CCASE:
COLBY COOPERATIVE STARCH COMPANY
DDATE:
19850603
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
COLBY COOPERATIVE STARCH COMPANY WAB Case No. 84-21
Caribou, Maine Dated: June 3, 1985
BEFORE: Alvin Bramow, Chairman, Thomas X. Dunn, Member, and
Stuart Rothman, Member, Concurring
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
Colby Cooperative Starch Company (hereinafter Colby) seeking
reversal of the ruling of the Assistant Administrator, Wage and
Hour Division, dated October 1, 1984. The ruling in question
provides that the Economic Development Administration has the
authority to withhold grant funds otherwise due Colby to satisfy
Davis-Bacon and Contract Work Hours and Safety Standards Act wage
violations and that these withheld funds may be transferred to the
Department of Labor for disbursement directly to the employees.
In February, 1980, Colby received a $1.5 million grant from
the Economic Development Administration for the purpose of
constructing a starch manufacturing facility in Aroostock, Maine.
In July, 1980 Colby contracted with Barr & Murphy International
Ltd. to be general contractor on the project. Construction began
one year later. The general contract and all subcontracts contain [1]
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[2] the required prevailing wage and overtime pay provisions
of the Public Works and Economic Development Act of 1965 and the
Contract Work Hours and Safety Standards Act, respectively.
An investigation of the project by the Department of Labor's
Wage and Hour Division disclosed that six of the subcontractors
to Barr & Murphy owed $167,883 for prevailing wage and overtime
violations. Two of the subcontractors paid the back wages,
leaving a balance of $151,186 remaining.
In conferences between the parties in 1983 Barr & Murphy
acknowledged the occurrence of the violations but indicated it
could not pay the back wages until the grantee, Colby, paid Barr
& Murphy the sums due it. Colby, on the other hand, claims that
Barr & Murphy was responsible for a fire which occurred and
seriously damaged the project. Colby claims Barr & Murphy
owes Colby approximately $1,000,000. The parties have sued
each other over these claims.
The Wage and Hour Divis[i]on has requested that the Economic
Development Administration pay $150,000 to it for disbursement
to the employees and the prime contractor and subcontractors
have agreed to this procedure.
Colby, through its attorney, objected to the withholding
and the proposed disbursement. Colby claims that the Economic
Development Administration does not have the authority to pay
over any of the grant to the Department of Labor, and that the
Department did not have the authority to order EDA to turn over
the grant money. [2]
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[3] Wage and Hour, through the Assistant Administrator, issued
a ruling that it has the authority to request the withholding and
EDA has the authority to withhold amounts from the grantee and
transfer the funds to the Department for disbursement to employees.
The Assistant Administrator concluded that since the grantee,
Colby, had not contested the occurrence of the wage violations
and since the contractors agree that at least $130,169.53 in
back wages were due, the Department has the authority to request
EDA to transfer the funds to it for disbursement to employees.
It is from this ruling that Colby appealed to the Wage Appeals
Board on November 27, 1984.
The Board considered this appeal on the basis of the Petition
for Review and the Reply Statement from the petitioner, Colby, and
the record of the case before the Wage and Hour Division and the
Statement for the Assistant Administrator, Wage and Hour Division,
filed by the Solicitor of Labor. No request for an oral hearing
was received by this Board.
* * *
The majority of the Board first must address the contention
of the petitioner that the Economic Development Administration
does not have authority to withhold grant funds from the grantee
because of prevailing wage and overtime pay violations committed
by contractors performing on the project.
The labor standards provisions of the Public Works and
Economic Development Act of 1965 and the Department of Labor
Regulations [3]
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[4] pertaining to this matter provide as follows:
All laborers and mechanics employed by contractors
or subcontractors on projects assisted by the
Secretary under this chapter shall be paid wages
at rates not less than those prevailing on similar
construction in the locality as determined by the
Secretary of Labor in accordance with the Davis-
Bacon Act, as amended. The Secretary shall not
extend any financial assistance under section
3131, 3141, 3142, 3171, 3243, and 3246b of this
title for such a project without first obtaining
adequate assurance that these labor standards will
be maintained upon the construction work. The
Secretary of Labor shall have, with respect to
the labor standards specified in this provision,
the authority and functions set forth in
Reorganization Plan Numbered 14 of 1950 and section
276c of Title 40. (42 U.S.C. 3222)
Department of Labor Regulations:
The (write in name of Federal Agency or the loan or
grant recipient) shall upon its own action or upon
written request of an authorized representative
of the Department of Labor withhold or cause to be
withheld from the contractor under this contract
or any other Federal contract with the same prime
contractor, or any other Federally-assisted contract
subject to Davis-Bacon prevailing wage requirements,
which is held by the same prime contractor, so much
of the accrued payments or advances as may be considered
necessary to pay laborers and mechanics, including
apprentices, trainees, and helpers, employed by the
contractor or any subcontractor the full amount of wages
required by the contract. In the event of failure to pay
any laborer or mechanic, including any apprentice, trainee,
or helper, employed or working on the site of the work
. . . all or part of the wages required by the contract,
the (Agency) may, after written notice to the contractor,
sponsor, applicant, or owner, take such action as may be
necessary to cause the suspension of any further payment,
advance, or guarantee of funds until such violations have
ceased. (29 CFR 5.5(a)(2)) [*] With holding. [*] [4]
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[5] In the event of failure or refusal of the contractor or
any subcontractor to comply with labor standards
stipulations required by the regulations contained in this
part and the applicable statutes listed in section 5.1, the
Federal agency shall take such action as may be necessary to
cause the suspension of the payment, advance or guarantee of
funds until such time as the violations are discontinued or
until sufficient funds are withheld to compensate employees
for the wages to which they are entitled and to cover any
liquidated damages which may be due. (29 CFR 5.9, Suspension
of funds)
The petitioner reads the labor standards provisions of the
Public Works and Economic Development Act of 1965 and the
Department of Labor's Regulations 29 CFR 5.5(a)(2) and 5.9,
regarding withholding, to apply only to contractors performing on
the project. The petitioner maintains that a grantee's only
obligation is to insert in the construction contracts with its
contractors all the terms imposed by the funding agency. After
this is accomplished, it relinquishes all responsibility for
all the labor standards provisions contained in the grant documents
and applicable law.
Notwithstanding the facts that petitioner maintains that the
fire on the project was the responsibility of the prime contractor,
that the prime contractor may owe petitioner approximately
$1,000,000 as a result thereof, and that to turn over the money to
the workers will in essence cause a further burden on petitioner,
the majority of the Board cannot agree with petitioner's strained
interpretation of the Davis-Bacon and related Acts and the
regulations promulgated thereunder.
There is no question that the Acts in question are remedial [5]
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[6] statutes for the benefit of laborers and mechanics. See
U.S. v. Binghampton Construction Co., 347 U.S. 141 (1954).
Therefore, the statute and all the regulations must be read
together. Such a reading places a grantee in the same position as
a prime contractor on a direct Federal project. To hold otherwise
would render the labor standards provisions of the Public Works and
Economic Development Act of 1965 and similar statutes meaningless.
It is the grantee who entered into an agreement with a
Federal agency for funds and as part of this agreement the
grantee obligated itself to the Government to assure that the
labor standards would be maintained upon the construction work.
By a plain reading of the Act, Department of Labor regulations
and the grant agreement there can be no question that a violation
of the labor standards provision renders the grantee liable for
such underpayments. The primary method provided by the Government
to reimburse laborers and mechanics for underpayments is to
withhold funds. In this case, the sanction of withholding can
only be applied against the grantee and such action is proper
under the Act and regulations promulgated by the Department of
Labor as authorized by Reorganization Plan No. 14 of 1950 and
section 276c of Title 40.
Secondly, the petitioner contends that the Department of
Labor has no authority to take possession of grant funds and to
disburse the funds to employees. Again, the majority of the [6]
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[7] [Board] cannot agree with this position of the petitioner.
It is perfectly clear that the above-cited Department of Labor
Regulations and the Agency's Supplemental General Conditions at
5-15 (contained in the record) provide for the disbursement of
withheld funds to satisfy the underpayment of wages. The above
authorities are silent as to the manner this disbursement will
be accomplished.
It appears to the majority that this is a matter strictly
between the Department of Labor and the Federal agencies involved
and as long as the disbursement of the withheld funds is carried
out in a proper manner there can be no basis in law to challenge
such disbursement.
In view of the foregoing, the decision of the Assistant
Administrator is affirmed and the petition herein is dismissed.
* * *
Stuart Rothman, Member, Concurring
I concur in the result reached in this case but write to
explain my views. I am not in full accord with the expression
of the majority's reasoning.
As the majority opinion notes, "the prime contractor, Barr
and Murphy acknowledge the occurrence of the violations but
indicated it could not pay the back wages until the grantee,
Colby, paid Barr and Murphy the sums due it." The Colby
Cooperative [7]
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[8] Starch Company did not underpay the laborers and mechanics on this
job. The contractors and subcontractors did. Two subcontractors paid
the back wages.
There is a standoff, according to the record, between Barr
and Murphy on one side, and Colby on the other. Colby claims
Barr and Murphy were responsible for a fire at the project and
it owes Colby about one million dollars. The contractor claims
that it cannot pay the back wages until it collects payments
being withheld by Colby. We are told the parties have sued each
other, but we are unaware of the status or outcome of this suit.
My problem with this case on the basis of incomplete briefing
is the following: I assume that the prime contractor worked
under a lump sum construction contract. It owes the laborers
and mechanics for underpaid wages due. Colby does not. The
contractor either presently or in the long run is the one that
should have to make up the payroll difference that should have
been in the employee's checks. We do not know whether the
contractor is saying it doesn't have the money to make the payment
which it owes or it simply is not going to make the payment until
it collects some partial or final payments from Colby. But it is
the contractor who did not put the right amount of pay in the
employee's checks. Into this intricate denouement the EDA and [8]
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[9] the Department of Labor are going to take $150,000 out of
Colby's grant and pay the laborers and mechanics directly. This
looks to me the same as giving the money to Barr and Murphy to make
up the difference in underpayment that was Barr and Murphy's
primary responsibility not to let happen.
I concur in the result because of the specificness of the
last sentence (29 CFR [sec] 5.9 Suspension of Funds) quoted in the
majority opinion. This provision provides that in the event or
refusal of the [*] contractor or any subcontractor [*] to comply
with the labor standards stipulations, the Federal agency shall
suspend "payment, [*] advance [*] or [*] guarantee [*] of funds
until such time as . . . sufficient funds are withheld to
compensate the employees for the wages to which they are
entitled. . . ." [*] (Underlining supplied) [*] Under this
provision I conclude that the authority to suspend [*] advances [*]
or [*] guarantees [*] until sufficient funds are withheld to
compensate employees for wages due encompasses the authority
not only to withhold guaranteed funds to a sponsor but to pay
them directly to the employees. [*][EMPHASIS IN ORIGINAL][*] The
provision is quite specific.
Whether the contractor and Colby have counterclaims against
each other not related to whether Barr and Murphy has met its
Davis-Bacon obligations is irrelevant to whether Barr and Murphy
has a statutory and contractual obligation to the laborers and
mechanics on the job. As third party beneficiaries, they should
not be caught in any cross fire between Barr and Murphy, and
Colby over a dispute irrelevant to whether they have been properly
paid. [9]
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[10] I must assume for purposes of this concurring view, but in
the absence of a better record and briefing, that the contractors
on this job were required to post the necessary payment bonds or
their equivalent. If not, this is a matter the grantee overlooked.
While the laborers and mechanics who have been underpaid should
receive their full wages with minimum delay, more should be done
by EDA and the Department of Labor and by Colby to place the
responsibility where it belongs, on the contractors and/or
subcontractors and their sureties. The contractor's refusal to
meet its contractual and statutory obligations can only result in
the long run in that company making up the necessary underpayments
and also exposing itself to additional statutory liabilities.
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary,
Wage Appeals Board [10]
