rates for truck drivers provided they were shifted to the
Enterprise payroll and performed no actual work on the three job
sites when they delivered the materials. Because of the
information furnished Mr. Cox on or about June 22, 1967 in the
insurance broker's letter to Mr. Cox (allegedly quoting FHA field
offices' advice), counsel for Mr. Cox advised the company not to
make the back wages (1967-1969) nor pay the related liquidated
damages. It is the latter ($8,775.05 restitution and $1,990.00
liquidated damages) which are now in issue. [6]
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[7] The first question to be decided by the Board in this case
is: Are these 27 truck drivers, under these conditions entitled to
the wage rates set forth in the three covered highway projects
awarded to the construction company for the hours spent hauling
fuel oil, road oil and construction equipment from the Manti
headquarters of both firms to the highway job sites? The answer
is, yes.
There would be no question as to coverage had these truck
drivers hauled material or equipment from one point to another on
the Cox Construction Company job sites. And, by the nature of the
classification, covered truck drivers (unlike other laborers and
mechanics subject to the Davis-Bacon and related Acts) often leave
the "site of the work" to go to quarries or batch plants or other
locations of noncovered materialmen to pick up loads of various
materials to be hauled back to the construction site or sites for
incorporation into the projects.
The Office of the Solicitor of Labor has had occasion to
assess this situation in decisions to which the Board fully
subscribes in principle. In the published decision of the
Solicitor of Labor, DB-22, [7]
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[8] March 12, 1962, the applicability of the Davis-Bacon
(and related Acts) to truck drivers and materialmen was reviewed
in considerable detail. The Solicitor cited Section 5.2 of
Regulations, Part 5 (29 CFR, Subtitle A) which provides under
Subsection (g):
The terms "construction", "prosecution", "completion", or
"repair" [activities covered by the Davis-Bacon and
related Acts] mean all types of work done on a particular
building or work at the site thereof . . . including
without limitation, altering, remodeling, painting and
decorating, [*] the transporting of materials and
supplies to or from the building or work by the employees
of the construction contractor or construction
subcontractor [*], and the manufacturing or furnishing of
materials, articles, supplies or equipment on the site of
the building or work, . . . [*](Emphasis added.).[*]
Subsection (f) of the same Section 5.2 of the Regulations
provides as follows:
The terms "building" or "work" generally include
construction activity as distinguished from
manufacturing, furnishing of materials, or servicing and
maintenance work . . . The manufacture or furnishing of
materials, articles, supplies or equipment . . . is not
a "building" or "work" . . . [within the meaning of the
Davis-Bacon and related Acts or of the Regulations]
. . . unless conducted in connection with and at the site
of such a building or work . . .
Accordingly, the Solicitor continued:
this Department has traditionally considered the
manufacture and delivery of supply items to the work
site, when accomplished by bona fide materialmen serving
the public in general, as noncovered activities. [8]
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[9] With respect to the trucking firm involved in DB-22, which
considered itself a non-covered commercial hauler, the Solicitor
stated:
We assume, moreover, that the subject trucking firm is a
separate legal entity with independent substantial
investment in facilities and equipment, and an
independent business organization and operation, with
like opportunities for profit or loss, and including that
nature and degree of control utilized by a principal.
Under these circumstances, we have held that where a
construction contractor purchases materials which are
subsequently delivered to the site of construction by an
independent trucking firm, acting for and on behalf of
the producer, such deliveries are incident to the sale
and purchase of these materials and the drivers involved
are not covered by the Davis-Bacon and related Acts ...
Stressed throughout DB-22 is the [*] independence [*] of the
trucking firm. [*EMPHASIS IN ORIGINAL*] The decision concludes as
follows:
[*] This opinion is not intended to relieve construction
contractors or their subcontractors from the obligation
imposed by the Davis-Bacon and related statutes where
their own employees are themselves engaged in the
transporting of materials and supplies. . . to and from
the building or work within the meaning of Section 5.2(g)
of Regulations Part 5. [*(Emphasis supplied.)*]
On the same subject, the Department of Labor's Regional
Attorney in San Francisco, by letter opinion of November 3, 1961,
(unpublished) elaborated on published opinion No. DB-14 of October
11, 1961, in response to a request for clarification from the
General Contractors Association of Hawaii. The Board incorporates
herein and accepts the pertinent text of that letter opinion
because of its clarity of [9]
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[10] expression with respect to the instant situation. The Regional
Attorney noted that the essence of DB-14 was that "tailgate spreading"
(or "tailgate unloading") is "merely a method of delivery and, therefore,
incidental to the sale by the materialman. Thus, the Davis-Bacon Act
would not cover the drivers who unload gravel by means of 'tailgate
spreading'." He also emphasized that the Solicitor's ruling "specifically
mentions '[*] materialmen [*] stone producers'. [*(Emphasis supplied).*]
This was done to differentiate the truck driver hauling for a
materialman from one hauling for a construction contractor." He
continued:
I believe we have three basic situations here: First,
the truck driver hauling for a prime construction
contractor. Secondly, the driver hauling for the typical
established local materialman. And, thirdly, the driver
hauling material for a construction contractor who also
operates, as part of his business, his own material or
aggregate department.
Now, in the first instance, that of the driver hauling
for a paving contractor, the trucker would be subject to
the Davis-Bacon Act in his entire aggregate hauling
operations, including all types of dumping and spreading.
Sub-contract trucking firms would also be subject to the
Davis-Bacon Act when employed by the prime contractor.
In the second instance, the hauling and the dumping by or
for a subcontractor materialman would not be subject to
the Davis-Bacon Act. This is what [the] Solicitor was
referring to -- that tailgate spreading by these
employees would not in itself provide a basis for
coverage under the Davis-Bacon Act. This would also be
true if the work was performed by contract truckers. [10]
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[11] In the third situation where a material supply firm is
owned and operated by the general contractor or a
subcontractor construction firm on a Government contract,
two situations may arise. If the material supply
business is maintained separately from his
construction-type operations, then the employees hauling
aggregates would be in the same situation as that
described in the second instance . . . However, if the
contracting and material supply work is intermingled
. . ., then such hauling would be subject to the
Davis-Bacon Act in its entirety. A contract trucker
. . . in this latter instance would also be subject.
It is clear that under the facts of record viewed under the
applicable laws and regulations, the 27 truck drivers were
"laborers and mechanics" entitled to be paid not less than the
hourly rates included in the three highway contracts. The
Petitioner has made it clear that Cox Enterprises was not in the
hauling business and did not haul material for anyone other than
the Cox Construction Company. By simply transferring the names of
the employees from the Cox Construction Company, Inc., to the Cox
Enterprises, Inc., payroll, the prime contractor could not avoid
his contract labor standards obligations. Although two
corporations were involved, it was one operation with two brothers
equally owning both firms, with the same employees working for
both, (at times during the same day), and without [11]
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[12] accurate records being maintained. /FN2/ The Department of Labor's
"noncovered materialman" opinions provide no relief here.
The remaining question is whether, having complied
prospectively with the Department's coverage ruling of 1969,
Petitioner is entitled to be relieved from the $8,775.05 additional
wages computed for the 27 truck drivers, and the $1,990.00 charged
as liquidated damages, for the period 1967 to 1969. The Board
concludes that the 27 truck drivers in question should be
compensated for all hours worked hauling oil and equipment from
Manti to the three job sites for the period 1967 to 1969. If the
Petitioner, (in reality, Mr. Cecil Cox, -- half-owner and the
"prime mover" of both firms), having a bona fide doubt, had
resorted to the contracting agency (the Utah State Department of
Highways) or to the Department of Labor, /FN3/ for guidance, there
might have been an equitable basis for relief with respect to
retroactive restitution and liquidated damages had he followed an
erroneous opinion given him by the appropriate agency. Mr. Cox, a
long-time Government contractor, sought guidance from his insurance
broker who, in turn, [12]
???????????????????????????????????
/FN2/ In 1963, when a similar problem arose, Mr. Cox assured the
USDH and FHA that he would in the future retain the individual
daily time cards as required. When confronted with the coverage
issue in 1969, Petitioner not only did not contest the ruling,
rather he promptly agreed to pay the contract rates from that time
on.
/FN3/ Sec. 5.12 (29 CPR, Subtitle A) Rulings and Interpretations
All questions arising in any agency relating to the
application and interpretation of the rules contained in
this part and in Parts 1 and 3 of this subtitle, and of
the labor standards provisions of any of the [FN3
CONTINUED ON PAGE 13] statutes listed in [sec] 5.1 shall
be referred to the Secretary for appropriate ruling or
interpretation. The rulings and interpretations shall be
authoritative and those under the Davis-Bacon Act may be
relied upon as provided for in section 10 of the
Portal-to-Portal Act of 1947 (29 U.S.C. 259) . . . [END
FN3]
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[13] resorted to the Bridge Engineer of the FHA in Salt Lake City,
Utah and not to the USDH or the Department of Labor. But equally,
if not more important, the facts presented to the Bridge Engineer
upon which the advice was given are not the facts of this case.
The Bridge Engineer placed a memorandum in his files reflecting his
conversation with the insurance broker. This "memorandum to the
files" is a part of the record in this case. The Board accepts it
as an accurate statement of the conversation.
As understood by the Bridge Engineer, Mr. Cox's agent referred
to the transporting of oil from a supplier's source to an
interstate project by a third party. The insurance agent
represented that the third party, Cox Enterprises, Inc., was
completely independent, in corporate structure and otherwise, of
the Cox Construction Company. The FHA Bridge Engineer in his
informal opinion stressed the requirement of complete independence
of the transporting corporation from the construction corporation
for there to be noncoverage of the truck drivers. The record
discloses: (1) Mr. Cox and his insurance agent were informed that
the coverage view expressed might not coincide with the views of
the Department of Labor, should the Department review the case; (2)
to bolster the noncoverage position, the insurance agent advised
Mr. Cox to make sure that all transport equipment used reflect
ownership by Cox Enterprises and that the truck drivers be
employees of and carried on the payrolls of Cox Enterprises. [13]
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[14] Under the facts and circumstances of this case it is
concluded that no sufficient basis exists for providing relief from
the restitution found due the 27 truck drivers. In this
connection, it has been noted that counsel for the Petitioner
claims that the restitution figures have not been adequately
explained to his client. The Employment Standards Administration
shall make sure that its normal procedures in computing and
assessing restitution are fully explained to the Petitioner. It is
noted that Petitioner by his disposal of the basic records (the
daily time cards) after four weeks, has created a situation where
computations on back wages will have to be assessed in accordance
with Department of Labor normal procedures in such cases.
With respect to the liquidated damages computed in connection
with the daily and/or weekly overtime involved, since the Cox firms
did pay daily and weekly overtime (though on the basis of lower
hourly rates than those found due), the US[D]H and the FHA are
authorized to give consideration (on payment of the restitution) to
the nonassessment of the liquidated damages presently computed.
ORDER
The contract labor standards compliance decision of the Utah State
Highway Department (the contracting agency), the Federal Highway [14]
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[15] Administration (the Federal Agency involved), and
of the Administrator (Wage and Hour Division, U.S. Department of
Labor), is affirmed. The Petition is dismissed.
SO ORDERED
Oscar S. Smith, Chairman
Stuart Rothman, Member
Clarence D. Barker, Member [15]
