L.T.G. CONSTRUCTION CO., WAB No. 93-15 (WAB Dec. 30, 1994)
CCASE:
L.T.G. CONSTRUCTION CO.
DDATE:
19941230
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
L.T.G. CONSTRUCTION CO. WAB Case No. 93-15
Prime Contractor, et al.
BEFORE: David A. O'Brien, Chair
Ruth E. Peters, Member
Karl J. Sandstrom, Member
DATED: December 30, 1994
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition of
L.T.G. Construction Co., Phoenix-Griffin Group II, Gatsby Housing Associates
and Lloyd T. Griffin, Jr. a principal of each the above (collectively
referred to as "petitioners") for review of the July 1, 1993 decision
and order issued by Administrative Law Judge ("ALJ") David W. DiNardi.
The ALJ determined that petitioners had failed to pay statutorily
required wages on the housing projects in question, ordered that the
back wages due be paid, and further ordered that petitioners be debarred
in accordance with the provisions of 29 C.F.R. 5.12 (a) (1) and be
ineligible to receive any contract or subcontract subject to any of the
statutes listed in 29 C.F.R. 5.1 for a period of three years.
For the reasons set forth below, the decision and order of the
ALJ is affirmed.
I. BACKGROUND
This case arises from the Turnkey Housing Project in Providence, Rhode
Island, a scattered-site public housing development funded by the United
States [1]
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[2] Department of Housing and Urban Development ("HUD") under the United
States Housing Act of 1937, as amended (42 U.S.C. [sec] 1437j)( the
"Housing Act") and therefore subject to federal construction contract
prevailing wage requirements of the Davis-Bacon Act (40 U.S.C. [sec]
276a et seq.) pursuant to 29 C.F.R. Part 5. The Providence Housing
Authority (the "PHA") was the contracting agency for this project. The
PHA contracted with Phoenix-Griffin Group II, Ltd. ("PGG") for
development of Phase I of the project, which ultimately involved
ninety-two housing units, scattered throughout the City of Providence.
PGG then contracted with L.T.G. Construction Co., Inc. ("L.T.G.") to
construct the units. L.T.G. utilized its own employees and
subcontractors to prepare the sites, fabricate and erect the houses,
install interior material such as linoleum and cabinets and contracted
with Gatsby Housing Associates ("GHA") to clean the units prior to their
being tendered to PHA.
At the time it submitted its bid in April 1988, L.T.G. anticipated it
would also be the successful bidder on Phase II of the project which was
to involve an additional sixty-two units of housing. However, Phase II
was subsequently cancelled. To control costs and provide security,
L.T.G. chose to build the housing units in sections at a prefabrication
plant located on Veazie Street in Providence. The sections were
transported to the various housing sites and erected on foundations.
Petitioners believed that the wages paid at the Veazie Street site were
exempt from the prevailing wage requirements of the Housing Act. Mr.
Griffin based this belief on a written opinion and a handbook that he
had received from PHA and HUD, the governmental entities responsible for
administering this project.
The actual construction work undertaken at the building sites was
subcontracted by L.T.G. Framing subcontractors were responsible for the
assembly and erection of the prefabricated panels on each site. The
various subcontractors provided labor and tools, while L.T.G. was
responsible for the organization and delivery of materials to the site
and the furnishing of major pieces of equipment. The subcontractors
retained for the project were for the most part owner-operated small
companies. Petitioners believed, again based on communication from HUD,
that wages paid to owner operator were exempt from the prevailing wage
requirements.
In November 1990, the Wage and Hour Division instituted an investigation
into possible Davis-Bacon prevailing wage violations on this project.
At the conclusion of the investigation, the Wage and Hour Division found
that petitioners failed to pay Davis-Bacon prevailing wages at the
Veazie Street fabrication facility and at the various scattered housing
sites. Additionally, it found that petitioner L.T.G. had failed to keep
adequate records, and failed to pay subcontractors who were owner
operators and clean-up crews prevailing wages. Finding the violations [2]
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[3] to be aggravated and willful, the Wage and Hour investigator
recommended that petitioners be debarred from federal government
contracts for three years.
In March 1991 the Department of Labor ("DOL") directed HUD to withhold
$500,000 from future funding of the project for failure of petitioners
to pay Davis-Bacon prevailing wages. As a result of this directive,
L.T.G. ceased all construction activity on the project. At this stage,
52 of the units had been completed and conveyed to the PHA. Another 35
were virtually complete and 5 were at the foundation stage. In light of
the withholding order and the possible loss of repayment funds, Fleet
Bank, the source of construction financing, refused, in accordance with
a pre-set requisition procedure, to advance any additional funds from
the revolving construction loan.
After a series of meetings between petitioner Griffin and
representatives of DOL during which petitioner was informed of the
basis for the withholding order, Mr. Griffin through counsel requested
a hearing pursuant to 29 C.F.R. 5.11(a) and 5.12(a). A hearing was
scheduled before ALJ DiNardi. After 24 days of hearing between October
13, 1992 and November 24, 1992, the ALJ issued his decision and order on
July 1, 1993 upholding the Administrator's position on each of the major
issues. Petitioners have appealed that decision to the Board pursuant
to 29 C.F.R. Parts 6 and 7.
II. DISCUSSION
This matter presents the Board with three issues for review: (1)
whether the employees employed by L.T.G. at its Veazie Street facility
are entitled to Davis-Bacon prevailing wages; (2) whether the Department
of Labor should be estopped from seeking back wages for workers employed
at the Veazie Street site as independent contractors; and (3) whether
the violations found by the ALJ were aggravated or willful. The Board
addresses each of these issues in turn below.
A. Veazie Street Facility
There is no question that laborers and mechanics employed in the
development of a low income housing project funded, in whole or in part,
under the Housing Act, are required to be paid Davis-Bacon prevailing
wages. Section 1437j(a) of the Housing Act provides:
Any contract for loans, contributions, sale or lease pursuant to this
Act shall contain a provision requiring that not less than the wages
prevailing in the locality as determined or adopted (subsequent to a
determination under applicable State or local law) by the Secretary,
shall be paid to all architects, technical engineers,[3]
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[4] draftsmen and technicians employed in the development, and all
maintenance laborers and mechanics employed in the operation, or the low
income project involved; [*]and shall also contain a provision that not
less than the wages prevailing in the locality, as predetermined by the
Secretary of Labor pursuant to the Davis-Bacon Act (49 Stat. 1011) [40
USCS 276a et seq.] shall be paid to all laborers and mechanics employed
in the development of the project involved[*] (including a project with
nine or more units assisted under section 8 of this Act [42 USCS 1437f],
where the public housing agency or the Secretary and the builder or
sponsor enter into an agreement for such use before construction or
rehabilitation is commenced), and the Secretary shall require
certification as to compliance with the provisions of this section prior
to the making any payment under such contract.
[*](Emphasis added)[*]. Section 1437a(c)(1) of the Housing Act defines
"development" as follows:
The term "development" means any or all undertakings necessary for
planning, land acquisition, demolition, construction, or equipment,
in connection with a low- income housing project.
Applying this definition to the facts of this case, the Board finds
that the work performed by petitioners' employees at the Veazie Street
facility is covered. The fabrication of integral construction elements
by a contractor in a facility largely dedicated to the production of
those elements is unmistakably an "undertaking necessary for . . .
construction . . ., in connection with a low-income housing project."
The fact that the work in question is of a type that is commonly
performed at the site of construction removes any question regarding
its coverage. To find otherwise would defeat Congress's clear and
unambiguous intent to guarantee that workers employed in the development
of federally financed or assisted low-income housing projects are paid
Davis-Bacon prevailing wages. It would fly in the face of logic to find
that Congress intended that architects and draftsmen involved in the
planning of low-income housing projects be paid prevailing wages but not
the employees of the contractor who actually construct the walls of the
project.
To reach this judgment, it not necessary for this Board to lay out
the full contours of the term "development;" it is necessary only for
the Board to find that the work at issue clearly falls within the plain
meaning of the statute. In finding that petitioners' Veazie Street
employees were engaged in an "undertaking necessary for . . .
construction . . ., in connection with a low-income housing project,"
the Board applies only the most natural and obvious meaning of those
words.[4]
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[5] It is important to note that the Housing Act contains no "site of
work" limitation similar to that found in the Davis- Bacon Act. The
United States Court of Appeals for the District of Columbia relied in
Ball, Ball & Brosamer, Inc. v. Reich, 24 F.3d 1447 (D.C. Cir. 1994) on
that provision to strike down the Department of Labor's "site of work"
regulations (29 C.F.R. 5.2(l)) as inconsistent with the plain language
of the Davis-Bacon Act. In the instant case, the Administrator does not
rely on DOL's definition of "site of work",/FN1/ as found in 29 C.F.R.
5.2(l), but on the plain meaning of the language of the Housing Act and
on DOL's regulation at 29 C.F.R. 5.2(j). In support of the
Administrator's position, the ALJ specifically cited the absence of a
site of work limitation in finding that under the Housing Act that the
workers at the Veazie Street facility were entitled to be paid
Davis-Bacon prevailing wages. For the Board to graft onto the Housing
Act a site of work limitation, as petitioners urge us to do, would be
without statutory foundation.
Instead the Board affirms the ALJ's decision and the Administrator's
enforcement policy, which recognizes no site of work limitation in
matters arising under the Housing Act. Even if the Administrator were
to eventually acquiesce in Ball, Ball & Brosamer, it would consequently
have no impact on the Board's decision in this case. For the reasons
given above, the Board finds that the workers at petitioners' Veazie
Street facility were employed in the development of a federally assisted
low-income housing project on which Davis-Bacon prevailing wages were
required to be paid.
B. Estoppel
Petitioners argue that DOL should be estopped from seeking back
wages due: (1) employees at the Veazie Street facility; (2) subcontractors
who were owner operators; and (3) employees of GHA who were employed in
the cleaning of housing units prior to the conveyance of the units to
the PHA. According to petitioners' argument, even if the Board were to
find that these various categories of employees were entitled to
Davis-Bacon prevailing wages, DOL should be estopped from making a claim
against petitioners for the back wages due.
Petitioners contend that statements contained in a HUD Handbook,
entitled "Federal Labor Standards Compliance in Housing and Community
Development Programs Handbook," and distributed to petitioners and
statements made by HUD and PHA officials should bar DOL on equitable
estoppel principles from making a claim against petitioners for back
wages due. The Board finds it unnecessary [5]
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[6] to review all of the ALJ's factual findings in this regard or to
decide whether petitioners approach the Board with the "clean hands"
necessary to merit equitable relief. The Board deems it sufficient to
conclude that even read under the most favorable light to petitioners
the facts of this case would not merit the invocation of equitable
relief against DOL.
Whether petitioners could conceivably prevail on a contract modification
or promissory estoppel theory against the PHA or HUD is not within the
province of the Board to decide. It is well settled law that the
mistakes of one agency cannot be used to estop another agency from
carrying out its statutory responsibilities. U.S. v. Stewart, 311 U.S.
60 (1940) and Graff v. C.I.R., 673 F.2d. 784 (5th Cir. 1982). DOL is
charged with the responsibility of assuring that workers on federally
financed or assisted construction projects are not exploited and receive
the prevailing wages to which they are statutorily entitled. To invoke
estoppel against DOL to defeat a legitimate claim for back wages on
behalf of aggrieved workers may be a legal impossibility (see Heckler v.
Community Health Services of Crawford County, Inc., 457 U.S. 51 (1984)),
but even if were not, it would require at a minimum a compelling
demonstration of conscious and aggravated misconduct on the part of DOL.
Additionally, petitioners would have to establish reasonable reliance
to their detriment on that misconduct. The facts of this case will not
bear the heavy burden placed on them by petitioners. Petitioners
concede that the misconduct on which it allegedly relied was on the part
of PHA and HUD. There is no suggestion that petitioners received or
relied upon wrong advice given to them by DOL. Petitioners have failed
to establish that DOL even knew, let alone participated in a conscious
and aggravated manner, in the communication of misinformation to
petitioners.
As noted above, DOL has the statutorily mandated responsibility to
see to it that employees on federally financed and assisted construction
projects receive Davis-Bacon prevailing wages. This mandate cannot be
defeated merely by petitioners' failure to appreciate which government
agency has the responsibility and authority to render definitive
decisions in this area.
Unable to carry their burden on the first prong of the test,
petitioners' failure to demonstrate that they relied on the advice that
they were allegedly given by HUD removes any remaining doubt as to the
appropriateness of equitable relief. The ALJ expressly rejected
petitioners' contention that they relied on the advice. This is a
question of fact which the Board will not upset absent a showing that
the finding was clearly erroneous. There is sufficient evidence in the
record to support the ALJ's finding in this regard.[6]
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[7] The Board has regularly and consistently taken the position that
reliance on a contracting agency's advice is misplaced and will not
defeat a contractor's obligation to pay employees legally required
prevailing wages. In Tollefson Plumbing and Heating Co., WAB Case No.
78-17 (Sep. 24, 1979), at page 8, the Board stated "that advice by a
contracting agency was not binding on the Department of Labor and did
not estop the Department of Labor from requiring the payment of the
proper wage rate." And in Fry Brothers Corp., WAB Case No. 76-06 (June
14, 1977), at page 19, the Board held that "only a written ruling of the
Secretary of Labor can be relied upon for wages which must be paid under
the Davis-Bacon Act." This case presents no compelling reason for the
Board to stray from its well considered precedents. Therefore the ALJ's
decision is affirmed and petitioners' request for equitable estoppel is
denied.
C. Debarment
The Wage Appeals Board is an essentially appellate body. 29 C.F.R.
7.2(e). Only under extraordinary circumstances will the Board hear
matters de novo. The Board will defer to the trier of fact, absent a
convincing demonstration that the trier of fact's findings were clearly
erroneous. Prime Roofing, Inc., WAB Case No. 92-15 (Jul. 16, 1993).
The Department's regulations at 29 C.F.R. 5.12(a)(1) provide that a
contractor who is found to be in willful or aggravated violation of the
Davis-Bacon Act shall be ineligible to receive any contract subject to
Davis-Bacon labor standards (See 29 C.F.R. 5.1). The test as to whether
a violation or series of violations is willful or aggravated and
therefore calls for debarment is primarily a question of fact. The
Board will not overturn an ALJ's debarment order unless it is convinced
that the order is without a factual foundation. The Board will not set
aside a debarment order merely on the basis that the Board may have
resolved some factual disputes differently than the trier of fact. The
Board defers to the trier of fact as to the weight and credibility to be
given to evidence. (See Wayne J. Griffin, Inc., WAB Case No. 93-05
(Oct. 29, 1993)).
In the instant matter, the ALJ correctly identified a "willful"
violation to encompass intentional disregard, or plain indifference to
the statutory requirements of the Davis-Bacon Act. (ALJ's decision at
p. 47). Although mere inadvertent or negligent conduct would not
warrant debarment, conduct which evidences an intent to evade or a
purposeful lack of attention to, a statutory responsibility does.
Blissful ignorance is no defense to debarment.
Applying these standards to the present case, the Board is compelled
to affirm the ALJ's debarment order. In a lengthy decision which followed
twenty four days of hearings, the ALJ extensively reviewed the factual
record upon which he rested his decision. At pages 48 and 49 of that
decision, the ALJ recites twelve [7]
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[8] specific findings in support of his debarment order. A review of
those findings and the supporting record provide ample grounds for
affirming the ALJ's order.
The record demonstrates that L.T.G. and Lloyd Griffin were aware that
subcontractors were required to pay prevailing wages to their employees.
Nevertheless as the ALJ found, L.T.G. approved a clear subterfuge of
this statutory requirement by its subcontractor, Henderson and Sullivan,
whereby employees of the subcontractor were treated as subcontractors.
To compound this violation, L.T.G. encouraged another subcontractor,
Stone Framing, to employ the same ruse in evading its statutory
responsibility to pay the prevailing wage. L.T.G. did not see fit to
bring this highly questionable and indeed impermissible scheme to the
attention of the appropriate officials. L.T.G.'s conduct in this regard
evidences a clear indifference to, if not intentional violation of, its
statutory responsibility.
Further L.T.G.'s failure to regularly obtain certified payroll
records from subcontractors and to keep adequate records itself and its
suggestion to subcontractors that records could be falsified are all
findings of the ALJ that have a substantial basis in the record and
support his order. Again the ALJ was justified in concluding from this
conduct that the petitioners exhibited a willingness to evade its
statutory responsibility. This conclusion is bolstered by the ALJ's
finding that L.T.G. engaged in a transparent attempt to evade the
prevailing wage requirements by treating employees as subcontractors
despite the fact these employees clearly lacked the indicia of
independent contractors.
Each of these findings would independently be sufficient to support
the order of debarment. Therefore, it is unnecessary for the Board to
address whether the ALJ's other findings, either independently or
collectively, are sufficient to support a debarment order. In summary,
the Board finds that the ALJ's decision accurately reflects the legal
standard for debarment and further finds that ALJ's decision is
supported by the preponderance of reliable and probative evidence on the
record and is not clearly erroneous. Therefore the ALJ's debarment
order is affirmed.
BY ORDER OF THE BOARD:
David A. O'Brien, Chair
Ruth E. Peters, Member
Karl J. Sandstrom, Member
Gerald F. Krizan, Esq.
Executive Secretary[8]
FOOTNOTES
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ The Administrator also argues that proper application of the "site
of work" would still subject the Veazie Street facility to prevailing
wage requirements. Because the Board accepts the Administrator's
primary contention, there is no need for this Board to address the
application of the "site of work" regulations to the facts of this case.
