PATTON-TULLY TRANSPORTATION CO., WAB No. 93-13 (WAB May 6, 1994)
CCASE:
PATTON-TULLY TRANSPORTATION CO.
DDATE:
19940506
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
PATTON-TULLY WAB Case No. 93-13
TRANSPORTATION CO.
BEFORE: Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
DATED: May 6, 1994
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board upon the
petition of Patton-Tully Transportation Co. (``Patton-Tully'')
for review of a May 12, 1993 ruling (``Ruling II''), issued by
the Acting Administrator of the Wage and Hour Division. The
Acting Administrator determined that Davis-Bacon labor standards
were applicable to work contracted by Patton-Tully to
subcontractor John Massman Contracting Company (``Massman''),
which in turn contracted with lower-tier subcontractor J.C.I.
Industries (``JCI''). JCI employees quarried stone and hauled
the stone from a quarry for use on the Missouri River
stabilization project. For the reasons stated below, the Acting
Administrator's ruling is affirmed.
I. BACKGROUND
A. Procedural and factual background
This matter was previously considered by the Board in a
related case (Patton-Tully Transportation Company, WAB Case No.
90-27 (Mar. 12, 1993)(``Patton-Tully I''). That case was
similarly before the Board on a petition for review filed by the
Patton-Tully, seeking review of a March 27, 1990 ruling issued by
the Acting Administrator. In that ruling, the Wage and Hour
Division determined that Davis-Bacon labor standards provisions
were applicable to rock quarry workers who quarried stone and to
truck drivers who hauled the rock for a second-tier subcontractor
working on the Missouri River stabilization project under a
contract with the Corps of Engineers. A full discussion of the
facts underlying that earlier proceeding -- and the dispute at
issue here -- are contained in the Board's decision in Patton I.
In Patton-Tully I, we affirmed the Acting Administrator's
Davis-Bacon coverage determination to the quarrying and hauling
work conducted at one of the quarries -- the Marion Quarry.
However, we concluded that the Wage and Hour Division's ruling
was insufficient to impose coverage on the work conducted at and
from the remaining quarry, which was the Meyer Quarry. The Board
accordingly remanded the question of coverage for the Meyer
Quarry to the Acting Administrator for reconsideration and a new
determination, stating:
We agree with Acting Administrator (Response, at
p. 10) that Davis-Bacon coverage of JCI's operations at
the Meyer Quarry is a ``closer question'' than coverage
of the Marion Quarry. The Board concludes that this
matter must be remanded to the Wage and Hour Division
for reconsideration and further explanation of whether
the Meyer Quarry meets the functional prong of the
``site of the work'' test set forth in 29 C.F.R.
5.2(l)(2), and whether the Meyer Quarry operation is
exempt from coverage pursuant to 29 C.F.R. 5.2(l)(3).
As noted earlier, sales in excess of 11,000 tons of
stone had been made to various parties from the Meyer
Quarry in the year preceding this government contract.
Furthermore, the Acting Administrator found that during
the period of the contract 1,532 tons were identified
as used for purposes other than the river channel
stabilization project (Petitioner asserts that these
other sales may have totaled as much as 4,280 tons
during the period of Davis-Bacon work).
The Acting Administrator acknowledges (Response,
at pp. 12-13) that if the owners of the Meyer Quarry
``had utilized their own equipment and employees to
provide rock to Massman, and could show that their
quarry operation was permanent in nature and that they
had prior significant commercial sales, their operation
would be excluded from coverage under [29 C.F.R.
5.2(l)(3)], even if all of their production during the
time of the government contract was used on the
government contract.'' Nevertheless, the Acting
Administrator argues (Id. at p. 11), that the facts of
this case ``do warrant separate treatment of the
Massman/JCI quarrying operation from other sales made
by the Meyer quarry owners.'' The ruling letter of the
Acting Administrator treats the subject of commercial
sales prior to and during the period of this government
contract in the following manner:
The fact that the quarry owners may have made
limited commercial sales prior to and during
the Corps of Engineers contract does not
defeat Davis-Bacon coverage. Those
commercial sales by the quarry owners were
separate and distinct from the quarry
operation established by Massman, and
performed by JCI, pursuant to the leases.
Having stated, however, that the ``commercial
sales by the quarry owners were separate and distinct
from the quarry operation established by Massman, and
performed by JCI,'' the Acting Administrator's ruling
letter does not explain why this distinction between
the commercial sales by the quarry owners and the
operations performed by JCI make a difference for
purposes of Davis-Bacon coverage. As noted above, the
Acting Administrator acknowledges to this Board that if
the quarry owners had used their own employees and
equipment to provide stone to Massman and if the owners
could show that they had made prior significant
commercial sales, their operation would be excluded
from coverage pursuant to 29 C.F.R. 5.2(l)(3) (see n.2,
supra). We make the further observation that under the
current state of the law, if the quarry owners had
utilized the employees of JCI, Massman or Patton-Tully
to quarry the stone and haul it to the barges for
delivery to the channel stabilization project, their
operation would likewise be excluded from coverage.
Thus, it seems imperative to us that the coverage
ruling with respect to the Meyer Quarry be
reconsidered, and if the same result is reached upon
reconsideration, that the rationale for coverage be
adequately explained.
Patton-Tully I, supra at pp. 9-10.
B. The Acting Administrator's ruling on
reconsideration
In his ruling on remand, the Acting Administrator examined
the questions identified in Patton-Tully I as insufficient to
support the prior coverage ruling, i.e., ``whether the Meyer
Quarry meets the functional `site of the work' test at 29 CFR
5.2(l)(2), and if so, whether it meets the exception from
coverage set forth at 29 CFR 5.2(l)(3).'' Ruling II, p. 1. In
short, the Acting Administrator ruled that the disputed quarry
did meet the ``functional `site of the work''' test and,
moreover, that Massman and JCI failed to meet the requirements
for exception from coverage of off-site work locations.
Wage and Hour's ruling led with a recitation of relevant
facts. For clarity, the Acting Administrator's full recitation
of the operative facts with respect to the Meyer Quarry follow:
On July 9, 1986, the Corps awarded Contract No.
DACW-41-86-C-0122 for channel stabilization work to
Patton-Tully Transportation Company who in turn
subcontracted the performance of the contract work to
John Massman Contracting Company (Massman). There is
no dispute that Massman is a construction subcontractor
for this contract. On January 17, 1987, Massman leased
the Meyer Quarry from its owners, Vester and Darlene
Meyer and Edna Meyer. The terms of the lease granted
Massman the right to quarry, dig, blast in and upon
such premises, and to remove from such premises any
rock and stone produced to effect the performance of
Contract No. DACW-41-86-C-0122. The relationship
between Massman and the quarry owners was -- as
stipulated in the agreement -- that of landlord and
tenant. The owners have no direct relationship to the
channel stabilization project.
Massman entered into an agreement with JCI
Industries (JCI) to perform the actual quarrying
activities and the hauling of rock from the Meyer
Quarry to the river barges. As no quarry equipment was
on the site, JCI moved its equipment and employees onto
the Meyer Quarry. The firm hauled 36,775.71 tons of
product from the Meyer Quarry between March 3 and March
14, 1987 to various points along the river at distances
ranging from 16 to 60 miles. Thereafter, Massman
obtained its rock product from a commercial quarry
known as the St. Charles Quarry.
The record states that the Meyer property was
converted to a quarry some 30 to 40 years prior to
1987. However, the Corps' contracting officer asserts
that the Meyer quarry was opened only when a government
contractor was performing in the vicinity. The
landowner, Vester Meyer, stated that he sold products
from the quarry to buyers other than Massman. Mr.
Meyer lists fifteen other buyers who purchased stone
from March 20, 1985 through June 24, 1987 for a total
tonnage sold of approximately 15,000.
Ruling II, pp. 1-2; footnote omitted.
Initially, the Acting Administrator noted the Board's
approval of Wage and Hour's first determination that the Meyer
Quarry met the geographic proximity test required for a
determination of coverage. Patton-Tully I, supra at p. 8. The
Acting Administrator correctly also noted that the geographic
test with respect to the Meyer Quarry dispute was no longer at
issue.
Next, Wage and Hour concluded that Massman and JCI were
subcontractors within the meaning of the Davis-Bacon Act. Thus,
the Acting Administrator reaffirmed his first ruling's conclusion
that ``commercial sales by the quarry owners were separate and
distinct from the quarry operation established by Massman, and
performed by JCI, pursuant to the leases.'' The Acting
Administrator found that Massman and JCI had an ``obligation'' to
fulfill the specifications of the Corps of Engineers' contract,
whereas, the owners of the quarry did not. That is, a clear
distinction was found between the land owners' purported
operation and the Massman/JCI operation, given that the
subcontracts were under contractual obligation (through prime
contractor Patton-Tully) to supply materials for the construction
project. Thus, ruled the Acting Administrator, Massman -- which
was Patton-Tully's subcontractor -- and JCI (the lower-tier
subcontractor) were construction contractors or subcontractors
for the channel stabilization project. See Ruling II, pp. 3-4.
In addressing the question of whether the Meyer Quarry met
the ``functional'' prong of the regulatory test at 29 C.F.R.
5.2(l)(2) for coverage of off-site work locations, the Acting
Administrator found that
the location and continuance of [the subcontractors']
quarrying operations were clearly dependent on the
Corps contract. The lease, on its face, granted
Massman the right to quarry stone only for the duration
of [the] contract, and JCI did not continue a permanent
operation at the quarry.
Id. at p. 5. Thus, he concluded that any commercial sales by the
quarry owners notwithstanding, the separate operation of the
subcontractors was dedicated exclusively, or nearly so, to a
particular government contract -- the channel stabilization
project.
Finally, the Acting Administrator determined that the
subcontractors did not qualify for exception from coverage
because the Meyer Quarry was not a commercial supplier's or
materialman's operation established by a supplier of materials
for the project prior to opening of bids for the Corps of
Engineers' project. In the first place, reasoned the Acting
Administrator, Massman and JCI were clearly subcontractors and
not commercial suppliers within the meaning of the regulation at
29 C.F.R. 5.2(l)(3). Secondly, the Massman/JCI operation at the
Meyer Quarry was clearly established long after the opening of
bids for the channel stabilization project. Finally, Wage and
Hour dismissed the possibility that the land owners had a
functioning, pre-existing quarry operation, given ``the absence
of information showing that the owners had a functioning business
to supply crushed or quarried stone on a regular and reoccurring
basis as opposed to a land leasing business with materialmen or
subcontractors who performed their own quarrying. . . .'' Id. at
p. 6.
Patton-Tully filed a petition for review of the May 12, 1993
ruling with the Board and subsequently filed a statement in
support of the petition. The Acting Administrator filed a
written opposition -- joined by interested person Building and
Construction Trades Department, AFL-CIO -- to Patton-Tully's
petition and statement. Oral argument of the issues raised was
conducted by the Board on January 11, 1994.
II. DISCUSSION
As in Patton-Tully I, the Davis-Bacon coverage question
presented here is governed by application of the Department of
Labor's ``site of the work'' regulation -- a duly promulgated
rule in effect at the time the channel stabilization project was
bid and construction was ongoing. The question of continuing
validity of 29 C.F.R. 5.2(l) remains under consideration by the
United States Circuit Court of Appeals for the District of
Columbia Circuit. The Court has heard argument in the appeal of
the decision of the United States District Court for the District
of Columbia in Ball, Ball and Brosamer, Inc. v. Martin, Civil
Action No. 91-3266 (CRR)(Aug. 18, 1992), appeal docketed No.
92-5366 (Oct. 9, 1992)(D.C. Cir.).
This Board is therefore limited to determining whether Wage
and Hour's application of the regulation in this case was
reasonable and not a departure from past determinations. Titan
IV Mobile Service Tower, WAB Case No. 89-14 (May 10, 1991), slip
op. at p. 7. We conclude that the Acting Administrator's
application of Davis-Bacon standards to Massman's and JCI's
quarrying and hauling operations is both a reasonable application
of the regulation and is consistent with past determinations.
The Acting Administrator in his ruling on remand from the
Board adequately explained Wage and Hour's distinction -- made
first in the 1990 ruling -- between the operations of Massman and
JCI on the one hand and that of the Meyer Quarry owners on the
other. Patton-Tully's subcontractor, Massman, undertook an
integral part of the Corps of Engineers' contract for the channel
stabilization project. JCI in turn assumed the obligation under
contract. The quarry owners -- as noted by the Acting
Administrator -- had no responsibility for supplying stone for
the project and acted only in the role of lessors to the
subcontractor and lower-tier subcontractor.
Wage and Hour's distinction between a contractor-in-fact and
an otherwise exempt materialman operating from the same off-site
location has previously been upheld by this Board. In an
analogous situation presented in the matter of Big Six, Inc., WAB
Case No. 75-03 (Jul. 21, 1975), an established batch plant
operator set up a batch plant at a commercial quarry -- owned by
a commercial operator -- from which it had purchased rock. The
Board ruled the temporary batch plant to be subject to
Davis-Bacon labor standards; the pre-existing commercial
operations were not affected. In finding Davis-Bacon coverage
for work at the batch plant, the Board stated:
. . . in the case of an established commercial batching
plant, it is not expected when work is awarded that the
prime contractor will do the work to provide the
materials that normally come from such sources. It is
for this reason, too, the established commercial quarry
or batching plant is said to be a ``materialman.'' In
such cases the established commercial operator
continues to do its own thing in its own way at the
same place. But where the prime contractor must do the
work with his own forces because no commercial operator
is established and ready to perform, another contractor
who takes on a part of the contractor's obligation to
do this becomes subject to the Davis-Bacon Act in the
same way.
Big Six, Inc., supra, slip op. at p. 11. We therefore conclude
the Acting Administrator's determination that Massman and JCI
were contractors or subcontractors within the meaning the
Davis-Bacon Act and the regulations was a reasonable
determination and not inconsistent with past administrative
practice or this Board's decisions. See, T.L. James Co., WAB
Case No. 69-02 (Aug. 14, 1969); Sweet Home Stone Co., WAB Case
Nos. 75-01 and 75-02 (Aug. 14, 1975).
There is no serious dispute that Massman's and JCI's
operations were ``dedicated exclusively, or nearly so'' to the
Corps of Engineers project, within the meaning of 29 C.F.R.
5.2(l)(2). The fact that the Meyer Quarry owners may have
themselves sold product from the quarry is simply not relevant to
determining the functional nature of the Massman/JCI operation at
the Meyer Quarry.
The final issue presented in this appeal is the Acting
Administrator's determination that Massman and JCI were not
entitled to the exemption provisions established under 29 C.F.R.
5.2(l)(3). This regulation provides:
Not included in the site of the work are permanent home
offices, branch plant establishments, fabrication
plants, and tool yards of a contractor or subcontractor
whose locations and continuance in operation are
determined wholly without regard to a particular
Federal or federally assisted contract or project. In
addition, fabrication plants, batch plants, borrow
pits, job headquarters, tool yards, etc., of a
commercial supplier or materialman which are
established by a supplier of materials for the project
before opening of bids and not on the project site are
not included in the site of the work Such permanent,
previously established facilities are not a part of the
site of the work, even where the operations for a
period of time may be dedicated exclusively, or nearly
so, to the performance of a contract.
The Board has agreed with the Acting Administrator that
Massman and JCI were subcontractors. We further conclude that
Wage and Hour was correct in finding that the location and
continuance of the subcontractors' Meyer Quarry operation was
conducted wholly with regard to the channel stabilization project
and that the first exemption under 29 C.F.R. 5.2(l)(3) is not
available on these facts. As noted by the Acting Administrator,
Massman's right to quarry stone in the Meyer Quarry was only for
the duration of the Corps of Engineers contract. After the
project was completed, JCI did not continue operations at the
Meyer Quarry. It is therefore clear that this exemption cannot
apply to the subcontractors in this case.
With respect to the second exemption from coverage in 29
C.F.R. 5.2(l)(3), we agree that the ``commercial supplier or
materialman'' clause is not applicable to contractors such as
Massman and JCI who assumed responsibility for a key element of
this public work, under contract with Patton-Tully, the prime
contractor. Moreover, even assuming JCI was a bona fide
commercial supplier, it is established in this case that JCI
commenced its Meyer Quarry operations long after the opening of
bids. Again, under the clear directive of this regulation, the
materialman exemption is not available.
Lastly, we concur with the Acting Administrator's
determination that there is no evidence in the record to support
a conclusion that the Meyers themselves had an established quarry
operation before the opening of bids for the channel
stabilization project. There is simply no showing that the land
owners had a functioning, ongoing materialman business and the
commercial supplier exemption cannot therefore be claimed for
Massman/JCI by virtue of the Meyers' intermittent commercial use
of the quarry.
Several final considerations need be addressed.
Patton-Tully has argued in its written submission to the Board
and at oral argument that the Acting Administrator's rulings
incorrectly determined Davis-Bacon coverage for work performed by
employees working from river barges. These employees would --
apparently -- be the workers who placed or set the stone
(previously quarried and hauled to the river project construction
sites) directly into the public work. However, no such
determination was ever reached in the Wage and Hour Division's
rulings in either Patton-Tully I or the present case.
Accordingly, this question is not properly before the Board and
we therefore make no ruling with respect to this contention
improperly raised by the petitioner. See John J. Ray & Buffalo
Building Trades, WAB Case No. 91-20 (Jul. 30, 1991); 29 C.F.R.
7.1(b).
Patton-Tully has further argued in this proceeding that our
decision in Patton-Tully I is in error. As noted, in that
decision, the Board affirmed Wage and Hour's 1990 determination
that Davis-Bacon standards applied to quarrying and hauling from
the Marion Quarry. No new arguments have been raised in this
regard and the Board, moreover, considers this belated argument
as a most untimely request for reconsideration. We therefore
decline to revisit our decision in Patton I. Lastly,
Patton-Tully's extensive arguments against the validity of the
Department's ``site of the work'' regulations cannot be
entertained in this forum.
For the forgoing reasons, the Wage and Hour Division's May
12, 1993 ruling on remand is affirmed.
BY ORDER OF THE BOARD:
Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Gerald F. Krizan, Esq.
Executive Secretary []
