Fry Brothers Corp., WAB No. 76-06 (WAB June 14, 1977)
CCASE:
FRY BROTHERS CORPORATION
DDATE:
19770614
TTEXT:
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[1] UNITED STATES OF AMERICA
DEPARTMENT OF LABOR
DECISIONS AND ORDERS OF THE WAGE APPEALS BOARD
In the Matter of
FRY BROTHERS CORPORATION WAB Case
No. 76-06
Subcontractor on HUD-FHA Project
No. 116-44034 LDP, Plaza Dorado
Apartments; Project No. 116-44045 DECISION AND ORDER
LDP Sandia Vista Apartments;
Project No. 116-44Q26 LDP, Vista Dated: June 14, 1977
Oriente Apartments,
Albuquerque, New Mexico
Fry Brothers Corporation,
Petitioner
Appearances: Charles G. Berry, Esq., Marchiondo and Berry, P.O.
Box 568, Albuquerque, New Mexico 87103
Herman Fry, President, Fry Brothers Corporation
Steven Horowitz, Esq., Department of Housing and
Urban Development
Gail Coleman, Esq., George Rivers, Esq., Office of
the Solicitor, United States Department of Labor
Thomas X. Dunn, Esq., Building and Construction
Trades Department, AFL-CIO
Dorothy P. Come, Director, Division of Gov't
Contract Regulation, United States Department of
Labor [1]
~2
[2] Before: Oscar C. Smith, Chairman, Clarence Barker and
Stuart Rothman, Members. /FN1/
BACKGROUND OF THE CASE AND
POSITION OF THE PETITIONER
Petitioner, Fry Brothers Corporation (herein "Fry"), was the
carpentry subcontractor for the prime contractor, Plaza
Construction Company, on three HUD/FHA insured projects in
Albuquerque, New Mexico: Plaza Dorado, Vista Oriente and Sandia
Vista Projects.
After each of these projects was substantially completed, HUD
under instruction of the Department of Labor withheld $72,213.54
for underpayments based on misclassification of carpenters as
laborers. Fry disagreed. The dispute was brought to a hearing
before an Administrative Law Judge On June 20, 1975, the
Administrative Law Judge filed findings of fact, conclusions of
law, and his decision holding generally in favor of Fry except for
ten specific employees to whom [2]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ This case was heard by the Wage Appeals Board on May 17,
1976, considered by the full Board and a unanimous decision reached
prior to May 30, 1976. The decision was prepared by Board Member
Rothman at the direction of and with concurrence of Chairman Smith
and Board Member Barker. [2]
~3
[3] he found $2,604.40 was due. The Department of Labor appealed.
The Assistant Secretary of the Employment Standards Administration,
Bernard E. DeLury, on December 31, 1975, reversed the decision of
the Administrative Law Judge.
The petition points out that Mr. DeLury's decision essentially
turns on his determination that the wage determinations issued by
the Department of Labor for the three projects reflected union
negotiated rates. He erred in concluding that work classifications
accepted by practice under negotiated agreements would be enforced
on each project. It was clearly established in the Administrative
Law Judge hearing, says petitioner, that the prevailing practice in
the area was to the contrary. Mr. DeLury further overruled the
Administrative Law Judge's determination as to the credibility of
the witnesses. He accepted the testimony of the HUD wage
requirement officer on these projects with respect to the use to
which definitions set forth in the Dictionary of Occupational
Titles could be used. The HUD wage requirement officer had
testified that he had not been asked to construe the meaning of the
definitions in the Dictionary of Occupational Titles. Although the
HUD wage requirement officer referred to the Dictionary of
Occupation Titles in explaining to the contractors what duties
their employees could perform under a given classification, Mr.
DeLury concluded that Fry Brothers had gone well beyond what was
contemplated by the Dictionary on [3]
~4
[4] what they had been told, and that the employees in question were
improperly classified and were entitled to receive carpenter's wage
rates as opposed to laborer's wage rates. The petitioner requested the
Board to rule upon the following three questions which it claims the
Assistant Secretary erroneously resolved:
1. Did the Assistant Secretary erroneously hold that if
the wages reflected in the wage determinations are the
same as the union-negotiated rates, the duties ascribed
to the classification must be the same as those performed
under the union-negotiated agreement?
2. Were the wage predeterminations for carpenters the
same as union-negotiated rates?
3. Did the Assistant Secretary err in rejecting the
findings of the Administrative Law Judge that the
utilization of the employees in this dispute was proper
and the instructions of a HUD officer to the petitioner
concerning the classification of employees were also
proper?
THE UNDERLYING FACTS OF THE
CASE IN MORE DETAIL
On the basis of an investigation, the Wage and Hour Division,
U.S. Department of Labor, determined that employees of Fry
classified as laborers (or carpenter laborers) on the certified
payrolls performed the work of carpenters. The computations of the
Wage [4]
~5
[5] and Hour Division indicated that approximately 158
employees were due $85,184.64 in back wages, of which $72,213.54
was withheld by the Department of Housing and Urban Development.
The mort[g]ages on three projects insured by the Federal
Housing Administration under Section 236 of the National Housing
Act (12 U.S.C. 1715z-1), were covered by Davis-Bacon labor
standards requirements under Section 212 of the Act (12 U.S.C.
1715c). /FN2/ Each project consisted of seven to twelve two- or
three-story garden apartment buildings. The Department of Labor
issued its wage decisions for the three projects on July 17, 1972,
November 21, 1972, and December 7, 1972. [5]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ Section 212 of the National Housing Act, 12 U.S.C. 1715c,
provides in pertinent part:
(a) The Secretary shall not insure under section 1713 or
1715a or 1743 of this title, pursuant to any application
for insurance * * * a mort[g]age or investment which
covers property on which there is or is to be located a
dwelling or dwellings, or a housing project * * * unless
the principal contractor files a certificate or
certificates (at such times, in course of construction or
otherwise, as the Secretary may prescribe) certifying
that the laborers and mechanics employed in the
construction of the dwelling or dwellings or the housing
project involved have been paid not less than the wages
prevailing in the locality in which the work was
performed for the corresponding classes of laborers and
mechanics employed on construction of a similar
character, as determined by the Secretary of Labor, in
accordance with the Davis-Bacon Act, as amended, prior to
the beginning of construction and after the date of the
filing of the application for insurance. * * * The
provisions of this section shall also apply to the
insurance of any mort[g]age under Section 1715z [Section
236] of this title * * *. [5]
~6
[6] Under established Davis-Bacon Act procedures (29 CFR [sec]
5.5(a)(1)(ii)) Plaza Construction Company, the prime contractor,
requested additional wage rates from HUD for 12 helper
subclassifications, including carpenter helpers, for the Plaza
Dorado Apartments. Rates were issued for only two helper
subclassifications: marble and tile helpers and roofer helpers.
Fry performed only the framing and rough carpentry work. Fry
began construction in December 1972, and completed the work in
January 1974. Fry classified its employees as carpenters, forklift
operators, and laborers (or carpenter laborers). The employees at
issue in this proceeding were classified on the certified payrolls
as laborers from December 1972 until July 1973, and as "carpenter
laborers" from July 1973 until construction ended. These employees
were paid in accordance with the classification appearing on the
wage determinations as: "Laborers: Unskilled: Building and Common
Laborers, Carpenters tenders."
Employees who were classified as "laborers" or "carpenter
laborers" worked on the fabrication table and in the construction
of buildings. They cut wall panels and other component pieces
according to a pattern with a radial arm saw, nailing the pieces
together with an air hammer, stapling celotex to the wall panels,
and making simulated pilasters. In the buildings "laborers" laid
down and nailed precut joists, placed and fastened metal bridging
between joists, helped [6]
~7
[7] raise wall panels, laid down and nailed plywood sheets for flooring,
and did corrective or "back-up" work such as replacing crooked wall
studs. In some instances "laborers" cut stair horses from a pattern and
assembled them, assisted in installing doors and windows, did top
plating, and put up exterior siding and rough-cut trim. One employee
classified as a "laborer" or "carpenter laborer" was a "pusher" or lead
man on back-up work, who listed items to be corrected in the buildings.
Employees classified as forklift operators operated a forklift
truck and also performed the duties of employees classified as
"laborers" (or "carpenter laborers") described in the preceding
paragraph.
Employees classified by Fry as carpenters performed the same
type of work as the "laborers" or "carpenter laborers" but in
addition, they laid out the work, made patterns, plumbed walls,
installed windows and doors, and supervised the work of the
employees classified as "laborers" or "carpenter laborers."
The Department of Labor Administrative Law Judge conducted a
hearing in September 1974, pursuant to Section 5.11(b) of Title 29
of the Code of Federal Regulations. Union representatives and non-
union contractors testified as to work assignments of laborers and
carpenters on residential construction in the Albuquerque area.
According to the testimony of union people, a carpenter under
negotiated arrangements on residential housing of the type built
does all of the cutting, fabrication, and installation of
components with the exception of electrical, plumbing and sheet
metal work, and placement of concrete. Framing work [7]
~8
[8] in general is exclusively carpenter's work under such arrangements.
A laborer working with carpenters (when classified as a carpenter tender
under the laborer's agreement) carries materials, cleans up, cleans
materials, and strips forms. He does not assist a carpenter by holding
components in place, feed a fabrication table, or use tools except in
cleaning materials and stripping forms.
Nonunion contractors testified that they expect a man who is
a full ("qualified") carpenter and receives the highest wage rate
to be able to build a house from a set of blueprints. Such men
were described as supervisors of a crew of less skilled men
performing carpent[r]y work under their direction. Those employees
who are not "full" carpenters are generally termed carpenter
helpers. They perform carpentry work, and are paid according to
their skill, ability, experience, and/or productivity. The
nonunion contractors described laborer's work, or the work
performed by men receiving the lowest wage rate, as cleaning up,
pulling nails out of used lumber, and hauling lumber. Laborers
seldom (if ever) perform work with carpenter tools.
It is clear the parties went to considerable effort to explain
to the Administrative Law Judge the local practices in making work
assignments on jobs which were subject to the control and
discipline of a negotiated contract as compared with projects [8]
~9
[9] where the contractor was free to classify work and determine
the rate of pay for any job free from such discipline and
restraint.
Although there was conflicting testimony concerning the amount
of union and nonunion residential construction in the Albuquerque
area, the Administrative Law Judge found that the substantial
majority of residential construction was performed by nonunion
contractors and therefore concluded that the practice of nonunion
contractors was the prevailing area practice in residential
construction and would control in his decision.
No classification of "carpenter helper" which is a negotiated
classification was issued by the Department of Labor. /FN3/ A
conformable [9]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN3/ Carpenter helpers employed by nonunion contractors, as well
as the "carpenter laborers" employed by Fry, were informal
apprentices or trainees rather than a separate "class" of laborers
and mechanics for purposes of the Davis-Bacon and related Acts. A
vice president of Fry Brothers and superintendent on these
projects, described the practices of Fry in a letter to Plaza
Construction Company as an "attempt to teach them the various tasks
as required". In addition, a foreman for Fry Brothers testified,
"I didn't say that we were running an apprenticeship program, but
that's more or less what it amounted to."
In order to receive less than the predetermined rate for the
work performed, apprentices must be registered in a program
approved by the Bureau of Apprenticeship and Training or a
recognized State apprenticeship agency, and trainees must be
enrolled in a program approved by the Bureau of Appren[]ticeship
and Training. Neither of these requirements was satisfied
here. [9]
~10
[10] classification was not issued by the Department of Housing and
Urban Development pursuant to 29 CFR [sec] 5.5(a)(1)(ii).
Nonetheless, the Administrative Law Judge concluded that the wage
determinations specifically provided an intermediate classification
of "carpenter tender." He concluded that Fry employees classified
as "laborers" or "carpenter laborers" performed duties consistent
with the prevailing area practice for [*] nonunion [*] "carpenter
helpers" and hence Fry was in compliance with the wage
determinations requirements. [* Emphasis in original *]
The Department of Labor had advised the Board in its
posthearing statement that the Department does not issue a wage
determination with "helper" classifications unless a practice
of using such a subclassification prevails in the area. Where
the prevailing rate for carpenters, for example, is the same as
the negotiated rate, a helper classification is included only if it
is included in the collective bargaining agreement. The duties are
those contemplated in the agreement. The Department of Labor
further advises that in this case the negotiated carpenter's rate
for residential construction was identical to the carpenter's rate
in the wage determinations. No helper subclassification was
included in the carpenter's collective bargaining agreement.
Accordingly, such a subclassification was not issued. [10]
~11
[11] In contrast, a "carpenter tender", it is pointed out, is
a classification in the collective bargaining agreement of Laborers
Local 16. Since negotiated rates prevail, a wage determination
for the Albuquerque area would include a "carpenter tender"
classification under laborers and not a carpenter helper
subclassification under carpenters.
The Administrative Law Judge based his conclusion on a
statement of Mr. Dale Hill, wage requirement officer in the
Albuquerque office of the Federal Housing Administration, that
"when you find a carpenter tender, I don't believe you'll find a
carpenter helper rating on the decision." From this statement, the
Department of Labor points out, the Administrative Law Judge
concluded that "Mr. Hill did infer that the terms 'tender' and
'helper' in the absence of further qualifications, were used
interchangeabl[y] in Wage Determinations." Mr. Hill, however,
testified that he interpreted carpenter tender as a laborer and
[*] not [*] as a helper. We cannot agree with the inferences drawn
by the Administrative Law Judge. [* Emphasis in original *]
By the terms and structure of the wage determinations issued in
this case and the nature of work classifications in the
construction industry, a carpenter tender in the laborer's
classification is an [*] unskilled [*] employee, as distinguished
from semiskilled employees such as cement mason tenders. [*Emphasis
in original *] The classification of carpenter tender in the
laborer schedule is not an intermediate classification of carpenter
in the carpenter's schedule. [11]
~12
[12] The Administrative Law Judge relied on his finding that
Mr. Hill of the Federal Housing Administration told Plaza
Construction Company and Fry that "carpenter laborers" could
perform the duties of "Laborer, Carpentry" set forth in the
Dictionary of Occupational Titles. The Dictionary purchased and
said to have been relied on by Mr. Fry, contains a "Special Notice"
that it does not necessarily reflect area practice and cannot be
considered standards for setting wages or hours.
The petitioner contends that Mr. Hill was the representative of
the contracting officer on the three projects. The claim is made
that he was acting in accordance with the Department of Labor
regulations, 29 CFR [sec] 5.5(a)(1)(ii), when he "agreed that these
employees could perform these functions." Therefore, petitioner
argues, the Government is bound by the actions of Mr. Hill.
The contracting officer for the projects was Luther Branham,
the Director of HUD's Albuquerque Insuring Office, not Mr. Hill.
Mr. Branham's signature appears on the conformed classifications
which were issued. The Department of Labor contends it is
difficult to perceive how an informal conversation with Mr. Hill,
in which the interpretation of a classification was discussed, could [12]
~13
[13] be construed to comply with the Department of Labor
procedures in 29 CFR [sec] 5.5(a)(1)(ii). /FN4/
It was this procedure which was followed by Plaza Construction
Company when it requested the carpenter helper classification. The
request was not granted. No appeal was made to the Department of
Labor. Reliance on this provision by petitioner is misplaced.
The Administrative Law Judge concluded that (with the
exception of ten employees who were reclassified as carpenters
after a trial period), the carpenter laborers employed by Fry were
paid in accordance with the applicable wage determinations and
performed duties [13]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN4/ 29 CFR [sec] 5.5(a)(1)(ii) provides:
The contracting officer shall require that any class of
laborers or mechanics, including apprentices and
trainees, which is not listed in the wage determination
and which is to be employed under the contract, shall be
classified or reclassified conformable to the wage
determination and a report of the action shall be sent by
the Federal agency to the Secretary of Labor. In the
event the interested parties cannot agree on the proper
classification or reclassification of a particular class
of laborers and mechanics, including apprentices and
trainees, to be used, the question accompanied by the
recommendation of the contracting officer shall be
referred to the Secretary for final determination. [13]
~14
[14] consistent with the "prevailing area practice in residential
building construction," and consistent with the interpretations
of HUD. /FN5/
In his decision of December 31, 1975, the Administrator
concluded that the employees in question were improperly classified
and were entitled to the carpenters' wage rate as opposed to the
laborers' wage rate. He reversed the decision of the
Administrative Law Judge and remanded the case for the purpose of
determining the amounts due individual employees. The matter is
before [the] Wage Appeals Board on Fry's petition for review of the
Administrator's decision.
THE DECISION OF THE BOARD
The Board has considered all matters presented in this request
for review, including the record on appeal, the parties' prehearing
and posthearing statements, and matters considered at the oral
hearing. [14]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN5/ The Wage and Hour Division determined that two employees
classified as forklift operators were performing the work of
carpenters 50 percent of the time and computed back wages
accordingly. The Administrative Law Judge found that they
performed the same work as the employees classified as "carpenter
laborers" in addition to their duties as forklift operators. These
employees should be considered the same as the other carpenter
laborers for disposition of the matter. [14]
~15
[15] 1. The Board concludes that the Assistant Secretary of Labor
who acted in this matter in place of the Administrator, Wage and
Hour Division, did not err in reversing the decisions reached by
the Administrative Law Judge. Not to have reversed the decision of
the Administrative Law Judge would have turned some 40 years of
consistent administration of the Davis-Bacon Act on its head. The
Department of Labor would have become a party to shooting the
Davis-Bacon Act so full of holes that there would be little left of
the Act on the statute books to enforce.
2. The Board views this matter as a classical case of
misclassification of the work of employees covered by the Act. The
argument that developed between the contending parties before
the Administrative Law Judge over whether the employees in question
were properly classified as a subgroup of "unskilled carpenter
tenders" under the laborers classification because the unorganized
sector of the construction industry in the Albuquerque area gave
laborers the carpenters's tools of the trade and told them to do
carpentry work is much beside the point. Under established
principles of Davis-Bacon Act administration, when the wage
predetermination schedule contains only one wage rate for the
carpenter classification without intermediate rates, it is not
permissible for contractors who come on the project site, whether
organized or unorganized, to divide work customarily considered to
be the [15]
~16
[16] work of the carpenters' craft into several parts
measured according to the contractor by his assessment of the
degree of skill of the employee and to pay for such division of the
work at less than the specified rate for the carpenters' craft.
3. Under facts which are not in dispute, the prime
contractor, Plaza Construction Company, showed that it was aware of
this basic principle. It applied for an "in conformity with"
determination under Davis-Bacon regulations for the
subclassification of carpenter helper, which is a subclassification
recognized in the construction industry for the carpentry craft.
An application by a prime contractor would be for itself and subs
on the work. It did not get it. It is of some interest that Plaza
Construction Company has made no app[]earance in this case and has
let Fry Brothers Corporation go it alone.
4. Some limited flexibility exists under Davis-Bacon Act
principles, with respect to classification of work in such matters
as the acceptable use of composite crews and in cases of legitimate
overlapping jurisdictional claims. The Board finds no such
exculpatory circumstances in this case.
5. The Board finds no error in the determination of the
Assistant Secretary that the wage predeterminations issued for
these three projects reflected the wages paid under negotiated
arrangements in the organized sector of the construction industry
in the Albuquerque locality. When an interested person in the [16]
~17
[17] construction industry desires to challenge a practice of the
Labor Department to accept the negotiated wage rates as prevailing
without a wage data survey, it is necessary that the attack come
before the Labor Department decision becomes the basis upon which
bids are taken. It should not be raised at the enforcement stage.
We again find no exonerating circumstances permitting it to be
raised here at the enforcement stage.
6. When the Department of Labor determines that the
prevailing wage for a particular craft derives from experience
under negotiated arrangements, the Labor Department has to see to
it that the wage determinations carry along with them as fairly and
fully as may be practicable, the classifications of work according
to job content upon which the wage rates are based. If a
construction contractor who is not bound by the classifications of
work at which the majority of employees in the area are working is
free to classify or reclassify, grade or subgrade traditional craft
work as he wishes, such a contractor can, with respect to wage
rates, take almost any job away from the group of contractors and
the employees who work for them who have established the locality
wage standard. There will be little left to the Davis-Bacon Act.
Under the circumstances that the Assistant Secretary determined
that the wage determinations that had been issued reflected the
prevailing wage in the organized sector it does not make any
difference at all what the practice may have been for those
contractors who do and pay what they wish. Such a contractor
could change his own practice according to what he believed each
employee was worth for the work he was doing. [17]
~18
[18] 7. The Department of Labor contends that under
Reorganization Plan No. 14 of 1950 (5 U.S.C. App.), the Secretary
of Labor is charged with the responsibility of assuring the
coordination of the administration of the Davis-Bacon and related
Acts and consistency of their enforcement. Pursuant to Labor
Department regulations, if a question arose concerning work which
could be performed by laborers and which work by carpenters, an
authoritative ruling should have been requested from the Secretary
of Labor as provided in 29 CFR [sec] 5.12. Thus, the U.S. District
Court for the District of New Mexico, in dismissing for lack of
jurisdiction an action related to this proceeding, Fry Brothers
Corp. v. Department of Housing and Urban Development, 77 CCH LC
[par] 33,306 (D.N.M. 1975, not officially reported /FN6/
specifically rejected petitioner's argument that plaintiff relied
on an agreement with HUD as to the classification of certain
workers. The Court concluded that the authority to classify
workers lies with the Department of Labor, and not with the
contracting agency on the project. [18]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN6/ The Labor Department pointed out in its statement that this
case concerns the same facts and legal issues as the instant
proceeding. Fry Brothers alleged that the withholding of funds
was the result of arbitrary, capricious and intentional conduct by
the Department of Labor defendants, and requested three million
dollars in alleged damages to Fry Brothers' business as a carpentry
subcontractor. As noted above, the case was dismissed for lack of
jurisdiction. [18]
~19
[19] The Department of Labor also points out that under the
Portal-to-Portal Act (29 U.S.C. 259) only a written ruling of the
Secretary of Labor can be relied upon as a defense against
liability for wages which must be paid under the Davis-Bacon Act.
See, e.g., Hodgson V. Square D Co., 459 F.2d 805 (C.A. 6, 1972),
cert. denied, 409 U.S. 967 (1972). "Reliance" on an oral statement
by a local official of the contracting agency cannot be a basis for
finding that Fry Brothers has complied with the labor standards
requirements of the National Housing Act, which does not provide
any "good faith" exception. Again, the Board finds no excusing
circumstances.
The Board is not convinced that a building subcontractor will
undertake to assume required labor costs at the time he submits his
bid without a careful consideration of his methods of operation as
compared to the methods of operation required under negotiated
agreements when the wage scales and their classifications patently
reflect negotiated arrangements. The differences are too well
understood for the contentions of the petitioner to be convincing
here. The study of occupational titles in standard classification
guides and the drawing of erroneous conclusions from what a HUD
representative read in a book after bids are submitted is not a
substitute for the close examination of the nature of the work
required at the time that bids are submitted. [19]
~20
[20] 8. The petitioner has alleged that the Assistant Secretary
has not duly taken into account credibility determinations made by
the Administrative Law Judge. This case does not turn on such
credibility considerations but upon the basic misapplication by
the Administrative Law Judge of long-established Davis-Bacon Act
enforcement regulations used in reaching and applying the initial
wage predeterminations. The Board looks to the final decision of
the Department of Labor that is brought to it for review. In this
case, the Board concludes that the final decision, the decision of
the Assistant Secretary, was correct in all respects.
ORDER
The Assistant Secretary of Labor did not err in reversing the
decision of the Administrative Law Judge. The decision of the
Assistant Secretary of Labor is affirmed. The petition herein is
denied.
SO ORDERED
Oscar Smith, Chairman
Stuart Rothman, Member
Clarence D. Barker, Member [20]
