CCASE:
NORSAIRE SYSTEMS,
DDATE:
19950228
TTEXT:
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WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of:
NORSAIRE SYSTEMS, INC., WAB CASE NO. 94-06
("Norsaire II")
BEFORE: Karl J. Sandstrom, Presiding Member
James C. Riley, Member
Joyce D. Miller, Alternate Member
DATED: February 28, 1995
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 an August 30,
1994 ruling on remand by the Acting Assistant Administrator of the Wage
and Hour Division. In its initial decision in this matter (Norsaire
Systems, Inc., WAB Case No. 94-06 (June 27, 1994) ("Norsaire I")), this
Board remanded the case to Wage and Hour for reconsideration of its
January 25, 1994 ruling 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. On remand, Wage and Hour
reaffirmed its earlier ruling. For the reasons stated below, the Board
affirms Wage and Hour s ruling on remand.[1]
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[2]
I. BACKGROUND
A. Wage and Hour s initial coverage ruling
The underlying facts and procedural history of this matter are set forth
in Norsaire I. Briefly, PCL Construction Services, Inc. ("PCL") was the
prime contractor on a contract with the United States Postal Service
("USPS") to construct a "General Mail Handling Facility" at Stapleton
Airport in Colorado. PCL subcontracted with Natkin & Company ("Natkin")
for installation of air cooling units in the facility. Norsaire entered
into a purchase agreement with Long & Associates, Inc., to provide 19
air handling units to Natkin. Subcontractor Natkin employed Chavez
Construction to install the units.
After conducting a compliance investigation, Wage and Hour concluded
that Norsaire had failed to pay the prevailing wage rate to employees
who performed work on the construction site. The Norsaire employees in
question performed on-site warranty work on the cooling units which had
been damaged after the units had been installed, but before the mail
handling facility was accepted by the USPS. In Wage and Hour s initial
(January 25, 1994) ruling, the Deputy Assistant Administrator concluded
Norsaire was a subcontractor within the meaning of the Davis-Bacon Act
and that the Norsaire employees were entitled to Davis-Bacon prevailing
wage rates for the time spent on the construction site. Wage and Hour
assessed back wages totaling $21,933.97.
Wage and Hour also informed PCL and Natkin by letter of their
responsibility as prime contractor and subcontractor for unpaid wages
owed by a lower-tier subcontractor (Norsaire). The letters to Norsaire,
PCL and Natkin advised them that if they believed relevant facts were in
dispute, they should submit a hearing request within 30 days. None of
the firms requested a hearing. Norsaire, however, did file a petition
for review of Wage and Hour s January 25, 1994 ruling with this Board.
In its decision on Norsaire s appeal (Norsaire I), the Board directed
Wage and Hour to reconsider its ruling that Norsaire s workers at the
construction site were subject to Davis- Bacon coverage. The Board took
issue with two primary points in Wage and Hour s coverage ruling: (1)
Wage and Hour s application of Department regulations in this matter;
and, (2) Wage and Hour s reliance upon Board precedent in support of its
ruling.
1. Application of the Department s regulations
The Board focused on Wage and Hour s application of the definition of
"building" and "work" at 29 C.F.R. 5.2(i), which defines those terms as
"generally includ[ing] construction activity, as distinguished from
manufacturing, [2]
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[3] furnishing of materials, or servicing and maintenance work." In
its coverage ruling Wage and Hour stated that while Section 5.2(i) "may
generally exclude servicing or maintenance work, it does not exclude
repair work that is conducted on equipment in connection with and at the
site of such a building or work." Wage and Hour distinguished between
"routine or regular service or maintenance work that is preventative in
nature" and the tasks performed by Norsaire s employees, which Wage and
Hour described as "directed to correcting a problem that had already
occurred and were more akin to repair work than to service or
maintenance work." The Board directed Wage and Hour on remand to
reconsider the suggested distinction between work that is within
Davis-Bacon coverage pursuant to the definition of "construction,
prosecution, completion or repair" at 29 C.F.R. 5.2(j) and "servicing
and maintenance work" that is excluded from coverage pursuant to Section
5.2(i).
2. The Board s decision in Alcoa Construction Systems,
Inc., and Opinion Letter WH-206
The Board directed Wage and Hour to reconsider whether the work done
by Norsaire s employees was covered in light of the Board s decision in
Alcoa Construction Systems, Inc., WAB Case No. 75-06 (Sep. 1, 1975), and
a 1973 Wage and Hour opinion letter (Opinion WH-206 (Mar. 9, 1973)).
Wage and Hour had relied upon Alcoa in support of its first Norsaire
coverage ruling. In Alcoa, the supplier of prefabricated kitchen and
bathroom modules came on site to do some repair work on the modules.
The Board in Alcoa, rejecting the supplier s argument that the work was
performed under the warranty provisions of the contract, stated that the
work done on site "was clearly construction work in every sense of the
word."
However, the Board in Alcoa also stated 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 requirements." In Norsaire I, the Board stated
that instead of mandating the conclusion reached by Wage and Hour with
respect to coverage of Norsaire, "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." (Footnote omitted.)/FN1/
The Board in Norsaire I also took note of a 1973 Wage and Hour
opinion letter, in which Wage and Hour ruled that on-site repair work on
prefabricated kitchen and bathroom units was construction work "rather
than ordinary warranty work." The Board stated that the opinion letter,
like Alcoa, suggests that some [3]
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[4] types of on-site work, performed under warranty, may not be covered
by Davis-Bacon requirements.
3. Other points
The Board also raised two other points to be addressed by Wage and
Hour on remand. First, the Board noted that the administrative record did
not contain a copy of the prime contract between PCL and USPS, or a copy
of the subcontract between PCL and Natkin. The Board remanded the
matter for completion of the administrative record by the inclusion of
the prime contract and the PCL/Natkin subcontract.
In addition, the Board noted that the record contained very little
information on the type of work actually performed on-site by Norsaire s
employees. The Board directed Wage and Hour to set forth in its remand
decision further information on the types of work done by the Norsaire
employees.
B. Wage and Hour s decision on remand
Wage and Hour issued its ruling on remand on August 30, 1994. The
ruling letter stated that "[w]e have re-examined the facts of this case
and reaffirm our original determination" that Davis-Bacon requirements
apply to the work performed by Norsaire employees at the construction
site.
1. The availability of the construction contracts
As noted above, the Board directed that on remand the administrative
record be completed with the inclusion of the prime contract between PCL
and the USPS, and the subcontract between PCL and Natkin. Wage and Hour
stated that it requested the USPS project manager to provide a copy of
the prime contract, or if that document was not available, to verify
whether the prime contract required the installation of functioning air
cooling units. The USPS verified, by letter dated August 3, 1994
(Record on Remand, Tab C), that the prime contract required installation
of cooling units and that the units had to be functional at the time of
building acceptance. Thus, stated Wage and Hour, "Norsaire employees
were on the job site performing work to ensure that the cooling units
were functional and operating before completion of the project and prior
to acceptance of the building by the Federal government. . . ."
Accordingly, Wage and Hour reaffirmed its [4]
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[5] initial determination that the Norsaire employees "were performing
work required by the contract and necessary for its successful prosecution"
(footnote omitted).
2. The regulatory distinction between "construction" and
"servicing and maintenance work"
Wage and Hour noted that the initial ruling had described the work
done by Norsaire s employees at the construction site as "directed toward
correcting a problem that had already occurred rather than regular
service or maintenance work that is preventative in nature." That
statement, Wage and Hour said, was not intended as a definitive
interpretation of the terms "construction" and "servicing and
maintenance work," since there is no bright line marking the boundaries
of those terms. Instead, Wage and Hour stated, whether Davis-Bacon
requirements apply in a particular situation depends upon an assessment
of the facts specific to that situation.
In conducting such an evaluation, Wage and Hour added, several
factors are considered significant. For example, past rulings issued
by Wage and Hour and opinions issued by the Solicitor of Labor "have
consistently differentiated between non-covered routine and recurring
maintenance work in which workers are engaged for the purpose of keeping
something in such a condition that it may be continuously utilized
[versus] covered activities such as the restoration of a facility by
replacement, overhaul or reprocessing of constituent parts or
materials." Another factor considered by the Department of Labor, as
Wage and Hour stated, is "whether the contract requires an activity to
be performed continuously over a period of time or whether the contract
requires the correction of individual defects as separate and segregable
incidents." An additional factor is the amount of time necessary to
complete the work in question. Wage and Hour emphasized its position
that the "single most determinative criterion" for deciding whether work
is subject to Davis-Bacon requirements "centers around whether the
activity is undertaken as part of the construction contract."
In this case, Wage and Hour stated, "there is no question that
the installation of the air cooling units was a requirement of the
construction contract, that the units had to be functional prior to the
acceptance of the building, and that the work performed by Norsaire
employees at the site of the work was performed during the construction
of the new building." Accordingly, Wage and Hour concluded that the
work done by Norsaire employees at the construction site came within the
regulatory definition of covered "construction" work, and was not
excluded from coverage as "servicing or maintenance work."[5]
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[6]
3. The Board s decision in Alcoa, and WH-206
As directed by the Board, Wage and Hour s ruling on remand addressed
whether the work performed by Norsaire s employees was covered in light
of the Board s decision in Alcoa and Wage and Hour opinion letter
WH-206. Wage and Hour determined this precedent did not provide a basis
for excluding Norsaire s employees from Davis-Bacon coverage.
With regard to WH-206, the Board noted in Norsaire I that the
opinion letter made an apparent distinction between covered construction
activity and "ordinary warranty work." This suggested, stated the
Board, that there are some types of on-site work, performed under
warranty, that may not be covered by Davis-Bacon requirements. In its
ruling on remand, Wage and Hour noted that WH-206 involved application
of prevailing wage requirements to warranty repair work performed on
prefabricated kitchen and bathroom units. That opinion letter examined
the regulatory definition (at 29 C.F.R. 5.2(i)) of "building" and
"work," Wage and Hour stated, and placed particular emphasis on the
provision stating that "manufacture or furnishing of materials,
articles, supplies or equipment" is not covered activity "unless
conducted in connection with and at the site of such a building or
work."
Wage and Hour added that the distinction in WH-206 between non-covered
"ordinary warranty work" and covered construction activity is completely
consistent with the precedent that specifies that cleaning work that
occurs after the completion of a construction project is not covered.
But in the instant case, Wage and Hour stated, the facts do not show
that Norsaire s employees performed their work after the project had
been completed and the building had been accepted by the USPS. "In
fact," Wage and Hour concluded, "the opposite is true."
Turning to the Board s decision in Alcoa, Wage and Hour stated that
the importance of that decision is the Board s recognition that "no special
significance should be attached to the label warranty work, and that
work fully and closely related to the completion of the building and
modules was viewed as covered work." Wage and Hour added that drawing a
distinction, for coverage purposes, between repair of equipment and
other repairs is not mandated by Alcoa and is not consistent with other
precedent and past practice. Instead, Wage and Hour stated, the
appropriate analysis for determining Davis-Bacon coverage is to examine
whether the equipment being repaired is part of a "public building" or
"public work."
Using this analysis, Wage and Hour stated that the Department of
Labor "has always distinguished activities that involve the alteration,
relocation or rearrangement of architectural and structural components
of a facility that affected the structural strength, stability, safety,
capacity, efficiency or usefulness of the [6]
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[7] facility from alteration of non-fixed components that are not an
integral part of the building or work." Wage and Hour added that in
drawing coverage boundaries between the Service Contract Act/FN2/ and
the Davis-Bacon Act,/FN3/ the Department of Labor "has continually held
that building systems which are functional and integral parts of the
building or work, such as chillers, boilers, furnaces, central air
conditioning, elevators, sprinkler systems are part of the public
building or public work and the repair of these components is covered
under the Davis-Bacon Act."
4. The tasks performed on-site by Norsaire s employees
Wage and Hour responded to the Board s request for additional
information on the tasks performed by Norsaire s employees at the
construction site with a lengthy list of the tasks performed, the tools
used by the employees, and an approximation of the time spent on various
tasks. Wage and Hour estimated that certain employees spent 30% of
their time doing mechanical and electrical work; 20% installing filters,
dampers and gears; 30% doing electrical tasks such as checking wire
leads and taking readings of control panels; and 15% doing plumbing and
pipefitting work. Other employees spent the majority of their time
caulking and puttying. Based on the tasks performed and the tools used,
Wage and Hour concluded that Norsaire s employees were covered "laborers
and mechanics" within the meaning of the Davis-Bacon Act for all the
time they spent on-site.
Wage and Hour also rejected Norsaire s argument that as a manufacturer,
the work performed by its employees on-site did not come within
Davis-Bacon coverage. Wage and Hour referred to Section 15e15 of the
FOH, which discusses coverage of employees of manufacturers or suppliers
who undertake to perform part of a construction contract, or who perform
more than an incidental amount of construction work on-site. Among
other things, Section 15e15 provides that if such employees "are
required to perform more than an incidental amount of construction work
in a workweek at the site of work [they] would be covered by
[Davis-Bacon requirements] and due the applicable wage rate for the
classification of work performed. This would include warranty and/or
repair work." (Original emphasis.) Thus, stated Wage and Hour, even
apart from its conclusion that Norsaire undertook a part of the
construction contract, Norsaire s employees clearly performed work
on-site for more than an incidental amount in any given workweek.
Accordingly, Wage and Hour reaffirmed its January 25, 1994 ruling and
found that Norsaire s employees came within Davis-Bacon coverage as
"laborers and mechanics" who performed work on-site.[7]
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II. DISCUSSION
This case centers on the distinction between "construction" or "repair,"
and "servicing and maintenance work." Davis-Bacon coverage extends, by
law, to work performed under contracts for "construction, alteration
and/or repair." 40 U.S.C. [sec] 276a(a), and the Department of Labor s
regulations (at 29 C.F.R. 5.2(j)(1)) define "construction, prosecution,
completion or repair" as encompassing "[a]ll types of work done on a
particular building or work at the site thereof ...." On the other
hand, the Department s regulations (at 29 C.F.R. 5.2(i)) define the
terms "building" or "work" to "generally include construction activity
as distinguished from manufacturing, furnishing of materials, or
servicing and maintenance work." (Emphasis supplied.)
In Norsaire I, this Board remanded this matter to Wage and Hour
for two primary reasons: First, this Board was dissatisfied with the
distinction posited by Wage and Hour between covered "construction" or
"repair" work and non-covered "servicing and maintenance work." The
Board directed Wage and Hour to reconsider and more fully explain the
distinction between covered and non-covered work. Second, Board
precedent does not exclude construction work performed under warranty
from Davis-Bacon coverage. However, the Board directed Wage and Hour to
reconsider whether, under the precedent established by Board decisions
and Wage and Hour opinion letters, the repair -- under warranty -- of
equipment that had been installed in the facility under construction was
excluded from the coverage of Davis-Bacon requirements as servicing and
maintenance activity. For the reasons given below, the Board concludes
that Wage and Hour s inclusion of the work performed by Norsaire s
employees within the scope of Davis-Bacon coverage was reasonable and
should be affirmed.
A. The distinction between covered "construction" or "repair"
work and non-covered "servicing and maintenance work"
Wage and Hour explained in the remand ruling that it relies on a
number of factors in distinguishing between "construction" or "repair" work
which is subject to Davis-Bacon requirements and non-covered "servicing
and maintenance work." [8
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[9] No single factor is determinative. The determination almost always
requires a close examination of the work actually performed. The
present case is no exception. At page 7 of the Administrator s August
30, 1994 final ruling letter, a detailed description of the work is
provided. Petitioner does not take issue with the Administrator s
description of the work.
The work, as described, primarily involves the adaptation, adjustment
and calibration that accompanies the installation of a cooling system of
this magnitude in a building of this size. The work was not a matter of
correcting a discrete defect in the manufacture of the cooling system,
but was of the type typically performed by a contractor or subcontractor
responsible for installing a cooling system in a building. The fact
that the scope of the work was magnified by the premature activation of
the cooling system does not change the nature of the work performed.
It is irrelevant whether Norsaire was contractually bound to perform
this work or whether it chose on its own accord to assume a contractual
responsibility of the contractor or subcontractor. It was not merely
fulfilling a purchase order for a piece of equipment. It was assuming
responsibility for the proper installation of that equipment which is
clearly construction for the purposes of Davis- Bacon. The Board need
not address whether any of this work might be considered, under
different circumstances, exempted service or maintenance work. The
cooling system was never properly installed and functioning. At a
minimum, a system must be properly installed and operating before work
on it can be characterized as service or maintenance.
The Board is satisfied after reviewing the work performed that Wage
and Hour has properly characterized it as construction.[9]
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[10] B. Coverage of work performed under warranty
Neither Board precedent, nor Wage and Hour opinion letters, nor the
guidance set forth Wage and Hour s Field Operations Handbook places work
outside the bounds of Davis-Bacon coverage simply because the work is
performed under warranty. In Norsaire I, however, the Board directed
Wage and Hour to reconsider whether the Board s decision in Alcoa and
Wage and Hour opinion letter WH-206 suggested that the repair, under
warranty, of equipment installed in a covered facility should, in some
circumstances, not be covered by Davis-Bacon requirements.
In the remand ruling, Wage and Hour noted that the discussion in WH-
206 of "ordinary warranty work" and covered construction activity took place
in the context of consideration of the definition of "building" and
"work." In particular, Wage and Hour added, the opinion letter
emphasized the provision of 29 C.F.R. 5.2(i) which specifies that
manufacture or furnishing of materials, supplies and equipment is not
covered unless such activity "unless conducted in connection with and at
the site of" a building or work. We agree with Wage and Hour that
viewed in this context, WH-206 is consistent with the principle,
discussed above, that places activity within the scope of covered
"construction" or "repair" when the work is of the type in this case,
performed at the construction site, and prior to acceptance of the
facility by the contracting agency.
The Board also agrees with Wage and Hour that Alcoa does not mandate
a distinction, for coverage purposes, between repair of equipment and
other types of repairs. Further, it is appropriate for Wage and Hour to
focus it coverage analysis on whether the equipment that is being
repaired is part of a "public building" or "public work." Wage and Hour
represented to this Board that utilizing such an analysis, Wage and Hour
has consistently ruled that "building systems which are functional and
integral parts of the building or work, such as chillers, boilers,
furnaces, central air conditioning, elevators, sprinkler systems are
part of the public building or public work and repair of these
components is covered under the Davis-Bacon Act." We reserve for
consideration in an appropriate case whether, under this analysis, the
warranty repair of the type of equipment discussed in Alcoa --
residential kitchen and laundry equipment -- would be covered activity.
However, the Board accepts Wage and Hour s conclusion that under this
analysis Norsaire s on-site repair of the air cooling units in the USPS
mail handling facility was subject to Davis-Bacon requirements.[10]
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[11] In sum, the Board affirms Wage and Hour s ruling that the work
performed on-site by Norsaire s employees is within the scope of
Davis-Bacon coverage.
BY ORDER OF THE BOARD:
Karl J. Sandstrom, Presiding Member
James C. Riley, Member
Joyce D. Miller, Alternate Member
Gerald F. Krizan, Esq.
Executive Secretary[11]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
FOOTNOTES
/FN1/ PCL did submit to Wage and Hour a copy of the PCL/Natkin
subcontract, but Wage and Hour had not yet received the subcontract when
it issued the remand ruling. (See Statement of the Administrator in
Opposition to the Petition for Review, at p. 4 n.3).
/FN2/ McNamara-O Hara Service Contract Act of 1965, as amended (41
U.S.C. [sec] 351 et seq.).
/FN3/ 40 U.S.C. [sec] 276a et seq.
/FN4/ Section 5.2(j)(1) specifies that "construction, prosecution,
completion, or repair" includes, without limitation:
(i) Altering, remodeling, installation (where appropriate) on the
site of the work of items fabricated off-site;
* * *
(iii) Manufacturing or furnishing of materials, articles, supplies
or equipment on the site of the building or work. . . .
/FN5/ As set out in the August 30, 1994 letter, the tasks included:
puttying and caulking inside the units and the duct work; making minor
repairs; performing electrical and mechanical work; lining belts and
sheaves on fans; installing filters, dampers, and gears; checking wire
leads; taking readings of control panels, motors and sensors; soldering
pipe; adjusting water levels; sealing units up the sides and around the
bottom; making adjustment to the dampers, bolts, thrusts, restraint
springs; and painting welds. The tools used include socket wrenches,
pliers, pipe wrenches, torches, putty knives, screw drivers and hammers.
Estimate of time spent performing specific tasks vary from employee to
employee. However, in general, approximately 30% of the time for
certain employees was spent performing mechanical and electrical work
(lining belts and sheaves on fans, etc.); 20% of employees time was
installing filters, dampers and gears; another 30% was electrical
(checking wire leads, taking reading of control panels, etc.), and 15%
of the time was performing plumbing or pipefitting tasks (soldering pipe
and adjusting water levels). Other employees spent the majority of
their time on the job site caulking and puttying.
/FN6/ Among other things, repair of these types of residential
appliances might involve only an incidental amount of on-site work. In
instant case, however, the Board readily accepts Wage and Hour s
conclusion that the amount of on-site work performed by Norsaire
employees -- an average of 19 hours per week by 24 employees between
February and May 1990 -- was more than incidental.
