ENERGY ENGINEERING & CONTROLS, INC., WAB No. 92-19 (WAB Mar. 31, 1993)
CCASE:
ENERGY ENGINEERING & CNTRLS INC & S.C. WAGNER
DDATE:
19930331
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
ENERGY ENGINEERING & WAB Case No. 92-19
CONTROLS, INC. &
STEPHEN C. WAGNER
BEFORE: Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Anna Maria Farias, Member
DATED: March 31, 1993
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition
of Energy Engineering and Controls, Inc. and Stephen C. Wagner
("Petitioners" or "EEC"), seeking review of the September 22, 1992
Decision and Order issued by Administrative Law Judge ("ALJ") Paul
H. Teitler. In his Decision and Order ("ALJD"), the ALJ found that
EEC had committed violations of the prevailing wage provisions of
the Davis-Bacon Act (40 U.S.C. [sec] 276a et seq.; "the Act") and
submitted to contracting agencies falsely certified payrolls which
reflected payment consistent with the Act's requirements. The ALJ
concluded that these wage and recordkeeping violations were a
"disregard of [Petitioners'] obligation to their employees within
the meaning of Section 3(a) of the Davis-Bacon Act." ALJD at p.
53. Based on his findings and conclusions, the ALJ ordered that
Petitioners be debarred from federal and federally-assisted
contracting eligibility for a period not to exceed three years.
Id.
Petitioners seek reversal of the ALJ's findings and
conclusions on numerous grounds, enumerated and discussed infra at
pages 3 and 4-7. For the following reasons, the Petition for
Review is denied and the ALJ's Decision and Order is affirmed, as
modified herein, to conform to applicable law. [1]
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[2] I. BACKGROUND
Petitioners were the successful bidders on eight federal
construction contracts -- awarded between September 1987 and June
1988 -- which were subject to the prevailing wage requirements of
the Act /FN1/. Each of the contracts was for the construction,
alteration or repair of a federal public work and was for an amount
in excess of $2,000, the Act's threshold dollar limit for coverage.
Further, the contracts were subject to various wage determinations
issued pursuant to the Act, specifying the rates of wages and
fringe benefits for various classifications of employees performing
construction work on the projects. ALJD at pp. 43-46.
Two Senior Investigators of the Wage and Hour Division
conducted investigations of Petitioners' compliance with the Act.
Both investigators reported similar practices which they alleged to
be violations. Specifically, the investigators determined that
employees on the respective federal construction projects were not
paid in accordance with the requirements of wage determinations
which were made a part of each of the eight contracts. See ALJD at
pp. 43-46, 50. Generally, employees were paid at wage rates far
below the requirements of the Act and the applicable wage
determinations.
The investigators alleged that Petitioners' employees were
paid actual hourly earnings equal to the amounts shown on internal
company payroll records which were known as "Individual Payroll
Certifications." However, both investigators reported that
Petitioners submitted certified payrolls to the various federal
contracting agencies which purported -- in most cases -- to show
much higher hourly wage payments which were in compliance with the
requirements of the Act and the wage determinations. Both
investigators further determined that the certified payrolls were
falsified to show payment of hourly rates which simulated
compliance with the Act. ALJD pp. 51-52. Further, it was reported
that certain of EEC's employees were alternately listed in the
certified payrolls as employees or independent contractors, while
performing the same work under the contracts. [2]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/The ALJ rejected Petitioners' contention that two of the
contracts were subject to the prevailing wage provisions of the
McNamara-O'Hara Service Contract of 1965, as amended (41 U.S.C.
[sec] 351 et seq.). This question was not preserved on appeal and
we decline to address it. [2]
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[3] At the conclusion of the investigations, EEC was presented
with computations for back wages allegedly owed for work under the
contracts. Restitution in excess of $6,600 was made and paid to
affected employees as back wages owed pursuant to the Act. /FN2/
Following the investigation, an Order of Reference was issued
by the Wage and Hour Division, commencing an administrative hearing
process under 29 C.F.R. 5.12(b). Three-year debarment for
disregard of obligations to EEC's employees -- within the meaning
of section 3(a) of the Act -- was sought. After prehearing
discovery, a hearing was conducted before ALJ Teitler May 4-6,
1992. Witnesses were called and five testified for the government
and one for EEC; documentary evidence and post-hearing briefs were
submitted by both sides.
In his September 22, 1992 Decision and Order, the ALJ found
that wage underpayments in violation of the Act and contracts had
been committed by EEC. He further found that certain employees
were misclassified and that EEC had failed to post applicable wage
determinations at the respective job sites. Finally, the ALJ found
that EEC had deliberately falsified certified payrolls to simulate
compliance with the requirements of the Act.
Petitioners sought Board review of the ALJ's decision,
alleging several grounds for appeal. First, the credibility
determinations made by the ALJ were challenged as "inherently
contradictory." Petitioners protest the Wage and Hour Division's
decision to seek their debarment as contrary to "longstanding
operating procedure of the Wage and Hour Division - i.e., to forego
debarment proceedings in return for an uncontested payment of back
wages allegedly due." Petitioners further challenge the propriety
of the ALJ's "overturn[ing] the settlement agreement reached by the
parties." Petitioners also object to the debarment proceeding as
an abuse of prosecutorial discretion. Finally, Petitioners seek
review of the ALJ's use of an improper legal standard in ordering
their debarment.
Oral argument of the issues raised by the Petition for Review
was conducted on March 2, 1993. Both parties were represented by
counsel.
II. DISCUSSION
Initially we address several preliminary matters raised by
the parties. First, we reject the Acting Administrator's
suggestion that this matter should be summarily dismissed, given
the lack of statements of specific factual or legal [3]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ A nominal amount -- less than $20.00 -- was assessed and paid
as restitution for violation of the overtime provisions of the
Contract Work Hours and Safety Standards Act (40 U.S.C. [sec] 327
et seq.). [4]
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[4] reasons in support of the petition for review. See, 29 C.F.R.
6.34, 7.9(b). The petition for review in this case admittedly
could have been more specific in citing grounds for review;
however, we do not conclude that the petition was so unspecific
that the case should be summarily dismissed.
Secondly, Petitioners have requested the Board to compel the
production of four broad categories of documents -- dealing
specifically with the settlement purportedly reached in this case
and generally with respect to Wage and Hour Division policy
regarding settlement of back wage and debarment cases. No
authority has been cited for the proposition that the Board may
compel the production of documents. Assuming for the sake of
argument, that the Board did possess such inherent power, we would
decline to order production of investigative documents -- otherwise
subject to protection under the Freedom of Information Act /FN3/ --
based only "[u]pon information and belief . . . that it is standard
Wage and Hour practice not to seek debarment upon voluntary payment
of back wages." Petitioners' Second Request for Production of
Documents, p. 1. Our experience as the appellate forum for Davis-
Bacon enforcement cases is that debarment is often sought in
situations where, as here, voluntary restitution of back wages has
been made. See, e.g., G & O General Contractors, Inc., WAB Case
No. 90-35 (Feb. 19, 1991); Jen-Beck Associates, Inc., WAB Case No.
87-02 (July 20, 1987).
We also reject Petitioners' efforts to add to the record two
letters (dated October 20 and October 26, 1989 and addressed to
Petitioners by the Wage and Hour Division). These letters, after
all, [*] were addressed to Petitioners [*], and there is no claim
that these letters were not in the possession of Petitioners at the
time of the evidentiary hearing [*emphasis in text*]. Petitioners,
however, did not introduce the letters into evidence, nor did they
make any reference to these letters at the hearing. The Board
concludes that there are no "extraordinary circumstances" within
the meaning of the Board's regulation at 29 C.F.R. 7.1(e) which
would warrant either accepting these letters into evidence at this
late date, or remanding this matter to the ALJ for consideration of
additional evidence.
Petitioners' exception to the ALJ's credibility findings as
being inherently contradictory and therefore subject to reversal is
not persuasive. Apparently this point of appeal is based on the
ALJ's findings that EEC's president, Stephen C. Wagner (as well as
his bookkeeper), admitted that the certified payroll information
submitted to contracting agencies was known by them to be false at
the time the certified payrolls were prepared. The certified
payrolls were known by these witnesses to be false. They knew that
the wages actually paid employees [4]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN3/ To the extent that these unspecified documents are public
information or otherwise subject to disclosure, the Board is not
the proper forum for such requests. See 29 C.F.R. 70.4(a),
70.19(a).
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[5] by EEC and the actual hours worked by employees were
substantially different from those certified to the contracting
agencies by EEC as true and accurate. EEC maintained records of
actual wages paid and hours worked in separate internal company
documents. The ALJ accepted the testimony -- amounting to
admissions -- by Wagner that the certified payrolls were false.
However, the ALJ did not find credible Wagner's testimony to the
effect that Wage and Hour Investigator Brennan agreed with Wagner
to drop further action with respect to possible debarment in
exchange for EEC's voluntary payment of assessed back wages.
Wagner testified that Wage and Hour Investigator Brennan
told him that debarment was less likely upon voluntary payment of
the back wages assessed during the investigation. However,
Investigator Brennan denied making any such representation; the
other investigator testified that she specifically notified
Petitioners of the possibility of debarment where her conclusion
was that certified payrolls -- as in this case -- had been
falsified. Finally, Investigator Brennan's testimony that
decisions to proceed with debarment were made in the Wage and Hour
Division's National Office persuaded the ALJ that the
investigators' testimony was more credible than Wagner's on this
point and he found that there had been no promise made by the
investigators that debarment would not be sought if the assessed
back wages were paid.
The ALJ is in the unique position to judge the quality of
testimony and the demeanor of witnesses during a hearing. In the
absence of clear error on the part of an ALJ, the Board is
reluctant to set aside "credibility resolutions and factual
findings and the weight [] accorded to the record evidence." Milnor
Construction Corporation, WAB Case 91-21 (Sept. 12, 1991), slip op.
at p. 4. Accordingly, we find no error in the ALJ's determination
of credibility on this issue.
Several of EEC's challenges to the ALJ's Decision and Order
rest upon Petitioners' contention that the Wage and Hour Division
entered a settlement agreement with them and agreed to forgo
debarment upon payment of the back wage assessment. As noted
above, we reject Petitioners' direct submission to the Board:
copies of two Wage and Hour Division letters (dated October 20 and
October 26, 1989) proffered as evidence of the government's
agreement to forgo debarment proceedings in this case. However,
even if we were to accept this belated attempt to introduce these
letters into the record, we would be compelled to conclude that
neither letter supports Petitioners' argument; the letters merely
reference the Wage and Hour investigation and recite the parties'
agreement to conclude allegations of wage violations by payment of
certain amounts due employees pursuant to the Act. No mention
whatsoever is made of debarment.
We find no basis in the record for estopping the government's
debarment proceeding. As we noted, supra, there is no basis --
given the ALJ's credibility [5]
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[6] determinations -- to find that any oral promise to forgo debarment
was ever made. Nor is there support in the record for the existence of
a written agreement. Thus, the case of Northwest Foam Systems, Inc.,
WAB Case No. 88-15 is not on point with the facts of the instant matter.
In Northwest Foam, the parties had specifically agreed that the legal
standards required for debarment had not been met; the Board therefore
properly reversed the ALJ's debarment order in that case as an improper
usurpation of the parties' consent findings.
Finally, we reach several substantive issues raised by the
ALJ's conclusions of fact and law with regard to debarment in this
case. In this case, the ALJ's findings that wage underpayments
were committed and certified payrolls were falsified to simulate
compliance with the Act are well supported by the testimony of
employee witnesses, the admissions of the Petitioners' president
and bookkeeper, and documentary evidence establishing the wage
underpayments and falsity of the certified payrolls. Petitioners
have not, in fact, contended during this appeal that wage
violations were not committed; nor have they argued that the
certified payrolls were not falsified. Accordingly, the findings
of prevailing rate violations and certified payroll falsification
are unchallenged before us and we affirm the ALJ's findings of fact
in their totality.
It has long been settled that underpayment of prevailing
wages coupled with falsification of certified payrolls constitutes
disregard of a contractor's obligations to employees. As held in
R. J. Sanders, Inc., WAB Case No. 90-25 (Jan. 31, 1991), the
submission of falsified payrolls raises a prima facie case that the
violations were intentional. See generally, J & L Janitorial
Services, Inc., WAB Case No. 86-10 (Nov. 13, 1986); Marvin E.
Hirchert d/b/a M & H Construction Company, WAB Case No. 77-17 (Oct.
16, 1978); and C.M. Bone, Acme Painting Co., WAB Case No. 78-04
(June 7, 1978), reconsideration denied, Sept. 13, 1978.
Petitioners finally claim reversible error in their exception
to the ALJ's application of an improper legal standard in
determining and ordering their debarment. The ALJ apparently did
consider whether there were "extraordinary circumstances in the
case sub judice which would warrant anything less than a three-year
debarment." ALJD at p. 53. The ALJ ordered debarment "not to
exceed three years," citing as authority 29 C.F.R. 5.12(a)(1).
This was error /FN4/ but we conclude that it was harmless error.
The ALJ clearly and specifically [6]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN4/ Debarment under the Davis-Bacon Act is for a mandatory three-
year period given a finding of "disregard of obligations" to
employees. G & O General Contractors, Inc., supra. A shorter
period of debarment -- authorized under 29 C.F.R. 5.12(a)(1) -- for
violations of the so-called Davis-Bacon Related Acts may be in
order if there is a finding of "extraordinary circumstances." See,
e.g., A. Vento Construction, WAB Case No. 87-51 (Oct. 17, 1990) (29
WH 1685), at p. 15, and cases cited therein at p. 7 n.4.
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[7] made the findings requisite to debarment under the Davis-Bacon
Act: wage violations were committed and false certified payrolls
-- simulating compliance with the Act -- were submitted to the
federal contracting agencies. More important than the ALJ's
allusion to the Related Acts' debarment standard, in our opinion,
was that the ALJ agreed with the government's contention that the
wage and payroll violations were a "disregard of obligations" to
EEC's employees within the meaning of Section 3(a) of the Act. See
generally, ALJD at pp. 51-53. This is the correct legal standard
for determining whether debarment is appropriate under the Davis-
Bacon Act. The fact that the ALJ may have considered a shorter
debarment period possible does not affect the ALJ's application of
the "disregard of obligations" standard.
For the foregoing reasons, the ALJ's Decision and Order is
affirmed, with the following proviso to the ALJ's Order: It is
hereby Recommended that the names of Energy Engineering & Controls,
Inc. and Stephen C. Wagner be placed on the ineligible list
pursuant to 29 C.F.R. 5.12(b) for a period of three years.
BY ORDER OF THE BOARD:
Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Anna Maria Farias, Member
Gerald F. Krizan, Esq.
Executive Secretary [7]
