PHOENIX PAINT CO., WAB No. 87-08 (WAB May 5, 1989)
CCASE:
PHOENIX PAINT COMPANY
DDATE:
19890512
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of
PHOENIX PAINT COMPANY, Contractor WAB Case No. 87-08
& Lorene Truman Kuimelis, Owner Dated: May 5, 1989
APPEARANCES: Margaret A. Corrigan, Esquire, for Phoenix Paint
Company & Lorene Truman Kuimelis
Jonathan M. Kronheim, Esquire, for the
Administrator, Wage and Hour Division, U.S.
Department of Labor
BEFORE: Jackson M. Andrews, Chairman, Thomas X. Dunn,
Member, & Stuart Rothman, Member. Decision of
Members Dunn and Rothman.
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
the Administrator, Wage and Hour Division, seeking review of a
decision and order of the Administrative Law Judge (hereinafter
ALJ) in the above-captioned matter recommending that Phoenix Paint
Company and Lorene Truman Kuimelis, its owner, (hereinafter
respondent or Phoenix) be relieved from the sanction of debarment
where the record shows that respondent's employees were not paid
the required wage rates or fringe benefits and that certified
payrolls submitted to the contracting agency were knowingly
falsified to simulate compliance with the applicable regulations
and labor standards provisions of the contract. [1]
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[2] The case arose from the following factual situation. Phoenix
was awarded an Air Force contract to paint the interior of family
housing units at Travis Air Force Base in California. The wage
determination applicable to the project contained an hourly wage
rate for painters of $24.15.
A compliance investigation during the performance of the
contract revealed that Phoenix actually paid its painter employees
at a piece rate of $.04 per square foot instead of the
predetermined prevailing wage rate issued by the Department of
Labor. This resulted in lower wage rates being paid the painters
than the predetermined rate called for. It was determined that
underpayments totaling $32,961.90 were due to 14 painters. Phoenix
did not contest the Department of Labor's findings of back wages
and made restitution to 12 painters and deposited the remaining
sums with the Department of Labor for the other two painter
employees.
In addition, the employer admitted that she knowingly
submitted false certified payrolls to the Air Force, that she
filled out and signed the payrolls for all employees, including
those she called subcontractors. The certified payrolls showed that
the Davis-Bacon predetermined wage rates were paid to the 14
painters instead of the wages actually paid. Phoenix's other
business records differed from the certified payrolls and showed
the amounts actually paid.
At respondent's request an ALJ hearing was held on October 24,
1985. Mrs. Kuimelis was the sole witness. The [2]
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[3] ALJ determined in her decision and order dated January 23, 1987 that
respondent failed to pay painters the predetermined Davis-Bacon wage
rate and that respondent had submitted false certified payrolls to the
contracting agency. The ALJ also ruled that respondent had violated the
Davis-Bacon Act on an earlier contract which it performed. The ALJ
found that respondent made full restitution as noted above. The ALJ
found that respondent Kuimelis had explained in a letter to the
Assistant Administrator that conflicting advice and information had led
her to commit unintentional viola[]tions of the Davis-Bacon Act.
In addition, the ALJ found that the Assistant Administrator's
letter finding reasonable cause for debarment was sent to
respondent 15 months after a business reorganization and that the
Order of Reference of the hearing to the Office of the Chief
Admini[s]trative Law Judge was sent 16 months after respondent's
restitution and reorganization.
Finally, the ALJ found that respondent was "honestly confused
and mistaken as to the meaning of the Act's provisions and its
application". The ALJ also agreed with respondent's arguments that
respondent was understandably confused by conflicting advice, that
belated debarment would serve no worthwhile purpose and would
detrimentally impact on respondent's ability to conduct business
with the State and city governments as a recently certified
minority business enterprise. The ALJ declined to recommend
debarment. [3]
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[4] On April 2, 1987, the Administrator filed a Petition for
Review of the ALJ's decision and order with the Wage Appeals Board
on the basis that when respondent admits to filing false and
erroneous certified payrolls with the contracting agency to
simulate compliance with the Act, knowing that the reported rates
were not paid, such violations constitute a "disregard of
obligations to employees" within the meaning of sec. 3(a) of the
Davis-Bacon Act. It is argued, therefore, that it was legal error
for the ALJ to recommend against debarment.
The Board considered this appeal on the basis of the Petition
for Review, a Supplemental Statement on Behalf of the Administrator
and the record of the case before the Wage and Hour Division filed
by the Solicitor of Labor, the Response of Phoenix Paint Company &
Lorene Truman Kuimelis to the Petition, a Response to the
Administrator's Supplemental Statement filed by the respondent, and
an oral hearing held October 26, 1988 at which all parties were
present, or represented by counsel, and participated.
- - -
The Board majority Members Dunn and Rothman conclude that the
decision of the Administrative Law Judge showed little
comprehension of Davis-Bacon Act requirements in terms of
enforcement and less comprehension as to what the facts, although
accurately found, mean in terms of whether the [4]
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[5] petitioner had "disregarded its obligations to its employees".
Assuming all facts as found by the ALJ to be true, in fact the
petitioner has admitted to them all, there is an egregious
disregard of the Davis-Bacon employer's obligation to its employees
warranting, crying out for, the Davis-Bacon three year debarment
penalty. If this is not a case for debarment and such a view were
to spread to other ALJ debarment cases, employers who have
deliberately adopted a business plan to underpay their employees
may look upon Davis-Bacon enforcement in only two ways: (1) The
prospect of not being detected is good, and (2) if they are, all
they need do is confess the violation and using the Department of
Labor as their agent, make a back-pay restitution in the instances
in which violation has been detected and proved. The prospect of
the debarment penalty as a preventative, prophylactic tool for the
enforcement of the Act will be lost.
The standard for review in this kind of case is the same as
the standard for review of a question of law were the matter
pending in an appellate court. The question is whether an employer
has "disregarded its obligations to its employees". Although there
maybe factual issues also involved in that question, when it
reaches the Board the question whether the facts add up to a
disregard of the employer's obligations to its employees
predominates. [5]
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[6] The majority then, when considering an ALJ decision, looks at
the whole ball of wax to see whether the result recommended is in
consonance with a fair and reasonable administration of the Act and
that similarly situated persons will receive, and will know they
will receive, the same treatment.
Credibility as to which of two witnesses to believe has little
if anything to do with this case. The facts really were never in
dispute and were admitted to. The majority takes those facts,
examines them and determines whether they add up to the kind of
disregard of an employer's obligations to its employees as to
require the imposition of debarment penalty.
Looking at just two sets of facts in this case they alone are
enough to make the point why the majority concludes that if the
debarment sanction is not imposed, the enforcement of the
Davis-Bacon Act will, without justification, be materially
weakened.
This was a contract in the amount of approximately $133,000
for painting work at Travis Air Force Base. To perform the work the
employer used 14 subcontractors, each wielding his paint brush,
each paid subminimum Davis-Bacon wages, and each paid by the square
foot. Secondly, recognizing, by admission, that these paint brush
wielding, underpaid "subcontractors" were not subcontractors but
employees, the employer in effect kept separate sets of [6]
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[7] books. When the employer keeps one set of books based upon payment
on the basis of $.04 per square foot and then shows a pattern and
practice of certifying payrolls to the contracting agency that each
employee was paid $24.15 per hour as the Davis-Bacon schedule
required, this was not just a matter of converting cents per square
foot into dollars per hour but it was keeping a false set of books
because the certifications were false.
With these two factors alone, the Department of Labor proved
its case beyond further dispute. At the least, it had, before the
employer's defenses were introduced, established a very strong,
compelling prima facie case. The burden would shift to the employer
to come up with an explanation excusing its disregard of its
obligations to the employees. There may be such explanations, the
majority does not shut the door on the possibility that there may
be in some cases adaptations and explanations human ingenuity can
devise, but this is not one. The explanations that the employer had
done the same thing before and had not been investigated or that
others had done the same thing and had not been detected or that
this was the employer's first Davis-Bacon contract, or that the
employer with a substantial Davis-Bacon contract was deficient in
intelligence to understand Davis-Bacon Act requirements, have a
hollow ring and generally are not good excuses. There has to be a
presumption that the employer who has the savvy to understand [7]
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[8] government bid documents and to bid on a Davis-Bacon Act job
knows what wages the company is paying its employees and what the
company and its competitors must pay when it contracts with the
federal government on a Davis-Bacon Act job.
This is not this employer's first violation. The petition of
the Administrator to impose the three year debarment penalty and
not accept the recommendation of the ALJ is granted.
- - -
The opinion of Chairman Andrews will be issued separately.
BY ORDER OF THE BOARD
Thomas X. Dunn, Member
Wage Appeals Board [8]
