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BUILDERS, CONTRACTORS & EMP. RETIRE. TRUST
DDATE:
19861217
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~1
[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of
BUILDERS, CONTRACTORS AND WAB Case No. 85-06
EMPLOYEES RETIREMENT TRUST
AND PENSION PLAN Dated: December 17, 1986
APPEARANCES: Terry R. Yellig, Esquire, for the Building and
Construction Trades Department, AFL-CIO
James S. Ray, Esquire, and Don Elisburg, Esquire,
for the Laborers International Union of
North America, AFL-CIO
Karen Mehl, Esquire, for the Associated General
Contractors of America, Inc.
Richard G. Vernon, Esquire, for the National Western
Life Insurance Co.
Douglas Davidson, Esquire, for the Wage and Hour
Division, U.S. Department of Labor
BEFORE: Alvin Bramow, Chairman, Stuart Rothman, Member, and
Thomas X. Dunn, Member, dissenting
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the April 1,
1985 petition of the Building and Construction Trades Department,
AFL-CIO, (hereinafter BTD) seeking review of a January 30, 1985
ruling by the Administrator, Wage and Hour Division, that the [1]
~2
[2] Builders, Contractors and Employers Retirement Trust and
Pension Plan, (hereinafter Builders Plan) meets the requirements of
the Davis-Bacon Act and the Copeland Anti-Kickback Act and their
respective implementing regulations. It is the BTD's position
that the Builders Plan violates the Copeland Act and its
regulations and, for this reason, is not a bona fide plan under
the Davis-Bacon Act because the laborers and mechanics covered by
the Plan have not voluntarily consented in writing to the
employers' contributions made in their behalf, a requirement of 29
CFR [sec] 3.5(d).
On May 28, 1985 the Laborers' International Union of North
America, AFL-CIO, (hereinafter Laborers) also appealed the Wage
and Hour Administrator's ruling that the Builders Plan meets the
requirements of the "prevailing wage" provisions of the Davis-
Bacon Act. The Laborers claim that the plan does not meet the
requirements of the Davis-Bacon Act for three reasons. It is
asserted that the plan violates the fiduciary responsibility
provisions of the Employee Retirement Income Security Act of 1974
(ERISA), a claim which is currently being considered in a civil
suit pending in federal court. It is also claimed that the
participating employers divert a part of their employees'
prevailing wages into payments to the plan, thereby reducing the
employees' cash wage, and reducing various payroll taxes [2]
~3
[3] and social security payments, contrary to the purposes of the
Davis-Bacon Act. The Laborers also reiterate the BTD's argument
that the Plan violates the Copeland Act because the employers'
contributions to it divert large portions of their employees' wages
into pension contributions without the employees' written consent.
The Solicitor of Labor argued on behalf of the Administrator,
Wage and Hour Division, that the Copeland Anti-Kickback Act
regulation 3.5(d) applies to deductions for employee contributions
to fringe benefit plans, and not employer contributions. For this
reason the participating employers' deductions being paid to the
Builders Plan were not violations of this regulation.
Wage and Hour also relies on advice by the Department of
Labor's Office of Pension and Welfare Benefits Programs that the
Builders Plan did not violate ERISA and therefore the Plan
constitutes a bona fide pension plan.
National Western Life Insurance Company and the Associated
General Contractors of America, Inc., (AGC) filed briefs in support
of the position of the Administrator. The AGC also filed a
supplemental brief prior to the hearing. Subsequent to the
hearing Mr. Jacob J. Weiss, President of Benefits Incorporated,
submitted a brief for the Board's consideration.
The Wage Appeals Board considered this appeal on the basis of
the petitions for review filed by Petitioners BTD and Laborers, [3]
~4
[4] the statement on behalf of the Administrator and the record of
the appeal before the Wage and Hour Division filed by the Solicitor
of Labor, and briefs and a supplemental brief filed by National
Western Life Insurance Company and the AGC. On September 9, 1986
an oral hearing was held at the Department of Labor at which all
interested persons were present and participated.
The facts concerning this case are not in dispute. The
National Western Life Insurance Company has established a
retirement trust and pension plan, the Builders Plan herein, which
permits its participating employers to contribute amounts on
behalf of each employee who works on a construction project
covered by the Davis-Bacon Act or its related statutes, or a state
prevailing wage statute for each hour worked on the project. The
amount contributed varies depending on the wage rate determination
to which the project is subject and the amount the employer wishes
to contribute. /FN1/
A
The Wage Appeals Board's authority and responsibilities are
limited to matters delegated to it by Secretary of Labor's Order
24-70 (36 FR 306, October 7, 1970) and the Board's Regulation at 29
CFR 7.1(b). [4]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ The employers' contribution on behalf of an employee is
limited by a provision of the Internal Revenue Code, 26 U.S.C.
415(c) which requires that in order for a defined contribution plan
to be tax qualified, the amounts that can be allocated to an
individual participant's account are not to exceed 25% of the
participant's total compensation from the employer for the year.[4]
~5
[5] The Laborers contend that the Department of Labor erred in
determining that the Builders Plan is not in violation of ERISA
and hence is a bona fide plan for Davis-Bacon Act purposes. The
issue whether provisions of the Builders Plan violate ERISA is a
matter within the authority of the Administrator of the Office of
Pension and Welfare Benefits Programs, U.S. Department of Labor.
That office found no evidence of any violations of ERISA. Under
the authority and responsibilities given to the Board, it has no
jurisdiction to review determinations made by the Office of Pension
and Welfare Benefits Programs. It is not for the Board to say
whether the decision made by the Administrator of the Office of
Pension and Welfare Benefits Programs was made in accordance with
substantive law or procedural due process and the majority does not
pass on such determination in the context of these appeals from the
Wage and Hour decision.
B
The issue of whether the Builders Plan violates the principles
of the Davis-Bacon Act, and, therefore, is not a bona fide pension
plan for Davis-Bacon purposes also is not properly before this
Board in the context of the petitioners' review requests.
The allegations made by Petitioner Laborers and the examples
presented at the hearing as to who primarily benefits from the
Builders Plan must have been before the Administrator, Wage and [5]
~6
[6] Hour Division, before this Board will consider the matter on
appeal. The Administrator's final ruling of January 30, 1985 does
not cover this issue.
Under these circumstances the request made by petitioner at
the hearing to remand this matter to the Wage and Hour Division
and to order a further investigation as to whether the plan is
bona fide as far as the Davis-Bacon Act is concerned is not
appropriate. However, this does not preclude the petitioners from
requesting the Wage and Hour Administrator to investigate such
allegations.
While the Wage and Hour Administrator may conduct an
investigation and resolve this issue pursuant to the Wage and Hour
Division's techniques or in such a way as she may see fit, or not
at all, the majority of the Board would prefer that in cases of
first impression any further analysis presented by a petition for
review be upon a case-by-case basis whether a particular and
challenged pension plan is or is not bona fide for Davis-Bacon Act
purposes. Upon an actual case or case-by-case approach, the Wage
and Hour Administrator as well as the Board will be in a position
to take into account the reality of bidding, wage, and fringe
benefit practices. /FN2/ [6]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ Responses to questions propounded at the oral hearing showed
that the answers the contending parties were prepared to give were
less than the kind of in-depth analysis this Board and the Wage and
Hour Administrator should require to determine the question whether
a challenged pension plan meets the requirements of the combined
wage rate and fringe benefits package required by the Act, as
amended. The Board would not decide [6][FN2 CONTINUED ON PAGE 7]
~7
[7] this issue without a more complete and accurate briefing of
this particular point and more and complete answers to questions
propounded. The Wage and Hour Administrator can make such an
in-depth analysis in the event that her office goes back into the
issue of bona fides. The majority is not directing the
Administrator with respect to what she should do, if anything, but
holds only that the Board does not have a final meaningful decision
of the Wage and Hour Administrator that presents this question of
bona fides for a meaningful, accurate, and realistic review based
on the Wage and Hour Administrator's articulation of underlying
reasoning.
The majority does not hold that the Wage and Hour
Administrator is required to stay any action which the
Administrator believes has already been taken in this matter and it
does not hold that the Administrator is required to take any
further action. The majority does not hold that it will review an
opinion letter articulating reasons in support of a plan's bona
fides of the Wage and Hour Administrator dealing with an approval
of a particular pension plan that does not arise in connection with
a disputed contract award among competitive bidders or by an
aggrieved employee or his representatives on such project. [END
FN2][7]
C
The petitioners, principally the BTD, contend that the Wage
and Hour Administrator did not follow the Copeland Act and the
Department of Labor's long established implementing regulations
(29 CFR Part 3) in concluding that a Davis-Bacon Act employer does
not have to secure the individual written consent of each
construction site employee before such employer can establish the
kind of pension plan which is under present attack in this appeal.
The majority has carefully and fully considered this [7]
~8
[8] contention. Contrary to the petitioners' argument on this point,
the majority concludes that the Wage and Hour Administrator has followed
the Department of Labor regulation 29 CFR 3.5(d) on the matter and
applied it in accordance with its terms and its intent.
The Copeland Act, 18 U.S.C. [sec] 874, provides as follows:
Whoever, by force, intimidation, or threat of procuring
dismissal from employment, or by any other manner
whatsoever, induces any person employed in the
construction, prosecution, completion or repair of any
public building, public work, or building or work
financed in whole or in part by loans to give up any part
of the compensation to which he is entitled under his
contract of employment, shall be fined not more than
$5,000 or imprisoned not more than five years, or both.
Section 2 of the Copeland Act, 40 U.S.C. 276c, reads in
pertinent part:
The Secretary of Labor shall make reasonable regulations
for [*] contractors and subcontractors [*] engaged in the
construction, prosecution, completion or repair of public
buildings, public works or buildings and works financed
in whole or in part by loans or grants from the United
States, . . . [*(Emphasis added.)*]
The implementing regulations found at 29 CFR [sec] 3.5 were
promulgated pursuant to section 2 of the Copeland Act. It is
obvious that as far as Davis-Bacon purposes are concerned the
Copeland Act and regulations promulgated thereunder applies to
contractors and subcontractors. Thus, there is no way that the
Builders Plan must comply with the requirements of 29 CFR [sec]
3.5.
However, today the majority reaches the question of whether
employees covered by the Plan must voluntarily consent in writing [8]
~9
[9] to the employers' contributions made on their behalf as
provided by 29 CFR 3.5(d). The issue is a grave one.
The provision in controversy, 29 CFR 3.5(d) states:
(d) Any deduction constituting a contribution on behalf
of the person employed to funds established by the
employer or representatives of employees, or both, for
the purpose of providing either from principal, income,
or both, medical or hospital care, pensions or annuities
on retirement, death benefits, compensation for
injuries, illness, accidents, sickness, or disability, or
for insurance to provide any of the foregoing, or
unemployment benefits, vacation pay, savings accounts, or
similar payments for the benefit of employees, their
families and dependents: Provided, however, That the
following standards are met:
(1) The deduction is not otherwise prohibited by law;
(2) It is either: (i) Voluntarily consented to by the
employee in writing and in advance of the period in which
the work is to be done and such consent is not a
condition either for the obtaining of or for the
continuation of employment, or (ii) provided for in a
bona fide collective bargaining agreement between the
contractor or subcontractor and representatives of its
employees;
(3) No profit or other benefit is otherwise obtained,
directly or indirectly, by the contractor or
subcontractor or any affiliated person in the form of
commission, dividend, or otherwise; and
(4) The deductions shall serve the convenience and
interest of the employee.
The promulgation of this regulation was started at least two
years prior to the enactment of the fringe benefits provisions of
the Davis-Bacon Act. The proposed revision was published in the
Federal Register at 27 FR 10761, November 3, 1962, and finalized on
January 4, 1964, whereas, the fringe benefits [9]
~10
[10] provisions of the Davis-Bacon Act were not enacted until July 2,
1964. This chronology does not support petitioners' contention that
revision of the Copeland Act regulation was prompted by enactment of the
fringe benefits provisions of the Davis-Bacon Act.
Prior to the enactment of the fringe benefits provisions the
wage determinations contained only the basic hourly rates of pay,
i.e., cash wages. Therefore, all payroll deductions authorized
under the Copeland Act regulations were employee contributions.
Since the revision in 29 CFR 3.5(d) was considered and
promulgated in advance of the fringe benefits provisions, the
language "(a)ny deduction constituting a contribution on behalf of
the person employed to funds . . ." could only refer to employee
contributions as there were no allowable employer contributions at
that time. This reasonable interpretation is strengthened by the
explanation for the revision contained in the preamble of the
publication of the revisions in the Federal Register at 29 FR 97,
January 4, 1964. The preamble indicates that the revision was
designed:
To improve the so-called Copeland "anti-kickback"
regulations by eliminating the necessity of requests for
permission to make payroll deductions in those instances
where experience has shown that the policy and provisions
of the Copeland Act will not be impeded.
This revision did nothing more than add a number of employee
contributions to the list of types of deductions that could be
made without coming to the Secretary of Labor for permission. [10]
~11
[11] Furthermore, to interpret the language of section 3.5(d)
to include employer contributions would render unnecessary the
language of the amendment to the Davis-Bacon Act which specifically
permitted a contractor to satisfy its obligation under the Act by
the making of payments in cash, by the making of contributions (to
fringe benefit plans), or any combination thereof. But the
Congress considered it necessary and specifically changed the
original language to expressly authorize the combining of the cash
wage with the costs of providing fringe benefits to meet the
obligation of a contractor or subcontractor under the bill. See
H.R. Rep. No. 308, 88th Cong., 1st Sess. P. 4 (1963). Nothing was
mentioned to require the permission of the employee in order for a
contractor to make such contributions.
It is also significant that the Department of Labor
promulgated regulations 29 CFR Part 5, Subpart B - Interpretations
of the Fringe Benefits Provisions of the Davis-Bacon Act, 29 FR
13465 (Sept. 30, 1964). Section 5.20 states that "(t)his subpart
makes available in one place official interpretations of the fringe
benefits provisions of the Davis-Bacon Act." Then 29 CFR 5.31 of
this subpart explains the methods by which a contractor or
subcontractor may discharge its obligations under a Davis-Bacon
wage determination. [11]
~12
[12] The Congress went to the trouble to revise the original
bill to include methods by which a contractor and a subcontractor
may discharge their obligations. The Department of Labor
promulgated specific independent regulations interpreting and
implementing the fringe benefits provisions enacted by the
Congress. The Copeland regulations deal with something else and in
terms and intent do not apply to employers' fringe benefits
contributions. The majority does not conclude that the Congress or
the cited regulations intended that a segment of the industry (the
segment that does not have collectively bargained fringe benefit
programs) must always pay the combined hourly predetermined wage
and fringe benefit package in cash. The Copeland Act does not
prohibit the nonorganized segment of the construction industry from
having pension plans for construction site employees on a project
by project basis. Under petitioner's contention it would appear
that the Davis-Bacon Act employer who does not use a union hall
referral system with a pension plan established pursuant to a
collective bargaining agreement could have a pension plan only for
its permanent work force and would not be able to hire construction
workers on a project-by-project basis.
While a handle must be found in each case and all cases to see
that the Davis-Bacon Act is fairly administered to the fullest
extent that is possible to do so, the majority believes that it was
not the intention of the Act to protect any one segment or more
than one segment of the construction industry and the employers in
that segment from employers in any other segment or segments of [12]
~13
[13] of the industry.
In view of the above, the Board finds that the Administrator's
ruling that neither the Copeland Act nor the Department of Labor's
regulations 29 CFR 3.5(d) promulgated thereunder require that
employer contributions to fringe benefits plans be either
voluntarily consented to by the employee in writing or provided for
in a bona fide collective bargaining agreement is reasonable and
proper. The majority's determination however, should not be
construed as the approval of the bona fides of any particular plan
not properly before it.
For the foregoing reasons the Administrator's ruling is
affirmed solely on the Copeland Act question and the petitions are
dismissed.
* * *
Member Dunn, dissenting.
Petitioners made a number of arguments in support of their
contention that the Builders Plan is not "bona fide" for Davis-
Bacon purposes and therefore should not be recognized by the Wage
and Hour Division. I was impressed by the fact that the Builders
Plan expressly provides that the contributions can only be made by
the participating contractors on behalf of employees for their
hours of employment on construction projects covered [13]
~14
[14] by Davis-Bacon and related Acts. Representatives of the Builders
Plan, when asked by the Board to explain why employers were not
permitted to make contributions on behalf of their employees for all
hours worked, replied that the Internal Revenue Service would not permit
them. No documentary evidence was offered to support this
representation.
One of the exhibits admitted into the record is a brochure
issued by the insurance carrier to the contractors, hawking
economic advantages which the contractor will attain by adopting
the Plan. These advantages are gained by deducting an amount of
money from the employee's predetermined wages for some kind of
health and welfare employee benefits. Neither the amount of money
to be deducted, the kind of benefits that the Plan may return to
the employees or indeed, the Plan itself, is approved or consented
to by the employees. Moreover, if the applying worker does not
approve this Plan, as is, he does not get a job.
The above, coupled with other evidence submitted to the Board
which demonstrated that the Builders Plan was not created for the
benefit of the workers, but to give participating contractors an
advantage when competing for contracts covered by Davis-Bacon and
related Acts, leads me to conclude that the Builders Plan is not a
"bona fide fringe benefit plan" for Davis-Bacon purposes.
The Davis-Bacon Act was not enacted for the benefit of
contractors, but rather to protect their employees from substandard
earnings by fixing a floor under wages on Government projects. [14]
~15
[15] U.S. v. Binghampton Construction Co., 347 U.S. 171, 176-77
(1954). The Davis-Bacon Act was designed to provide equality of
opportunity for contractors, to protect prevailing living standards
of the building tradesmen, and to prevent the disturbance of the
local economy. H.R. Report No. 308, 88th Cong., 1st Sess. 2
(1964) [reprinted in] Legislative History of the Act Amending the
Prevailing Wage Section of the Davis-Bacon Act. 88th Cong., 2d
Sess.
In 1963, the General Subcommittee of Labor of the House
Education and Labor Committee held hearings to include fringe
benefits in prevailing wages. After these hearings, the General
Subcommittee reported H.R. 6041 to the full Committee, which in
turn, reported it favorably to the House. H.R. No. 308 at 3.
Fringe Benefit Amendment Legislative History at 6. H.R. 6041 was
passed by the House and sent to the Senate Committee of Labor and
Public Welfare. The Senate Committee examined in detail the
transcript of the House Subcommittee's hearings in 1962 and 1963.
Thereafter the Committee reported H.R. 6041 favorably and
recommended its approval by the Senate. S. Report No. 963, 88th
Cong. 2d Sess. 1-2 (1964).
The Senate Committee's report noted:
At the time of the enactment of the Davis-Bacon Act in
1931, cash wages constituted virtually the only type of
remuneration paid to employees. Fringe benefits such as
group life insurance, group hospitalization, disability
benefits, medical care, and pensions were not improtant
(sic) wage factors until World War II when it became [15]
~16
[16] a wide-spread practice to substitute them for
increases in cash wages. This was the only means of
providing compensation since increases in cash wages were
prohibited or restricted at the time under wage
regulations of the National War Labor Board.
Welfare and pension plans have experienced a phenomenal
growth. In a report of this committee issued in 1958 it
was then estimated that almost 85 million persons were
relying on benefits from such plans. According to recent
figures furnished the committee by the Department of
Labor, that number has now reached almost 110 million.
The Department of Labor also advises that the employer's
share of contributions to health and welfare benefit
plans has increased from 47 percent in 1954 to 71 percent
in 1961. Also, employers now finance 85 percent of the
cost of retirement plans and almost all multiemployer and
unfunded pension plans are financed entirely by employer
contributions. As stated in our 1958 report:
Regardless of the form they take, the
employer's share of the cost of these plans or
the benefits the employers provide are a form
of compensation.
* * *
There are may localities throughout the country in which
the great majority of contractors provide fringe benefits
in addition to the cash wages paid to their employees.
As we have indicated, these fringe benefits clearly
constitute a form of wages. Therefore, if they are not
included in the prevailing wage determinations, only a
part of the compensation for employment is reflected.
Under such circumstances, the minority of employers
operating in the locality who do not provide the
prevailing fringe benefits now enjoy an unfair advantage
in bidding on Federal and federally assisted construction
projects. By not providing for their employees the
benefits that prevail in the locality these employers are
now able to enter lower bids than the local employers who
maintain adequate wage standards. [16]
~17
[17] The legislative history of the 1964 amendment of the Davis-
Bacon Act clearly indicates that fringe benefits were included in
the statutory definition of "prevailing wages" in order to assure
competitive equality among contractors, many of whom provided such
benefits to their employees in lieu of higher cash wages. It is
equally clear that recognition of any fringe benefit plan the
purpose of which is primarily to give contractors competing for
contracts covered by the Davis-Bacon and related Acts a competitive
advantage is contrary to the principles underlying the Davis-Bacon
Act.
Consequently, I would reverse the Administrator's
determination that the Builders Plan is a "bona fide fringe benefit
plan" for Davis-Bacon purposes for these reasons alone. The
majority declines to address this argument because it supposedly
was not presented to the Administrator. A review of the record of
this case indicates, however, that complaints filed by the Building
and Construction Trades Department, AFL-CIO, on April 25, 1983, and
on behalf of the Laborers' International Union of North America
expressly alleged that the primary purpose of the Builders Plan is
to give participating contractors an unfair competitive advantage
when bidding for Davis-Bacon work.
The fact that the Administrator chose to disregard this issue
in his January 30, 1985 and February 28, 1985 decisions in response
to the respective complaints about the Builders Plan does not [17]
~18
[18] preclude this Board from addressing the issue. At the very
least, it would seem that we ought to remand this matter to the
Administrator for a ruling as originally requested by both
petitioners.
Turning to consideration of the bases for the Administrator's
decisions, while I agree that the contention of the Builders Plan
violates provisions of ERISA is not within the Board's
jurisdiction, I do not agree with the majority that compliance with
29 CFR [sec] 3.5(d) of the Secretary's Copeland "anti-kickback"
regulations is not properly before the Board. In effect the
majority concludes that this issue is not "ripe" for review because
participating contractors, not the Builders Plan, are responsible
for compliance with this regulation.
The majority concludes that this issue can only be addressed
in the context of a complaint by one or more laborers and mechanics
that contributions were made to the Builders Plan by their
employers without first obtaining written authorization, as
provided in 29 CFR [sec] 3.5(d).
In considering petitioners' challenge to the Builders Plan I
note that it is the standards which the Administrator applies in
reviewing the bona fides of all fringe benefit plans which is
questioned, not the Administrator's decision with regard to the
Builders Plan alone. The majority therefore misses the mark in
concluding that resolution of this case is premature solely because [18]
~19
[19] the Administrator has not denied an identifiable
worker[']s complaint against a contractor participating in the
Builders Plan without his written authorization. The
Administrator's position with regard to interpretation of 29 CFR
[sec] 3.5(d) is well established, formalized and represents the
final product of the Wage and Hour Division's deliberation.
Courts, when considering a "ripeness" question, are required
by Abbott Laboratories v. Gardner, 387 U.S. 1326 (1967) to examine
both the fitness of the issues for review and the hardship that
withholding consideration would cause the parties. Id. at [].
This inquiry is "very much a matter of practical common sense".
Continental Air Lines v. C.A.B., 522 F.2d 107, 124 (D.C. Cir.
1974)(en banc). The courts, in following the dictates of Abbott
Laboratories must inquire whether the "interests of the court and
the agency in postponing review until the question arises in some
more concrete and final form" are outweighed by the interest of
those who seek relief from the immediate and practical impact of
the challenged action upon them. Diamond Shamrock Corp. v. Castle,
580 F.2d 670, 672 (D.C. Cir. 1978); Continental Air Lines, 522 F.2d
at 125.
The two-pronged test is equally applicable to the Board's
review process. There would be a strong interest in postponing
review of this matter if the Administrator is likely to abandon or
modify her interpretation of 29 CFR [sec] 3.5(d). However, there
is little likelihood of this happening. [19]
~20
[20] The second prong of the ripeness inquiry is whether the
challenged action of the Administrator will cause a present
damaging [e]ffect on the interests that the petitioners seek to
protect. There is no question that the Administrator's
interpretation of 29 CFR [sec] 3.5(d) immediately affects building
tradesmen represented by petitioners. In short, this case is ripe
for review.
Turning to the merits of petitioners' claim regarding the
interpretation of 29 CFR [sec] 3.5(d), I do not agree with the
majority's contention that the Secretary promulgated this
regulation as a means of defining "bona fide fringe benefit plans"
for Davis-Bacon purposes. Nevertheless, I find that [*] all [*]
fringe benefit plans must comply with the requirements of 29 CFR
3.5(d), regardless of whether they are funded by employee or
employer contributions.
The requirement currently imposed by section 3.5(d) that a
deduction be either consented to in writing by an employee or be
authorized by collective bargaining agreement, was originally
imposed in 1945 on certain deductions for fringe benefits involving
the "payment of dues or premiums to unaffiliated insurance
companies or associations for medical or hospitalization insurance"
(29 CFR [sec] 3.5(e)) (10 F.R. 7393, 1945). This regulation, on
its face, made no distinction between deductions for employee and
employer contributions.
In November of 1962, proposed revisions of Parts 1, 3 and [20]
~21
[21] 5 of DOL regulations were published in the Federal Register
(27 F.R. 10761). The proposed revisions to Part 3 included adding
a number of fringe benefit contributions to the list of deductions
which require employee consent. This regulation was promulgated in
final form on January 4, 1964, with an effective date of February
3, 1964 (29 F.R. 13465).
Just as its predecessor, the revised regulation made no
distinction, on its face, between employer and employee
contributions for fringe benefits.
Nonetheless, the Administrator stated in the January 30, 1985,
decision letter that section 3.5(d) requires:
employees' written consent only for employee
contributions to fringe benefit plans. Moreover, the
text and legislative history of the Copeland Act and the
Davis-Bacon Act do not suggest that Congress intended to
require consent for employer contributions for fringe
benefit plans.
The Administrator's distinction between employer and employee
contributions lacks any basis in the Copeland "anti-kickback" Act,
its legislative history, or 29 CFR Part 3, First, the statute
itself prohibits "kickbacks" or "any part of the [*] compensation
[*] to which the [the employee] is entitled under his contract of
employment." [*EMPHASIS IN ORIGINAL*] 18 U.S.C. [sec] 874. There
is no distinction in the statutory language between employee and
employer contributions. The law simply refers to "compensation".
Second, the legislative history of the Copeland Act
[i]ndicates that Congress was concerned about the abuses disclosed
during [21]
~22
[22] the hearings on proposed amendments to the Davis- Bacon Act
conducted in 1932. These abuses included a variety of employment
agreements which resulted in the payment of wages below the prevailing
wage required by the Davis-Bacon Act. At that time, there was no
statutory penalty against an employer who paid fictional prevailing
rates by demanding a refund of part of the determined rates from
employees as a condition of employment.
The legislative history of the Copeland Act indicates that it
is intended to supplement and support employer compliance with the
prevailing wage requirement in the Davis-Bacon Act. It is not
surprising, therefore, that the 1964 regulations implementing the
Copeland Act share their genesis with the amendment of the Davis-
Bacon Act to include fringe benefits. In March, 1962, the Special
Committee on Labor of the House Committee on Education and Labor
conducted three days of hearings concerning a bill to amend the
Davis-Bacon Act to include fringe benefits, H.R. 9656, and a bill
to consolidate and raise a group of complicated and overlapping
statutes known as the 8-hour laws. H.R. 9657. /FN1/
During the course of the Subcommittee's hearings in March,
1962, some testimony was presented regarding the administration of
the Davis-Bacon Act and possible revisions to include judicial
review and changes in regulations relating to determinations made
[22]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Hearings Before the Special Subcommittee on Labor of the
Committee on Education and Labor, House of Representatives, A Bill
to Amend the Davis-Bacon Act to Include Fringe Benefits [FN1
CONTINUED ON PAGE 23] And a Bill to Establish Uniformity In
Existing 8-Hour Laws, 87th Cong., 2d Sess. (1962) (hereafter
referred to "House Fringe Benefit Hearings"). [END FN1]
~23
[23] by the Secretary of Labor thereunder, but which had no
relation to the bill to include fringe benefits in the Act.
Because of the concern expressed by members and witnesses
concerning these matters, Subcommittee Chairman James Roosevelt
agreed to hold further hearings on the Davis-Bacon Act and its
administration.
As a result, 21 days of hearings were held by the Subcommittee
beginning on June 6, 1962, and continuing through the months of
June, July, and August. /FN2/
Testimony given before the Subcommittee covered a wide range
of subjects; however, there were four areas that received most
attention:
1. How prevailing wages are determined.
2. Review of these determinations.
3. Administrative practices followed by the Department of
Labor in administering the Act.
4. Responsibilities of the contracting agencies, Comptroller
General and the Department of Labor. /FN3/
Labor Secretary Goldberg appeared before the Subcommittee [23]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ Hearings Before the Special Subcommittee on Labor of the
Committee on Education and Labor, House of Representatives, A
General Investigation of the Davis-Bacon Act and Its
Administration, 87th Cong., 2d Sess. (1962) (hereafter referred to
as "House Davis-Bacon Hearings").
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN3/ Administration of the Davis-Bacon Act, Report of the General
Subcommittee on Labor of the Committee on Education and Labor, 88th
Cong., 1st Sess. 1 (1963) (Comm. Print). [23]
~24
[24] once again, accompanied by Solicitor of Labor Donahue.
Subsequently, Mr. Donahue appeared before the Subcommittee four
more times to answer questions raised by other witnesses and to
report on the Department's efforts to remedy many of the problems
discussed during the hearings. Solicitor Donahue submitted to the
Subcommittee a set of proposed regulations amending 29 CFR Parts 1,
3, and 5. /FN4/
Included among these proposed regulatory changes was a
regulation to be codified in 29 CFR [sec] 3.5(d). Subsequently,
these regulations were published for commen[t] in the Federal
Register on November 3, 1962, and eventually became final rules on
February 3, 1964.
An analysis of this legislative process clearly reveals that
the Secretary recognized the need for substantial changes in the
[a]dministration of the Davis-Bacon Act and moved to [e]ffect those
changes in 1962 through a package of regulatory amendments to 29
CFR Parts 1, 3 and 5. Among those changes was the creation of this
Board in order to provide a formal procedure to review
determinations made under the Davis-Bacon and Related Acts and
decided questions of law and fact on behalf of the Secretary.
More relevant to this case, the Secretary moved to amend his
regulations in order to insure that federal labor standards [24]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN4/ House Davis-Bacon Hearings at 1061. [24]
~25
[25] laws adequately addressed the growth of fringe benefit plans
in the construction industry since the Davis-Bacon and Copeland
Anti-Kickback Acts were passed. Secretary Goldberg told the
Special Subcommittee on Labor that he had considered including
fringe benefits within the definition of "prevailing wages" in the
Department's regulations[] [under] the Davis-Bacon Act, without
legislative action by the Congress. /FN5/ He decided, however,
that such administrative action "would be stretching the law too
far. . . ." /FN6/
Nonetheless, the chronology of events strongly supports the
conclusion that the Secretary was keenly aware of the need to
update the administration of both the Davis-Bacon Act and the
Copeland Anti-Kickback Act to deal with the growth of fringe
benefit plans in the construction industry. While he concluded
that legislation was necessary to include fringe benefits within
the definition of "prevailing wages" in the Davis-Bacon Act, it
appears that he decided that he could extend application of the
Copeland Act to such plans through administrative changes. As a
result, he promulgated a new 29 CFR Part 3, including the current
version of Section 3.5(d).
Accordingly, there is no basis for the Administrator's
conclusion that 29 CFR [sec] 3.5(d) only applies to employee
deductions, and not to employer contributions to fringe benefit
plans. [25]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN5/ House Fringe Benefit Hearings at 8.
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN6/ Id. at 9. [25]
~26
[26] As a result, I strongly disagree with the majority's holding
that contractors participating in the Builders Plan, and any other
fringe benefit plan not provided for in a bona fide collective
bargaining agreement, need not obtain the voluntary consent of each
of its employees, in writing and in advance of the period in which
federally financed construction work is to be done, before
contributions can be made which satisfy their statutory obligations
to pay prevailing wages.
For this reason, as well as the others I have discussed, I
must respectfully dissent from the majority decision.
BY ORDER OF THE BOARD
Craig Bulger, Executive Secretary
Wage Appeals Board [26]
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