NATIONAL STRUCTURES, INC., WAB No. 90-04 (WAB Aug. 30, 1991)
CCASE:
NATIONAL STRUCTURES
DDATE:
19910830
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
NATIONAL STRUCTURES, INC.
(NSI) d/b/a/ ENVIRODOME
DOMICILE OPERATIONS WAB Case No. 90-04
AMERICAN HOME INDUSTRIES
700 Family Housing Units, Fort Drum,
New York, Corps of Engineers Contract
DACA-65-86-C-0071
BEFORE: Ruth E. Peters, Presiding Member
Stuart Rothman, Senior Member
Patrick J. O'Brien, Member
DATED: August 30, 1991
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition
of National Structures, Inc. ("NSI") from a ruling of the
Administrator of the Wage and Hour Division dated October 18, 1989,
wherein Wage and Hour determined that the Davis-Bacon Act applied
to the employees of American Home Industries working at a warehouse
facility some 6 to 8 miles from the jobsite and wherein NSI's
request for additional classifications was denied. An oral
argument was held on July 10, 1991. [1]
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[2] For the reasons more fully explained in the concurring
opinions of Presiding Member Peters and Senior Member Rothman, this
matter is remanded for further proceedings consistent with their
statements.
I. BACKGROUND
On April 11, 1986, the Army Corps of Engineers awarded NSI a
contract for the construction of 700 family housing units at Fort
Drum in upstate New York. The Administrative Record ("AR...")
reveals that the bid competition was based on complete project
design and on total price without specific price breakouts for
labor, materials, or other individual elements of the final
contract (AR,Exhibit 1). On September 9, 1986, NSI executed
purchase orders with American Home Industries ("AHI") of
Bakersfield, California for the fabrication of components for the
project (such as floor and roof trusses, factory-built panels,
roofing, windows, cabinets and doors). These purchase orders were
FOB jobsite (AR, Exhibit 2).
On October 15, 1986, over a month after the execution of the
purchase orders, AHI leased a warehouse in Watertown, New York,
some six to eight miles from the Fort Drum jobsite of NSI. At the
time of the lease, AHI made public pronouncements regarding its
intention to use the facility to supply components to construction
projects on the East Coast and in Europe; however, the leased
facility was in fact used exclusively for the performance of the
two NSI purchase orders.
After an investigation in the fall of 1987, the Wage and Hour
Division determined that AHI employees at the Watertown warehouse
who cut, assembled, and fabricated components should have been
classified as carpenters; that others acting as helpers should have
been classified as laborers; and that both groups should have been
paid at the prevailing wage rate for those classifications.
On July 18, 1988, NSI submitted a wage survey and a request
for additional classifications based on shop classifications and
job classifications allegedly prevalent in the area. The request
was denied fifteen months later because Wage and Hour concluded
that the work performed at the AHI warehouse was work performed by
classifications already contained in the applicable wage
determination (AR, Exhibit 9).
The counsel for the Wage and Hour Division argues that the
Davis-Bacon Act covers the employees at the AHI warehouse, and that
the Wage and Hour Division properly denied the NSI request for
additional classifications. NSI argues that the AHI employees were
not employed on the "site of the work," and thus not covered by the
Davis-Bacon Act; that AHI is a bona fide commercial [2]
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[3] supplier rather than a construction subcontractor; and that the
request for additional classifications was improperly denied.
II. DISCUSSION
This matter presents a number of issues concerning the "site
of work" question, the interrelationships between the parties,
local practices in the construction and fabrication industries in
the relevant geographic market, and the nature of the "materialman
or supplier" exemption. Accordingly, this matter is remanded for
the purpose of developing the items of information described
in the Opinions of Presiding Member Peters and Senior Member
Rothman. Wage and Hour shall forward its response within 30 days
of the date of this opinion.
BY ORDER OF THE BOARD:
Ruth E. Peters, Presiding Member
Stuart Rothman, Senior Member
Patrick J. O'Brien, Member
Gerald F. Krizan, Esq.
Executive Secretary
SENIOR MEMBER ROTHMAN, CONCURRING
Recently the Circuit Court of Appeals for the District of
Columbia decided a Davis-Bacon Act case, Building and Construction
Trades Department, AFL-CIO v. U.S. Department of Labor, Wage
Appeals Board ("Midway Excavators Inc."), (D.C. Cir. May 17, 1991).
The Circuit Court affirmed the result reached by the Wage Appeals
Board under Section 5.2(j) of the Regulations, 29 C.F.R. Part 5,
but did so on grounds broader than the narrow reasoning of the
Board. Petitioner claims Midway Excavators and the Circuit Court
decision should carry great weight here. Although this case arises
under Section 5.2(l) and not 5.2(j) of the Regulations parties in
proceedings involving off-site execution of project work cite the
Circuit Court decision even though the Circuit Court expressly
excludes Section 5.2(l) from its consideration.
Although I was not a member of the Board panel that decided
Midway Excavators, I am in agreement with the result reached by the
Board and, accordingly, with the result reached by the Circuit
Court. However, in my view the record in Midway Excavators should
have had more in it concerning the [3]
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[4] relationship between the general contractor, Midway Excavators,
and its subsidiary company, King Town Trucking. A probing into that
relationship may not have yielded any different result in that case
does not involve an established trucking company serving all callers at the
same time as performing deliveries to a covered Davis-Bacon
project. Much as I would like to join the fray concerning the
interpretation of Sections 5.2(j) and 5.2(l) of the Regulations, I
would hold off until the record here is more fully developed on a
few points.
An examination of the record discloses that American Home
Industries ("AHI") at a meeting with regional DOL enforcement
representatives stated that it had no money to meet a $195,000 back
pay obligation if it were assessed. This, although it was able to
undertake a procurement program for National Structures, Inc.
("NSI") in excess of $9,000,000. AHI contended while at the
meeting that the purchase order did not include Davis-Bacon
provisions; NSI stated that the purchase order required compliance
with the Davis-Bacon Act if it were finally held applicable. NSI,
the prime contractor to which DOL could look for liability,
explained that to be a private law matter between it and AHI.
Should it be determined that the work at Watertown was Davis-Bacon
Act covered and assembler classifications were not permissible, the
AHI/NSI-Envirodome contractual relationship was outside DOL
purview; NSI would recoup any back pay and overtime requirements
from AHI. Although AHI has not joined in this petition, it is or
would appear to be the entity which, under the lump sum purchase
order described by NSI, will be the company required to add
approximately $195,000 to its performance costs.
The record discloses a newspaper article dated October 2, 1986
in the local Watertown paper reporting an interview with an AHI
official. Although this is only a newspaper article it was
submitted by NSI in support of its position that the Davis-Bacon
Act should not apply to the Watertown operation. According to the
article AHI has supplied materials or performed work for Morrison-
Knudsen, NSI-Envirodome's parent. Its intention is to continue to
do so in the future. The article and the record are silent on
AHI's general business activities and whether it handles
procurement or supplies materials as a commercial operator to any
one else. The newspaper article is subject to an inference based
on the information reported that AHI serves primarily if not solely
as a procurement arm or possibly a subcontractor for
Morrison-Knudsen, and its subsidiaries.
With considerable reluctance I would remand this case to the
Administrator for the development of a fuller record on the points
discussed herein. This factual information can and should be
readily obtained from Petitioner, National Structures, Inc., d/b/a
Envirodome Domicile Operations. Petitioner can secure whatever
additional information is required from American Home Industries.
It is not necessary to refer such inquiry to an administrative law
judge. [4]
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[5] On the remand the Administrator should examine the
following matters:
1. The commercial operations of AHI in general and its
relationship to Morrison-Knudsen and Morrison-Knudsen subsidiaries
in particular; AHI's history, its organizational structure, and
the manufacturing facilities it has had or presently maintains.
2. The relevant NSI/AHI purchase order requires AHI to
supply:
all materials and fabrication required for the complete
fabrication of all factory-built panels, roof trusses and
floor trusses for a complete framing installation of all
permanent plywood, siding, gypsum wallboard (interior and
exterior), roofing, sheet metal, windows and sliding
glass doors, exterior doors, wood privacy fencing,
umbrella clothes drying units and including all
fasteners, shots, pins, screws, hardware, adhesives,
caulking and all permanent materials for the complete
installation of all of the above, for 700 Family Housing
Units, Fort Drum, New York, Corps of Engineers Contract
No. DACA65-86-C-0071, in accordance with the approved
drawings and specifications prepared by NSI-ENVIRODOME.
Materials to be furnished include, but are not limited to
the following specification sections:
06100 Rough Carpentry
06300 Privacy Fencing (Wood)
07400 Shingle Roofing
07600 Sheet Metal
08200 Doors and Frames
08370 Sliding Glass Doors
08500 Metal Windows
09250 Gypsum Wallboard
The Administrator should determine where, by whom and how the roof
and floor trusses, wood primary fencing, doors and frames were
fabricated; whether they were in fact supplied by AHI; whether in
respect to such and other itemized materials, payment was made by
NSI to AHI or directly to the lower-tier supplier as the purchase
order permits. At the hearing NSI did not have answers at
hand. [5]
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[6] 3. With respect to the assembly work at Watertown, NSI
stated at the hearing that "all factory-built panels" as identified
in the NSI/AHI purchase order means the assembly NSI describes as
"wood stud walls." The work assembled at Watertown appears to be
two by four open framing for onsite wall construction. Normally a
"factory-built panel" will have a skin of some kind, in this case
plywood or gypsum wall board. It appears that for experienced
procurement persons, open framing for the exterior and interior
walls to be supplied by a commercial supplier would have defined
the item in specific terms such as it did for roof trusses or floor
trusses, rather than just rough carpentry. This matter can be
relevant to whether the disputed work at Watertown was in fact a
part of a purchase order from a commercial supplier or the
performance by a contractor or subcontractor. The Administrator
should inquire into the matter.
4. The Administrator should examine into the relationship of
NSI-Envirodome and AHI at Watertown and at Ft. Drum in terms of
NSI's direction and control of the work at Watertown or AHI
direction and control of work at Fort Drum, if any.
5. At peak load AHI had only 20 employees. However it
employed 232 employees with a large turnover rate. The
Administrator should compare AHI's and NSI-Envirodome's payroll
records to determine whether there was a pattern or practice for
AHI employees to move to NSI-Envirodome as laborers and carpenters
or supervisors, and vice versa.
The inquiry which I propose the Administrator make should not
be taken as prejudgment of whether the work performed at Watertown
was the work of a subcontractor or of a materialman; whether it was
work covered by the Davis-Bacon Act or not; or whether, if it was
covered work, an assemblers' rate was permissible.
There are cases that require the development of a fuller
record before the question of on-site versus off-site construction
(or fabrication) should be reached. This is such a case. Upon
completion of the Administrator's inquiry the Administrator should
furnish his report and position thereon. All parties shall have
the same opportunity to file simultaneous supplemental statements.
PRESIDING MEMBER PETERS, CONCURRING
Member Rothman would remand the case to the Wage and Hour
Division for further development of the record on several points.
I do not agree that all the points enumerated by my colleague are
necessarily relevant to resolution of this case -- in particular,
I do not think that further information on the relationship between
AHI, NSI and NSI's parent would be helpful in resolving the [6]
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[7] coverage issue. I do agree, however, that this matter should
be remanded to the Wage and Hour Division. Since it would serve
the interests of administrative efficiency for all items of
interest to the Members of the Board to be addressed on remand so
that the Board can expeditiously reach a final disposition of this
matter upon completion of the remand, I concur in Member
Rothman's opinion remanding this matter to the Wage and Hour
Division.
In addition, I would like to make the following points.
First, the central issue is whether AHI's employees who assembled
wall panels at a warehouse about 6-8 miles from the project site
were employed upon the "site of the work" as defined in the
Department of Labor's regulation at 29 C.F.R. 5.2(l). As that
regulation has been applied in the past by Wage and Hour and by
this Board, I think that the work done by employees at the
warehouse would be covered for Davis-Bacon purposes. That is, the
warehouse would be considered sufficiently proximate to the project
site to satisfy the geographic prong of the two-part test set forth
at 29 C.F.R. 5.2(l)(2), and the functional prong of the test would
also be satisfied in the circumstances of this case.
While this matter was pending before the Board, however, the
D.C. Circuit issued its decision in Building and Construction
Trades Department, AFL-CIO v. U.S. Dept. of Labor ("Midway
Excavators"), (May 17, 1991), rehearing denied (July 18, 1991). In
that decision the court of appeals declared 29 C.F.R. 5.2(j)
invalid, insofar as that regulation provided for coverage of
offsite material delivery truck drivers. The court of appeals also
specifically noted that it was not ruling on the validity of the
Department's site of work regulation -- 29 C.F.R. 5.2(l). As
counsel for the Acting Administrator properly observed at oral
argument in the instant matter, Section 5.2(l) remains a valid
regulation, and the Department is obliged to adhere to the terms of
its own regulations. However, counsel also properly and
responsibly stated that it is possible that the court's decision in
Midway Excavators could have some implications for Section
5.2(l), and that the Acting Administrator had not yet reached a
final decision regarding the impact of Midway Excavators on Section
5.2(l). After oral argument was held in this matter, the D.C.
Circuit denied rehearing in Midway Excavators and the government
determined that it would not seek Supreme Court review of the court
of appeals' decision. Given these intervening events, it
now seems appropriate to expect that upon remand of this matter the
Acting Administrator, in order to assist the Board in making an
appropriate disposition in this case, will state and explain his
position on the impact -- if any -- of the court of appeals' Midway
Excavators decision on the interpretation and application of
Section 5.2(l).
Secondly, and as noted by Member Rothman, the NSI/AHI purchase
order called for AHI to furnish a large number of items. By the
time this matter reached the Board, however, the only item
apparently in controversy was the [7][8] fabrication of stud wall
panels. I agree with Member Rothman that it would be very helpful
to resolution of the issues before the Board to have further
information on where, by whom and how the items such as floor and
roof trusses were fabricated. From the record currently before us
we are unable to tell, for example, whether the trusses were
fabricated by one of the established suppliers in the Ft. Drum area
and a determination was made that this work came within the
materialman exemption, or whether a determination was made that
the work of fabricating some items was covered but that shop
classifications and wage rates were appropriate, or whether some
other set of factual circumstances underlies this case. In any
event, further development of the record in this area will assist
the Board in reviewing both the site of work and the conformance
classification and wage rate determinations made by the Acting
Administrator in this matter. [8]
