CCASE:
ARBOR HILL REHABILITATION PROJECT
DDATE:
19871103
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of
ARBOR HILL REHABILITATION WAB Case No. 87-04
PROJECT, Albany, New York Dated: November 3, 1987
APPEARANCES: William J. Rodgers, Esquire, and Thomas G. Olp,
Esquire, for Arbor Hill Associates
Terry R. Yellig, Esquire, for Tri-Cities Building
and Construction Trades Council, AFL-CIO, and
Building and Construction Trades Department, AFL-CIO
G. Brockwel Heylin, Esquire, for Associated General
Contractors of America, Inc.
Ford Newman, Esquire, and Douglas Davidson, Esquire,
for the Administrator, Wage and Hour Division,
U.S. Department of Labor
BEFORE: Alvin Bramow, Chairman,/FN1/ Thomas X. Dunn, Member,
and Stuart Rothman, Member.
DECISION OF THE WAGE APPEALS BOARD
This case involves a petition for review challenging the
October 22, 1986 determination of the Wage and Hour Administrator
that the Davis-Bacon prevailing wage requirements in Sec. 110 of
the Housing and Community Development Act of 1974, 29 U.S.C. Sec.
5310, are applicable to the Arbor Hill Redevelopment Project in
Albany, New York. Petitioners are the project developer, Vulcan
Arbor Hill Corporation a/k/a Arbor Hill Associates (Arbor Hill
Associates); the general contractor, Barry, Bette & Led Duke
Residential, Inc. (BBLR); one of the subcontractors, Enterprise
Roofing, Inc., and [1]
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/FN1/ Chairman Bramow decided this case prior to his retirement on
October 3, 1987. [1]
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[2] Joe Ivey, one of the workers employed on the project. /FN2/
The U. S. Department of Housing and Urban Development (HUD or
DHUD) approved an Urban Development Action Grant (UDAG) to the City
of Albany, N.Y., on December 27, 1984. The UDAG, in the amount of
$3,500,000, was for the renovation of 82 separate buildings to
provide 232 residential apartment units and 14 retail stores in the
Arbor Hill section of the City of Albany. The Street and Lot Map
of Arbor Hill indicates that many of the buildings to be renovated
are side by side and all are contiguous to each other. /FN3/ The
approximate cost to renovate the 82 buildings, known as the Arbor
Hill Redevelopment Project, was $13,000,000. [2]
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/FN2/ The Petitioners suggested that Wage Appeals Board Member
Thomas X. Dunn should recuse himself from hearing the appeal
because he had been a partner in the law firm of Sherman, Dunn,
Cohen and Leifer, which is before the Board representing the
Building and Construction Trades Department, AFL-CIO, and the
Tri-Cities Building Trades Council, one of the interested parties
to the appeal. After Member Dunn explained that he no longer is
associated with the law firm in any way, the Petitioners' objection
was withdrawn.
/FN3/ The UDAG Grant Agreement defines the "project site" as the
Arbor Hill section of Albany, located within the Clinton Avenue and
Ten Broeck Triangle historical districts. Seventy-five of the
buildings are located along the north and south sides of Clinton
Avenue between North Pearl Street and Northern Boulevard and the
remaining seven buildings directly north and adjacent
to Clinton Avenue.
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[3] Certifications in the UDAG Grant Agreement require that the
City of Albany comply with the Davis-Bacon prevailing wage
requirements in Sec. 110 of the Housing and Community Development
Act of 1974.
Arbor Hill Associates purchased the 82 buildings at various
times prior to rehabilitation from various sources, including the
City of Albany, the County and private owners. Each building was
transferred to Arbor Hill Associates by individual deed and
recorded separately. Arbor Hill Associates pays taxes on each
building. Each building has been rehabilitated in accordance with
an individual architectural plan based on historic preservation
requirements applicable to it. Separate certificates of occupancy
are issued for each property. As part of its financial package,
Arbor Hill Associates will own and manage the residential units in
all 82 buildings for approximately 12 years, after which they will
be sold to individual buyers.
On February 7, 1985, W. Vito Gambelli, DHUD Director of Labor
Relations, Buffalo, New York, Area Office, provided to the Albany
Urban Renewal Agency a copy of the Davis-Bacon wage determination
issued for the Arbor Hill Redevelopment Project by the Labor
Department's Wage and Hour Division and advised that this wage
determination should be incorporated in the contract specifications
before release to prospective bidders.
Arbor Hill Associates agreed in an April 1, 1985, Legally
Binding Commitment that it signed with the City of Albany in order
to receive the UDAG-financed $3,500,000 loan, "to require its
Construction Manager and those parties who are its prime and
subcontractors to comply with the provision of the Davis-Bacon
Act."
Two days later, on April 3, 1985, a preconstruction conference
was held at which the Davis-Bacon prevailing wage determination was
discussed applicable to the Arbor Hill Redevelopment Project. The
minutes of the meeting indicate that Mark Simmons, President of
Arbor Hill Associates, questioned the accuracy of some of the rates
in the wage determination and stated that he intended [3]
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[4] to request modification of the rates. The minutes do not indicate
that Arbor Hill Associates contested the application of the Davis-Bacon
prevailing wage requirements to the Arbor Hill Redevelopment Project;
however Arbor Hill Associates contends that it did raise the question.
Thereafter, Arbor Hill Associates asked Alfred C. Moran, DHUD
Assistant Secretary, to rule that the Arbor Hill Redevelopment
Project is exempt from the Davis-Bacon prevailing wage
requirements. Assistant Secretary Moran never responded to Arbor
Hill Associates May 22, 1985, letter. Indeed, on September 27,
1985, Mr. Zambelli advised Arbor Hill Associates that Davis-Bacon
prevailing wage requirements do not apply to the Arbor Hill
Redevelopment Project because he concluded that Sec. 110 exempts
"residential construction when the property contains fewer than
seven units.
Arbor Hill Associates did challenge the rates in the
prevailing wage determination applicable to the Arbor Hill
Redevelopment Project in a June 5, 1985, letter to the Wage and
Hour Division. Nowhere in this letter, however, did Arbor Hill
Associates question the applicability of the Davis-Bacon prevailing
wage requirements to the Arbor Hill Redevelopment Project.
In the meantime, on June 21, 1985, Arbor Hill Associates and
BBLR, the general contractor, signed a construction agreement./FN4/
This agreement did not contain Davis-Bacon labor standards,
but did provide that BBLR would apply such standards "if
applicable". Preliminary start-up work began in August, 1985, but
BBLR delayed the main construction work until it received a
response from DHUD concerning its request for an exemption from the
Davis-Bacon requirements.
On October 31, 1985, an attorney for the Tri-Cities Building
and Construction Trades Council asked Edward R. Davis, DHUD
Regional Administrator in New York to investigate Mr. Zambelli's
September 27, 1985 determination [4]
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/FN4/ The Board notes that the record does not contain a copy of
this construction agreement because petitioners have failed to
provide a copy. Nevertheless, Petitioners do not dispute that a
construction agreement was signed on June 21, 1985.
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[5] that the Arbor Hill Redevelopment Project was exempt from
Davis-Bacon prevailing wage requirements. Robert A. Georgine,
President of the Building and Construction Trades Department,
AFL-CIO, also wrote to DHUD Secretary Samuel Pierce, Jr.,
about the Arbor Hill Redevelopment Project on November 22, 1985.
Shortly thereafter, Mr. Davis advised the Tri-Cities Council's
attorney on November 26, 1985, that DHUD had determined that the
Arbor Hill Redevelopment Project is not exempt from Davis-Bacon
coverage and that Davis-Bacon prevailing wage rates would be paid
to laborers and mechanics on the project.
On November 29, 1985, Justin Logsdon, Assistant to DHUD
Secretary for Labor Relations, referred President Georgine's
complaint to the DHUD Office of General Counsel for review and
opinion. Burton Bloomberg, DHUD Associate General Counsel,
responded on December 13, 1985, with an opinion that was sharply
critical of Mr. Zambelli's actions:
[Zambelli's] statement ignores the precedent established
in our August 30, 1984 memorandum to you concerning the
Historic Pastures UDAG project, also in Albany, which
consisted of a residential project with fewer than eight
units in each building, but more than eight units in the
project as a whole. The Historic Pastures opinion
concluded that the project met the criteria for
Davis-Bacon coverage of residential properties previously
set out in our August 1, 1984 memorandum to the Kansas
City Regional Counsel. /FN5/ Mr. Zambelli clearly had
knowledge of the August 1, 1984 opinion since he wrote a
lengthy memorandum to you on September 28, 1984
expressing disagreement with it. Since Mr. Zambelli is
responsible for Davis-Bacon compliance in Albany we
presume he also had knowledge of the Historic Pastures
opinion. We are disturbed, therefore, by the September
27, 1985 letter to the Arbor Hill developer. The letter
does not assert that precedent may be ignored, but
purports to rely on precedent and misstates the precedent
allegedly applicable to the case. Moreover, as we
discuss below, the letter fails to note that according to
the UDAG application, 14 commercial units will be
provided within the project. [5]
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/FN5/ The Historic Pastures opinion to which Mr. Bloomberg referred
found the 65 buildings on that project to be "related" because
they: (1) were for the most part on contiguous lots or parcels, (2)
initially were to be operated as one project until 20 buildings
were sold and then the rental units were to be operated as one
rental project for seven years, and (3) initially were to be
commonly owned by the developer until sales were made to individual
buyers, but the rental project was to remain commonly owned by the
developer for seven years. [5]
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[6] Associate General Counsel Bloomberg concluded that the Arbor
Hill Redevelopment Project is covered by the Davis-Bacon wage
requirements in Sec. 110. As a result, Mr. Logsdon advised
Mr.Georgine in a December 19, 1985 letter that the Arbor Hill
Redevelopment Project is covered by Davis-Bacon requirements.
DHUD then advised Arbor Hill Associate's President Simmons
that a final determination had been made that Davis-Bacon rates
must be paid to laborers and mechanics employed on the Arbor Hill
Redevelopment Project.
On January 22, 1986, Mr. Logsdon responded to [] Mr. Simmons
on behalf of Secretary Pierce and advised him that if he disagreed
with DHUD's decision, he was welcome to present any arguments not
already expressed to DHUD's General Counsel, or appeal DHUD's
determination to the Labor Department's Wage and Hour Administrator
pursuant to 29 CFR Sec. 5.13 within thirty (30) days of Mr.
Logsdon's letter. Mr. Simmons was advised that, in the interim,
Arbor Hill Associates should comply with the Davis-Bacon
requirements applicable to the Arbor Hill Redevelopment Project.
Pursuant to Mr. Logsdon's suggestion, Counsel for BBLR
requested a ruling by Deputy Wage and Hour Administrator Herbert J.
Cohen on January 31, 1986. Thereafter on October 22, 1986, the Wage
and Hour Administrator issued her ruling concerning application of
the Davis-Bacon prevailing wage requirements to the Arbor Hill
Redevelopment Project. The Administrator ruled that the Arbor Hill
Redevelopment Project is covered by Davis-Bacon requirements.
During 1986, a Wage and Hour Division investigation of the
Arbor Hill Redevelopment Project continued and attempts were made
to have funds withheld to satisfy the potential back wage
liability. On February 4, 1986 Assistant to the DHUD Secretary
Logsdon wrote the DHUD Regional Administrator in New York
instructing him that the "City (of Albany) shall cause the
withholding of $700,000 from Vulcan's 3.5 million dollar UDAG for
possible back wages and [6]
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[7] liquidated damages owed." In lieu of withholding, however, the City
entered into an escrow agreement with Arbor Hill Associates on March 14,
1986, wherein the developer agreed to deposit $423,106.88 into an escrow
account to cover back wages owed in the event the Department of Labor
made a final determination that Davis-Bacon applies to the Arbor Hill
Redevelopment Project.
In August, 1986, the City was requested by Regional Wage and
Hour Administrator Anthony J. Ponturiero to suspend further UDAG
construction loan advances with respect to the Arbor Hill
Redevelopment Project. The Mayor of Albany responded that the City
would take Wage and Hour's request "under advisement". At about the
same time, the Administrator advised the Assistant to DHUD
Secretary Logsdon of DOL's concern that the City of Albany had
failed to give adequate assurance that further payments out of the
UDAG would be suspended.
On October 28, 1986, the City requested from Secretary Pierce
$1.2 million in Community Development Block Grant Special Project
funds to pay the back wages owed employees on the Arbor Hill
Redevelopment Project. The request was summarily denied by DHUD's
General Deputy Assistant Secretary Jack R. Stokvis by letter dated
November 21, 1986.
Upon being advised of DHUD's denial of the City's request for
Special Project funds, the Administrator expressed DOL's concern
about the adequacy of funds being withheld to satisfy the back
wages in this case to Assistant to the DHUD's Secretary Logsdon on
December 10, 1986. On the same date the Administrator requested the
Mayor of Albany to withhold $1,152,272 to cover the back wages
computed by DOL. The Mayor took no apparent action with regard to
this request.
Shortly thereafter, Mr. Logsdon wrote the DHUD Regional Office
in New York on January 16, 1987, stating that he had received
unverified reports that Arbor Hill Associates had requested the
City of Albany to dissolve the escrow [7]
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[8] agreement. The DHUD Regional Office then wrote to the Mayor of
Albany on February 2, 1987 instructing the City not to dissolve the
escrow agreement until the question of Davis-Bacon applicability had
been finally resolved. Prior to this time, however, and without
consultation with either DHUD or DOL, the City entered into a collateral
substitution agreement with Arbor Hill Associates whereby it substituted
a bank letter of credit in the amount of $880,346.03 for the escrow
agreement. Thus, the City discharged to Arbor Hill Associates the funds
contained in the escrow account.
On July 30, 1986, petitioners commenced an action in the U.S.
District Court for District of Columbia against Secretary Pierce,
and in September, 1986 amended the complaint to include the
Secretary of Labor as a defendant. Vulcan Arbor Hill Corp. v.
Pierce, et al., C.A. No. 86-2089 (D.D.C. July 30, 1986).
Petitioners sought among other things a declaratory judgment that
the Arbor Hill Redevelopment Project falls within the exemption for
the rehabilitation of residential properties of eight units or less
in Sec. 110, an injunction preventing DOL from enforcing
Davis-Bacon requirements on the Arbor Hill Redevelopment Project,
and an injunction preventing DHUD from refusing, on grounds of
non-compliance with Davis-Bacon prevailing wage requirements, to
disburse UDAG funds to the City of Albany for the project.
The court, on April 23, 1987, dismissed petitioners' amended
complaint for failure to pursue an appeal before this Board prior
to resorting to the Courts.
On February 9, 1987 Arbor Hill Associates filed a Petition for
Review of the Wage and Hour Administrator's ruling requiring
Davis-Bacon coverage of the Arbor Hill Redevelopment Project with
this Board. The Board considered the appeal on the basis of the
Petition for Review and Petitioners' Reply to Statement for [8]
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[9] the Administrator and Statement for HUD filed by petitioners,
the Statement for the Administrator and the record of the case
before the Wage and Hour Division filed by the Solicitor of Labor,
the Statement on Behalf of the Building and Construction Trades
Department, AFL-CIO, and the Tri-Cities Building and Construction
Trades Council, AFL-CIO, a Statement for the U.S. Department of
Housing and Urban Development, and a Statement for the Associated
General Contractors of America, Inc., in Support of Petitioners.
On August 18, 1987 an oral hearing was held by the Board at
which all interested par[ti]es were present and participated.
Thereafter, the petitioners, the Building and Construction Trades
Department and Tri-Cities Building and Construction Trades Council,
and the Solicitor of Labor filed post-hearing briefs.
JURISDICTION
Before turning to the substantive issues in the case, the
Board must address a threshold jurisdictional question raised by
the petitioners: Whether the Secretary of Labor or his designee has
authority to interpret the labor standards provision in the Housing
and Community Development Act of 1974?
Petitioners contend that the Secretary of Housing and Urban
Development is responsible for the administration of the above Act
and therefore, he, not the Secretary of Labor, is the appropriate
official to interpret the meaning of the term "residential property
designed for residential use for eight or more families" that
appears in Sec. 110 of the Act.
The Board finds petitioners' argument without merit for two
reasons. First, Congress enacted Reorganization Plan No. 14 of
1950, 5 U.S.C. Appendix, to confer upon the Secretary of Labor
authority to coordinate the administration and enforcement of the
Davis-Bacon Act and any statutes listed in 29 CFR Sec. 5.1 or
subsequently enacted which provide for prevailing wage
determinations by the [9]
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[10] Secretary of Labor in accordance with or pursuant to the
Davis-Bacon Act.
The role of the Department of Labor in the implementation of
Reorganization Plan No 14 is unique. The Plan's regulatory scheme,
unlike most statutory schemes which delegate authority to a single
agency of the Executive Branch of the Federal Gover[n]ment,
distributes responsibility for its administration and enforcement
between the Department of Labor and the agencies which contract for
construction, repair and/or alteration of federal public works and
buildings, and which lend or grant federal funds or act as
guarantors of mortgages to aid in the construction of projects to
be built by State or local public agencies or private individuals
or groups.
This unorthodox delegation of authority is based on
recognition by Congress and President Truman that the purpose of
federal prevailing wage standards is contrary to the basic
objective of the Government's procurement laws which provide that
the lowest qualified bidders must be awarded the contract even if
his competitive advantage is based on a willingness to pay his
employees less than the prevailing wage rates. See generally, 10
Comp. Gen. 294, 200-301 (1931). Thus, federal prevailing wage
standards create a paradoxical situation for federal agencies
responsible for the procurement or funding of construction
services. On the one hand, the agencies' foremost objective is
to procure construction services at the lowest cost, but on the
other hand, they are legally obligated by prevailing wage standards
to insure that workers who perform such services receive prevailing
wages.
President Truman recognized the inherent inconsistency between
the agencies' competing responsibilities and proposed
Reorganization Plan No. 14 of 1950 to the Congress as a means of
insuring uniform and consistent administration and enforce-
ment of the Davis-Bacon Act and other federal labor standards which
authorize the Secretary of Labor to issue prevailing wage
determinations applicable to construction projects funded, in whole
or in part, by federal funds made available [10]
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[11] pursuant to the provisions of the federal statutes.
A primary concern prior to the enactment of the Reorganization
Plan was the degree of protection afforded to workers. As President
Truman stated in his message to the Congress on March 13, 1950;
"the degree of protection afforded to workers varies from agency to
agency. In order to protect this situation, this Plan authorizes
the Secretary of Labor to coordinate the administration of
legislation relating to wages and hours on federally financed or
assisted projects by prescribing standards, regulations, and
procedures to govern the enforcement activities of the various
federal agencies." To rule out the authority of the Secretary of
Labor to decide questions of coverage under the various related
Acts would defeat the primary objective of the Reorganization Plan,
i.e., the protection of the workers which varied from agency to
agency. Accordingly, the Board concludes that Sec. 110 of the
Housing and Development Act of 1974 confers upon the Secretary of
Labor with respect to labor standards provided therein the
authority and functions set forth in Reorganization Plan No. 14.
Nothing in the August 6, 1987, opinion issued by the Assistant
Secretary General Charles J. Cooper concerning interpretation of
another provision in Sec. 110, upon which petitioners rely heavily,
affects our conclusion. Mr. Cooper simply states that
"Reorganization Plan (No. 14 of 1950) does not preclude either the
head of a department from seeking, or the Attorney General
from rendering an opinion on a question of law arising in the
administration of his department." The Board does not read Mr.
Cooper's opinion as saying that the Secretary of Labor, or his
designee, this Board, does not have the primary responsibility to
interpret and administer the labor standards provisions in the
Davis-Bacon and Related Acts.
In Vulcan Arbor Hill Corp., et al. v. Samuel R Pierce, Jr.,
supra, U.S. District Judge Harold Greene stated: [11]
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[12] Administrative review of a [*contracting agency's
coverage determination*] under the Davis-Bacon Act, 40
U.S.C. sec. 276a et seq., is a two-step process. First,
a ruling or interpretation must be requested from the
Wage and Hour Administrator of the Department of Labor.
29 C.F.R. sec. 5.13. A party or interested person, to
whom the decision of the Wage and Hour Administrator is
adverse, initiates the second step by filing an appeal
with the Wage Appeals Board. 29 C.F.R. sec. 7 et seq. The
Board has jurisdiction to hear and resolve appeals from
final decisions involving wage determinations as well as
other controversies relating to coverage, 29 C.F.R. sec.
5 et seq. . . . [*Emphasis added*]
The Court concluded that the issue of coverage in this case
was within the expertise and jurisdiction of the Department of
Labor and dismissed the case for failure to exhaust available
administrative remedies.
The plain reading and intent of Reorganization Plan No. 14 of
1950 coupled with the above cited U.S. District Court decision
clearly assigns to the Department of Labor jurisdiction and final
authority over coverage issues. Also, DHUD in its statement of its
views as an interested party before the Board filed on April 30,
1987 recognized that under Reorganization Plan No. 14 of 1950 that
the Department of Labor has the final authority on coverage issues
under the statute.
SUBSTANTIVE ISSUES
Section 110 of the Housing and Community Development Act of
1974, 42 U.S.C Sec. 5310, provides as follows:
All laborers and mechanics employed by contractors or
subcontractors in the performance of construction work
financed in whole or in part with assistance received
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 (40
U.S.C. 276a-276a-5):
[*] Provided, That this section shall apply to the
rehabilitation of residential property only if such
property is designed for residential use for eight or
more families [*]. The Secretary of Labor shall have,
with respect to such labor standards, the authority and
functions set forth in Reorganization Plan Numbered 14 of
1950 (15 F.R. 3176; 64 Stat. 1267) and section 276c of
Title 40. [*Emphasis added.*]
The Board adheres to the well established principle that
"statutory [12]
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[13] construction must begin with the language employed by Congress and
the assumption that the ordinary meaning of that language accurately
expresses the legislative purpose." Park 'n Fly, Inc. v. Dollar Park
and Fly, Inc., 469 U.S. 189, 194 (1955). See American Tobacco Co. v.
Patterson, 456 U.S. 63, 68 (1982). Petitioners contend that the plain
meaning of the phrase "residential property designed for residential use
of eight or more families" in Sec. 110 refers to the design of the
individual buildings being rehabilitated.
The Board finds, however, that the meaning of the term
"residential property" of Sec. 110 is ambiguous and therefore,
reference to legislative history is appropriate. The Administrator
found that legislative history concerning the meaning of the term
"residential property" in Sec. 110 is "meager and inconclusive".
The Board disagrees.
The Joint Explanatory Statement of the Committee of
Conference, Conference Report 93-1279, 93rd Cong., 2nd Sess., 307
(1974), which appears in the compilation of the Housing and
Community Development Act of 1974 gives some insight into the
meaning of the term "residential property". The statement regarding
labor standards at page 307 appears to refer to rehabilitation of
residential structures as a proposed project. The last sentence in
the portion of the labor standards section states:
It is intended that the area of consideration should be
large enough to yield an adequate factual basis for each
wage determination, yet small enough to reflect only the
wages and practices of the area surrounding the location
of the [*] proposed project [*]. [*Emphasis supplied.*]
This reference to "proposed project" may not be significant
standing alone, but must be placed in context with the statute
itself and the purpose of the entire undertaking.
Sec. 105 of the Act refers to activities for which assistance
may be [13]
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[14] granted. Among such activities is the clearance, demolition, and
removal and rehabilitation of buildings and improvements. This section
of the Act speaks collectively of buildings and improvements.
Similarly, Sec. 119 of the Act, under which the Urban Development
Administration was authorized in this case, uses the term "development
activity". Again, the Act is referring to the entire property for which
the grant is made. No reference is made to an individual building as a
"property". The Act appears to take into consideration the entire
undertaking as the "property" in question.
Moreover, the grant agreement uses the term "project" in
reference to the entire property to be rehabilitated. Ex. A,
Supplemental Provisions, describes the "project elements" as the
acquisition and rehabilitation of 82 vacant buildings resulting in
the creation of 232 residential apartment units and 14 storefronts.
Therefore, to define the term "residential property" to mean each
building, would take that term out of context with the statute.
It is also clear from the above that the rental property for
which the UDAG grant was made is designed to be occupied by 232
families. The UDAG grant provides funds directly for the
construction of the entire undertaking; all the structures are
under one common ownership; the general contractor and
subcontractors are performing interchangeably on all the
structures; and petitioners indicated that the laborers and
mechanics were also performing activities if not on all the
structures, at least on more than one.
The petitioners' position that the term "residential property"
means a single building is also flawed by the characterization of
the 14 storefronts. They say these are de minimis. They can only be
de minimis to the entire undertaking as no individual building has
more than 3 or 4 units and, in fact, some buildings are 2 units
including the storefront. Therefore, the 14 storefronts can only be
considered de minimis or incidental under the Act if the term
"residential property" means the entire undertaking, i.e., the 232
units as a whole [14]
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[15] or as a project.
However, even assuming the legislative history of the Housing
and Community Development Act of 1974 is not sufficient to explain
the Congressional intent regarding the meaning of the term
"residential property", the Administrator's approach is reasonable
and appropriate.
The Administrator, faced with interpreting the ambiguous term
"residential property" without the benefit of legislative history
that she felt might explain Congress' intent, relied on past
practice. She explained that "in administering and interpreting the
Davis-Bacon and related Acts, the Wage and Hour Division has
traditionally determined coverage on a project basis unless there
is some reason to believe from the statutory language and
legislative history that Congress intended a different result."
The primary purpose of Title I of the Housing and Community
Development Act is to develop viable urban communities by providing
decent housing, suitable living environments and expansion of
economic opportunities, principally for persons of low and moderate
income./FN6/ Consistent with these objectives, Congress provided
that laborers and mechanics employed by private contractors to
perform construction work financially assisted by funds made
available pursuant to Title I must be paid locally prevailing
wages, except where such funds are used to finance rehabilitation
of residential property designed for residential use for less than
eight families./FN7/
Sec. 110, like the Davis-Bacon Act prevailing wage
requirements which it incorporates by reference, is remedial
legislation which should be liberally construed in order to achieve
its purpose. Gillioz v. Webb, 99 F.2d 585, (5th Cir. 1938). [15]
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/FN6/ 42 U.S.C. Sec. 5301
/FN7/ Accordingly, the Board finds, as a matter of law, that the
primary purpose of Title I of the Housing and Community Development
Act of 1974 is not inconsistent with the Davis-Bacon standards in
Sec 110 of the Act or that compliance with such requirements
necessarily interferes with affirmative action requirements
contained therein. [15]
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[16] Petitioners' proposed interpretation of Sec. 110 is contrary
to this well established principle because, as DHUD's own Regional
Counsel observed in his April 3, 1984 memorandum:
Under the present General Counsel opinions, we could
have one rehabilitation contract for $1,000,000 covering
many residential buildings on a one owner tract of land
and as long as none of the buildings on the tract were
designed for residential uses of more than seven families,
Davis-Bacon would not apply. The buildings could even
constitute one project or apartment complex connected by
walks, enclosed by a fence and be served by private roads and
common recreational facilities such as a clubhouse, swimming
pool, tennis courts and playground without triggering
Davis-Bacon wage rates.
Yet, this is exactly what petitioners' proposed interpretation
would mean.
There is no question that Congress intended to exempt the
rehabilitation of single family and small multifamily structures
from Davis-Bacon prevailing wage requirements. There, however,
several structures are going to be rehabilitated for residential
use as a single construction project, it is more reasonable to
interpret the term "residential property" in Sec. 110 to mean the
property as a whole, rather than individual structures regardless
of how few residential units are contained in each individual
building.
Accordingly, the Board concludes that the eight unit threshold
in Sec. 110 for application of Davis-Bacon prevailing wage
requirements to the rehabilitation of residential property refers
to the aggregate number of units in all the buildings being
rehabilitated whenever they are commonly owned, will be operated as
a single project, and are situated either side-by-side or on
contiguous lots.
The Arbor Hill Development Project meets this test. Arbor Hill
Associates own and will operate all 232 residential units in the 82
buildings that comprise the project for at least 12 years.
Moreover, Exhibit A to the UDAG grant agreement between Arbor Hill
Associates and the City of Albany describes the "Project Site" as
"the Arbor Hill section of Albany, located within the Clinton
Avenue and Ten Broeck Triangle historic districts. Seventy-five of
the buildings [16]
~17
[17] are located along the north and south sides of Clinton Avenue
between North Pearl Street and Northern Boulevard, and the remaining
seven buildings directly north and adjacent to Clinton Avenue."
It is apparent to the majority from all of the above that the
grant documents as well as the developers, are, in reality,
treating this undertaking as one entire property. Under these
circumstances, the Board cannot conclude that the Administrator was
erroneous in holding that the term "residential property" means
project and that the Davis-Bacon labor standards of Sec. 110 of the
Housing and Community Development Act of 1974 are applicable to the
Arbor Hill Redevelopment Project.
Petitioners contend, however, that the Board should not reach
the merits of this case for a variety of reasons.
First, petitioners contend that the Board cannot make findings
of fact that are necessary to the resolution of the issues raised
by their petition for review because the Board is an appellate
review body. Accordingly, petitioners insist that this matter be
remanded to the Administrator, who, in turn, should conduct an
evidentiary hearing in order to resolve these alleged factual
issues. The mere existence of alleged factual disputes does not
require the Board to remand this matter for an evidentiary hearing.
The only time a case should be remanded for the taking of
additional evidence pursuant to Rule 7.1(e), 29 CFR sec. 7.1(e) is
when there is a genuine issue of material fact.
Only disputes over facts that might affect the outcome of the
case under the applicable law should be remanded for evidentiary
hearing. Factual disputes that are irrelevant and unnecessary need
not be remanded. Thus the Board must determine whether there are
any factual issues that properly can be resolved only by an
evidentiary hearing.
Petitioners raise several "factual" issues that they claim
require a [17]
~18
[18] hearing. The Board finds, however, that none of the factual issues
are "material" and therefore, remand to the Administrator is
unnecessary.
Petitioners also argue that denial of an evidentiary hearing
deprives them of due process of law because the resulting decision
will be arbitrary and capricious. If, however, none of the factual
issues that petitioners wish to pursue are material to the
resolution of the dispute in this case, the denial of such hearing
is not "arbitrary or capricious".
Inasmuch as the Board has found that there is no genuine issue
of material fact which necessitates remand to the Administrator for
an evidentiary hearing, Petitioners have not been denied due
process.
Petitioners also claim that the Government is estopped from
enforcing Davis-Bacon prevailing wage requirements on the Arbor
Hill Redevelopment Project. The Board has often considered estoppel
arguments by contractors and others seeking to avoid compliance
with Davis-Bacon labor standards. In Prometheus Development
Company, et al., WAB Case No. 81-2 and 81-3 (August 19, 1985), the
Board quoting its holding in Warren Oliver Company, WAB Case No.
84-8 (November 20, 1984) stated:
This Board has rejected estoppel arguments that a
petitioner's reliance upon the advice of the contracting
agency as to the appropriate wage rate operates to
relieve petitioner of its responsibility to pay the
proper wage rate to laborers and mechanics employed on
the project. The Secretary of Labor was given the power
to regulate the interpretation and enforcement of the
Davis-Bacon and related acts by Reorganization Plan No.
14 of 1950. This authority has been reinforced by two
opinions of the Attorney General of the United States.
Sentinel Electric Company, WAB Case No. 82-09 (April 5,
1984). See also Jos. J. Brunetti Construction Co. and
Dorson Electric and Supply Co., Inc., WAB Case No. 80-09
(Nov. 18, 1982), Metropolitan Rehabilitation Corp., WAB
Case No. 78-25, (Aug. 2, 1979) and Tollefson Plumbing and
Heating Co., WAB Case No. 78-17, (Sept. 24, 1979).
Accordingly, the Board rejects petitioners' estoppel argument. [18]
~19
[19] Finally, petitioners contend that the administrative process
adopted by the Secretary of Labor pursuant to Reorganization Plan
No. 14 of 1950 for the resolution of disputes concerning
interpretation and application of the Davis-Bacon and Related Acts
"is more akin to rule making". As such, Petitioners argue that the
Wage and Hour Administrator's decision challenged in this
proceeding should have been adopted in accordance with the "notice
and comment" provisions of Sec. 4 of the Administrative Procedures
Act (APA), 5 U.S.C. Sec. 553.
Under the APA definitional scheme, the Secretary of Labor's
administrative procedures for resolving disputes concerning
application and interpretation of the labor standards provisions of
the Davis-Bacon and Related Acts is "adjudication" rather than
"rule making" and the Administrator's decision in this case is an
"order", not a "rule".
Perhaps the best explanation of the distinction between "rule
making" and "adjudication" was in U.S. v. Florida East Coast RR,
410 U.S. 224, 244-45 (1972) where the Supreme Court stated:
The basic distinction between rulemaking and adjudication
is illustrated by this Court's treatment of two related
cases (Londoner v. Denver, 210 U.S. 373 (1908) and
BiMetallic Investment Co. v. State Board of Equalization,
239 U.S. 441 (1915)) under the Due Process Clause of the
Fourteenth Amendment. . . . While the line dividing them
may not always be a bright one, these decisions represent
a recognized distinction in administrative law between
proceedings for the purpose of promulgating policy-type
rules or standards, on the one hand, and proceedings
designed to adjudicate disputed facts in particular cases
on the other.
Accordingly, the Administrator's decision was appropriately
issued without publication for notice and comment as provided by
Sec. 4 of the APA. The Board's holding that the administrative
process established by the Secretary of Labor for resolution of
disputes concerning application and interpretation of the labor
standards provisions in the Davis-Bacon and Related Acts is
"adjudication" does not mean, however, that petitioners are
entitled to a full evidentiary [19]
~20
[20] hearing as provided in Sec. 5 of the APA. 5 U.S.C. Sec. 554.
Under the APA a formal adjudication is necessary only when some statute
requires determination "on the record after opportunity for an agency
hearing". 5 U.S.C. Sec. 554. Iz[a]ak Walton League v. Marsh 655 F.2d
346, 361-62 (D.C. Cir. 1981), cert. denied. Neither the Davis-Bacon
Act nor any of the Related Acts set forth such requirement. Thus the
Secretary's administrative procedure is "informal" adjudication, which
is a residual category including all agency actions that are not
rulemaking and need not be conducted through "on the record" hearings.
In view of the foregoing the decision of the Administrator is
affirmed and the Petition is dismissed.
* * *
Chairman Bramow, concurring:
The petitioners not only challenge the Wage and Hour
Administrator's ruling of October 22, 1986 that Davis-Bacon Act
labor standards must be applied to the Arbor Hill Redevelopment
Project, but also challenge the jurisdiction of the Secretary of
Labor or his designee to interpret the labor standards provisions
of Section 110 of the Housing and Community Development Act of
1974, 42 U.S.C sec. 5310. It is therefore incumbent upon the Board
to address the issue of its jurisdiction over this matter before
rendering a decision concerning the coverage question.
The petitioners contend that the interpretation of the
statutory labor standards provision of the Act are beyond the scope
of the jurisdiction and the expertise of the Department of Labor.
Petitioner's maintain that the authority rests completely with the
grant agency, the Department of Housing and Urban Development, and
thereafter must be addressed and decided by a court.
The Wage Appeals Board has jurisdiction over the coverage
issue by virtue of two authorities. One by the jurisdiction
afforded under Reorganization Plan No. 14 of 1950, 5 U.S.C.
Appendix, and the other by the memorandum Decision and Order of the
U.S. District Court for the District of Columbia dated April 12,
1987. [20]
~21
[21] Reorganization Plan No. 14 of 1950 reads in pertinent part
as follows:
In order to assure [*] coordination of administration [*]
and [*] consistency of enforcement [*] of the labor
standards provisions of each of the following Acts by the
Federal agencies responsible for the administration
thereof, the [*] Secretary of Labor [*] shall prescribe
appropriate standards, regulations and procedures, which
shall be observed by these agencies. . . . [*Emphasis
added.*]
Section 110 of the Housing and Community Development Act of 1974
confers upon the Secretary of Labor with respect to labor standards
provided therein the authority and functions set forth in
Reorganization Plan No. 14.
A primary concern prior to the enactment of the Reorganization
Plan was the degree of protection afforded workers. As President
Truman stated in his message to the Congress on March 13, 1950 "the
degree of protection afforded workers varies from agency to agency.
In order to correct this situation, this plan authorizes the
Secretary of Labor to coordinate the administration of legislation
relating to wages and hours on federally financed or assisted
projects by prescribing standards, regulations, and procedures to
govern the enforcement activities of the various Federal
agencies. . . ." To rule out the authority of the Secretary of
Labor to decide questions of coverage under the various related
Acts would defeat the primary objective of the Reorganiza[ti]on
Plan, i.e., the protection of the workers which varied from agency
to agency.
The facts of this case demonstrate the lack of coordination
and consistency of administration of the labor standards provisions
by HUD. Over the years HUD has issued contradictory interpretations
as to the meaning of the proviso in the labor standards provisions
of Section 110 which states:
Provided, That this section shall apply to the
rehabilitation of residential property only if such
property is designed for residential use for eight or
more families.
There is no dispute that HUD initially indicated that the
labor standards [21]
~22
[22] provisions of Section 110 of the Act were applicable to the Arbor
Hill Redevelopment Project. Then after an inquiry by the petitioners an
official of HUD's Buffalo area office on September 27, 1985 advised the
petitioners that the project does not require the application of the
Federal labor standards. This official based his advice on a mistaken
premise that the exemption had been applied by HUD for twelve years on
this type of project, whereas in August, 1984, the Associate General
Counsel of HUD issued two opinions that such undertakings were not
exempt because of the proviso in Section 110. Subsequently, in
December, 1985, the National Office of HUD reversed the Buffalo area
office stating that the Arbor Hill project was subject to the labor
standards provisions of the Act.
The above factual situation certainly demonstrates the purpose
of Reorganization Plan No. 14 of 1950. Therefore, the Board must
conclude that the Plan gives HUD and other similar Federal agencies
the initial responsibility in the determination of coverage,
whereas the Department of Labor has the final authority.
Further, this conclusion is supported by the Memorandum
Decision in Vulcan Arbor Hill Corporation, et al. v. Samuel R.
Pierce, Jr., Civil Action No. 86-2089, U.S. District Court for the
District of Columbia, decided April 23, 1987. This action was
brought by the petitioners praying that the court issue a
declaratory judgment holding that the Arbor Hill Rehabilitation
Project falls within the exemption language of Section 110 of the
Act.
Judge Greene in his decision stated:
Administrative review of a contracting agency's coverage
determination under the Davis-Bacon Act, 40 U.S.C. sec.
276a et seq., is a two-step process. First, a ruling or
interpretation must be requested from the Wage and Hour
Administrator of the Department of Labor. 29 C.F.R. sec.
5.13. /FN1/ [22]
컴컴컴컴컴컴컴컴컴컴컴컴
/FN1/ If The Department of Labor's authority to promulgate
regulation sec. 5.13 is derived from Reorganization Plan No. 14 of
1950. [22]
~23
[23] A party or interested person, to whom the decision of the
Wage and Hour Administrator is adverse, initiates the
second step by filing an appeal with the Wage Appeals
Board. 29 C.F.R. sec. 7 et seq. The Board has
jurisdiction to hear and resolve appeals from [*] final
decisions [*] involving wage determinations as well as
[*] other controversies relating to coverage [*], 29
C.F.R. sec. 5 et seq. . . . [*Emphasis added.*]
The Court concluded that the issue of coverage in this case
was within the expertise and jurisdiction of the Department of
Labor and dismissed the case for failure to exhaust available
administrative remedies. /FN2/
The plain reading and intent of Reorganization Plan No. 14 of
1950 coupled with the above cited U.S. District Court case clearly
assigns to the Department of Labor jurisdiction and final authority
over coverage issues. Also, HUD in its statement of its views as an
interested party before the Board filed on April 30, 1987
recognized that under Reorganization Plan No. 14 of 1950 that the
Department of Labor has the final authority on coverage issues
under the statute.
The Board now must consider the issue whether the proviso in
Section 110 that rehabilitation of residential property designed
for residential use for less than eight families is exempt from the
labor standard provisions is applicable to this case. The
petitioners contend that because each separate building
is designed for less than eight families the entire undertaking is
exempt. In order to make this determination, the Board must examine
the legislative history along with the provisions of the Act and
the purpose of the UDAG grant to determine whether or not the
exemption is applicable.
The petitioners have made light of the legislative history and
even went so far as to indicate that there really is none which
would be helpful in resolving the issue. The Joint Explanatory
Statement of the Committee of Conference, Conference Report
93-1279, 93rd Cong., 2nd Sess., (1974) which [23]
컴컴컴컴컴컴컴컴컴컴컴컴
/FN2/ The Wage Appeals Board has the jurisdiction to review the
decisions of the Wage and Hour Administrator.
~24
[24] appears in the Compilation of the Housing and Community
Development Act of 1974 does at page 307 give some insight into the
meaning of the term "residential property". The statement regarding
labor standards at page 307 appears to refer to the rehabilitation
of residential structures as a proposed project. The last sentence
in the portion of the labor standards section states:
It is intended that the area of consideration should be
large enough to yield an adequate factual basis for each
wage determination, yet small enough to reflect only the
wages and practices of the area surrounding the location
of the [*] proposed project [*]. [*Emphasis added.*]
This reference to proposed project may not be significant
standing alone, but must be placed in context with the statute
itself and purpose of the entire undertaking.
Section 105 of the Act refers to activities for which
assistance may be granted. Among such activities is the clearance,
demolition, removal and rehabilitation of buildings and
improvements. This section of the Act speaks collectively of
buildings and improvements. Section 119 of the Act under which the
Urban Development Action Grant was authorized in this case uses the
term "development activity". Again, the Act is referring to the
entire property for which the grant is to be made. No reference is
made to an individual building as the property. The Act appears to
take into consideration the entire undertaking as the property in
question.
Moreover, the grant agreement itself uses the term "project"
in reference to the entire property to be rehabilitated. Exhibit.
A, Supplemental Provisions, describes the "project elements" as the
acquisition and rehabilitation of 82 vacant buildings resulting in
the creation of 232 residential apartment units and 14 storefronts.
Therefore, to define the term "residential property" to mean each
building would take that term out of context with the statute. [24]
~25
[25] It is also perfectly clear from all the above that the rental
property for which the UDAG grant was made is designed to be
occupied by 232 families. The UDAG grant provides funds directly
for the construction of the entire undertaking; all the structures
are under one common ownership; the general contractor and
subcontractors are performing interchangeably on all the
structures; and petitioners indicated that the laborers and
mechanics were also performing construction activities if not on
all the structures, at least on more than one.
The petitioners' position that the term "residential property"
means a single building is also flawed by their characterization of
the 14 storefronts. They characterize these storefronts as de
minimis. They can only be de minimis to the entire undertaking as
no individual building has more than 3 or 4 units and, in fact,
some buildings are 2 units including the storefront. Therefore, the
14 storefronts can only be considered de minimis or incidental
under the Act if the term "residential property" mean the entire
undertaking, i.e. the 232 units as a whole or as a project.
It is apparent to me from all of the above that the grant
documents as well as the developers are in reality treating this
undertaking as one entire property. Under these circumstances, I
cannot conclude that the Administrator was erroneous in holding
that the term "residential property" means project and that the
Davis-Bacon Act labor standards of Section 110 of the Housing and
Community Development Act of 1974 are applicable to the Arbor Hill
Redevelopment Project.
With respect to the estoppel issue, this Board has rejected
arguments that a petitioner has relied upon the advice of the
contracting agency. The Secretary of Labor was given the power to
regulate the interpretation and enforcement of the Davis-Bacon Act
and related acts by Reorganization Plan No. 14 of 1950. [25]
~26
[26] See Warren Oliver Company, WAB Case No. 84-08 (November 20, 1984)
and the cases cited therein.
With respect to the request for a fact finding hearing, there
does not appear to be any material dispute as to the facts in this
case. The Board considered those facts expressed by petitioners in
their brief and at the oral hearing in reaching its decision.
Therefore, it is not deemed necessary to remand the case to the
Administrator to hold a fact finding hearing.
Also, it appears from the facts of this case that the question
of Davis-Bacon coverage is moot. The specifications which have been
made a part of petitioners' contract contain Davis-Bacon coverage.
Therefore by contract petitioners have agreed to apply the
Davis-Bacon labor standards. Under these circumstances, the
petitioners cannot be permitted to circumvent their agreed-
to obligations under the contract.
In view of the foregoing, I affirm the decision of the
Administrator and dismiss the petition.
* * *
Member Rothman, Concurring and Dissenting.
I concur in the result reached by Chairman Bramow and Member
Dunn that the petition should be dismissed. But because I believe
the application of the Sec. 110 need not be reached and also may be
misapplied, I write a separate opinion.
For the reasons discussed below, I would reserve the question
of the application of the Sec. 110 proviso of the Housing and
Community Development Act of 1974 (hereinafter HCDA) until such
time as DHUD or a grant agency brings the matter before the
Secretary of Labor under Reorganization Plan No. 14 of 1950
(hereinafter Reorg. Plan 14) and Davis-Bacon regulations, 29 CFR
Parts 1, 5 and 6, before the "Legally Binding Commitment" referred
to by the majority is executed. A DHUD briefing on the nature and
facts of the [26]
~27
[27] particular rehabilitation project when made at such a time should
be significantly different from one at the enforcement stage.
I agree with my colleagues that there are no disputed
questions of material fact between DOL, DHUD and the petitioners
that stand in the way of a resolution of this dispute under Reorg.
Plan[] 14, and applicable DOL regulations. All material statements
and representations about facts made by the petitioners are taken
as true and looked at in the best light to petitioners.
This is not a rulemaking proceeding. The Board does not engage
in rulemaking. It is the disposition of a dispute raised at the
enforcement stage of a Davis-Bacon matter. It is made in the same
way that it has been made under Reorg. Plan 14 and the DOL
regulations, 29 CFR Part 5, since the Board was established in
1964.
* * *
I further agree that there can be no estoppel against the
DHUD. An estoppel against a government agency would be extremely
difficult to prove in any case. Here, none of the elements of
equitable estoppel are present, neither lack of knowledge,
misstatement, intent to deceive, reliance, nor detriment are
present.
There are procedures Davis-Bacon contractors know must be
followed. When the grant document, here the Legally Binding
Commitment, provides that the Davis-Bacon Act will be applied, it
would be farfetched to excuse a grantee because a local subordinate
officer says the Legally Binding Commitment (made at a much higher
agency level) is no such thing.
The grant document was predicated on coverage; the petitioners
would comply with the Davis-Bacon Act wage predeterminations. There
was an early outright disavowal and reversal by DHUD of the
subordinate officer's failure to follow [27]
~28
[28] DHUD's decisions in the matter. This is not a case, if there could
be such a case, in which DHUD has waived the application of an agreed
upon contractual requirement re the Davis-Bacon Act.
Further, when the Davis-Bacon Act applies, the determination
of the prevailing wage rates must by definition be based upon
classification of laborers and mechanics by craft or class. When a
grantee under a program such as this wishes to challenge a
classification upon which a Davis-Bacon wage survey is based, it
must do so at an appropriate time, otherwise serious questions of
misclassification may arise at the enforcement stage.
I agree with the majority decision that this Board has
jurisdiction to resolve this dispute. The Congress promulgated
Reorg. Plan 14 ln 1950 because of variations in the ways
contracting agencies administered the Davis-Bacon Act.
One agency was to achieve uniformity. That agency was the
Department of Labor and that is the way it has been done for 37
years. At the enforcement stage of a Davis-Bacon proceeding, it is
given exclusively to the Secretary of Labor by Reorg. Plan 14 to
achieve coordination of administration and consistency of
enforcement of the labor standards provisions of a number of
enumerated acts.
From the beginning under Reorg. Plan 14 DOL authority has
included resolution of disputed questions of coverage. To
illustrate, the Davis-Bacon Act applies to all Federal agency
contracts for the construction of "public buildings or public
works". And the contemporaneous and continued application of Reorg.
Plan 14 from 1950 on has included the question whether particular
structures or buildings were public works of the United States for
Davis-Bacon purposes. With respect to coverage questions under the
Davis-Bacon Act itself, the buck administratively, as President
Truman put lt, has stopped with the Secretary of Labor. /FN1/[28]
컴컴컴컴컴컴컴컴컴컴컴컴
/FN1/ Whether within a governmental administration, one Department
should seek the advice[] of another outside of the enforcement
stages of a Davis-Bacon Act proceeding, is a matter of policy for
the administration, but it is not relevant to the enforcement
proceeding before the Board today. [28]
~29
[29] It has not been seriously contended during the past 37 years
that the Secretary of Labor did not determine questions of coverage
when the Davis-Bacon Act was the sole coverage act which applied.
But what about the many other federal assistance statutes into
which Davis-Bacon and Reorg. Plan. 14 have been incorporated? Some
of these Davis-Bacon Related Acts contain special coverage
language.
When the Congress promulgated Reorg. Plan 14 in 1950, it did
not limit the Secretary's power to the Davis-Bacon Act alone. It
bestowed the same powers with respect to many enumerated statutes.
It has added many additional grant acts since then. What the
Secretary of Labor can do with respect to the administration of the
Davis-Bacon Act under Reorg. Plan 14 he can do with respect to the
administration of other federal statutes to which the Congress
has said the Secretary shall have the powers that he has under
Reorg. Plan 14. The HCDA is such a statute.
The Congress has placed such responsibility in the Department
of Labor as an institution. It has resided and been exercised there
under Reorg. Plan 14 for 37 years and before that on a less formal
basis. The petitioners' attack therefore upon the jurisdiction of
the Department of Labor, the Wage and Hour Administrator and this
Board to resolve basic questions concerning the application of this
Davis-Bacon Related Act is unwarranted.
The petitioners' attack upon the expertise of the Board in
this case is directed, apparently, to the situation that there is
an uneasy matter of statutory interpretation on what looks like
inconclusive legislative history; that is, if legislative history
be needed at all. It is said that there is no reason why an
administrative agency is in a better position to construe a statute
than is a court. It is said this is the business of courts and what
courts do all [29]
~30
[30] the time. All this is very true. But it is given to
administrative agencies and it is particularly given under Reorg. Plan
14 to the Secretary of Labor to make the determination at certain stages
of administrative proceedings. It is not simply a matter of statutory
interpretation in the air, standing alone, but the application of
particular statutory language to a given set of facts. There is a
factual situation to which through administration under the act the
Congressional intent must be applied. In this case it s given
exclusively to the Secretary of Labor to do so under Reorg. Plan 14.
Whether the Davis-Bacon Act applies or does not apply under the language
of a statute incorporating the Davis-Bacon Act and Reorg. Plan 14 to a
particular project becomes a determination for the Secretary of Labor to
make for the governmental agencies. This will be discussed further
below in connection with the Sec. 110 proviso and the DHUD position.
In this concurring opinion I do not venture to state the
standard of review should this matter be returned to a court. It
has been there once. But it is given to the Secretary of Labor and
required by Reorg. Plan 14 that this matter be resolved within the
Department of Labor for governmental agencies and therefore this
Board must do so. /FN2/
* * *
It should not go unnoticed that DHUD has not come in to argue
that the petitioners in this enforcement proceeding should be
relieved of their Legally Binding Commitment bargain. DHUD has
never abandoned its enforcement position in this case. [30]
컴컴컴컴컴컴컴컴컴컴컴컴
/FN2/ Petitioners have referred to a Department of Justice opinion
dated Aug. 6, 1987 to DHUD. (Memorandum to Secretary of DHUD, from
Charles J. Cooper, Assistant Attorney General) There is reason to
conclude, based on the administration of Davis-Bacon for over 50
years, that if the DOJ were to undertake a construction program to
which the Congress has said the Davis-Bacon Act and Reorg. Plan 14
applies, it would be given to the Secretary of Labor to determine
questions of coverage. [30]
~31
[31] If a HCDA participant believes Davis-Bacon does not apply and
does not want to commit to pay the Davis-Bacon wage
predeterminations, that is a matter to be resolved before the quid
pro quo grant is given. Davis-Bacon obligations may not be foremost
in a developer's mind at the financing stage of a many million
dollar undertaking. But a grantee cannot be presumed to be naive
or uninformed about Davis-Bacon labor construction obligations if
he agrees to them to get the money. There is nothing that prohibits
a recipient of federal financial assistance from agreeing in a
Legally Binding Commitment to apply Davis-Bacon to the undertaking.
The situation is akin to the situation which requires a contractor
to straighten out disputed Davis-Bacon matters such as correct wage
predeterminations, classification matters and coverage at the
bidding and proposal stage, not at the enforcement stage. Nothing
the DHUD or the City of Albany did or intended to do has been
intended to relieve petitioners of an obligation exchanged for a
grant of public funds. DHUD does not take that position in this
enforcement proceeding. There I would end the decision and
holding in this case.
A government brief before the quid pro quo is exchanged should
have a different look with respect to what goes into the detailed
evaluation and approval of such a project than the kind of brief
submitted after the Davis-Bacon commitment is a fait accompli, and
the grant money used and the question is before the Board at the
enforcement stage.
* * *
[*But it is also important to listen to what the DHUD is
saying in this kind of case. DHUD did not request to be heard at
the oral argument. It stated in a submitted brief, however, that if
it had its druthers, DOL should conclude that with respect to an
Arbor Hills type project, such a project should be excluded [31]
~32
[32] from coverage under Sec. 110 of HCDA. But, I would withhold a
final decision on the proviso until such time as DHUD should take
a position contrary to the Wage and Hour Administrator on the facts
of another specific case, raised before grant money is used.
However, the Board majority goes on to apply the Sec. 110
proviso. The majority aggregate all the dwelling units in the Arbor
Hills undertaking subject to the Legally Binding Commitment and
declare that the undertaking pertains to residential property
designed for the use of eight or more families. For that reason,
the majority reasons it is an undertaking per the proviso
and is a [*project*] subject to the Davis-Bacon Act.
But I am not sure that the majority's interpretation of the
proviso as applied to the undisputed facts in this case is correct.
My view looks to the contrary. The fact that in the 1930's the
Davis-Bacon Act was a remedial statute, as the DOL argues, does not
mean that any and all doubts in Davis-Bacon Related Acts must be
decided in favor of coverage. That aphorism may be overapplied if
facts do not support it. We are not dealing with a question whether
the Davis-Bacon Act is remedial or not, or, as counsel for the Wage
and Hour Administrator further argues, with a DOL past practice of
deciding all questionable questions of coverage in favor of
coverage. For one thing, I doubt the existence of any such past
practice; no examples are given. We are concerned with what did the
Congress in 1974, not 1938, intend by an express limitation
imposed by the proviso? /FN3/
In a letter to Congressman Benjamin, April 2, 1981 (Brief of
Building and Construction Trades Department, AFL-CIO), the Wage and
Hour Administrator stated: [32]
컴컴컴컴컴컴컴컴컴컴컴컴
/FN3/ The 1972-74 era was a period when the Federal Administration
believed it necessary to impose wage and price restraints. This is
a matter of which administrative notice may be taken. [32]
[t]he term "residential property" (in Sec. 110) refers to
projects rather than buildings. Thus, the Davis-Bacon labor
standards provisions would apply to contracts for the
rehabilitation of a housing development comprised of several
buildings of less than eight units provided that the total
number of units to be rehabilitated is eight or more. However,
they would not apply to a contract for rehabilitation of
unrelated buildings of less than eight units, even though the
total number of units to be rehabilitated is eight or more.
/FN4/
To identify the Arbor Hills undertaking, DHTJD processed
petitioners' grant application under a project concept. The
"Legally Binding Commitment" was entered into on a "project" basis
thus identifying the purposes for which appropriated funds were
committed. This is the normal course of financing a development and
it results in what is commonly referred to as a project.
But there has been too much wrangling in this dispute over the
word "project" and not enough focus by Wage and Hour upon the
nature of the specific undertaking. The project consists of 82
separate residential buildings and, when initially planned, that
is, "designed", as the proviso states, were individual buildings of
one to four family dwelling units. At the time of acquisition each
was a separate municipal tract with its own separate improvements,
including utility connections to the principal trunk lines. It has
been represented to the Board that each of these 82 dilapidated
buildings, located over a blighted neighborhood was to be brought
back through rehabilitation. But in doing so the initial design was
not changed physically from what each building and improvements
were before. Each will stand independently of any other on its own
municipal tract with its own utility connections of all kinds. The
Petitioners represented that they obtained and were required to
obtain separate permits for each basic governmental use for which
a permit was required. From this it would follow that each remains
separately listed on the [33]
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/FN4/ If one pores over this letter in the context of the instant
dispute, one concludes that the Wage and Hour Administrator says
the same thing to reach opposite results by a play on words: a
"project", a "contract". The HCDA Sec. 110 does not say the term
"residential property" as there used refers to a project and not to
buildings. Nor does it say it does not. [33]
~34
[34] public rolls for all local governmental purposes including
taxation and assessments. /FN5/ The majority has so noted. One of
the reasons for this retention of separateness is that after 12
rental years each building is to be individually sold.
In short, when these buildings and improvements were initially
designed, each building was not designed to house eight or more
families. After rehabilitation, none of these buildings on separate
tracts will have been redesigned to house eight or more families.
Nor will the utility systems or other improvements have been so
redesigned to interconnect these buildings such as into an
integrated garden-type residential housing development.
As an urban neighborhood rehabilitation program, the HCDA
deals with acquisition and rehabilitation of buildings and
improvements. This includes, per the Act, financing public or
private acquisition of privately owned properties. This is
immediately apparent not only from consideration of the nature
of the program but from an examination of Sec. 105 of the HCDA.
Funds are available for
(4) clearance, demolition, removal and rehabilitation
(including rehabilitation which promotes energy efficiency)
of buildings and improvements (including interim
assistance, and financing public or private acquisition
for rehabilitation, and rehabilitation of privately owned
[*properties*], and including the renovation of closed school
buildings); [*Emphasis added.*]
Sec. 110 of the H[CD]A of 1974 reads as follows:
All laborers and mechanics employed by contractors or sub-
contractors in the performance of construction work financed
in whole or in part with assistance received under this
chapter shall be paid wages at rates not less than those
prevailing on similar construction in the locality as deter-
mined by the Secretary of Labor in accordance with the Davis-
Bacon Act, as amended (40 U.S.C. 276a--276a-5): Provided,
That this section shall apply to the rehabilitation of [34]
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/FN5/ My reasoning with respect to the application of the Sec. 110
proviso is limited to a project with this acquisition, physical and
rehabilitation configuration and local governmental attributes.[34]
~35
[35] residential property only if such property is designed for
residential use for eight or more families. The Secretary
of Labor shall have, with respect to such labor standards,
the authority and functions set forth in Reorganization
Plan Numbered 14 of 1950 (15 F.R. 3176; 64 Stat. 1267) and
section 276c of Title 40.
Laying Sec. 110 of the Act along side Sec. 105(a)(4) with its
reference to "properties" for rehabilitation, the proviso is
subject to the interpretation that "property" in Sec. 110 refers to
buildings and improvements in a general way and that Congress
intended the term "residential property" in the proviso to be
applied severally or collectively depending upon full consideration
of the facts in each case.
While the foregoing approach is one inference to which Sec.
110 and Sec. 105(a)(4) considered together is susceptible, is it
the correct interpretation? Or did the Congress intend that the
total number of dwelling units in the overall undertaking should
define the Sec. 110 term "residential property" as the majority
herein conclude, and therefore the aggregate number of dwelling
units subject to the Legally Binding Commitment will determine
application of the Davis-Bacon Act?
Of these two possibilities, the conclusion I reach is that
looking at the nature of a neighborhood residential rehabilitation
project as contemplated by Sec. 105(a)(4), consisting as it does of
the acquisition of various parcels of land or "properties", the
term "residential property" in Sec. 110 is used in a generic sense,
"relating to or characteristic of a whole group or kind of class",
and that it may apply severally or jointly, and that when
individual city tracts, that is, individual properties, though
handled under one loan grant program nonetheless remain separate
tracts for all local government and local neighborhood purposes,
public and private, such as being separately retained on the local
rolls for taxes and assessments and permits, that kind of a project
is a project in which the residential property or properties have [35]
~36
[36] not been either initially designed or redesigned under the
standard of the Sec. 110 proviso.
Under this reasoning and approach, it would be irrelevant that
each of the buildings on separate tracts are adjacent to each other
or in the same neighborhood. It is further irrelevant that a
grantee or other rehabilitation agency or agencies undertakes the
rehabilitation of a number of such separate properties at the same
time to achieve construction economies. These individual properties
have not been reassembled or realigned into a different design than
when initially built. The word "designed" cannot be written out of
the picture.
In the case in which assembled properties are redefined into
a single property or into several properties for single local
government treatment, then the result reached could be different
because in such a case there would most likely be a new redesign of
property into "use" by more than seven families. The nature of the
instant project appears to be such that these individual properties
were never assembled into a common tract yielding a single
residential property. A common ownership of many different
properties in a neighborhood rehabilitation operation does not
result in a single "residential property".
Other rehabilitation projects under Sec. 105(a)(4) of the HCDA
may be different on their facts. For this reason this dissenting
view is itself a limited one. And since this is a minority view, it
could not be retroactive, anyway. But I believe that DHUD should
have the opportunity in an appropriate future case to raise this
kind of question before the specific Legally Binding Commitment is
entered into, or at least before grant funds are used. In the
event that a grantee was then not satisfied with the result
obtained under Reorg. Plan 14, it would then be in a position not
to use or to return the appropriated funds.
* * *
~37
[37] To prevent misunderstanding concerning this minority view, the
following is added.
This case is not like Muskogee Shopping Mall (UDAG Proj. No.
B-81-AB-40-0033, WAB Case No. 85-26, decided June 24, 1986) where
the "scope" of a project subject to federal assistance was in
issue. The question there was, at what point did the acquisition
and development program as a public undertaking come to an end and
private enterprise privately financed take over? Nor does this case
involve the situation which petitioners allude to in th[eir]
posthearing statement by attaching the opinion of the Department of
Justice dated August 6, 1987. See fn. 2, p. 30, supra. The DOJ
opinion did not determine the scope of any particular project. If
it was the intent of the DOJ opinion, as the decision concludes,
that the Davis-Bacon Act would not apply if construction
[*materials*] are paid for with federal financial assistance but
wages are not, such an opinion when applied in a particular case
may not be on firm, solid ground. For example, if the purport of
such opinion is that lumber and nails are paid for with federal
financial assistance but laborers and mechanics who use such lumber
and such nails are not the Davis-Bacon Act does not apply, I
believe there is room for looking further into so broadly a stated
proposition. I doubt that such was the intent of the opinion. In
determining close cases and the scope of a particular project and
attendant coverage there is no substitute for getting down to brass
tack details of financing, development and construction.
* * *
Wage and Hour's counsel makes the interesting argument that
Congress intended the Davis-Bacon Act to apply to a rehabilitation
project according to the aggregate number of dwelling units to be
rehabilitated under a single grant. Otherwise, the argument goes,
there could be buildings in the same project that [37]
~38
[38] had more than eight dwelling units and others that had less. How
could the Davis-Bacon Act apply in such a case? That is a different
problem to be dealt with if it ever arises. This was not such a
project.
The petitioners (or their construction contractor) applied to
DHUD and DOL under Davis-Bacon procedures for additional wage
classifications under the residential building schedule. Fourteen
of these 82 buildings included partial redesign to provide
commercial space. Whether such commercial use of the premises was
justified under the statute is not the point. Whether DHUD was
correct in excluding these buildings from application of the
building construction wage rates is still another matter. The Wage
and Hour Division should take a no-enforcement position and let it
go. But there can be no question that at the time the "de
minim[i]s" concept was developed, the parties were proceeding on
the basis that the residential Davis-Bacon wage rates would be
applicable to this project.
BY ORDER OF THE BOARD
Craig Bulger,
Executive Secretary
Wage Appeals Board [38]
