BEACON PLACE CORP., WAB Nos. 87-34 and 87-39 (WAB Sept. 20, 1989)
CCASE:
BEACON PLACE CORPORATION
DDATE:
19890920
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of
BEACON PLACE CORPORATION WAB Case No. 87-34 & 87-39
Toledo, Lucas County, Ohio Dated: September 20, 1989
Inadvertence to Wage
Determination OH 83-5124
APPEARANCES: Diane E. Burkley, Esquire, for Cavalear Corporation
& Beacon Place Corporation
Christopher Hartenau, Esquire, for the U.S.
Department of Housing and Urban Development
Wendy Bader, 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
the Cavalear Corporation and the Beacon Place Corporation seeking
review of the Wage and Hour Administrator's ruling of October 21,
1988 denying petitioners' request that the Administrator rescind
the letter of inadvertence applicable to this project, dated
February 14, 1986. [1]
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[2] This appeal and one in a companion case, Palmer Gardens,
WAB Case No. 87-05, arises over wage determination OH-83-5124 which
was originally issued on December 2, 1983, by the Wage and Hour
Division to apply to building and residential construction projects
in Lucas County, Ohio. The wage determination included a wage rate
for carpenters of $18.81 plus $2.73 in fringe benefits for both
building and residential construction. On August 17, 1984, Wage
and Hour issued Modification No. 2 to this wage determination to
change the hourly wage rate for carpenters on building construction
to $19.31 plus $2.97 in fringe benefits, and $11.57 plus $2.97 in
fringe benefits for carpenters on residential projects. The Wage
and Hour Division used the negotiated collective bargaining
agreement in the area as the basis for the carpenter's wage rate.
The collective bargaining agreement in question provided the same
rate of $19.31 for building and residential carpenters, but added
a classification and rate ($11.57) for carpenters working on
residential projects described as "residences up to and including
four-family dwellings". Wage and Hour omitted the limiting
language from the wage determination when it issued Modification
No. 2, so that it applied the $11.57 rate for carpenters engaged on
all residential construction. Wage and Hour on February 21, 1986,
issued a supersedeas wage decision, OH 86-28, which replaced the
earlier wage decision, OH 83-5124, and included the lower wage rate
of [2]
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[3] $11.57 plus fringe benefits only for residential
construction up to and including four-family dwellings. Earlier,
on February 14, 1986 Wage and Hour issued the letter of
inadvertence in question to the Department of Housing and Urban
Development (hereinafter DHUD). (It should be noted that this
letter of inadvertence was issued about 18 months after
Modification No. 2 was published.)
Before the supersedeas decision was issued and while OH
83-5124, Modification No. 2 was still current, the City of Toledo
in Lucas County applied to DHUD for a grant to construct Beacon
Place, a residential project of 201 units of low-rise apartments
for low-income tenants. DHUD agreed to partially finance the
project and the project was therefore subject to the Davis-Bacon
prevailing wage requirements. In December, 1985, Toledo entered
into a contract with the Beacon Place Corporation for the
development of Beacon Place, and at the end of December, 1985, the
Beacon Place Corporation signed a contract with the Cavalear
Corporation to construct Beacon Place.
The letter of inadvertence was issued because the contract for
Beacon Place had been awarded before the supersedeas decision was
issued. The effect of the letter of inadvertence was to require
the contractors on Beacon Place to pay $19.31 plus fringes to all
carpenters engaged on the project, instead of paying a minimum
predetermined wage rate of $11.57 plus fringes which was in effect
when their [3]
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[4] contract was entered into (or the $16.15 plus fringes petitioner
actually paid to its carpenters on the job pursuant to a project
agreement.) DHUD asked the Department of Labor to reconsider its letter
of inadvertence. The Department denied DHUD's request and DHUD has
appealed this question to the Board in In re Palmer Gardens Project, WAB
Case No. 87-05, which is pending before the Board.
On April 18, 1988, the Petitioners requested that the
Administrator rescind her letter of inadvertence and Wage
Determination No. OH 86-28 and reinstate Wage Determination No. OH
83-5124, Modification No. 2. Alternatively, they requested that
the Department recognize a light commercial and industrial wage
rate contained in a project agreement negotiated with the
Carpenter's local union. /FN1/
The Administrator issued a final ruling on October 31, 1988.
This ruling denied Petitioners' request that the letter of
inadvertence be rescinded, and affirmed that the applicable
residential wage rate for carpenters on Beacon Place was the one
identical to the building rate because the project involved
residences of more than four-family dwellings. The Petitioners
appealed to the Wage Appeals Board from the Administrator's October
31, 1988 ruling on the basis that the company would never have
undertaken this [4]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ The project agreement signed with the Maumee Valley
Carpenters District Council provided that union carpenters employed
on Beacon Place would be paid the light commercial and industrial
wage rate contained in the current collective bargaining agreement
which was $16.15 per hour. [4]
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[5] project if it has not been able to utilize the residential wage
rates issued in wage determination OH 83-5124, Modification No. 2.
The Board considered this appeal on the basis of the Petition
for Review filed by the Petitioners on November 30, 1988 and on the
Statement on Behalf of the Administrator and the record of the case
before the Wage and Hour Division filed by the Solicitor of Labor.
On April 18, 1989 the Board held an oral hearing at which all
parties were present and represented by counsel. The result
reached in this case is unanimous, but the reasoning by which each
member reaches his decision differs.
- - -
Chairman Andrews:
I do not accept the presumption that an "error" occurred when
Modification No. 2 to the wage determination was originally
published August 17, 1984, and I do not believe the record clearly
demonstrates any such "error". I reach the same result as my
colle[a]gues, but for the following reasons:
The Administrator has argued that the failure of the
Department of Labor staff to include, as part of the original
general wage determination, a rather inscrutable negotiated clause
limiting the lower residential rate to work on "residences up to
and including four-family dwellings", was originally an error. In
my judgment, the record shows little [5]
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[6] indication, other than a bald assertion by the Administrator made
many months after the fact, that there was an "error" in the exclusion
of this language from the general wage determination. It is just as
likely, if not more likely, that any "error" was in the negotiated
limitation itself: specifically, the omission of the word "story".
(This would at least have made the limiting clause read "residences up
to and including four-story family dwellings", an understandable
differential between residential and commercial work based upon the
nature of buildings to be constructed rather than upon the definition of
"family".)
In any event, the negotiated limitation clause is irrelevant
because the Secretary of Labor is not compelled to accept such
exceptions or limitations as prevailing even where she determines
negotiated rates are otherwise prevailing. I don't think this
particular language makes much sense, not[]withstanding the
Administrator's current acceptance of it as "prevailing" in the
Toledo area. Even i[f] it does, it should not be relevant to our
decision in this case.
The central issue presented by this case is whether the
Administrator has properly utilized her authority pursuant to 29
CFR Sec. 1.6(d) to correct, after publication, clerical errors in
wage determinations. The Board unanimously agrees that the
Administrator's action was not proper, and the appeal is
granted. [6]
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[7] The wage determination at issue, OH 83-5124, Modification
No. 2 was published in the Federal Register and became effective on
August 17, 1984. Eighteen months later, on February 14, 1986, the
Administrator issued a letter of inadvertence to the Department of
Housing and Urban Development purporting to correct a "clerical
error". The "correction" would increase the carpenter's rate over
66%, effective retroactively to the beginning of construction some
eighteen months earlier.
In this case, the Administrator's use of a letter of
inadvertence is not proper. This general wage determination had
been published, and thus been in force, for over thirteen months
before the beginning of construction in Palmer Gardens and about 16
months before construction contracts were signed in Beacon Place.
Both agencies and contractors must be able to rely upon the
published wage decisions of the Department of Labor in the absence
of clearly self-evident error or timely notice of error. After a
general wage determination such as this has been in effect and
relied upon for over a year, the Administrator may not assert that
an increase of over 66% in a carpenter's rate constitutes mere
"clerical error". Neither is a "letter of inadvertence", published
eighteen months after issuance of a wage determination, timely
notice of a clerical error.
The procedure available to the Administrator for correcting
clerical errors, set forth in 29 CFR Sec. 1.6(d), [7]
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[8] gives retroactive effect to such corrections. There are a number of
procedures in 29 CFR, Sections 1.6(c),(e) and (f), by which the
Administrator may modify wage determinations, issue supersedeas wage
determinations, or correct utilization of incorrect wage determinations.
None of these procedures is given retroactive effect without providing
proper compensation to the contractor for increased costs resulting from
such modification or change. Only to correct bona fide clerical errors
pursuant to Sec. 1.6(d) are the Administrator's findings given
retroactive effect without adjustment of compensation, or contract
re-bid. This authority is clearly a narrow one, and may not
appropriately be utilized here to modify wage determination No. OH
83-5124.
Permitting the Administrator to retroactively change her
published wage determination in such large amounts and over such an
expanse of time would evi[s]cerate the contractual reliability
underlying Davis-Bacon prevailing wage determinations. Further,
such an interpretation of Sec. 1.6(d) authority would enable the
Administrator to assert at any time after publication, in a
potentially arbitrary and capricious manner, that her wage
determinations do not reflect her intent because of "clerical
error". Such a legal standard of "intent" would here be no more
than whimsy, and would render the entire process by which wage
determinations are utilized unpredictable. The Administrator's
decision is reversed and the appeal is granted. [8]
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[9] - - -
Member Dunn:
I concur in the result, but not for the reasons of the other
members of the Board.
This was not a clerical error as the Administrator has
determined. It was an unfortunate omission by the Administrator,
for she, and she alone, has at hand the many negotiated agreements,
as was the case here./FN2/ The contractors entered into this
project with the clear understanding that the lower residential
carpenter's rate was applicable and, apparently, the contractors
paid those rates for 18 months.
Contractors have few rights under the Davis-Bacon Act.
Workers enjoy the benefits of the Act, while generally the
contractors have compliance obligations only. However, throughout
the years, one of the few protections given to contractors is, that
once the award has been made, the contractor has a right to rely on
the wage determinations on which he has made his bid.
Since I find that a clerical error was not made in this case,
I hold that the rate on which the contractors bid should stand. I
am fully aware that the workers suffer a loss of wages in this
case, to which they would have been entitled by virtue of the
Administrator's omission. I also [9]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ The contractors here were non-union and did not necessarily
have access to the negotiated agreements. [9]
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[10] understand the tremendous task the Administrator faces on a
day to day basis to assure that the workers are fully protected.
But even assuming that clerical error had been made, it would seem
to me that clerical errors (which should be obvious to see,) would
be corrected long before 18 months.
Fortunately, the contractors in this case, after the omission
occurred, entered into project agreements under which the workers
have been paid substantially more than those contained in the
omitted provisions on the agreement upon which the Administrator
relied.
I wish to make clear that I am [*] not [*] applying equitable
principles in reaching this conclusion. I am simply applying the
ruled referred to above, that after contract award, the wage
determinations stand as made. [*Emphasis in original*]
- - -
Member Rothman:
The Administrator's argument is uncomplicated but also naive;
when the Department of Labor's Davis-Bacon staff copied the
commercial wage rate for carpenters from the locally negotiated
collective bargaining agreement, the Davis-Bacon clerk failed to
include the negotiated exception for residential housing. This
negotiated exclusion from the commercial carpenters' wage rate,
reads, "residences up to and including four-family dwellings", and
establishes an hourly wage rate of $11.57 and $2.97 in fringe
benefits for [10]
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[11] such work. Modification #2 simply provided "residential $11.57"
plus fringe benefits. Since the error was made by a clerk, says the
Administrator, it can be corrected at any time, calling it an
inadvertence. This the Administrator did 18 months later in February,
1986.
It was an error made by a clerk, but it was something more
when first made and it became still more with the passage of time.
The position of the Administrator overlooks factors which by 1986
should have been taken into account. The omission of the
qualification that the lower rate applied only to "residences up to
and including four- family dwellings" raised no consternation among
parties to the negotiated agreement or to anyone else for over a
year and a half. During this period local multifamily residential
housing projects of more than four family units were undertaken,
including the Beacon Place project, and construction was begun on
the basis that the Davis-Bacon wage schedules truly reflected the
local applicable residential rate. The schedule was understood for
18 months to mean what it said.
The record cannot sustain a conclusion that during this
18-month period local participants in the residential housing field
in Lucas County, whether subject to a negotiated agreement or
otherwise, could immediately recognize that the published
Davis-Bacon wage schedule did not ring true. The residential rate
as published looked more like it reflected [11]
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[12] the residential rate prevailing in the community for low-rise
multifamily residential housing than did the general commercial
construction rate for carpenters.
What may have been a clerical error if it had been corrected
shortly after publication of the Davis-Bacon schedule and before
developers and contractors had entered into DHUD commitments and
had begun construction, becomes substantially something else when
the Davis-Bacon wage schedule is changed 18 months later to be
applied re[]troactively. By that time the Administrator's office
was on notice that the negotiated residential wage limitation,
Modification No. 4, did not then, 18 months later, and did not
earlier when the Davis-Bacon wage schedule Modification No. 2 was
published, reflect a realistically defined local area practice that
multifamily (more than 4 units) low-rise residential housing was
being built at commercial wage rates in the locality. /FN3/ [12]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN3/ The Board is acquainted with residential housing wage rates
in negotiated agreements which exclude from the commercial rate
garden-type low-rise housing projects (normally without elevators)
of four stories or less or sometimes under four stories. The
limitation in this case restricting residential housing to
"residential up to and including four family dwellings" draws a
line at a place where it is difficult to base a sustainable area
local practice as to wage rates paid on all low-rise residential
housing built by all residential housing contractors and
developers. The Petitioner in Beacon Place has made a sufficient
showing that the prevailing area wage rate for what is normally
considered and accepted as residential housing is not the
union-negotiated commercial rate but a rate the same as or less
than the rate in Modification No. 2, $11.57 in wages and $2.97 in
fringes. [12]
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[13] The inadvertence published in 1986 did not reflect as of
October, 1984, the true state of affairs as to the prevailing wage
rate for low rise, multifamily residential housing construction as
normally understood in the locality. Whether the word
"inadvertence" is used or something else, it boils down to the
publication of a new wage rate as of February 14, 1986. Under the
local factual circumstances it would be manifestly unjust to apply
in 1986 what is essentially a new and also erroneous wage rate,
made retroactive to 1984.
Sometime subsequent to October, 1986, when the new wage rate
was published to be applied retroactively the Petitioner and the
local union agreed in a project agreement to a $16.15 wage rate to
be paid on this project. The Board has been informed there will be
no "harm" done to any employees on this project by the decision of
the Board. This is noted in passing; the office of the
Administrator should avoid entanglement in local contract
negotiations or representational matters.
It is sufficient to summarize this case as follows: The
Petitioner and the local industry concerned with low- rise
residential multifamily housing relied upon the published wage
schedule and changed their positions by reason of it. The record
does not justify or support the conclusion that the original
clerical error did not more truthfully reflect the prevailing wage
for this kind of residential construction than if the error had not
been made. Because [13]
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[14] there was little or no reason for the local residential building
community to suspect that the in[i]tial wage determination (Modification
No. 2) was not the one intended by the Administrator it would be
manifestly unjust to change the rate in October, 1986, retroactive to
December 2, 1983. Presumably, the Administrator will proceed to
ascertain the correct prevailing Davis-Bacon wage rates for residential
construction for future projects in this locality.
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board [14]
