JOHNSON ELECTRIC, INC., WAB No. 85-21 (WAB May 16, 1986)
CCASE:
JOHNSON ELECTRIC, INC.
DDATE:
19860516
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of
JOHNSON ELECTRIC, INC. WAB Case No. 85-21
Des Moines, WA Dated: May 16, 1986
BEFORE: Alvin Bramow, Chairman, Thomas X. Dunn Member
Stuart Rothman, Member
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
Johnson Electric, Inc., (hereinafter Johnson) seeking review of a
decision of the Deputy Administrator, Wage and Hour Division, dated
July 26, 1985. In his decision, the Deputy Administrator denied
Johnson's request for a variance from the provision of the
Department's regulation 29 CFR [sec] 1.6(c)(3), ruling that a
variance was not necessary and proper in the public interest or to
prevent injustice and undue hardship under the circumstances of
this case.
The facts under which this appeal arises are as follows. A
developer of a nursing care facility in Des Moines, King County,
Washington, awarded a prime contract for the facility's
construction to the Gail Landau Young Construction Co.,
Incorporated, (Gail Landau) on April 1, 1984. The project was
subject to the prevailing wage labor standards provisions of the
National Housing Act since the mortgage was insured by the
Department of [1]
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[2] Housing and Urban Development. The initial endorsement of the
mortgage for the project occurred on April 19, 1984. At the time of the
initial endorsement of the mortgage the labor standards provis[i]ons and
wage rates contained in wage determination No. WA 83-5110, including
Modifications 1 through 11, were applicable to and included in the prime
contract.
Gail Landau started work on the construction project on April
24, 1984. On June 11, 1984, Johnson started work on the electrical
portion of the project, and on June 22, 1984, Johnson was awarded
the electrical subcontract for the project. On the previous day
petitioner acknowledged that the labor standards provisions were
included in the subcontract it was about to sign.
On June 1, 1984, the terms and conditions of a new collective
bargaining agreement between Johnson and the International
Brotherhood of Electrical Workers (IBEW) went into effect. The
new agreement provided for a roll-back of wage rates to a level
which for the journeyman electrician was approximately $3.00 per
hour less than those contained in the wage determination applicable
to the nursing home project.
On July 13, 1984, the Wage and Hour Division published
Modification No. 15 to the general wage determination reflecting
the reduced electrician's wage rate. This change in the rate
had not been communicated to the Wage and Hour Division by the [2]
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[3] parties to the agreement until July 6, 1984.
Johnson in its work on the project paid its employees the
rolled-back wage rates under the new agreement. Upon reviewing
the certified payrolls, DHUD determined in July, 1984 that Johnson
was not paying the proper predetermined wage rates to its
electrician employees.
DHUD notified the prime contractor of Johnson's violations and
on September 20, 1984 DHUD confirmed in writing to Gail Landau that
the wage rates contained in Modification No. 15 were not applicable
to the construction project and requested that Johnson make payment
of back wages to its electricians.
Johnson, through counsel, requested a variance of the
contested wage rate, first from DHUD and then from the Wage and
Hour Division. On July 26, 1985, the Deputy Administrator, Wage
and Hour Division, denied the request for a variance, ruling that
the use of Modification No. 15 was "clearly precluded" by the
applicable regulation. The Deputy Administrator also ruled that a
variance from the regulation was not necessary and proper in the
public interest or to prevent injustice and undue hardship. On
September 10, 1985, the Wage Appeals Board received a Petition for
Review from Johnson to review the Deputy Administrator's decision.
The Board considered this appeal on the basis of the Petition
for Review and Petitioner's Response to the Statement of the Deputy
Administrator filed by the petitioner, and the [3]
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[4] Statement for the Deputy Administrator and the record of the case
before the Wage and Hour Division filed by the Solicitor of Labor. No
request for oral argument was received from the parties to the appeal.
* * *
The only issue before this Board is whether the Deputy
Administrator acted properly in denying petitioner's request for a
variance under the Department of Labor Regulations, 29 CFR [sec]
5.14. The effect of the variance would allow the petitioner to pay
a lower wage rate for electricians than the one determined as
prevailing and made applicable to and included in the prime
contract.
The labor standards provisions of the National Housing Act, 12
U.S.C. 1715c, are applicable to the project in question. These
provisions provide in pertinent part as follows:
. . . the laborers and mechanics employed in
the construction . . . have been paid not less
than the wages prevailing in the locality in
which the work was performed for the corresponding
classes of laborers and mechanics employed on
construction of a similar character, as determined
by the Secretary of Labor, in accordance with the
Davis-Bacon Act, as amended, prior to the beginning
of construction and after the date of the filing
of the application for insurance.
The petitioner bases its contention that a variance is
appropriate on the grounds 1) that petitioner had good faith
in its attempt to pay its employees prevailing wages as required
by law; 2) that there was an absence of any competitive advantage; [4]
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[5] and 3) that the June 1 union wage rate was in effect and
prevailing in the area before petitioner commenced work.
There is no reason for the Board to take a position on any
of these factors except the one concerning the petitioner[']s
commencement of work after the June 1 rate became prevailing in
the area.
Department of Labor Regulation 29 CFR [sec] 5.14 which sets
forth the criteria for granting variances reads as follows:
The Secretary of Labor may make variations,
tolerances, and exemptions from the regulatory
requirements of this part and those of Parts 1
and 3 of this subtitle whenever the Secretary
finds that such action is necessary and proper
in the public interest or to prevent injustice
and undue hardship. Variations, tolerances and
exemptions [*] may not [*] be made from the statutory
requirements of any of the statutes listed in
[sec] 5.1 unless the statute specifically provides
such authority. [*] (Emphasis added). [*]
A review of the provisions of the National Housing Act does
not reveal any provision for a variation from the labor standard
requirement that the prevailing wages be those prior to the
beginning of construction and after the date of the filing of the
application for insurance. It is therefore imperative to rule on
precisely what the express language "prior to begin[n]ing of
construction" means in the National Housing Act.
In view of the fact that the labor standards provis[i]ons,
including the prevailing wage schedule, must be included in the [5]
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[6] prime contract, it follows that the term "prior to the
beginning of construction" refers to the starting of the first
construction on the project whether by the prime or a subcontractor
and not by each individual subcontractor. The Board can envision
no other rational interpretation of this clear language.
It is the Board's understanding that construction started on
the project on April 24, 1984. This is the controlling date
according to the National Housing Act. No changes can be made
subsequent to this date. Therefore, the petitioner's contention
that its commencement of work after the June 1 rate became
prevailing is controlling is misplaced.
In view of the fact that the work on the project began prior
to the effective date of the June 1 rate, and the fact that there
is no provis[i]on for a variation in the National Housing Act, the
denial of a variance is proper in this case. Petitioner's Petition
for Review is hereby dismissed.
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board [6]
