PROMETHEUS DEVELOPMENT CO., WAB Nos. 81-02 and 81-03 (WAB Aug. 19, 1985)
CCASE:
PROMETHEUS DEVELOPMENT
DDATE:
199850819
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matters of
PROMETHEUS DEVELOPMENT CO. WAB Case Nos. 81-02
& 81-03
PROMETHEUS DEVELOPMENT CO. &
V. M. H. CONSTRUCTION CO.
FHA Proj. No 127-35306 Dated: August 19, 1985
King County, Washington
BEFORE: Thomas X. Dunn, Member, Gresham Smith, Alternate
Member /FN1/ and Stuart Rothman, Member, dissenting
DECISION OF THE WAGE APPEALS BOARD
These cases are before the Wage Appeals Board on the petitions
of Prometheus Development Company (hereinafter Prometheus) and
Prometheus Development Company and V.M.H. Construction Co.
(hereinafter Prometheus and V.M.H ) requesting review of the
decisions of the Wage and Hour Division with regard to petitioners'
involvement with the Department of Housing and Urban Development's
(hereinafter DHUD) project No. 127-35306, Cove I, Phase II in
King County, Washington. As soon as these petitions were filed
with the Board the Solicitor of Labor filed a motion that the two
appeals be consolidated pursuant to the Board's regulations for
practice before it, 29 CFR [sec] 7.13, since the appeals involved
the same persons and issues, and are closely related. Upon
consideration of this Motion the Board has ordered that the two
appeals be consolidated for all purposes. [1]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Chairman Alvin Bramow withdrew from consideration of this
appeal and did not participate in the decision. [1]
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[2] Prometheus, the owner-developer, and V.M.H., a rough
framing subcontractor, have appealed the Wage and Hour Division's
rulings as to the proper wage determination and wage rates for
carpenters which should apply to the project in question.
The factual history of the appeal is quite involved. In
1980 Prometheus undertook to build a 140-unit two-story apartment
building in King County, Washington. The project was insured with
a $4,661,000 mortgage administered by the Federal Housing
Administration pursuant to the National Housing Act. A portion of
the project was also subject to the U.S. Housing Act of 1337.
These acts require that laborers and mechanics working on the
project be paid in accordance with a Department of Labor
Davis-Bacon wage determination and the regulations applicable
thereto.
At a preconstruction conference the general contractor was
provided by DHUD with wage determination WA80-5125 which was
applicable to his project. Receipt of this wage determination
was acknowledged by a vice president of the general contractor
writing his initials on the back of the wage determination.
Initial endorsement of the application for mortgage insurance
and construction began on the project on the same day as the
preconstruction conference.
About 40 days thereafter, and in connection with another
project, the Department of Labor notified DHUD's Regional
Labor [2]
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Relations Officer that wage determination WA80-5125 had been
cancelled and that the appropriate wage determination for a
project in Snohomish County was WA78-5103.
The following day DHUD sent notices to all parties with
projects to which wage determination WA 80-5125 applied that the
wage determination was cancelled and that residential construction
was to continue under wage determination WA78-5103. Prometheus
received this notice and claims to have relied on it.
About a month later DHUD sent another letter to concerned
parties, including Prometheus, that the Department of Labor had
withdrawn wage determination WA80-5125 and instructed affected
parties to request a wage decision for each proposed project
prior to the start of construction. On January 12, 1981,
Prometheus requested a copy of all wage decisions and related
materials for the Cove I project.
On February 18, 1981, DHUD sent a letter advising petitioner
Prometheus that wage determination WA80-5125 was still the wage
determination applicable to the Cove I project. DHUD also
referred petitioner to the DHUD Handbook provisions on Labor
Standards at Section 1340.3A, paragraph 2.1k (entitled Changes in
Wage Decisions) which read as follows:
Wage decision changes (modifications and supersedeas
decisions) shall be effective unless, prior to their
issuance by the Secretary of Labor, construction
has been started on insured programs or contract
has been awarded on other HUD programs . . . . [3]
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[4] Furthermore, Prometheus was subsequently advised both by
telephone and a letter from the Department of Labor in March,
1981, that the applicable wage determination was WA80-5125.
Nevertheless, Prometheus determined to continue to pay the
wage rates contained in wage determination WA78-5103 pending
their decision to appeal the wage determination.
Specifically, with regard to the carpenter's wage rate,
wage determination WA80-5125 contained a rate of $14.93 plus
$1.74 in fringe benefits. A telefax of a proposed modification
containing a carpenter's wage rate of $10.72 with no fringe
benefits was sent from the Department of Labor to DHUD and this
rate was communicated by DHUD to Prometheus, but the proposed
modification was never issued in a bona fide modification published
in the Federal Register. A third wage rate for carpenters of
$12.27 was issued in wage determination WA78-5103. V.M.H. contends
that DHUD cited this latter rate as the one applicable before
V.M.H. began performance of its subcontract on the project.
The petitioners argue that all preparation for financing and
planning the Cove I project was undertaken on the basis of the wage
rates in wage determination WA78-5103, although it is not disputed
that wage determination WA80-5125 was presented to them at or near
the time of the preconstruction conference. Petitioners further
contend that when they subsequently received notice of the
cancellation of WA80-5125 from DHUD because the decision lacked
sufficient supportive data, they understood that they were to [4]
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[5] proceed with their project paying the wage rates upon which
they originally based their proposals. Petitioners' main premise
is that they were innocent parties following conflicting
instructions of the contracting agency and the Department of Labor
as these instructions were passed on to them. Petitioners' claim
to have relied fully on the letter from DHUD indicating that the
applicable wage determination with respect to the project was
WA78-5103 This reliance caused them, they claim, to pay wage
rates below those set forth in WA80-5125 and if they are required
to pay the higher wage rates it will materially increase both
the cost of the project and the mortgage requirements and the
amortization requirements with respect to the project as
originally conceived.
The Wage and Hour Division, on the other hand, contends
that the Department of Labor ruled correctly that wage decision
WA80-5125 which was in effect on the date the mortgage insurance
was init[i]ally endorsed and construction was begun was the only
wage determination which could apply to the project in accordance
with the Department of Labor's regulations and DHUD's regulations.
Wage and Hour relies on the statutory language of the National
Housing Act and the Department of Labor regulation at 29 CFR
[sec] 1.7(b)(1) which establishes that changes of wage
determinations will not be effective if made after initial
endorsement of the mortgage and after construction has started.
Wage and Hour also relies on two cases handed down by the Wage
Appeals Board /FN2/. [5]
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/FN2/ Southeastern Capital Corporation, WAB Case No. 78-12
(January 16, 1979) and Espana Gardens, WAB Case No. 76-15, (May 4,
1977). [5]
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[6] It is Wage and Hour's position that cancellation of wage
determination WA80-5125 had no effect on the Cove I project because
it occurred subsequent to the initial endorsement of the mortgage
and subsequent to the start of construction.
The result of this is that Wage and Hour affirms that the
carpenter's wage rate of $14.93 plus $1.74 in fringe benefits
applies to carpenters engaged on the project, including those
hired by V.M.H. since this was the wage rate contained in
WA80-5125.
Finally, Wage and Hour asserts that the doctrine of estoppel
of the government due to the conflicting instructions petitioners
received from the Department of Labor and DHUD is not applicable.
Wage and Hour argues that estoppel should not be invoked against
the government where it results in defeating the effec[ti]ve
operations of policies to protect the public. The Solicitor of
Labor cites the Binghampton case /FN3/ as support for the position
that the Davis-Bacon related acts were enacted not for the benefit
of contractors, but to protect their employees. Furthermore,
Wage and Hour claims that petitioners have not established any
detrimental reliance being demonstrated prior to the date when the
mortgage was initially endorsed and construction began. This is
the date, according to Wage and Hour, when the wage rates were
set, when the petitioners accepted them and after which they
cannot be varied. All of the reliance which petitioners claim [6]
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/FN3/ U.S. v. Binghampton Construction Co., 347 U.S. 171
(1954). [6]
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[7] influenced them was based on letters, telephone calls and
communications after this time.
The Wage Appeals Board considered these appeals on the basis
of the Petitions for Review filed by the petitioners and a
Statement for the Assistant Administrator and the record of the
appeal in the Wage and Hour Division filed by the Solicitor of
Labor. The Board is aware that these appeals have been pending
for an exceptionally long time and that this is due in part to
the fact that a Wage Appeals Board was not constituted when the
appeals were originally filed and for about one year thereafter.
However, subsequent to the appointment of new members to the
Board, petitioners have not been diligent in pursuing the appeals
and have repeatedly caused delays which have forestalled the
Board from hearing and deciding the appeals. Attempts by the
Board to schedule a hearing have not been successful and as a
result the Board notified petitioners that it would decide the
appeals and issue a decision on the basis of the record as it
now stands.
* * *
The law, and particularly the regulations which apply to
this case are long established, clear and not difficult to
understand. Although there is some evidence that the Department of
Labor's instructions regarding the wage rates applicable to the
area in question in the State of Washington were not clear or
well defined, it is hard for the Board to understand how the [7]
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[8] officials of DHUD could so completely misapply the wage
determinations which were provided to them by the Department of
Labor.
The Department of Labor Regulations 29 CFR 1.7(b)(1) /FN4/
which applies to these cases reads in part as follows:
. . . Similarly, in the case of contracts entered
into pursuant to the National Housing Act, [*] changes
or modifications in the original determinations
shall be effective if made prior to the beginning
of construction, but shall not apply after the
mortgage is initially endorsed by the Federal
agency [*] . . . [*](Emphasis added.)[*]
This regulation is also encompassed in DHUD's Handbook provisions
of Labor Standards which is quoted on page 3 of this decision.
This regulation requires that the wage determination cannot
be changed after start of construction and initial endorsement of
the mortgage, in this case, after September 30, 1980. This rule
would apply to modifications, supersedeas decisions or
cancellations. There is evidence in the record that the general
contractor received wage determination WA80-5125 at the
preconstruction conference. The subsequent letters and
instructions which petitioners received from DHUD were
unfortunately and carelessly worded because they could not apply to
the Cove I project.
Petitioners were told in writing on several occasions after
the controversy arose what the correct and applicable wage
determination and wage rates were by both a responsible DHUD
official and a Labor Department official. Petitioner chose to
proceed [8]
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/FN4/ References herein are to the regulations in effect at the
time the contract was performed. The regulations were
substantially revised on April 29, 1983. [8]
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[9] with the project using a decision that did not apply to them
and with a wage rate for carpenters that was about $2.00 per
hour lower than the correct rate. Petitioners paid the lower
rate despite the fact that they had been advised by the contracting
agency and the Department of Labor what the rate should have been
and the number of the wage determination which applied to their
project. It is difficult for the Board to see what more the
agencies could have done to correct their earlier errors.
Petitioners cannot now be allowed to escape their obligations to
their employees to pay them the applicable predetermined wage rate.
With reference to petitioners' estoppel arguments, the Board
has stated its position in a recent decision. In Warren Oliver
Company, WAB Case No. 84-08 (Nov. 20, 1984):
This Board has rejected estoppel argu[ment]s that
a petitioner's reliance upon the advice of the
contracting agency as to the appropriate wage
rate operates to relieve petitioner of its
responsibility to pay the proper wage rate to
laborers and mechanics employed on the project.
The Secretary of Labor was given the power to
regulate the interpretation and enforcement of
the Davis-Bacon Act and related acts by
Reorganization Plan No. 14 of 1950. This
authority has been reinforced by two opinions
of the Attorney General of the United States.
Sentinel Electric Company, WAB Case No. 82-09
(April 5, 1984). See also Jos. J. Brunetti
Construction Co. and Dorson Electric and Supply
Co., Inc., WAB Case No. 80-09 (Nov. 18, 1982),
Metropolitan Rehabilitation Corp., (WAB Case No.
78-25, (Aug. 2, 1979)) and Tollefson Plumbing and
Heating Co., WAB Case No. 78-17, (Sept. 24, 1979).
In view of these considerations the majority of the Wage [9]
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[10] Appeals Board affirms the decisions of the Wage and Hour
Division in relation to these cases and the petitions filed herein
are dismissed.
Stuart Rothman, Member, dissenting:
All that the National Housing Act, Section 212, and the
Davis-Bacon Act require is that laborers and mechanics employed
in the construction of a housing project insured under the
National Housing Act be paid not less than the wages prevailing
in the locality in which the work is performed as determined by
the Secretary of Labor. The correct prevailing wage rate for
carpenters was ultimately found by the Department oœ Labor to be
$12.27 (WA78-5103) The Department of Labor had originally
put out a determination for the project with a carpenter's
rate of $14.93 plus $1.74 in fringe benefits (WA80-5125), which
was wrong. The real prevailing wage rate was $12.27. There
was a lot of hemming and hawing by both DHUD and the Department
of Labor, but in the end it came up with $12.27 as the rate
being paid to a majority of employees in the locality. Presumably,
this is what carpenters working on this kind of project in this
locality get. This appears to have been the negotiated rate at the
time the FHA mortgage commitments were entered into and it was the
rate that should have been used. [10]
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[11] I do not see how it serves the purposes of the Davis-Bacon
Act that the Department of Labor must seek to defend its
regulations against its own error. Nor can I find justification in
requiring the developer to pay a carpenter's wage rate of $14.93
plus $1.74 in fringe benefits when the locally negotiated
collective bargaining rate for the carpenters doing this work
is only $12.27. It doesn't make sense to me to stick it to the
construction contractor for the government's mistake. Local
contractors would know what the local negotiated rate was and
they would not expect to pay more, and laborers and mechanics
would not expect to receive more. I would therefore hold the
petitioners to the payment of the $12.27 rate plus whatever
other fringes, if any, may be involved, and would accordingly
reverse the decision of the Administrator of the Wage and
Hour Division.
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board
