MIREE CONSTRUCTION CORP., WAB Case No. 87-13 (WAB Feb. 17, 1989)
CCASE:
MIREE CONSTRUCTION CORP
DDATE:
19890217
TTEXT:
~1
[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of
MIREE CONSTRUCTION CORP. WAB Case No. 87-13
Birmingham, Alabama
Dated: February 17, 1989
APPEARANCES: Braxton Schell, Jr., Esquire, for Miree Construction
Corp.
Terry Yellig, Esquire, for the Building and
Construction Trades Dept., AFL-CIO
Carol Arnold, Esquire, and Doug Davidson, Esquire,
for the Administrator, Wage and Hour Division
U.S. Department of Labor
BEFORE: Jackson M. Andrews, Chairman, Thomas X. Dunn,
Member, and Stuart Rothman, Member
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
Miree Construction Corp. (hereinafter Miree or Petitioner) seeking
review of the decision of the Administrator, Wage and Hour
Division, denying Miree the right to claim a Davis-Bacon prevailing
wage fringe benefit credit for contributions made to an
apprenticeship training fund for bricklayers, carpenters and
laborers on five contracts which were subject to the labor
standards provisions of the Housing and Community Development Act
of 1974 and the Davis-Bacon Act, as amended. [1]
~2
[2] The facts in this case are not in dispute. Miree was the
prime contractor on five construction contracts at three locations
in Birmingham, Alabama. All of the contracts were subject to the
Department of Labor's labor standards provisions as stated above.
During Miree's performance of the projects in question, Miree
contributed $.25 per hour to the Apprenticeship Plan of the
Associated Builders and Contractors of Alabama, Inc. (hereinafter
the ABC plan) on behalf of each of its employees working on these
projects as bricklayers, carpenters and laborers. The ABC plan is
an approved and registered plan sanctioned by the Department of
Labor's Bureau of Apprenticeship and Training (hereinafter, BAT).
The ABC plan only requires the contractor to pay $500 for tuition
and books for each apprentice enrolled. The payment by Miree of the
$.25 per hour per employee working on the federal or federally
assisted projects was voluntary. Miree did not make any
contributions for its employees working on its private construction
projects.
Miree had only one employee, an apprentice carpenter,
registered in the ABC plan during the time of contract performance
and it paid the $500 required fee for this employee in addition to
the $.25 per hour contribution. [2]
~3
[3] Almost all of the $11,293.52 for which Miree seeks credit was
contributed to the ABC plan./FN1/ It also paid the plan the $500
tuition and books fee for the one apprentice enrolled therein. The
Wage and Hour Administrator allowed the Davis-Bacon fringe benefit
credit only for the $500 tuition payment for the employee enrolled
in the plan. In its appeal to the Wage Appeals Board Miree is
seeking to be permitted to claim credit for the full $11,293.52
voluntary contribution it made to the plan. On March 11, 1987,
Miree filed a petition for review with the Wage Appeals Board
seeking review of the Administrator's final decision.
The Board considered this appeal on the basis of the petition
for review and a response to the Administrator's statement filed by
counsel on behalf of Miree, the record of the case before the Wage
and Hour Division and the statement on behalf of the Administrator
filed by the Solicitor of Labor, a statement of the Building and
Construction Trades Department, AFL-CIO, as an interested party,
and a hearing by the Board held on September 2, 1988 at which all
parties were present or represented by counsel, and participated.
- - - [3]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ There was a "small" contribution to an apprenticeship
program sponsored by the Associated General Contractors,
also presumed to be BAT approved and registered. [3]
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[4] Decision of Member Dunn:
The Administrator held in her July 9, 1986, decision that only
the actual costs necessary to provide bona fide apprenticeship
training for apprentices registered in the ABC Apprenticeship Plan
and employed by Miree are creditable towards the company's Davis-
Bacon prevailing wage liabilities. Accordingly, the Administrator
concluded that "any alleged apprentice training contributions which
are in excess of the actual costs required to fund the [ABC]
apprenticeship program would not be creditable."
The Administrator further concluded that Miree should only
allow Davis-Bacon prevailing wage credit for contributions made by
Miree to the ABC Apprenticeship Plan to fund apprenticeship
training benefits for carpenters employed on the three covered
projects even though Miree also employed bricklayers and laborers
on these projects. [4]
~5
[5] The Administrator correctly concluded in her July 9, 1986,
decision that Miree's payment of $.25 on behalf of each of its
employees who worked on the three federal and federally-assisted
projects for every hour of employment to the ABC Apprenticeship
Plan was not a "contribution" within the meaning of Section
1(b)(2)(A) of the Davis-Bacon Act, as amended, 40 U.S.C. [sec]
276a(b)(2)(A). The only source of financial support expressly
provided for in the ABC Apprenticeship Plan is the payment of
annual tuition fees by participating contractors on behalf of
enrolled apprentices who they employ. Therefore, Miree's voluntary
contribution of $.25 per hour for each of its employees was not
made "pursuant" to the ABC Apprenticeship Plan, as required by
Section 1(b)(2)(A) of the Davis-Bacon Act. As such, the ABC
Apprenticeship Plan is not a "funded plan" within the meaning of
the Davis-Bacon Act.
A "funded plan" is defined in Section 1(b)(2)(A) of the
Davis-Bacon Act, as a fringe benefit plan that expressly provides
for its funding by contributions irrevocably made by contractors
and subcontractors to a trustee or to a third person. An "unfunded
plan", as defined in Section 1(b)(2)(B) of the Act, 40 U.S.C.
[sec] 276a(b)(2)(B), is a fringe benefit plan that does not provide
for contributions to a "trustee or third person pursuant to a fund,
plan, or program." Instead, an "unfunded plan" permits employers
to purchase fringe benefits for the laborers and mechanics they
employ and receive credit against their obligation to pay
prevailing [5]
~6
[6] wages and fringe benefits on the basis of their actual hourly "
rate of costs".
The language and legislative history of Section 1(b) of the
Davis-Bacon Act, as amended, 40 U.S.C. [sec] 276a(b), as well as
the Secretary of Labor's regulations interpreting the fringe
benefit provisions of the Act, 29 C.F.R. [sec] 5.28, make it clear
that an "unfunded plan" is one which does not provide that an
employer will put funds aside from which to pay for employee fringe
benefits, but rather that the employer will pay for such benefits
as the need arises from its operating funds. The legislative
history of Section 1(b) of the Davis-Bacon Act also clearly
indicates that Section 1(b)(2)(B) was added to enable contractors
who are not party to collective bargaining agreements which provide
for contributions to "funded plans," to receive credit toward their
obligation to pay prevailing wages and fringe benefits under
federally-funded construction contracts subject to such
requirements.
Similarly, there is no question that Section 1(b)(2)(A) of the
Davis-Bacon Act, as amended, was intended by Congress to enable
contractors bound by collective bargaining agreements to make
payments to employee fringe benefit plans administered by separate
trust funds pursuant to prescribed rates of contribution.
The report issued by the Senate Committee on Labor and Public
Welfare accompanying the Davis-Bacon fringe benefit bill to the
Senate floor explained Section 1(b)(2)(A) as follows:
Under the bill, these contributions must be irrevocable
and they must be made pursuant [6]
~7
[7] to a fund plan, or program. While it
was not the desire of the committee to impose
specific standards relating to the administration
of the plans it is expected that the majority of plans of
this nature will be those which are administered in
accordance with the requirements of section 302(c)(5) of
the National Labor Relations Act as amended. Among other
things, therefore, the contributions would have to be
placed with a trustee or third person who could not later
be required to return them to the contractor or
subcontractor making the contributions. This will help
insure the bona fides of the plan, fund, or program, and
protect and preserve the interest of the beneficiaries in
them. The phrase "plan, fund, or program" is merely
intended to recognize the various types of arrangements
commonly used to provide fringe benefits through employer
contributions. It is identical with language contained in
section 3(l) of the Welfare and Pension Plans Disclosure
Act and the experience of the Department of Labor under
that statute should be of assistance in applying the term
here.
S. Rep. No. 963, 88 Cong., 2d Sess. 5 (1964) (hereafter "S. Rep.
["]), reprinted in Legislative History of the act Amending The
Prevailing Wage Section of the Davis-Bacon Act, As Amended, 1964,
at 40 (Comm. Print 1964) ("Legislative History").
This legislative history leaves no doubt that Congress
believed there were already in place safeguards to insure that
fringe benefit plans described in Section 1(b)(2)(A) would be bona
fide and that the interest of the employees for whose benefit such
plans are created would be protected. On the other hand, Congress
was concerned that Section 1(b)(2)(B) provide protection against
the use of unfunded fringe benefit plans as a means of avoiding the
prevailing wage and fringe benefit requirements of the Act.
Accordingly, the Senate committee report explained as follows: [7]
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No type of fringe benefit would be eligible for
consideration as a so-called unfunded plan (sec.
1(b)(2)(B) of the bill) unless--
(a) It was a type that could be reasonably
anticipated to provide benefits similar to
those enumerated in the bill;
(b) It represented a commitment that could be
legally enforced;
(c) It could be carried out under a
financially responsible plan or program; and
(d) The plan or program providing the benefits
was communicated in writing to the laborers
and mechanics affected.
It is in this manner that the bill provides for the
consideration of unfunded plans or programs in finding
prevailing wages and in ascertaining compliance with the
act. At the same time, however, there is protection
against the use of this provision as a means of avoiding
the act's requirements. The words "reasonably
anticipated" are intended to require that any unfunded
plan or program be able to withstand a test which can
perhaps be best described as one of actuarial soundness.
Moreover, as in the case of other fringe benefits payable
under the act, an unfunded plan or program must be "bona
fide" and not a mere simulation or sham for avoiding
compliance with the act.
In order to insure against the possibility that this
provision might be used to avoid compliance with the act,
the committee contemplates that the Secretary of Labor in
carrying out his responsibilities under Reorganization
Plan No. 14 of 1950, as a minimum requirement, would
direct an employer to set aside in an account assets
which, under sound actuarial principles will be
sufficient to meet the future obligation of the employer
under the plan. The preservation of this account for the
purpose intended would, of course, also be essential. [8]
~9
S. Rep. at 6 (1963), reprinted in Legislative History at 41.
Thus, Miree's complaint that the Administrator subjected the
ABC Apprenticeship Plan to stricter scrutiny than she gives to
union-negotiated "Section 302(c) apprenticeship plans" is without
merit, assuming the former is an "unfunded plan" within the meaning
of Section 1(b)(2)(B) of the Davis-Bacon Act, rather than a "funded
plan" within the meaning of Section 1(b)(2)(A).
Miree asserts that "[t]here is no requirement in the Act or
the regulations that an apprenticeship plan specify a rate of
contribution, and there is no implication in the Act or regulations
that voluntary contributions are somehow suspect or due to be
disallowed." However, Section 1(b)(2)(A) of the Act clearly
provides that only irrevocable employer contributions made to a
trustee or third person to finance a bona fide employee fringe
benefit "pursuant to a fund, plan, or program" may be credited
against that employer's obligation to pay prevailing wage and
fringe benefits in accordance with the specifications of federally-
funded construction contracts and subcontracts.
The plain fact is that Miree's $.25 per hour payment to the
ABC Apprenticeship Plan was not made "pursuant" to that Plan, and
Miree's $500 tuition payment to the ABC Apprenticeship Plan on
behalf of its sole enrolled apprentice was not a "contribution"
within the meaning of Section 1(b)(2)(A) of the Davis-Bacon Act.[9]
~10
[10] If these payments do not qualify as "contributions under
Section 1(b)(2)(A)" creditable against Miree's obligation to pay
prevailing wages and fringe benefits under its five
federally-funded construction contracts, then they must be
scrutinized under the standards in Section 1(b)(2)(B) and the
Secretary of Labor's regulations applicable to "unfunded plans."
Section 1(b)(2)(B) of the Davis-Bacon Act provides that "the
rate of costs to the contractor or subcontractor which may be
reasonably anticipated in providing benefits to laborers and
mechanics" may be credited against any contractor or
subcontractor's obligation to pay prevailing wages and fringe
benefits. Thus, applying Section 1(b)(2)(B) standards to the
payments made by Miree to the ABC Apprenticeship Plan, it was
necessary to determine the "reasonably anticipated" "rate of costs"
to Miree of defraying [*] its [*] costs of apprenticeship under a
test of "actuarial soundness". [*Emphasis in original*]
The Administrator's July 9, 1986, determination addressed this
matter and correctly concluded that only actual training costs were
creditable for Davis-Bacon purposes. Accordingly the Administrator
ruled that Miree would be given Davis-Bacon credit based upon the
"effective annual rate of contribution, which is computed by
dividing the total contributions made in each classification [of
laborer or mechanic] for which apprentices were [10]
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[11] being trained during the year by the total number of hours worked
in the same classification on both government and non-government work.
This method of computing credit is based on the annualization
principle."
Miree challenges the Administrator's use of the "annualization
principle" to determine its "rate of costs" for defraying its cost
of providing apprenticeship training. Miree made payments to the
ABC Apprenticeship Plan only on behalf of its employees for hours
worked on projects covered by the Davis-Bacon and Related Acts, and
not for hours worked on privately-funded projects. The
Administrator ruled that Miree would be given credit toward its
Davis-Bacon prevailing wage obligations based on the effective
annual rate of contribution, which she computed by dividing the
total payments made in each classification of mechanics for which
apprentices were trained during the year by the total number of
hours worked by employees working in the same classification on
both federally-financed or assisted work and privately-financed
work.
Miree argues that the annualization principle should not
be applied to apprenticeship training plans because payments to
fund such programs "do not directly benefit the individual employee
in any tangible manner." However, apprenticeship and training
programs are expressly referred to in Section 1(b) of the Davis-
Bacon Act, as amended, as the kind of "benefits to laborers and
mechanics" the cost of which government contractors may receive
credit for against their obligation to pay prevailing wages and [11]
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[12] fringe benefits. See also, Sections 302(c)(5) and (6) of
the National Labor Relations Act, as amended, 29 U.S.C. [sec]
186(c)(5) and (6).
Accordingly, it is appropriate to apply the annualization
principle to contractor payments for apprenticeship training just
as it is to the computation of the "rate of cost" of any other bona
fide fringe benefit.
Similarly, Miree contends that the Administrator exceeded
her authority by regulating effectively its conduct on private jobs
as well as projects covered by the Davis-Bacon and Related Acts.
Miree claims that the annualization principle requires it to fund
the ABC Apprenticeship Plan at the same rate for private work as
it does for projects covered by the Davis-Bacon and Related Acts.
This argument is also without merit.
The annualization principle is simply a method of determining
the "rate of costs", within the meaning of Section 1(b)(2)(B) of
the Davis-Bacon Act, for which a contractor may receive credit
against its obligation to pay prevailing wages and fringe benefits
when there is inadequate evidence available to the Administrator
concerning the "rate of costs" of unfunded fringe benefits which
the contractor could have "reasonably anticipated."
That is, the annualization principle is not the only way that
a contractor's "rate of costs" can be determined. Section 5.28(c)
of the Secretary's regulations, 29 C.F.R. [sec] 5.28(c), states
that "[t]he words reasonably anticipated [in Section 1(b)(2)(B) of
the Act] are intended to require that any unfunded plan or [12]
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[13]program, be able to withstand a test which can perhaps be best
described as one of actuarial soundness."
In the absence of such evidence, application of the
annualization principle is a reasonable method of determining a
contractor's "rate of costs" to pay for "unfunded" fringe benefits
which ensures that amounts credited toward the contractor's
obligation to pay prevailing wages and fringe benefits are not
excessive or disproportionate thereby avoiding compliance with the
Davis-Bacon Act.
Pursuant to the annualization principle, the Administrator is
simply making a determination as to how much of the cost of a
fringe benefit is creditable for Davis-Bacon purposes. While the
ratio of hours worked by employees on projects covered by the
Davis-Bacon and Related Acts compared to their hours worked on
privately-financed projects will obviously affect the calculation
of the contractor's hourly "rate of costs", use of the
annualization principle does not "regulate" Miree's compensation
policies on non-federally funded or assisted projects.
The Administrator's July 9, 1986, determination also refused
to allow Miree credit for its "rate of costs" of defraying its
costs of providing apprenticeship training against its obligation
to pay prevailing wages and fringe benefits to classes of laborers
and mechanics that it employed, other than those classified as
carpenters. Miree contends that it should be allowed credit for its
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[14] "rate of costs" of providing apprenticeship training [13]
against its obligation to pay prevailing wages and fringe benefits
to all of its laborers and mechanics.
The Administrator explained that her longstanding position is
that "training costs incurred for one classification of employees
may not be used as credit toward the prevailing wages required to
be paid another classification of worker." Thus, the Administrator
concluded that, because Miree only paid to train one apprentice
carpenter, the rate of costs of apprenticeship training should only
be credited against Miree's obligation to pay prevailing wages and
fringe benefits to its employees classified as carpenters, even
though it also employed workers classified as laborers and
bricklayers.
This is a close question. The Administrator is properly
concerned that Miree not use a payment on behalf of workers in one
classification to offset its obligation to workers in other
classifications. Miree counters by arguing that its employees may
move from one job classification to another in the course of their
employment and, therefore, apprenticeship contributions do not
cease to benefit employees classified as carpenters when they
assume the duties of another classification.
Miree's argument would be more persuasive if the ABC
Apprenticeship Plan in which it participated was designed to train
cross-craft workers. A review of the ABC Apprenticeship Plan
indicates that apprenticeship candidates are screened and selected
for specific craft training. Both the classroom and on-the-job
training are provided on a craft basis. In order to advance, an [14]
~15
[15] apprentice must complete designated craft-oriented duties.
Consequently, Miree's alleged employment practice seems
inconsistent with the craft-oriented structure of the ABC
Apprenticeship Plan.
Accordingly, I agree with the Administrator's finding that
Miree's rate of costs of apprentic[e]ship training is creditable
only against its obligation to pay prevailing wages and fringe
benefits to its employees classified as carpenters.
Therefore, I affirm the Administrator's July 9, 1986,
determination that Miree is entitled to credit its rate of costs of
apprenticeship training against its obligation to pay prevailing
wages and fringe benefits to its employees classified as
carpenters. Miree is not, however, entitled to credit for its
voluntary contributions to the ABC Apprenticeship Plan.
- - -
Member Rothman concurring as to result, expressing separate
views as to future cases:
The Board members take three different analytical approaches
to this case. Unlike arrows unleashed from different vantage points
which converge to reach the same mark, these independent views do
not. However, because I believe the Board should achieve a
plurality and because my view of the historical and legislative
premises of the Davis-[15]
~16
[16] Bacon Act and of apprenticeship
training programs converge more closely with those of Member Dunn,
I reluctantly concur to form the required majority. If I did not,
the result would be the same. The decision of the Administrator
would stand.
I also concur in the result reached by Member Dunn as to
this and other cases of like nature pending at the enforcement
stage to avoid a retroactive shift in policy. I go on, however, to
recommend for the consideration of the Administrator ten essential
points to be taken into account in the disposition of future cases
based on the same factual model as this case; the Davis-Bacon wage
and fringe benefits schedule reflects the negotiated wage structure
and benefits in the locality including apprenticeship training. The
petitioner stated that a purpose of the appeal, if not the primary
purpose, was to seek guidance for the future in such cases. Though
my additional views thus have no retroactive effect, and being
without the consensus of my colleagues remain a minority view, I
state them for the consideration of the Administrator in connection
with the future expression of policy in such cases.
1. The Administrator should seek a pragmatic, gradualist
approach under which Davis-Bacon Act bidders will know where they
stand and which can be administered in the field by plain and
simple rules.
2. Presumably, Davis-Bacon Act bidders are familiar with wage
and fringe conditions and the structure of the [16]
~17
[17] construction industry in the locality including whether there
are apprenticeship training programs on a craft-by-craft basis in
negotiated agreements. A Davis-Bacon employer who does not know
such operational facts takes federal and federally-aided work at
his peril. But similarly, all bidders should enter through the same
Davis-Bacon gate and be subject to the same conditions of payment
and of regulation.
3. Using this case as an example, the Davis-Bacon wage
schedule for carpenters was $13.12 in wages and $1.43 in fringes
per man-hour worked, 13 cents of which was for apprenticeship
training. The fact that the wage schedule was determined with this
kind of fringe package, would put the reasonably prudent
construction contractor on notice that this was a locally
negotiated fringe arrangement; that is, the Davis-Bacon schedule
was taken from or was for other reasons the same as in the locally
negotiated agreement for fringes and was numerically prevailing.
4. In the case of a Davis-Bacon job awarded to a contractor
subject to a negotiated agreement, the contractor knows what the
agreed upon apprenticeship training payment must be on all his
jobs, Davis-Bacon or not. One would infer that the contractor who
is not subject to a negotiated agreement has access to such
information through contractors' associations or otherwise or, if
not so, to be careful about how to determine his labor costs, he
could ask the Department of Labor for a breakdown.
5. The Wage and Hour Administrator is concerned that an [17]
~18
[18] employer without a negotiated agreement who is not
required to make apprenticeship training payments on all
construction work, whether Davis-Bacon or not, will somehow be
doing something wrong under the Act and be gaining some kind of
advantage by making such payments only on the Davis-Bacon job. But
counsel for the Wage and Hour Administrator has not pointed out in
this case just what it is that such an employer is doing which is
in violation of the Davis-Bacon Act.
6. The Wage and Hour Administrator does not administer the
financing of apprenticeship training programs provided for under
negotiated agreements, nor is that the purpose of the Davis-Bacon
Act itself. The Office of the Administrator only sees to it that
the amounts of the package of fringe benefits are paid to the
funds, or equivalents paid to the employees. Nor does the
Department of Labor otherwise investigate into negotiated
agreements outside of the Davis-Bacon Act requirement that payment
of the prevailing wage rate and fringes be paid on Davis-Bacon work
when such rates and fringes are negotiated rates.
7. In future cases I commend for the Administrator's
consideration that in the case in which the fringe benefit package
includes apprenticeship training based on negotiated agreements,
the nonsignatory contractor would not be out of compliance with the
requirements of the Davis-Bacon Act when he pays into the
apprentice training up to the same amount per man-hour worked that
the union signatory employer pays [18]
~19
[19] for apprenticeship training. For example, in this case, 13
cents per hour for carpenters. If this is not the case, similarly
situated contractors who are successful bidders will not be treated
equally./FN1/
8. If a contractor is in compliance with the Davis-Bacon Act
when on the Davis-Bacon Act project, that is all that the
Davis-Bacon Act asks of him. I see no requirement in the
administration of the Davis-Bacon Act that the Department of Labor
should be concerned with payment of monies for apprenticeship
training on non-Davis-Bacon Act projects.
9. The contractor not subject to a negotiated agreement may
employ persons to do multicraft work and may, as in this case,
participate in an apprenticeship program on that basis. On
Davis-Bacon work, rates based on negotiated rates are on a craft or
class basis. They are normally so anyway. Accordingly, in the
determination of the cents per hour payment for apprenticeship
training, the amount permissible per man-hour worked would be
dependent upon the amounts for apprenticeship training provided in
the different negotiated agreements by craft or class even though
at the other end, the monies reaching the apprenticeship training
program is [19]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ In the instant case, this was a legitimately established,
approved apprenticeship training program, in place, and operating.
The Administrator has been expressly specific in not challenging
the program or where the payments went, and there this question
should end. There was no contention that the contractor, Miree,
received any benefits, directly or indirectly, by reason of the
payment other than he was contributing to the operation of an
apprenticeship program from which he could benefit. [19]
~20
[20] unified. The amount to be paid for a carpenter per man-hours
worked may be different from the amount to be paid for a
bricklayer. This presents no problem. If there were no
apprenticeship training program for the employer without a
negotiated agreement, how much would he have to add to the
employee's paycheck; this is what he should be able to pay
into an approved apprenticeship training program.
10. At one time the Department of Labor broke down the
negotiated fringe benefit package in Davis-Bacon schedules. The
fact that it has discontinued this practice does not mean that
there is not a prevailing local practice as to the amount paid for
apprenticeship training. I see no reason why the Administrator
should not upon request or otherwise give Davis-Bacon contract
bidders such information.
This concurring opinion and still minority view, is limited to
the apprenticeship training program payment. It has no application
to other kinds of fringe benefits which were not before the Board
in this case. Also, the question of apprenticeship ratios was not
before the Board. This concurring view expresses no opinion on that
question. [20]
- - -
~21
Chairman Andrews, dissenting:
The Board's majority dismisses the petition herein. I would
grant the petition in part and remand the case to the Administrator
for further determinations. Therefore, I respectfully dissent from
the Board's decision for the following reasons:
This case presents the Board with a number of issues, but the
most fundamental is petitioner's position that its Davis-Bacon
fringe benefit contributions to a BAT approved apprenticeship
program must be fully credited by the Administrator, without any
regard to whether or not it made similar contributions on private
jobs not covered by the Davis-Bacon and Related Acts. Petitioner
argues that because the Davis-Bacon Act specifically permits
payments for apprentice training as a qualified fringe benefit in
meeting the employer's obligation on federally funded or assisted
work to pay the prevailing wage as determined by Secretary of
Labor, that Congress has recognized apprenticeship programs as
"desirable from a social point of view." /FN1/ Thus, petitioner
argues, any restriction on such contributions discourages rather
than encourages such apprenticeship programs. Petitioner further
states: "when the government requires that contributions to an
apprenticeship program be spread over government and non-government
work, this amounts to a requirement that a contractor make such
contributions [21]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Petitioner Miree's brief, page 11. [21]
~22
[22] for jobs in which the federal government admittedly has no
interest whatsoever. There is no basis for the Administrator's
intervention in these purely private contracts, directly or
indirectly." /FN2/ In short, petitioner argues that the government
has no authority under the Davis-Bacon Act to limit (other than to
assure that the contributions are related to the reasonably
anticipated rate of cost of providing the apprenticeship's program)
its contributions on Davis-Bacon work to the actual cost of
training its own apprentices or to any relationship to
contributions made or not made on private work not subject to the
Davis-Bacon prevailing wage requirements.
Section 1(b) of the Davis-Bacon Act, 40 USC Section 276
a(b), provides:
(b) As used in this Act the term "wages", "scale of
wages", "wage rates", "minimum wages", and "prevailing
wages" shall include--
(1) The basic hourly rate of pay; and
(2) The amount of--
(A) the rate of contribution irrevocably made by a
contractor or subcontractor to a trustee or to
a third person pursuant to a fund, plan, or
program; and
(B) the rate of costs to the contractor or
subcontractor which may be reasonably
anticipated in providing benefits to laborers
and mechanics pursuant to an enforceable
commitment to carry out a financially
responsible plan or program which was
communicated in writing to the laborers and
mechanics affected, for medical or hospital
care, pensions on retirement or death, [22]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ Petitioner Miree's brief, page 12. [22]
~23
[23] compensation for injuries or illness resulting
from occupational activity, or insurance to
provide any of the foregoing, for unemployment
benefits, life insurance, disability and
sickness insurance, or accident insurance, for
vacation and holiday pay, for defraying costs
of apprenticeship or other similar programs,
or for other bona fide fringe benefits, but
only where the contractor or subcontractor is
not required by other Federal, State, or
local law to provide any of such benefits:
Provided, That the obligation of a contractor
or subcontractor to make payment in accordance
with the prevailing wage determinations of the
Secretary of Labor, insofar as this Act and
other Acts incorporating this Act by
reference are concerned may be discharged by
the making of payments in cash, by the making
of contributions of a type referred to in
paragraph (2)(A), or by the assumption of an
enforceable commitment to bear the costs of a
plan or program of a type referred to in
paragraph (2)(B), or any combination thereof,
where the aggregate of any such payments,
contributions, and costs is not less than the
rate of pay described in paragraph (1) plus
the amount referred to in paragraph (2).
Congress has specifically authorized as a benefit to laborers
and mechanics which may be included in the prevailing wages, "costs
of apprenticeship or other similar programs." Petitioner's argument
that such contributions may only be limited in that they must
relate to the reasonably anticipated costs of providing such
apprenticeship benefits is not persuasive. [23]
~24
[24] First, in permitting such apprenticeship program costs,
the Davis-Bacon Act provides authority to defray the costs of a
benefit to laborers and mechanics. It is not the purpose of the Act
or the intent of Congress that the Davis-Bacon Act be administered
so as to constitute a federal subsidy for apprenticeship programs,
whether union or nonunion. Recognition by the Act that
apprenticeship programs are a limitable bona fide benefit to
laborers and mechanics, is not inconsistent with governmental
encouragement of such programs. Likewise, the Act's recognition
and encouragement of such programs is not intended to utilize
Davis-Bacon apprenticeship contributions as a mechanism to fund
apprenticeship programs which benefit laborers and mechanics whose
wages are not subject to the requirements of the Davis-Bacon and
Related Acts.
Because Davis-Bacon apprenticeship program contributions are
not intended as a federal subsidy for non Davis-Bacon related
apprenticeship programs, the amount of contributions creditable
toward meeting Davis-Bacon prevailing wages must bear a reasonable
relationship to the Davis-Bacon work performed. The federal
government does not, nor did Congress, intend for the operation of
the Davis-Bacon and Related Acts to pay for apprenticeship programs
to benefit either contractors or unions except in a manner
ancillary and subordinate to the primary purpose of such programs.
Contributions to apprenticeship programs permitted in paying the
prevailing wage rates required by the Davis-Bacon Act are intended
as benefits to [24]
~25
[25] workers, and as such, must relate to the governmental work
performed by those workers. Whether such workers are union or nonunion
is irrelevant.
But the petitioner argues that in establishing the reasonable
relationship between the amount of Davis-Bacon contributions
creditable for apprenticeship prevailing wage fringe benefits, and
the government work performed: A.) the Administrator's use of the
'annualization principle' ". . . requires that contributions to an
apprentice program be spread over government and non-government
work," and that this requires contractors to make apprenticeship
program contributions ". . . for jobs in which the federal
government admittedly has no interest whatsoever." /FN3/; and
B.) that the effect of the Administrators' establishment of a
relationship between allowable Davis-Bacon contributions and
the amount of Davis-Bacon work ". . . discriminates against non-
union contractors and their apprenticeship plans vis-a-vis
union plans, which is surely not the intent of the act." /FN4/
The Administrator's application of the "annualization
principle" does not have the effect or intent that the petitioner
suggests. The government's interest herein is to assure that
prevailing wage apprenticeship. contributions paid for government
work benefit laborers and mechanics who perform government work.
The application of the annualization principle does not require
apprenticeship program contributions of union or nonunion
contractors engaged in [25]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN3/ Petitioner Miree's brief, p. 12.
/FN4/ Petitioner Miree's brief, p. 12. [25]
~26
[26] private nongovernment work; it does, however, permit the
government to assure that government paid fringe benefits intended
for workers on government jobs are not diverted to the benefit of
union or nonunion workers or employers on private nongovernmental
work. There is no governmental "requirement" herein (of either
union or nonunion contractors) that such contributions be made on
private, nongovernment work./FN5/
Petitioner's argument that the Administrator's application of
the annualization principle to apprenticeship program contributions
results in discrimination by the government against nonunion
contractors is unconvincing. The petitioner misunderstands a
fundamental point: that application of the annualization principle
by the government to determine creditability of contributions for
apprenticeship benefit plans toward payment of Davis-Bacon
prevailing wages is made where an employer[']s contributions are
not consistent throughout a work year. Whether the plan or program
is sponsored by a union, an organization of nonunion employees,
union contractors, or nonunion contractors is immaterial. /FN6/
For contributions to any such apprenticeship program, union or
nonunion, to be creditable under the Davis-Bacon and Related Acts,
such programs must be registered with, and have the approval of,
the U.S. Department of Labor, Employment and Training
Administration, Bureau of Apprenticeship and [26]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN5/ Cf. U.S. v. Binghamton Construction Co., 347 U.S. 171;
Endicott Johnson Corporation v. Perkins, 317 U.S. 501; and Perkins
v. Lukens Steel Co., 310 U.S. 113.
/FN6/ See 29 CFR Section 29.2(g). [26]
~27
[27] Training pursuant to regulations set forth in 29 CFR Section
29.1 et seq. only after this registration and approval process,
does the Administrator of the Wage and Hour Division utilize the
annualization principle to ascertain amounts creditable toward
compliance with fringe benefit provisions of the Davis-Bacon Act
pursuant to regulations promulgated by the Secretary at 29 CFR
Section 5.20 et seq.
While the purpose of the annualization principle utilized by
the Administrator, as has been previously discussed, is consistent
with the intent of the Davis-Bacon Act, petitioner correctly
asserts that its application should apply the same whether an
apprenticeship plan is union or nonunion.
For example, if a collectively bargained contract required
union employers to contribute to an apprenticeship program for
Davis-Bacon work, but waived that contribution requirement for non
Davis-Bacon (but still union) work, the Administrator's application
of the annualization principle should operate exactly the same as
it does for nonunion employers. Here, the union contractor's
apprenticeship contributions would be creditable only based upon
the effective annual rate of contribution. Thus, again, the union
or nonunion character of the contractor or of the apprenticeship
program should be irrelevant.
With respect to the apprenticeship plan here at issue, both
petitioner Miree and the Administrator accept the Administrator's
determination that "The ABC Plan is a funded [27]
~28
[28] plan within the meaning of the Act and the regulations." /FN7/ The
Building and Trades Department, AFL-CIO, in its statement on this case
submitted as an interested party, objects to the characterization of
this plan as a "funded plan" within the meaning of section 1(b)(2)(A) of
the Davis-Bacon Act, asserting that the plan instead is an "unfunded
plan" within the meaning of section 1(b)(2)(B) of the Act. The
distinction, the Trades Department argues, either permits or requires
the Administrator to utilize a stricter standard of scrutiny for
nonunion apprenticeship plans as herein. /FN8/
Title 29 CFR Section 5.29(b) states:
The legislative history indicates that it was not the
intent of Congress to impose specific standards relating
to administration of fringe benefits. It was assumed that
the majority of fringe benefits arrangements of this
nature will be those which are administered in accordance
with the requirements of section 302(c)(5) of the
National Labor Relations Act as amended (S. Rep. No 963,
p. 5)."
Neither the legislative history nor its inclusion in the
Regulations acts to limit approval and registration of bona fide
apprenticeship programs to those arrangements "assumed" to be in
the majority. To the contrary, the specific language of the
Davis-Bacon Act fringe benefit provisions authorizes approval
of many types of fringe benefits. [28]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN7/ Statement for the Administrator, p. 6.
/FN8/ Statement of the Building & Construction Trades Dept.,
p.6.[28]
~29
[29] Section 1(b) of the Davis-Bacon Act provides that the
obligation of a contractor to make fringe benefit payment in
accordance with the Secretary of Labor's prevailing wage
determinations may be discharged by making contributions
"pursuant to" a Section 1(b)(2)(A) plan, or "pursuant to an
enforceable commitment" to bear the costs of a Section
1(b)(2)(B) plan, "or any combination thereof. . . ." /FN9/ The
Administrator's determination that the ABC plan is a "funded"
rather than "unfunded" plan is not relevant to her determination as
to whether an employer's fringe benefit contributions, funded,
unfunded "or a combination thereof," meet its prevailing wage
obligation, and the Act does not require her to make any
distinction based upon the union or nonunion character of a plan.
Thus, the Administrator's determination that the ABC plan is
"funded" rather than "unfunded" or "a combination thereof" is here
a distinction without a difference.
The Davis-Bacon Act clearly and specifically anticipated the
myriad of different program and fiduciary structures which may be
deemed bona fide fringe benefits for purposes of meeting prevailing
wage requirements. The Administrator's responsibility here is to
assure that "the aggregate of any such payments, contributions and
costs is not less than the rate of pay /FN10/ required by the
applicable prevailing wage determinations of the Secretary of
Labor. [29]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN9/ 40 USC Section 276a(b)(2)(B).
/FN10/ 40 USC Section 276a(b)(2)(B).
~30
[30] The issue before the Board is not whether the ABC plan
is a BAT approved and registered bona fide apprenticeship training
program -- the record herein clearly indicates that it is. The
issue is the amount of those contributions that may be credited
against the employer's obligation to pay prevailing wage and fringe
benefits in accordance with the Act.
While it is not my intention to perform mathematical
calculations which are properly the duty and province of the
Administrator, for purposes of example only, I note the following:
In determining the amount of petitioner Miree's contributions which
should be creditable toward its Davis-Bacon obligation, the facts
of this case show that Miree contributed a total of $11,293.52 for
apprenticeship training. There were 61 employees for whom
contributions were made at $.25 per hour. This comes to an average
contribution of $185.14 per employee, or 740.56 hours, or 92.57
days work per employee (assuming an eight-hour work day). 740.56
hours would constitute 37.028% of a 2,000 hour (250 day) work year,
and 35.6% of a 2,080 hour (260 day) work year.
Application of the annualization principle to the facts
herein, without addressing the issue of classification, and
assuming that a $.25 per hour contribution rate is reasonable,
clearly indicates that the petitioner is not entitled to be
credited the full $11,293.52 which it contributed. Thus, under a
2,000 hour work year, the petitioner's creditable [30]
~31
[31] contribution would total $4,181.76, or 9.257 cents per hour.
Under a 2,080 hour work year, the petitioner's creditable contribution
would total $4,020.49, or 8.89 cents per hour.
The Administrator states "there is no meaningful basis to
treat apprenticeship plans like the ABC Plan any differently from
other types of fringe benefit plans subject to the annualization
principle. /FN11/ However, she further argues that in addition to
the annualization principle, or as an additional element of her
application of the annualization principle, that she has correctly
and further limited Miree's Davis-Bacon credit to payments made to
the ABC Plan on behalf of workers employed as carpenters, and has
correctly denied any credit for contributions made by the
petitioner on behalf of bricklayers and laborers. This further
limitation and denial, in addition to the annualization principle,
is justified in order to uphold "... the longstanding position
of the Administrator of the Wage and Hour Division with regard to
apprenticeship plans, that training costs incurred for one
classification of employees may not be used as credit toward the
prevailing wages required to be paid another classification of
workers." /FN12/ Thus, the Administrator has limited the
creditability for Davis-Bacon purposes of contributions to those
made by Miree on behalf of carpenters [31]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN11/ Statement for the Administrator, p. 14.
/FN12/ Statement for the Administrator, p. 16. [31]
~32
[32] [*] only [*], and, because only one "carpenter apprentice
employed by Miree received any such training", /FN13/ further
limited those contributions to the $500.00 tuition cost directly
attributable to training of that one apprentice. [*Emphasis in
original*]
Yet, it is the Administrator's position that: "There is
no requirement that a contractor participating in either a
union or nonunion approved apprenticeship plan have employees
currently receiving training before its contributions are
creditable for Davis-Bacon purposes." /FN14/
The Administrator's position here is inherently in conflict
with itself. Clearly, if there is no requirement that a contractor
(whether union or nonunion) have current employees in
apprenticeship training for its contributions to be creditable for
Davis-Bacon purposes, it is totally inconsistent to impose such a
requirement on petitioner Miree. Therefore, the Administrator's
application of additional limitations on the creditability of
Miree's apprentice training contributions, based upon the number of
employee apprentices Miree had in training during the period of its
performance of the Davis-Bacon work at issue here, is in error.
The very nature of apprenticeship programs would make it
actuarially unsound, fiscally imprudent, and practically
inadministrable to require each participating employer to
maintain at all times the exact number of apprentices in [32]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN13/ Statement for the Administrator, p. 16.
/FN14/ Statement for the Administrator, p. 8. [32]
~33
[33] training that would simultaneously consume the combined
contributions of its own employees. Thus, apprenticeship
programs, whether union or nonunion, may receive in a month
more contributions than actually expended, just as in other
months they may expend more than actually received. The
annualization principal is the mechanism used by the
Administrator to assure that the individual contributions of
an employer relate to its employees' share of carrying out a
financially responsible apprenticeship program.
To obtain administration which treats apprenticeship programs
(whether union or nonunion in character) in the same manner,
contributions should not be disallowed for employees, in this case
bricklayers, for which Miree had no apprentices currently in
training. Furthermore, the Administrator has acknowledged that
certain Miree employees performed work as laborers and as
carpenters or bricklayers, and were paid the appropriate wage for
work performed in each classification. Bifurcation, trifurcation,
or other multichotomous division of each employee's work day to
determine that portion of a day's work for which an apprenticeship
program is a benefit, would create an administratively
schizophrenic burden.
If the Administrator disallows apprenticeship contributions on
behalf of laborers for similar apprenticeship programs, whether
union or nonunion, denial of creditability of Miree's contributions
for its laborers herein is appropriate. However, bricklayers
benefit from [33]
~34
[34] reasonable contributions to strengthen the education within their
craft. Therefore, the Administrator has misapplied the annualization
principle by denying creditability of contributions for bricklayers.
The overriding purpose of the Secretary's determinations
in the administration of the Davis-Bacon Act, including its
fringe benefit provisions, is to protect laborers and mechanics
from substandard wages on government projects. /FN15/ The
Administrator has stipulated: "The Department of Labor has approved
deductions of .25 cents or more per hour for apprenticeship funds,
when those deductions are made pursuant to a bona fide collective
bargaining agreement", but believes the stipulation is "irrelevant
in this case." /FN16/ Miree argues that the $.25 contribution rate
is "generally accepted in the construction industry." /FN17/ The
issue is not whether this $.25 rate is "generally accepted" or
whether the Administrator has ever approved a $.25 contribution in
other situations. The issue is whether the $.25 rate is related to
the reasonably anticipated rate of cost of providing this
apprenticeship program, and whether the Administrator routinely
approves such a rate of contribution for similar apprenticeship
programs (whether union or nonunion) in this area. [34]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN15/ See U.S. v. Binghamton Construction Co., 347 U.S. 171 1954).
/FN16/ Administrator's letter and final ruling dated February 20,
1987, p. 2.
/FN17/ Petitioner's brief in response to the Statement for the
Administrator, p. 2. [34]
~35
[35] Here, the Administrator has stated: "In the absence of
allegations of abuse, the Administrator assumes that the rate of
contribution required by both union and nonunion apprenticeship
plans approximates the cost of providing training and administering
the plan for all the employers in the program."/FN18/ There is
nothing in the record to indicate that the petitioner has committed
either fraud or abuse with respect to its contributions to the BAT
approved and registered apprenticeship program.
However, the Administrator's opinion letter and ruling dated
July 9, 1986, stated to the petitioner:
. . . the investigation disclosed that the funds
contributed by your firm to the ABC program for
bricklayers and laborers to fund apprenticeship programs
for bricklayers or laborers. No apprentice has been
trained as a bricklayer under this program since August
1978. /FN19/
The alleged lack of use of Miree's contributions to fund
training for "bricklayers or laborers" cannot be logically
attributed, absent fraud or collusion, as either the
responsibility of the petitioner, or as constituting an "abuse" by
Miree of its Davis-Bacon obligations. Miree has made contributions
to this program based upon prior public notice that the program was
approved and [35]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN18/ Statement for the Administrator, p. 8.
/FN19/ Administrator's opinion letter, July 9, 1986, p. 2. [35]
~36
[36] registered by the authority of the federal government at the
time these contributions were made.
The degree to which this disclosure constitutes an "abuse" has
not been clearly established in this case. It is fundamental that
if there has been "abuse" in the operation of this, or any
apprenticeship program, the Secretary must act to remedy the
situation in order to protect workers. The issue thus becomes
whether the Department has an appropriate remedy in the facts of
this case to determine who is responsible and enforce correction of
alleged abuse.
First, it is clear that the petitioner does not administer the
ABC Plan, and should rightfully, absent collusion or fraud, be able
to rely upon the approval and registration of the program by the
Bureau of Apprenticeship and Training to assure that its
apprenticeship contributions are properly, legally, and unabusively
utilized by the program to benefit its employees. This is
applicable, again, without distinction between union or nonunion
employers. The Administrator's position not only places the
petitioner in a position of responsibility for the operation of a
plan approved by the Department of Labor and administered by a
third party association, it suggests that Miree should be
responsible for maladministration of the program, even if such
abuse occurred before or after it made the contributions herein.
Such a position cannot be sustained, and based upon the record in
this case, Miree should be entitled to its reliance upon the
Department's certification of the ABC [36]
~37
[37] program.
It is the very approval and registration authority which provides the
Administrator in this situation an appropriate remedy for "abuse" in an
apprenticeship program. Deregistration/disapproval procedures are set
forth in the Secretary's regulations at 29 CFR Section 29.7. There is
ample authority provided to disapprove an entire program, or any
portion, such as the bricklayers program, which the Administrator's
investigation determines to have been improperly inactive for a period
of years. Whether this constitutes violation of the certified standards
should be determined by the Administrator of BAT in consultation with
the Administrator of the Wage and Hour Division. However, it is the
sponsor of the program, here the ABC, not each participating employer,
that is responsible for assuring that the program is administered and
operated in accordance with the requirements for approval, registration,
and thus qualification, as a bona fide fringe benefit for Davis-Bacon
purposes.
Consistent with this opinion, I would remand this case to the
Administrator to make the following determinations:
1) Whether the prevailing annual work year for the employees
in this case is 2,000 hours, 2,080 hours, or some other, as a basis
for application of the annualization principle herein.
2) Whether []25 cents per hour or some other figure,
consistent with the Administrator's determinations with respect to
other similar bona fide apprenticeship [37]
~38
[38] programs, whether union or nonunion in character, is a reasonable
rate of contribution as a basis for application of the annualization
principle to determine the amount creditable by Miree in anticipation of
providing a financially responsible apprenticeship program for the
benefit of its laborers and mechanics.
3) Recalculation of the amount of the petitioner's
contribution which is creditable toward its Davis-Bacon prevailing
wage obligation.
BY ORDER OF THE BOARD
Craig Bulger, Esquire
Executive Secretary
Wage Appeals Board [38]
