JORDAN & NOBLES CONSTRUCTION CO., WAB No. 81-18 (WAB Aug. 19, 1983)
CCASE:
JORDAN & NOBLES CONSTRUCTION
DDATE:
19830819
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
JORDAN & NOBLES CONSTRUCTION CO. WAB Case No. 81-18
&
W. R. PIERCE & ASSOCIATES
El Paso, Texas Dated: August 19, 1983
APPEARANCES: Jonathan D. Schwartz, Jr., Esquire for Jordan &
Nobles Construction Co. & W. R. Pierce & Associates
Douglas J. Davidson, Esquire for the Wage and Hour
Division, U.S, Department of Labor
BEFORE: Stuart Rothman, Acting Chairman, Gresham C. Smith,
Alternate Member /FN1/, Thomas X. Dunn, Member,
Concurring
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition
of Jordan & Nobles Construction Company, prime contractor, and
W. R. Pierce & Associates, subcontractor, which seeks review of
a decision of the Administrator, Wage and Hour Division, dated
October 6, 1981. This decision reversed a ruling by Administrative
Law Judge Robert L. Ramsey dated May 13, 1981, holding that [1]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Board Chairman Alvin Bramow withdrew from consideration
of the appeal prior to hearing because as an established
practice [] he does not sit in any case that the Division
of General Legal Services, Office of the Solicitor, handled
when he was a member of that Division. He also did not participate
in this decision. Chairman Bramow made an oral announcement of his
withdrawal at the hearing.
~2
[2] the wage determination issued by the Department of Labor and
contained in petitioner Jordan & Nobles contract with the City
of El Paso for construction of a municipal building was void
and unenforceable because it was not arrived at in conformity
with the procedures set forth in the Department of Labor's
regulations at 29 CFR [sec] 1.3. /FN2/
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ Section 1.3 of 29 CFR reads as follows:
Obtaining and compiling wage rate information.
For the purpose of making wage rate determinations,
the Administrator shall conduct a continuing program
for the obtaining and compiling of wage rate
information.
(a) The Administrator shall encourage the voluntary
submission of wage rate data to the appropriate Regional
Office as shown in Appendix B by contractors, contractors'
associations, labor organizations, public officials and
other interested parties, reflecting wage rates paid to
laborers and mechanics on various types of construction
in the area. Rates must be determined, among others,
for such varying types of projects as buildings, bridges,
dams, highways, tunnels, sewers, power lines, railways,
airports (building and runways), apartment houses, wharves,
levees, canals, dredging, land clearing, and excavating.
Accordingly, the information submitted should reflect
not only that the specified wage rate or rates are paid
to a particular craft in an area, but also the type or
types of construction on which said rate or rates are
paid.
(b) The following types of information will be considered
in making wage rate determinations:
(1) Statements showing wage rates paid on projects.
(Such statements should indicate the names and addresses
of contractors, including subcontractors, the locations,
approximate costs, dates of construction and types of
projects, the number of workers employed in each
classification on each project, and the respective
wage rates paid such workers.) [FN2 CONTINUED ON PAGE 3]
(2) Signed Collective bargaining agreements. (Administrator
may request the parties to an agreement to submit statements
certifying to its scope and application.)
(3) Wage rates determined for public construction by State
and local officials pursuant to prevailing wage legislation.
(4) Information furnished by Federal and State agencies.
See [sec] 1.5. (In making wage rate determinations pursuant
to Federal-Aid Highway Acts as codified in 23 U.S.C. 113,
the highway department of the State in which a project in the
Interstate System is to be performed shall be consulted.
Before making a determination of wage rates for such a
project the Administrator shall give due regard to the
information thus obtained.)
(5) Any other information pertinent to the determination
of prevailing wage rates.
(c) The Administrator shall supplement such information
obtained on a voluntary basis by such means, including the
holding of hearings, and from whatever sources he deems
necessary. [END FN2] [3]
~3
[3] The case arose in connection with the construction of the
Central Municipal Administrative Offices in El Paso, Texas,
starting in 1978. The City of El Paso awarded the contract to
Jordan & Nobles as the result of a grant from the Economic
Development Administration pursuant to the Local Public Works,
Capital Development and Investment Act of 1976 (42 U.S.C. 6701
et seq.) which requires the payment of prevailing wages as
determined by the Secretary of Labor during the construction
of the project. Therefore, both the bid solicitation and the
contract contained a Davis-Bacon Act wage determination and [3]
~4
[4] the Davis-Bacon labor standards provisions.
Jordan & Nobles subcontracted with W.R. Pierce & Associates
(hereinafter Pierce) to perform the plumbing work on the contract.
Pierce agreed to comply with the wage determination and the labor
standards provisions. During performance of the contract an
investigation by the Department of Labor disclosed violations
involving Pierce's classification and payment of employees as
laborers who were performing the work of plumbers. Back wage
computations amounted to approximately $47,000. Both Jordan &
Nobles and Pierce denied liability and refused to make restitution,
therefore this amount was withheld from Jordan & Nobles by the
contracting agency for the alleged violations.
On August 20, 1981 the Deputy Administrator directed the Office
of the Administrative Law Judges (hereinafter ALJ) to conduct a
hearing pursuant to 29 CFR [sec] 5.11(b) to determine whether the
alleged violations had occurred. Prior to the hearing, petitioners
submitted a motion to dismiss. The motion was granted by the ALJ.
He ruled that the Department of Labor did not consider or consult
all the sources of wage rate information listed in [sec] 1.3 of 29
CFR. The ALJ concluded that the Department was not in compliance
with this regulation. According to the ALJ it had relied solely on
wage rate information from collective bargaining agreements
applicable to the El Paso area. [4]
~5
[5] The Wage and Hour Division appealed Judge Ramsey's decision
to the Administrator. On October 6, 1981, the Administrator
overturned the ALJ's decision on the bases that the wage
determination could not be disputed after contract award. Further,
the ALJ had erred in concluding that 29 CFR [sec] 1.3 required the
Department of Labor to use all the sources of wage rate information
listed in that regulation in issuing each wage determination.
Petitioners have also filed an action in the U.S. District
Court of the Western District of Texas against the City of El Paso
and the Government seeking a $47,000 judgment for the amount
withheld under the contract here in question. The District Court
stayed its proceedings pending a final administrative ruling by
this Board.
The petitioners' position on the merits of this appeal is that
the process by which the Department of Labor issued its wage
determination and work classifications applicable to the contract
for the El Paso municipal building was defective. This in turn
rendered the wage determination and work classifications void and
unenforceable. They were not established in accordance with the
Department of Labor's statutory and regulatory requirements.
Since the wage determination is unenforceable, argue
petitioners, the Administrator's finding that petitioners are
endeavoring to change the wage rates applicable to the project [5]
~6
[6] after the contract has been awarded, has no significance.
Petitioners claim to be making a challenge to the process by
which the wage determination was made, and not a challenge to the
substantive correctness of the wage determination itself.
Petitioners charge that they have a constitutional right to have
the government follow its own rules.
It is Wage and Hour's position that Section 1.3 of 29 CFR
describes the kinds of information the Administrator is to
consider while conducting a continuing program for obtaining and
compiling wage rate information. The Department of Labor,
according to Wage and Hour, has never considered the regulation
a requirement that each and every wage information source
listed in the regulation must be considered each and every time
before any single wage determination can be issued. Wage and
Hour points out that with the Department issuing about 15,000
wage determinations per year, it would be administratively
impossible to conduct a complete wage rate survey prior to issuing
each wage determination.
Wage and Hour defends the issuance of wage rates obtained from
collective bargaining agreements applicable to the El Paso area on
the basis of an earlier survey made for similar building
construction prior to the wage determination in question. In this
earlier survey it was determined that the negotiated wage rates
prevailed in the locality. Wage and Hour had received no
information prior to the issuance of wage determination [6]
~7
[7] No. TX 77-4257, applicable to the Central Municipal Administrative
Offices, that indicated that the payment practices had changed in
the area. On this basis Wage and Hour justifies issuing the wage
rates that it did for the project.
Wage and Hour asserts that the wage determination was not void
or unenforceable and that petitioners are actually using this
argument as a means to justify payment of lower wage rates than
those they agreed to pay in their contracts with the City of El
Paso. Wage and Hour points out that an opportunity to challenge a
wage determination exists prior to contact award and that
petitioners made no effort at that time to submit wage rate
information to Wage and Hour which would tend to contradict the
rates issued. Wage and Hour cites three decisions of this Board
/FN3/ which have held that challenges to wage determinations must
be made prior to contract award in order to insure that no
contractor gains an unfair bidding advantage and to prevent
disruption of the contracting process.
* * *
The Board considered this appeal on the basis of the Petition
for Review, Reply to Statement of the Administrator and a Post
Hearing Brief filed by petitioners, a Statement on behalf of the
Administrator, a Supplemental Statement for the Administrator filed
after the hearing and a record of the appeal [7]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN3/ Fry Brothers Corp., WAB 76-06 (June 14, 1977), Holloway Sand
& Gravel Trucking, Inc., WAB 79-13 (January 16, 1980) and
Southeaster[n] Capital Corp., WAB 78-12 (January 16, 1979). [7]
~8
[8] before the Wage and Hour Division filed by the Solicitor of
Labor, and a Statement on behalf of the Building and Construction
Trades Department, AFL-CIO. A hearing was held before the Board on
May 24, 1983 at which all parties were present and participated.
Prior to the scheduling of a hearing on this appeal counsel for
petitioners filed a motion for disqualification of the judges
(members) of the Wage Appeals Board on the basis that each member
might not be impartial. Chairman Bramow withdrew from
participation in the appeal as mentioned in footnote 1, supra.
Chairman Bramow was replaced on the Board by Alternate Member
Gresham C. Smith and on May 29, 1983, Counsel for petitioners filed
a motion that Alternate Member Smith also withdraw from
participation in this appeal because of possible partiality.
* * *
At the scheduled hearing the Board considered petitioners'
motions that the entire Board declare itself disqualified from
considering this appeal because of the possibility that each member
might not be impartial.
Acting Chairman Rothman's impartiality was questioned by
petitioners because Member Rothman is a former Solicitor of Labor
and was member of the Board before which Member Dunn appeared in
the Fry Brothers Corp. case, supra. [8]
~9
[9] Petitioners also questioned the impartiality of Member Dunn
because he was a member of the firm of Sherman, Dunn, Cohen,
L[ei]fer & Counts which entered an appearance in this case in
support of the Administrator's decision.
Member Smith was objected to because he is on the staff of the
Solicitor of Labor and has been employed in that capacity since
1961.
Petitioners are concerned that these Board members have a
personal bias and predisposition in favor of the Department of
Labor with reference to the particular facts at issue in this
appeal which would prevent them from rendering a fair and impartial
decision.
Acting Chairman Rothman declined to withdraw from
participation in the appeal and provides the following statement in
support thereof:
The Wage Appeals Board has to take seriously any proposal
advanced by those who appear before it that Board members
should recuse themselves, whatever the reason. However,
the contention that all four members do so, each for
different reasons, suggests a tactical sententiousness
as a prelude to an attack upon the Board's decision on
the merits.
This Board was established in 1964. It has resolved
numerous disputes, large and small. In every case it
has given the parties the fullest opportunity to make
their positions known. Generally, review of administrative
decisions -- even decisions of Administrative Law Judges --
are not subject to oral argument. When such arguments
are granted, it is in the exceptional case, the Board
believes. This Board, however, has a practice that
parties desiring to present their position orally and to
confront the government enforcement agency before an
administrative board shall have the fullest opportunity
to do so. [9]
~10
[10] The petitioner in this case now challenges all four
members of the Wage Appeals Board (the three regular
sitting members and the one alternate) to hear such oral
argument. With respect to myself as designated Chairman
to hear this matter, the objection appeared to be that I
was at one time the Solicitor of Labor. It was pointed
out to petitioner that I was last the Solicitor in 1959,
24 years ago. Since that time I have been the general
counsel of the National Labor Relations Board and a public
member of the Construction Industry Stabilization Committee
in 1972-74. Since 1963 I have been actively engaged
in the practice of law and also for at least the last 18
years an arbitrator in labor management relations in the
private and public sector. I was also a member of the
original Wage Appeals Board from 1964 to 1976. There
was a hiatus until 1982 when I was reappointed to the
Board. I have accordingly held this appointment under
at least a half dozen Secretaries of Labor. I would
point out that Supreme Court Justices who served in
the Department of Justice hear matters presented by the
Department of Justice all the time. For these reasons
I advised petitioners that I do not doubt that I could
render a fair and impartial decision in connection with
this appeal and I will not recuse myself.
None of the Board members has the slightest idea who
Jordan & Nobles Construction Company or W.R. Pierce &
Associates in Texas are.
Member Dunn declined to withdraw and makes the following
statement in support thereof:
Petitioner has moved for my disqualification because I
was formerly a member of the law firm that is representing
the Building and Construction Trades Department, AFL-CIO,
in this case.
I was appointed to the Board on June 14, 1982 by the
Secretary of Labor and serve as his representative and
at his pleasure. Prior to my appointment, the Secretary
was made aware of my previous relationship with the
firm and my separation therefrom. Apparently, the
Secretary is satisfied that I can serve in an impartial
and unbiased manner. Petitioners allege, however, that
my impartiality 'might reasonably be questioned' as
set forth in Canon 3C of the Judicial Canon of Ethics. [10]
~11
[11] Canon 3C(1)(b) requires a judge to disqualify himself
in a proceeding in which he served as a lawyer in the
matter in controversy, or a lawyer with whom he previously
practiced law served during such association as a lawyer
concerning the matter. As I stated at the hearing, I
retired from the law firm of Sherman, Dunn, Cohen &
Leifer on January 1, 1980, and I no longer have any
connection with that law firm. Since the law firm of
Sherman, Dunn, Cohen & Counts /FN4/ was not involved
in the instant case during the time that I was connected
with the law firm, neither I nor my former law firm
is required, under the Canons of Ethics, to disqualify
ourselves from this proceeding[].
Petitioners also allege that members of the Board have
a personal bias and predisposition in favor of the
Department of Labor with reference to the facts at issue
in this case which would prevent them from rendering
a fair and impartial decision. Actually the Board has
followed long-standing precedential standards in this
case rendered by previous boards appointed by the
Secretary. Moreover, my decisional record does not
indicate bias or prejudice in favor of the Department
of Labor.
Petitioners' reliance on United Farm Workers of America,
AFL-CIO, v. Arizona Agricultural Employment Relations
Board, 696 F.2d 1216 (9th Cir. 1983), is also misplaced.
The Court, in Farm Workers, held that the composition of
the Arizona Agricultural Employment Relations Board
deprived the Farm Workers of due process. The Arizona
Agricultural Employment Relations Act provides that
the Governor shall appoint to the Board two representatives
of agricultural employers, two representatives of organized
agricultural labor and three additional members as
representatives of the general public. The basis for the
Court of Appeals' decision was the fact that members of the
Board were [*] designated [*] labor or employer
representatives appointed for the purpose of serving their
philosophical viewpoint. Because a representative is
appointed with a clear mandate to serve the interests of the
side he or she represents, the court concluded that the
representative could not reasonably be expected to ignore
that bias when faced with close questions of fact or law
in an adjudicatory context. [11]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN4/ By a[gr]eement, my name, as well as my former partner
Louis Sherman's, was retained in the firm's name after
my retirement. [11]
~12
[12] Members of the Wage Appeals Board, however, are not
chosen as representatives of employers or labor unions.
Pursuant to Section 3 of the Secretary of Labor's
Order No. 24-70:
The Board shall consist of three public
members, one of whom shall be designated
Chairman. The members of the Board shall
be appointed by the Secretary of Labor, and
shall be selected upon the basis of their
qualifications and competence in matters
within the authority of the Board.
2 CCH Wages-Hours Para. 26,926. Moreover, members of
the Wage Appeals Board serve as representatives of the
Secretary of Labor and not as representatives of employers
or labor unions. Id. at Section 2. Thus, any analogy
to the Farm Workers case is inappropriate. Unlike the
Farm Workers case, there is no 'built-in' bias for an
interest and thus, no reason for me to recuse myself
from this case. Laird v. Tatum, 409 U.S. 824 (1972).
Alternate Member Smith declined to withdraw and makes the
following statement in support thereof:
Petitioner moved that I disqualify myself on the basis
that there was an apparent conflict of interest because
of my employment in the Office of the Solicitor [of]
Labor. Although the petitioner did not explicitly so
state, the conflict, if any, would be the result of a
possible violation of the principle of separation of
prosecutorial and adjudicative functions as provided
by the Administrative Procedure Act (APA). Section
554(d) of the APA provides, inter alia, that "(a)n
employee engaged in the performance of investigative
or prosecuting functions for an agency in a case may
not, in that or a factually related case, participate
or advise in the decision, recommended decision, or
agency review pursuant to section 557 of this title,
except as witness or counsel in public proceedings."
This provision is designed to encourage agencies to
isolate agency personnel into separate investigatory,
prosecution and adjudicatory positions in any given
case. The concern is that when prosecution and
adjudicatory functions are commingled, there is a danger
that the judge who was also an advocate for one side will
not grant the degree of impartiality demanded by due
process. [12]
~13
[13] Although I have been employed in the Office of the
Solicitor for nearly 22 years, I am not now, nor have
I ever been, personally involved in the investigation
or the prosecution of any cases arising under the Davis-
Bacon Act or the related acts. Further, I have never
been employed in a Solicitor's Office Division where
such functions are performed. Additionally, since my
appointment as an alternate member of the Wage Appeals
Board, I have never engaged in ex parte discussions of
actual Davis-Bacon or related acts cases with the
Solicitor of Labor, other members of his staff or
attorneys in the Solicitor's office involved in the
prosecution or investigation of such cases.
Therefore, as I advised petitioners at the Board's hearing
on May 24, 1983, I am confident that I can render a fair
and impartial decision in this case. Accordingly, I will
not recuse myself.
* * *
This case concerns the question whether a government
contractor who is the successful bidder for a construction contract
that contains predetermined Davis-Bacon wage schedules can accept
the award over unsuccessful bidders, and when challenged
through enforcement proceedings by the government to see that
the employees are paid the contractually specified wages due,
claims that the contractually specified Davis-Bacon wage
predeterminations were not reached in accordance with the
Department of Labor's "own" regulations describing the procedures
and considerations to be taken into account in making wage
pr[e]determinations. The issue in this case is at what time or
times can a government contractor challenge the accuracy of a
Department of Labor Davis-Bacon wage determination? [13]
~14
[14] Following a review and investigation of the Davis-Bacon
operations between 1931 and 1933, a Special Committee of the Senate
Committee on Education and Labor recommended five specific changes
in the Act.
One of these, and probably the most important, was an
amendment requiring a predetermination of wages by the Secretary
of Labor. The Committee reported that the amendment was necessary
To carry out fully the obvious intent of Congress as
indicated by the forgoing laws and in justice to both
Government contractors and their employees, it is
recommended that legislation be enact[ed] which would
amend the Davis-Bacon Act: . . .
2. To provide for a pr[e]determination of the
prevailing wage on contracts so that the contractor
may know definitely in advance of submitting his bid
what his approximate labor costs will be.
The 1935 amendment to the Davis-Bacon Act indicated to the
government agencies, contractors, employees and unions alike that
once the bidding process was completed and the contract awarded,
the wage determination became a final cost item for the
construction project involved. Furthermore, the regulations
adopted thereafter gave easy access to government agencies,
contractors, employees and unions alike [14]
~15
[15] to question the wages as determined before the contract award.
The construction industry has accepted this finality of the bidding
process to this day. This Board has followed this rule and has
indicated to all interested parties that it will hold emergency
hearings when an agency has a deadline for opening bids so that the
Board will act before the contract is awarded.
This Board in its 18 year history has consistently held that
there is one time when a contractor in the industry, whether the
successful bidder or not, a sponsor or anyone else in the industry
can challenge the accuracy of a Davis-Bacon wage determination.
That time is prior to the award of bids. This principle is so well
understood in the construction industry that to raise such defense
anew borders on the ingenuous. It assumes a naivete on the part of
the Board, the industry and the courts.
We do not believe such an ingenuous contention will find a
foothold in an unsuspecting tribunal. That unfortunately may have
been the case before the ALJ although it may be that the counsel
for the Wage and Hour Division was himself unable to fully
enlighten the ALJ. The decision [15]
~16
[16] of the ALJ and the petitioners' contention would put 50
years of Davis-Bacon Act Administration down the drain. The
Act would become totally incapable of application. Government
construction and government financed construction would wind up
with the payment of wages below the minimum wage predeterminations
specified in the contract to be paid, [*] exactly what the Act
forbids [*]. [*Emphasis in original*]
The Board has addressed the question of parties challenging
in a timely manner the Department's wage determinations since the
first decision it issued in 1964. See Huntsville-Madison County
Airport, WAB Case No. 64-01 (August 31, 1964).
In Gananda Development Corp., WAB 73-13 [&] 74-01 (May 14,
1974) it was stated
To entertain this case on the contention that the
Department of Labor's survey was in error, after work
commenced and the contract firmly awarded would permit
a construction contractor, sponsoring agency and a
like-minded governmental regional underling, sua sponte,
inter sese, and pendente lite to take it upon themselves
to dismantle the administration of the Act whenever they
are unhappy with a Department of Labor wage predetermination
action.
Similarly, in Southeastern Capital Corp., supra, the Board
granted Wage and Hour's motion to dismiss stating:
If the Petitioner disagreed with Wage and Hour's
determination of the rate as provided to it by HUD,
Petitioner should have requested the wage and Hour
Division to resolve the matter. Further appeal could
have been made to the Wage Appeals Board at that time.
These channels of appeal are provided to eliminate
questions and disagreements arising during construction
of the project and would seem to the Board to be an
appropriate effort on the part of the contracting
agencies and the [16]
~17
[17] Department of Labor to assist
the parties interested in Federal or Federally assisted
construction. However, they can only be of assistance
to the parties if they avail themselves of them.
In Espana Gardens, WAB 76-15 (May 4, 1977) the Board ruled:
It is apparent here that the petitioner is still trying
to raise the question of what was the prevailing rate
for the craft in question before the project started.
Petitioner had at the time the question first arose in
1972 the options of appearing before the Wage Appeals
Board to protest the prevailing wage rates in contention
prior to the start of construction or initial endorsement
of the mortgage, as provided in Regulations, Part 1, Section
1.7(b) (29 CFR); or he could have chosen not to proceed with
the construction of the project until such time as the
question of the wages was finally settled. Following neither
of these options he chose to proceed with construction. He
cannot be allowed to question the wage rates in the
wage determination provided to him.
See also, Fry Bros. Corp., supra, Holloway Sand and Gravel
Trucking, Inc., supra.
This principle does not derive from some general
administrative preference in the air, but derives from the scheme
and substance of how the Congress that enacted the Davis-Bacon Act
and its amendments intended the Act to operate.
The Board has been required to say in a number of earlier
cases that the Davis-Bacon Act operates within the context of the
construction industry. To properly administer it, to properly
interpret the rules and regulations promulgated to carry it out, it
is necessary to have more than a [17]
~18
[18] passing acquaintance with the nature and structure of the
construction industry in the United States, the legislative
background of the Act, and a realistic understanding of the changes
that have taken place in the construction industry since the Act was
passed.
In referring to the background of the Act upon which the
decision in this case must be predicated, the Board has a
tremendous assist in the recent decision of the Circuit Court of
Appeals for the District of Columbia, Building and Construction
Trades Department v. Raymond J. Donovan, Secretary of Labor,
decided July 5, 1983. Judge McGowan, the Senior Circuit Judge
writing for the panel including Judge Edwards and Judge McKinnon,
goes into the historical predicates of the Act as follows:
As noted, the Davis-Bacon Act was enacted during the
Great Depression to ensure that workers on federal
construction projects would be paid the wages prevailing
in the area of construction. The evil sought to be
remedied was that, with the precise specifications
set out in federal contracts and the increasing
standardization of building material prices, the
low-bidding contractor on a federal job was generally
the one who paid the lowest wages. See generally S. Rep.
No. 332, 74th Cong., 1st Sess. pt. 2, at 4 (1935)
("variations between bids submitted by competing
contractors are due most frequently to different
estimates of labor costs"). The contractor would
accomplish this by taking advantage of widespread
unemployment in the construction industry and hiring
workers at substandard wages, often bringing a low-paid
crew in from distant area. Id. at 7-8. [18]
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[19] This practice was deemed to be a problem for two
reasons. First, and apparently most important,
it tended to undercut one of the purposes of the
massive federal building program of the times,
which was to distribute employment and federal
money equally throughout the country. S. Rep. No.
1445, 71st Cong., 3d Sess. 1-2 (1931). Local
contractors and workers, used to a certain wage
and living standard, could not compete with the
migratory labor of the winning bidder. Id. at
2, see also 74 Cong. Rec. 6510 (1931) (remarks
of Senator Bacon) ("I think it is a fair proposition
where the Government is building these post offices
and public buildings throughout the country that the
local contractor and local labor may have a 'fair
break' in getting the contract."); 10 Comp Gen.
294, 295 (1931) ("'The Government should be the last
employing agency to expect or countenance the
performance of its construction contracts at the
sacrifice of its citizens.'") (quoting letter from
Treasury Secretary proposing administrative predecessor
of Davis-Bacon Act).
Second, the lower wages led to labor strife and to
broken contracts by contractors who speculated on
the labor market unwisely, thus preventing the most
economical and orderly granting of Government
contracts. S. Rep. No. 332, supra, pt. 2, at 8,
see also 74 Cong. Rec. 6510 (1931) (remarks of
Rep. LaGuardia) ("the workmanship of the cheap
imported labor was of course very inferior").
Nevertheless, under a ruling by the Comptroller
General, federal contracting agencies could not
insist on contractors paying the prevailing wage
because of the statutory requirement that federal
contracts go to the lowest bidder. 10 Comp. Gen.
294, 301 (1931) (prevailing wage requirement would
"remove[] from competitive bidding on the project
an important element of cost and tend[] to defeat
the purpose of the [low-bid] statute"). Thus,
legislation was called for.
The original Davis-Bacon Act was enacted in 1931
and required that federal contractors on certain
projects pay the prevailing wage in the area, as
determined by the contractors. Any disputes over [19]
~20
[20] the contractors' determinations were to be referred to
the Secretary for conclusive determination. Davis-
Bacon Act, ch. 411, 41 Stat. 1494 (1931). Dissatisfaction
with this arrangement surfaced quickly, however,
as widespread violations and abuses were discovered.
An attempt to provide for predetermination of the
prevailing wage by the Secretary and penalties for
failure to pay that rate was vetoed by President
Hoover in 1932 as "obscure and complex and . . .
impracticable of administration," 75 Cong. Rec. 14,589
(1932) (veto message), see id. at 14,590 ("The whole
design of the new . . . proposal requires an expansion
of bureaucratic control over activities which now
function effectively with the minimum of interference
by the Gover[n]ment and that only when dispute arises.").
Congress had greater success in 1935. It passed wage
predetermination and enforcement provisions that have
remained essentially unchanged to this day. The Act
now provides that the advertised specifications for
every federal construction project in excess of
$2,000 that requires the employment of mechanics and/
or laborers
shall contain a provision stating the minimum
wages to be paid various classes of laborers
and mechanics which shall be based upon the
wages that will be determined by the Secretary
of Labor to be prevailing for the corresponding
classes of laborers and mechanics employed on
projects of a character similar to the contract
work in the city, town, village, or other civil
subdivision of the State, in which the work is
to be performed.
40 U.S.C. [sec] 276(a) (1976). The construction contract
must contain a stipulation requiring that the advertised
wages be paid, and the applicable wages must be pos[t]ed
at the site. Id. The contracting agency is empowered to
withhold payment to ensure compliance with the minimum wage
requirements. Id.
* * *
~21
This detailed recitation of the legislative history of the
Davis-Bacon Act illustrates the needs and abuses that the Act was
passed to alleviate. The Wage Appeals Board and the courts have
been sensitive to the requirement that the wage predetermination
not be challenged by any means after bids have been opened and the
contract awarded. The Board sees petitioners' strategy as merely
an attempt to challenge the wage rate determination itself. The
claim that they are not in fact challenging the wage rate is
transparently only a circumlocution to do that very thing.
Petitioners raise a question on which they could file suit in the
District Court. But the Supreme Court has ruled that prevailing
wage determinations under the Davis-Bacon Act and related acts are
simply not subject to judicial review by the federal courts.
United States v. Binghampton Construction Co., 347 U.S. 171 (1954),
Burnett Construction Co. v. United States, 413 F.2d 563 (1969),
Nello B. Teer Co. v. United States, 348 F.2d 533 (1965), cert.
denied 383 U.S. 934 (1966).
* * *
While the Board does not have to reach the question whether
the Labor Department abided by its own rules or not, the Board sees
clearly that the ALJ did not read Section 1.3 correctly. In his
recommended decision, the ALJ makes the following statement:
~22
Accordingly, I find that the Department did not comply
with its own regulations for obtaining and compiling
wage rate information prior to issuing the Wage
Determination which was incorporated into J&N's Contract.
In spite of its disregard of the regulations setting
forth the mechanics for making Wage Determinations,
the Department would have me apply and enforce this
Wage Determination.
The ALJ was egregiously in error on a fundamental Davis-
Bacon Act principle. /FN5/ The ALJ's observations do not reflect
almost 50 years of uniform Davis-Bacon Act administration, and the
enforcement of thousands upon thousands of construction contract
provisions. [22]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN5/ This was a normally awarded construction contract where all
bidders submitted bids on an equal footing. When a construction
contract is subject to the Davis-Bacon Act, there is no such thing
as a validly awarded contract with a void or voidable total set of
the Secretary of Labor's minimum wage determinations in it. It
should be noted that the petitioners in this case paid the
predetermined prevailing minimum wage for all classes of mechanics
and of laborers except that of plumbers. We do not understand the
petitioners' factual contention to be that the plumber's rate was
something different from the rate predetermined by the Secretary
of Labor. We understand the contention to be that because the
plumber's rate alone of all the rates was, according to the
petitioners, not determined pursuant to the Secretary's
regulations, there was no valid plumber's rate in the contract at
all. Therefore the petitioners could pay any rate that they
wished. In this case they paid the laborer's rate.
It looks to the Board like the petitioners have simply
entangled a straightforward Davis-Bacon problem in a long chain of
administrative law semantics. The petitioners' contention is
untenable. For one thing the ALJ was in error in that part of his
decision in which he concluded that there had not been compliance
with the applicable administrative regulation. [END FN 5] [22]
~23
[23] Section 1.3, (see footnote 2) must be read as a consistent
whole. Its object is to make provision for the [*] voluntary
submission of wage rate data [*] on a [*] comprehensive basis [*]
by those in the construction industry who have such locality
knowledge and who are willing to contribute to the establishment of
accurate prevailing rates. [*Emphases in original*]
Section 1.3(a) makes provision for such voluntary contribution
of information. This system has been in effect for many years.
Section 1.3(b) is for the instruction of those who voluntarily
contribute to let them know the type of information the
Administrator is seeking. If such information is submitted, it
will be considered by the Administrator in making wage rate
determinations. It gives to the contributor the opportunity to
influence and participate in the wage rate setting process.
[*] Section 1.3(c) provides that the Administrator shall
supplement such voluntary information by such means and from
whatever sources he deems necessary, including hearings. [*]
[*Emphasis in original*] Other sections of the regulations provide
for the making of surveys when there is reasonable cause to
believe that the voluntary system may not be yielding the correct
results. [23]
~24
[24] Section 1.3(b) is not a mandatory direction to the
Administrator as to what the Department of Labor must use to get
an accurate prevailing wage in every wage predetermination. If
those who voluntarily cooperate submit information under items 1
through 5, the Administrator will consider it.
All that the statute itself provides is that the wages will
be determined by the Secretary to be prevailing. As the United
States Circuit Court of Appeals for the District of Columbia
Circuit stated in Building and Construction Trades Department v.
Raymond J. Donovan, Secretary of Labor, supra, the statute
delegates to the Secretary in the broadest terms imaginable the
authority to determine which wages are prevailing.
If, on the basis of such voluntary showing within the
construction industry in the community, a change in the prevailing
rates or in the structure of the industry has or is taking place
which would bring about a change in prevailing rates since the last
wage predetermination, or if a prima facie case of wage change is
made out, the Administrator should go on through a survey or by
such means or from whatever sources he deems necessary to see that
the proper wage rate is determined. It is the Board's conclusion
that Section 1.3(b) was never intended to either require or
circumscribe any or all of the factors which the Administrator is
to take into account in establishing a true and [24]
~25
[25] accurate prevailing minimum wage. But if there has not been
such voluntary submission under items 1 through 5, it does not
necessarily follow that the Administrator has not followed Section
1.3 or that he has used an improper methodology in reaching the
prevailing wage predetermination.
So on the basic point on which the ALJ concluded that the
Administrator did not follow his own Department of Labor
regulations, the Board does not agree. The ALJ has simply misread
Section 1.3 considered in its entirety and as based on experience
in the industry.
All that it takes is a careful reading of the provisions of
the regulations and an understanding that when bidders submit their
bids on a job subject to the Act, any one or some of the bidders
cannot underbid the others by reducing their estimated labor costs
on the gamble that they may or may not through subsequent
litigation establish that the Secretary of Labor missed something
in a particular craft or classification. The importation of
technical and not well understood administrative law rules from
nonconstruction industry areas to be applied in a sterile way
will not result in a reasonable and pragmatic administration of
this statute. [25]
~26
[26] The successful bidder takes the job on the basis that he
will pay laborers and mechanics the wage rates the Secretary of
Labor has determined to be prevailing. This is not to say that
there are not many other questions that can be raised at the
enforcement stage, such as misclassification, coverage, etc., but
an attack on the specific wage rate itself is not one of them.
In view of these considerations, the Wage Appeals Board
affirms the decision of the Administrator and directs that the case
be remanded to the Administrative Law Judge for findings of fact
and conclusions of law regarding whether petitioners have complied
with the labor standards provisions of the contract and wage
determination number TX 77-4257.
Member Dunn, Concurring
It is well settled that a challenge to a wage determination
before this Board is timely only if made prior to contract award.
Southeastern Capital Corp., supra, Fry Brothers Corp., supra,
Holloway Sand and Gravel Trucking Inc., supra, Gananda Development
Corp., Broken Bow, WAB 73-11 (Feb. 20, 1974), and Huntsville-
Madison County Airport, 16 WH 648 (Aug. 31, 1964).
Petitioners attempt to distinguish this case by arguing that
they are not challenging the substantive correctness of [26]
~27
[27] wage determination TX 77-4257. Instead petitioners characterize
their challenge as limited to a claim of noncompliance by the
Wage and Hour Division with applicable regulations, that is
29 C.F.R. [sec] 1.3. The Board does not disagree with the
petitioner's contention that an administrative agency is bound by
its own regulations. U.S. ex. rel. Accardi v. Shaughnessy, 347
U.S. 260 (1954); Vetarelli v. Seaton, 359 U.S. 535. 539 (1959),
Service v. Dulles, 354 U.S. 363, 379 (1957). Nonetheless, this
case cannot be resolved simply by deciding whether the Wage and
Hour Division complied with the provisions of 29 C.F.R. [sec] 1.3
when it issued wage determination TX 77-4257.
It is true that if the Davis-Bacon Act or one of the related
statutes applies to a contract, the contractor must pay wages not
less than the minimum wages specified in the wage determination
furnished by the Department of Labor. U.S. v. Binghampton
Construction Co., 347 U.S. 171 (1954). But the converse is not
necessarily true. Nothing in the Davis-Bacon Act precludes the
parties from contracting with reference to it. Woodside Village v.
Secretary of Labor, 611 F.2d 312, 315 (9th Cir. 1980). In Woodside
Village, the court held that even though the Davis-Bacon Act had
been suspended by Executive Order at the time the contract was
executed, the contractor was still obligated to comply with the
prevailing wage determination incorporated in its contract. The
Ninth Circuit [27]
~28
[28] relied upon Binghampton Construction Co., supra, and Walsh v.
Schlecht, 429 U.S. 401 (1977), to reach this conclusion. /FN[6]/
Here, petitioners failed to challenge Wage Determination
TX 77-4257 when it was incorporated into the bid solicitation for
the El Paso Central Municipal Administrative Offices project.
Petitioners first questioned the legality of the wage determination
on the basis that it was derived solely from collective bargaining
agreements when the Wage and Hour Division commenced [28]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN[6]/ Administrative Law Judge Ramsey relied upon Way of Life
Television Network, Inc. v. F.C.C., 593 F.2d 1356, 1359 (D.C. Cir.
1979); United States v. Heffner, 420 F.2d 809, 811-812 (4th Cir.
1970); Peoples Bank v. Eccles, 171 F.2d 636, 644 (D.C. Cir.
1947), rev'd on other grounds, 333 U.S. 426 (1948); Boatland
Inc. v. Brunswick Corp., 558 F.2d 818, 823 (6th Cir. 1977),
and Northwest Airlines, Inc. v. Alaska Airlines, Inc., 351
F.2d 253 (9th Cir. 1965), in his decision below. Way of Life
Television Network and U.S. v. Heffner hold agencies are bound
to comply with their own regulations. As stated above, the Board
does not disagree with this proposition of law. Boatland, Inc. v.
Brunswick Corp, and Northwest Airlines, Inc. v. Alaska Airlines
simply state that contractual provis[i]ons are not enforceable
which require an unlawful act or which, given effect, would violate
the public interest. Again, the Board does not take issue with
this principle. Finally, Judge Ramsey relies on Peoples Bank v.
Eccles for the proposition that an administrative agency has no
authority to contract with a regulated corporation in a manner
contrary to the statute which is being administered, nor in a way
which does not give effect to the intent of Congress. Likewise, we
do not disagree.
Nonetheless, we do disagree with Judge Ramsey's conclusion
that enforcement of the prevailing wage determination incorporated
in petitioners' contracts, (even assuming that it was not
calculated in accordance with the procedures in 29 C.F.R. [sec]
1.3), is contrary to public policy. As stated infra, the
Davis-Bacon Act was not enacted to benefit contractors, but rather
to protect their employees from substandard earnings by fixing a
floor under wages on Government projects. U.S. v. Binghampton
Construction Co., supra. The public interest protected by the
Davis-Bacon Act is not threatened by enforcement of this wage
determination. [END FN6] [28]
~29
[29] enforcement proceedings concerning alleged wage violations.
In Fry Brothers Corp., supra, the Board dismissed such a post award
challenge stating that:
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 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. (pp. 16-17) [*(Emphasis added)*]
Both Jordan and Nobles and W.R. Pierce voluntarily and
knowingly agreed to the terms and conditions of the contract,
including the wage determination. Petitioners argue, however, that
they cannot be bound by contractu[]al provisions that violate
applicable regulations, citing Alyeska Pipeline Service Co. v.
United States, 624 F.2d 1005 (Ct. Cl. 1980). In that case, the
Secretary of Interior argued, inter alia, that regardless of
whether he had complied with certain statutes authorizing fee
assessments, the plaintiffs had bound themselves contractually to
pay the assessments, and that basic principles of contract law
precluded a refund. The Secretary relied upon United States v.
Edmondston, 181 U.S. 500 (1901), in which the plaintiff had paid
the Government $2.50 an acre for land with a statutory selling
price of $1.25 an acre, apparently on the mistaken assumption of
both parties that the higher price was correct. [29]
~30
[30] The Court of Claims awarded the purchaser the amount of
the overpayment, but the Supreme Court reversed, holding that
the plaintiff had not stated a claim within the Court of Claims
jurisdiction. The Supreme Court ruled that "the transaction
was purely voluntary on [the plaintiff's] part, and that while
there was a mistake it was mutual and one of law -- a mistake on
his part not induced by any attempt to deceive or misrepresenta-
tion by the government officials." Id. at 515.
Subsequently, however, the Court of Claims found the
Edmondston doctrine inapplicable in a line of cases originally
arising out of sales of surplus ships by the Government after World
War II. See, e.g., Finn v. United States, 192 Ct. Cl. 814, 428
F.2d 828 (1970). The line drawn by the Court of Claims was
explained in Alyeska Pipeline Service Co. as follows:
. . . a voluntary payment may be recovered if the statute
barring the payment was enacted for the benefit of the
persons seeking recovery but may not be recovered if
enacted for the benefit of another.
624 F.2d at 1017-18 citing Rough Diamond Co. v. United States, 173
Ct. Cl 15, 21-26, 351 F.2d 636, 639-42 (1965), cert. denied, 383
U.S. 957 (1966).
In Alyeska Pipeline Service Co., the court found that the
plaintiffs were intended beneficiaries under the Mineral Lands
Leasing Act and, therefore, ruled they were entitled to a refund of
fees assessed against them by the Government. Unlike the
plaintiffs in Alyeska Pipeline Service Co., petitioners in [30]
~31
[31] this case cannot rely on specific statutory or regulatory
provisions designed for their benefit. The Davis-Bacon Act "was
not enacted to benefit contractors, but rather to protect their
employees from substandard earnings by fixing a floor under
wages on Government projects." United States v. Binghampton
Construction Co., supra. "That objective is clearly not
'frustrated' when contractual arrangements between employers and
their employees result in higher compensation and benefits than the
floor established by the Act." Walsh v. Schlecht, supra.
Accordingly, petitioners must pay the wages prescribed by Wage
Determination TX 77-4257 because they are contractually bound to do
so and enforcement of that obligation is not inconsistent with the
purpose of the Davis-Bacon Act.
Thus, even under the holding in Alyeska Pipeline Service Co.,
and assuming, arguendo, that the wage determination was null and
unenforceable, petitioners cannot avoid their contractual
obligation to pay their employees in accordance with Wage
Determination TX 77-4257. Having failed to protest the validity of
the wage determination prior to accepting the contract, such
challenge during an enforcement proceeding is untimely.
Because I conclude that petitioners' claim is untimely, I
find it unnecessary to reach the merits of the claim that the [31]
~32
[32] Wage and Hour Division failed to comply with the requirements
of 29 CFR [sec] 1.3 when it issued Wage Determination No. TX
77-4257.
* * *
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board
