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CCASE:
MUSKOGEE SHOPPING MALL
DDATE:
19860121
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
MUSKOGEE SHOPPING MALL WAB Case No. 85-26
UDAG Proj. No. B-81-AB-40-0033 Dated: January 21, 1986
Muskogee, Oklahoma
APPEARANCES: Terry R. Yellig, Esquire, for Eastern Oklahoma
Building and Construction Trades Council, AFL-CIO,
and Building and Construction Trades Department,
AFL-CIO
Harold P. Coxson, Esquire, R. Forney Sandlin,
Esquire, for City of Muskogee
Christopher H. Hartenau, Esquire, for Department of
Housing and Urban Development
Gail V. Coleman, Esquire, Douglas Davidson, Esquire,
for Wage and Hour Division, U.S. Department of Labor
BEFORE: Alvin Bramow, Chairman, Thomas X. Dunn, Member, and
Stuart Rothman, Member, Concurring in part,
dissenting in part.
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition
of the Eastern Oklahoma Building and Construction Trades Council,
AFL-CIO, (hereinafter BTC) seeking review of the opinion of the
Deputy Administrator, Wage and Hour Division, dated October 11,
1985. This opinion held that the Davis-Bacon provisions of [1]
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[2] section 110 of the Housing and Community Development Act of 1974
are applicable to the construction of the Muskogee Shopping Mall
in Muskogee, Oklahoma. However, the Deputy Administrator also
ruled that the Department of Labor would not require the inclusion
of the Davis-Bacon requirements in the agreement for the mall
construction.
This appeal arises from the following factual situation. In
November, 1981, the City of Muskogee signed a grant agreement under
the Urban Development Action Grant program (UDAG) as provided for
in the Housing and Community Development Act of 1974. This program
is administered by the U.S. Department of Housing and Urban
Development (DHUD). The grant, in the amount of $11,750,000, was
to assist in the development of a shopping mall in Muskogee and the
UDAG funds were used for the purchase and clearing of the site for
the mall project. It was estimated that the total cost of the mall
would be approximately $57,036,000. The Davis-Bacon labor
standards provisions applied to the clearing of the mall
construction site. The opinion letter of the Deputy Administrator
indicated that the Davis-Bacon labor standards provisions also
should apply to the construction activities of the mall developer
even though the developer's activities were to be privately
financed.
The grant agreement also provides that the developer would
invest almost $42 million of private funds in order to construct,
maintain and operate the shopping mall, to buy the pad for the [2]
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[3] mall from the City and to lease the remaining portion of the
mall site from the City.
Advice given to the city officials by the DHUD project manager
in 1981 indicated that the developer's privately financed
construction would not be subject to the Davis-Bacon requirements.
In 1983, when the City contracted with the developer, the agreement
did not contain any reference to the Davis-Bacon requirements.
However, pursuant to advice from DHUD, Davis-Bacon prevailing wage
rates were included in the City's contract for demolition at the
mall site awarded in April, 1985, and in the City's contract for
construction work adjacent to the site, including street work and
water, sewer and storm sewer relocation and improvements. When the
Developer began backfilling for his construction work at the mall
site in July, 1985, the Davis-Bacon requirements were not applied
to his work. It was at this point that the BTC began questioning
the absence of the Davis-Bacon wages rates from the developer's
portion of the project.
On July 31, 1985, the Deputy Under Secretary replied to a
letter from the President of the Building and Construction Trades
Department inquiring if the Davis-Bacon provisions would apply to
construction on the project other than those directly financed by
UDAG funds. In her reply the Deputy Under Secretary stated that
the Davis-Bacon provisions apply not only when UDAG funds are used
directly to pay for activities thought of as construction, but
"also when those funds are used for other activities [3]
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[4] which are integrally and proximately related to that
construction".
City officials wrote to the Department of Labor in October,
1985, indicating that since 1980 the City had relied on DHUD's
interpretation that the developer's construction work would not
be subject to the Davis-Bacon Act. The City claimed that if
Davis-Bacon provisions were now applied to the developer's portion
of the project, the private development would not be feasible and
the project would default. The City, then, would be obligated to
repay the $10 million of UDAG funds already spent. The Deputy
Administrator's letter of October 11, 1985 stating that the
Department of Labor would not require the inclusion of the Davis-
Bacon provisions in the developer's contract was the result of
this situation. On November 4, 1985, the BTC appealed the Deputy
Administrator's ruling to the Wage Appeals Board.
The Board considered this appeal on the basis of the Petition
for Review and Reply Brief filed by the counsel for the BTC and the
Building and Construction Trades Department, the record of the case
before the Wage and Hour Division, the Statement and Reply Brief
for the Deputy Administrator filed by the Solicitor of Labor, the
Br[ie]f and Reply Brief for the City of Muskogee, a statement for the
United States Department of Housing and Urban Development, and the [4]
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[5] Associated General Contractor's Memorandum to the Board
in support of the City of Muskogee. On December 20, 1985, an oral
hearing was held at which all interested persons were present and
participated.
* * *
A
The Wage Appeals Board affirms the decision of the Wage and
Hour Deputy Administrator that the Department of Labor will not
require the inclusion of the Davis-Bacon Act provisions in this
developer's construction contracts. But the Board's reasoning is
different than the one upon which the Deputy Administrator focused
in his ruling of October 11, 1985.
This is the type of case which prompted the Department of
Labor to promulgate 29 CFR 1.6(f). That regulation reads in part
as follows:
The Administrator may issue a wage determination after
contract award or after the beginning of construction if
the agency has failed to incorporate a wage determination
in a contract required to contain prevailing wage rates
determined in accordance with the Davis-Bacon Act,....
Here, the City of Muskogee and the developer entered into an
agreement for the construction of the mall with private funds
without the inclusion of the Davis-Bacon requirements on the
advice of DHUD. The record indicates that the negotiations
with the developer were concluded on May 27, 1983 and the
construction by the developer began sometime in July, 1985. [5]
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[6] Prior to the promulgation of 29 CFR 1.6(f) it has been held
by the Board and the Courts that it is not proper to include
the Davis-Bacon requirements after contract award or beginning
of construction. /FN1/ However, the courts did recognize that if
the Department of Labor had regulations to provide for such
inclusion after contract award or beginning of construction, then
incorporation of wage determinations was permissible.
Therefore, since the construction has begun the only method
to include a wage determination would be under the provisions of
29 CFR 1.6(f). This regulation was promulgated effective only
with respect to contracts for which bids were solicited or
negotiations concluded on or after June 28, 1983. /FN2/ It is
clear to the Board that negotiations between the City and the
developer were concluded prior to the effective date of the
regulation.
In view of the above, the Board must conclude that the
Deputy Administrator's decision not to issue a wage determination
was proper. [6]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ See Installation of Conveyor System, Naval Supply Center,
WAB Case No. 78-24 (April 6, 1979); Universities Research Ass'n
v. Coutu 101 S. Ct. 1451, 1456 (1981); and United States ex rel.
Boatwright v. Beggs, 97 CCH Labor Cases at p. 45,451.
/FN2/ See the preamble to the regulation at 48 F.R. 19532 (April
29, 1983). [6]
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B
[7] Even though the Board does not have to reach the question
of whether the Davis-Bacon provisions of the Housing and Community
Development Act of 1974 are applicable to the construction
activities in question, the majority considers it imperative to do
so bec[au]se of the large number of "Urban Development Action
Grants" and "Community Development Block Grants". To allow this
issue to go unanswered would not be fair to the various segments
of the construction industry.
The record is clear that funds from the grant have been
used for activities which are integrally and proximately related
to the construction work of the mall. Such federal funds received
under the Act were used to finance acquisition and clearance
of the land upon which the mall project is to be situated,
without which the mall could not be built. Therefore, the
majority concludes that had Davis-Bacon provisions been properly
included in the developer's agreement, the construction of the
mall would be covered by the Davis-Bacon provisions of the Housing
and Community Development Act of 1974.
In view of the foregoing considerations the Petition for
Review is hereby dismissed. [7]
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[8] S. Rothman, Concurring with Part A and dissenting from Part B.
I join with my colleagues in Part A, but dissent as to Part B.
I am able to agree with Part A because it is decided on
grounds different from the reasoning of the Deputy Administrator,
Wage and Hour Division, excusing the shopping mall developer
from Davis-Bacon Act compliance. This part of the redevelopment
plan comes after the City, using Davis-Bacon Act funds, had
prepared a municipal redevelopment site for further private
development. The Deputy Administrator decided that the private
development which does not directly use federal grants or loans is
covered Davis-Bacon work. He excused the City of Muskogee and the
developer on an unfamiliar "hardship" principle. The Board in Part
A concludes for a different reason that Davis-Bacon should not be
included in that part of the plan that comes after the City of
Muskogee completed its work.
The way the Deputy Administrator decided this dispute there
would be one rule for Muskogee and another rule for other cities
with such projects either current or future. Fortunately, the
Board has identified another reason overlooked by the Wage and
Hour Division, why the Davis-Bacon Act is not applicable. The
object seems to be to let Muskogee off the hook, and that having
been determined, there is nothing else left to be decided in this
case. Having decided that the Davis-Bacon Act is not [8]
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[9] to be applied to that part of the redevelopment program at issue in
this case, namely, the part that comes after the City of Muskogee
completed its public development, Part B makes an excursion into areas
that do not have to be decided at this time.
I would not remand this case to the Wage and Hour
Administrator, as DHUD has requested, because there is nothing to
remand. The case has been decided under Part A. Nor would I
decide the question of coverage on the basis of the two letters
from officials of the Department of Labor, that is the July 31,
1985 and October 11, 1985 letters. Such an issue would in my view
require further briefing by Wage and Hour on its reasoning vs. the
reasoning of DHUD on legislative history. The reasoning used by
Wage and Hour, i.e., that the total project is integrally and
proximately related, is one that has arisen out of a different
context. This would be its first application in a case in which
the question turns on a matter of Congressional intent concerning
the relationship of private enterprise and local public works in a
local redevelopment program.
This Board since 1964 has always brought home to the federal
agencies the supremacy of the Department of Labor in Davis-Bacon
matters under Reorganization Plan No. 14 of 1950. However, I
believe that in the case of this Act, there is a need for further
consul[t]ations between DHUD and the Department of Labor over
Congressional intent. [9]
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[10] Because of the direct conflict between DHUD and the
Department of Labor in reading the legislative history of the Act,
I believe further consideration by both agencies and an exchange
between them is required before this Board should undertake to
decide which agency, DHUD or the Department of Labor, is right
about coverage.
Such an issue is something that could be brought back to this
Board if it becomes necessary to do so in a case in which it is the
issue that has to be decided. The integrally related rule, without
further analysis, cannot be used as a catch-all for any undertaking
the Deputy Administrator concludes should be covered. It is not
always a substitute for Congressional intent. If the Deputy
Administrator is correct, as he might well be, he will be able to
explain the rationale behind the application of the integrally
related rule in the appropriate case. We don't have to decide such
issue in this case, and so we shouldn't.
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board [10]
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