SUPERIOR MASONRY, INC., WAB No. 94-19 (WAB Apr. 28, 1995)
[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of:
SUPERIOR MASONRY, INC. WAB Case No. 94-19
and FRANK SELTZER,
Individually and as President
BEFORE: Karl J. Sandstrom, Presiding Member
James C. Riley, Member
Joyce D. Miller, Alternate Member
DATED: April 28, 1995
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition
of Superior Masonry, Inc. and it's president and co-owner, Frank
Seltzer (Superior or Petitioners). Petitioners seek review of
the October 13, 1994 Decision and Order (D & O) of the
Administrative Law Judge (ALJ), finding Petitioners liable for
$9,029.70 for overtime wage violations and recommending that they
be debarred for three years. Petitioners request reversal of the
order of debarment on the grounds that hearsay evidence was
improperly admitted into the record and that the record does not
otherwise support the ALJ's conclusions. Counsel for the
Administrator urges the Board to affirm the ALJ's decision. For
the reasons set forth below, the decision and order of the ALJ is
affirmed.
I. BACKGROUND
This matter arises under the Contract Work Hours and Safety
Standards Act (CWHSSA)(40 U.S.C. [sec] 327 et seq.). Superior
was awarded a contract for construction work as a masonry
subcontractor or second tier (sub)contractor on a [1][2] terminal
building project at the Tallahassee Regional Airport (Project No.
3-12-0077-0688-88-1). The contract -- awarded on December 16,
1987 -- was subject to Wage Decision No. FL-87-10 and contained
the stipulations required by the Davis-Bacon Act (40 U.S.C. [sec]
276a et seq.), CWHSSA, and the applicable regulations at 29
C.F.R. Part 5.
Superior was investigated by the Wage and Hour Division in
1989 and 1990. The company allegedly failed to pay all employees
overtime compensation of not less than one and one half times
their basic rate of pay for all hours worked in excess of forty
hours per week in violation of CWHSSA. Further, Superior
allegedly falsified certified payroll records to simulate
compliance with the requirements of CWHSSA. The Administrator
assessed back wages in the amount of $9,029.70 for overtime
violations.
On June 16, 1993, the Administrator issued a charging
letter alleging that Petitioners had committed aggravated and
willful violations of the CWHSSA, and that debarment in
accordance with 29 C.F.R. 5.12(a)(1) would be sought as the
appropriate sanction. By letter of July 15, 1993, Petitioners
requested a hearing on the alleged violations. The Order of
Reference directing that a hearing be held pursuant to
Petitioners' request was signed by the Administrator on February
8, 1994. A hearing was held before the ALJ on August 13, 1994
and the parties presented evidence and witnesses.
The ALJ concluded in his October 13, 1994 D & O that
debarment of Petitioners was appropriate under the circumstances.
The ALJ found that Petitioners had not paid overtime wages to
nineteen (19) employees and, accepting the compliance officer's
computations, found that back wages were due such employees in
the aggregate amount of $9,029.70. D & O at 4. The ALJ found
that Petitioners willfully attempted to conceal their wage and
hour violations through falsification of certified payroll
reports. Id. at 5. The ALJ concluded that submission of
falsified payroll records -- in the absence of contrary or
mitigating evidence -- constituted an aggravated or willful
violation of CWHSSA, as described in 29 C.F.R. 5.12(a)(1).
Accordingly, the ALJ held that Superior and Frank Seltzer should
be debarred for the three year period provided by regulation.
At the hearing below, compliance officer Jere McWinn (who
investigated Superior's performance on the contract) testified as
to statements made to him by Lureen Spencer (Superior's
bookkeeper) during several conversations which occurred in the
course of the investigation. In his testimony, McWinn stated
that Mrs. Spencer compiled the company payroll according to her
employer's compensation formula based on weekly telephone reports
from the job site, disbursed checks, and prepared certified
payroll records which were signed by Mr. Seltzer. No question
was raised at the hearing or in briefs related to this appeal,
[2][3] that Mrs. Spencer was not acting within the scope of her
employment, or under the authority and direction of her employer
in discharging her responsibilities. McWinn described Spencer's
job duties as "taking care of pay records, all pay records, and
all accounting records of every type." Transcript (Tr.) at 61.
Indeed, Mrs. Spencer, according to testimony at the hearing,
continues to fulfill those same responsibilities for the company
today. D & O at 4.
McWinn testified that Seltzer's instructions to Spencer were
to pay the employees, "straight time but she was to put it down
on the payrolls as time and a half by reducing the number of
overtime hours by roughly one-third and showing it as overtime
when it was, in reality, only straight time pay." Tr. at 62.
McWinn also testified that Ms. Spencer provided a statement as to
falsification of the company books, which she refused to sign,
indicating that "the case might settle beforehand and she really
didn't want to commit herself." Tr. at 75. Spencer was
subpoenaed by the Department of Labor, but did not appear at the
hearing. In the course of that proceeding, Petitioners' attorney
acknowledged that Spencer was still Superior's employee and also
asserted that she was accessible. Tr. at 13.
Five workers employed at the airport terminal job also
testified at the hearing. All testified they often worked more
than 40 hours in a week, but never received overtime premium pay.
All testified they received straight time pay for all hours
worked, including hours worked over 40 per week.
Kenneth Gaines, Sr., one of the five employee witnesses,
testified that as masonry foreman on the airport project, he was
responsible for keeping time sheets on each employee. He
described the company reporting system as him making a weekly
call from the job site to Spencer to report the number of hours
worked by each employee. He stated that pay checks were
delivered to employees in Tallahassee by an express courier
service. Gaines testified that he received the same rate of pay
($13.00 hourly) for all hours worked, whether or not he worked
over 40 hours per week. Gaines, Sr. also testified that he "knew
we weren't going to be paid any overtime" because Seltzer told
him so when they first bid for the job. Tr. at 17-18.
Superior presented a single witness at the hearing, Frank
Seltzer. Mr. Seltzer testified that "some overtime" did occur at
the Tallahassee airport job, but that no employee had ever
complained to him about was not being paid overtime. D & O at 3.
In his testimony, Seltzer denied instructing Spencer to reduce
overtime hours by one third (Id. at 4), but admitted that he
signed certified payroll records prepared by Spencer. Tr. at
111. Seltzer denied that employees were paid straight time for
hours worked over 40 per week. D & O at 4.[3]
II. DISCUSSION
Petitioners seek to set aside the ALJ's finding of
violations and his order debarring Superior and its principal
owner from federal contracting activity for 3 years. Petitioners
raise two challenges before the Board: that 1) Jere McWinn's
testimony is hearsay and therefore inadmissible; and 2) there is
not substantial independent evidence in the record to justify the
ALJ's findings. Petitioners have raised no exception to the
ALJ's finding they committed over $9,000 in CWHSSA violations.
Petitioners' Reply Brief In Support Of Petition To Review
(Reply), cites with approval the Administrator's characterization
of admissions by party opponents as nonhearsay. The
"Administrator begins [her] argument by stating correctly the
Code of Federal Regulations rule that admissions by
party-opponents are not hearsay if the statement is made by a
party's agent or servant concerning a matter within the scope of
the agency or employment, made during the existence of the
relationship. Rules of Practice and Procedure for Administrative
Hearings, 29 C.F.R. 18.801(d)(2)(iv). The rule corresponds to
Rule 801(d)(2)(D) of the Federal Rules of Evidence (FRE)." Reply
at 2, quoting the Statement of the Administrator (Statement) at
7. Petitioners continue, noting that "[a]fter stating the rule
above, [the] Administrator concludes in the very next sentence of
[her] brief that because Mrs. Spencer was an employee of Superior
Masonry, Inc., at the time of the statement and because her
statement was related to a matter within the scope of
employment,' the statement is not hearsay." Id.
Petitioners, in the next paragraph of their Reply present
the basis for this appeal, that "the Administrator's statement
cites no law and no reasoning why the statements of Mrs. Spencer
were within the scope of her employment. In the absence of other
support, this conclusory language can only be taken as the
opinion of the Administrator." Id. Petitioners cite two cases
which they contend support their argument. The first case holds
that an accountant's admissions as a party opponent's agent or
servant about her employer's accounts payable are admissible,
since that is what the accountant gets paid to do, prepare
billing statements and answer questions about them. Union Mutual
Life Insurance Co. v. Chrysler Corp., 793 F.2d 1 (1st Cir. 1986).
The second case holds that a truck driver's admissions as a party
opponent's agent or servant, about speeding in the company truck
are admissible since driving is his primary responsibility for
the company and he was performing that duty when an accident
occurred. Martin v. Savage Truck Line, 121 F. Supp. 417 (D.D.C.
1954).
The Administrator and Petitioners are in agreement as to the
applicable legal standard for admissibility of hearsay evidence
in an administrative [4][5] proceeding. The dispute then is only
whether the facts of Superior's case fit within the consensus
standard for the exception. The Board finds that the
requirements of 29 C.F.R. 18.801(d)(2)(iv) and FRE 801(d)(2)(D)
have been met in admitting the disputed testimony.
There is no dispute in the record as to the fact that
Spencer is Superior's bookkeeper. The characterization in
McWinn's testimony that "[Spencer's] duty was to take care of pay
records, all pay records and all accounting records of every
type," is not challenged anywhere in Petitioners' briefs or in
any other part of the record. Tr. at 13. In his own testimony,
Seltzer admits he signed certified payroll records prepared by
Mrs. Spencer. Tr. 111. The Savage Truck and Union Mutual Life
Insurance Co. cases demonstrate that Mrs. Spencer's statements
about how she prepared payrolls are admissible under
18.801(d)(2)(iv) since the statements concern things Mrs. Spencer
did as part of her job. Petitioners' argument falls short in
asserting that Spencer's admissions as a party opponent's agent
or servant, are not within the scope of her employment. In this
regard, we conclude that the holdings in the Savage Truck and
Union Mutual Life Insurance Co. cases run directly counter to
Petitioners' argument that Seltzer's statements to Spencer were
outside the scope of her employment. As the Savage Truck
driver's speeding admission was within his scope of employment,
so too were Bookkeeper Spencer's payroll falsification admissions
within the scope of her employment. Grayson v. Williams, 256
F.2d 61 (10th Cir. 1958).
McWinn's testimony regarding Mrs. Spencer's statements are
admissible under the exemption at 29 C.F.R. 18.801(d)(2)(iv) (or
FRE 801(d)(2)(D)) as an admission by a party opponent's agent or
servant concerning a matter within the scope of the agency or
employment made during the existence of the relationship. The
statements McWinn describes in his testimony are not speculative.
Nor do these statements relate to idle comment or mere
observations made to her about matters beyond her sphere of
influence and involvement. The challenged statements relate to
issues crucial to her work, illustrating how Spencer prepared
certified payrolls pursuant to her understanding of how her
employer wanted her to record payroll hours and compensate
workers on the Tallahassee Airport job.
Spencer performed her bookkeeping and payroll
responsibilities consistent with the practice described in the
alleged statements. Since the record indicates that Spencer
continues to enjoy the trust and confidence of this same
employer, it is reasonable to infer that Spencer understood the
mandate from her employer and operated within the parameters
enunciated. Furthermore, Seltzer assented to Spencer's
understanding of his payroll instructions by his silence in
failing to object to and correct any misunderstanding of his
instructions implicit in her methodology. Seltzer affirmatively
endorsed Spencer's interpretation of his payroll "formula" by
signing and certifying the company payroll reports as true and
[5][6] correct. In fact, the certified payrolls were false
concerning numbers of hours worked and whether overtime wages
were paid.
Petitioners assert that McWinn's testimony regarding
Spencer's statements to him are inadmissible as hearsay.
Petitioners further assert that remarks made to Spencer by
Seltzer and incorporated within Spencer's statement are
inadmissible as hearsay within hearsay, or double hearsay. We
find that the disputed testimony was properly allowed as a double
admission. Seltzer's statement to Spencer is an admission of a
designated party. As the Board concluded above, Spencer's
statement to McWinn is an admission of an employee acting within
the scope of her employment. Additionally, the statement from
Seltzer to Spencer is admissible as an order or directive by a
superior to a subordinate. The overwhelmingly performative
aspect of such mixed acts and assertions has traditionally
justified non-hearsay treatment. For instance, "[i]n a hospital
orders from a treating physician set treatment protocols in
motion and words of this sort are quintessentially performative.
/FN1/ Similar arguments apply in other settings in which people
in authority give directives to others. /FN2/ Federal Evidence,
2nd Ed., Vol. 4, Mueller, Christopher B., Lawyers Cooperative
Publishing (1994). Finally, the statement from Spencer to McWinn
would also be admissible, not to show the truth of the matter
asserted (that employees were paid straight time when hours were
put in payroll records as overtime), but to prove what Spencer
believed she was instructed to do by Seltzer.
Having found multiple bases to overcome Petitioners' hearsay
exceptions regarding Mrs. Spencer's statements, the Board has no
trouble concluding this evidence is relevant to the issue of
debarment. Here, the testimony is admissible and probative of
the fact that certified payroll records were falsified in order
to conceal that overtime was not being paid as required by
statute, regulation and the contract for construction. The
disputed testimony is certainly corroborative of other evidence
presented at the hearing indicating that Superior Masonry engaged
in a pattern and practice of behavior intended to deny workers
legal rights to overtime pay.
Petitioners' protest that McWinn should not have been
allowed to testify as to Mrs. Spencer's statements to him,
because Mrs. Spencer was "accessible." [6][7] However, the
Department -- having invoked the subpoena process -- made a good
faith effort to obtain her testimony and the Board has not relied
in this decision on any hearsay exceptions which require
consideration of witness availability. See FRE 804.
The Board has carefully considered Petitioners' second
argument on appeal and finds it without merit. The D & O that
gives rise to this appeal provides a detailed analysis of the
documentary and testimonial evidence in the record and
sufficiently supports the ALJ's conclusion -- even without the
disputed evidence. The computations of the compliance officer,
along with the testimony of five employees all of whom contradict
Seltzer's solo testimony, provide ample basis for the conclusions
reflected in the D & O. At least one of the other witnesses
(Kenneth Gaines, Sr.) -- whom the ALJ found convincing -- also
provides additional evidence of Petitioners' willful disregard
for the law.
Five employees testified that they worked overtime hours for
which they received only straight time pay. One of the employee
witnesses who testified to having received straight time pay for
all hours worked, including hours over 40 in a week, also carried
the mantle of the Company's authority, conferred by Seltzer, to
supervise the work of others and to tally and report on all
employee hours worked. Kenneth Gaines, Sr., Superior's foreman
and job boss, testified that he was not surprised when he
received straight time pay for all hours worked because he was
told by Seltzer, at the time the company bid on the job, that no
overtime wages would be paid. Thus, the ALJ's factual findings
concerning backwages and responsibility for falsified payrolls
are well supported by the record. 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. See also, Prime Roofing, Inc., WAB Case No. 92-15
(Jul. 16, 1993).
Petitioners attempt to shift responsibility for keeping an
accurate account of payroll and certifying a true record in
weekly payroll reports. The law is well settled that statutory
responsibilities cannot be delegated. We have held that "Board
precedent does not permit a firm or a responsible company
official to avoid debarment by claiming that the labor standards
violations were committed by employees of the firm." Permis
Construction Corp., WAB Case No. 88-11 (July 31, 1991); Map
Maintenance and Construction Corp., WAB Case No. 90-33 (Mar. 11,
1991); P.B.M.C., Inc., WAB Case No. 87-57 (Feb. 8, 1991); Marvin
E. Hirchert, WAB Case No. 77-17 (Oct. 16, 1978). Indeed, if
Seltzer had faithfully discharged his statutory responsibility
there would be no need to reconstruct a payroll record through
inference derived from witness testimony, nor would there be any
question as to whether his recordkeeping instructions to Spencer
were at variance with his duty under the law. In another case
where the petitioner raised [7][8] similar objections, the Board
stated, "as Lazzinnaro did not keep accurate payroll records,
Wage and Hour relied on survey results and individual testimony
to prove the underpayments. This inferential proof was
introduced and accepted in accordance with the principles of
Anderson v. Mt. Clemens Pottery, 328 U.S. 680 (1946) and
Structural Services, WAB Case No. 82-13 (June 22, 1983)." M&C
Lazzinnaro (I), WAB Case No. 88-08 and (II), WAB Case No. 89-12
(Mar. 11, 1991).
The Board has long held that proof of underpayment of wages
-- coupled with the submission of false certified payrolls -- is
prima facie evidence of the commission of willful and aggravated
violations within the meaning of the debarment regulation at 29
C.F.R. 5.12(a)(1). In Gaines Electric Service Company, Inc., WAB
Case No. 87-48 (Feb. 12, 1991), at p. 4, the Board reiterated the
principle behind this line of decisions:
Falsification of certified payrolls is itself
deliberate conduct that violates law and regulation;
furthermore, submission of falsified payrolls raises a
prima facie case that any accompanying underpayment of
wages or overtime compensation was deliberately
undertaken.
Absent proof to the contrary, a petitioner has failed to meet his
burden in coming forward with proof to rebut the inference that
the wage and certified payroll violations were willfully
committed. Phoenix Paint Company, WAB Case No. 87-08 (May 5,
1989). The ALJ correctly followed similar reasoning in this
matter in concluding that debarment was warranted:
. . . I find that [Petitioners'] conduct constituted
willful and aggravated violations of the Acts and that
debarment is required. Falsification of payroll
records to simulate prevailing wage compliance is prima
facie evidence of a willful violation and itself a
debarrable act, and I find in this instance that the
submission of the falsified records indicates that
[Superior] knew of the prevailing wage requirements and
willfully chose to violate their obligations and in the
absence of contrary or mitigating evidence the
corporation and responsible officer should be debarred.
Footnote omitted; D & O at 5.
The record clearly establishes that Petitioners failed to
pay employees required overtime wages, failed to keep accurate
payroll records and certified false reports. The D & O provides
a thoughtful review and analysis of witness testimony. The ALJ,
having had the opportunity to observe and question witnesses,
credited the testimony of the several workers and the
Department's [8][9] witness over Seltzer's personal appearance as
the only defense witness. The ALJ squarely addresses
Petitioners' threshold objection to the disputed testimony and
articulated a solid basis for admitting such testimony. On the
weight of all evidence in the record, the ALJ's determinations
are reasonable, the decision well grounded and the order of
debarment appropriate. For the foregoing reasons, the ALJ's
Decision and Order is affirmed.
BY ORDER OF THE BOARD:
Karl J. Sandstrom, Member
James C. Riley, Member
Joyce D. Miller, Alternate Member
Gerald F. Krizan, Esq.
Executive Secretary[9]
/FN1/ United States v. Sessin, 84 F.2d 669 (10th Cir. 1936) (in a
suit on war risk insurance,
admitting evidence that plaintiff was assigned to tubercular ward
in Army hospital; this testimony
was "direct and not hearsay," and if he did not go to this ward
as a tubercular patient, cross would
neutralize any inference).
/FN2 /Examples include commands by superiors to subordinates in
military or quasi-military units (Army, police
or fire department), directives to employees, and parental
instructions to children.
