M.C. MORGAN CONTRACTORS, INC., WAB No. 84-18 (WAB May 22, 1985)
CCASE:
M.C. MORGAN CONTRACTORS
DDATE:
19850522
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
Disputes concerning the payment of
prevailing wage rates and overtime
pay by:
M.C. MORGAN CONTRACTORS, INC., WAB Case No 84-18
Contractor
and Dated: May 22, 1985
Proposed debarment for Labor Standards
violations by:
M.C. Morgan Contractors, Inc.,
Contractor
William C. Morgan, Vice-President
With respect to laborers and mechanics
employed by the contractor under
various contracts with the Environmental
Protection Agency and the Department
of Housing and Urban Development in the
State of New York
BEFORE: Alvin Bramow, Chairman, Thomas X. Dunn, Member and
Stuart Rothman, Member
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition
of the Administrator, Wage and Hour Division, who seeks review
of the decision of the Administrative Law Judge (hereinafter
ALJ) dated August 1, 1984.
The case arose as a result of a number of contracts for the
construction of sewer and water lines on six projects in New [1]
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[2] York, financed in part under the Federal Water Pollution Control
Act and the Housing and Community Development Act of 1947, and
also subject to the Contract Work Hours and Safety Standards
Act. The matter was assigned to an ALJ for a hearing to decide
issues of alleged underpayments and proposed debarment for labor
standards violations by M.C. Morgan Contractors, Inc., Contractor
and William C. Morgan, Vice-President, (hereinafter Respondent)
The parties entered into a stipulation with regard to the
violations prior to the hearing. Respondent agreed to the payment
of $48,000 to satisfy back wage liability. The only remaining
issue was the proposed debarment of Respondent.
The standard for debarment for the Acts in question is
found at 29 CFR [sec] 5.12(a)(1) and provides for debarment
whenever any contractor or subcontractor is found to be in
aggravated or willful violation of the Acts. The ALJ concluded
that the Respondent's violations were neither aggravated nor
willful because a mathematical formula used to pay emplo[y]ees did
not result in a profit for Respondent.
This case arose from the fact that Respondent operated
with two companies, M.C. Morgan Contractors and Randy Rentals.
M.C. Morgan Contractors handled the installation of main sewer
and water lines for governmental entities and was a party to
the contracts here in question. Randy Rentals was responsible
for construction, installation and repair of sewer and water [2]
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[3] for private home owners. In general the same employees worked for
both companies. On the first four contracts in question, the
employees received two paychecks, one for work performed for
each company.
A Wage and Hour investigation in the spring of 1980 of the
federally-assisted projects disclosed that M.C. Morgan Contractors
failed to pay its employees classified as operating engineers and
laborers the applicable prevailing wage rate for the classification
of work performed and the required overtime rate when applicable.
Also, Respondent furnished the contracting agency with false
certified payrolls. These payrolls understated the number of hours
worked to show compliance with the applicable wage determinations.
The investigation disclosed that the Respondent applied a
mathematical formula of 65% from M.C. Morgan and 35% from Randy
Rentals to arrive at the employee's weekly wages. Employees were
paid from M.C. Morgan Contractors and Randy Rentals regardless of
actual hours worked or which company they worked for.
After Wage and Hour's investigation, Respondent instituted
a new pay system for the last two contacts here in question.
Under the new system employees recorded their time for federally
funded projects above a slash mark, and the time for private work
below the slash mark. Employees were told to work no more than 7 hours
per day on the federal jobs. A second Wage and Hour investigation
in 1981 disclosed that Respondent failed accurately to [3]
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[4] record daily and weekly totals of hours worked on the
covered projects by all employees. The certified payrolls
reflected only a part of the total hours actually worked on the
federally funded projects.
In the stipulation entered into before the ALJ hearing,
Respondent admitted to failing to pay prevailing wage rates and
fringe benefits on the six contracts from 1979 through 1981, it
admitted to failing to record on the certified payrolls the
true hours worked per day, and each occasion of more than 40
hours worked per week. Furthermore, Respondent stipulated that
it failed to keep adequate and accurate weekly records and that
as a result of using the mathematical formula, the certified
payrolls understated the true time spent by the employees working
on the federally funded projects. As stated above, Respondent
agree[d] to restitution of $48,000 for payment to employees of back
wages due on the six contracts.
The Board considered this appeal on the basis of the Petition
for Review of the Administrative Law Judge's Decision and Order
and the record of the case before the Wage and Hour Division
filed by the Solicitor of Labor, and the Response to the Petition
filed by the Respondent. No request for an oral hearing was
received by this Board.
* * * [4]
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[5] The standard for debarment for violations of the labor
standards provisions of the Federal Water Pollution Control
Act, the Housing and Community Development Act of 1972 and the
Contract Work Hours and Safety Standards Act is set forth in the
Department of Labor's Regulations, 29 CFR [sec] 5.12(a)(1)
(formerly [sec] 5.6(b)) which reads in pertinent part as follows:
Whenever any contractor or subcontractor is found
by the Secretary of Labor to be in [*] aggravated or
willful violation [*] of the labor standards provisions
of any of the applicable statutes listed in [sec] 5.1
. . . , such contractor or subcontractor . . . shall be
ineligible for a period not to exceed 3 years . . .
to receive any contracts or subcontracts subject
to any of the statutes listed in [sec] 5.1. [*] (Emphasis
added). [*]
There is no question that the petitioner violated the labor
standards provisions of the aforementioned statutes. The
Stipulation, Consent Findings and Order entered into by Respondent,
so ordered by the ALJ and made a part of the record makes it
clear that petitioner failed to pay prevailing wages, fringe
benefits and overtime for all hours worked and failed to record
the true hours worked on its certified payrolls for all six
contracts. Therefore, the Board finds the ALJ in error when
he concluded that the "slash system" appears to have resulted
in an accurate reporting of the time worked on the federally
funded projects.
The 65-35% system used on the first four contracts,
admittedly resulting in violations of the labor standards
provisions of the statutes in question and found by the [5]
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[6] ALJ to maintain harmony among employees by alleviating wage
disparities, is supported by the record. The absence of any
attempt to cover-up or hide the use of this formula when under
investigation by the Department of Labor and the immediate
abandonment of this practice after the investigation, coupled
with no other infractions, would certainly lead one to believe
that there was no intent to violate the Acts and that debarment
would not be warranted.
However, this is not the case here. The record shows that
the petitioner has had prior Davis-Bacon government contracts
dating back to at least 1973. This experience should have made
petitioner aware of its responsibility for the proper payment of
wages under the above Acts. Nonetheless, the petitioner has
been devising "systems" to avoid its obligations. After it
was found in violation on the first four contracts, petitioner
still used a "system" to try to avoid its obligation to its
employees on the last two contracts. It may be that any one
violation by itself may not warrant the harsh remedy of
debarment, but violations under both methods of payment coupled
with fabrication of its certified payrolls certainly meets the
standard of aggravated or willful violations for debarment under
these Acts. The Board has held [] the submission of falsified
payrolls to simulate proper payment to be aggravated and willful
violations of the Davis-Bacon related Acts. See Bay State Wiring [6]
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[7] Co., WAB Case No. 76-08 (June 15, 1977); Marvin E. Hirchert
d/b/a M & H Construction Co., WAB Case No. 77-17 (October 16,
1978); and Cosmic Construction Co., Inc., WAB Case No. 79-19
(September 2, 1980).
In view of the foregoing, the Decision and Order of the
Administrative Law Judge is reversed and M. C. Morgan Contractors,
Inc. and William C. Morgan, Vice-President are to be subject
to the ineligible list as provided in 29 CFR 5.12(a)(1).
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board [7]
