CCASE:
CALCULUS INC.
DDATE:
19931029
TTEXT:
~1
[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
CALCULUS, INC., WAB Case No. 93-06
Contractor
BEFORE: Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
DATED: October 29, 1993
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
the Administrator of the Wage and Hour Division for review of the
March 5, 1993 decision and order of Administrative Law Judge
("ALJ") Donald W. Mosser. The ALJ determined that "per diem"
payments by contractor Calculus, Inc. ("Calculus") to its employees
were creditable toward prevailing wage payments. For the reasons
set forth below, the petition for review is granted and the
decision and order of the ALJ regarding the per diem payments is
reversed.
I. BACKGROUND
Calculus entered into Contract No. F29651-87-C0091 on
September 30, 1987. The contract called for Calculus to install
overhead cranes and construct a breakroom in a building at Holloman
Air Force Base near Alamogordo, New Mexico. Work on the contract
began in December 1987 and was completed in the spring of 1988.
The wage determination included in the contract listed the
following hourly wage rates, including fringe benefits: Laborers,
Group I, $11.16; Laborers, Group II, $11.41; Iron Workers, $17.52;
Painters, $10.23.
Holloman Air Force Base is about 100 miles from the El Paso,
Texas area, where most of Calculus' employees reside. Calculus'
operations manager would not allow the employees to commute on a
daily basis from El Paso to Holloman because work on the project
was to start at 7:00 a.m. The operations [1]
~2
[2] manager required the employees to travel from El Paso on Sunday in a
company- owned truck and to return to El Paso in the company truck at
the end of the work week. The employees all stayed in the same motel in
Alamagordo. The motel was selected by Calculus' operations manager.
Calculus had an employee policy manual. A provision of the
manual adopted specifically for the contract involved in this case
provided:
You may choose the method that you wish to be paid so
that you can take advantage of the most favorable tax
breaks. Once the majority of the employees on a
particular contract choose a method of payment; the
company will not change the method until that particular
contract is over. (i.e., If a contract calls for a
salary of $16.00 an hour for a certain craft and your
base salary is $7.00 per hour. You may choose to take
$6.25 an hour for a maximum of $50.00 per day as per diem
with the taxable hourly salary of $9.75 per hour. The
per diem maximum is based on allowable per diems that the
government itself uses.
Your actual salary is $16.00 per hour and you are
required to maintain all records for the Internal Revenue
Service. Calculus Inc. does not care where you live, how
you spend your money, or does not expect any records from
you. We do expect you to be at the job location at the
designated time your supervisor gives you.
This per diem policy arose from the suggestion from one of
Calculus' employees that a policy be considered to reduce the
employees' tax withholdings from the wages to be paid under the
contract. With respect to all the employees who initially worked
on the project, Calculus designated $50 per day of their wages as
per diem. All but one of the employees later assigned to the
project were also paid in that manner. Calculus hired one employee
who resided in the Alamagordo area; that employee was paid the
prevailing wage rates without any designation of per diem payments
from wages.
A Department of Labor compliance officer investigated
Calculus' performance under the contract in the spring of 1988.
The compliance officer compared Calculus' certified Davis-Bacon
payrolls with Calculus' own payroll records and found the certified
payrolls to be incorrect. He decided that Calculus did not pay the
required prevailing wage rates because Calculus designated a
portion of the wages as per diem. The compliance officer
determined that the amounts designated as per diem represented
underpayment of the prevailing wage rates. The compliance officer
also disallowed as fringe benefits the amounts claimed by Calculus
for premiums paid on workers' compensation insurance for its
employees. The compliance officer determined that Calculus
underpaid 11 of its employees a total of $16,132.02, and the Air
Force withheld that amount from [2]
~3
[3] the accrued payments under the contract. Calculus subsequently
revised its certified payrolls to correct errors noted by the compliance
officer. On the revised payrolls Calculus listed the per diem payments
as fringe benefits.
A hearing was held before the ALJ on April 21, 1992, and the
ALJ issued a decision and order on March 5, 1993. The ALJ stated
that the "evidence in this case convinces me that Calculus
designated wages of its employees as per diem solely for the
benefit of the employees" (ALJ's Decision ("ALJD") at p. 10). The
ALJ further stated (Id.):
This proceeding principally relates to whether Calculus'
employees were underpaid under the contract because of
the per diem designation. I find they were not. They
received the same under this arrangement as they would
have received had Calculus paid them the full amount of
wages without such designation because the company was
under no obligation to pay the employees' travel
expenses.
The ALJ rejected Calculus' claim that the workers'
compensation insurance premiums paid by Calculus for its employees
should be credited as fringe benefits.
II. DISCUSSION
Upon review, the Board concludes the portion of the ALJ's
decision and order pertaining to the per diem payments must be
reversed. The Davis-Bacon Act and Department of Labor regulations
require that employees be paid the full amount due each week at a
rate not less than the applicable prevailing wage rate. 40 U.S.C.
276a(a); 29 C.F.R. 5.5(a)(1). Furthermore, the Davis-Bacon Act,
as amended in 1964, defines "wages" and "wage rates" to include the
basic hourly rate of pay, and the rate of contribution or costs
reasonably anticipated for bona fide fringe benefits. Thus, as
noted by the Administrator (Petition, at p. 5), in order for board
and lodging reimbursement to be creditable toward the employer's
obligations under the Davis-Bacon Act, such subsistence payments
must be determined to be either part of the basic rate of pay or a
bona fide fringe benefit. However, the guidance set forth in the
Wage and Hour Division's Field Operations Handbook ("FOH") states
that subsistence payments are not wages, are not considered to be
bona fide fringe benefits, and do not constitute permissible
deductions from employees' wages. The FOH states (at 15f18): [3]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Prior to the hearing before the ALJ, the parties agreed that
$787.75 be released to Calculus. Of the remaining $15,344.27
remaining in dispute, $11,507.76 represented the per diem payments
and $893.26 represented the workers' compensation insurance
payments. The remaining $2,943.25 represented Calculus' agreed
unpaid wages. [3]
~4
[4] Where an employer sends employees who are regularly
employed in their home community away from home to
perform a special job at a location outside daily
commuting distances from their homes so that, as a
practical matter, they can return to their homes only on
weekends, the assumption by the employer of the cost of
the board and lodging at the distant location, not
customarily furnished the employees in their regular
employment by the employer, and of weekend transportation
costs of returning to their homes and reporting again to
the special job at the end of the weekend, are considered
as payment of travel expenses properly reimbursable by
the employer and incurred for its benefit. Such payments
are not considered bona fide fringe benefits within the
meaning of the [Davis-Bacon and Related Acts], are not
part of the employees' wages, and do not constitute
board, lodging, or other facilities customarily furnished
which are deductible from the predetermined wage pursuant
to [29 C.F.R.] 3.5(j).
Permissible deductions from Davis-Bacon wages are listed at 29
C.F.R. 3.5. The regulatory provision cited in the FOH (29 C.F.R.
5.2(j)) specifies that a deduction from wages may not be made for
more than the "reasonable cost" of board, lodging or other
facilities that meet the requirements of Section 3(m) of the Fair
Labor Standards Act ("FLSA"). Section 3(m) of the FLSA provides
that wages may include the "reasonable cost" of furnishing board,
lodging or other facilities "if such board, lodging, or other
facilities are customarily furnished by [the] employer to his
employees." (Emphasis supplied.) If such deductions are made,
additional records must be kept as required under 29 C.F.R. 516.27.
The Department's regulations also set forth (at 29 C.F.R. Part 531)
an interpretation of the requirements of Section 3(m) of the FLSA.
Under 29 C.F.R. 531.3(d), the cost of furnishing facilities that
are found by the Administrator of the Wage and Hour Division to be
primarily for the benefit or convenience of the employer will not
be recognized as a "reasonable cost."
The application of these legal principals to the facts of this
case leads the Board to the conclusion that Calculus' per diem
payments to its employees were not properly creditable toward the
required prevailing wage payments. First, Calculus' only witness
at the ALJ hearing testified that Calculus did not keep any
additional records regarding the per diem payments. Furthermore,
the record shows that Calculus did not customarily furnish board
and lodging to its employees, but did so only on the contract
involved in this case. Therefore, the per diem payments did not
meet the requirements of law and regulation that board and lodging
must be "customarily furnished" by an employer to its employees in
order to be creditable toward wages, and that additional records
must maintained by the employer. In addition, the record does not
support the ALJ's determination that the board and lodging was not
"primarily for the benefit and [4]
~5
[5] convenience of the employer," but instead was for the benefit of the
employee. As aptly stated by the Administrator (Petition, at p. 7):
[T]he evidence in the record reveals that the employees
had no choice about whether to accept the per diem in
lieu of the full prevailing wage payments just as they
had no choice about whether to commute to the job or stay
at the hotel selected by Calculus. Since employees were
required to remain at the job site during the week and
return on Sunday night, there can be no other conclusion
than that the facilities were for the benefit and
convenience of the employer. Accordingly, the per diem
payments are not permissible deductions from the wages
earned by Calculus' employees.
This Board also agrees with the Administrator that the
subsistence payments are not bona fide fringe benefits within the
meaning of the Davis-Bacon Act. Subsistence payments are not among
the fringe benefits enumerated in the Act. The Administrator notes
(Petition, at pp. 8-9) that the Davis-Bacon Act does allow the
Department of Labor to recognize other bona fide fringe benefits
--other than those specifically enumerated in the Act -- as those
other benefits become prevailing. The Administrator adds, however
(Id. at p. 9), that the legislative history of the 1964 amendments
to the Act show that Congress viewed the Act as listing all the
benefits that were common to the industry at the time of the
amendments. "Since subsistence expenses were common at the time
Congress enacted the fringe benefit amendments, but were not
enumerated in the Act," states the Administrator, "the Department
has never recognized such items as bona fide fringe benefits."
Calculus has presented no argument to this Board that would warrant
disturbing the Department's approach to subsistence payments. See
Cody-Zeigler, Inc., WAB Case No. 89-19 (Apr. 30, 1991).
In sum, the ALJ's decision and order as it pertains to
subsistence payments is reversed.
BY ORDER OF THE BOARD:
Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Gerald F. Krizan, Esq.
Executive Secretary [5]
