CCASE:
DELTA CONSTRUCTION
DDATE:
19830920
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
DELTA CONSTRUCTION CO., INC. WAB Case No. 81-15
Lapeer, Michigan Dated: September 20, 1983
BEFORE: Stuart Rothman, Member, Thomas X. Dunn, Member, Gresham
C. Smith, Alternate Member /FN1/
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
Delta Construction Company, Inc., a Michigan corporation, seeking
review of Wage and Hour's Deputy Administrator's decision dated
August 14, 1981, holding that Delta failed to pay the applicable
prevailing wage rate and fringe benefits to sixteen employees on
the Missaukee County Sewer and Water Treatment Complex in McBain,
Michigan.
Delta's construction contract, in the amount of $1,600,000,
was for the installation of a collection and interceptor sewer
system for the collection of waste in an area of McBain. Delta
also contracted to construct six inch lateral sewers from the sewer
mains, which were not covered by the Federal grant under the
Federal Water Pollution Control Act, 33 U.S.C. [sec] 1251 et seq.
The Federal portion of the project was subject to the labor
standards provisions of the Act. Wage determination No. MI 70-2125
was incorporated into the contract. [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] During a Department of Labor investigation of the project,
a review of the certified payrolls for a period in 1979 disclosed
that Delta had failed to segregate the hours worked on the
federally-assisted portion of the project from hours worked on the
nonfederally-assisted portions or from regular work on other
projects.
Furthermore, although Delta paid a basic hourly wage in excess
of the predetermined wage rate, it did not pay an amount sufficient
to cover the basic hourly wage plus the fringe benefits issued in
the wage determination. Since Delta paid no fringe benefits, it
was required to pay its employees the cash value of the
predetermined fringe benefits contained in the wage determination.
The amounts due the laborers and mechanics varied according to the
various classifications. As an example of the underpayments, the
Wage and Hour investigation indicated that the laborers employed on
the Federal portion of the project were entitled to an additional
$.74 per hour for each hour worked.
After the wages were recalculated, the Department of Labor
determined that $11,215.85 was due sixteen of Delta's employees.
In arriving at this figure the Wage and Hour Division subtracted
the hours from the total worked which, it was agreed between Wage
and Hour and the petitioner, represented the hours the employees
were engaged on noncovered work. This amounted to approximately
12% of the total hours worked.
Petitioner Delta did not agree with Wage and Hour's
recomputation [2]
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[3] of wages and on October 19, 1981 filed a Petition for Review
with the Wage Appeals Board.
It is petitioner's position that it paid the predetermined
basic hourly wage rate plus a sum which it calculated would
satisfy the cash value of the fringe benefits required by the
applicable wage determination. Delta claims that it should receive
not only credit for the amounts paid in excess of the predetermined
basic hourly rate but also credit for overtime payments made which
were greater than those required by the wage determination.
Furthermore, for the first time before this Board, petitioner has
raised some questions concerning Wage and Hour's classification of
some of Delta's employees and claims that the skills of some of its
employees were such as would not entitle them to the journeyman's
wage rate.
The Solicitor of Labor defends the Wage and Hour Division's
computations of the underpayments on the basis of the labor
standards provisions of the contract and the regulations, 29 CFR
[sec] 5.5(a)(1), which require a contractor to pay [] not less than
the aggregate of the basic hourly rate and any fringe benefits
contained in the wage determination. The Solicitor points out that
although the provisions require the payment of not less than the
prevailing rate, they do not preclude payment of higher hourly wage
rates, provided that sufficient fringe benefits (or cash
equivalents) are paid so that the aggregate at least equals the
total of the predetermined basic hourly rate and the required
fringe benefits. [3]
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[4] To counter petitioner's claim that it paid more in overtime
compensation than was required, the Solicitor cites the labor
standards provisions of the contract, the legislative history and
the regulations at 29 CFR [sec] 5.32(c)(2), which specifically
prohibits reducing cash wages when determining overtime wages. It
is the Solicitor's position that petitioner correctly paid overtime
on the hourly rate paid its employees and that the Department could
not properly allow any credit for the overtime payments against the
deficiency in fringe benefits. The Department has not alleged that
any overtime violations occurred.
The Wage Appeals Board considered this appeal on the basis of
the Petition for Review and two Reply briefs filed by petitioner,
the Statement for the Administrator, Wage and Hour Division, a
Response to petitioner's first Reply brief and the record of the
appeal before the Wage and Hour Division filed by the Solicitor of
Labor. No request for an oral argument was made.
* * *
The Wage Appeals Board has attempted to simplify the somewhat
complicated factual situation presented in this case. Using the
laborers classification as an example, the predetermined
Davis-Bacon wage rate for laborers was $5.75 per hour. The wage
rate the petitioner, Delta Construction Company, paid employees
working in the laborers classification was $6.50 per [4]
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[5] hour, or $.75 over the predetermined minimum. The company worked
overtime on the instant job. When it did, it paid laborers at the
rate of time and one/half times Delta's regular hourly rate of pay
for laborers.
The petitioner now says that when it established the $6.50
rate of pay it took all local conditions into account and,
according to its best calculations, the $.75 above the
predetermined minimum scale represented to it what was a fair
amount of pay to take care of fringes. Accordingly, Delta contends
now that if there is a fringe benefit deficiency here, it should be
adjusted by the enforcing agency by giving Delta credit for excess
overtime Delta actually paid on the $6.50 rate which will be the
difference between the overtime hours multiplied by the
predetermined rate for $5.75, and Delta's rate of $6.50. Delta
claims that this amount should be allowed as a credit to Delta
toward the cash equivalents for the fringes which were not paid.
Although Delta claims that $6.50 per hour ($.75 above the
predetermined minimum) represented its fair appraisal of the
minimum wage plus fringe benefits at the place of construction,
it is not the contractor's appraisal that is controlling. The
required amount is the predetermined wage and fringe benefit
schedule provided in the contract bidding documents. There can be
no contractor's alleged "fair appraisal" when the [5]
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[6] bidding documents provide, as in this case, the minimum wage
paid must be $5.75 per hour, health and welfare $.55, pensions
$.35, vacation pay $.55 and apprenticeship training $.04 for a
total of $7.24.
Delta's claim that $6.50 represented its appraisal of what
should fairly be paid to a laborer working in the area (for whom
the employer had no obligation to pay contractually imposed fringe
benefits) is simply nothing more at the enforcement stage than a
continued effort to circumvent the requirements of the Davis-Bacon
Act. Since 1964 the Act has required the payment of the prevailing
minimum wage plus fringe benefits or fringe benefit equivalents in
cash.
But this is not the real issue in this case. The issue is
whether in a case in which an employer elects to pay employees a
total wage rate above the prevailing minimum but no fringe
benefits, and calculated the employee's overtime under the Contract
Work Hours and Safety Standards Act (CWHSSA) 40 U.S.C. [sec] 327 et
seq., at time and one/half multiplied by the above minimum wage
rate without segregating, for overtime purposes, the Davis-Bacon
Act minimum wage and the amount allocated to fringe benefits, can
that employer later claim a credit because the time and one/half
overtime payments were based upon a wage rate higher than the
predetermined wage rate in the bidding documents?
The Board cannot agree with the contention of petitioner. [6]
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[7] It is not enough for the Board to say that the contractor
could have segregated the Davis-Bacon Act minimum wage rate from a
partial fringe benefit equivalent but it did not do so. It is
not the purpose of an enforcement proceeding to use a backpay
liability and its computation as a penalty for a violation of the
Act. There are other ways in which that can be handled in cases
where a penalty is indicated.
The problem here is something else. Petitioner, Delta,
contends that inasmuch as the enforcement agency is allowing the
difference between $5.75 and $6.50 in wages, $.75 as a credit
against the $1.49 fringe benefit package that the contractor should
have paid him in cash, the enforcement agency has in effect
required Delta to pay overtime on the $.75 the agency is willing to
allocate to the fringe benefit equivalent underpayment.
If there is an alternative to the formula applied by the
enforcing agency, it is that the contractor in this case paid no
fringe benefits at all, and the $.75 in wages that it had paid
above the predetermined Davis-Bacon schedule should only be used to
satisfy the contractor's compliance with the Davis-Bacon wage
requirements.
There is a great deal to be said in favor of such a position.
Under this position, it can be pointed out that [7]
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[8] the computation of overtime under CWHSSA is irrelevant to the
administration of the Davis-Bacon Act. The two acts are separate
and were enacted with different objectives in mind.
However, the applicable rules and regulations, 29 CFR [sec]
5.32(c)(2), have dealt in advance with the situation in which
petitioner finds itself. The Wage and Hour Administrator has
applied the $.75 wage payment above the scheduled minimum as an
offset against the underpayment (in this case non-payment
altogether) of the required fringe benefits equivalent. We find no
error in this. On the contrary it was a proper, pragmatic, and
fair thing to do in determining an appropriate remedy at the
enforcement stage of this kind of proceeding.
Accordingly, the Wage Appeals Board denies the petition of
Delta Construction Co., Inc., and affirms the decision of the Wage
and Hour Deputy Administrator as adjusted for two employees, Walsh
and Nowakowski, based on a revision of their classification from
Class I Operators to Class [II] Operators.
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board
