NORSAIRE SYSTEMS, INC., WAB No. 94-06 (WAB June 27, 1994)
[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
NORSAIRE SYSTEMS, INC., WAB CASE NO. 94-06
BEFORE: David A. O'Brien, Chair
Ruth E. Peters, Member
DATED: June 27, 1994
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition of Norsaire Systems, Inc.
("Petitioner" or "Norsaire") for review of a January 25, 1994 ruling by the Deputy Assistant
Administrator of the Wage and Hour Division. In the ruling the Deputy Assistant Administrator
determined that employees of Norsaire were covered by the prevailing wage requirements of the
Postal Reorganization Act, 39 U.S.C. [sec] 410(b)(4)(C) (a Davis-Bacon Related Act), for time
spent on the construction site performing work on air cooling units which had been manufactured
and supplied by Norsaire. For the reasons stated below, the ruling is reversed, and this matter
is remanded for further proceedings consistent with this decision.
I. BACKGROUND
PCL Construction Services, Inc. ("PCL"), was the prime contractor on a contract
(Contract No. 16982-89-B-0031) with the United States Postal Service ("USPS") to construct a
new "General Mail Handling Facility" at Stapleton Airport in Commerce City, Colorado. The
project was subject to the labor standards provisions of the Postal Reorganization Act and the
Department of Labor's regulations at 29 C.F.R. Part 5. Among other things, the prime contract
[1][2] called for installation of air cooling units into the facility./FN1/ PCL subcontracted this
portion of the contract to Natkin & Company ("Natkin"). On March 31, 1989, Norsaire entered
into a purchase agreement with Long & Associates, Inc. ("Long") to provide 19 indirect/direct
air handling units to Natkin./FN2/ The purchase order agreement entered into by Norsaire did
not contain Davis-Bacon labor standards provisions. Subcontractor Natkin employed Chavez
Construction, a lower-tier subcontractor, to install the air cooling units.
The Wage and Hour Division conducted a compliance investigation of the project during
the period from February 4, 1990 to May 27, 1990. Wage and Hour informed Norsaire by letter
dated January 25, 1994 that the investigation had disclosed that Norsaire failed to pay the
prevailing wage rate for the hours that Norsaire employees performed construction work on the
job site. The letter stated that according to information provided by Norsaire's attorneys, the
cooling units were turned on prematurely and were damaged by construction dust. Norsaire then
sent employees to the job site to do on-site warranty work on the units. To ensure the continued
performance of the air handling units, the Wage and Hour letter stated, Norsaire employees
returned to the job site at least three times to clean and maintain the air handling units and to
replace key parts. Wage and Hour stated that Norsaire employees "puttied and caulked inside the
units and the duct work, and made minor repairs due to damage caused by leaking water." In
addition, the letter stated, "the investigation disclosed that, for several months beginning in early
1990, your employees were lining belts and sheaves on fans; installing filters, dampers and gears;
soldering pipe; and making adjustments to the unit parts." Thus, Norsaire employees "were
performing any remaining work on the units necessary to complete the manufacturing process
and ensure that the units were working and functional prior to the acceptance of the building as
complete in 1991."
Wage and Hour determined that Norsaire employees who were performing the work of
sheet metal workers at the job site were entitled to receive $22.77 per hour including fringe
benefits, employees performing electricians' work were entitled to receive $20.11 including
fringe benefits, and employees performing steamfitters' work were entitled to $21.20 per hour
including fringe benefits. [2][3] Norsaire, the letter stated, paid employees doing sheet metal
work from $5.00 to $10.90 per hour including fringe benefits, and paid electricians and
steamfitters from $7.27 to $10.38 per hour.
Wage and Hour rejected Norsaire's argument that the firm was not subject to Davis-Bacon
requirements because Norsaire was a manufacturer whose employees were performing on-site
service and maintenance work pursuant to a warranty agreement. The Deputy Assistant
Administrator stated that although Davis-Bacon labor standards ordinarily do not apply to the
employees of manufacturers or material suppliers, "the prevailing wage requirements do apply
where a material supplier or manufacturer undertakes to perform a part of a construction contract
as a subcontractor." The Department of Labor, he added, "has consistently held that employees
of a manufacturer who perform more than an incidental amount of construction work in any work
week at the site of the work prior to completion of the construction project are covered by the
Davis-Bacon provisions and are due the applicable wage rate for the classification of work
performed. This includes warranty and/or repair work."
The Deputy Assistant Administrator examined the regulatory definitions of pertinent
statutory terms, noting that the terms "construction, prosecution, completion or repair" are
defined at 29 C.F.R. 5.2(j) as encompassing "all types of work done on a particular building or
work at the site thereof . . . including without limitation, altering, remodeling, installation (where
appropriate) on the site of the work of items fabricated off-site. . . ." He also noted that the
definition of the terms "building" and "work" at 29 C.F.R. 5.2(i) "may generally exclude
servicing or maintenance work, [but] it does not exclude repair work that is conducted on
equipment in connection with and at the site of such a building or work. Unlike routine or
regular service or maintenance work that is preventative in nature, the tasks performed by your
employees were directed to correcting a problem that had already occurred and were more akin
to repair work than to service or maintenance work."
The investigation disclosed, stated the Deputy Assistant Administrator, that during the
period from February 4, 1990 to May 27, 1990, Norsaire had 24 employees performing repair
work on the air cooling units at the construction site, and that the employees spent from 8 to 40
hours on the job site in any given work week./FN3/ "Given your firm's agreement to repair the
cooling units and the [3][4] amount of time that your employees were engaged in construction
activities on the job site," the Deputy Assistant Administrator stated, "the Department maintains
that your firm had undertaken a portion of the construction contract that was both contractually
required and necessary for the prosecution and completion of the contract." Consequently, he
concluded Norsaire was a subcontractor within the meaning of the Davis-Bacon Act and
Norsaire's employees were entitled to be paid Davis-Bacon prevailing wages. Wage and Hour
assessed back wages totaling $21,933.97.
The Deputy Assistant Administrator stated that since there did not appear to be a dispute
over relevant facts, his letter constituted a final ruling under 29 C.F.R. 5.11(c)(1). If Norsaire
believed relevant facts were in dispute, he stated, the firm should inform Wage and Hour within
30 days, for purposes of determining whether the matter should be referred to the Chief
Administrative Law Judge for a hearing. If Norsaire did not respond within 30 days, he added,
the back wage findings would become final with respect to Norsaire; if subcontractor Natkin and
prime contractor PCL also failed to request a hearing, Wage and Hour would notify the
contracting agency to disburse the withheld funds to the affected employees. Wage and Hour
also notified PCL and Natkin of the results of the labor standards investigation by letters dated
January 25, 1994. Norsaire subsequently filed a petition for review with this Board.
II. DISCUSSION
The Deputy Assistant Administrator of the Wage and Hour Division determined that
employees of Norsaire were covered by prevailing wage requirements for time spent performing
work on air cooling units which had been manufactured by Norsaire and installed in the USPS
mail handling facility under construction at Stapleton Airport. Upon review, the Board
concludes that this matter must be remanded to the Wage and Hour Division for completion of
the record and for reconsideration of whether the work performed by Norsaire employees at the
construction site was covered by prevailing wage requirements.
In the Wage and Hour ruling in this case, the Deputy Assistant Administrator stated that
the" Department maintains that [Norsaire] had undertaken a portion of the construction contract
that was both contractually required and necessary for the prosecution and completion of the
contract" (emphasis supplied). Our problem upon review of this determination is that the
administrative record submitted to this Board does not contain a copy of the prime [4][5] contract
between PCL and USPS (see note 1, supra), nor does it contain a copy of the subcontract
between PCL and Natkin. In previous cases/FN4/ the Board has emphasized the importance of
including the contract in the administrative record in Davis-Bacon cases. Similarly, in this case
the Board finds it difficult to review a coverage determination -- which is based, at least in part,
on contractual requirements -- without access to the relevant contracts. Accordingly, this case
must be remanded for completion of the administrative record by the inclusion of the prime
contract and the PCL/Natkin subcontract.
The Deputy Assistant Administrator also based his ruling on an examination of Department
regulations and of Board precedent. Thus, he noted that the definition of the terms
"construction, prosecution, completion or repair" at 29 C.F.R. 5.2(j) includes "all types of work
done on a particular building or work at the site thereof . . . including without limitation, altering,
remodeling, installation (where appropriate) on the site of the work of items fabricated off-site .
. . ." He also took note of the definition of "building" and "work" at 29 C.F.R. 5.2(i), which
states that those terms "generally include construction activity, as distinguished from
manufacturing, furnishing of materials, or servicing and maintenance work." The Deputy
Assistant Administrator stated that although the definition "may generally exclude servicing or
maintenance work, it does not exclude repair work that is conducted on equipment with and at
the site of such a building or work." He distinguished between "routine or regular service or
maintenance work that is preventative in nature" and the tasks performed by Norsaire's
employees, which he stated "were directed to correcting a problem that had already occurred and
were more akin to repair work than to service or maintenance work." Wage and Hour is directed
upon remand to reconsider and/or further explain the proffered distinction between work that
comes within Davis-Bacon coverage according to the definition of "construction, prosecution,
completion or repair" at 29 C.F.R. 5.2(j) and "servicing and maintenance work" which is
excluded from coverage by the definition of "building" and "work" at 29 C.F.R. 5.2(i). As a
practical matter, it seems difficult to confine service and maintenance work to only those tasks
that are "preventative in nature," and to exclude all tasks that are "directed to correcting a
problem that had already occurred"; without further explanation, this Board does not have a basis
for affirming the distinction drawn by Wage and Hour.
The Deputy Assistant Administrator also relied upon Board precedent -- namely, Alcoa
Construction Systems, Inc., WAB Case No. 75-06 (Sept. 1, 1975); The Griffith Company, WAB
Case No. 64-03 (July 2, 1965); and S.D.F. Inc., WAB Case No. 92-12 (Aug. 31, 1993).
However, this case is not squarely controlled by that precedent. In Alcoa, the supplier of factory
prefabricated kitchen and bathroom modules came upon the construction site to do some repair
[5][6] work on the modules. Most of the work involved correcting defects in the coating on door
jambs, adjusting door jamb installations, touching up drywall and repairing or replacing wet
drywall. The Board turned aside the supplier's argument that the work was done pursuant to
warranty provisions of the contract, stating that it "attach[ed] no significance to the label "
`warranty.' " The Board held that "adjustment, alignment and plumbing, including loosening and
fastening of a door jamb on the construction site, in our view, is clearly construction work in
every sense of the word . . . ." Likewise, the Board stated that "repair or replacement of
damaged drywall, including nailing, taping and painting can only be regarded as on-site
construction." The Board cautioned, however, that "[t]his is not to say that some factory
installed components of modern day residential equipment (e.g., the internal control mechanisms
of a dishwasher or a clothes washing machine) may not be repaired or replaced on-site without
reference to Davis-Bacon Act requirements." Thus, rather than dictating the result reached by
the Deputy Assistant Administrator in this matter, Alcoa at least suggests that there is a
distinction to be drawn between traditional construction work which -- if performed on-site --
would be covered by prevailing wage requirements, and the work involved in repairing or
replacing components of equipment which has been installed in the facility under
construction./FN5/
In addition, we note that in a 1973 Wage and Hour opinion letter (Opinion WH-206 (Mar.
9, 1973) the Wage and Hour Division determined that substantial on-site repair work performed
on prefabricated bathroom and kitchen units was construction activity "rather than ordinary
warranty work." Although the opinion letter did not define or describe "ordinary warranty
work," like Alcoa the letter does suggest that there are some types of on-site work, performed
under warranty, that may not be covered by prevailing wage requirements. On remand, the
Wage and Hour Division must reconsider and explain whether the work performed by Norsaire
employees on the air cooling equipment is covered in light of this opinion letter and the Board's
decision in Alcoa.
Finally, the Board notes that the record contains only scant information on the types of
work actually performed on-site by Norsaire's employees. Additional information would be
helpful, and perhaps necessary, to reaching an appropriate determination in this matter. It is
possible, for example, that some of the tasks performed by the Norsaire employees were covered
by prevailing wage requirements, and that other tasks they performed were not covered. It is not
possible, however, to make or to review such a determination based on the record currently
before the Board. In its decision on remand, Wage and Hour must set forth further information
on the types of work performed by the Norsaire employees.[6]
[7] This matter is remanded to the Wage and Hour Division for further proceedings consistent
with this decision. The Wage and Hour Division shall issue its ruling on remand within 60 days
of the date of this decision. On the date of issuance, the Administrator shall provide the Board
a copy of the ruling upon remand.
BY ORDER OF THE BOARD:
David A. O'Brien, Chair
Ruth E. Peters, Member
Gerald F. Krizan, Esq.
Executive Secretary[7]
FOOTNOTES
/FN1/ Counsel for the Administrator of the Wage and Hour Division states (Statement of the
Administrator in Opposition to Petition for Review ("Statement"), at p. 2 n.3) that the
Administrator has been unable to obtain a copy of the prime contract. Counsel further states,
however, that it is undisputed that the prime contract was subject to labor standards requirements,
and that the prime contract required installation of air cooling units.
/FN2/ Counsel for the Administrator describes Long as a sales agent. Norsaire, on the other
hand, claims that Long is not a sales agent. This Board agrees with counsel for the Administrator
(Statement, at p. 2 n.2) that the dispute over whether Long is a sales agent is not material to the
issue of whether labor standards provisions are applicable to Norsaire's employees for the time
spent on the construction site.
/FN3/ In a September 10, 1990 memorandum transmitting the file in this matter from the Denver
Regional Office (which conducted the investigation) to the national office of the Wage and Hour
Division, the Regional Wage Specialist did not state that Norsaire was involved in repair of the
cooling units; instead, he stated in the transmittal memo that Norsaire "helped to install" the
cooling units, and that Norsaire "refuses to recognize the installation of the coolers as covered
DBRA work" (Record, Tab E). The decision letter from the Deputy Assistant Administrator to
[FN3 CONTINUED ON P. 4] Norsaire, however, does not contain a determination that Norsaire
was involved in the installation of the cooling units, but does contain a determination that
Norsaire was involved in on-site repair of the units.
/FN4/ See Cat Construction, Inc., WAB Case No. 88-36 (May 17, 1991); Martin Marietta
Manned Space Systems, WAB Case No. 90-08 (May 31, 1991).
/FN5/ S.D.F., Inc., like Alcoa, involved coverage of on-site work (touchup painting) which
would be considered traditional construction activity. The Griffith Company, unlike the instant
matter, involved coverage of on-site repair of tractors used in the construction process.