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February 23, 2007
Edited by: Seena Foster
These enactments
operate to ensure the payment of proper wages, fringe benefits, and overtime.
The Davis Bacon Act is designed to give local laborers and contractors a fair
opportunity to participate in federal building programs, to protect the
employees of government contractors from substandard wages, and to promote the
hiring of local labor rather than cheap labor from distant sources. United
States v. Binghamton Construction Co., 347 U.S. 171, reh'g. denied, 347 U.S. 940
(1954). The Service Contract Act was enacted in 1965 for the purpose of
providing "wage and
safety protection to employees working under service contracts with the United
States government, where the contract amount exceeds $2,500 and the contract is
performed within the United States."
Marlys Bear Medicine v. United States, 47 F. Supp. 1172
(D. Mon. 1999), rev'd.
on other grounds, 241 F.3d 1208 (9th Cir. 2001); 41 U.S.C. § 353(b). Upon issuance of
a decision and order or other final order by the administrative law judge, the
aggrieved party has the right to appeal to the Administrative Review Board ("ARB" or "Board").
Table of Contents
STATUTORY AND REGULATORY AUTHORITY
I. Davis-Bacon Act
II. McNamara-O'Hara Service Contract Act
III. Contract Work Hours and Safety Standards
Act
IV. Non-displacement of qualified workers-Executive Order 12933 (rescinded February 17, 2001)
The Davis-Bacon Act
I. Generally
A. Purpose
B. Contractor liable regardless of existence of contractual relationship
1. Traditional employer/employee relationship not required
2. Prime contractor liable for lower tier contractor
II. Jurisdiction
A. Administrative delay; laches
1. Actual prejudice required for dismissal of complaint
2. Laches not applicable
[a] Delay from date of hearing request and referral
[b] Delay from commencement of investigation and notice of alleged violations
[c] Delay in scheduling hearing
B. Motion for reconsideration
C. Untimely petition for review; appeal period not jurisdictional
D. Portal-to-Portal Act is inapplicable
E. Enforcement action not barred by statute of limitations
F. Interplay with the Contract Disputes Act
G. ARB lacks authority to intervene in Administrator's discretionary duties
III. Standard of review
A. By the ALJ
Adoption of a party’s brief
B. By the ARB
C. By the circuit court
D. Statutory construction, generally
IV. Evidence
A. Burdens of proof
1. Generally
2. Establishing back wages owed
B. Use of payroll records to demonstrate disregard for classification; business records exception to hearsay
C. Terms of contract to pay prevailing wage controlling
D. Testimony demonstrates lack of compliance with classification requirements
E. Contemporaneous calendar maintained by employee; business records exception to hearsay
F. Stipulations
G. Challenge to wage determination after contract issued held improper
V. Discovery
A. Failure to comply with discovery orders
1. Summary decision proper
2. Ruling against interests
B. Privileges
1. Informants’ privilege
[a] Upheld
[b] Denied
C. Validity of prevailing wage determination; discovery not permitted
D. Protective order
VI. Classification of employees
A. Disregard for classification established by payroll records
B. Determined solely by Secretary; cannot be determined by employer
C. False Claims Act
1. Held applicable
2. Held inapplicable
D. Sporadic nature of work irrelevant to classification determination
E. Unforeseen circumstances; wage determination cannot be rescinded
F. Collateral estoppel
Held inapplicable
[a] Work performed at a “dedicated” plant
[b] DOL debarment proceeding distinct from HUD criminal proceeding
G. Contractual relationship between contractor and employees irrelevant
H. Classification based on area of practice by unions and signatory contractors
I. “Side bar” agreements unenforceable
J. No estoppel based on actions of contracting agency
K. Exempt employees
L. Contractor presumed to know the Frye Brothers rule
VII. "Site of work" determinations
A. Controlling law
B. Scope of definition limited
C. Sites which are not covered
1. Batch plants-truck drivers hauling asphalt from batch plant to site
2. Batch plant up to one-half a mile from construction site
3. Transportation to and from dedicated borrow pit
4. Tow truck operators assisting motorists on public highways
D. Sites that are covered
1. Batch plant employee-site was integral and adjacent to work for long, continuous project (“dedicated” plant)
2. Off duty police officers directing traffic
3. Warehouse workers
4. Lease for construction of federal facility
VIII. Compensation
A. Constitutes part of prevailing wage rate; properly deemed a fringe benefit
Contributions to employee pension plans
B. Does not constitute part of prevailing wage rate
1. Bonuses
2. Employer's administrative costs
3. Vacation and holiday benefits, unfunded plans
4. Apprenticeship training program; no “reasonable relationship” established
5. Profit-sharing plans
6. Health insurance
7. Meals and lodging
C. Overtime wages cannot be reduced by fringe benefits
IX. Relief
A. Debarment
1. Generally
[a] Debarment is remedial, not punitive
[b] Intent to violate required
[c] Authority to lessen three year period of debarment
i. ALJ without authority
ii. Administrator has authority
Abuse of authority
[d] Debarment of individuals, as well as company, authorized
[e] CWHSSA and SCA violations-different debarment standards
2. Debarment not proper
[a] Unsuccessful attempts to pay required wages established
[b] No evidence of fraud; consistent payment practices
3. Debarment proper
[a] Falsification of payroll records
[b] Actual or constructive knowledge of mis-classification
[c] Failure to pay prevailing wages
[d] Destruction of time cards
[e] Receipt of kickback of back owed wages
[f] Overtime violations; liquidated damages
[g] Ignorance
[h] Experienced federal government contractor; presumption of knowledge
[i] Failure to read contract requirements
4. Early removal from debarment list under 29 C.F.R. § 5.12(c)
[a] Administrator entitled to presumption that factors properly considered in denying early removal
[b] Administrator's decision reviewed by the ARB
[c] Abuse of authority
B. Pre-judgment interest against government disallowed
C. Withheld funds
1. Department's claim superior to surety
2. Due process rights of Respondent
D. Sanctions and attorney's fees; Equal Access to Justice Act inapplicable
E. Liquidated damages
Not permitted under the CWHSSA
X. Types of dispositions
A. Stipulations and withdrawal therefrom
B. Consent findings
C. Settlements
D. Dismissal
1. Untimely challenge to wage determination
2. For lack of prosecution
XI. FOIA requirements regarding issued decisions
The McNamara O'Hara Service Contract Act
I. Generally
A. Purpose
B. Proceedings exempt from automatic stay provisions of the Bankruptcy Code
II. Jurisdiction
A. Motion for reconsideration
1. By the ARB
2. By the ALJ
3. By the Administrator
Review of wage determination
B. Untimely challenge
1. Wage determination; not permitted after close of contract
2. Administrator has discretion to waive procedural requirements in the interest of justice
3. Appeal dismissed as untimely
C. Unavailability of ALJ and reassignment for decision
D. Portal-to-Portal Act inapplicable
E. District court jurisdiction
1. May consider propriety of debarment
2. No authority to remand for further proceedings absent holding that the ALJ's findings not supported by a preponderance of the evidence
F. Tennessee Valley Authority covered
III. Standard of review
IV. Evidence
A. Burden of proof
1. Preponderance of the evidence
2. Reconstruction of payroll records
B. Limitations on evidence held to be improper
1. Exclusion of evidence on remand
2. Limitation on cross-examination too arbitrary
C. Testimony regarding documentation not in the record
V. Discovery
A. Interrogatories
B. Protective order
1. Informant's privilege
2. Deliberative process privilege
3. Work product privilege
C. Compelling electronic discovery
VI. Exempt employees
A. No coverage for certain types of employees
1. Service employee defined, generally
2. Certain contracts for public buildings; public tariffs; Postal Service
3. Executive, administrative, or professional exemptions at 41 U.S.C. § 356
B. Application of exemptions
1. Application proper
[a] Courier service-published tariff rates in effect
[b] Airline pilots
2. Application improper
[a] Employer primarily performed janitorial duties
[b] Airline pilots
[c] Ownership interest in company irrelevant
[d] Contracts between federal agencies and contract agencies
C. Contract between private individual and Native American Tribe
VII. Party responsible
A. Party responsible
1. Generally
2. Examples
a. Manager jointly and individually liable
b. Joint venture company liable
c. Individual in “de facto control” of daily operations liable
d. Employer and its officers liable for acts of subordinate
B. Successor contractor
1. Determination of status as
2. Successor liable for predecessor's contract
a. Generally
b. Liability not affected by successor's collective bargaining agreements
c. One contract period only
d. Minor change in job duties between predecessor and successor insufficient to avoid contract obligations
e. More than one predecessor collective bargaining agreement
VIII. Compensation
A. Collateral estoppel
Inapplicable; no affirmative misconduct
B. Suspension of payment of wages or delay in increase in wages Held to be improper; waiting for DOL approval or reimbursement
C. Fringe Benefits
1. Not contingent on full-time status of employee
[a] Health and welfare benefits
[b] Holiday pay
2. Cross-crediting is permitted
3. Proper records must be maintained
4. Cannot offset wages to credit against fringe benefit violations
5. Cannot claim fringe benefit credit where deducted from substandard wages
D. Credit for tips
E. Right to overtime pay cannot be waived by employee or bargained away
F. Prevailing wage determination; challenge to
1. No collective bargaining agreement
2. Mis-classification of employees
G. Standard for determining whether hours worked are compensable—“principal activity” test
Time spent waiting for mail is compensable
Rest periods compensable; meal breaks not compensable
IX. Relief
A.Debarment
1. Generally
2. CWHSSA and SCA violations-different debarment standards
3. Company and individual debarment; “party responsible”
4. Injunction against debarment not permitted
5. Violation was willful (culpable neglect or culpable disregard); debarment mandatory
[a] Established
i. Poor business judgment; failure to pay wages
ii. Employer's reliance on expired collective bargaining agreement
iii. Widespread and continuing violations
iv. Failure to maintain payroll records
v. No "bona fide legal issue of doubtful certainty"
vi. Failure to honor terms of predecessor's contract
vii. Failure to cooperate with investigation
viii. Ignoring the government's advice
ix. Ignorance of the law
x. Failure to comply with consent findings
[b] Not established
6. "Unusual circumstances" defined
[a] Established
i. Deficiencies corrected; debarment would cause employer's demise
ii. De minimus violations
iii. Immediate corrective action
iv. Reasonable mistake in judgment; no prejudice to employees
v. Unexpected expenses
[b] Not established
i. Unexpected costs required by contract and law
ii. Difference between wage determination and bid solicitation immaterial
iii. Discrimination against small, minority-owned business untimely presented and unpersuasive
iv. Proficiency in the English language
7. Commencement of term of debarment
8. ALJ without authority to lessen three year debarment term
B. Withholding employee's wages by contractor improper
C. Unnamed employees who could not be located; award of back wages against contractor held proper
D. Pre-judgment interest properly awarded
E. Liquidated damages
Not permitted under the CWHSSA
F. No interest assessment against government without its consent
VII. Types of dispositions
A. Default judgment
1. Missing contractor
2. Uncooperative contractor
3. Unnamed employees who could not be located; award of back wages against contractor held proper
4. Unrepresented party; special considerations
5. Failure of Respondent to timely file answer
B. Consent findings
C. Summary judgment
Non-displacement of qualified workers - Executive Order 12933 (rescinded February 2001)
STATUTORY AND REGULATORY AUTHORITY
A. Davis-Bacon Act
1. Enacted in 1949, amended in 1974, and codified at 40 U.S.C. § 276a et seq.
2. 29 C.F.R. Parts 1, 5, 6 and 7.
B. McNamara-O'Hara Service Contract Act
1. Enacted in 1965 and codified at 41 U.S.C. § 351 et seq.
2. 29 C.F.R. Parts 4, 6 and 8.
C. Contract Work Hours and Safety Standards Act
1. Enacted in 1962 and codified at 40 U.S.C. § 327 et seq.
2. 29 C.F.R. Parts 5, 6, and 7.
D. Non-displacement of qualified workers-Executive Order 12933
1. Executive Order 12933 issued on October 24, 1994.
2. 29 C.F.R. Part 9.
3. Executive Order 12933 was rescinded by Executive Order 13204 on February 17, 2001.
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The Davis-Bacon Act
I. Generally
A. Purpose
The dual purposes of the Davis-Bacon Act are to: (1) give local laborers and contractors a fair opportunity to participate in building programs when federal money is involved; and (2) protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the locality. L.P. Cavett Co. v. U.S. Dep't of Labor, 101F.3d 1111 (6th Cir. 1996).
B. Contractor liable regardless of existence of contractual
relationship
In Arliss D. Merrell, Inc., 1994-DBA-41 (ALJ Oct. 26, 1995), the ALJ observed that it was well-settled that a prime contractor is responsible for the back wages due employees of its subcontractor under the Davis-Bacon Act, and is responsible for insuring that all persons engaged in performing the duties of a laborer or mechanic on the construction site receive the appropriate prevailing wage rate, irrespective of any contractual relationship alleged to exist or not to exist between the contractor and such persons. 29 C.F.R. § § 5.2(o), 5.2(i), 5.5(a)(2), 5.5(a)(6)
1.
Traditional employer/employee relationship not required
Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004) (“partnership” agreement irrelevant); Superior Paving and Materials,
Inc., ARB Case No. 99-065, 1998-DBA-11 (ARB, June 12, 2002); Commonwealth of Massachusetts v. U.S. Dep't. of Labor, Case No. 1998-JTP-6 (ALJ, Oct. 29, 2001); Star Brite Construction Co., ARB Case No. 98-113, 1997-DBA-12 (ARB, June 30, 2000) (lack of a traditional employer/employee relationship between Star Brite and its workers did not absolve Star Brite from the responsibility to insure that they were compensated in accordance with the requirements of the Act); All Phase Electric Co., WAB Case No. 85-18 (WAB, June 18, 1986); Tap Electrical Contracting, Inc., WAB Case No. 84-1 (WAB Mar. 4, 1985) (the prime contractor is not relieved of
its obligations under the Davis-Bacon Act and the CWHSSA merely because it did not know about the violations of the subcontractor until after they occurred). Further, a subcontractor is also responsible for the violations of a lower tier subcontractor. 29 C.F.R. § 5.5(a)(6).
2.
Prime contractor liable for lower tier contractor
In Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004), the Board held that the prime contractor “is ultimately liable for (the subcontractor’s) failure to ensure its own lower-tier subcontractor’s DBA compliance.”
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II. Jurisdiction
A. Administrative delay; laches
1. Actual prejudice required for dismissal of complaint
In Bill J. Copeland, 1996-DBA-18 (ALJ, Jan. 28, 1997), Respondent moved that the case be dismissed because of the delay by the Wage
and Hour Administration in investigating and referring the case to the Office of Administration Law Judges after Respondent's request for a hearing. The ALJ noted that the four factors to consider when assessing whether there had been a denial of procedural due process in a case affected by administrative delay are: (1) the length of the delay; (2) the reason for the delay; (3) the defendant's assertion of his/her rights; and (4) prejudice to the defendant.
In this case, the formal charges were not issued until two and one-half years after the investigation was initiated and more than two years after the initial
withholding of funds. In addition, over a year passed between Respondent's initial request for a hearing and the Order of Reference. After assignment to an administrative law judge for hearing, counsel for the Administrator indicated that he would not be able to proceed to trial before an additional six months. The ALJ noted that, as a result, the hearing would be five years after the initial investigation and withholding of funds, and he classified this as excessive administrative delay.
The Administrator's reasons for the delay involved a variety of delays in the investigatory process, several due to the actions of Respondent. The ALJ found that most of the excuses failed to adequately explain the delay and that the Administrator's assertion that the delays were attributable to Respondent was incorrect. Specifically, the ALJ concluded that Respondent's efforts at conciliation could not be interpreted as a waiver of due process rights. The Administrator cites Respondent's petition to the Wage Appeals Board requesting an Order of Reference as one reason for delay. The ALJ disagreed, stating that the Administrator should have anticipated the dismissal of the petition as filed in the wrong forum and that he should have followed the Board's urging by filing
the Order of Reference. The ALJ found this delay "almost completely unexplained."
The ALJ stated that Respondent repeatedly asserted his rights by requesting hearings, requesting referral to the OALJ, and objecting to continuances. As for the element of prejudice to Respondent, the ALJ decided that Respondent had demonstrated that he had been prejudiced where (1) his chief witness passed away, (2) other witnesses had moved and were unavailable, and (3) he was unable to secure documents from an employer that went out of business. Thus, the ALJ
dismissed the matter, ordered that monies withheld be returned to Respondent, and denied the request for interest.
On appeal, in Bill J. Copeland, ARB Case No. 97-064, 1996-DBA-18 (ARB, Oct. 31, 1997), the ARB reversed, in part, the ALJ's dismissal with prejudice based on the Administrator's various and inexcusable delays in processing the complaint and bringing it to hearing. The ARB remanded the case for a determination on the merits or a showing of "actual prejudice" as a result of the administrative delays. The ARB took the position that a dismissal without a determination on the merits of the action is detrimental to the rights of employees who may have been wrongfully underpaid pursuant to the DBA and the CWHSSA. The ARB found that the rights of the parties need to be balanced and mere allegations of prejudice due to delay are insufficient to warrant a dismissal-there must be actual prejudice. In reversing the ALJ's dismissal without a hearing or determination on the merits, the ARB cited Slotnick Co., WAB Case No. 80-05 (WAB, Mar. 22, 1983); Gemini Construction Co., WAB Case No. 91-23 (WAB, Sept. 12, 1991); Tom Rob, WAB Case No. 94-03 (WAB, June 21, 1994); Barker v. Wingo, 409 U.S. 514 (1927); Public Developers Corp. (PDC), WAB Case No. 94-02 (WAB, July 29, 1994). See also Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004).
In Public Developers Corp., 1992-DBA-36, aff'd. in part, WAB Case No. 94-02 (WAB, July 29, 1994), the Wage Appeals Board addressed the issue of whether the ALJ properly dismissed a case based on laches. Laches is the principle that a party who delays doing a thing at the proper time is barred from bringing a legal proceeding. The defense of laches may be brought against the federal government upon a showing that the government's actions were dilatory and resulted in actual prejudice against the asserting party. Citing Barker v. Wingo, 407 US 514 (1927), the Board held that administrative delay must be examined in light of four factors: (1) the length of delay; (2) the reason for the delay; (3) the defendant's assertion of his/her rights to a hearing; and (4) prejudice to the defendant. The Board held that, in the case before it, the ALJ erred both by failing to make findings or conclusions on the merits of the case and by failing to make specific findings of fact to support the conclusion that Respondent was prejudiced in its ability to present a defense. The laches defense required Respondent to demonstrate that it was "actually prejudiced" in its ability to present a defense. The presumption of prejudice may only be used in the most extreme circumstances where the defense
may be utilized with or without demonstrating palpable injury.
By decision on remand in Public Developers Corp., 1992-DBA-36 (ALJ, Sept. 19, 1994), the ALJ held a party asserting "laches" or administrative delay has the burden of proving all elements of the defense. The party asserting the defense of laches must prove actual prejudice. Actual prejudice may be either evidentiary or economic. Evidentiary prejudice occurs when a respondent's inability to present a full and fair defense on the merits
is due to the loss of records, the unavailability of witnesses, or the unreliability of memories of past events, thereby undermining the court's ability to judge the facts. Economic prejudice may occur where a respondent suffers the loss of monetary investments or incur damages which would have been prevented by earlier resolution of the matter. Upon review of these factors, the ALJ concluded that the extreme delay cause by DOL prejudiced Respondent both economically and evidentially.
2. Laches not applicable
[a] Delay from date of hearing request and referral
The doctrine of laches was not applicable where a hearing was requested in January of 1992, but the case was not referred to OALJ until September 1994. There had been no delay in charging Respondent with the alleged violations, and Respondent did not demonstrate that its defense was impaired by the passage of time. Specifically, Respondent's contention that witnesses were unable to remember details, such as employees who were allegedly mis-classified and underpaid, was not material as these details would not have bolstered Respondent's defense. The ARB further held that Respondent actually benefitted from the delay by having the opportunity to continue to secure government contracts in the
interim. P&N, Inc./Thermodyn Mechanical Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB, Oct. 25, 1996).
[b] Delay from commencement of investigation and notice of alleged
violations
In Star Brite Construction Co., ARB Case No. 98-113, 1997-DBA-12 (ARB, June 30, 2000), the ARB held that a three year delay between the beginning of the investigation and the official notice of alleged violations did not result in injury or prejudice to the company such that the doctrine of laches was inapplicable. The ARB cited to the following four factors in determining whether to apply the doctrine: (1) length of the delay; (2) reason for the
delay; (3) the defendant's assertion of his or her rights; and (4) prejudice to the defendants. The ARB
noted that the company argued that passage of time "blurred the memories" of the Administrator's witnesses. However, this did not support the application of laches according to the ARB, where witness testimony at the
hearing was consistent and the ALJ specifically found it to be credible. The ARB further noted that findings of fact turned on key pieces of documentary evidence, i.e., the company's certified payroll records which were inconsistent with its own internal payroll information. The ARB noted that "Star Brite itself controlled this information at one time or another and the mere passage of time could not prejudice the defense." As a result, the ARB concluded that general allegations of prejudice were insufficient to support dismissal under the doctrine of laches.
In KP & L Electrical Contractors, Inc., ARB Case No. 99-039, 1996-DBA-34 (ARB, May 31, 2000), Respondent argued that a three year and seven month span of time between issuance of the Wage and Hour Division's "notice of issues" and its subsequent issuance of the Order of Reference to the Office of Administrative Law Judges had prejudiced Respondent in its defense of the charges. Respondent maintained that "the employee witnesses' memories had faded and their testimony at the hearing in 1997 conflicted with written statements they gave in 1992 soon after the e0vents at issue in this case." The ARB pointed to four factors in determining whether a contractor's rights had been violated by reason of delay: (1) the length of the delay; (2) the reason for the delay; (3) the defendant's assertion of his right to a hearing; and (4) prejudice to the defendant. In
this vein, the ARB noted that KP&L "ha(d) not pointed out any particular instances in the record to support its contention that employee witnesses contradicted their own prior written statements (which were in the record for the ALJ to examine), or refused to testify because of lost memory." The ARB further noted that KP&L did not allege, or demonstrate, that any "critical witnesses were made unavailable because of the passage of time." The ARB then concluded that Respondent failed to make a showing of actual prejudice and the ALJ's decision, finding it in violation of the Davis-Bacon Act, was affirmed.
[c] Delay
in scheduling hearing
In Peabody Construction Co., ARB Case No. 04-070, 1994-DBA-45 (ARB, Aug. 31, 2005), the Board upheld the ALJ’s order that funds be disbursed to ten underpaid workers. In so holding, the Board rejected Respondent’s argument that it suffered prejudice from the delay between its August 3, 1993 hearing request and the ALJ’s denial of the hearing request on February 4, 2004. In support of this holding, the Board noted that 29 C.F.R. § 5.11 “does not specify a time limit for when the hearing must be scheduled or conducted.” As a result, the Board denied Respondent’s petition for review.
B.
Motion for reconsideration
In Thomas & Sons Building Contractors, Inc., ARB Case No. 98-164, 1996-DBA-33 (June 8, 2001), the ARB held the following:
The Davis-Bacon Act has no explicit grant of authority to reconsider; therefore, if the Board has authority to reconsider, it perforce must be based on an - inherent authority' theory. To determine whether the Board has such inherent authority in this debarment case, we would
need to examine the statute underlying the decision to determine whether reconsideration would adversely affect its enforcement provisions or statutory purposes. Significantly, even if we were to conclude that we had reconsideration authority, any party seeking reconsideration by this Board would need to make the request within a reasonable period of time.
From this, the Board noted its concern in accepting motions for reconsideration in debarment matters because of the "possible conflicts between the Board's authority and the responsibilities of other Federal officials such as the Comptroller General" who maintains the debarment list. The Board stated that the question of its authority in non-debarment cases "may follow a different analysis from the analysis used in debarment cases." Nevertheless, the Board concluded that it did not have to resolve the issue because:
In this case, Thomas
and Sons filed their request for reconsideration more than five months after we
issued our October 1999 D&O. No new evidence or changed circumstances have
been cited by Thomas and Sons in support of their request, which essentially
raises the same argument that was considered and squarely rejected by this
Board in our prior decision. Moreover, no good cause has been shown for the
delay. We therefore find that the request is untimely.
Slip op. at 7. See also Thomas & Sons Building Contractors, Inc., ARB Case No. 00-050, 1996-DBA-37 (ARB, Dec. 6, 2001).
C. Untimely petition for review; appeal period not
jurisdictional
In Superior Paving & Materials, Inc., ARB Case No. 99-065, 1998-DBA-11 (ARB, Sept. 7, 1999), the ARB accepted an untimely petition for review and held that the 40 day appeal period was not jurisdictional; rather, it could be tolled based upon equitable grounds. Under the facts of the case before it, the ARB found that the government failed to establish that the contractor "'slept on its rights'" or that the claim presented was stale. The contractor filed its appeal with the ARB three days late because it misinterpreted the appeal regulations and initially filed the appeal with the Chief Docket Clerk of the Office of Administrative Law Judges within the time limits.
D. Portal-to-Portal Act is inapplicable
In Cody Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), aff’d in relevant part, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the ALJ cited to Progressive Design & Build, Inc., WAB Case No. 87-31 (WAB, Feb. 21, 1990) to hold that the Portal-to-Portal Act at 29 U.S.C. § 255 is inapplicable to Davis-Bacon Act or Related Act proceedings. See also KP & L Electrical Contractors, Inc., ARB Case No. 99-039, 1996-DBA-34 (ARB, May 31, 2000); Glenn Electric Co. v. Donovan, 755 F.2d 1028 (3d Cir. 1985).
E. Enforcement action not barred by statute of limitations
In Irwin Co. v. 3525 Sage Street Associates, Ltd., 826 F. Supp. 1067 (S.D. Tex. 1992), the ALJ issued a decision on November 1, 1990 finding that the contractor was liable for $136,024.72 in back wages due to 45 employees based upon its failure to pay the prevailing wage rate. The decision was not appealed and, therefore, it became final pursuant to 29 C.F.R. § 6.34. The contractor argued that the subcontractor's collection suit was time-barred but, as the entitlement issue was timely litigated and resolved by the ALJ's decision, the court held that "[t]his suit is simply a collection suit based on the violations previously found" and, as a result, it was not time-barred.
F. Interplay with the Contract Disputes Act
In Herman B. Taylor Const. Co. v. Barram, 203 F.3d 808 (Fed. Cir. 2000), the circuit court held that disputes over labor standards in federal contracts must be resolved through the provisions of the Davis Bacon and Related Acts:
Under the Federal Acquisition Regulations specifying the labor provisions that certain federal procurement contracts must include, disputes arising out of the labor standards
provisions of the contracts are not to be subject to the Contract Disputes Act, but are to be resolved in accordance with the procedures of the Department of Labor (which clearly means by the department). Emerald Maintenance v. United States, 925 F.2d 1425, 1428 (Fed. Cir. 1991). A board of contact appeals must accept the Labor Department's adjudication of such a dispute, the Board has no jurisdiction itself to determine a labor provisions dispute or to review the labor Department's ruling on that issue (citations omitted).
The court further stated, however, that it must be "clear and beyond question that the Labor Department in fact has found under its established procedures that the contractor has committed such a violation." Under the facts of the case before it, the court held that, because the parties terminated the hearing process and settled the case, there was no clear adjudication that the contractor violated the labor provisions of the contract. Specifically, the court reviewed the terms of the agreement and the contractor did not concede any violation of the labor laws.
G. ARB lacks authority to intervene in Administrator's
discretionary duties
In Greater Kansas City Automatic Sprinkler Contractors Ass'n., ARB Case No. 97-107 (ARB, Sept. 30, 1997), the ARB dismissed an appeal on grounds that it lacked authority to order the Administrator to initiate a prevailing wage rate survey for sprinkler fitters in the Kansas City area. The ARB stated that it has "routinely
declined to intervene in matters pertaining to the Administrator's discretionary administrative management of the Wage and Hour Division." The ARB cited to Veterans Canteen Service, ARB Case No. 96-115 (ARB, Oct. 25, 1996)(Administrator's decision not to enforce the Davis Bacon Act); W.J. Menefee Constr. Co., WAB Case No. 90-15 (ARB, Oct. 25, 1993) (Administrator's decision not to seek back wages); Ames Constr., Inc., WAB Case No. 91-02 (ARB, Feb. 3, 1993) (Administrator's
decision to release withheld funds).
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III. Standard of Review
A. By the ALJ
Pursuant to 29 C.F.R. § 6.19(b)(2),
the ALJ conducts a de novo review of the record. The regulation provides, in part, the following:
The decision of the Administrative Law Judge shall include findings of fact and conclusions of law, with reasons and bases therefor, upon each material issue of fact, law, or discretion presented on the record. The decision of the Administrative Law Judge shall be based upon a consideration of the whole record, including any admissions made under § § 6.16, 6.17 and 6.18 of this title. It shall also be supported by reliable and probative evidence.
29 C.F.R. § 6.19(b)(2).
Adoption of a party’s brief
In Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305), the ARB cautioned that, although “wholesale adoption of the prevailing party’s brief is to be discouraged, an ALJ’s findings of fact will not be set aside if the evidence supports them.”
B. By the ARB
In Star Brite Construction Co., ARB Case No. 98-113, 1997-DBA-12 (ARB, June 30, 2000), the ARB held that it reviews the ALJ's findings de novo. Credibility determinations, on the other hand, will be upheld absent "clear error." See also
also Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004); Thomas & Sons Building Contractors, Inc., ARB Case No. 00-050, Case No. 1996-DBA-37 (ARB, Aug. 27, 2001).
With regard to an Administrator's decision, in Phoenix Field Office, Bureau of Land Management, ARB Case No. 01-010 (ARB, June 29, 2001) the ARB cited to 29 C.F.R. § 7.1(e) and held that "review of decisions issued by the Administrator is in the nature of an appellate proceeding, and the Board "-will not hear matters de novo except upon a showing of extraordinary circumstances.'"
C. By the circuit court
In L.P. Cavett Co. v. U.S. Dep't of Labor, 101 F.3d 1111 (6th Cir. 1996), the circuit court held that the proper standard of review of a decision by the Wage Appeals Board was limited to the question of whether the agency action was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); Communities, Inc. v. Busey, 956 F.2d 619, 623 (6th Cir.), cert. denied, 113 S. Ct. 408 (1992).
D. Statutory construction, generally
In interpreting statutory language, the court in L.P. Cavett Co. v. U.S. Dep't of Labor, 101 F.3d 1111 (6th Cir. 1996) (citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837, 842-43 (1984)), held that the first issue is whether Congress has clearly spoken on the precise question at issue. Under the facts of the case, the DOL asserted that truck drivers were covered by the DBA
prevailing wage rates as the "site of the work" at 29 C.F.R. § 5.2(l) included "both a batch plant located at a quarry more than three miles away from the highway construction project and the Indiana highway system that was used to transport materials from the batch plant to the construction project." The circuit court held
the language of the DBA was clear and that 29 C.F.R. § 5.2(l) was inconsistent with the statute, which requires the payment of prevailing wage rates for "employees working directly on the physical site of the public work under construction . . .."
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IV. Evidence
A. Burdens of proof
1. Generally
In Cody Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), aff’d in relevant part, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the ALJ held that the proponent of the Order of Reference in a Davis-Bacon Act case bears the initial burden of going forward with the evidence and establishing a prima facie claim. Then the burden shifts to the opposing party who bears the ultimate burden of proof by a preponderance of the evidence. See also Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004) (Respondent has the burden to rebut Department’s proof of extent and amount of violations); Thomas & Sons Building Contractors, Inc., ARB Case No. 00-050, Case No. 1996-DBA-37 (ARB, Aug. 27, 2001) ("the Administrator has the burden of establishing that the employees performed work for which they were improperly compensated).
2. Establishing back wages owed
In Thomas & Sons Building Contractors, Inc., 1996-DBA-37 (ALJ, Feb. 17, 2000), aff'd., ARB Case No. 00-050 (ARB, Aug. 27, 2001), order denying reconsideration (ARB, Dec. 6, 2001), the ALJ cited to the Fair Labor Standards Act case of Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), which was applied to Davis-Bacon Act cases by Trataros Construction Corp., WAB Case No. 92-03 (WAB, Apr. 28, 1993), to set forth the parties' burdens in a case involving recovery of unpaid wages. The ALJ determined that the employee has the initial burden "of proving that he performed work for which he was not properly compensated." The ALJ further held, however, that the employee is not required to establish the "the precise extent of uncompensated work." Rather, the employee's burden is met "if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference." Once the employee's burden is carried, then it is the employer's burden to demonstrate the precise number of hours worked or to present evidence sufficient to negate "the reasonableness of the inference to be drawn from the employee's evidence." If the employer fails to carry this burden, then damages may be awarded to the employee, even if the amount of such damages is approximate. Moreover, the ALJ noted that, where the DOL reconstructs an employer's payroll, the burden is on the employer to present evidence which is sufficiently precise to contradict the reconstructed payroll.
See also Northeast Energy Services, Inc. (NORESCO), Case No. 2000-DBA-3 (ALJ, Feb. 12, 2002); Cody Zeigler, Inc., 1997-DBA-17 (ALJ, Sept. 18, 2000) (the ALJ concluded that the employer failed to sustain its burden in challenging the Department's calculations of back wages due its employees); Peabody Construction Co., 1996-DBA-20 (ALJ, Apr. 18, 2000); Arliss D. Merrill, Inc., 1994-DBA-41 (ALJ, Oct. 26, 1995); Superior Masonry, Inc., 1994-DBA-19 (ALJ, Oct. 13, 1994) (failure to maintain proper records of overtime wages paid).
The employer filed for reconsideration with the ARB and argued that, because its employees did not have written documentation that they were underpaid, then the burden of proof set forth in Anderson had not been satisfied. Thomas & Sons Building Contractors, Inc., ARB Case No. 00-050, Case No. 1996-DBA-37 (ARB, Dec. 6, 2001) (on reconsideration). The ARB noted two "fundamental errors" in the employer's position:
First, this enforcement case was initiated by the Wage and Hour Administrator. As the party who brought the case, the initial burden of proof falls on the Administrator-not the workers.
. . .
The Zagari employees participated in this case only as witnesses, not as parties, and therefore did
not personally bear any proof burden. This is in contrast to Anderson-a case under the Fair Labor
Standards Act-which was brought directly by the employees, and in which the employees therefore
assumed the initial burden of proof.
Second, nothing in the Anderson methodology requires that any plaintiff or prosecuting party present 'written documentation' of wage underpayment. All that is required is evidence sufficient to show that the employees 'in fact performed work for which [they were] improperly compensated[,]' and also sufficient. . . to show the amount and extent of that work as a matter of just and reasonable inference.'
Slip op. at 2.
It is noted that, in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88 (1946), the Supreme Court held the following in a Fair Labor Standards Act case:
When the employer has kept proper and accurate records, the employee may easily discharge his burden by securing the production of those records. But where the employer's records are inaccurate or inadequate and the employee cannot offer convincing substitutes, a more difficult problem arises. The solution, however, is not to penalize the employee by denying him any recovery on the ground that he is unable to prove the precise extent of uncompensated work. Such a result would place a premium on an employer's failure to keep proper records in conformity with his statutory duty; it would allow
the employer to keep the benefits of an employee's labors without paying due compensation as contemplated by the Fair Labor Standards Act. In such a situation we hold that an employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee's evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate (citation omitted).
B. Use of payroll records to demonstrate disregard for classification;
business records exception to hearsay
In P&N, Inc./Thermodyn Mechanical Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB, Oct. 25, 1996), the payroll records did not reflect an effort by Respondent to properly compensate the laborers for the sheet metal work they had performed and which had been observed by the Wage and Hour investigator. In particular, the ARB noted that after the meeting with the DOL investigator, Respondent should have ensured that the sheet metal foreman was providing accurate payroll information reflecting the sheet metal mechanics' work being done by employees classified only as laborers. See also Star Brite Construction Co., ARB Case No. 98-113, 1997-DBA-12 (ARB, June 30, 2000) (given Respondent's lack of records, it was
proper for the ALJ to rely on the testimony of witnesses).
In Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004), the Board held that, despite their hearsay character, certified payroll records are properly admitted as evidence under the hearsay exception of allowing “[r]ecords of regularly conducted activity.” 29 C.F.R. § 18.803(a)(6).
C. Terms of contract to pay prevailing wage controlling
Even if a contractor or developer is not required by force of statute to pay Davis-Bacon wages, it may elect to pay prevailing wages by contract. Vulcan Arbor Hill Corp. v. Reich, 81 F.3d 1110 (D.C. Cir. 1996), previously 87-WAB-04. In Vulcan, the contractor entered into an agreement with the Department of Housing and Urban Development (HUD) in which it agreed to pay locally prevailing wages under the Davis-Bacon Act. Vulcan later
disputed that the DBA applied, and HUD agreed that the wage determinations should not apply to the project due to an exemption. The court held that the contractor was liable for payment of the prevailing wage rates because it had contracted to pay such wages. The court noted that "[n]othing in the Davis-Bacon Act precludes the parties from contracting with reference to it, even if by proper interpretation its requirements may not have been applicable by force of law to the project in question." The court found the language of the contract unambiguous and declined to look at extrinsic material.
In Cody Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), the ALJ held that, where the contract stated that work would be performed in Franklin County and it was actually performed in Delaware County (where the prevailing wage rate was higher) it was too late to modify the contract to reflect the higher wage rate. Citing to 29 C.F.R. § 1.6(c)(2)(ii) and M.A. Mortenson Dairy Development Ltd., WAB Case No. 88-35 (WAB, Aug. 24, 1990), the ALJ determined that "changing the wage requirement from the Franklin County rate to the Delaware County rate would constitute an impermissible modification to the project wage determination after the contract award." The ALJ noted that Employer based its bid and performed work on the contract based on representations of the Postal Service that the project was located in Franklin County.
D. Testimony demonstrates lack of compliance
with classification requirements
Employer's superintendent testified that the foremen were instructed to tell the laborers not to use sheet metal tools unless instructed by the foreman because the foreman could split the hours. The ARB held that this indicated an improper practice of utilizing employees who are otherwise classified as laborers to perform the work of sheet metal mechanics because it reflected a practice of segregating workers' hours for the different classifications in which work was performed. P&N, Inc./Thermodyn Mechanical Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB, Oct. 25, 1996).
In Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004), the Board upheld the ALJ’s use of testimony by workers “in the absence of accurate employer records” from either the contractor or the subcontractor.
E. Contemporaneous calendar maintained by employee;
business records exception to hearsay
In Star Brite Construction Co., ARB Case No. 98-113, 1997-DBA-12 (ARB, June 30, 2000), the foreman maintained a calendar for Respondent, which set forth the hours worked by employees on any given day. The company argued that it was prejudiced by the government's failure to provide it with a copy of the calendar prior to the hearing. The ARB disagreed and stated that "[t]he calendar was, in the first place, Star Brite's own business record" which was maintained by its foreman and used to report the hours worked. Moreover, the ARB held that the calendar qualified for the business records exception to the hearsay rule as provided at 29 C.F.R. § 18.803(6).
F. Stipulations
In Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004), the Board held that a “trier of fact may properly reject a stipulation made by counsel or a party in the course of hearing if the stipulation does not conform to the evidence of record.”
G. Challenge to wage determination after contract issued
held improper
In Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305), the Board held that, “[i]f contractors wish to protest the use of union wage rates as prevailing, it must be at the wage determination stage, before the award of the contract, and not at the enforcement stage.”
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V. Discovery
A. Failure to comply with discovery orders
1. Summary decision proper
In Tri-Gem's Builders, Inc., 1998-DBA-17 (ALJ, July 14, 1999), the ALJ adopted the Acting Administrator's findings of fact and issued a summary decision against Tri-Gems Builder. The ALJ found that the contractor was afforded multiple opportunities to comply with the Administrator's discovery requests, but failed to do so. The ALJ concluded that summary judgment was proper under 29 C.F.R. § 18.6(d)(2)(v) "because the requested
discovery encompassed all of the underlying facts and issues and because the Respondent's repeated and unjustified failures to cooperate in discovery either voluntarily or in response to Judge Donnelly's orders clearly established that compliance could not be achieved by less drastic sanctions." As a result, the ALJ ordered the payment of back wages owed and debarment as requested by the Acting Administrator. The Respondents appealed, but their appeal was dismissed by the ARB for failure to prosecute the case. Tri-Gem's Builders, Inc., 1998-DBA-17 (ARB, Feb. 25, 2000) (Order of Dismissal).
2. Ruling against interests
By supplemental order in Cody Zeigler Inc., 1997-DBA-17 (ALJ, June 14, 2000), the ALJ issued a ruling against the Department's interests for its failure to comply with his order directing disclosure of the witness statements. Specifically, the ALJ
concluded that the contractor did not mis-classify its employees and, therefore, it did not owe $13,584.99 in back wages. The ALJ further directed that the contractor submit an itemized statement of costs and attorney fees "directly attributable to the defense of (the Department's) claim of the informer's privilege." Slip op. at 1. With regard to an award of fees and costs, the ALJ initially noted that the Equal Access to Justice Act (EAJA) "clearly applies to administrative proceedings." However, in light of the regulatory provisions at 29 C.F.R. § 6.6(a), he found that EAJA's applicability in a Davis Bacon Act claim would appear to be precluded. The ALJ then cited to 5 U.S.C. § 504(a)(1) of the Administrative Procedure Act which he stated "provides direct authority for the payment of costs and fees by the United States in an adversary adjudication to the prevailing party unless it is determined that the position of the agency was substantially justified." Slip op. at 3.
The ALJ noted that the OALJ's procedural rules at 29 C.F.R. § § 18.1(a), 18.29(a)(6), and 18.29(a)(8) permit resort to the Federal Rules of Civil Procedure (FRCP). Turning to FRCP 37(a)(4) and 37(b)(2), the ALJ found that these rules "authorize sanction under circumstances where a party to the proceeding fails to make disclosure or cooperate in discovery, or comply with an order of the Administrative Law Judge."
Slip op. at 4. Upon review of the record before him, the ALJ determined that the Department did not present any substantial justification for its refusal to produce the witness statements. As a result, the ALJ found that the Department was liable for a total of $1,856.25 in attorney's fees.
B. Privileges
1. Informants' privilege
[a] Upheld
By discovery order in Thomas & Sons Building Contractors, Inc., 1996-DBA-33 (ALJ, Nov. 10, 1987), the ALJ noted that the provisions at 29 C.F.R. § 6.5 prohibited disclosure of the identity of any employee who makes a written or oral statement during an investigation under the Davis-Bacon Act without the prior consent of the employee. The ALJ further determined that the FOIA provisions at 5 U.S.C. § 552a(b)(7)(D) exempts from public disclosure matters which are part of "investigatory records" to the extent that such disclosure of a confidential source is at issue. The ALJ also stated that FRCP 26(b)(1) provides for discovery of all relevant information which is not privileged. From these rules and regulations, the ALJ concluded that the contractor was not entitled to obtain the names of those employees who made statements during the investigation. Rather, the ALJ held that redacted versions of their statements sufficiently protected the due process rights of the contractor. See also Star Brite Construction Co., ARB Case No. 98-113, 1997-DBA-12 (ARB, June 30, 2000) (in response to the company's allegations that it was prejudiced by the interview statement of one of its employees which was not provided before the hearing, the ARB noted that the ALJ relied upon the employee's testimony at the hearing which paralleled his interview statement; the interview statement was not relied upon in the ALJ's
decision; and the ARB stated in a footnote that, pursuant to 29 C.F.R. § 6.5, "it is not likely that (the
employee's) interview statement could have legally been disclosed prior to the hearing").
In Woodside Village v. Secretary of Labor, 611 F.2d 312 (9th Cir. 1980), the court affirmed the ALJ's application of the informant's privilege to protect the names of persons making statements to the government as well as the statements where the action was brought on behalf of the government.
[b] Denied
In Cody Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), the ALJ ordered that counsel for the DOL produce copies of all witness statements to Respondents where the DOL investigator testified that she relied, in part, upon the statements to determine the proper classification of the employees' jobs. Citing to 29 C.F.R. § § 5.6(a)(5) and 6.5 and invoking the informant's privilege, counsel for DOL argued that such statements would not be released unless the informants were called to testify. The ALJ acknowledged the validity of the informant's privilege, citing to Roviaro v. United States, 353 U.S. 53 (1957) which upheld the existence of such a privilege as a qualified, not absolute, one. The ALJ further noted that, on January 2, 1997, the DOL issued Secretary's Order 5-96 which "delegates from the Secretary authority for the Assistant Secretary for Employment Standards to carry out the functions to be performed by the Secretary of Labor under a variety of statutes including the Davis Bacon Act." Slip op. at 28. The ALJ stated that this delegation of authority specifically encompassed invocation of "all appropriate claims of privilege." Slip op. at 28. The ALJ determined that the interests of each of the parties to the case were compelling and he stated that "the reoccurring problem concerning production of witness statements in these proceedings is caused by a conflict in the government's interest in enforcing the Act, the informer's right to be protected against possible retaliation and also in the Respondents' need to prepare for trial." The ALJ concluded that the regulatory provision at § 6.5 "does not address the question of non-testifying potential witnesses." He further stated that, pursuant to the Secretary's Order 5-96, the Wage and Hour Administrator must "personally" review the materials sought to be covered by the privilege and the privilege must be invoked in writing. In finding that the privilege was not properly invoked, the ALJ found that "[t]his case record includes no evidence of an Administrator affidavit claiming the privilege nor of any document review by the Acting Administrator." Given the government's failure to comply with the ALJ's discovery order, the ALJ concluded that the classification issue would be decided in favor of the Respondents pursuant to 29 C.F.R. § 18.6(d)(2)(ii). The ALJ further requested that Respondents submit an itemized statement of requested attorneys' fees and costs expended in defense of that part of the case directly attributable to the DOL's claim of informer's privilege.
C. Validity of prevailing wage determination; discovery
not permitted
In Thomas & Sons Building Contractors, Inc., 1996-DBA-33 (ALJ, Nov. 10, 1997), the ALJ denied the contractor's request for discovery related to challenging the validity of the wage determination. The ALJ concluded that the proceedings before him were limited to proper classification of employees and the payment of wages owed. He noted that the Federal Acquisition Regulations contain the procedures which a contractor must use to challenge the validity of a wage determination.
D. Protective order
In Northeast Energy Services, Inc. (NORESCO), 2000-DBA-3 (ARB, Apr. 20, 2001), the ALJ issued an order to protect the identity of informants and "the information provided to the Department by them" pursuant to 29 C.F.R. § § 6.5, 18.14, and 18.15. The ALJ held that it was proper to protect the informant's identity and the information s/he provided to the government but, citing to Jencks v. United States, 353 U.S. 657 (1957), once the informant is called to testify for the government, then his or her statement must be made available
to the opposing party. The ALJ stated the following:
I find that neither the Department nor (subcontractor) Brilliant has standing to object from (contractor) Taj obtaining from Brilliant communications to the latter from any other party, so long as such communication does not reveal the identity of the Department's informants, statements of the informants to the Department, or the mental impressions, conclusions, opinions, legal theories, or work product of Brilliant's own counsel.
Slip op. at 4.
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VI. Classification of employees
A. Disregard for classification established by payroll records
The payroll records did not reflect an effort by Respondent to properly compensate the laborers for the sheet metal work they had performed and which had been observed by the Wage and Hour investigator. Respondent only took steps to ensure that laborers would not be using sheet metal tools in the future. The ARB found that, after the meeting with the DOL investigator, Respondent should have ensured that the sheet metal foreman was providing accurate payroll information reflecting the sheet metal mechanics' work being done by employees classified as laborers. P&N, Inc./Thermodyn Mechanical Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB, Oct. 25, 1996).
B. Determined solely by Secretary; cannot be determined
by employer
It is noted that the Administrator's prevailing wage determinations, as well as his or her decisions whether to add classifications, must be directly appealed to the ARB. American Building Automation, Inc., ARB Case No. 00-067 (ARB, Mar. 30, 2001).
The ALJ is without discretion to adjudicate the propriety of a prevailing wage determination. 29 C.F.R. § § 1.8 and 1.9 (2000). The ALJ may, on the other hand, determine whether an employee is properly classified for purposes of determining the appropriate prevailing wage rate.
In Thomas & Sons Building Contractors, Inc., ARB Case No. 98-164, 1996-DBA-23 (ARB, Oct. 19, 1999), recon. denied (ARB, June 8, 2001), the ARB cited to United States v. Binghamton Construction Co., 347 U.S. 171, 177 (1954) as support for its holding that the Secretary has sole authority to issue prevailing wage determinations under the Act, the propriety of which are not subject to review. With regard to job classifications, however, the ARB held the following:
In short, relevant precedent plainly affirms the Secretary's
(and the ALJ's) authority to determine the correct trade classifications for Thomas and Sons' employees on the Naval Reserve and Air National Guard contracts.
The contractor challenged the ALJ's determination that it be debarred because it mis-classified and underpaid its workers. The government maintained that it was improper to pay workers performing roofers' duties at the laborers' rate. The ARB held that an employer cannot unilaterally establish a classification for "sheet metal mechanics' helpers" by using semi-skilled laborers in a capacity that required them to use sheet metal tools with a pay rate less than that required by the relevant wage determination. The record provided no basis from which to conclude that the position of helper to a sheet metal mechanic would meet the requirements for a helper position under the pertinent guidelines. P&N, Inc./Thermodyn Mechanical Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB, Oct. 25, 1996). See also Actus Corp., 1996-DBA-1 (ALJ, Jan. 29, 1999) (the Administrator has the right to rely upon the statement of employees to determine their proper classification and area collective bargaining agreements are properly considered in determining whether employees have been mis-classified); Berbice Corp., 1998-DBA-9 (ALJ, Apr. 16, 1999) (a company cannot rely on a contracting officer's advice; the Secretary or Secretary's designee determines the classification of employees; reliance on classification of a prior contract is improper).
See also Thomas and Sons Building Contractors, Inc., ARB Case No. 00-050, Case No. 1996-DBA-37 (ARB, Aug. 27, 2001), order denying reconsideration (ARB, Dec. 6, 2001) (Respondent's argument, that the Administrator's prevailing wage determination was incorrectly based on union wages in the area rather than the wage survey amounted to a request for review of the wage determination, which must be made prior to the contract award and must be timely filed directly with the ARB).
Cases involving the Department’s conformance regulations at 29 C.F.R. § 5.5(a)(1)(ii)(A), which explain how the Secretary determines the wages for a type of job that is left out of the Department’s pre-bid wage decision, but that a contractor subsequently requires for a project, are appealed directly from the Administrator to the Administrative Review Board. See Mistick PBT v. Chao, 440 F.3d 503 (D.C. Cir. 2006). For a discussion of an Administrator’s obligations in conducting prevailing wage surveys, particularly with regard to considering collective bargaining agreements, see Mistick Construction, ARB Case No. 04-051 (ARB, Mar. 31, 2006).
C. False Claims Act
1. Held applicable
In United States v. C.W. Roen Const. Co., 183 F.3d 1088 (9th Cir. 1999), the circuit court held that, where a contractor falsely certified to the government that its workers received the prevailing wage rate in a worker classification dispute, the contractor could be held liable under the False Claims Act.
2. Held inapplicable
In United States v. DynCorp, Inc., 895 F. Supp. 844 (E.D. Va. 1995), the court held that the provisions of the False Claims Act, at 31 U.S.C. '' 3729-3733, are designed to prevent federal contractors from defrauding the government in obtaining, concealing, or reducing federal monies to which the contractor was not entitled. In this vein, the court concluded that a worker classification dispute does not, in and of itself, support a claim under the False Claims Act. Rather, such a dispute must be resolved by the Department of Labor under the provisions of the Davis Bacon Act.
D. Sporadic nature of work irrelevant to classification
determination
An employer who utilizes employees in more than one classification must ensure that those employees are properly paid for the various types of work performed and for the hours such work was performed. The ALJ erred in relying on the sporadic nature of the mechanics' work that was performed by the laborers; that some of Employer's laborers were underpaid on an intermittent, rather than a continuous, basis did not negate the finding that they were underpaid because they were mis-classified. P&N, Inc./Thermodyn Mechanical Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB, Oct. 25, 1996).
E. Unforeseen circumstances; wage determination
cannot be rescinded
For a Coast Guard construction project described as "New Family Housing," the ARB in Joe E. Woods, Inc., ARB Case No. 96-127 (ARB, Nov. 19, 1996), held that Wage and Hour correctly characterized the project as "residential" where the All Agency Memorandum 130 provided that residential construction projects were "those involving the construction, alteration, or repair of single family houses or apartment buildings of no more than four (4) stories in height." Woods argued, however, that the Coast Guard's description of the project was so inadequate that imposition of relief was justified pursuant to 29 C.F.R. § 1.6(f). The ARB disagreed, stating that the description submitted by the Coast Guard was sufficiently clear and unambiguous such that only the residential construction category clearly applied. The ARB also rejected Woods argument that it was forced to pay higher wage rates that those contained in the wage determination due to the complexity of the siting, terrain, and location in the Seismic 3 zone. The ARB responded that the wage determinations merely establish the minimum wages and fringe benefits that must be provided. There is no guarantee that the minimum wages contained in a wage determination will be the wages required to actually be paid to perform the contract. Unforeseen circumstances do not constitute a legal basis for rescinding the application of the wage determination.
F. Collateral estoppel
Held inapplicable
[a] Work
performed at “dedicated” plant
In Lloyd T. Griffin, Jr., 1991-DBA-92 (ALJ, 1999), rev’d. ARB Case Nos. 00-032 and 00-033 (ARB, May 30, 2003), the ALJ reconsidered his holdings in light of the remand issued by the United States District Court in Griffin v. Reich, 956 F. Supp. 98 (D.R.I. 1997). On remand, the ALJ was confronted with whether equitable estoppel should be applied against the Department of Housing and Urban Development (HUD) to preclude recovery of back wages owed from the contractor. Based on the evidence before him, the ALJ concluded that, if the contractor had not received erroneous advice from HUD, he would have abandoned the project or "handled labor matters differently." Under the final element of equitable estoppel as set forth by the district court, the ALJ found that the contractor complied with HUD's advice and policies on the project. Consequently, it was determined that the contractor was entitled to equitable estoppel relief for work performed at the Veazie Street plant and the DOL was precluded from recovering back wages owed to the Veazie Street plant workers.
By decision dated May 30, 2003, however, the Board reversed the ALJ’s holding and concluded that collateral estoppel did not apply to the Veazie Street plant workers. In support of this holding, the Board cited to 29 C.F.R. § 5.2(l)(2) (1993) which provides, inter alia, that “an off-site fabrication facility like the Veazie Street plant would be covered by the prevailing wage regulation as long as its production was covered by the Davis-Bacon-covered project it was serving.” Respondent again appealed to the district court and, by decision in Phoenix-Griffin Group II, Ltd. V. Chao, 376 F.Supp.2d 234 (D.R.I. 2005), the court affirmed the Board’s conclusion that the contractor was not entitled to application of collateral estoppel with regard to wages owed to the Veazie
Street plant workers. In this vein, the court noted its agreement with the Board that, because the prefabricated materials generated at the Veazie Street were for the sole purpose of DBA-covered construction sites, “[t]his single finding of fact alone should have served as an absolute bar” to use of collateral estoppel.
[b] DOL debarment proceeding distinct from HUD
criminal proceeding
In Facchiano Const. Co. v. U.S. Dep't. of Labor, 987 F.2d 206 (3d Cir. 1993), the court held that collateral estoppel did not preclude the DOL from seeking debarment of the contractor, even when HUD already obtained debarment. The court reasoned that, by its regulatory authority, HUD only has authority to debar contractors from participation in HUD programs for a specific period of time. The DOL, on the other hand, has authority to debar a contractor from any and all federal contracts under 29 C.F.R. § 5.12(a)(1). The court further noted that the standard for obtaining debarment under HUD is different than that required for DOL debarment:
Not only are the parties different, but the two violations do not constitute the same cause of action. Although the HUD violation involved the same underlying wrongful
conduct, the two debarment proceedings arose from different statutes and different evidence. What was material to the HUD proceeding was the criminal conviction and mitigating factors that would demonstrate that the Company was now a 'responsible' party that could again be entrusted with HUD contracts. The facts material to the DOL proceeding were actual evidence of the violations, the extent and nature of the mis-classification and under payments, evidence of previous violations and falsification of the certified payrolls. Finally, the demand for recovery in each of these proceedings was different. DOL demanded a three year, government-wide debarment for willful and aggravated violation of Davis-Bacon Related Acts. HUD demanded a debarment from HUD programs only, for a period of up to three years.
Id. at 213. See also Actus Corp., 1996-DBA-1 (ALJ, Jan. 29, 1999).
G. Contractual relationship between contractor
and employees irrelevant
In Ray Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004), Respondent argued that certain workers were not covered employees because they were partners or owner-operators of the company. The ARB disagreed and noted that the Act required payment of the prevailing wage to all workers performing construction activity on a covered project “regardless of any contractual relationship which may be alleged to exist between the contractor or
subcontractor and the laborers and mechanics.” 40 U.S.C. § 3142(c); 29 C.F.R. § 5.2(o).
H. Classification based on area of
practice by
unions and signatory contractors
In Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305), the Board held the following:
[T]he contractors had to pay prevailing wages in accordance with the way local unions classified the work. Where, as in this case, previous wage rates are based upon a
collective bargaining agreement, proper classification of duties under the Wage Determination must be determined by the area of practice of the unions that are parties to the agreement.
The Board further held that, in a
Davis-Bacon Related case, “the rate to be paid for particular tasks is the rate
found to be prevailing in the locality for that work, regardless of what tools
the workers use.” Thus, under the facts of Abhe & Svoboda,
the Board noted that “[t]he industry paid painters’ wage rates contained in the
Connecticut Statewide Bridge Agreement for all tasks associated with bridge
painting, including construction of scaffolds and containment structures, and
cleanup of lead waste.” In this vein, the Board held that it was improper for
the contractors to make their classifications of workers “based on the tools of
the trade” analysis where one worker using a blasting hose or spray gun would
be paid as a painter and another worker using a screw gun and wood would be
paid as a carpenter. See also William J. Lang Land Clearing, Inc.,
ARB Case Nos. 01-072 to 01-079 (ARB, Sept. 28, 2004).
I. “Side
bar” agreements unenforceable
In Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305), the Board held that a “side bar” agreement between the
contractor and local union for new classifications of employees, that were not
in the wage determination, was unenforceable as a matter of law.
J. No estoppel based on actions of
contracting
agency
In Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305), the Board held that “[t]he Department of Labor cannot be
estopped by the actions of a contracting agency.” Citing to L.T.G.
Construction Co., WAB Case No. 93-15 (WAB, Dec. 30, 1994), the ARB
noted that “mistakes of one agency cannot be used to estop another agency from
carrying out its statutory responsibilities.” As a result, the Board held that
acquiescence or erroneous advice from the state’s contract administrator with
regard to classification and payment of employees on a Davis-Bacon Related Act
job site was not binding on the Department of Labor.
K. Exempt employees
Under the Davis-Bacon Act, the term laborer or mechanic “does not apply to workers whose duties are primarily administrative, executive, or clerical. The regulations at 29 C.F.R. § 5.2(m) provide that persons in a bona fide executive, administrative, or professional capacity “as defined in part 541 of this title are not deemed to be laborers or mechanics.”
Executive employee
Under 29 C.F.R. § 541.1, an employee is considered to be “employed in a bona fide executive capacity” and exempt from coverage under the Act if his or her primary functions are executive in nature and s/he spends less than 20 percent of the work hours doing activities that are not directly and closely related to the performance of executive functions.
In Dumarc Corp., Case No. 2005-DBA-7 (ALJ, Apr. 27, 2006), the ALJ found that, although one employee “did act as a foreman or manager” of Respondent, “he spent the vast majority of his time working as a fire sprinkler fitter along with the other employees” and, thus, was covered by the Act.
Ownership interest and/or control
Under 29 C.F.R. § 541.1(e), an employee may be exempt from coverage under the Act if s/he “is in sole charge of an independent establishment or a physically separated branch establishment, or who owns at least a 20-percent interest in the enterprise in which he is employed.”
In Dumarc Corp., Case No. 2005-DBA-7 (ALJ, Apr. 27, 2006), the ALJ noted that Respondent was legally owned by Mr. Hannan, who was involved with the company’s operations as much as his illness would permit. The evidence of record established that Mr. White “ran the company, made the payroll, and controlled company cash” and otherwise helped Mr. Hannan’s wife keep the business operating after Mr. Hannan became ill. However, in determining whether Mr. White was exempt from the Act’s coverage, the ALJ found that there was sufficient evidence that Mr. Hannan, his wife, Mr. White, and another employee of Respondent shared management of company such that Mr. White was not “in sole charge” of the business and he was not exempt from coverage under the Act.
L. Contractor presumed to know the Frye Brothers rule
In Frye Brothers, 1977 WL 24823 (W.A.B. 1977), a contractor is on notice under the Davis-Bacon Act that it must pay employees according to locally prevailing practices.
In Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305), the District Court of the District of Columbia held that the employer “may indeed have been unaware of the rule announced in Frye Brothers, but it is not unreasonable to hold plaintiff responsible for knowing the rule” (italics in original).
In George Campbell Painting Corp. v. Chao, 463 F.Supp.2d 184 (D. Conn. 2006), the district court agreed with the decision in Abhe & Svogoda, Inc. v. Chao, 2006 WL 2474202 (D.D.C., Aug. 25, 2006) and held that, “since the leading decision in Fry Brothers Corp., 1977 WL 24823 (DOL W.A.B. 1977)”, “it is not unreasonable to hold plaintiff[s] responsible for knowing the rule.”
Return to Top of Document
VII. "Site of work" determinations
A.
Controlling law
The Davis-Bacon
Act, 40 U.S.C. § 276a,
provides that for all contracts involving the federal construction projects,
mechanics and laborers employed directly on the site of the work shall be paid
local prevailing wage rates as determined by the Secretary of Labor. Twenty-nine
C.F.R. § 5.2(l) was
amended in November and December 2000 and states:
(1) The site of the
work is the physical place or places where the building or work called for in
the contract will remain; and any other site where a significant portion of the
building or work is constructed, provided that such site is established
specifically for the performance of the contract or project;
(2) Except as provided in paragraph (l)(3) of this section, job headquarters, tool yards,
batch plants, borrow pits, etc., are part of the site of the work, provided
they are dedicated exclusively, or nearly so, to performance of the contract or
project, and provided they are adjacent or virtually adjacent to the site of
the work as defined in paragraph (1)(l) of this section;
(3) Not included in the site of the work are permanent home offices, branch plant establishments,
fabrication plants, and tool yards, etc., of a contractor or subcontractor whose location 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 or material supplier, which are established by a supplier of materials for the project before opening of bids and not on the site of work as stated in paragraph (1)(l) of this section, 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.
29 C.F.R. § 5.2(l) (2000).
B.
Scope of definition limited
In general, the
courts have held that the statute requires the payment of prevailing wages for
those workers "employed
directly upon the site of the work"
such that, in some cases, the courts have found the language at 29 C.F.R. § 5.2(l)(2) to be
inconsistent with the plain, unambiguous language of the statute. In L.P. Cavett Co. v. U.S. Dep't of Labor,
101 F.3d 1111 (6th Cir. 1996), the Department asserted that the Secretary was
not precluded from applying the broader definition of the phrase "site of
the work," as encompassed in 29 C.F.R. §
5.2(l), than that permitted by the Davis-Bacon Act because the Federal-Aid
Highway Act, which also applied, did not limit its scope to employees working
directly at the site of the work. The court rejected this argument, noting
that the Federal-Aid Highway Act, 23 U.S.C. § 113(a), provided that employees "shall
be paid wages at the rates not less than those prevailing on the same type of
work on similar construction in the immediate locality as determined by the
Secretary of Labor in accordance with the . . . Davis-Bacon Act. . .
.." (emphasis added). Thus, the court held that the Federal-Aid
Highways Act incorporated from the Davis-Bacon Act not only its method of
determining prevailing wage rates, but also its method of determining prevailing
wage coverage. Accordingly, because the Department's interpretation of 29 C.F.R. § 5.2(l) was inconsistent
with the Davis-Bacon Act, it was inconsistent with the Federal-Aid
Highways Act. In addition, the court noted that if the Department of Labor
truly believed that the Federal-Aid Highways Act dictated a more
expansive prevailing wage coverage than the Davis-Bacon Act, it would not
have enacted only one set of implementing regulations for both statutes. See
also Cody Zeigler, Inc. v. Administrator, Wage & Hour Division,
ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003) (although
prequalification and solicitation materials stated that project located in Franklin
County, Ohio, work was performed in Delaware County, Ohio and workers were
entitled to higher prevailing wage rate for that location).
C.
Sites which are not covered
1. Batch plants -
truck drivers hauling asphalt
from batch plant
to site
In L.P. Cavett Co. v. U.S. Dep't of Labor,
101 F.3d 1111 (6th Cir. 1996), Cavett was awarded a contract to resurface ten
miles of Indiana road. The contract specified that Cavett would perform
surface and shoulder removal, widening of the highway, and then resurfacing
with a bituminous mix. The parties decided that a bituminous plant would be
established approximately three miles from the midpoint of the highway to be
reconstructed. Cavett obtained a subcontractor to haul materials, supplies,
and equipment from the bituminous batch plant to the highway. This subcontract
did not contain a Davis-Bacon prevailing wage standard. The DOL
determined that the truck drivers hauling asphalt from the batch plant to the highway
site should have been paid at the prevailing wage rate because the batch plant
could be considered as part of the "site of the work" and assessed
$11,202 in back wages against Cavett. The Wage Appeals Board and magistrate
upheld this determination.
The Sixth
Circuit Court of Appeals held that the phrase "directly upon the site of
the work" in the statute is not ambiguous, and it followed the D.C.
Circuit which had ruled that the provisions in the Davis-Bacon Act were
unambiguously intended to apply only to workers on the actual physical site of
the public work. Ball, Ball & Brosamer, Inc. v. Reich,
24 F.3d 1447 (D.C. Cir. 1994); Building & Construction Trades
Dep't. AFL-CIO v. U.S. Dep't. of Labor Wage Appeals Bd., 932
F.2d 985 (D.C. Cir. 1991)("Midway" case). In Ball,
subcontractors transporting sand and gravel from a batch pit two miles from
the nearest point of the construction site were not covered. In Midway,
the court found that the phrase "mechanics and laborers employed directly
on the site of the work" restricted the coverage to employees working
directly on the physical site of the building." Thus, stating that it
was not unreasonable to conclude that a facility located three miles from the
site was not considered a part of that site, the court in L.P. Cavett
Co. v. U.S. Dep't of Labor, 101 F.3d 1111 (6th Cir. 1996), ruled
that the employees at issue were not working directly at the site of the work
and, therefore, Cavett was not responsible for payment of the prevailing wage
rate.
2. Batch plant up to one-half a mile from
construction site
In Bechtel Constructors Corp., 1991-DBA-3
(ALJ, Aug. 21, 1997) (remand from ARB Case No. 95-045A), the ALJ held
that batch plants located 2
to less than 1/4 miles from the construction site were not on the "site of
the work" pursuant to the regulation at 29 C.F.R. § 5.2(l). See Building and
Const. Trades Dep't, AFL-CIO v. U.S. Dep't. of Labor Wage Appeals Board
(Midway), 932 F.2d 985 (D.C. Cir. 1991).
3. Transportation to and from dedicated borrow pit
In Les
Calkins Trucking, 1990- DBA-65 (ALJ, July 13, 1995),
the ALJ cited to Ball, Ball & Brosamer, Inc. v. Reich,
24 F.3d 1447 (D.C. Cir. 1994) and held that the statutory phrase "employed
directly upon the site of work," means "employed directly upon the
site of work."
Consequently, laborers who fit that description are covered by the statute. Id.
at 1452-53. On the other hand, those workers who are not employed
directly upon the site of work are not covered by the DBA. Id. at
1453. Based on the facts before him, the ALJ concluded that employees engaged
in the transporting of materials from a dedicated borrow pit to the actual
construction site were not entitled to the prevailing wage rate under the Davis-Bacon
Act.
4. Tow truck operators assisting motorists on
public highways
In Aetna
Bridge Holding Co. v. Coletta's Downtown Auto Services, Inc., ARB
Case No. 97-095, 1994-DBA-54, slip op. at 2 (ARB, Oct. 29, 1996),
the ARB held that tow truck drivers who assist motorists and tow disabled
vehicles from travel lanes on a bridge undergoing repair are not
"laborers" or "mechanics" performing
"construction" within the meaning of the DBA and its related Acts,
specifically the Federal-Aid Highway Act, 23 U.S.C. § 113. The applicable wage
determination did not contain a wage for tow truck drivers, but the Wage and
Hour Administration argued that the tow trucker drivers should have been paid
the wages provided in the wage determination for two-axle heavy or
highway construction vehicles. The ALJ determined that the tow truck drivers
performed work on the site of the construction, as required by the DBA, because
they were located in actual or virtual adjacency to the construction site. He
also found that the drivers are analogous to employees of traffic service
companies who set up and service traffic control devices and are specifically
covered by the DBA. The ARB disagreed, stating that the tow truck drivers were
clearly not part of a construction crew and that their service was provided as a
convenience to the public. Slip op. at 2-3. The tow truck operators
performed no work that facilitated the completion of the construction project,
and the ARB held that, under these facts, the work performed was too removed
and weakly connected with actual construction work for the tow truck operators
to be considered "laborers" or "mechanics" under the DBA
and related Acts. See also Aleutian Constructors and Universal
Services, Inc., WAB Case No. 90-11 (WAB, Sept. 27, 1991)
(holding that food service workers and janitors were too indirectly tied to the
construction project to be covered).
D.
Sites that are covered
1. Batch plant employee-site
was integral and adjacent to work area
for long,
continuous project (“dedicated” plant)
In Bechtel Constructors Corp., ARB Case No.
95-045A (ARB, July 15, 1996), Respondents were engaged in a massive
construction project consisting of 330 miles of aqueduct and pumping plants.
Batch plants were constructed near each of the pumping stations under
construction, but were also used to supply concrete for the aqueduct
construction. The issue was whether employees at the temporary batch plants
were employed on the "site of work" and consequently covered by the
DBA. See 29 C.F.R. §
5.2(l)(1). The ARB interpreted the decision of the D.C. Circuit in Ball,
Ball & Brosamer, Inc. v. Reich, 24 F.3d 1447 (D.C. Cir. 1994),
to permit coverage of workers working at "temporary batch plants on land
integrated into the work area adjacent to the pumping plants." The Board
also held that in work of the kind involved in the case before it, where the
project consistent of miles of narrow aqueduct, "work performed in actual
or virtual adjacency to one portion of the long continuous project is to be
considered adjacent to the entire project." The ARB thereby rejected an
interpretation that the Ball decision requires that the
statutory phrase "directly
upon the site of the work"
limits the wage standards of the DBA to the "physical
space defined by contours of the permanent structures that will remain at the
close of work."
The
ARB noted that one Respondent argued that because "it supplied concrete to
more than one contractor on the project, its temporary batch plants were not
dedicated exclusively to one contract and therefore the functional test was
not satisfied which the regulations and our predecessor, the Wage Appeals Board
applied in determining whether work was performed on site. United
Construction Co., WAB Case No. 82-10, January 14,
1983." The Board found, however, that "the applicable section of the
regulations, Section 5.2(l)(1) does not explicitly contain a functional
test" and that "to the extent that a functional test is read into
Section 5.2(l)(1), the Board refuses to draw an artificial distinction between
one portion of the project that is let under one contract and another portion
of the same project that is let under a separate contract." (footnote omitted).
See also Phoenix-Griffin Group II, Ltd. V. Chao, 376 F.Supp.2d 234 (D.R.I. 2005) (workers at a pre-fabrication facility “dedicated” to producing material for a Davis-Bacon-covered worksite are covered); Winzler
Excavating Co., 1987-DBA-3 (ALJ, Feb. 17, 1988), aff'd., WAB Case No. 91-02
(WAB, Feb. 23, 1993) (a borrow pit located 12 miles from the sewer construction
site was covered); Abhe & Svoboda, Inc., ARB Case Nos.
01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB,
July 30, 2004), recon. denied (ARB, Oct. 15, 2004) (on appeal to
District Court of District of Columbia, Civil Action No. 04-1973).
2. Off duty police officers directing traffic
In Superior
Paving & Materials, Inc., 1998-DBA-11 (ALJ, Feb. 19, 1999), aff'd in relevant part, ARB
Case No. 99-065 (ARB, June 12, 2002), the ALJ held
that off duty police officers, who directed traffic around a federal highway
construction site, were entitled to the prevailing wage rate as flaggers. The
company argued that the police officers were independent contractors. Citing
to N.B.A. Enterprises, Ltd., CCH Lab. Cas. Admin. Rulings
p. 32,068 (WAB 1991), the ALJ held that "if
a person works on a job site covered by the Davis-Bacon Act, that person is an
employee within the meaning of the Act regardless of the contractor. Congress
clearly intended covering such workers regardless of the attempts of the
contractor to distance itself from Davis-Bacon obligations." In affirming the ALJs
decision, the Board noted that the police officers "performed the manual and physical work of >flaggers'" and they were, therefore, "laborers" under the Act. The Board
stated that the terms "laborer" and "mechanic" are defined as follows in
the regulations:
The term laborer or
mechanic includes at least those workers whose duties are manual or physical in
nature (including those workers who use tools or who are performing the work of
a trade), s distinguished from mental or managerial . . .. The term does not
apply to workers whose duties are primarily administrative, executive, or
clerical, rather than manual.
29 C.F.R. § 5.2(m) (2001). See also Arliss D.
Merrell, Inc., 1994-DBA-41 (ALJ, Oct. 26, 1995).
3. Warehouse workers
Dworshak Dam, Idaho,
WAB Case No. 72-04 (WAB, June 1, 1973) (holding that duties of warehouse
workers were directly related to the completion of the project such that they
were covered).
4. Lease for construction of federal facility
In Phoenix
Field Office, Bureau of Land Management, ARB Case No. 01-010 (ARB,
June 29, 2001), the ARB held that the Bureau of Land Management's (BLM) "lease" contract for construction
of a field office building in Phoenix was subject to the DBA's prevailing wage
requirements. In so holding, the ARB stated that "Davis-Bacon coverage does not depend on the
contracting agency exercising complete authority over the building that will be
leased" and it cited
to Military Housing, Ft. Drum, New York, WAB Case No.
85-16 (Aug. 23, 1985) wherein the Wage Appeals Board held that the DBA applies
to "a lease
construction contract even while explicitly recognizing that the developers had
some flexibility with regard to building design, materials, and equipment."
Return to Top of Document
VIII. Compensation
A.
Constitutes part of prevailing wage rate;
properly deemed a fringe
benefit
Of central importance
in determining whether certain fringe benefits are properly credited against a
worker’s prevailing wage rate is whether the fringe benefit is “vested.” In Cody
Zeigler, Inc., ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19,
2003), the Board held that “pension or other fringe benefit plans which provide
for immediate vesting are similar to deferred cash payments, whereas a fringe
benefit plan that does not provide for immediate vesting is not the functional
equivalent of a deferred cash payment that is creditable for DBA purposes.”
Moreover, citing to
40 U.S.C. § 3142(2)(B) and 29 C.F.R. § 5.29(c) and (d), the Board noted that “a
particular fringe benefit need not be recognized beyond a particular area for
the Secretary to find it prevailing in that area; but in the ordinary case a
fringe benefit will be considered bona fide only if it is common in the
construction industry.” William J. Lang Land Clearing, Inc.,
ARB Nos. 01-072 to 01-079 1998-DBA-6 (ARB, Sept. 28, 2004).
Contributions to employee pension plans
In Cody
Zeigler, Inc., ARB Case Nos. 01-014 and 01-015, 1997-DBA-17 (ARB,
Dec. 19, 2003), the Board held that “only the proportion of the pension fund
contributions attributable to Davis-Bacon work is credited toward the
prevailing wage requirement.” The Board noted that Employer contributed to the
pension fund at a rate that varied depending on an employee’s job
classification while working on a Davis-Bacon contract. Employer also
contributed “at a lower flat rate for all employees when working on a private,
non-Davis-Bacon project.” Employer was not permitted to take a credit for
pension plan contributions based on non-Davis-Bacon work. But see Mistick
v. Reich, 54 F.3d 900 (D.C. Cir. 1995) (pension plan contributions not
required to be annualized as the Department "presented
no evidence that Employer (was) funding its private pension fund contributions
with Davis-Bacon Act work"
and the plan was vested).
B.
Does not constitute part of prevailing wage rate
1. Bonuses
In Cody
Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), aff’d. in
relevant part, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the
ALJ disallowed Respondents'
Christmas bonus as a fringe benefit. Citing to Cody-Zeigler, Inc.,
WAB Case No. 89-19 (WAB, Apr. 30, 1991), the ALJ held that bonuses do not
constitute bona fide fringe benefits or wages under the Davis-Bacon Act.
In William
J. Lang Land Clearing, Inc., 1998-DBA-1 (ALJ, Feb. 22, 2001), aff’d.
in relevant part, ARB Case Nos. 01-072 to 01-079 (ARB, Sept. 28, 2004), the
ARB upheld the ALJ’s finding that “the irregularly made cash payments to
employees were not bona fide vacation fringe benefits”; rather, they
constituted “bonus” payments that could not be considered fringe benefits under
the Act. The Board cited to testimony of the employees and pre-hearing
deposition testimony in support of finding that the irregular cash payments
were “bonuses.”
2. Employer's
administrative costs
In Cody
Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), aff’d. in
relevant part, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the
ALJ cited to Collinson Construction Co., WAB Case No.
76-09 (WAB, Apr. 20, 1997) and held that Employer improperly sought to claim
its administrative costs in providing employee benefits as a fringe benefit.
Employer argued that 29 C.F.R. §
5.5(a)(1) provided for a deduction for such costs. However, the ALJ noted that
Employer was required to obtain approval from the Secretary of Labor before
making these payments to a third party to administer the employees' benefits which it failed
to do.
3. Vacation and holiday benefits, unfunded plans
In Cody
Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), aff’d. in
relevant part, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the
ALJ noted that vacation plans are among the enumerated fringe benefits at 29
C.F.R. § 5.29.
However, he found that Employer's
plan was unfunded "as
there (was) no evidence that Employer relinquished control over the fringe
benefit funds involved."
As an unfunded plan, the ALJ noted that it did not comply with the requirements
of 29 C.F.R. §
5.28(b). He stated that there was no evidence that Employer "had provided a written
explanation of the vacation plan to its employees or that it even had a written
plan." Slip op. at
37. Moreover, the ALJ found that employees were not eligible for the vacation
plan until they had worked for the company for one year such that those working
for Employer less than a year "clearly
could not legally enforce their rights pursuant to § 5.27(b)(2) to the amount deducted from their
prevailing wage for this claimed benefit."
As a result, the ALJ ordered Employer to pay back wages to those employees
ineligible for vacation or who did not receive their vacation. See also
William J. Lang Land Clearing, Inc., 1998-DBA-1 (ALJ, Feb.
22, 2001), aff’d. in relevant part, ARB Case Nos. 01-072 to 01-079 (ARB,
Sept. 28, 2004) (vacation payments did not qualify as fringe benefits under 29
C.F.R. § 5.5(a)(1)(i)
because they were not paid on a regular basis-i.e.,
at least quarterly).
4. Apprentice
training program; no
“reasonable relationship” established
In Royal
Roofing Co., 1999-DBA-29 (ALJ, June 11, 2003), aff’d., ARB
Case No. 03-127 (ARB, Nov. 30, 2004), the ALJ held that, pursuant to Miree
Const. Corp. v. Dole, 930 F.2d 1526 (11th Cir. 1991),
Respondent violated the Act by taking “credit for excessive training
contributions it made to . . . (the) apprenticeship training program” and the
amount claimed by Respondent did “not bear a reasonable relationship to the
actual benefit received by Royal Roofing employees.” The ALJ noted that
“contributions were taken from employees’ paychecks without their knowledge and
without any tangible benefit to the employees.” Further, Respondent “failed to
offer a reasonable explanation for the high administrative and legal expenses
other than apparently as start-up costs either predating or postdating the
period at issue . . ..” The ALJ noted that Respondent deducted hourly
contributions in the amounts of $0 to $6.99 from employees who were making the
same wages. Moreover, Respondent admitted that $.20 per hour per employee was
sufficient to meet training expenses. The ALJ found that the “unreasonableness
of the excess contributions” was buttressed by the “erratic and disorganized
manner in which employees were charged with fringe benefit contributions . .
..” Specifically, the ALJ noted that fringe benefits payments to
apprenticeship programs were charged “against both apprentices and journeymen
despite journeymen lacking a direct benefit.” Finally, the ALJ found the
contributions were unreasonable because of Respondent’s failure to place the
contributions in a fund managed by a trustee or third person as required by 40
U.S.C. § 276a(b) and 29 C.F.R. § 5.26.
The ALJ concluded
that “[u]sing funds contributed on behalf of Royal Roofing’s employees to
defend a case against these employees does not benefit these employees” and
“[c]learly, this is not a ‘fringe benefit’ for these employees.”
The ALJ also noted
that Respondents failed to notify employees, in writing, of the fringe benefit
contributions” as required by § 276a of the Act. Finally, the ALJ held that
Respondent must apply the “annualization principle” to determine proper fringe
benefit contributions per Davis-Bacon Act employee “when the actual
contributions are not reasonably related to training”:
[T]he IRCC plan
contemplates year round training and thus year-long benefits to the apprentices
enrolled therein. Since Royal Roofing contributed only to the IRCC plan during
Davis-Bacon projects and the IRCC plan contemplates year-round benefits for its
apprentices, Royal Roofing’s contributions must be annualized.
In this vein, the ALJ held that
dividing Royal Roofing’s total contribution into the IRCC plan in 1996 by the
total number of hours working by Royal Roofing employees on all projects in
1996 in order to yield an annualized credit amount of $.50 per hour for
apprentice training for each Davis-Bacon employee.
5. Profit-sharing
plans
In Cody
Zeigler, Inc. v. Administrator, Wage & Hour Division, ARB Case
Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the Board affirmed disallowance of
Employer’s claim for credit for contributions to a profit-sharing plan as a
fringe benefit credit against the prevailing wage rate. See 29 C.F.R. §
5.28(b)(4).
6. Health insurance
In Cody
Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), aff’d. in
relevant part, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the
ALJ held that health insurance constitutes a bona fide fringe benefit
which justifies a credit towards the prevailing wage determination. However,
the ALJ found that the employer failed to properly account for co-pays and it
used a "blended rate
for family and individual health coverage rather than determining the benefit
to each employee based on his or her type of coverage" such that back wages were due for these
violations. Moreover, the ALJ held that it was improper for the employer to
seek a "deduction for
benefits that employees were ineligible to receive" because they were on a union plan with a
waiting period. See also William J. Lang Land Clearing, Inc.,
1998-DBA-1 (ALJ, Feb. 22, 2001), aff’d. in relevant part, ARB Nos.
01-072 to 01-079 (ARB, Sept. 28, 2004) (it was improper to take a prevailing
wage credit by averaging more expensive family premiums with less expensive
individual premiums).
7. Meals and lodging
In William J. Lang Land
Clearing, Inc., ARB Case Nos. 01-072 to 01-079, 1998-DBA-1 (ARB, Sept.
28, 2004), the ARB noted that the provisions at 40 U.S.C. § 276(b)(2)(B) provide for a
number of fringe benefits which may be credited towards the prevailing wage
rate, but the provisions do not specifically mention meals and lodging. The
ARB further concluded that meals and lodging do not constitute “other bona
fide fringe benefits” that are creditable against the prevailing wage rate.
In disallowing meals and lodging paid by Respondent for long-distance
Davis-Bacon contracts, the Board reasoned:
The employee lodging
and food expenses in this case were clearly undertaken for Lang’s primary
benefit. Lang could only perform its far distant DBA contracts (and benefit
thereby) if its employees incurred the substantial detriment of traveling to
locales far from their homes for most of every work week. Lang’s employee
travel to the ‘special’ out-of-area jobs served the primary purpose and benefit
of the employer. Lang required employees to travel to the ‘special’ jobs as a
condition of their employment. The employees had no choice but to travel on
Lang’s business in order to get and keep their jobs. (citations omitted). We
accordingly conclude Lang’s subsistence payments for its employees meals and
lodging were for the primary purpose of furthering the employer’s business and
not for the primary benefit of the employees. These subsistence payments
cannot be credited as acceptable DBA cash payments in lieu of fringe benefits.
Slip op. at 18. See
also Matter of Calculus, Inc., 1993 WL 537381, WAB Case No.
93-06 (WAB, Oct. 29, 1993).
C.
Overtime wages cannot be reduced by fringe benefits
In Cody
Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), aff’d. in
relevant part, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003), the
ALJ held that the regulations at 29 C.F.R. § §
5.32(a) and 5.32(c)(2) prohibit the reduction of overtime rates based on Davis
Bacon fringe benefit contributions. He cited to Delta Construction,
WAB Case No. 81-15 (WAB, Sept. 20, 1983) and held that "[c]ash wages may not be reduced when
determining overtime wages."
Return to Top of Document
IX. Relief
A.
Debarment
1. Generally
[a] Debarment is remedial, not punitive
In finding that
Respondent failed to pay the prevailing wage and fringe benefits and
misrepresented that rates paid to the contracting agency, the ALJ, in Minor
Construction Co., 1995-DBA-42 (ALJ, June 12, 1997),
held that debarment for three years was a remedial measure, rather than a
punishment. See also S.A. Healy Co. v. Occupational Safety &
Health Review Comm'n, 96 F.3d 906, 911 (7th Cir. 1996); United
States v. Bizzell, 921 F.2d 263, 267 (10th Cir. 1990); Bae
v. Shalala, 44 F.3d 489, 493 (7th Cir. 1995).
[b] Intent to violate required
In Sundex,
Ltd., ARB Case No. 98-130, 1994-DBA-58 (ARB, Dec. 30, 1999), the
ARB declined to disturb the ALJ's
findings that the contractor's
owner was not a credible witness and violations of the Davis-Bacon Act and the
CWHSSA were committed. The ARB noted that the ALJ's findings were based upon his first-hand
observations of the witness'
demeanor on the stand. Turning to the issue of debarment, the ARB found that
establishment of a "level
of culpability beyond mere negligence, involving some element of intent" was required. Citing to G&O
General Contractors, Inc., WAB Case No. 90-35 (WAB, Feb. 19, 1991),
the ARB stated that, once an intentional violation is established, "the standard for debarment
is a 'bright-line' test, i.e. a 3-year
debarment period is mandatory, without consideration of mitigating factors or
extraordinary circumstances."
The ARB noted that, while there is a statutory debarment provision under the
Davis-Bacon Act, the DOL's
regulations also provide for debarment for violations of "related acts," including the CWHSSA.
Therefore, where the contractor intentionally failed to pay proper overtime as
required by the CWHSSA, the ALJ properly entered an order of debarment.
For
additional cases, see Cody Zeigler, Inc. v. Administrator, Wage &
Hour Division, ARB Case Nos. 01-014 and 01-015 (ARB, Dec. 19, 2003)
(Employer was on notice that certain fringe benefit costs could not be credited
against the prevailing wage rate and fact that Employer still claimed a credit
constituted a “willful” violation); Thomas and Sons Building
Contractors, Inc., ARB Case No. 00-050, Case No. 1996-DBA-37 (ARB,
Aug. 27, 2001), order denying reconsideration (ARB, Dec. 6, 2001) ("disregard for obligations" under the Act means a
level of culpability beyond mere negligence, involving some element of intent; "once a violation is
established, the standard for debarment is a 'bright
line' test, i.e.,
a three-year debarment period is mandatory, without consideration of mitigating
factors or extraordinary circumstances");
Berbice Corp., 1998-DBA-9 (ALJ, Apr. 16, 1999) (evidence
must establish a level of culpability beyond mere negligence).
[c] Authority to lessen three year period of debarment
i. ALJ without authority
In Structural
Concepts, Inc., 1994-DBA-23 (ALJ, Feb. 23, 1995), the
ALJ held that while mitigating factors may affect debarment under labor
standards regulations, they do not have an impact on the debarment issue under
the Davis-Bacon Act. 29 C.F.R. §
512(a)(1). Additionally, it was held that an ALJ lacks the discretion to
lessen the three year period of debarment as contained in 40 U.S.C. § 276(a)(2).
ii. Administrator has authority
Abuse of
authority
In Bhatt
Contracting Co., ARB Case No. 97-068, 1993-DBA-124 (ARB, Jan. 26,
1998), the ARB rejected the "untimely
decision" of the
Administrator who denied the contractor relief from debarment. The ARB noted
that the Acting Administrator "breached
a material term of the consent decree by not placing Bhatt on the ineligible
list for nine months."
Moreover, the ARB stated that the Acting Administrator "failed to take advantage of the remedial
nature of our prior ruling by not 'immediately' issued a decision
regarding Bhatt's
renewed request for relief."
Rather, the ARB noted that it took the Acting Administrator 78 days to issue
its denial of the contractor's
request for relief from debarment pursuant to 29 C.F.R. § 5.12(c) (a contractor may request removal
from the debarment list after six months). As a result, the ARB rejected the
Acting Administrator's
decision and determined that the contractor's
petition set forth sufficient facts under §
5.12(c) to support relief from debarment.
[d] Debarment of individuals, as well as
company, authorized
In Facchiano
Const. Co. v. U.S. Dep't.
of Labor, 987 F.2d 206 (3d Cir. 1993), the circuit court held that,
pursuant to 29 C.F.R. §
5.12(a)(1), it was proper to debar responsible corporate officers, in addition
to the company, for a period three years. However, the court declined to
assess liability against corporate officers unless they had knowledge of the
violations committed by their subordinates, i.e. their conduct was "willful or aggravated." See also Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305); Ray Wilson Co., ARB Case Nos. 02-086,
2000-DBA-14 (ARB, Feb. 27, 2004) (debarment of subcontractor and its president
and vice president was proper because of disregard to employees); Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001) (owner and president of Respondent charged with supervision of
day-to-day operations must be debarred for CWHSSA and SCA violations);
Berbice Corp., 1998-DBA-9 (ALJ, Apr. 16, 1999); Superior
Masonry, Inc., 1994-DBA-19 (ALJ, Oct. 13, 1994) (president and
owner of company was debarred; he controlled and managed company operations and
directed falsification of the payroll records).
[e] CWHSSA and SCA violations-different
debarment
standards
In Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001), the ARB held the following with regard to debarment under the CWHSSA
and SCA:
[T]he SCA and CWHSSA
impose different standards for assessing liability for debarment. Under the
CWHSSA - a Davis-Bacon Related Act - the burden is on the Secretary to
establish that the violations are 'aggravated
or willful' such that debarment is warranted. 20 C.F.R. § 5.12(a). Under the SCA, on the other hand, debarment is presumed once violations of that Act have been found, unless the violator is able to show the
existence of 'unusual circumstances' that
warrant relief from SCA's debarment sanction. 29 C.F.R. § 4.188(a) and (b). Ventilation and Cleaning Eng'rs., Inc., Case No. SCA-176 (Sec'y., Sept. 27, 1974) Labor L. Rep. (CCH) & 30,946.
The debarment sanction differs under the two Acts as well. By statute, debarment under the SCA is for
three years, without modification. By comparison, under the Department's regulations and Board
precedent, a contractor debarred under the Davis-Bacon Related Acts (including
the CWHSSA) is placed on the ineligibility list for a period 'not to exceed' three years, 29 C.F.R. § 5.12(a)(1), from which the
contractor may petition to be removed after six months. 29 C.F.R. § 5.12(c).
Accordingly, charges
of CWHSSA violations (e.g., overtime under payments and recordkeeping)
must be analyzed under the Davis-Bacon Related Acts applicable to the CWHSSA,
while SCA violations (e.g., fringe benefit and holiday under payments,
and recordkeeping) must be analyzed under the SCA debarment standard.
Slip op. at 8-9.
2. Debarment not proper
[a] Unsuccessful attempts to pay required wages established
In Mr.
Paint, Inc., 1992-DBA-27 (ALJ, Mar. 31, 1995), the ALJ
examined what constitutes a disregard of obligation necessary to debar a
respondent under the Davis-Bacon Act. The ALJ noted that a respondent's
failure to pay the required wages to its employees alone does not equate to a
disregard of obligation in support of debarment. When a respondent makes
valiant efforts to pay employees, it has not disregarded its obligations under
the Act.
[b] No evidence of fraud;
consistent payment practices
In Cody
Zeigler, Inc., 1997-DBA-17 (ALJ, Apr. 7, 2000), the ALJ held that
debarment was not warranted where there was "no
evidence of altered records, fraud, deceit or any of the other telltale signs
of knowing violation of the law."
Slip op. at 40. The ALJ noted that the issues presented in the case were "highly technical" and Employer's "methods were consistent" and were unquestioned during prior audits.
3. Debarment proper
[a] Falsification of payroll records
In P
& L Fire Protection, Inc., 1994-DBA-66 (ALJ, May
15, 1997), the ALJ determined that debarment is warranted where a respondent
has "disregarded its obligations to employees." Falsifying payroll
records and certified payrolls constitutes a sufficient basis for debarment. See
also Abhe & Svoboda, Inc., ARB Case Nos. 01-063, 01-066, 01-068, 01-069, 01-070, ALJ Case Nos. 1999-DBA-20 to 27 (ARB, July 30, 2004), recon. denied (ARB, Oct. 15, 2004), aff’d., Abhe & Svoboda, Inc. v. Chao, 2006 WL 2474202 (D.D.C. Aug. 25, 2006) (on appeal to Circuit Court of District of Columbia, Case No. 06-5305)(underpayment of prevailing wages and
submission of falsified payrolls “that masks the underpayments” constitute a
willful violation of the DBRA and warrants debarment); Commonwealth of
Massachusetts v. U.S. Dep't.
of Labor, Case No. 1998-JTP-6 (ALJ, Oct. 29, 2001); Star
Brite Construction Co., ARB Case No. 98-113, 1997-DBA-12 (ARB, June
30, 2000); KP&L Electrical Contractors, Inc.,
1996-DBA-34 (ALJ, Dec. 31, 1998), aff'd.
in part, ARB Case No. 99-039 (ARB, May 31, 2000) (failure to pay prevailing
wages and failure to submit accurate certified payroll records in compliance
with the Copeland Act constitutes grounds for debarment); Fred Wiggins,
1999-DBA-30 (ALJ, Mar. 3, 2000); Thomas & Sons Building
Contractors, Inc., ARB Case No. 00-050, 1996-DBA-37 (ARB, Aug. 27,
2001), order denying reconsideration (ARB, Dec. 6, 2001) (Employer's "failure to offer any verifiable explanation of
the discrepancies between the certified and home payroll records"); Sundex, Ltd.,
1994-DBA-58 (ARB, Dec. 30, 1999) (significant discrepancies between the
employee's paychecks
and certified payrolls constituted violations of the Davis-Bacon Act and CWHSSA
sufficient to warrant debarment); Superior Masonry, Inc.,
1994-DBA-19 (ALJ, Oct. 13, 1994) (debarment proper where Contractor falsified
payroll records to simulate prevailing wage compliance); Trataros
Construction Corp., WAB Case No. 92-03 (WAB, Apr. 28, 1993); Ace
Contracting Co., WAB 76-23 (WAB, May 30, 1980); Thomas
L. Moore, T.A.M., Inc., WAB 79-5 (WAB, Aug. 16, 1979).
Although the
evidence in P&N, Inc./Thermodyn Mechanical
Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB,
Oct. 25, 1996) did not demonstrate flagrant, intentional payroll falsification,
the circumstances clearly demonstrated that Respondent's mis-classification of laborers, especially
after the meeting with the Wage and Hour investigator, was more than merely
negligent. Having been reminded of its obligations under the DBA and advised
of its failure to fulfill those obligations by mis-classifying and underpaying
employees, Respondent was responsible for policing the supervision of such
employees to ensure compliance with DBA requirements. Conduct which evidences
an intent to evade its DBA obligations, and a purposeful lack of attention to
statutory responsibilities, support debarment. The ARB held that "blissful ignorance" is no defense to
debarment. Consequently, rather than simply relaying the direction to the
sheet metal foreman on site, Respondent's managers should have taken steps such
as regularly visiting the site, observing the work being done, and reviewing
payroll records, to ensure that the employees, who were actually performing the
work of sheet metal mechanics, were being paid the proper hourly rate.
[b] Actual or constructive knowledge of mis-classification
The ALJ
improperly required evidence that Respondent's officers had direct, certain
knowledge that employees classified as laborers were performing the work of
sheet metal mechanics. An earlier meeting with a Wage and Hour investigator put
Respondent on notice regarding the mis-classification of laborers who were, during
some periods, performing the work of sheet metal mechanics. Allowing the
violations to persist demonstrated a "reckless disregard" for
Respondent's obligations to pay its employees in accordance with the wage
determination. P&N, Inc./Thermodyn Mechanical
Contractors, Inc., ARB Case No. 96-116, 1994-DBA-72 (ARB,
Oct. 25, 1996). See also KP&L Electrical Contractors, Inc.,
1996-DBA-34 (ALJ, Dec. 31, 1998), aff'd.
in part, ARB Case No. 99-039 (ARB, May 31, 2000) (the ALJ held that
Respondent mis-classified employees as laborers when they actually performed
the work of electricians or carpenters).
[c] Failure to pay prevailing wages
In Lloyd
T. Griffin, Jr., 1991-DBA-94 (ALJ, Dec. 12, 1999), the ALJ noted on
remand that the violation of a prevailing wage statute does not, in and of
itself, constitute a per se aggravated or willful violation warranting
debarment. Citing to Miller Insulation Co., WAB Case No.
91-38 (WAB, Dec. 30, 1992), slip op. at 10-11, the ALJ stated that finding hat "reckless disregard" satisfies the standard for
debarment and there is no de minimus principle to avoid debarment where
the violation is aggravated or willful. The ALJ noted that, in Miller
Insulation, the contractor falsified payroll records to conceal its
failure to pay overtime and the violation was no less willful or aggravated
where only three employees on one contract were affected. The ALJ found, in
the case before him, that the contractor engaged in multiple schemes to avoid
payment of prevailing wages to its workers including:
. . . failing to pay
its own employees . . . for hours worked on the project laying linoleum;
failing to pay employees prevailing wage rates for hours worked on the project
at the housing sites; using LTGs Veazie Street employees to lay linoleum,
treating these workers as 'independent
contractors' and failing to pay them the prevailing wage for such work; failing to keep accurate
certified payroll records and encouraging falsification of payroll records;
failing to pay the workers hired by Gatsby, and affiliated corporation, the
prevailing wage for cleaning work done at the housing sites . . ..
Slip op. at 29. As a result, the
ALJ concluded that debarment for three years was proper. However, on appeal,
in Phoenix-Griffin Group II, Ltd., ARB Case Nos. 00-032
and 00-033, 1991-DBA-94 (ARB, May 30, 2003), aff’d., Phoenix-Griffin
Group II, Ltd. v. Chao, 376 F.Supp.2d 234 (D.R.I. 2005), the Board
was notified that Lloyd Griffin had died. Because all of the Respondent
corporations served as his “alter egos,” the Administrator dropped its claim
for debarment and the Board vacated the previous debarment orders.
See also
LTG Const. Co. v. Reich, 956 F. Supp. 98 (D.R.I. 1997); KP&L
Electrical Contractors, Inc., 1996-DBA-34 (ALJ, Dec. 31, 1998), aff'd.
in part, ARB Case No. 99-039 (ARB, May 31, 2000) (the ALJ found that
employees work with Respondent predated their "appearance on the
company's payrolls";
Respondent failed to pay hotel expenses for employees who traveled two hours to
job site and stayed during the week to perform work-these
expenses are not considered fringe benefits, but were part of expenses to be
reimbursed by the employer because they were for the employer's
benefit; and Respondent accepted a kickback of back owed wages from the
employees). See also Thomas & Sons Building Contractors, Inc.,
ARB Case No. 00-050, Case No. 1996-DBA-37 (ARB, Aug. 27, 2001), order denying
reconsideration (ARB, Dec. 6, 2001).
[d] Destruction of time cards
In Fred
Wiggins, 1999-DBA-30 (ALJ, Mar. 3, 2000), the ALJ found that the
contractor destroyed relevant time cards which constituted a "clear cut, willful
violation of the record keeping requirements of the Act and were part of
Respondent's pattern
of business practice on this project which violated the provisions of the Act." Consequently, the ALJ
ordered that the Respondent be debarred.
[e] Receipt of kickback of back owed
wages
In KP&L
Electrical Contractors, Inc., 1996-DBA-34 (ALJ, Dec. 31, 1998), aff'd. in part, ARB Case
No. 99-039 (ARB, May 31, 2000), the ALJ found that the Respondent violated the
Davis-Bacon Act based upon the testimony of four employees who stated that
Respondent requested that they cash checks received for back wages owed and
return the money to him. As a result, the ALJ directed that Respondent repay
the back wages to the employees as they were entitled to these monies. The ALJ
described Respondent's
conduct as "a blatant
attempt to undermine the administration and enforcement of the Federal
employment laws."
[f] Overtime violations; liquidated damages
In KP&L
Electrical Contractors, Inc., 1996-DBA-34 (ALJ, Dec. 31, 1998), aff'd. in part, ARB Case
No. 99-039 (ARB, May 31, 2000), the ALJ found that Respondent committed
violations of the CWHSSA warranting debarment where it failed to pay its
employees for work performed in excess of 40 hours per week. The ALJ then
concluded that Respondent was liable for liquidated damages in the amount of
$160.00 to account for each calendar day on which an employee was required or
permitted to work overtime without compensation. See 29 C.F.R. §§ 5.5(b)(2) and 5.8.
In Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001), a case involving Respondents'
failure to pay overtime compensation, the ARB held that the "aggravated or willful" standard requiring
debarment has been strictly applied. The Board cited to the "seminal case" of A. Vento
Constr., WAB Case No. 87-51 (Oct. 17, 1990) to state that "'aggravated or willful' has not been expanded to
encompass merely inadvertent or negligent behavior." Rather, the ARB applied the Supreme Court's standard for establishing
wilful conduct under the Fair Labor Standards Act (FLSA) in McLaughlin
v. Richland Shoe Co., 486 U.S. 128, 133 (1988) which requires
establishing that "the
employer know or showed reckless disregard for the matter of whether its
conduct was prohibited by statute."
The Board also cited to the First Circuit's
decision in Baystate Alternative Staffing v. Herman, 163
F.2d 668 (1998), which rejected the negligence standard of liability in line
with the Supreme Court's
Richland Shoe decision to hold that an employer does not
act willfully ">even if it acts
unreasonably in determining whether it is in compliance with the FLSA.'" Applying this standard to the facts before
it, the ARB concluded that Respondents willfully violated the overtime pay
requirements of the CWHSSA. In this vein, the Board noted that Respondents
were on notice of the overtime requirements which were incorporated by
reference in their procurement contract. Moreover, the records established
that Wage and Hour Division officials as well as officials from the Bureau of
Land Management notified Respondents on "numerous
occasions" of the
overtime pay requirements. Finally, the ARB found that Respondents falsified
their payroll records in order to simulate compliance with the CWHSSA. Citing
to Miller Insulation, WAB No. 91-38 (WAB, Dec. 30, 1992),
the Board held that it is "well-established
that 'failure to
pay employees the appropriate wage rate or overtime compensation, accompanied
by falsifying certified records in an effort to conceal Related Acts
violations, warrants debarment'
under the CWHSSA." In
a footnote, the ARB indicated that falsifying payroll records to simulate
compliance or conceal violations "may
of itself constitute willful violation of the Related Acts."
[g] Ignorance
In Berbice
Corp., 1998-DBA-9 (ALJ, Apr. 16, 1999), the ALJ held that "[b]lissfully ignorant is no
way to operate a business and is certainly no defense to debarment under the
DBA." The ALJ cited
to the company's long
history of performing federal government contract work. He found that, where
the company's officers
allowed the violations to persist (such as mis-classification of workers),
there is "evidence of
an intent to evade or a purposeful lack of attention to a statutory
responsibility in support of debarment."
The ALJ found that the company's
owner continued to misclassify and underpay his employees after being informed
of the DBA violations by a government investigator. As a result, the ALJ
concluded that the contractor's
actions were "willful" and debarment was proper.
[h] Experienced Federal government
contractor; presumption of knowledge
In Ray
Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004),
the ALJ properly debarred a subcontractor and its officers, who had ten years
of federal contracting experience such that they were likely aware that the
prevailing wage requirements applied despite a “partnership agreement” its
subcontractor had with workers on the job. The Board held the following:
When the government
awards a contract, or when a portion of the work is subcontracted, ‘there has
to be a presumption that the employer who has the savvy to understand
government bid documents and to bid on a Davis-Bacon Act job knows what wages
the company is paying its employees and what the company and its competitors
must pay when it contracts with the federal government . . .. (citation
omitted).
Slip op. at 12.
[i] Failure
to read contract requirements
In Ray
Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004),
the Board held debarment was proper where the contractor admitted that it did
not read the requirements of its federal contract.
4. Early removal from debarment list under 29 C.F.R. § 5.12(c)
[a] Administrator entitled to presumption that factors
properly considered in denying early removal
In IBEW, Local No. 103, ARB Case No. 96-123
(ARB, Nov. 12, 1996), the union sought review of the Deputy Assistant
Administrator's decision to remove Wayne J. Griffin Electric, Incorporated from
the three year debarment list for violations of Davis-Bacon Related Acts.
See Wayne J. Griffin Electric, Inc., WAB Case No.
93-05 (WAB, Oct. 23, 1993). IBEW argued that the Administrator did not
consider all of the factors contained in 29 C.F.R. § 5.12 in determining that it was appropriate
to remove the company from the debarment list after ten months. Not only does
29 C.F.R. § 5.12
require that the petitioner be in full compliance with the labor standards and
that full restitution be made for the past violations, but it also provides
that the Administrator should consider factors such as the severity of the
violations, the contractor's attitude towards compliance, and the past
compliance history of the firm. The ARB stated that the record demonstrated
that the Administrator considered all of these factors, and had even stated so
in the letter granting the company's request, and that the Wage and Hour
Division is entitled to a presumption that the Administrator properly carried out
his administrative responsibilities.
[b] Administrator's
decision reviewed by
the ARB
In IBEW, Local No. 103, ARB Case No. 96-123
(ARB, Nov. 12, 1996), the ARB held that it has the authority to review the
decision of the Wage and Hour Division's granting a request for early removal
from the debarment list. Although 29 C.F.R. §
5.12(c) only refers to the right to appeal from a denial of a request for removal,
the ARB noted that the general regulatory provision dealing with debarment
includes a right to petition for review of a "final decision in any agency
action." 29 C.F.R. §
7.9(a). Because a decision by the Administrator to remove an employer from the
debarment list is a "final decision," the ARB ruled that it had
jurisdiction to decide a petition for review of such a decision.
[c] Abuse
of authority
In Bhatt
Contracting Co., ARB Case No. 97-068, 1993-DBA-124 (ARB, Jan. 26,
1998), the ARB rejected the "untimely
decision" of the
Administrator who denied the contractor relief from debarment. The ARB noted
that the Acting Administrator "breached
a material term of the consent decree by not placing Bhatt on the ineligible
list for nine months."
Moreover, the ARB stated that the Acting Administrator "failed to take advantage of the remedial
nature of our prior ruling by not 'immediately' issued a decision regarding
Bhatt's renewed
request for relief."
Rather, the ARB noted that it took the Acting Administrator 78 days to issued
its denial of the contractor's
request for relief from debarment pursuant to 29 C.F.R. § 5.12(c) (a contractor may request removal
from the debarment list after six months). As a result, the ARB rejected the Acting
Administrator's
decision and determined that the contractor's
petition set forth sufficient facts under §
5.12(c) to support relief from debarment.
B.
Pre-judgment interest against government disallowed
In Aetna
Bridge Holding Co., ARB Case No. 97-095 (ARB, Sept. 9, 1997),
a contractor whose employees had been found in an earlier decision not to be
laborers or mechanics covered by the DBA or the FHWA, sought an award of
prejudgment interest on progress payment funds withheld in 1993 by the state transportation
department at the request of the Wage and Hour Administrator. The ARB held
that it did not have ". . . statutory authority to waive sovereign
immunity and award interest. See Mast Construction, Inc.,
WAB Case No. 84-22 (WAB, Mar. 14, 1986); Library of Congress v.
Shaw, 478 U.S. 310, 314-15 (1986)."
C.
Withheld funds
1. Department's claim superior to surety
By Amended
Decision and Order Approving Partial Consent Findings and Decision and Order,
Liberty Mutual Ins. Co., 1999-DBA-11 (ALJ, Nov. 4, 1999), aff’d.,
ARB Case No. 00-018 (ARB. June 20, 2003), the ALJ held that, because the surety
did not pay fringe benefits due the employees under its contract, it did not
have a right to withheld funds over the right asserted by the Secretary of
Labor. The ARB agreed and concluded as follows:
Liberty Mutual was
obligated to complete the entire Coast Guard contract, including the
responsibility to ensure the payment of prevailing wages. And although Liberty
did not violate the Act, nevertheless as the completing surety here, it is also
the ‘contractor’ from whom ‘accrued payments’ may be withheld. Therefore,
whether the funds are deemed ‘accrued’ or ‘unaccrued,’ and notwithstanding the
terms of the takeover agreement to the contrary, the Administrator properly
withheld contract monies from Liberty to pay prevailing back wages to the
Brunoli laborers and mechanics. Moreover, the Administrator may also rely on
recoupment or setoff to claim the funds on behalf of the Brunoli employees.
Slip op. at 14.
2. Due
process rights of Respondent
In Ray
Wilson Co., ARB Case No. 02-086, 2000-DBA-14 (ARB, Feb. 27, 2004),
the Board held that a prime and subcontractor’s due process rights were not
violated with regard to withheld contract funds. The Davis Bacon regulations
provided for an administrative hearing and appellate process to determine
Respondent’s rights to the funds. As a result, neither the prime nor
subcontractor had any “present entitlement” rights to the withheld funds. The
Board cited to 29 C.F.R. § 5.5(a)(2) to state that Respondent had notice on its
contract of the government’s right to withhold funds in the event of
underpayment allegations. See also Lujan v. G & G Fire Sprinklers,
Inc., 532 U.S. 189 (2001).
D.
Sanctions and attorney's
fees;
Equal Access to Justice Act inapplicable
In Cody
Zeigler, Inc. v. Administrator, Wage & Hour Division,
ARB Case Nos. 01-014 and -1-015 (ARB, Dec. 19, 2003), aff’g. in part,
vacating and rev’g in part, 1999-DBA-17 (ALJ, June 14, 2000), the Board
vacated the ALJ’s award of fees under the Equal Access to Justice Act holding
that “administrative proceedings under the DBA and Related Acts are not subject
to the attorney’s fee and costs provisions of the EAJA, 5 U.S.C. § 504, as they
are not ‘adversarial adjudications’ within the meaning of the EAJA, because
there is no statutory requirement for an administrative proceeding conducted
pursuant to the APA and as DBA proceedings are not listed in the enumerated
types of DOL administrative proceedings subject to the EAJA, see 29
C.F.R. § 16.104.” See also 29 C.F.R. § 6.6(a).
In Bhatt
Contracting Co., ARB Case No. 98-097, 1993-DBA-65 (ARB, May 19,
1998), the ARB declined to award attorney's
fees and costs under EAJA. It stated that it previously ruled that "DBA administrative proceedings
are not 'adversarial
adjudications' within
the meaning of the EAJA, because there is no statutory requirement for an
administrative proceeding conducted pursuant to the Administrative Procedure
Act." Moreover, the
ARB noted that DBA proceedings are not listed at 29 C.F.R. § 16.104 as proceedings
which are subject to EAJA and 29 C.F.R. §
6.6(a) specifically excludes DBA proceedings from coverage by EAJA.
E.
Liquidated damages
Not permitted
under the CWHSSA
Pursuant to 20
C.F.R. § 6.19(b)(3),
"[t]he Administrative Law Judge shall make no findings regarding
liquidated damages under the Contract Work Hours and Safety Standards
Act."
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X. Types of dispositions
A.
Stipulations and withdrawal therefrom
In Bechtel Constructors Corp., ARB Case No.
95-045A (ARB, July 15, 1996), the primary issue concerned whether
workers were employed at the "site of work." Prior to the hearing,
the Administrator entered into a stipulation that the concrete batch plants at
issue were located from one-half to fifteen miles from the physical
locations of the construction. After the close of the hearing, but prior to
issuance of the ALJ's decision, the D.C. Circuit issued Ball, Ball
& Brosamer, Inc. v. Reich, 24 F.3d 1447 (D.C. Cir. 1994). The
effect of this case was to reverse prior decisions that indicated that any
batch plant within fifteen miles of the work site was sufficient geographic
proximity. The record at the hearing also indicated that, in fact, the minimum
one-half mile stipulation was false-the
sites were closer. The ALJ did not permit the Administrator to withdraw from
the stipulation. The Board found that this was an abuse of discretion because
the Administrator had entered into the stipulation "unable to appreciate
the effect that a subsequent change in the case law would give to the
stipulation."
B.
Consent findings
The regulations
at 29 C.F.R. § 6.32
provide that the parties in Davis-Bacon Act and Contract Work Hours and Safety
Standards Act (unrelated to the Service Contract Act) proceedings may enter
into consent findings which dispose of the case in whole or in part. See Western
Pacific Roofing Corp., 1999-DBA-13 (ALJ, Jan. 19, 2000) (decision
and order approving consent findings); Yeroush Corp,,
1999-DBA-18 (ALJ, Nov. 18, 1999) (ALJ approved consent findings in case
involving Davis-Bacon Act and CWHSSA claims). Also, in John J. Kuqali,
1999-DBA-9 (ALJ, Jan. 13, 2000), the ALJ issued an Order Granting Assented
to Motion to Dismiss and dismissed the Davis-Bacon Act case based upon
settlement by the parties which was not submitted to the judge for review. See
also 29 C.F.R. §
6.43 (permitting disposal by consent findings in substantial interest cases).
C.
Settlements
In Black
Star Drywall, Inc., 1999-DBA-3 and 1999-DBA-5 (ALJ, Feb. 29, 2000),
the parties requested that the cases be referred to a settlement judge. An
agreement was executed by the parties to settle claims under the Reorganization
Plan No. 14 of 1950 and the CWHSSA. The ALJ accepted and approved of the
agreement pursuant to 29 C.F.R. § §
5.11, 5.12(b), and 6.32. See also D&R Building and Remodeling,
1999-DBA-4 (ALJ, Apr. 14, 2000); Sharp Construction Co.,
1997-DBA-15 (ALJ, Nov. 29, 1999) (settlement regarding violations of the
Reorganization Plan No. 14 of 1950, the Davis-Bacon Act, and the CWHSSA).
D.
Dismissal
1. Untimely challenge to wage determination
In Joe E. Woods, Inc., ARB Case No. 96-127
(ARB, Nov. 19, 1996), the ARB held that the contractor's failure to raise a
challenge until well after the contract award rendered the request for the
application of residential rates to the contract untimely. Citing Dairy
Development, Ltd., WAB Case No. 88-35 (WAB, Aug. 24, 1990), aff'd
sub nom. Dairy Development v. Pierce, Civ-86-1353-R
(W.D. Okla. 1991), the ARB explained the policy behind this rule: that manifest
injustice would result to bidders if the successful bidder could challenge the
contract wage determination rates after all other competitors were excluded
from participation. Other concerns noted by the ARB were ensuring certainty of
the procurement processes of the government and protection of wage standards
for employees by providing a floor for wages of which all potential bidders
were aware. The ARB stated that an appeal of a wage determination must be made
before the contract is awarded and modifications to wage determinations are
applicable to a project only if they are published before the contract award or
start of construction where there is no contract award. 29 C.F.R. §§ 1.6(c)(ii) and
1.6(c)(2).
2. For lack of prosecution
In Tri-Gems
Builders, Inc., ARB Case No. 99-117, 1998-DBA-17 (ARB, Feb. 25,
2000), the ARB dismissed an appeal by the contractor for failure to prosecute.
In so holding, the ARB stated that "[c]ourts
possess the 'inherent
power' to dismiss a
case for lack of prosecution."
The ARB further noted that the power is not governed by statutory or regulatory
provisions ">but by the control
necessarily vested in courts to manage their own affairs so as to achieve the
orderly and expeditious disposition of cases.'"
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XI. FOIA requirements regarding issued decisions
In Bechtel Constructors Corp., ARB Case No.
95-045A, 1991-DBA-3 (ARB, July 15, 1996), one Respondent argued that the
Administrator unlawfully relied upon Wage Appeals Board decisions that have not
been indexed and appropriately made available pursuant to the Freedom of Information
Act (FOIA). 5 U.S.C. §
552(a)(2). The Board found this argument to be without merit. It cited to the
Department of Labor's
notice to the public, through the "Guide to Freedom of Information
Indexes," published in the Federal Register, of the availability of
an index and digest for Wage Appeals Board decisions." Moreover, the Board noted that the full
text of Wage Appeals Board decisions was also available through a computer
bulletin board. The Board found that the decisions cited only served to
highlight the Department's regulation 29 C.F.R. §
5.2(I)(1), which constituted the basis for the reversal of the ALJ's decision
in this matter.
Return to Top of Document
The McNamara-O'Hara Service Contract Act
I. Generally
A.
Purpose
In Marlys
Bear Medicine v. United States, 47 F. Supp. 1172 (D. Mon. 1999), rev'd. on other grounds,
241 F.3d 1208 (9th Cir. 2001), the court noted that the Service
Contract Act was enacted in 1965 for the purpose of providing "wage and safety protection
to employees working under service contracts with the United States government,
where the contract amount exceeds $2,500 and the contract is performed within
the United States." See
also Pony Express Courier Corp., 1995-SCA-45
(ALJ, Feb. 29, 1996) ("[t]he SCA was specifically designed to prevent the
challenging of government service contract business to those whose competition
is based on paying the lowest wages. An exemption was provided to 'regulated
industries' subject to published tariff rate because there did not exist the
competitive situation faced in service contract cases generally").
As noted by the
ARB in James A. Machos, ARB Case No. 98-117 (ARB, May 31,
2001), under the SCA the "Secretary
of Labor is responsible for determining the minimum hourly wage and fringe
benefit rates to be paid to various classifications of service workers who may
be employed on service procurement contracts in excess of $2,500 entered into
by the United States, the principle purpose of which is to provide services
through the use of service employees in the United States."
In Russian
and East European Partnerships, Inc., ARB Case No. 99-025 (ARB,
Oct. 15, 2001), the Board noted that the "SCA requires that
every service procurement contract in excess of $2,500 entered into by the
United States, the principle purpose of which is to provide services through
the use of service employees in the United States, contain a provision
specifying the minimum hourly wage and fringe benefit rates payable to the
various classifications of service employees working on the service contract."
B.
Proceedings exempt from automatic stay provisions
of the Bankruptcy
Code
In Smith
Real Estate Investments, Inc., 1998-SCA-9 (ALJ, Dec. 3, 1998), the
ALJ issued default judgment against the contractor for failure to pay the
proper wages and fringe benefits to its employees. Previously, the ALJ issued
an Order to Show Cause stating that, pursuant to 11 U.S.C. §
362(b)(4), the SCA proceeding was exempt from the automatic stay provisions of
the Bankruptcy Code and the contractor was requested to state why default
judgment should not be issued for its failure to comply with the ALJ's
pre-hearing order. No response was received and, pursuant to the provisions at
29 C.F.R. § 18.6(d)(2)(v), the
ALJ issued default judgment against the contractor.
In Johnson
v. U.S. Dep’t. of Labor, 2005 WL 1970742, Case No. 2:04-CV-0775
(S.D. Ohio, Aug. 16, 2005), aff'd., Case No. 05-4355 (6th Cir. Aug. 16, 2006), aff’g. in relevant part, Rasputin, Inc., ARB
Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004), the district court concluded that an officer of the company,
who was properly deemed a “party responsible” for violations of the Act, could
not seek relief from debarment based on 11 U.S.C. § 525 of the Bankruptcy
Code. In essence, the office maintained that his debarment was based, in part,
on his failure to repay his wage obligations under the Service Contract Act.
In this vein, the officer argued that the debt had been discharged in
bankruptcy and, therefore, it should not have been used to support his
debarment. The court disagreed and stated:
In this case,
debarment was based upon (the officer’s) failure to demonstrate ‘unusual
circumstances,’ only one of which was the failure to repay the obligation.
Even if he had repaid the obligation, because the ARB found that he engaged in
culpable conduct, it would still have debarred him from further contractual
proceedings for a period of three years. Thus, the decision was not based
solely upon Mr. Johnson’s failure to repay an obligation discharged in
bankruptcy, and his claim for discrimination under 11 U.S.C. § 525 cannot
stand.
Return to Top of Document
II. Jurisdiction
A.
Motion for reconsideration
1. By the ARB
In Thomas
& Sons Building Contractors, Inc., ARB Case No. 98-164,
1996-DBA-33 (June 8, 2001), a case arising under the Davis-Bacon Act, the ARB
held the following:
The Davis-Bacon Act
has no explicit grant of authority to reconsider; therefore, if the Board has
authority to reconsider, it perforce must be based on an >inherent authority' theory. To determine
whether the Board has such inherent authority in this debarment case, we would
need to examine the statute underlying the decision to determine whether
reconsideration would adversely affect its enforcement provisions or statutory
purposes. Significantly, even if we were to conclude that we had
reconsideration authority, any party seeking reconsideration by this Board
would need to make the request within a reasonable period of time.
From this, the Board noted its
concern in accepting motions for reconsideration in debarment matters because
of the "possible
conflicts between the Board's
authority and the responsibilities of other Federal officials such as the
Comptroller General"
who maintains the debarment list. The Board stated that the question of its
authority in non-debarment cases "may
follow a different analysis from the analysis used in debarment cases." Nevertheless, the Board
concluded that it did not have to resolve the issue because:
In this case, Thomas
and Sons filed their request for reconsideration more than five months after we
issued our October 1999 D&O. No new evidence or changed circumstances have
been cited by Thomas and Sons in support of their request, which essentially raises
the same argument that was considered and squarely rejected by this Board in
our prior decision. Moreover, no good cause has been shown for the delay. We
therefore find that the request is untimely.
Slip op. at 7.
2. By the ALJ
In TDP,
Inc., 1994-SCA-23 (ALJ, April, 12, 1995) (Order Denying
Motion for Reconsideration), the ALJ noted that, although the implementing
regulations did not provide for the filing of a motion for reconsideration in a
SCA or CWHSSA case, it was "well-settled
that administrative agencies have the power to reconsider their own decisions
absent unreasonable passages of time or legislation to the contrary." In support of his
holding, the ALJ cited to Bookman v. United States, 453
F.2d. 1263, 1265 (Cl. Ct. 1972), Belville Mining Co. v. United States,
763 F. Supp. 1411, 1420 (S.D. Ohio 1991), Faircrest Site Opposition
Committee v. Levi, 418 F. Supp. 1099, 1105 (N.D. Ohio 1976), and
Fed.R.Civ.P. 59(e). The ALJ nevertheless denied Respondent's motion for
reconsideration as the contractor merely argued that it did not understand the
nature of the proceeding.
In Summitt
Investigative Service, Inc. v. Herman, 34 F. Supp.2d 16, 26 (D.D.C.
1998), the district court noted that following:
[U]nlike some
statutes that require as a condition precedent to seeking judicial review that
a party petition for reconsideration before an agency board, see, e.g., 47
U.S.C. § 405(a), the SCA imposes no such obligation. Thus, once the ARB issues its final decision
reviewing the ALJ, the agency process is complete and there exists a final
agency action from which a party may seek judicial review.
3. By the Administrator
Review of
wage determination
In William
Lathan, ARB Case No. 00-054 (ARB, June 26, 2000), the ARB dismissed
the appeal without prejudice pursuant to 29 C.F.R. § 1.9 which directs that "before a petitioner may
obtain review of the wage determination by the Board, the petitioner must first
request the Administrator to reconsider the wage determination and the
Administrator must, in turn, act upon the request." See also Favata's Bakery, Inc.,
ARB Case No. 99-026 (ARB, Jan. 27, 1999).
B.
Untimely challenge
1. Wage determination; not permitted after
close of contract
In Fort Hood Barbers Ass'n.,
ARB Case No. 96-181 (ARB, Nov. 12, 1996), aff'd., 137 F.3d 302 (5th
Cir. 1998), where the contractor did not challenge a wage determination until
three years after the determination was issued and after completion of the
affected contract, the ARB held that it lacked authority to amend the
determination and award relief. The regulatory provisions at 29 C.F.R. § 8.6(d) provide that the
decision by the ARB shall not affect the contract after award, exercise of
option, or extension. Thus, the contractor could not request retroactive
relief on a concluded matter.
2. Administrator has discretion to waive
procedural requirements in the interest of justice
In Amcor,
Inc. v. Brock, 780 F.2d 897 (11th Cir. 1986), the court
noted that the ALJ issued a decision on December 1, 1978 requiring that the
contractor repay certain back-wages owed and that the contractor be placed on
the debarment list. Exceptions to the decision were due by February 15
pursuant to 29 C.F.R. §
6.10(b), but the Administrator did not receive the government's exceptions until February
22. The Administrator waived the regulatory deadline for filing exceptions and
concluded that the ALJ's
decision was erroneous, thus modifying the amount owed by the contractor in
back wages. The contractor objected to state that the Administrator was
without jurisdiction to review the ALJ's
decision given the untimely filing of exceptions. The court held that "the administrator was
entitled to waive the filing deadline in the interest of justice," which was a procedural
requirement, as long as the opposing party will not suffer prejudice. The
court then summarily concluded that no prejudice was suffered by the contractor
in this case.
3. Appeal dismissed as untimely
In United
Gov't.
Security Officers of America, ARB Case No. 98-154 (ARB, Oct. 2,
1998), the ARB dismissed a petition for review which was filed one year after
the contractor's
receipt of the Administrator's
ruling letter.
C.
Unavailability of ALJ and reassignment for decision
In Houston Building Services, Inc., ARB Case
No. 95-041A, 1991-SCA-30 (ARB, Aug. 21, 1996), the ALJ who
conducted the hearing retired before issuing a decision, and the case was
transferred to another ALJ. Since adjudication of the case was based on legal
issues and involved no credibility determinations, Respondents' objections in
regard to the reassignment were "inconsequential."
D.
Portal-to-Portal Act inapplicable
The six year
statute of limitations period contained at 28 U.S.C. § 2415 governs an action by the United States
government against a government contractor for the failure to pay its employees
the minimum wage as required by the terms of its contract. As a result, the
two year statute of limitations period under the Portal-to-Portal Act at 29
U.S.C. § 255 was
inapplicable. United States v. Deluxe Cleaners and Laundry, Inc.,
511 F.2d 926 (4th Cir. 1975).
E.
District court jurisdiction
1. May consider propriety of debarment
In Midwest
Maintenance & Const. Co. v. Vela, 621 F.2d 1046 (10th
Cir. 1980), the Tenth Circuit held that the district court had jurisdiction to
consider the propriety of the Secretary's
debarment of a government contractor for a period of three years for violations
of the SCA.
2. No authority to remand for further proceedings
absent holding that
ALJ's findings
not supported
by a preponderance of the
evidence
In United
States v. Todd, 38 F.3d 277 (6th Cir. 1994), the
Department of Labor pursued an enforcement action in the district court for
under payments which the ALJ determined were made to non-government service
employees of the contractor. Initially, the district court denied the
enforcement motion and remanded the case to the ALJ for reopening of the record
to allow the contractor another opportunity to be heard. On appeal, the
circuit court held that the trial judge exceeded the scope of his
jurisdiction. The circuit court concluded that, in order for a remand to be
upheld, the district court must have determined that the ALJ's findings were not
supported by a preponderance of the evidence. Absent this finding, the
district court was without authority to remand the case for reopening of the
record.
F. Tennessee Valley Authority covered
The Tennessee Valley Authority is covered by the SCA. Tennessee
Valley Authority, ARB Case No. 01-024 (ARB, Mar. 31, 2003).
Return to Top of Document
III. Standard of review
In Dantran,
Inc. v. Dep't.
of Labor, 171 F.3d 58, 71 (1st Cir. 1999), the circuit
court held that fact-finding under the SCA must be performed in accordance with
the preponderance of the evidence standard at 41 U.S.C. § 39. A reviewing tribunal must uphold the ALJ's findings in the absence
of "clear error." Id. at 72.
In Stephen
W. Yates, ARB No. 02-119, 2001-SCA-21 (ARB, Sept. 30, 2003), the
Board held that its “review of an ALJ’s decision is in the nature of an
appellate proceeding.” In particular, under 29 C.F.R. § 8.1(d), “the Board
shall modify and set aside an ALJ’s findings of fact only when it determines
that those findings are not supported by a preponderance of the evidence.”
The court, in J.N.
Moser Trucking, Inc. v. U.S. Dep’t. of Labor, 306 F.Supp.2d 774
(N.D. Ill 2004), held that it was not required to defer to the ARB’s decision
where the ARB’s “sole basis for reversing the hearing officer is because it has
simply come to a different conclusion as to the credibility of witnesses
(persons whom it has neither seen nor heard) in the absence of such other
evidentiary support.” See Groberg Trucking, Inc., ARB
Case No. 03-137, 2001-SCA-22 (ARB, Nov. 30, 2004) (the Board noted that its
“general practice” is to “defer to the ALJ’s credibility findings, and accept
all the ALJ’s findings of fact based on those credibility determinations”).
Return to Top of Document
IV. Evidence
A.
Burden of proof
1. Preponderance of the evidence
In Dantran,
Inc. v. Dep't.
of Labor, 171 F.3d 58, 71 (1st Cir. 1999), the circuit
court held that fact-finding under the SCA must be performed in accordance with
the preponderance of the evidence standard at 41 U.S.C. § 39. A reviewing tribunal must uphold the ALJ's findings in the absence
of "clear error." Id. at 72. See
also J.N. Moser Trucking, Inc., ARB Case No. 01-047,
1995-SCA-26 (ARB, May 30, 2003).
2. Reconstruction of payroll records
In D's Nationwide Industrial
Services, ARB Case No. 98-081, 1995-SCA-38 (ARB, Nov. 24, 1999),
the ARB held that, because Respondent failed to maintain records demonstrating
the actual number of hours worked under a contract with the United States
Postal Service, the records of the Postal Service constituted sufficient proof
of the hours worked for back wage reconstruction purposes. In support of its
holding, the ARB cited to Ray v. Dep't. of Labor, 26
WH Cases 1244, 1246 (C.D. Ill. 1984).
In Amcor,
Inc. v. Brock, 780 F.2d 897 (11th Cir. 1986), the court
held that, where an employer fails to maintain work records in compliance with
the regulations, the Supreme Court's
decision in Anderson v. Mt. Clemens Pottery Co., 328 U.S.
680, 687-88 (1946) is useful:
When the employer
has kept proper and accurate records, the employee may easily discharge his
burden by securing the production of those records. But where the employer's records are inaccurate or
inadequate and the employee cannot offer convincing substitutes, a more
difficult problem arises. The solution, however, is not to penalize the
employee by denying him any recovery on the ground that he is unable to prove
the precise extent of uncompensated work. Such a result would place a premium
on an employer's
failure to keep proper records in conformity with his statutory duty; it would
allow the employer to keep the benefits of an employee's labors without paying due compensation as
contemplated by the Fair Labor Standards Act. In such a situation we hold that
an employee has carried out his burden if he proves that he has in fact
performed work for which he was improperly compensated and if he produces
sufficient evidence to show the amount and extent of that work as a matter of
just and reasonable inference. The burden then shifts to the employer to come
forward with evidence of the precise amount of work performed or with evidence
to negative the reasonableness of the inference to be drawn from the employee's evidence. If the
employer fails to produce such evidence, the court may then award damages to
the employee, even though the result be only approximate. (citation omitted).
B.
Limitations on evidence held to be improper
1. Exclusion of evidence on remand
Despite numerous
errors in excluding admissible evidence, the ARB determined that a remand for a
new hearing was not required where the evidence which was admitted was
sufficient to reverse the ALJ's opinion. Summitt
Investigative Service, Inc., ARB No. 96-111, 1994-SCA-31,
slip op. at 6 (ARB, Nov. 15, 1996), aff'd., 34 F. Supp.2d 16 (D.D.C. 1998). If,
however, the record of evidence supported the ALJ's decision, then a remand
would be necessary. The ARB suggested that ALJs take disputes as to the
admissibility of evidence under advisement and sift through them later,
avoiding prolonged discussions on the record.
2. Limitation on cross-examination too arbitrary
In Summitt Investigative Service, Inc., ARB
No. 96-111, 1994-SCA-31, slip op. at 5-6 (ARB, Nov. 15,
1996), aff'd.,
34 F. Supp.2d 16 (D.D.C. 1998), the ARB stated that, although there are
situations in which a time limitation on the completion of cross-examination
would be in order, the arbitrary placement of such a limitation by the ALJ in
this case was error. Questioning on direct examination encompassed 122 pages
of hearing transcript, and after sixty pages of questioning on cross-examination,
the ALJ cited interminable delays between questions and granted counsel ten
minutes in which to finish cross-examination. The ARB noted that half of
the pages devoted to cross-examination included statements by the ALJ and
opposing counsel. Thus, the short time limit imposed was in error.
C.
Testimony regarding documentation not in record
In Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001), the ARB held that it was proper for the ALJ to permit the Assistant
Director of the Portland Office of the Wage and Hour Division "to testify about
information contained in Wage and Hour Division records about prior
investigations of, and past contacts with, Petitioners without introducing the
documents themselves."
Initially, the Board noted that the record did not indicate that Petitioners
objected to admission of the testimony at the hearing. However, even if a
timely objection had been made, the ARB stated the following:
The underlying
rationale for the hearsay rule is to avoid prejudice by protecting against the
admission of unreliable evidence and by insuring that an opposing party can
have effective cross-examination. Had Yerger testified about meetings or
events unknown to Petitioners, it could be argued that her testimony would have
affected a 'substantial
right' guaranteed them. In the instant case, however, Yerger's
testimony recounted the results of investigations, meetings and actions taken
that were fully within Petitioner's knowledge, and thus within Petitioners'
ability to effectively counter or rebut."
The ARB held that Petitioners
failed to demonstrate that they were prejudiced by the testimony. Moreover,
although Petitioners argued that documents underlying the testimony were
requested through discovery but not produced, Yerger's testimony was not precluded. The Board
noted that Petitioners failed to file a timely motion to compel and failed to
request introduction of the documents at the hearing, noting that the Wage and
Hour Administrator's
attorney had brought the documents to the hearing.
Return to Top of Document
V. Discovery
A.
Interrogatories
In U.S.
Dep't.
of Labor v. Stewart, 1992-SCA-49 (ALJ, July 11, 1995)
(Pre-Hearing Order), the ALJ applied Fed.R.Civ.P. 33, which limits the
number of written interrogatories allowed propounded on an opposing party to 25
without leave of the court or written stipulation. The ALJ further noted that
the rule provides that a subpart is counted as a single interrogatory only when
that subpart represents a discrete and separate subject matter that can stand
alone.
B.
Protective order
1. Informant's
privilege
In S.C.
Security, Inc., 1998-SCA-26 (ALJ, June 29, 1999), the ALJ was
confronted with a motion for a protective order, which she found was actually a
motion to compel discovery:
Turning to
Respondents' Motion
for a Protective Order, I note that, in actuality, it is a motion to compel
discovery. However, Respondents have sought for the responses to discovery for
which the Department of Labor has made of claim of privilege to be provided to
their counsel, who would then be bound by a Protective Order which would
prevent the information and documents from being provided to Respondents.
While, despite my misgivings, I might have considered such an approach if it
were agreed to by both parties, I find the approach likely to be unworkable and
I decline to adopt it. In this regard, the actions taken by Respondents' counsel after obtaining
the requested information and documents would provide Respondents with some
inkling as to the nature of the information provided, and making counsel
subject to a protective order would inhibit their frank discussion of the
merits of the case and litigation strategy with their clients. Accordingly, I
will, instead, construe Respondents'
Motion as a motion to compel.
The ALJ then noted that the
Department of Labor asserted the informant's
privilege, the deliberative process privilege, and the work product privilege
and declined to produce documents requested by Respondents. With regard to the
informant's privilege,
the ALJ cited to Roviaro v. United States, 353 U.S. 53, 59
(1957), to state that the privilege may be asserted by the government "'to withhold the disclosure (of) the
identity of persons who furnish information of violations of law to officers
charged with enforcement of that law.'" In this vein, the ALJ
noted that the "scope
of the privilege is limited by its underlying purpose" and that it is inapplicable where the
informers identity has been disclosed or when the documents sought to be
produced will not reveal the informer's
identity. The ALJ stated that the privilege also "must give way when essential to a fair
determination of the case. Citing to Martin v. Albany Business
Journal, Inc., 780 F. Supp. 927 (N.D.N.Y. 1992), the ALJ found that
the informant's
privilege was applicable to Fair Labor Standards Act (FLSA) cases and that "FLSA cases are analogous to
the instant case, with the important exception that the instant case involves
claims for back wages and the employee informants have a pecuniary interest in
the outcome." The ALJ
analyzed the holdings in Albany Business Journal as well
as Brock v. Gingerbread House, Inc., 907 F.2d 115 (10th
Cir. 1989), Reich v. Great Lakes Collection Bureau, Inc.,
172 F.R.D. 58, 60 (W.D.N.Y. 1997), and BAC Steel Products,
312 F.2d 14, 16 (4th Cir. 1962). The ALJ found that Great
Lakes Collection Bureau, in particular, "set forth a sound analysis
of the principles applicable to the informer's
privilege" and she
stated the following:
Applying these
principles (considered along with the regulation discussed above) to the
instant cases, I find that the statements of employees interviewed by Wage and
Hour investigators, together with any documents that cannot have identifying
information redacted, are protected by the informer's privilege and do not need to be produced at
the present time. The Respondent's
need for the statements at the present time in order to present its case is
outweighed by the need of the Department of Labor to protect the
confidentiality of the employees interviewed during the course of its
investigation, to ensure that employees will not be reluctant to come forward
in the future. However, the Department of Labor must identify its witnesses as
ordered by the undersigned administrative law judge and, at the time each
witness is called, will be required to provide the requested statements related
to each such witness. Those employees who agree to testify no longer have any
interest in protecting the confidentiality of their statements, but those
employees who do not testify will retain their anonymity. In this regard, I
note that the employees concerned here have a pecuniary interest in the outcome
of this case which requires that Respondents not be hampered in cross examining
them. I understand that having to wait until the time of trial to obtain these
statements may put the Respondents at a disadvantage. However, I will allow
the Respondents whatever additional time is necessary to combat any prejudice.
Absent unfair surprise, it would appear that a brief recess some time prior to
the cross examination for the purpose of allowing the Respondents an
opportunity to read the subject statements would be sufficient. If necessary
due to unfair prejudice, the trial could be recessed and (only if absolutely
necessary) discovery could be reopened.
Slip op. at 5-6.
2. Deliberative process privilege
In S.C.
Security, Inc., 1998-SCA-26 (ALJ, June 29, 1999), the ALJ was
confronted with a motion for a protective order, which she found was actually a
motion to compel discovery:
Turning to
Respondents' Motion
for a Protective Order, I note that, in actuality, it is a motion to compel
discovery. However, Respondents have sought for the responses to discovery for
which the Department of Labor has made of claim of privilege to be provided to
their counsel, who would then be bound by a Protective Order which would
prevent the information and documents from being provided to Respondents.
While, despite my misgivings, I might have considered such an approach if it
were agreed to by both parties, I find the approach likely to be unworkable and
I decline to adopt it. In this regard, the actions taken by Respondents' counsel after obtaining
the requested information and documents would provide Respondents with some
inkling as to the nature of the information provided, and making counsel
subject to a protective order would inhibit their frank discussion of the
merits of the case and litigation strategy with their clients. Accordingly, I
will, instead, construe Respondents'
Motion as a motion to compel.
The ALJ then noted that the
Department of Labor asserted the informant's
privilege, the deliberative process privilege, and the work product privilege
and declined to produce documents requested by the Respondents. With regard to
the deliberative process privilege, the ALJ cited to Martin v. New
York City Transit Authority, 148 F.R.D. 56, 59 (E.D.N.Y. 1993) and
noted that this privilege is designed to prevent the disclosure of documents
which reflect ">advisory opinions,
recommendations and deliberations comprising part of a process by which
governmental decisions an policies are formulated.'"
The ALJ further noted that, as with the informer's
privilege, the deliberative process privilege "must
be properly invoked by the head of the agency or a high level subordinate to
whom the authority to assert the privilege has been delegated together with
guidelines on its use."
Citing to Ashley v. U.S. Dep't. of Labor,
589 F. Supp. 901, 907 (D.D.C. 1983), the ALJ noted that the burden of proof
rests with the Department of Labor "with
respect to each document or portion thereof, and reasonably segregable factual
material must be provided."
The ALJ further stated that "[i]t
is a matter of concern where, as here, the affidavit of the high level
subordinate suggests that the decision to assert the privilege was not made by
agency policymakers in consideration of the agency's interest in the deliberative confidentiality
but as a matter of litigation strategy."
In this vein, the ALJ noted that Ashley requires that "[a] decision on the
applicability of the privilege should generally be made on the basis of
specific, clear, and detailed agency affidavits rather than based on an in
camera review."
Based on the facts of the case before, the ALJ determined that the agency
official's declaration
"falls far short of
the detailed discussion of specific documents . . . and it appears to have been
made by DOL counsel and then ratified by (the agency official) and adopted as
policy." The ALJ
further found that the agency official did not produce sufficient evidence of
guidelines to accompany the delegation of authority to him to assert the
privilege. As a result, the ALJ ordered that for those documents which, "by virtue of their
description, clearly fall within the purview of the deliberative process
privilege, I will apply the privilege."
The ALJ then determined that the remaining documents requested would have to be
produced.
3. Work product privilege
In S.C.
Security, Inc., 1998-SCA-26 (ALJ, June 29, 1999), the ALJ was
confronted with a motion for a protective order, which she found was actually a
motion to compel discovery:
Turning to
Respondents' Motion
for a Protective Order, I note that, in actuality, it is a motion to compel
discovery. However, Respondents have sought for the responses to discovery for
which the Department of Labor has made of claim of privilege to be provided to
their counsel, who would then be bound by a Protective Order which would
prevent the information and documents from being provided to Respondents.
While, despite my misgivings, I might have considered such an approach if it
were agreed to by both parties, I find the approach likely to be unworkable and
I decline to adopt it. In this regard, the actions taken by Respondents' counsel after obtaining
the requested information and documents would provide Respondents with some
inkling as to the nature of the information provided, and making counsel
subject to a protective order would inhibit their frank discussion of the
merits of the case and litigation strategy with their clients. Accordingly, I
will, instead, construe Respondents'
Motion as a motion to compel.
The ALJ then noted that the
Department of Labor asserted the informant's
privilege, the deliberative process privilege, and the work product privilege
to decline to produce documents requested by the Respondents. With regard to
the work product privilege, the ALJ initially noted that this privilege is part
of Rule 26(b)(3) of the Federal Rules of Civil Procedure as well as the
Department of Labor's
procedural rules at 29 C.F.R. §
18.14(c) "which
generally provides that discovery by one party of documents prepared in
anticipation of or for the hearing by or for another party's representative will be
allowed only upon a showing of substantial need (for preparation of the party's case) and undue hardship
to obtain the substantial equivalent by other means." Citing to Reich v. Great Lakes
Collection Bureau, Inc., 172 F.R.D. 58, 60 (W.D.N.Y. 1997) and Wayland
v. NLRB, 627 F. Supp. 1473 (M.D. Tenn. 1986), the ALJ noted that
the work product doctrine does not apply to "all
work done by the investigator after the initial employee complaint is received
. . .." The ALJ
stated the following:
Mr. Clark asserts
that he supervised the investigation of the Navy contract involved in the
instant case, that he discussed whether a complaint should be filed with
Regional Counsel Ronald Gurka on March 24, 1998, and that following this
conversation, seven signed statements were taken by an unnamed Wage and Hour
investigator. It is unclear what guidance was given to the unnamed
investigator or by whom it was provided. Nevertheless, Mr. Clark goes on to
state that the statements were 'obtained
pursuant to the advice given by Mr. Gurka, and these statements (were) obtained
in anticipation of litigation.'
Mr. Clark's
declaration falls short of establishing a basis for invocation of the work
product protection for these statements.
The ALJ did state, however, that
the statements may be protected by the informant's
privilege to the extent previously discussed in her opinion, which is
summarized at subsection [a] above.
C. Compelling
electronic discovery
In Lawn
Restoration Corp., 2002-SCA-6 (ALJ, Jan. 17, 2003), the ALJ issued
an order compelling electronic discovery. The ALJ noted that “[w]hether to
authorize electronic discovery requires that I balance the benefits of allowing
DOL access to legitimately discoverable material against the burdens imposed on
Respondents in providing access to its electronic data. These “burdens”
include “the costs of hiring an expert to inspect electronic data” as well as
“costs associated with the disruption of Respondents’ business and the
potential threat posed to materials which are legitimately covered by the
attorney-client privilege. The ALJ concluded that discovery was appropriate
under the facts before him. Specifically, the ALJ stated the following:
I find that ordering
the electronic discovery sought by DOL in its motion to compel is appropriate
in that it provides the Agency with access to specifically identified
information which is relevant to the issues raised in this litigation. In
addition, Respondents’ incomplete, inconsistent, and delayed responses to the
Agency’s prior discovery requests further justify such discovery. Since I
believe the financial costs associated with the Agency’s utilization of a
computer expert to carry out the discovery ordered herein are more
appropriately assigned to DOL, there will be little or no financial burden
imposed on Respondents in providing access to its electronic data.
The ALJ noted
that Respondents’ privacy, attorney-client privilege, and business operations
would be properly protected because (1) no DOL representative, other than its
computer expert, would be present; (2) the inspection would be conducted in the
presence of Respondents’ counsel; (3) the expert would conduct a search only
for information relating to terms and conditions of employment, which was the
subject of the litigation; and (4) Respondents would produce a “privilege log”
with respect to any data that the contractor would be precluded from searching.
Return to Top of Document
VI. Exempt employees
A.
No coverage for certain types of employees
1. Service employee defined, generally
A "service
employee" is defined
under the SCA as the following:
any person engaged
in the performance of a contract entered into by the United States and not
exempted under section 356 of this title, whether negotiated or advertised, the
principle purpose of which is to furnish services in the United States (other
than any person employed in a bona fide executive, administrative, or
professional capacity, as those terms are defined in part 541 of Title 29, Code
of Federal Regulations, . . . and shall include all such persons regardless of
any contractual relationship that may be alleged to exist between a contractor
or subcontractor and such persons.
41 U.S.C. § 357(b). The regulations at 29 C.F.R. § 4.155 state, in part, the
following:
Any person, [except
those employed in a genuine executive, administrative or professional capacity]
. . . who performs work called for by a contract or that portion of a contract
subject to the Act is, per se, a service employee. Thus, for example, a person's status as an "owner operator" or an "independent contractor" is immaterial in
determining coverage under the Act and all such persons performing the work of
service employees must be compensated in accordance with the Act's requirements.
In D's Nationwide Industrial
Services, ARB Case No. 98-081, 1995-SCA-38 (ARB, Nov. 24, 1999),
the ARB held that "it
is clear that it is an employee's
work duties, not his or her title or status in the business, that determine
whether he or she is a service employee."
Slip op. at 6.
Moreover, in Stephen
W. Yates, ARB No. 02-119, 2001-SCA-21 (ARB, Sept. 30, 2003),
payment of SCA prevailing wages for truck drivers was required “regardless of
any contractual relationship that may be alleged to exist between a contractor
or subcontractor and such persons.” The Board held that United States Postal
Service mail hauling contracts were subject to SCA wage requirements.
Respondent, a limited liability company, failed to comply with the SCA’s wage
payment requirements because “the four truck drivers working on the USPS mail
hauling contracts were ‘members’ (or ‘partners’) of the LLC and therefore were
not service employees under the Act.” Respondent maintained that the truck
drivers worked under a subcontract, and not a contract directly with the postal
service. The ALJ disagreed and properly cited to 41 U.S.C. § 357(b) and 29 C.F.R.
§ 4.155, which required payment of prevailing wages for the truck drivers. The
Board noted that the relevant inquiry was “whether the drivers (came) within
the SCA definition of ‘service employee.’” It found that an employee’s work
duties, not his or her title or status in the business, determines coverage
under the Act.
2. Certain contracts for public buildings; published
tariffs;
Postal Service
The exemptions
at 41 U.S.C. § 356
include any contract of the United States or District of Columbia for
construction, alteration, and/or repair, including painting and decorating
public buildings or public works; any work to be done in accordance with the
provisions of the Walsh-Healey Public Contracts Act at 41 U.S.C. § 35 et seq.; any
contract for the carriage of freight or personnel by vessel, airplane, bus,
truck, express, railway line, or oil or gas pipeline where published tariff
rates are in effect; any contract for the furnishing of services by radio,
telephone, telegraph, or cable companies which are subject to the
Communications Act of 1934 at 47 U.S.C. §
151 et seq.; any contract for public utility services, including
electric light and power, water, steam, and gas; any employment contract
providing for direct services to a Federal agency by an individual or
individuals; and any contract with the United States Postal Service, the
principal purpose of which is the operation of postal contract stations. See
Stephen W. Yates, ARB No. 02-119, 2001-SCA-21 (ARB, Sept. 30,
2003) (truck drivers for Postal Service subcontractor were “service employees”
and were not exempt from coverage under 41 U.S.C. § 357(b) or the provisions at
29 C.F.R. §§ 4.123(d) and 4.113(a)(1)); D's Nationwide Industrial
Services, ARB Case No. 98-081, ALJ Case No. 1995-SCA-38 (ARB, Nov.
29, 1999), slip op. at 5, n. 4; Williams v. U.S. Dep't. of Labor,
697 F.2d 842 (8th Cir. 1983) (no coverage for carriage of freight by
truck for military personnel where published tariffs were in effect).
3. Executive, administrative, and professional
exemptions at
41 U.S.C. § 357(b)
Executive,
administrative, and professional employees are also exempt from coverage. The
regulations at 29 C.F.R. § §
541.1(e), 541.2(d), and 541.3(d) provide that, to qualify as an executive,
administrative, or professional employee, an individual must devote at least 80
percent of his or her hours of work to executive, administrative, or managerial
activities.
B.
Application of exemptions
1. Application proper
[a] Courier service-published
tariff rates
in effect
In Pony
Express Courier Corp., 1995-SCA-45 (ALJ, Feb. 29,
1996), the ALJ granted summary decision for Respondent based on its contention
that it was exempt from coverage under the Service Contract Act, 41 U.S.C. § 351 et seq.
pursuant to Section 7(3) of the Act, 41 U.S.C. §
356(3), which provides that "any contract for the carriage of freight . .
. by truck [or] express . . . where published tariff rates are in effect"
is exempt. The ALJ noted that "[t]he SCA was specifically designed to
prevent the challenging of government service contract business to those whose
competition is based on paying the lowest wages. An exemption was provided to
'regulated industries' subject to published tariff rate because there did not
exist the competitive situation faced in service contract cases
generally." Slip op. at 5 (citation omitted). Respondent presented
un-refuted evidence that it had a contract for the carriage of freight with a
branch of the Federal Reserve Bank. The ALJ found that Respondent was a
transportation company within the meaning of the exemption, satisfying the
five pronged bona fide "express service test" of Transportation
Activities of Arrowhead Freightlines, Ltd., 63 M.C.C. 573, 581
(1955). Respondent further established that it provided a service to the
general public, utilized a regular rate schedule, utilized a hub and spoke
methods for making speedy daily deliveries throughout 37 states, and used
trucks to perform its contract with the Federal Reserve Bank. Finally,
Respondent established that, at all times relevant to the proceeding, it had
filed, with the ICC, published interstate tariff rates applicable to its
contract with the Federal Reserve Bank, and its bid for the subject contract was
based on the applicable tariff rate. The ALJ rejected Complainant's assertion
that Respondent was required, pursuant to 29 C.F.R. § 4.118, to produce bills of lading citing the
published tariff rate in order to establish entitlement to the exemption. The
ALJ noted that there was other compelling evidence of the published tariff
rate, and found that bills of lading were only one method of demonstrating the
use of a published tariff rate-the
regulation does not, however, make bills of lading the exclusive means of
evidencing entitlement to the exemption.
[b] Airline pilots
In Paul
v. Petroleum Equipment Tools Co., 708 F.2d 168 (5th Cir.
1983), reh'g.
denied, 714 F.2d 137 (5th Cir. 1983), the Fifth Circuit held
that an airline pilot met the test for the "professional" exemption at 29 C.F.R. § 541.315. Given the
significant level of training and experience required of Respondent's pilots, the court
concluded that they fell in a special class of pilots deemed "professionals.".2d 137 (5th
Cir. 1983). But see Suburban Air Freight, Inc.,
ARB Case No. 98-160 (ARB, Aug. 21, 2000) (the ARB held that it would exercise
non-acquiescence with regard to the Fifth Circuit's
decision to hold that airline pilots are not exempt professionals within the
meaning of the SCA).
3. Application improper
[a] Employee primarily performed
janitorial duties
In United
Kleenist Organization Corp., 1999-SCA-18 (ALJ, Jan. 10, 2000), aff'd., ARB Case No. 00-042
(ARB, Jan. 25, 2002), Respondent argued that one of its employees was "exempt" from the provisions of the
SCA since he was an "executive" employee. The ALJ noted
that, "[t]o be
employed in a 'bona
fide executive capacity',
a number of requirements must be met,"
including that "[t]he
employee's primary
duty must be management; he must regularly direct the work of two or more
employees; he must have the authority to hire and fire; he must regularly
exercise discretionary powers; and he must no devote more than 20% of his time
in non-management activities."
Under the facts of United Kleenist, the ALJ found that the
employee's primary
duty was performing janitorial services, "which
consumed much more than 20% of his time."
The ALJ further noted that the only non-janitorial duty performed by the
employee was providing the contractor with the number of hours worked by
employees at the job site. As a result, he was a covered employee.
[b] Airline pilots
In Suburban
Air Freight, Inc., 1997-SCA-4 (ALJ, July 23, 1998), the ALJ cited
to a Fifth Circuit decision in Paul v. Petroleum Equipment Tools Co.,
708 F.2d 168 (5th Cir. 1983) to hold that an airline pilot met the
test for the "professional" exemption at 29 C.F.R. § 541.315. The Department
argued that, according to 29 C.F.R. §
4.156, pilots were intended to be considered "service
employees" under the
SCA. Given the significant level of training and experience required of
Respondent's pilots,
however, the ALJ found that they fell "in
the sub-class of pilots deemed 'professionals' by the definitions in Paul." As a result, the ALJ
concluded that the exemption at 29 C.F.R. §
541.315 was applicable. On appeal, in Suburban Air Freight, Inc.,
ARB Case No. 98-160 (ARB, Aug. 21, 2000), the ARB disagreed and
remanded the case to the ALJ for further proceedings. In particular, the ARB
concluded that airline pilots are not ">learned professionals'" under Part 541 because the occupation does
not meet the ">knowledge of an advanced
type in a field of science and learning'
requirement." Citing
to U.S. Postal Service ANET and WNET Contracts, ARB Case
No. 98-131 (ARB, Aug. 4, 2000), the ARB set forth a three-prong "short" test for determining
whether an employee is exempt from the SCA as a learned professional: (1) the
worker's primary duty
requires advanced knowledge which is usually "acquired
by a prolonged course of specialized intellectual instruction and study; (2)
the employee's work "requires consistent
exercise of discretion and judgment";
and (3) the employee is compensated at a rate of $250 per week or more,
excluding ">board, lodging or other
facilities.'" Under the facts before it,
the ARB held that pilots are highly skilled, but the training required does not
consist of knowledge of an advanced type in a field of science or learning. In
so holding, the ARB noted its non-acquiescence with the Fifth Circuit's decision in Paul
v. Petroleum Equipment Tools Co., 708 F.2d 168, reh'g. denied, 714 F.2d 137
(5th Cir. 1983).
[c] Ownership interest in company
irrelevant
In D's Nationwide Industrial
Services, ARB Case No. 98-081, 1995-SCA-38 (ARB, Nov. 24, 1999),
the ARB held that five employees of Nationwide worked as truck drivers hauling
U.S. mail pursuant to a contract with the United States Postal Service and, as
a result, they were entitled to payment of the SCA prevailing wage. The
employees maintained that they were not paid the prevailing wage as required by
the SCA. Respondent, on the other hand, argued that three of the drivers owned
a one percent interest in Nationwide and, thus, were partners in the company
who were not entitled to the SCA prevailing wage. The ARB disagreed. It found
that Respondent "presented
no evidence that the drivers in question-who
worked hauling, loading, and unloading mail-spent
any of their time working in an executive, administrative or professional
capacity." Slip op.
at 6. As a result, the ARB affirmed the finding that the truck drivers were
covered the SCA and entitled to the prevailing wage rate.
[d] Contracts between federal agencies
and travel agencies
In Ober
United Travel Agency Inc. and Society of Travel Agents in Government v. United
States Dep't.
of Labor, Case No. 97-5046 (D.C. Cir. Feb. 13, 1998), the
D.C. Circuit affirmed the determination of the ARB and the Administrator in
finding that both reasonably interpreted the SCA to apply to travel management
contracts between federal agencies and travel agencies. The court rejected the
appellants' argument that the SCA only applies to contracts that obligate
appropriated funds. Likewise, the court found that the contracts were not
"contract[s] for the carriage of . . . personnel", thus, appellants'
argument that the contracts were nonetheless exempt from the SCA pursuant to 41
U.S.C. § 356(3) was
rejected.
C.
Contract between private individual and Native
American Tribe
In Marlys
Bear Medicine v. United States, 47 F. Supp. 1172 (D. Mon. 1999), rev'd. on other grounds,
241 F.3d 1208 (9th Cir. 2001)(the district court's ruling on this issue was
not appealed), a worker for a logging operation on the Blackfeet reservation
was injured by a falling tree and subsequently died. Representatives of his
estate filed suit against the United States and alleged that the provisions of
the Service Contract Act covered the logging operations such that, pursuant to
41 U.S.C. § 351(b)(1),
the contractor was required to provide its employees with occupational
compensation insurance and accident insurance. The court held, however, that
the SCA did not apply to the timber sale contract at issue because the
principle purpose of the contract was not to furnish services. The court
determined that the "principal
purpose of the timber sale contract in this case, was the sale of timber owned
by the tribe." The
court also noted that the contract was between Lone Bear and the Blackfeet
Tribe and the SCA only applies to contracts executed by service contractors and
the United States. In this vein, the court noted that the Bureau of Indian
Affairs only approved of the contract "as
trustee of the forests located on the Blackfeet Indian Reservation."
Return to Top of Document
VII. Party responsible
A. Party responsible
1. Generally
The Service Contract
Act provides, in part, the following with regard to assessment of liability for
back wages and other compensation owed to employees:
Any violation of any
of the contract stipulations required by section 351(a)(1) [wages] or (2)
[fringe benefits] or of section 351(b) of this title shall render the party
responsible therefore liable for a sum equal to any deductions, rebates,
refunds, or underpayment of compensation due to any employee engaged in the
performance of such contract.
41 U.S.C. § 352(a). The
regulations at 29 C.F.R. § 4.187(e)(4) further defines “party responsible” to
include corporate officers or owners as well as “those individuals . . . who
are found responsible for a service contractor’s performance of a contract.” See
Rasputin, Inc., ARB Case No. 03-059, 1997-SCA-32 (ARB, May
28, 2004), aff’d. in relevant part sub. nom., Johnson v. U.S. Dep’t. of Labor,
2005 WL 1970742, Case No. 2:04-CV-0775 (S.D. Ohio, Aug. 16, 2005), aff'd., Case No. 05-4355 (6th Cir. Aug. 16, 2006 (unpub.)
(affirming debarment of Johnson for failure to pay $173,460.34 in back wages and fringe benefits; court held that it consistently accords “substantial deference to the credibility determinations of the ALJ”).
2. Examples
a. Manager jointly and individually liable
In D's Nationwide Industrial
Services, ARB Case No. 98-081, 1995-SCA-38 (ARB, Nov. 24, 1999),
the ARB upheld the ALJ's
finding that accrued payments due on Respondent's
contracts with the United States Postal Service and United States Navy should
be withheld for the payment of back wages owed. In this vein, the ARB noted
that, when an employer fails to pay the minimum compensation due under the SCA,
accrued payments due on that contract or other contracts between the company
and the Federal Government may be withheld. See 41 U.S.C. § 352(a). The ARB further
held that Glaude, as the "business
manager who supervised the performance of the contract and directed the pay
practices of the company,"
was liable for back wages owed both individually and jointly with the company
pursuant to 29 C.F.R. §
4.187(e)(1).
b. Joint venture company liable
In Corporate
Investors Associates, Inc., 1995-SCA-48 (ALJ, Aug. 14, 1998), the
ALJ held that when High Point entered into a joint venture with Corporate
Investors Associates, "it
assumed the risk of loss under the contract"
such that funds could be withheld from High Point. The ALJ stated the
following:
High Point knew the
contract was subject to the SCA, and High Point knew or should have known of
the withholding provisions of the contract. It was this contract from which
funds were withheld, and this contract was with CIA, even after High Point's attempts to remove CIA's connection with it, and
CIA did substantial work on the contract, the benefits of which High Point is
now reaping. Thus, even if High Point was a completely unrelated party who
allowed CIA to be involved in the contract merely from the goodness of its
heart, High Point still assumed the risk of loss on the contract, and should
have investigated CIA further to minimize its risks. Furthermore, there is a
connection between High Point and CIA, as seen through some common employees
and the common employment of the president of both companies, thus implying
even more that High Point should have been aware of the risk it was
undertaking.
c.
Individual in “de facto control” of daily
operations
liable
In Rasputin,
Inc., ARB Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004) ), aff’d.
in relevant part sub. nom., Johnson v.
U.S. Dep’t. of Labor, 2005 WL 1970742, Case No. 2:04-CV-0775 (S.D.
Ohio, Aug. 16, 2005), aff'd. Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.), the
Board held that Johnson, who represented to clients that he was the President
of Rasputin, was properly deemed a “party responsible” under the Act. The
on-site contract operations manager testified that he reported to Johnson.
Further, Johnson made personnel and payroll decisions as well as decisions
regarding which bills would get paid and what equipment would be at the job
site. The ARB noted that Johnson misrepresented that he was president of the
company when the contract was awarded and that, although Johnson was neither an
officer nor a shareholder of the contractor, he had “de facto control”
over its daily operations. Moreover, the fact that Johnson received no wages
or other renumeration from Rasputin was immaterial. As a result, Johnson was
properly considered a “party responsible” and was debarred for three years.
d. Employer
and its officers liable for acts
of subordinate
In Coast
Industries, Inc., ARB Case No. 04-004, 2002-SCA-003 (ARB, Feb. 28,
2005), the ALJ properly applied 29 C.F.R. § 4.188(b)(5) to conclude that
Respondent and its officers could not evade responsibility for violating the
Act by blaming the bookkeeper. Respondent argued that it had a “well-defined
system for computing the hours its employees worked and that company policy was
to pay its employees the proper SCA wages.” From this, Respondent asserted
that the actions of its bookkeeper were “aberrant.” The ALJ disagreed to hold
that Respondent was responsible for the acts of an employee who was acting
within the scope of his or her employment.
B. Successor contractor
1.
Determination of status as
The
determination of "successor
contractor" is
primarily factual in nature and is based on the totality of the circumstances. See
Fall River Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S.
27 (1978) (factors to consider). One of the most significant factors is the
overlap in workforces between the two entities. Houston
Building Services, Inc. and Jason Yoo, ARB Case No. 95-041A,
1991-SCA-30, slip op. at 4 (ARB, Aug. 21, 1996) (citing N.L.R.B.
v. Houston Bldg. Service, Inc., 936 F.2d 178 (5th Cir. 1991)).
2.
Successor is liable for predecessor's
contract
a. Generally
Section 4(c) of
the SCA imposes an obligatory wage and fringe benefit floor on successor
contracts in the event that the predecessor contract has specified collectively
bargained rates and these provisions are self-executing. 41 U.S.C. § 353(c). See also Rasputin,
Inc., ARB Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004), aff’d.
in relevant part sub. nom., Johnson v. U.S. Dep’t. of Labor, 2005 WL
1970742, Case No. 2:04-CV-0775 (S.D. Ohio, Aug. 16, 2005), aff'd. Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.) (the district court added that a successor
company is liable even where the collective bargaining agreement did not become
effective until after expiration of the predecessor’s contract). Wages paid
and benefits furnished under a successor contract must be greater than or equal
to those provided under the predecessor contract. When a successor contractor
accepts a predecessor's employees, it automatically assents to those employees'
collectively bargained benefits and their expressly calculated fringe
benefits. 29 C.F.R. §
4.163(b). In Houston Building Services, Inc. and
Jason Yoo, ARB Case No. 95-041A, 1991-SCA-30, slip
op. at 4 (ARB, Aug. 21, 1996), the ARB concurred with the ALJ's determination
that Respondents constituted a successor contractor and they were obliged to
provide the employees of the predecessor contractor a severance allowance which
was required by the predecessor's
contract. Slip op. at 3. Even though Respondents did not negotiate the disputed
severance allowance provision, they accepted it as an express term of the
contract, and their status as a successor contractor required them to stand in
the shoes of the predecessor. Under the specific facts of Houston
Building, Respondents were successor contractors who had continued
the prior workforce temporarily while awaiting required security clearances for
the staff it intended to use. When Respondent replaced the prior workforce, it
did so without providing severance pay as required by the workforce's prior
contract. The ARB found this to be a clear violation of section 4(c) of the
Service Contract Act, 41 U.S.C. §
353(c). See also Rasputin, Inc., ARB Case No. 03-059,
1997-SCA-32 (ARB, May 28, 2004), aff’d. in relevant part sub. nom., Johnson v.
U.S. Dep’t. of Labor, 2005 WL 1970742, Case No. 2:04-CV-0775 (S.D.
Ohio, Aug. 16, 2005) , aff'd. Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.) (Section
4(c) obligations regarding a successor contractor’s payment obligations are
self-executing and does not have to be reflected in the wage determination to
be binding).
b. Liability not affected by successor's collective bargaining
agreements
In Secretary
of Labor v. International Resources Corp., 1994-SCA-35
(ALJ, Jan. 3, 1996), the Respondent negotiated several collective bargaining
agreements (CBAs) that called for imposition of a probationary period, but that
were silent as to the length of that period. Respondent contended that its
use of a 90-day probationary period did not violate the SCA because that
period was its standard operating practice. The ALJ held that Respondent's
standard practices in this regard were irrelevant, and that the relevant
practice is that of the predecessor contractor from which the successor
contractor assumes the contract which, in this case, was 30-days. See
41 U.S.C. § 353(c); Rasputin,
Inc., ARB Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004), aff’d.
in relevant part sub. nom., Johnson v. U.S. Dep’t. of Labor, 2005 WL
1970742, Case No. 2:04-CV-0775 (S.D. Ohio, Aug. 16, 2005), aff'd. Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.); Halifax Technical Services, Inc. v.
United States, 848 F. Supp. 240, 244 (D.C. Cir. 1994) (preventing
"a successor from relying on its own separate collective-bargaining
agreement to pay union members less . . . than its predecessor's collective-
bargaining agreement called for"). See also Vigilantes, Inc. v.
U.S. Dep't.
of Labor, 968 F.2d 1412 (1st Cir. 1992) (debarment
required where no unusual circumstances present; minority employer had numerous
deficiencies under several contracts totaling more that $70,000, failed to meet
its successor contractor responsibilities, and failed to make prompt payment of
monies due).
c. One contract period only
In Fort Hood Barbers Ass'n.,
ARB Case No. 96-181 (ARB, Nov. 12, 1996), aff'd., 137 F.3d 302 (5th
Cir. 1998), the ARB found that, pursuant to §
4(c) of the SCA, a successor contractor is liable for the collective bargaining
agreement (CBA) of a predecessor contractor for a period of one contract period
only. A multi-year contract with basic year and option periods is
treated as separate contracts rather than a single contract, and a predecessor's
CBA does not apply to the first option year. See Operating Engineers,
BSCA Case No. 92-23 (BSCA, Jan. 27, 1993). Five-year service
contracts are permitted if they provide for periodic adjustment of wages and
fringe benefits at least once every two years during the term of the contract
pursuant to § 4(d) of
the SCA. The ARB held that the CBA in Fort Hood applied
to the first two years of the contract, but that at the beginning of the third
year when the contractor no longer had an existing CBA, it became its own
predecessor contractor. Thus, the wage and hour revision, which did not include
the collectively bargained fringe benefits, was not erroneous. See also General
Services Administration, ARB Case No. 97-052 (ARB 1997) (§ 4(c) "attempts to strike a
balance between the protection of the prevailing labor standards and the
safeguarding of other legitimate Federal government interests" and it "imposes a direct statutory
obligation and is self-executing such that the time limitations set forth at 29
C.F.R. § 4.55(a)(1)
are not controlling";
the ARB declined to hold that the predecessor's
contract was binding on the successor for a period of one month only; rather,
it determined that the minimum contract period is one year); ITT
Federal Services Corp., ARB Case No. 95-042A (ARB, July 25, 1996)
(parties did not contest that the exercise of an option year by the government
constituted a new contract for purposes of the SCA; the ARB affirmed the
Administrator's ruling
that a collective bargaining agreement that "terminates
prior to the completion of a predecessor contract cannot serve as the basis for
a Section 4(c) wage determination";
substantial variance proceedings are not the exclusive remedy available to the
successor contractor, collective bargaining is also an option).
d. Minor change in job duties between predecessor and successor insufficient to avoid contract obligations
In General
Services Administration, Region 3, ARB Case No. 97-052 (ARB, Nov.
21, 1997), the ARB compared the duties required of security guards under the
predecessor and successor contracts and concluded that they were "substantially similar" and were to be performed
at the same locality. As a result, the ARB held that the "predecessor/successor
contract relationship"
under § 4(c) would not
be undermined such that the predecessor's
contract was binding upon the successor. Moreover, the ARB declined to hold
that the predecessor's
contract was binding on the successor for a period of one month only; rather,
it determined that the minimum contract period is one year.
e.
More than one predecessor collective
bargaining
agreement
Under 29 C.F.R.
§ 4.163(g), if more than one predecessor collective bargaining agreement is at
issue, then “the predecessor contract which covers the greater portion of the
work in such function(s) shall be deemed to be the predecessor contract for
purposes of subsection 4(c) . . ..” See Rasputin, Inc.,
ARB Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004), aff’d. in relevant part sub. nom., Johnson
v. U.S. Dep’t. of Labor, 2005 WL 1970742, Case No. 2:04-CV-0775
(S.D. Ohio, Aug. 16, 2005) , aff'd. Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.).
Return to Top of Document
VIII. Compensation
A.
Collateral estoppel
Inapplicable;
no affirmative misconduct
In Dantran,
Inc. and Robert Holmes, 1993-SCA-26 (ARB, June 10,
1997), aff'd.,
171 F.3d 58 (1st Cir. 1999), the ARB held that a legally
recognizable claim of estoppel against the government must be based on
affirmative misconduct of the governmental agency. In this case, the
contracting officer's
conduct was, at most, negligent and did not rise to the affirmative misconduct
necessary for estoppel. Specifically, the contractor could not assert collateral
estoppel based upon a 1989 "clean
bill of health" which
it received from the contracting officer years earlier. The circuit court
stated:
We cannot in good
conscience accept a broad rule that prevents the sovereign from enforcing valid
laws for no better reason than that a government official has performed his
enforcement duties negligently.
Id. at 66. See also CACI,
Inc., Case No. 86-SCA-OM-5 (Dep'y. Sec'y., Mar. 27, 1990), slip.
op. at 29; Azizi v. Thornburgh, 980 F.2d 1130, 1136 (2nd Cir. 1990); Rider v. United States Postal Service, 862
F.2d 239, 241 (9th Cir. 1988).
B.
Suspension of payment of wages or delay in increase
in wages
Held to be
improper; waiting for DOL
approval or reimbursement
In Secretary
of Labor v. International Resources Corp., 1994-SCA-35
(ALJ, Jan. 3, 1996), Respondent negotiated a Memorandum of Agreement
with the union as to wage and benefit increases to become effective October 1,
1990. The Agreement provided that the increase would not be paid until
DOL approved the wage determination and Respondent received reimbursement.
Because of delays by the parties and an intervening lawsuit brought by the
union, Respondent did not complete paperwork on the increase until September
28, 1994. The ALJ rejected Respondent's reliance on the DOL
approval/reimbursement clause of the Memorandum of Agreement, finding
that neither the SCA nor its implementing regulations "permit an employer
to temporarily suspend its obligation to its employees while waiting for
reimbursement from another agency." Slip op. at 8, citing In re
Kleen-Rite, Corp., BSCA Case No. 92-09 (BSCA, Oct.
13, 1992). The ALJ also found persuasive DOL's contention that approval of
the wage determination was implicit as it was agreed upon after arm's-length
negotiations. See 41 U.S.C. §
351(a)(2).
In Lucy
E. Enobakhare a.k.a. Lulu Star, 1996-SCA-46 (ALJ, Jan.
7, 1998), the ALJ held that Respondent must pay any increase in the wage amount
from the effective date of a revised wage determination, even where Respondent
is waiting for the contract price increase to be processed.
C.
Fringe benefits
1. Not contingent on full-time status of employee
[a] Health and welfare benefits
In Lucy
E. Enobakhare a.k.a. Lulu Star, 1996-SCA-46 (ALJ, Jan.
7, 1998), the ALJ held that the regulatory requirement of payment of health and
welfare fringe benefits is not contingent upon the full-time status of
the employee. 29 C.F.R. § §
4.164(a)(2), 4.176(a), and 4.174. See also Panamovers Transfer and
Storage, Inc., 1999-SCA-10 (ALJ, Feb. 6, 2002) (the SCA does not
differentiate between full-time and part-time employeesBall employees are entitled to health and
welfare benefits proportionate to the work performed pursuant to 29 C.F.R. §§ 4.165(a)(2) and 4.176);
White Glove Building Maintenance, Inc. v. Hodgson, 459 F.2d 175
(9th Cir. 1972) (finding that the "Secretary
has pointed to no provision in the Act or regulations . . . which precludes a
self-insurance plan from qualifying as an equivalent fringe benefit").
[b] Holiday pay
In Lucy
E. Enobakhare a.k.a. Lulu Star, 1996-SCA-46 (ALJ, Jan.
7, 1998), the ALJ held that the regulatory requirement of payment of holiday
pay is not contingent upon the full-time status of the employee. 29
C.F.R. § § 4.164(a)(2),
4.176(a), and 4.174. See also Hugo Reforestation, Inc.,
ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr. 30, 2001); Panamovers
Transfer and Storage, Inc., 1999-SCA-10 (ALJ, Feb. 6, 2002).
2. Cross-crediting is permitted
In Dantran,
Inc. v. U.S. Dep't.
of Labor, 171 F.3d 58, 63 (1st Cir. 1999), where postal
employees worked under multiple contracts, the court rejected the Secretary's interpretation of the SCA
regulations that "fringe
benefit determinations turn not on the total number of hours worked per week,
but on the number of different contracts to which an employee is assigned." To the contrary, the
court found that "cross-crediting" fringe benefits was
acceptable and did not violate the SCA's
requirements:
To illustrate,
assume that a service contractor has three separate mail-hauling contracts with
the Postal Service, and that in a given week worker A spends 25 hours on
contract X, 20 hours on contract Y, and 10 hours on contract Z. According to
the Secretary, worker A must receive an incremental payment equal to 55 hours
worth of fringe benefits, notwithstanding that worker B, who likewise toiled
for 55 hours that week but spent it all in carrying out contract X, will only
receive a payment equal to 40 hours worth of fringe benefits. In contract,
Dantran's
interpretation is not contract-specific. On its understanding, both A and B
would receive incremental payments in lieu of fringe benefits equal to the rate
times 40 hours. It follows, then, that if the Secretary's reading of the regulation is correct,
Dantran's use of cross-crediting
constituted a violation. Giving due weight to the language and structure of
the regulations, we find the Secretary's
gloss insupportable.
Id. at 63.
3. Proper records must be maintained
In United
Kleenist Organization Corp., 1999-SCA-18 (ALJ, Jan. 10, 2000), aff'd., ARB Case No. 00-042
(ARB, Jan. 25, 2002), the ALJ held that the contractor failed to fulfill its
obligation to pay fringe benefits. The contractor argued that it paid
employees an amount greater than the minimum wage to account for the fringe
benefits. The ALJ disagreed and stated that "the
employer must keep appropriate records evidencing the portion of pay intended
to compensate for wages and the portion intended for fringe benefits." Because no records of
fringe benefits costs were maintained by the contractor in this case, the ALJ
found that it had failed to provide its employees with the requisite fringe
benefits. See also William T. Carr, 1999-SCA-2 (ALJ, Jan.
4, 2000).
4. Cannot offset wages to credit against
fringe benefit
violations
In Panamovers
Transfer and Storage, Inc., 1999-SCA-10 (ALJ, Feb. 6, 2002), the
ALJ held that the regulations at 29 C.F.R. §
4.170 prohibited the contractor from crediting wages paid in excess of the
minimum required against "any
fringe benefit violations"
it made.
5. Cannot
claim fringe benefit credit
where deducted from substandard wages
In Lawn
Restoration Corp., 2002-SCA-6 (ALJ, Jan. 27, 2003), the ALJ noted
that an employer may include, as part of the minimum wage, the reasonable cost
or fair value of board, lodging, or other facilities that are (1) customarily
furnished to employees, (2) for the convenience and benefit of the employer,
and (3) employees have voluntarily accepted the benefit. 29 C.F.R. § 4.167.
Under the facts of Lawn Restoration, Respondent charged
rent to the H-2b employees who accepted Respondent’s offer of housing. The
employees were paid $8.00 or less per hour, which did not comply with the
contract wage requirements of $9.05 per hour. From the employees’ substandard
wages, Respondent further improperly deducted rent for lodging.
D.
Credit for tips
In Fort Hood Barbers Association, ARB Case
No. 96-181 (ARB, Nov. 12, 1996), aff'd., 137 F.3d 302 (5th Cir.
1998), the ARB upheld the Administrator's allowance of a tip credit under § 4.6(q) of the SCA which
states, in pertinent part, that "[a]n employee engaged in an occupation in
which he or she customarily and regularly receives more than $30 a month in tips
may have the amount of tips credited by the employer against the minimum wage
required by . . . the Act . . .." 29 C.F.R. § 4.6(q).
E.
Right to overtime pay cannot be waived by employee
or bargained away
In Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001), Respondent argued that it did not pay overtime compensation because
it was "merely
attempting to accommodate their employees'
desire for long weekends."
The ARB held that the argument was "legally
untenable" and that "[t]he employees' right to overtime pay
under the CWHSSA is mandated by statute, and as such could neither be waived by
(the) employees nor otherwise bargained away."
F.
Prevailing wage determination; challenge to
1. No collective bargaining agreement
In Dep't. of the Air Force SAF/AQCR
Eastern Regional Office, ARB Case No. 98-125 (ARB, May 26, 2000),
the ARB held that the SCA requires that, where there is no collective
bargaining agreement in effect, prevailing wage determinations must reflect
wages paid in the "locality." It noted that the term "locality" is not defined in the SCA
but that, pursuant to 29 C.F.R. §
4.54(a), the Administrator has "extraordinarily
broad discretion when determining the 'locality' to be used when issuing
wage determinations, with great flexibility to establish different localities
depending on a variety of factors."
In the case before it, the Administrator used a 36-county area in southeastern
North Carolina and adjacent South Carolina to determine the prevailing wage
rate. The ARB held the following:
[I]t has been a
longstanding practice of the Administrator to expand the geographic scope of a
wage determination area when sufficient reliable data is not available covered
a smaller jurisdiction. We agree with the Air Force that the 36-county
southeastern North Carolina area does not manifest the kind of economic
integration that typifies an urban area; however, although the wage
determination applies to a large territory, we see nothing in the record in
this case to suggest that the BLS wage date from the core 12-county area . . .
does not reasonably reflect the general wage patterns in the overall 36-county
jurisdiction. The area covered by the wage determination is substantially
rural, with three small urbanized centers and no major high-wage cities or
industrial areas that might otherwise skew the general survey results. The
availability of data from a larger survey universe ordinarily should enhance
the reliability of the wage determination process.
Based on the record
before us, we are not persuaded that the southeastern North Carolina area is an
impermissible 'locality
for SCA purposes, and therefore affirm the Administrator's decision on this issue.
In addition, the ARB held that it
was proper for the Administrator to reject the survey data compiled by state
and local agencies, which was offered by the Air Force. It stated that "this Board and its
predecessors similarly have considered data compiled by state and local
agencies that were deemed methodologically inferior to the BLS survey, and
likewise have affirmed the Administrator's
denial of reconsideration based on such evidence."
In this case, the ARB found multiple deficiencies in the state surveys,
including that (1) the employers were permitted to classify their own employees
in the survey, (2) the state survey focused on occupations by industry as
opposed to the Bureau of Labor Statistics survey which "is a true cross-industry survey", and (3)jobs listed in the
state's survey did not
provide distinctions between different levels of function within an occupation
whereas the BLS survey provided for this type of distinction.
In James
A. Machos, ARB Case No. 98-117 (ARB, May 31, 2001), the ARB held
that the Administrator's
use of "the slotting
procedure"in
classifying a position for prevailing wage purposes has "long been approved in SCA cases." As a result, it upheld
the classification of a Flight Instructor as a GS-11 level similar to the
Computer Systems Analyst II position. Moreover, the ARB dispensed with
Petitioner's argument
that his wage level as a Flight Instructor at Sheppard Air Force Base was lower
than Flight Instructor wage rates at other air bases. The ARB emphasized that
wage rates are based on locality and that these "rates may differ from the same classification
of service employees depending on the locality in which the services are
performed." The Board
found it persuasive that the Office of Personnel Management approved of the
Administrator's
classification for the position at issue. However, the ARB remanded the case
to the Administrator for reconsideration of a "current" wage rate for Flight
Instructors at Sheppard Air Force Base. The ARB noted that there was no
current Bureau of Labor Statistics data for the position and that "the fact that the
Administrator lacks current particularized wage survey data (for Flight
Instructors) does not justify taking no action at all under the facts of this
case, in light of the clear congressional directive that the Secretary update
wage determination rates on a regular basis."
2. Mis-classification of employees
In Melton
Sales and Services, Inc., 1982-SCA-127 (ALJ, Nov. 18, 1985), the
ALJ concluded that Respondent mis-classified as "helpers" employees who performed
the job duties of "journeymen." In so holding, the ALJ
compared the duties performed by the employees with the job descriptions for
helpers and journeymen in the Dictionary of Occupational Titles.
Respondent maintained that the employees "lacked
the knowledge, skills, experience, and competence to perform all of the duties
and complete all of the assignments which an employer might expect a seasoned
journeyman to accomplish."
The ALJ agreed that the record established that the employees could not perform
all of the tasks expected of a journeyman but they were, however, "expected to perform many of
the functions and duties of a journeyman"
in addition to those duties which would qualify as "helper's" work. The ALJ noted that
the key component of a "helper" is that s/he assists a
tradesman. In this case, however, the ALJ found that the employees received
their assignments from the job foreman, but performed the jobs "largely on their own." Moreover, they did not
carry materials for tradesmen, they cleaned up after themselves, they ran no
errands, and handed no tools to anyone else. As a result, the ALJ concluded
that the wage rate for journeyman classification should have been employed for
all hours worked in accordance with 29 C.F.R. §
4.169.
G.
Standard for determining whether hours worked are compensable—“principal
activity” test
In J.N.
Moser Trucking, Inc. v. U.S. Dep’t. of Labor, 306 F.Supp.2d 774
(N.D. Ill. 2004) vacating and rev’g., ARB Case No. 01-047, 1995-SCA-26
(ARB, May 30, 2003), the district court vacated the ARB’s decision and noted
that the Board mischaracterized the ALJ’s decision and improperly reweighed the
evidence. The court stated that the ALJ properly found that “bobtailing was
not integral and indispensable to Moser’s principal activity of hauling mail”
under the criteria set forth in Dunlop v. City Electric Inc.,
527 F.2d 394, 398-99 (5th Cir. 1976). Under the facts of the case,
Employer failed to pay its workers for inspection time and “bobtail” time.
“Bobtail” time was described as time taken by an employee to drive from one of
Employer’s terminals to a postal facility and pick up a trailer loaded with
mail. “Bobtail” time also included time spent at the end of the employee’s
route after s/he disconnected the trailer at the last post office for the day
and drove back to the terminal. The court further held that the ALJ properly
determined that Employer did not require its drivers to bobtail, nor did it
benefit economically from the practice “because it may actually have cost less
for Moser to maintain parking at the postal facilities.” The court did affirm
the ALJ’s award of back wages for “pre-trip inspections” of vehicles performed
by employees for the benefit of Employer.
On remand, in Department
of Labor v. J.N. Moser Trucking, Inc., Case No. 1995-SCA-26 (ALJ,
Aug. 25, 2004), the ALJ directed that withheld funds be released to Moser and,
if the affected employees had not been paid back-owed wages based on the ALJ’s
ruling four years earlier, then the Department of Labor would be liable for the
payment of interest on the backwages owed. However, by Decision and Order
on Motion for Reconsideration dated November 5, 2004, the ALJ vacated the
award of interest against the Department of Labor stating that he did not have
legal authority to award interest against the government without its consent.
The remainder of his August 25, 2004 decision on remand was affirmed.
Time spent waiting
for mail
The Board has held
that a postal contractor’s time spent waiting for mail, as well as time spent
loading and unloading mail, are compensable. Eddie and Betty Jackson,
2004-SCA-15 (ALJ, May 25, 2005) (citing to Joy R Manning d/b/a Manning
Mail Service, BSCA No. 82-SCA-136 (Sept. 28, 1990).
Rest periods
compensable; meal breaks not
compensable
In Lawn
Restoration Corp., 2002-SCA-6 (ALJ, Jan. 27, 2003), the ALJ held
that “rest periods running from five to approximately twenty minutes promote
efficiency of employees and are customarily paid as compensable time. 29
C.F.R. § 785.18.” Moreover, the ALJ stated that “[c]ompensable time of rest
periods may not be offset against other working time.” On the other hand, the
ALJ determined that “bona fide meal breaks are not work-time and employees are
not entitled to compensation for such breaks so long as certain requirements
are met” pursuant to 29 C.F.R. § 785.19.
Return to Top of Document
IX. Relief
A.
Debarment
1. Generally
Debarment is
warranted in the absence of "unusual
circumstances" or if
it is determined that the contractor acted in "willful" or "culpable"
violation of the SCA. Dantran, Inc. v. U.S. Dep't. of Labor,
171 F.3d 58, 68 (1st Cir. 1999) (if the contractor acted willfully
or culpably, then it "cannot
be saved from debarment); Vigilantes, Inc. v. U.S. Dep't. of Labor,
968 F.2d 1412 (1st Cir. 1992) (debarment required where no unusual
circumstances present; minority employer had numerous deficiencies under
several contracts totaling more that $70,000, failed to meet its successor
contractor responsibilities, and failed to make prompt payment of monies due).
In Summitt
Investigative Service, Inc. v. Herman, 34 F. Supp.2d 16, 19 (D.D.C.
1998), the court noted that, although debarment may constitute a severe
penalty, Congress intended that it be the norm for violating contractors as
opposed to the exception. The court stated that "Congress
recognized that employees of government-service contractors historically >tended to be among the
lowest paid people in the economy, and they tended not to be organized by trade
unions.'" Upon further review of the
legislative history, the court determined that "the
statutory safety valve of 'unusual
circumstances' was to
apply only to 'situations
where the violation was a minor one, or an inadvertent one' or where disbarment would
be 'wholly
disproportionate to the offense.'" (citation omitted). Id.
at 19.
2. CWHSSA and SCA violationsBdifferent debarment
standards
In Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001), the ARB held the following with regard to debarment under the CWHSSA
and SCA:
[T]he SCA and CWHSSA
impose different standards for assessing liability for debarment. Under the
CWHSSA - a Davis-Bacon Related Act - the burden is on the Secretary to
establish that the violations are 'aggravated
or willful' such that
debarment is warranted. 20 C.F.R. §
5.12(a). Under the SCA, on the other hand, debarment is presumed once
violations of that Act have been found, unless the violator is able to show the
existence of 'unusual
circumstances' that
warrant relief from SCA's
debarment sanction. 29 C.F.R. §
4.188(a) and (b). Ventilation and Cleaning Eng'rs., Inc., Case No.
SCA-176 (Sec'y., Sept.
27, 1974) Labor L. Rep. (CCH) &
30,946.
The debarment
sanction differs under the two Acts as well. By statute, debarment under the
SCA is for three years, without modification. By comparison, under the
Department's
regulations and Board precedent, a contractor debarred under the Davis-Bacon
Related Acts (including the CWHSSA) is placed on the ineligibility list for a
period 'not to
exceed' three years,
29 C.F.R. §
5.12(a)(1), from which the contractor may petition to be removed after six
months. 29 C.F.R. §
5.12(c).
Accordingly, charges
of CWHSSA violations (e.g., overtime under payments and recordkeeping)
must be analyzed under the Davis-Bacon Related Acts applicable to the CWHSSA,
while SCA violations (e.g., fringe benefit and holiday under payments,
and recordkeeping) must be analyzed under the SCA debarment standard.
Slip op. at 8-9.
3. Company and individual debarment;
“party responsible”
In Nantom
Services, Inc., 1997-SCA-35 (ALJ, Dec. 22, 1998), the ALJ held that
the company, as well as its President and principal stockholder, had committed
wilful violations of the SCA and CWHSSA which warranted debarment of both the
company and its President/stockholder. See also Rasputin, Inc.,
ARB Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004), aff’d. in relevant part sub. nom., Johnson
v. U.S. Dep’t. of Labor, 2005 WL 1970742, Case No. 2:04-CV-0775
(S.D. Ohio, Aug. 16, 2005), aff'd., Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.), (term
“party responsible” includes corporate officers and owners as well as
individuals “responsible for a service contractor’s performance of a contract”;
Johnson liable as he was in “de facto control” of day-to-day
operations); Stephen W. Yates, ARB Case No. 02-119,
2001-SCA-21 (ARB, Sept. 30, 2003) (citing to 29 C.F.R. § 4.187(e)(1), personal
liability could be imposed on the president/operating manager as “’party
responsible’ based on his level of overall control of the mail hauling and
delivery business operations”); SuperVan, Inc., ARB Case
No. 00-008, Case No. 1994-SCA-47 (ARB, Sept. 30, 2002) (Respondent Rullo was
president of the company and held a 95 percent interest in the company such
that he was a "party
responsible" and was
held liable for violations of the wage payment and fringe benefits provisions
of the contracts); Hugo Reforestation, Inc., ARB Case No.
99-003, 1997-SCA-20 (ARB, Apr. 30, 2001) (owner and president of Respondent
charged with supervision of day-to-day operations must be debarred); Melton
Sales and Services, Inc., 1982 SCA-127 (ALJ, Nov. 18, 1985) (two
brothers shared in the business operations of Respondent which mis-classified
employees and failed to pay the proper wages such that they, along with the
company, were debarred).
In Lawn
Restoration Corp., 2002-SCA-6 (ALJ, Jan. 27, 2003), the ALJ granted
partial summary judgment in favor of the Department and held that Jeffrey
Jones, who was president, chief executive officer, and sole owner of Lawn Restoration
Corporation, was a “party responsible” within the meaning of the Act and was
individually and jointly liable with the company. In so holding, the ALJ cited
to Hugo Reforestation, Inc., ARB Case No. 99-003,
1997-SCA-20 (ARB, Apr. 30, 2001), which set forth the criteria for individual
liability under the Act:
Under the
regulations it is clear that a corporate official who controls the day-to-day
operations and management policy, or is responsible for the control of the
corporate entity, or who actively directs and supervises contract performance,
including employment policies and practices and the work of the employees
working on the contract, is liable for the violations individually and jointly
with the company. 29 C.F.R. § 4.187(e)(1), (2) and (3).
4. Injunction against debarment not permitted
In Federal
Food Service, Inc. v. Marshall, 481 F. Supp. 816 (D.D.C. 1979), the
district court held that a federal contractor was not entitled to injunctive
relief from debarment as such relief was outweighed by the harm to employees
who were underpaid and public interest. The court noted that the SCA was
designed to provide fair wage standards for employees working under federal
service contracts and any decision which sets aside actions consistent with the
SCA, such as debarment, could cause substantial injury to the enforcement of
the SCA.
5. Violation was willful (culpable neglect or culpable
disregard); debarment mandatory
[a] Established
As previously
noted, if a contractor is found to have willfully violated the provisions of
the SCA, then debarment is mandated regardless of whether any "unusual circumstances" may be present. For
example, in John's Janitorial Service, Inc.,
1994-SCA-2, slip op. at 2-3 (ARB, July 30, 1996), the ALJ's
discretion to consider any unusual circumstances was properly limited. The ALJ
found that Respondents willfully violated the Act and had engaged in repeated
violations. Because a condition precedent to relief from debarment requires
that any violation not be willful, deliberate, of any aggravated nature, the
ARB held that the ALJ was correctly precluded from engaging in an "unusual
circumstances" analysis. See also Groberg Trucking,
ARB Case No. 03-137 (ARB, Nov. 30, 2004) (Postal contractor properly debarred
for three years on grounds that it engaged in culpable and willful conduct by
failing to properly record hours worked despite prior warnings and failing to
pay the proper wage rate).
i. Poor business judgment; failure to pay wages
The failure to
pay employees due to financial problems resulting from poor business judgment
constitutes culpable neglect. Summitt
Investigative Service, Inc., ARB Case No. 96-111, 1994-SCA-31,
slip op. at 12 (ARB, Nov. 15, 1996), aff'd., 34 F. Supp.2d 16, 25 (D.D.C. 1998).
In affirming the ARB's
holding, the district court stated that "it
cannot be doubted 'that
the impact of violations on unpaid employees . . . was severe" and that the contractor's "abject failure to meet its payroll during
October and November impelled its own employees to walk off the job out of
understandable frustration."
Id. at 25.
In D's Nationwide Industrial
Services, ARB Case No. 98-081, 1995-SCA-38 (ARB, Nov. 29, 1999),
the ARB held that Respondent's
willful violation of the SCA was sufficient to warrant debarment. It held that
the contractor's
failure to pay the back wages owed to its drivers and its failure to provide
assurances of future compliance supported debarment.
ii. Employer's
reliance on expired collective bargaining
agreement
In Commercial Laundry & Dry Cleaning, Inc.,
ARB Case No. 96-136 (ARB, Nov. 13, 1996), the ARB reiterated the three
part test at 29 C.F.R. §
4.188, which is employed to establish whether relief from debarment is
justified. The ARB held that the ALJ erred in finding that the petitioners had
addressed the first element (where the conduct causing or permitting violations
of SCA is willful, deliberate, or of an aggravated nature or where the
violations are a result of culpable conduct such as culpable neglect to
ascertain whether practices are in violation) where the parties' stipulations
provided that the petitioners had an expired collective bargaining agreement
and that they relied on the belief that the collective bargaining agreement had
priority over the SCA. The ARB held that such reliance was inexcusable and
does not constitute unusual circumstances warranting relief from debarment
under the SCA and that the expiration of the collective bargaining agreement
should have put them on notice to check with the Department of Labor to
ascertain whether they had a valid basis to rely on the priority of the expired
agreement.
iii. Widespread and continuing violations
In Federal
Food Service, Inc. v. Marshall, 481 F. Supp. 816 (D.C.D.C. 1979),
the court held that, because of Respondent's
history of repeated violations of the SCA over the years and its continuing
violations, Respondent was culpable and debarment was proper. See also Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001) (Respondents were notified of the SCA pay requirements but repeatedly
violated the Act); A to Z Maintenance Corp. v. Dole, 710
F. Supp. 853 (D.D.C. 1989) (contractor repeatedly violated the SCA, failed to
pay individual uniform allowances as required by contract, and it failed to pay
health, welfare, and pension benefits when due); U.S. Dep’t. of Labor
v. Loss Prevention, Inc., 2003-SCA-2 (ALJ, Jan. 28, 2004); G.A.
Johnson Trucking, 1997-SCA-37 (ALJ, Apr. 21, 1999) (Respondent
consistently failed to pay proper wages and had a history of similar
violations).
iv. Failure to maintain payroll records
In William
T. Carr, 1999-SCA-2 (ALJ, Jan. 4, 2000), the ALJ found that the
contractor was aware of his obligations under the SCA as demonstrated by his
testimony at the hearing, yet he failed to pay his service employees the proper
wages and he failed to keep and preserve adequate records for the statutory
three year period. The ALJ noted that, although the contractor did not have a
history of similar or repeated violations under the SCA, he had "committed culpable record
keeping violations in this case"
which precluded relief from debarment. See also Coast Industries,
Inc., ARB Case No. 04-004, 2002-SCA-3 (ARB, Feb. 28, 2005)
(employer debarred for deliberately falsifying payroll records); Groberg
Trucking, Inc., ARB Case No. 03-137, 2001-SCA-22 (ARB, Nov. 30,
2004) (employer debarred for maintaining false payroll records); Hugo
Reforestation, Inc., ARB Case No. 99-003, 1997-SCA-20 (ARB, Apr.
30, 2001) (failure to comply with SCA record-keeping requirements and repeated
violations of the Act).
v. No "bona
fide legal issue of doubtful certainty"
In Summitt
Investigative Service, Inc. v. Herman, 34 F. Supp.2d 16, 25 (D.D.C.
1998), the district court found that debarment was proper due to the contractor's culpable conduct and it
noted that an analysis of any potential "unusual
circumstances" was,
therefore, unnecessary. However, the court noted that Respondent's arguments regarding
overtime and fringe benefits were clearly contrary to the law such that "no bona fide legal issue of
doubtful certainty"
existed under 29 C.F.R. §
4.188(b)(3)(ii) which would have warranted relief from debarment. See also Melton
Sales and Services, Inc., 1982 SCA-127 (ALJ, Nov. 18, 1985) (no
bona fide legal issue existed where legal issues were straight-forward and
Respondent was advised by the government that "[w]hen
helpers are not assisting, but are instead spending substantial time performing
journeyman's work on
their own, they must be paid the journeyman's
wage").
vi. Failure to honor terms of predecessor's contract
In Houston Building Services, Inc. and Jason Yoo,
ARB Case No. 95-041A, 1991-SCA-30, slip op. at 5 (ARB, Aug. 21,
1996), the ALJ determined that Respondents' voluntary hiring of the
predecessor's employees and their failure to consider the severance allowance
in the predecessor's contract wage determination were circumstances under their
control. Although the ALJ did not expressly consider the debarment provisions
at 29 C.F.R. §
4.188(b)(3), the ARB found the ALJ's findings dispositive. Pursuant to 29
C.F.R. § 4.188(b)(4),
a contractor has an affirmative obligation to ensure that its pay practices are
in compliance with the SCA. The ARB found that Respondents' failure to comply
with the severance obligation of its contract was either culpable neglect or
exhibited a culpable disregard of its contractual responsibilities. Thus, the
ARB denied relief from the debarment provisions. See also Rasputin,
Inc., ARB Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004), aff’d.
in relevant part sub. nom., Johnson v. U.S. Dep’t. of Labor, 2005 WL
1970742, Case No. 2:04-CV-0775 (S.D. Ohio, Aug. 16, 2005), aff’d., Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.) (affirming debarment of Johnson for failure to pay $173,460.34 in back wages and fringe benefits; court held that it consistently accords “substantial deference to the credibility determinations of the ALJ”).
vii. Failure to cooperate with investigation
In United
Kleenist Organization Corp., 1999-SCA-18 (ALJ, Jan. 10, 2000), aff'd., ARB Case No. 00-042
(ARB, Jan. 25, 2002), the ALJ held that debarment was proper where the
contractor failed to cooperate with the investigation of its payment practices.
The DOL investigator was provided with "clearly
inadequate and incomplete information"
and, at times, the contractor "totally
refused to furnish her with records of any kind."
The ALJ concluded that the owner of the company could not "avoid debarment by having
delegated authority to others"
and the ALJ was not "convinced
of his feigned ignorance"
of the violations. See also William T. Carr, 1999-SCA-2
(ALJ, Jan. 4, 2000); Nantom Services, Inc., 1997-SCA-35
(ALJ, Dec. 22, 1998).
viii. Ignoring the government's advice
In Melton
Sales and Services, Inc., 1982 SCA-127 (ALJ, Nov. 18, 1985), the
ALJ concluded that debarment was proper where Respondent received clear written
and oral advice from the government regarding classification of workers, but
ignored the advice. The ALJ noted the following:
Respondents make
much of the fact that they sought advice from the Wage and Hour Division
concerning the use of helpers on the job, but, as the record shows, they
largely ignored it or sought to circumvent it. They were advised that when
helpers performed journeymens'
(sic) work they were entitled to journeymens'
(sic) wages. They were told that a worker's
job duties, not his skill levels, should be used to determine his
classification. They were admonished that the helper classification was not a
training position, and that helpers should not be trained in a craft unless
registered as apprentices. Yet, none of this advice was heeded. To the
contrary, employees were hired and classified based primarily on their skill
and experience, irrespective of the jobs they would be required to perform.
And, they were trained on the job, in the absence of an apprentice program.
Slip op. at 12-13. Consequently,
the ALJ concluded that Respondents committed willful violations of the Act and
debarment was warranted. See also Rasputin, Inc., ARB
Case No. 03-059, 1997-SCA-32 (ARB, May 28, 2004), aff’d. in relevant part sub. nom., Johnson
v. U.S. Dep’t. of Labor, 2005 WL 1970742, Case No. 2:04-CV-0775
(S.D. Ohio, Aug. 16, 2005) , aff’d., Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.) (individual
in charge of daily operations was an experienced federal government contractor,
yet he ignored government’s compliance guidance and he also obtained contract
under “false pretense of being (the company’s) president”).
ix. Ignorance
of the law
In Integrated
Resource Management, Inc., 1997-SCA-14 (ALJ, Aug. 5, 1999), the ALJ
held that ">culpable conduct' goes beyond mere
negligence but falls short of gross carelessness or specific intent." Upon review of the
record, the ALJ concluded that the contractor did not commit willful or
intentional violations of the SCA; rather, the violations were inadvertent "due to his ignorance of the
law." Once an
employee brought the pay problem to the contractor's attention, he immediately rectified it. The
ALJ stated that "although
(the contractor) should have become familiar with the law and the contract at
its inception, the period of his ignorance was brief and his response was
prompt."
On appeal, the
ARB reversed the ALJ's
holding and debarred Respondent in Integrated Resource Management,
Inc., ARB Case No. 99-119, 1997-SCA-14 (ARB, June 27, 2002). The
Board noted that the "exemption
from debarment where 'unusual
circumstances' are
demonstrated by the contractor is an extremely narrow one." Citing to 29 C.F.R. §§ 4.188(b)(3)(i) and (ii)
and (b)(1), the Board noted that the regulations specifically provide that "ignorance" of the Act's requirements does not
qualify as an "unusual
circumstance"
warranting relief from debarment. Under the facts of the case, the Board noted
that Respondent Barnes, who had a college education, admitted that "he failed to read the SCA
provisions of his contract"
which resulted in his culpably negligent conduct. The Board found that the ALJ
erred, as a matter of law, and Respondents'
"failure to read and
follow the plain terms of the contract was culpable conduct" such that the Board was
not required to consider any other possible mitigating factors.
x.
Failure to comply with consent
findings
In International
Services, Inc., 2003-SCA-18 (ALJ, July 6, 2005), Respondent had an
affirmative duty, pursuant to executed consent findings, to establish a compliance
program, including hiring an ombudsman. Although Respondent hired an
ombudsman, it failed to meet requirements of consent findings where the ombudsman
failed to respond to employees’ concerns and did not maintain required records.
The ALJ noted that, although Respondent’s “violations of the Act were not
purposeful and Respondent promptly rectified most issues after being made aware
of them by DOL,” the Respondent “never took adequate steps to ensure future
compliance and continued violating the Act until GSA finally cancelled the
contract.” The ALJ concluded that “the number of compliance actions initiated
against ISI alone indicates extreme irresponsibility amounting to culpable
neglect” and debarment for three years was proper.
[b] Not established
In Elaine's Cleaning Service, Inc. v.
U.S. Dep't.
of Labor, 106 F.3d 726 (6th Cir. 1997), the circuit
court affirmed the district judge's
reversal of an ALJ's
decision to debar the contractor for three years for failure to pay the proper
wages owed to its service employees under a federal contract. The circuit
court noted that the contractor failed to pay the proper wages on three
occasions. With regard to the first time, the court noted that the contractor
maintained that its failure to pay the proper fringe benefits was the result of
an oversight. The second time that certain fringe benefits were not properly
paid, the contractor knew of the violation but did not have the funding.
Because of the unexpected increase in required payments, the contractor was not
able to disburse the money to its employees until the Air Force made its
payment to the contractor. The final violation of the SCA was, according to
the contractor, due to its reliance on the advice of a bookkeeper regarding
holiday pay. Based upon the foregoing explanations regarding its conduct, the
circuit court held that the contractor did not willfully or culpably violate
the SCA such that the ALJ should have determined whether unusual circumstances
were present prior to finding that debarment was warranted.
6. "Unusual
circumstances"
defined
Where a
contractor's
violations are not willful, then the ALJ may determine whether "unusual circumstances" are present which warrant
relief from debarment. In D's Nationwide Industrial
Services, ARB Case No. 98-081, 1995-SCA-38 (ARB, Nov. 24, 1999),
the ARB noted that, although "unusual
circumstances" are not
defined in the SCA, the implementing regulations at 29 C.F.R. § 4.188(b) set forth a
three-part test for determining when such circumstances exist and relief from
debarment is proper: (1) whether Respondent's
conduct was of a willful, deliberate, aggravated nature, or culpable conduct
which, if present, would preclude relief from debarment; (2) whether Respondent
had a good compliance history and cooperated in the investigation, repaid the
money owed, and provided assurances of future compliance; and (3) whether
monies owed were promptly paid, whether liability depended upon resolution of a
bona fide legal issue of doubtful certainty, whether record-keeping violations
impeded the investigation, the Respondent's
efforts to ensure compliance, and the impact of violations on unpaid
employees. The ARB reiterated that willful or culpable conduct on a contractor's part ends the analysis
and there is no entitlement to relief from debarment. See also Federal
Food Service, Inc. v. Donovon, 658 F.2d 830 (D.C. Cir. 1981)
(Secretary has broad discretion in determining whether unusual circumstances
are present but must follow regulatory guidelines); Washington Moving
& Storage Co., Case No. SCA-168 (Sec'y., Mar. 12, 1974).
[a] Established
i. Deficiencies corrected;
debarment would cause
employer's demise
In United International Investigative Services, Inc.,
ARB Case No. 95-40A (ARB, Jan. 10. 1997), the ARB agreed with the
ALJ's determination that the purpose of the SCA would not be served by
debarring Respondent when it had cured its problems and debarment would likely
cause its demise. Noting case law and legislative history, the ARB stated that
debarment should not be used where the violation is minor or inadvertent or
where debarment would be wholly disproportionate to the offense. Thus, where
Respondent made a mistake in overbidding during his early experience with
government contracting and, where the violations were not willful or culpable,
the ARB affirmed relief from the debarment provisions. Debarment would not
serve the purposes of the SCA given Respondents'
unflagging and, ultimately successful, drive to rectify mistakes and remain in
compliance.
ii. De minimus violations
In United International Investigative Services, Inc.,
ARB Case No. 95-40A (ARB, Jan. 10. 1997), the Board found violations
of the SCA involving questions of reasonable differences in interpretation of
what was required of the contractor were "innocent" and
"petty" and excepted them from consideration in deciding whether debarment
was mandated for other violations by the contractor.
In Federal
Food Service, Inc. v. Donovan, 658 F.2d 830, 832 (D.C. Cir. 1981),
the court held that it was error to find that the contractor willfully violated
the SCA even where the ALJ noted that the its "past
history reflected violations of the Act during several years, and that there
were culpable violations which proper management would have precluded." As a result, the ALJ
ordered debarment of the company for three years. The court noted that a total
of $3,128.33 in back wages was owed to the employees and stated the following:
In the instant case,
after finding appellants were responsible for a deficiency of $3,328.35 an
amount less than one-fifth of 1 percent of the contract values and in a
labor-intensive business, . . ..
. . .
The ALJ found that
there was no evidence that the violations were willful or deliberate and the
appellants cooperated with the extensive and complex investigation of the case
except for one unexplained instance at the Norfolk location. Payments were
made fully and promptly even though substantial amounts had to be estimated
through no fault of appellants. Previous violations in the past were not
substantial and did not result in debarment because of unusual circumstances.
Id. at 834. The court
disagreed with the ALJ that "proper
management" would have
eliminated the possibility of SCA violations in view of the small ratio of
violations as compared to the substantial value of the contracts. The court
noted that "[l]arge
under payments might be res ipsa loquitur of improper management" but that, on this record,
there was "no
testimony of management experts or of prevalent business practices to establish
what practices appellants should have followed and did not." The court concluded that
it is error for an ALJ to make an inference of improper management "solely on the basis of
virtually de minimus under-payments":
[T]he Secretary must
consider the particular circumstances of the business under review . . ., the
actual problems it has faced, the precautions normally taken by well-managed
companies in the field, the likelihood that it could have avoided its
violations with proper management before implementing the severe debarment
provision. If as here he relies on a history of previous violations to support
debarment, he must apply the standards of reasonable management to them as
well.
Id. at 834.
iii. Immediate corrective action
The ARB affirmed
that Respondent's
conduct in United International Investigative
Services, Inc., ARB Case No. 95-40A (ARB, Jan. 10.
1997), was not culpable where (1) the dishonored paychecks were covered almost
immediately, (2) contract payments were not posted prior to the clearance of
the paychecks, and (3) the occurrences were during the period when the
contractor was just beginning many of its federal contracts. The ARB declined
to consider each incident as a separate violation because once the cash flow
problem was cured, payment was ensured, and it emphasized that the predominant
problem, created mostly by the bank's posting procedures, were remedied early
in the contract and that the dishonored paychecks were covered immediately by
other funds. Thus, the ARB considered the incidents to "comprise a
discrete phase in [the contractors'] acclimation rather than a cause of truly
repetitive violations."
iv. Reasonable mistake in judgment; no prejudice to
employees
In United International Investigative Services, Inc.,
ARB Case No. 95-40A (ARB, Jan. 10. 1997), the ARB held that
Respondent's failure
to make timely payments to the health and welfare benefit funds as required did
not constitute culpable conduct where (1) the Navy would not pay the increase
he requested, (2) a union board member gave assurances that he would do what he
could about the inability to make the payments on time in return for the
contractors remaining on the job, and (3) there was no indication that any employee
was harmed by the failure to make timely payments. The ARB found this to be a
good and pragmatic decision. Noting that financial problems arising from poor
business judgment cannot constitute unusual circumstances, the ARB stated that
mere mistaken judgment does not, however, necessarily mandate debarment. A
contractor's culpability should be measured by the reasons for and character of
the conduct. The ARB held that the mistake in this case did not rise to the
level of extremely poor business judgment in underbidding as presented in Summitt Investigative Services, Inc., ARB
Case No. 96-111, 1994-SCA-31 (ARB, Nov. 15, 1996), aff'd., 34 F. Supp.2d 16
(D.D.C. 1998), or gross neglect and disregard of fundamental responsibilities
involved in Unified Services, Inc., BSCA Case No. 92-36
(BSCA, Jan. 28, 1994). As a result, the ARB reversed the ALJ's determination
that Respondent willfully violated the SCA by making misrepresentations that
the benefits had been paid, when they had not. The ARB stated that a
communication of this type, even if culpable, is not a violation of the SCA.
The violation was the failure to make timely benefit fund payments. The ARB
found that evidence that Respondent knowingly misrepresented its payment status
was tenuous.
v. Unexpected
expenses
In affirming
relief from debarment in United International
Investigative Services, Inc., ARB Case No. 95-40A (ARB,
Jan. 10. 1997), the ARB noted that the ALJ examined the contractors' "progression
from a nascent contractor overwhelmed by a surfeit of contract awards to a
company which appears in all respects to be a responsible and competent
[contractor],'" the contractors' dedication to its employees and to
completion of the contracts, the unexpected expenses incurred when prior
contractors walked of the job, the cooperation with investigators, and prompt
payment of funds overdue.
[b] Not established
i. Unexpected costs required by contract and law
The ARB rejected
Respondents' argument that the contracting agency forced unforeseen costs on it
that were not required by law or contract. Summitt
Investigative Service, Inc., ARB Case No. 96-111, 1994-SCA-31,
slip op. at 9-12 (ARB, Nov. 15, 1996), aff'd.,
34 F. Supp.2d 16 (D.D.C. 1998). Respondents' contention that the contract
agency required it to pay time and a half for overtime on fringe benefits,
which was not required by the SCA or the contract, was not supported by the
record. Respondents' mistaken belief that it was required to do so was a
misunderstanding, which the Administrator had no obligation to correct. In
addition, providing paid vacations and uniforms approved by the contracting
agency should not have been unforeseen expenses, as this was required by law
and the contract.
ii. Difference between wage determination and bid
solicitation immaterial
A respondent
cannot be relieved of debarment because the contracting agency and the
Administrator made it comply with the obligations for which it had contracted,
even if these obligations caused a cash flow shortage. In Summitt Investigative Service, Inc., ARB
Case No. 96-111, 1994-SCA-31, slip op. at 8-9 (ARB,
Nov. 15, 1996), aff'd.,
34 F. Supp.2d 16 (D.D.C. 1998), the ARB held that a disparity between a wage
determination and a statement in a bid solicitation was immaterial, as the
regulations clearly provide that minimum monetary wages and fringe benefits for
service employees are set forth in the wage determinations. See 29
C.F.R. § 4.3(a). Any
confusion in this regard should have been raised by Respondent prior to
contract award through the challenge procedures provided to bidders. Said
differently, the wage determination was controlling over the bid solicitation
statements.
iii. Discrimination against small minority-owned business untimely
presented and unpersuasive
In Summitt
Investigative Service, Inc. v. Herman, 34 F. Supp.2d 16 (D.D.C.
1998), Respondent argued that "unusual
circumstances" existed
which warranted relief from debarment. In a petition for reconsideration
before the court, the contractor argued that the Department of Labor violated
the Fifth Amendment by selectively enforcing the SCA's debarment provisions against Summitt, a
small, minority-owned business. Initially, the court noted that Respondents
did not raise this constitutional argument before the ALJ and "offered no evidence in
support of their constitutional attack."
As a result, it determined that Respondents failed to exhaust their
administrative remedies and rejected the argument on appeal.
iv. Proficiency in the English language
In United
Kleenist Organization Corp., ARB Case No. 00-042, 1999-SCA-18 (ARB,
Jan. 25, 2002), the ARB held that the fact that English may not be Respondent's native tongue, "this fact does not, in and
of itself, establish that he lacks a proficiency in the English language or
that any such lack of proficiency materially impeded his ability to comply with
the SCA." As a
result, the ARB declined to find that "unusual
circumstances" were
established and Respondent was debarred.
7. Commencement of term of debarment
In Cimpi
v. Dep't.
of Labor, 739 F. Supp. 25 (D.D.C. 1990), the district court held
that the period of debarment commences to run from the date of publication of
the violator's name on
the debarment list, not from the date on which the name was forwarded to the
Comptroller General.
In International
Services, Inc., 2003-SCA-18 (ALJ, July 6, 2005), the ALJ held that
Respondent was not entitled to a “credit” against the three year debarment
period. Respondent had argued that it lost its federal contracts two years
before the hearing such that it was “de facto” debarred and should
receive a “credit” for this time period. Citing to a Board of Service
Contracts Appeals decision, The Swanson Group, Inc., 1995
WL 843407 (L.B.S.C.A. 1995), the ALJ stated that the Act, at 41 U.S.C. § 354
(a), provides that the Comptroller General publishes a list of debarred firms
and the debarment period commences on the date of publication of the list.
8. ALJ without authority to lessen three year debarment term
In G.A.
Johnson Trucking, 1997-SCA-37 (ALJ, Apr. 21, 1999), the ALJ cited
to the Davis-Bacon Act decision in Structural Concepts,
1994-DBA-23 (ALJ, Feb. 23, 1995) to hold that he was without authority to
lessen the three year term of debarment.
B. Withholding employee's wages by contractor improper
In Lucy
E. Enobakhare a.k.a. Lulu Star, 1996-SCA-46 (ALJ, Jan.
7, 1998), the ALJ concluded that, even had employees engaged in unauthorized
use with the contractor's van, neither the contract, the statute, nor the
applicable regulations permit the contractor to withhold wages.
C.
Unnamed employees who could not be located; award of back wages against
contractor held proper
In American
Waste Removal Co. v. Donovon, 748 F.2d 1406 (10th Cir.
1984), the court upheld an award for back wages and benefits owed against a
government contractor for unnamed employees who could not be located. The
court determined that the award did not constitute a penalty or fine, but was a
means of effectuating the purpose of the SCA. The award would be paid to the
United States Treasury in the event that the employees could not be located.
D.
Pre-judgment interest properly awarded
In United
States v. Powers Bldg. Maintenance Co., 336 F. Supp. 819 (W.D.
Okla. 1972), the court held that the government was entitled to pre-judgment
interest at a rate of six percent on amounts recovered as under-payments of
minimum wages due to the contractor's
employees. Interest accrued from the date the wages were due until the date on
which they were paid. The court noted that the right to interest recovered by
the United States in an action under the SCA was a question of federal law.
E.
Liquidated damages
Not permitted
under the CWHSSA
Pursuant to 20
C.F.R. § 6.19(b)(3),
"[t]he Administrative Law Judge shall make no findings regarding
liquidated damages under the Contract Work Hours and Safety Standards
Act."
F. No interest
assessment against government without
its consent
In J.N.
Moser Trucking, Inc., 1995-SCA-26 (ALJ, Nov. 5, 2004)(on recon.),
the ALJ cited to Industrial
Maintenance Service, Inc., B.S.C.A. Case No. 92-22 (Bd. Of Serv.
Cont. Appeals, Apr. 5, 1986) to state that interest awards on past due back
wage payments cannot be assessed against the government without its consent.
Return to Top of Document
X. Types of dispositions
A.
Default judgment
1. Missing contractor
In Michael
Relyea, Inc., 1999-SCA-17 (ALJ, Oct. 29, 1999), the ALJ granted
default judgment against the company and its owner and directed that they be
debarred for a period of three years. The ALJ further ordered Respondents to
repay employees in accordance with the Summary of Unpaid Wages submitted
by the DOL in its pre-hearing exchange. Under the facts of the case,
Respondents' counsel
originally stated that consent findings and a formal settlement agreement
appeared to be "imminent." However, he later lost
contact with his client and was unable to obtain his consent to the proposed
findings or to determine the contractor's
whereabouts.
2. Uncooperative contractor
In Supervan,
Inc., 1994-SCA-47 (ALJ, Aug. 18, 1999), the ALJ entered an order of
default judgment based upon Respondents'
failure to cooperate with any of his pre-hearing orders.
Although Respondents argued that the documents requested during discovery were
not within their custody, possession, or control, the ALJ found differently.
Specifically, the ALJ stated:
The Service Contract
Act imposes record keeping requirements on contractors and subcontractors
pertaining to the employment of employees subject to the Act. (citation
omitted). The Act further provides that a corporate officer who actively
directs and supervises the contract's
performance shall be held personally liable for violations of the Act. (citations omitted).
It is uncontroverted
that Mr. Rullo has failed to furnish supporting documentation for SuperVan,
Inc. Nevertheless, Mr. Rullo has previously contended that said documents are
not currently in his custody, possession, or control. He further asserted that
Mario Mendiola was responsible for and managed the day to day operations of
SuperVan, Inc. However, the record
reveals that Mr. Rullo had a duty to comply with the production orders. Mr.
Rullo concedes that he was president of SuperVan, Inc., and that he held a 95
percent interest in the company. The record also reveals that Mr. Rullo signed
the Concessionaire Contract and controlled corporate policy. Although Mr.
Mendiola was vice president, the record indicates that Mr. Mendiola managed the
company under the direction and control of Mr. Rullo. Finally, I note that the
record is void of any evidence indicating that Mr. Rullo has made a good faith
effort to secure the requested records.
Slip op. at 3-4. The ALJ
further stated that presentation of the Department's case was seriously prejudiced by the
Respondents' failure
to produce the requested documents and default judgment was entered. The ALJ
subsequently issued an Order Denying Motion for Reconsideration, SuperVan,
Inc., 1994-SCA-47 (ALJ, Oct. 12, 1999). In SuperVan, Inc.,
ARB Case No. 00-008, 1994-SCA-47 (ARB, Sept. 30, 2002), the ARB determined that
the ALJ "acted within
his discretion" and
affirmed his default judgment orders. The ARB then ordered that Respondents' names be placed on the
debarment list for three years.
See also Coleman
M. Wilbanks, 1998-SCA-14 (ALJ, Dec. 3, 1998) (the ALJ issued a
default judgment ordering the payment of back wages owed and debarment for
three years based upon the contractor's
failure to file an answer to the government's
complaint. The contractor also failed to respond to the show cause order). See
29 C.F.R. § 6.16.
3. Unnamed employees who could not be located; award of back
wages against
contractor held proper
In American
Waste Removal Co. v. Donovon, 748 F.2d 1406 (10th Cir.
1984), the court upheld an award for back wages and benefits owed against a
government contractor for unnamed employees who could not be located. The
court determined that the award did not constitute a penalty or fine, but was a
means of effectuating the purpose of the SCA. The award would be paid to the
United States Treasury in the event that the employees could not be located.
4. Unrepresented
party; special considerations
In Mitchem
Transports, Inc., ARB No. 03-115, Case No. 2002-SCA-16 (ARB, June
30, 2004), the Board held that, where a pro se party filed a general
answer to the SCA complaint submitted by the Department then the ALJ exceeded
his authority in waiving the hearing and entering default judgment under §
6.16(c) of the regulations. The Board noted that, giving a “liberal
construction” to Respondent’s responses to the complaint, Respondent had
generally denied the charges against it and admitted that it had contracts with
the Veterans Administration and Post Office. The Board concluded that
Respondent had filed an “answer” sufficient to survive default judgment. The
Board concluded that, in the case of a pro se party, the ALJ may issue
default judgment under § 6.16(c) only when “no answer is filed to an SCA
complaint.”
5. Failure of Respondent to timely file an answer
In James E. Baker, Case No. 2002-SCA-13 (ALJ, Feb. 18, 2003), aff’d., 2006 WL 1806485, No. 1:05-CV-685 (W.D. Mich. June 29, 2006), the ALJ entered an order of default judgment on grounds that Respondent failed to file an answer to the complaint within 30 days as required by 29 C.F.R. § 18.5(a). Moreover, default judgment was proper based on Respondent’s failure to comply with the ALJ’s pre-hearing order requiring the submission of certain information. In his default judgment order, the ALJ directed that Respondent pay the Department of Labor a total of $21,907.90 in back wages owed. The U.S. Postal Service was ordered to release $3,008.55 in withheld funds to the Department of Labor for disbursement to Respondent’s employees. Finally, as Respondent failed to demonstrate the presence of “unusual circumstances,” the ALJ ordered debarment for a period of three years.
B.
Consent findings
The regulations
at 29 C.F.R. §
6.18 permit adjudication of Service Contract Act and related Contract Work
Hours and Safety Standards Act cases on the basis of consent findings. See Professional
Services Unified, 1999-SCA-13 (ALJ, Feb. 3, 2000); VA
Transport, Inc., 1998-SCA-4 (ALJ, May 13, 1999) (issuance of
decision and order approving consent findings). See also 29 C.F.R. § 6.43 (disposition by
consent findings in substantial interest cases).
C. Summary judgment
In Bankal
Enterprises and Walter Smith, 2002-SCA-4 (ALJ, July 17, 2003), the
ALJ issued summary judgment pursuant to 29 C.F.R. § 18.40(d) on motion of the
Administrator. In particular, the ALJ was advised by the parties that a
settlement agreement had been reached, but Respondents later failed to return
the proposed Consent Decree to the Administrator. The ALJ determined that the
undisputed facts supported summary judgment debarring Respondents for failure
to pay the prevailing wage rate, and failure to “keep and preserve adequate
records of Respondents’ employees and of the hours worked and other conditions
of employment.”
In Charles
D. Canterbury, 2002-SCA-11 (ALJ, July 8, 2003), aff’d., ARB
Case No. 03-135 (ARB, Dec. 29, 2004), the ALJ granted summary judgment and
sanctions against Respondent for failure to respond to the Department’s Request
for Admissions, Interrogatories, and Requests for Production of Documents.
The ALJ held that all “matters contained in (the Department’s) Request for
Admissions are deemed admitted, (and) the facts are undisputed in this case.”
As a result, the ALJ concluded that Respondent breached its contracts with the
United States Postal Service “when he failed to pay the employees the proper
hourly wage, fringe benefits, and holiday pay.” The ALJ, therefore, entered
the following orders: (1) the Department’s First Request for Admissions were
deemed admitted; (2) there shall be an inference that responses to the
Department’s discovery requests would have been adverse to Respondent; (3)
Respondent is prohibited from offering into the record any evidence or
testimony regarding any matter that would have been identified in responses to
the Department’s discovery requests; and (4) Respondent is prohibited from
raising any objection to any secondary evidence offered by the Department to
show that the withheld responses to its discovery requests would have been
shown. The ALJ determined that Respondent was personally liable for payment of
$15,005.32 in back wages owed to employees. The ARB agreed and held that,
although “a certain degree of latitude” should be afforded unrepresented
parties, the ALJ properly entered summary judgment against Respondent based on
its repeated non-compliance with discovery requests and orders.
Return to Top of Document
NON-DISPLACEMENT of QUALIFIED
WORKERS-EXECUTIVE ORDER 12933
The ARB accepted
review of the ALJ's
January 9, 2001 decision in LB&B Associates, Inc., ARB
Case No. 01-031, 2000-NQW-1. The ALJ dismissed the workers' complaint against LB&B
Associates, Incorporated after finding no violations of Executive Order 12933.
In a Supplemental Briefing Order dated May 23, 2001, the ARB noted that
Executive Order 12933 was rescinded on February 17, 2001 by Executive Order
13204 which required that the Secretary of Labor "promptly
move to rescind any orders, rules, regulations, guidelines, or policies
implementing or enforcing Executive Order 12933 of October 20, 1994, to the
extent consistent with law."
Moreover, the ARB noted that the Secretary was directed to "terminate, effective today,
any investigations or other compliance actions based on Executive Order 12933[.]" As a result, the ARB
requested that the parties submit their positions on the issue of whether
rescission of Executive Order 12933 has rendered the appeal moot. In LB&B
Associates, Inc., ARB Case Nos. 01-131 and 01-086 (ARB, Aug. 8,
2001), the ARB stated that Executive Order 13204 repealed Executive Order 12933
and it "included no
savings clause suggesting that cases pending at the time the Order was issued
could be litigated further."
As a result, the ARB concluded that it no longer had jurisdiction to decide the
case and the Acting Administrator withdrew the appeal.
The only modification made by the ARB to the ALJ's
decision was that Officer Williams was not a "flagger" and "laborer" under the Act and could
not be awarded restitution like the other police officers. The Board reasoned
that Officer Williams had "fundamentally
different" duties than
the other officers because he did not use a stop sign for signaling traffic,
did not move traffic barrels or cones, and was never relieved by construction
crew members. Officer Williams also had a police cruiser throughout the time
that he directed traffic. As a result, he was not entitled to back wages under
the Act.
Note that the Fair Labor Standards Act at 29 U.S.C. § 213 contains similar provisions.
On April 29, 1999, he also issued a Decision and Order Granting Partial Default
Judgment against SuperVan, Inc.
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