WOODSIDE VILLAGE, WAB No. 1975-13 (WAB June 25, 1976)
CCASE:
WOODSIDE VILLAGE
DDATE:
19760625
TTEXT:
~1
[1] UNITED STATES OF AMERICA
DEPARTMENT OF LABOR
DECISION AND ORDERS OF THE WAGE APPEALS BOARD
IN THE MATTER OF
A Limited Partnership and J. L.
Johnston, General Partner, the Prime
Contractor and their Subcontractors, WAB Case No. 75-13
with respect to wage paid laborers
and mechanics employed by them on DATE: June 25, 1976
FHA Project No. 176-44018,
Anchorage, Alaska
PETITIONERS: Woodside Village, J. L. Johnston and United States
Fidelity and Guaranty Corp.
APPEARANCES: Richard F. Lytle, Esq., Houston and Lytle for
Petitioners Woodside Village and J. L. Johnston
Ronald S. Cooper, Esq., Steptoe and Johnson for
United States Fidelity and Guaranty Corp.
Gail Coleman, Esq., George E. Rivers, Esq., Office
of Solicitor for U.S. Department of Labor
Thomas X. Dunn, Esq., Sherman, Dunn, Cohen & Leifer
for The Building and Construction Trades Department,
AFL-CIO
Before: Oscar Smith, Chairman, Clarence Barker, Member, and
Stuart Rothman, Member [1]
~2
[2] DECISION AND ORDER OF THE BOARD
The Petitioners in this matter are Woodside Village, a limited
partnership, J. L. Johnson, a general partner with Woodside
Village, and United States Fidelity & Guaranty Company. /FN1/ The
proceeding is brought pursuant to Secretary of Labor's Order No.
21-70, as amended. The petition requests review of a decision of
the Assistant Secretary of Labor, dated November 13, 1975,
concerning the applicability of the Davis-Bacon Act to FHA Project
No. 176-44018, Woodside Village, a Title 236 HUD-FHA project at
Anchorage, Alaska.
The principal and pivotal contention of Petitioner is that
transactions occurred between Woodside Village, J. L. Johnson and
the local sponsoring agency, the Alaska State Housing Authority
(ASHA) at a time when President Nixon had suspended the operation
of the Davis-Bacon Act. The claim is that by reason of this
suspension Petitioner was excused from compliance with the minimum
wage and record keeping requirements of the Act and related rules
and regulations. Some other matters are also raised in the request
for review.
This matter reaches the Board as the culmination of an
enforcement proceeding in which there was a hearing [2]
??????????????????????????????
/FN1/ For purposes of discussion herein, Woodside Village, J. L.
Johnston and U.S.F. & G. will be referred to as "Petitioner." [2]
~3
[3] before an administrative law judge whose decision was affirmed
by the appropriate administering officer, in this case an Assistant
Secretary of Labor. The Assistant Secretary rejected fifteen
exceptions to the administrative law judge's findings and
conclusions filed by Petitioner. In the various matters which come
before this Board on review of final actions taken within the
Department of Labor, the Board looks primarily to the decision made
by the responsible administering officer. It therefore will
address itself to the Assistant Secretary's decision.
* * *
This case began on October 28, 1970 when the Alaska State
Housing Authority invited proposals for the sale of a specified
parcel of land for Urban Renewal Project R-16 Eastchester,
Anchorage, Alaska, a proposed Title 236 development of 200 rental
apartments for lower-income families.
The proposals submitted by interested contractors were to be
evaluated primarily on the basis of economic feasibility,
architectural quality, and planning. Title 236 mortgages must be
insured by FHA. As a condition, the contractor must certify that
the laborers and mechanics will be paid the prevailing wage rates
in accordance with the Davis-Bacon Act (12 U.S.C. 1715c(a),
1750z(b), (j)). [3]
~4
[4] Proposals for Woodside Village project were to be submitted
by March 1, 1971, with a 5% deposit unless submitted by a
non-profit corporation, a limited dividend corporation or a
cooperative. Petitioner did not submit the required 5% deposit
until March 31, 1971, after failing to qualify as a limited
dividend corporation.
The chronology of ensuing events is as follows:
* * *
On February 23, 1971, provisions of the Davis-Bacon Act were
suspended by Presidential Proclamation.
On February 27, 1971, Petitioner submitted a proposal to the
Alaska State Housing Authority to purchase the land with a
preliminary, partially completed application for project mortgage
insurance, FHA Form 2013, and Petitioner's estimated construction
costs.
On March 1, 1971, Petitioner amended its proposal by reducing
the estimated construction cost by approximately $200,000 and its
carrying charges and financing by approximately $100,000.
On March 29, 1971 provisions of the Davis-Bacon Act were
reinstated by Presidential Proclamation.
On April 28, 1971 Petitioner was notified on April 28, 1971
that ASHA had selected its proposal. ASHA gave the City of
Anchorage a required statutory 30-day notice of its intention to
accept Petitioner's proposal. [4]
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[5] On June 1, 1971, the HUD-FHA office received an official
application from Petitioner dated May 12, 1971, for mortgage
insurance.
On June 23, 1971 ASHA formally accepted Petitioner's offer to
purchase the redevelopment site.
On July 28, 1971 the HUD-FHA office after conducting a
feasibility study of its application, notified Petitioner that the
study had been completed. At about this time FHA reduced the
project from 200 to 180 units.
On August 27, 1971, the U.S. Department of Labor issued an
area wage determination for Anchorage applicable to projects like
Woodside Village.
At a preconstruction conference on October 1, 1971 the parties
executed a contract for the sale of the building loan agreement
between Petitioner and the mortgagee, Kassler and Company, the
Petitioner's application to FHA for mortgage insurance, and the
construction contract for Woodside Village. At this
preconstruction conference Petitioner was given a copy of the Area
Wage Determination dated August 27, 1971. Construction of the
project began shortly thereafter.
During construction the U.S. Department of Labor requested HUD
to withhold $200,000 from allowances due Petitioner after an
investigation revealed Davis-Bacon record keeping violations and
wage underpayments. [5]
~6
[6] Discussions concerning these violations were held between
Petitioner, HUD, and U.S. Department of Labor on May 22, 1973.
On or about October 20, 1973 a three day meeting was held
between representatives of Petitioner, U.S. Department of Labor,
and HUD-FHA. The Petitioner was given computations showing
$96,394.19 in wage underpayments. There was discussion concerning
an additional $54,623.85 allegedly due employees for clean up work
performed by a subcontractor called Kirby Janitorial, and other
employees for wages allegedly due for mechanical repair work.
Shortly after October 20, 1973, counsel for Petitioner and
the Labor Department drafted an assignment to release the sum of
$96,394.19 to the Department of Labor for disbursement to
employees. This was to be executed at a November 13, 1973
conference.
Instead of using this assignment Petitioner and a
representative of Kassler & Company, the mortgagee, executed a
"Deposit of Funds" memorandum and attached a check payable to FHA
in the amount of $96,394.19 for "wages which may be found due," as
determined by the [6]
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[7] Assistant Secretary Commissioner, FHA. At the same time Petitioner
executed a surety bond with United States Fidelity & Guaranty Company in
the amount of $54,623.85 to be held pending the outcome of the dispute
"presently pending before an administrative law judge."
The deposit of $96,394.19 was subsequently transferred by
FHA-HUD to the Department of Labor, Wage and Hour Division, for
disbursement to the employees.
* * *
Continuing further with the chronology of this matter, the
dispute between the Petitioner, the Department of Labor and HUD-FHA
over the government's enforcement position resulted in a hearing
before an admin[i]strative law judge. The hearing was held over
six days at Anchorage, Alaska, commencing September 17, 1974. On
September 16, 1974, a motion for summary judgment on the ground
that the Davis-Bacon Act did not apply to the construction of
Woodside Village was denied. The administrative law judge's
decision and order which was issued on July 18, 1975, was adverse
to the Petitioner on all points. The Assistant Secretary,
Department of Labor, affirmed the decision of the administrative
law judge on November 13, 1975. [7]
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[8] Petitioner filed its notice of appeal to this Board on
December 2, 1975. It was not until March 15, 1976 that Alaska
counsel for Petitioner and other interested parties could arrange
for a hearing in Washington, D.C. An extended period of time was
granted to file post-hearing briefs.
Petitioner states it has asked the United States District
Court for the District of Alaska to review its principal contention
that the Davis-Bacon Act is not applicable to Woodside Village
under the circumstances and, as Petitioner states, if the Act is
applicable, J. L. Johnston "did comply with its requirements."/FN2/
* * *
In a post-hearing statement counsel for the Department of
Labor has listed six matters raised by Petitioner. The Board finds
these points suitable for the resolution of this case.
(1) Are the provisions of the Davis-Bacon Act applicable to
Petitioner's contract for the construction [8]
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/FN2/ The Wage Appeals Board has serious question whether the
United States District Court has jurisdiction in this kind of
matter. If it does, it would appear to a very limited one.
Matters pertaining to the interpretation and application of the
Davis-Bacon Act and the implementation of the procedures provided
by the United States Department of Labor through its rules and
regulations and through its responsibilities under Reorganization
Plan 14, have not been considered to be the business of the
courts. For this reason, there is little or no court case law
under the Davis-Bacon Act. [8]
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[9] of the Woodside Village Project?
(2) Was there an agreement reached prior to the hearing
concerning the amount of $96,394.19?
(3) Are the provisions of the Davis-Bacon Act applicable to
the repair work performed on the fabricated kitchen and bathroom
core units?
(4) Are the provisions of the Davis-Bacon Act applicable to
the cleaning work performed by employees of Kirby Janitorial?
(5) Were there amounts due employees of Associated Painting
and Decorating Company for wage underpayments?
(6) Was Petitioner denied an opportunity to fully examine and
cross-examine witnesses at the hearing, and was there sufficient
evidence to support the findings and conclusions of law of the
administrative law judge?
The principal contention of the Petitioner and the issue that
brings this case to the Board is that there were transactions
between the Alaska State Housing Authority and Woodside Village and
J. L. Johnston during the period, or related to the period, when
the Davis-Bacon Act was suspended by Presidential Proclamation,
February 23, 1971 to March 29, 1971. Because of these transactions
Petitioner was exonerated from compliance with the Act. This claim
is stated in the petition in the following way: [9]
~10
The fact is that Section 212(a) of the National
Housing Act makes direct references to the Davis-Bacon
Act, which had been suspended as to contract bids or
negotiations. Therefore H.U.D. is trying to impose a
requirement, i.e., section 212(a) which was suspended by
the suspension of the Davis-Bacon Act. Further, HUD, in
Paragraph (14)(d) of the Building Loan Agreement, imposed
upon the borrower:
'The Borrower shall insert the labor standards
provisions of the aforesaid Supplementary
Conditions of the Contract for Construction in
any contract made by him for the construction
of the project, . . .'
Here, again, H.U.D. was imposing its improper
demands upon the borrower and attempting to compel the
borrower to improperly prevail upon the contractor.
The act of H.U.D., and the Department of Labor
requires J.L. Johnson to pay wages under the Davis-Bacon
Act, amounted to undue influence. This type of duress
has been recognized by the Court as Economic Duress or
Business Compulsion, 17 C.J.S. Contracts [sec] 177b:
'So, where a person is called on either to
comply with demands or suffer a serious
business loss, this has been regarded by some
courts as a species of duress invalidating
contracts induced thereby, . . .'
This is exactly the position J.L. Johnston was in at
the time the final contract was signed. The project had
been designed, the planning and negotiations had gone on
for about 10 months, and all would have been lost if the
documents furnished by H.U.D. had not been executed.
This alone, without the revocation of the Act by the
President, should invalidate the requiring of J. L.
Johnston to pay the Davis-Bacon Act wages.
The Wage Review Board should find that the
Davis-Bacon Act does not apply to the wages paid for the
construction of the Woodside Village Project. [10]
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[11] The forcing, or insistence, by the Government that
J. L. Johnston pay the wages under the Davis-Bacon Act is
the retrospective enforcement of the Act upon J. L.
Johnston. This is completely opposite to the plain
wording of the President's Proclamation 4040 where the
President only reinstated the Davis-Bacon Act as to the
construction contracts for which solicitations for bids
or proposals are issued after the date of the
Proclamation.
This is not a question then of trying to construe a
statute as to its retroactive effect, but the
Proclamation makes itself clear that it is not to be
retroactive. This was clarified by Part 1 and 5, 29 CFR,
wherein Robert D. Moran, Admin[i]strator of Workplace
Standards, stated:
. . . Attention is directed to the fact that
this revocation does not affect the validity
of contracts entered into after February 23,
1971, without Davis-Bacon rates pursuant to
authority of Proclamation No. 4031, including
contracts let after March 29, 1971.
When J. L. Johnston agreed, as the builder, with
himself as the sole general partner, to construct the
Project, and at the time the final documents were signed,
H.U.D. imposed upon the borrower, J.L. Johnston, in
Paragraph 14(a) of the Building Loan Agreement, FHA Form
No. 244, the following requirement:
'The Borrower understands that the wages to be
paid laborers and mechanics employed in the
construction of the project [*] are [*]
required by the provisions of Section 212(a)
of the National Housing Act, as amended, to be
not less than the prevailing wage rates for
corresponding classes of laborers and
mechanics employed on construction of a
similar character in the locality in which the
work is to be performed, as determined by the
Secretary of Labor with respect to this
project. The Borrower hereby states that it
has read the aforesaid determination by the
Secretary of Labor and is fully familiar with
the same. [*] (Emphasis added) [*] [11]
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[12] The pertinent Presidential Proclamations read as follows:
Now, therefore, I Richard Nixon, President of
the United States of America, do by this
Proclamation suspend, as to all contracts
entered into on or subsequent to the date of
this proclamation and until otherwise
provided, the provisions of the Davis-Bacon
Act of March 3, 1931, as amended, and the
provisions of all other acts providing for the
payment of wages, which provisions are
dependent upon determinations by the Secretary
of Labor under the Davis-Bacon Act . . .
[Presidential Proclamation No. 4031, dated
February 23, 1971].
Now, therefore, I, Richard Nixon, President of
the United States, due by this Proclamation
revoke Proclamation No. 4031 of February 23,
1971, as to all construction contracts for
which solicitations for bids or proposals are
issued after the date of this Proclamation,
whether direct federal construction or
federally assisted construction subject to the
previous Proclamation No. 4031 . . .
[Presidential Proclamation No. 4040, dated
March 29, 1971].
* * *
From our reading of the two proclamations, we cannot reach the
conclusion that Petitioner asks us to reach based on its reading of
them. Additionally, between the time that the Davis-Bacon Act was
reinstated and the Petitioner entered into the final contract
documents and obtained the necessary mortgage insurance, the
Department of Labor issued the following interpretive statement
(Agency Memorandum No. 93, dated April 6, 1971) concerning the
effects of the suspension and the reinstatement. [12]
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[13] Where bids or proposal for contract work were solicited
subject to Davis-Bacon provisions prior to Proclamation
No. 4031 suspending such provisions with respect to
'contracts entered into' on or after February 23, 1971,
and no further action has been taken and no contract
entered into pursuant to such solicitation between
February 23 and March 29, 1971, inclusive, it would
appear that no contract or solicitation therefor became
subject to the suspension proclamation before the
revocation by Proclamation 4040 and that the additional
effort and expense of issuing a resolicitation after
March 29, 1971, would not be required as a result solely
of the two proclamations. So long as the wage
determination on the basis of which the solicitation was
made remains in effect, a contract subject to its
provisions may be entered into as it would have been if
there had been no suspension during the intervening
period (All Agency Memorandum No. 93, at 3).
We believe that this analysis properly and clearly depicted
the state of law under the Davis-Bacon Act immediately after the
revocation of the February 23 suspension. In the Petitioner's
situation, no contract was entered into between February 23 and
March 29, 1971. Informal approval was not made until April 28,
1971. The applicable wage determination was not issued until August
27, 1971. Petitioner's application for mortgage insurance was
dated May 12, 1971, and endorsed by FHA on October 1, 1971, all
subsequent to reinstatement of the Act.
At the oral hearing, Mr. J. L. Johnston represented that [13]
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[14] between the time that he submitted his initial proposal,
and the execution of the final contracts and obtaining the
mortgage insurance, he began off-site construction of mechanical
components of the housing units. This is called the "core" units.
He was financially committed by the time he obtained the necessary
insurance and entered into final contracts which included the
Davis-Bacon Act requirements in them. No claim is made that
Petitioner entered into the final agreements through a mistake or
misunderstanding that the Davis-Bacon Act requirements were an
express contractual commitment, only that Petitioner was in a
financial bind by that time and could not withdraw even if it
wanted to.
* * *
We find no error in the Assistant Secretary of Labor's
decision that the Davis-Bacon Act applies to Petitioner's project.
We affirm that decision.
Petitioner claims that HUD's inclusion of the Davis-Bacon Act
provisions was "retrospective". Petitioner contends it did not
challenge the inclusion of the Davis-Bacon Act provisions at the
time of the final contractual commitments because of "economic
duress." [14]
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[15] The Board cannot find that the Petitioner's contention is
supported by the facts. We accept the position of the
Administrator that when Petitioner first submitted its proposal on
February 27th and then amended it on March 1st (allegedly in
reliance upon suspension of the provisions of the Davis-Bacon Act)
it could not have known what the required Davis-Bacon wage rates
would be. The applicable wage schedule for the project did not
issue until August 27, 1971.
There is no real dispute in this case that the contract for
the construction of Woodside Village was not entered into with
either the Alaska State Housing Authority or HUD-FHA between
February 23, 1971 and March 29, 1971. It was imperative upon
Petitioner that it determine for itself the effect of the
reinstatement of the Act at the time it sat down to execute the
closing documents. The Presidential proclamation of February 23,
1971, suspended the Davis-Bacon Act as to "all contracts entered
into on or subsequent to February 23, 1971, [*] and until otherwise
provided [*]. [*] (underlining supplied) [*]
The Petitioner's proposal of March 1, 1971 was irrevocable for
60 days, but the Alaska State Housing Authority did not accept the
Petitioner's proposal until June 23, 1971 [15]
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[16] long after the, reinstatement of the Davis-Bacon Act, and after the
Labor Department's explanation of April 6, 1971.
It was not until after completion of construction and at
commencement of enforcement proceedings that Petitioner first
raised the question of the Act's applicability.
HUD-FHA did not exert "economic duress" upon Petitioner when
it directed the inclusion of the Davis-Bacon Act requirements. It
was merely applying the law.
Petitioner states it was aware that the Davis-Bacon Act was
suspended on February 23, 1975. It claims now that it acted with
both alertness and alacrity to avail itself of an opportunity to
reduce its development costs. If this is what happened, it is
inescapable that Petitioner's alertness and alacrity would have
kept it informed about the reinstatement of the Act. It would have
been immediately concerned (as was the industry as a whole at that
time) as to what the suspension and the reinstatement meant to it
and where it should go to find out. The fact that Petitioners went
into the final closing stages of the project documents with their
eyes wide open to compliance with the Davis-Bacon Act requirements
and did not claim the Act was inapplicable at that time does not
justify this Board in considering whether under the circumstances
there are other surrounding [16]
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[17] circumstances that should excuse the contractor. To relieve this
contractor from the requirements of the Act would put him at an
advantage over the other contractors who were interested in bidding this
kind of redevelopment project. In turn this would affect the interests
of the laborers and mechanics whom the Act is designed to protect. We
can see no reason to single out this successful bidder for relief on the
claim he did not get himself straightened out concerning the application
of the Act immediately after March 29, 1971.
* * *
Turning to other issues in this case.
All to[o] frequently cases have been brought before this Board
on the incredible contention that because an employer has utterly
failed to maintain required payroll and other record data, the
enforcing agency is unable to establish -- to the last meticulous
cent -- the amount of underpayments due employees protected by the
Davis-Bacon Act. That is not the way the Davis-Bacon Act works.
Such naivete can only be exasperating to the enforcing agencies.[17]
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[18] Millions of manhours are expended each year by laborers
and mechanics protected by the provisions of the Act. It is the
duty of employers who accept work covered by the Act to maintain
the necessary records from which the employer, if called upon to do
so, can justify to the Labor Department and other enforcing
agencies that the requirements of the law have been met. The
requirement of proof is not the other way around. There may be
fair grounds for dispute and resist[a]nce to the Labor Department's
position, but the contractor must have his own affirmative basis to
support his contention. The Petitioner was informed during closing
contract negotiations and at the time of the preconstruction
conference that it would be required to comply with the minimum
wage and reporting requirements of the Davis-Bacon Act and what
those minimum wages would be. Petitioner acknowledged it knew
about the Act and would comply. [18]
~19
[19] The Petitioner's only attempt at explaining whether there
had been underpayments in this case is to maintain simply that the
Davis-Bacon Act was inapplicable. It has not indicated what the
proper amount of underpayment should be if the Act is applicable.
The Board has been confronted with this type of position before and
can find no merit in it. See, for example, Carabetta Enterprises,
Inc., Wage Appeals Board Case Nos. 74-04 decided January 28, 1975,
and 74-04A decided January 30, 1976.
It is not sufficient for a petitioner to appear before this
Board with the simple contention that the computation made by the
Department of Labor is wrong. Petitioners at the very least have
a correlative responsibility to explain what it believes to be the
right computation. Nothing of the sort having been done in this
matter, the Board can find no merit in the Petitioner's contention.
Petitioner contends that during the enforcement stages of this
matter, it was not permitted to obtain information through the
examination of government witnesses. There was a duty on the part
of the Petitioner at the enforcement stage to establish from its
own records by its own affirmative evidence that the computations
of the enforcing agency were in error. In such a case, the
enforcing agency could then determine how to proceed to establish
the amount due in [19]
~20
[20] a way in which Petit[i]oner and employees could be dealt with
fairly. We again can find no exonerating circumstances in this case.
The Board concludes that the Administrator did not err in
rejecting the Petitioner's objections that the cleaning work
performed by Kirby Janitorial during construction, the work
performed by Associated Painting & Decorating Company, and the
repair work performed on prefabricated kitchen and bathroom units
supplied by Mechanical Cores, Inc., a company owned by Petitioner
J. L. Johnston, was all construction work covered under the
provisions of the Davis-Bacon Act. The employees engaged in that
work were entitled to the Act's protections. See the Board's
decision in Alcoa Construction Systems, WAB Case Nos. 75-06 dated
September 11, 1975.
The amount due the employees of the Associated Painting &
Decorating Company is a computation matter which has been
satisfactorily resolved in the enforcement proceedings prior to the
taking of this appeal, and the Board will not go into it. [20]
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[21] ORDER
The Wage Appeals Board finds no error in the decision of the
Assistant Secretary of Labor dated November 13, 1975 rejecting the
objections of the Petitioners Woodside Village and J. L. Johnston
to the decision of the administrative law judge of July 18, 1975.
The decision of the Assistant Secretary of Labor, therefore, is
affirmed.
SO ORDERED
Stuart Rothman, Chairman
Clarence Barker, Member [21]
