CCASE:
ONTARIO PIPELINE & FAMINGTON
DDATE:
19850128
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
ONTARIO PIPELINE, INC. WAB Cases Nos: 81-12 & 81-13
&
FARMINGTON CONCRETE
PRODUCTS, INC. Dated: January 28, 1985
BEFORE: Thomas X. Dunn, Member, Gresham C. Smith, Alternate
Member /FN1/ and Stuart Rothman, Member, dissenting
DECISION OF THE WAGE APPEALS BOARD
These appeals are before the Wage Appeals Board on the
petitions of Ontario Pipeline, Inc., (hereinafter Ontario) and
Farmington Concrete Products, Inc., (hereinafter Farmington)
seeking review of the decisions of the Assistant Administrator,
Wage and Hour Division, dated July 29, 1981. The cases were
consolidated upon the motion by the Counsel for the Assistant
Administrator pursuant to Regulations, 29 CFR [sec] 7.13 since the
Board found that the two cases appear to be the same or closely
related involving the same factual circumstances and similar
legal issues. The Assistant Administrator ruled that Farmington
was a subcontractor to Ontario and not a materialman. As a
result Farmington's employees at the fabrication facility
for manufacturing precast concrete manholes in Lewisburg, [1]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Chairman Alvin Bramow withdrew from consideration of
this appeal and did not participate in the decision of the
case. [1]
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[2] West Virginia, and the truck drivers hauling the manholes from
the site of manufacture to the project were entitled to the
prevailing wage rates determined by the Wage and Hour Division
to be paid to laborers and mechanics working on the site. The
Wage and Hour Division has determined that back wages and overtime
wages in the amount of $66,930.62 are due 11 employees of
Farmington. On December 30, 1980, the Department of Labor
requested the Environmental Protection Agency to withhold money
from payments due petitioners to cover these deficiencies. On
October 2, 1381, Ontario and Farmington filed petitions for
review of the Assistant Administrator's decision with the Wage
Appeals Board.
The factual background of this appeal is as follows.
In mid-September, 1979, Ontario became the prime contractor on
six EPA financed contracts which were awarded by the Greenbrier
County Public Service District No. 2 in Rainelle, West Virginia.
The prime contracts in the amount of $14, 436,065 were for the
construction of a sewage system. Ontario was required to furnish
all materials, supplies, tools, equipment and labor for the
completion of the project. Farmington entered into a contract
with Ontario to manufacture and deliver precast concrete manholes
for this project. As soon as Ontario started the project
Farmington leased a site for 2 years near limestone pits in
Lewisburg, West Virginia, and also within ten miles of the
sewage system project at which to fabricate the manholes. [2]
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[3] Farmington erected a mobile fabrication facility at this
location. Sales from this facility from August 30, 1979
through August 31, 1980 totalled $625,547, of which only
approximately $500 in sales was made to customers not
connected with the sewage system project in Greenbrier
County. Sales figures subsequent to August 31, 1980 through
February, 1981, when the Lewisburg facility was moved to
Parkersburg, West Virginia, indicated that $130,074.50 of
Farmington's Lewisburg sales for the period was to Ontario
and $16,625.12 of the sales was to other contractors, who may
or may not have been connected with the sewer system project.
The petitioners contend that Farmington's facility for
manufacturing manholes in Lewisburg was intended to be a permanent
factory in the area to serve a broad market. They further argue
that the factory was not on the actual site of the sewage
system project, and since Farmington's truck driver employees
merely delivered the manholes and did not install them in the
system, these employees were not working directly on the site
of the project. Finally, it is petitioners' position that the
facility was located in the area to decrease transportation
expenses and that the removal of the facility following the
completion of the sewage system project was due to lack of
business in the area, and not due to the fact that the sewage
system project was completed. They are asking the Board to
rule that since Farmington was a material supplier and not a [3]
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[4] subcontractor, the labor standards provisions do not apply to
either company and that the predetermined wage rates need not be
paid to the facility's employees or the truck drivers delivering
the manholes.
It is the position of the Wage and Hour Division that since
Farmington set up its plant in the vicinity of the construction
site and the limestone pit in order to make the precast manholes
for the federally financed sewage system project, that in effect
Farmington had taken over some of Ontario's obligations under the
contract and was acting as a subcontractor. Wage and Hour points
out that approximately 93% of Farmington's Lewisburg production was
sold to Ontario for use on the project and 6% was sold to another
contractor on the same project. Wage and Hour notes that the
mobile fabrication plant was moved from Lewisburg to Parkersburg as
soon as the orders for the manholes on the sewage system were
filled. Wage and Hour relies on a line of cases decided by this
Board which have established that when a fabrication plant, borrow
pit or similar facility is located at or near the site of a
federally financed construction site for the exclusive or nearly
exclusive purpose of fulfilling the contract's material
requirements, the operator of such a facility has in effect
undertaken the performance of a part of the contract and as a
result is a subcontractor working on the site for the purpose of
the prevailing wage requirements. See Ameron, Inc., WAB 73-07
(Sept. 14, 1973), T.L. James, WAB 69-02, (Aug. 13, 1969). Sweet
Home Stone. WAB 75-01 and 75-02 (Aug. 14, [4]
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[5] 1975), Big Six, WAB 75-03 (July 21, 1975 and a Comptroller
General's decision, Granite Construction Company, B-201 631 (July
17, 1981).
Wage and Hour recites the facts in the record showing
that petitioner Farmington leased the land for the fabrication
facility coincidentally with the time Ontario received the
contracts from the Greenbrier County Public Service District
No. 2, that Farmington removed the facility immediately upon
the completion of the requirements for the federally financed
project, and that Farmington's sales to contractors other than
those engaged on the sewage system project were minimal, to
require the conclusion that the facility was dedicated exclusively,
or nearly exclusively to the requirements of this federally
funded project. As such, Wage and Hour asserts that Farmington
was performing as a subcontractor to Ontario and that those of
its employees working at the manhole fabrication plant and the
truck drivers engaged in transporting the manholes to the various
locations where they were required at the sewage system project
were entitled to Davis-Bacon and Contract Work Hours and Safety
Standards Act labor standards protection.
* * *
The Wage Appeals Board considered this appeal on the basis
of the consolidated petitions for review of Ontario and Farmington,
and upon the record of the cases before the Wage and Hour
Division, and a statement on behalf of the Administrator, Wage [5]
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[6] and Hour Division, filed by the Solicitor of Labor. No request
for an oral hearing was received by the Board.
The majority of the Board agrees with the Wage Appeals
Board cases cited on behalf of the Administrator which have
held that a material supplier may be considered to be a
subcontractor if the output which he supplies to the contract is
devoted entirely or nearly exclusively to that contract to
the general exclusion of other contracts in the area. In
these situations the Board has ruled that the contractor has
taken over the performance of an identifiable portion of the
overall contract and as such, is performing as a subcontractor.
This theory has been variously applied to borrow pits, gravel
pits, concrete or asphalt batch plants and suppliers of all
sorts of construction requirements which the general contractor
chooses not to perform but must obtain in order to complete the
project.
In the usual instance, a bona fide material supplier will
provide the materials (whether they are pipe, asphalt, concrete
mix, gravel, or in this case, manholes) to several contractors
at the same time. If this is the supplier's method of operation,
he is not considered to be a subcontractor, and, if the contract
is federally financed or assisted and is thereby subject to
the Davis-Bacon Act labor standards provisions, the supplier's
employees are not subject to the prevailing wage rates contained in
the applicable wage determination. However, if the supplier does
not operate in this manner and it appears [6]
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[7] from the facts that he is devoting all of his supply to one pro-
ject, he runs the risk of being labelled a subcontractor, and as such,
his employees are provided the protection of the labor standards provisions
and must be paid the predetermined wages along with the employees of
all the other subcontractors and the general contractor on the
Federal project.
In these cases the Board must consider the facts which are
contained in the record in making its judgment whether the party
is a bona fide supplier of materials or a subcontractor.
It is at this point that the majority of the Board has
determined that Farmington was not a bona fide material supplier.
To begin with, the lease for the location of the site of the
fabrication facility at the limestone pits was signed within
days of the time that Ontario was awarded the contract for
the Greenbrier County sewage system. It is also significant that
the mobile fabrication plant was closed down and moved to
another site immediately upon the completion of Ontario's
requirements for the project. These facts do not support
petitioners' contention that Farmington viewed itself as a bona
fide supplier to the public of precast manholes. What it does
connote is that Farmington's output was devoted exclusively, or
nearly so, to Ontario's requirements. It has also been pointed
out to the Board that Ontario and Farmington are owned by one
holding company, CVAS, Inc., and both companies have at least
3 persons who are either officers or on the Board of the other [7]
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[8] company. Although these facts would not conclusively determine
that Farmington was not a bona fide material supplier, when
considered with the sales figures showing Farmington's sales
to Ontario and other subcontractors on the federal project, and
the sales to the public during this time and from this particular
site, it appears that Farmington took over this portion of
Ontario's obligation under the contract. It also appears that
the sales to the public, which, as far as can be determined
from the record, totalled about $500, would be de minimis, when
compared to Farmington's Lewisburg sales to Ontario and other
subcontractors on the Greenbrier County project.
Petitioners' argument that Farmington did not operate
actually on the site of the project has been answered in several
decisions of this Board. A county-wide sewage system project
will, by definition, cover a large territory. Location of a
fabrication facility at the limestone pits and within 10 miles
of parts of the project are not so removed from the site as to
require a conclusion that Farmington's employees are not located
at the site of the project.
This Board considered in United Construction Company, WAB
Case No. 82-10 (Jan. 14, 1983) whether employees of an asphalt
plant which provided asphalt for roads and parking areas near the
reservoir of the Harry S. Truman Dam in Missouri were subject to
the labor standards provisions of the Davis-Bacon Act. The plant
was variously located from 8 to 55 miles from the construction
sites. The Board held ". . . the various construction [8]
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[9] sites in this appeal constituted a single site of work for the
purposes of processing the asphalt and hauling from the batch
plant to the place where the asphalt would be spread. The truck
drivers delivering the asphalt to the various construction
sites were covered for the same considerations."
Also in their petitions Ontario and Farmington argue that
they placed the plant in Lewisburg because of the expectation
that there would be considerably more sewer work in the vicinity
which would create a demand for the precast manholes. However,
funds for these project were not forthcoming and the business
did not develop. In United there was also an issue that the
plant had been located where it was on the basis of future
business expectations which failed to materialize. The Board
rejected this argument in United and does so here.
It appears to the majority of the Board that the record
does not demonstrate that petitioner was a bona fide supplier
of materials in accordance with the well recognized tests
established under the Secretary's regulations, interpretative
materials and earlier decisions of this Board. Accordingly,
the decisions of the Assistant Administrator are affirmed and
the petitions filed herein are dismissed.
* * * [9]
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[10] Member Rothman, dissenting.
Farmington Concrete Products, Inc, and Ontario Pipelines,
Inc., are both wholly owned subsidiaries of CVAS, Inc. Farmington
represents that it has been in the business of manufacturing
manholes for many years. It has sold its manholes to a wide
range of customers in the construction business over a considerable
period of time, having sold its product to over 125 customers who
are generally contractors building sewer systems. In 1981
approximately 20% of Farmington's sales were to Ontario Pipelines,
but the remaining 80% (elsewhere in the country) was sold to
unrelated contractors. In 1980, 60% of Farmington's sales
(elsewhere in the country) went to unrelated contractors.
Farmington further represents, "manholes must be manufactured
in a plant set up for that purpose." [and] ". . . [D]ue to the
enormous size and weight of a completed manhole, manufacturers
can profitably supply them only to an area within several hours
driving distance."
Based on the foregoing claims, Farmington's basic contention
is that it was a materialman and not a subcontractor on the
construction of the Greenbrier sewage system project.
There has not been a sufficient factual presentation on the
record by the Wage and Hour Division or anyone else upon which [10]
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[11] a conclusion can be reached with reasonable assurance of its
correctness that the "manufacture of manholes of the kind in
dispute here is considered in the construction industry and in
this locality as work traditionally and customarily performed as
a part of the on-site construction of a sewage system. I would
remand the case to the Wage and Hour Administrator for a fuller
and more adequate determination of the facts, utilizing the
resources and investigatory procedures available to him.
The term used by the petitioner, namely, that these manholes
are "manufactured" and then supplied to sewer contractors, may
or may not be a misuse of terms. But without the Administrator
supplying more facts concerning the structure of the industry
with respect to supplying manholes for sewer construction of this
kind or without more factual material concerning accepted local
practice, I do not think a fair determination can be made
dispute in this case.
If it is concluded that construction contractors of sewage
projects of this kind purchase their manholes from materialmen,
I would conclude that it does not make any difference that such
a materialman sets up a manufacturing plant nearer to the project
site to achieve economy in production and delivery. The analogy
to borrow pits off a construction site is not apropos.
Additionally, upon remand the Administrator should consider
whether Farmington and Ontario so conducted their business dealings
with respect to this project that they should be [11]
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[12] considered to be a single construction employer who elected to
perform work off the site which is the normal on site work of
construction contractors.
In short, the Wage Appeals Board has not been told enough
about the production of manholes for sewage systems to decide
this case. To illustrate, should the local practice establish
that manholes are produced, whether by construction processes or
by manufacturing processes, as specialty work predominantly
performed by specialty construction contractors under established
wage rates which predominate for such work, I would conclude that
the Davis-Bacon Act does not require that such specialty work must
be performed under the general commercial, heavy or highway
schedules and not at the prevailing rates for such specialty work.
Thus, even if it were concluded that the work in question is
construction work and not a manufacturing process by a materialman,
the Wage and Hour Administrator, depending on the facts, may be
required to reach the conclusion that special classifications and
wage rates exist and predominate for the work in question. See the
Wage Appeals Board decision in Ameron, Inc., WAB 73-07, (September
14, 1973) and WAB 73-07A, (March 28, 1974).
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board
