Collinson Construction Co., WAB No. 76-09 (WAB Apr. 20, 1977)
CCASE:
COLLINSON CONSTRUCTION COMPANY
DDATE:
19770420
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
COLLINSON CONSTRUCTION COMPANY WAB Case No. 76-09
HUD Project No. Mich. 74-2 Dated: April 20, 1977
Mount Pleasant, MI
APPEARANCES: Gordon J. Quist, Esquire for Collinson Construction
Company
Russell Hubbard, Esquire for General Electric
Company
Thomas X. Dunn, Esquire for Building and
Construction Trades Department, AFL-CIO
George E. Rivers, Esquire, Douglas J. Davidson,
Esquire for the Wage and Hour Division, U.S.
Department of Labor
BEFORE: Alfred L. Ganna, Chairman, William T. Evans, Member
Thomas Phelan, Member
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition
of Collinson Construction Company, a Michigan corporation, which
sought review of the Assistant Administrator's decision of July 23,
1975, concerning the creditability of payments for certain fringe
benefits toward satisfaction of the contractor's obligation to pay
prevailing wage rates in accordance with Wage [1]
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[2] Determination No. 74-MI-53, in its performance on HUD Project No.
74-2 in Mt. Pleasant, Michigan.
A hearing on this matter was held February 25, 1977, pursuant
to the Board's Notice of Hearing and all interested parties were
represented at the proceeding. At the hearing two issues were well
defined. The first issue was whether a contribution to a bona fide
fringe benefit plan was creditable toward discharging a
contractor's obligation to pay the prevailing wage under the
Davis-Bacon Act, where such bona fide fringe benefit is not of a
type listed on the prevailing wage determination for the particular
craft in question or otherwise found to be prevailing by the
Secretary of Labor. The second issue was whether administrative
expenses incurred by a contractor or subcontractor in connection
with the administration of a bona fide benefit plan are creditable
toward discharging its obligation to pay the prevailing wage under
the Davis-Bacon Act.
The case that the Board has before it for review clearly
presents the issue of the proper interpretation and application of
the proviso to section 1(b)(2) of the Davis-Bacon Act. As it has
been interpreted and applied heretofore by the Administrator of the
Wage and Hour Division, a contractor or subcontractor who makes
payments to a bona fide fringe benefit program may credit those
payments toward discharging the prevailing wage [2]
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[3] obligation [*] only [*] if the fringe benefit is of a type listed on
the applicable wage determination or otherwise found to be prevailing by
the Secretary of Labor. [* Emphasis in original] *] If there is no
fringe benefit found to be prevailing in a particular category, there is
no credit given for any fringe benefit payments in that category; but if
a fringe benefit is found prevailing, then a contractor may fully offset
all of such fringe benefit payments even to the extent of decreasing the
basic hourly rate.
The Board does not agree with this application of the statute
and believes that it must be changed. The Davis-Bacon Act, as has
so often been pointed out, is remedial legislation enacted not for
the benefit of the contractors or subcontractors but rather for the
benefit of the workers. Strict adher[e]nce to the Administrator's
interpretation of the Act brings about what the Board feels is an
anomalous conclusion that works to the detriment of the worker
rather than to his benefit. When no fringe has been found to be
prevailing, the Act as now applied by the Administrator does not
permit any offset against wages for the cost of providing bona fide
fringe benefits. However, under the Copeland Act "Antikick-back"
Regulations, the employees may voluntarily request that the
contractor withhold from their wages an amount equal to the cost of
those benefits.
The contribution, however, is considered as a part of the
wage payment and thereby becomes taxable to the employee as wages
under the Internal Revenue Code. When the same contribution is
made by the employer, it is not considered taxable wages at [3]
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[4] that time and the employee is permitted to defer the tax
consequences of the fringe benefit payment. Regardless of how the
payment is treated in the hands of the employee, the contractor or
subcontractor making the payment still gets to deduct it as a
business expense. As a consequence then, the practical result of
the Administrator's position is to penalize the employees for the
type of fringe benefits which they have received or to favor one
contractor over another contractor. The Board does not believe
that Congress intended such a result in this worker-oriented
legislation and therefore concludes that the Administrator's
application of the proviso is not in accordance with the statute.
The Board does not however believe that the contractor's own
administrative expenses in providing bona fide fringe benefits are
creditable toward discharging the obligation to pay prevailing
wages under the Davis-Bacon Act. It views these costs as a part of
the general overhead expenses of doing business and should not
serve to decrease the direct benefit going to the employee. The
contractor has chosen to self-administer the program presumably for
its own reasons and, whatever those business reasons, they should
not serve to take benefits away from the employees. It is evident
from the clear language of the statute and from its legislative
history that the term "costs" refers to the costs of [*] benefits
[*] under an unfunded plan, not costs of administration under a
funded plan, such as was involved in the instant case. [* Emphasis
in original *] [4]
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[5] It is therefore ordered that the Administrator direct the
Department of Housing and Urban Development to pay to the
petitioner that portion of the amount held in escrow ($6,577.53)
which represents payments for bona fide fringe benefits actually
paid by Collinson, and pay to the employees who worked on the
project those sums withheld for the administration of Collinson's
health and welfare insurance plan ($.09 per hour per employee).
In view of the principles expressed herein, the Administrator
should review the appropriate Regulations.
BY ORDER OF THE BOARD
Craig Bulger,
Acting Executive Secretary
Wage Appeals Board [5]
