CCASE:
SILVERTON CONSTRUCTION
DDATE:
19920929
TTEXT:
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WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
SILVERTON CONSTRUCTION CO.,
INC., Prime Contractor WAB Case No. 92-09
BEFORE: Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Anna Maria Farias, Member
DATED: September 29, 1992
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition
of the Acting Administrator of the Wage and Hour Division for
review of the April 29, 1992 decision and order of Administrative
Law Judge ("ALJ") Nicodemo De Gregorio. The Acting Administrator
seeks reversal of the ALJ's determination that prime contractor
Silverton Construction Co., Inc. ("Silverton") was not liable for
payment of back wages resulting from prevailing wage violations by
its subcontractor because no money was withheld from the accrued
payments under the contract to cover the wage claims. For the
reasons stated below, the petition for review is granted and the
ALJ's decision and order is reversed.
I. BACKGROUND
In September 1985 the Department of the Army awarded
Silverton a contract for repair work at Red River Army Depot in
Texarkana (Bowie County), Texas. Silverton subcontracted part of
the work to Crackers South, Inc. ("Crackers"). The contract and
subcontract were subject to the labor standards provisions of the
Davis-Bacon Act (40 U.S.C. 276a et seq.), the Contract Work
Hours and Safety Standards Act ("CWHSSA") (40 U.S.C. 327 et
seq.), and the Copeland Act (40 U.S.C. 276c).
After completion of the contract repair work, the Wage and
Hour Division investigated subcontractor Crackers' performance on
the project. The investigation revealed that Crackers failed to
pay the applicable prevailing wage rate for the work performed by
its employees. The applicable wage determination -- No. TX84-4104,
as modified with respect to Bowie County -- required that laborers
be paid a basic hourly rate of $5.10 per hour with no fringe
benefits and that power equipment operators be paid a basic hourly
rate of $6.90 with no fringe benefits. Crackers paid its employees
in these classifications a salary of $350 per week, $400 per week
or $450 per week for all hours worked. This method resulted in a
fluctuating rate of pay which frequently fell below the required
prevailing wage. Furthermore, Crackers failed to pay proper
overtime compensation. The Wage and Hour Division calculated that
a total of $1,085.33 in back wages was due for four employees,
including $241.90 for prevailing wage violations and $843.43 for
overtime violations.
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Neither prime contractor Silverton nor subcontractor Crackers
agreed to make restitution to the affected employees. Silverton
requested a hearing before an ALJ. On February 19, 1992 the
Regional Administrator filed a motion for summary decision.
Silverton filed a response by letter of March 12, 1992, listing its
defenses and requesting judgment in its favor. The ALJ treated
Silverton's letter as a cross-motion for summary decision. The ALJ
then granted Silverton's motion, ruling in the prime contractor's
favor on the sole issue in the case -- prime contractor Silverton's
liability for back wages as the result of subcontractor Crackers'
prevailing wage and overtime violations. The ALJ relieved
Silverton of liability for the back wages because no funds were
withheld from the contract to cover the unpaid wages. The ALJ
concluded that Silverton was not liable because the "Government's
authority to make covered employees whole by means of
administrative remedies is limited by the amount of funds withheld
under the contract" (ALJ's Decision at p. 4), citing Whitney
Brothers Plumbing and Heating v. United States, 224 F. Supp. 860,
863 (D.C. Alaska 1963) ("Whitney Bros."). The ALJ stated that his
conclusion was reinforced by Section 104(a) of the CWHSSA (40
U.S.C. 330(a)), which states that if the amount withheld on
account of unpaid wages is not adequate, the Comptroller General is
to pay workers "an equitable proportion of such amounts." That
language, stated the ALJ, "does not suggest a legislative intent to
authorize an administrative remedy to recover the deficiency."
The Acting Administrator filed a petition with this Board for
review of the ALJ's decision and order. Statements have been filed
by both the Acting Administrator and the Building and Construction
Trades Department, AFL-CIO ("BCTD"), but not by Silverton.
II. DISCUSSION
The Board concludes that the ALJ's decision and order must be
reversed. His determination that the "Government's authority to
make covered employees whole by means of administrative remedies is
limited by the amount of funds withheld under the contract" is at
odds with the Department of Labor's regulations -- in effect since
1983 -- that permit contracting agencies to withhold funds due a
contractor from contracts other than those under which the wage
violations occurred ("cross-withholding") if necessary to satisfy
Davis-Bacon and CWHSSA obligations.
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The Department's regulations addressing Davis-Bacon and
CWHSSA labor standards requirements provide, at 29 C.F.R.
5.5(a)(2):
(2) Withholding. The [federal agency or 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 (or under the United
States Housing act of 1937 or under the Housing Act of
1949 in the construction or development of the project),
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. (Emphasis supplied.)
As suggested by counsel for the BCTD, the comments of the
Secretary of Labor explaining the decision to promulgate Sections
5.5(a)(2) and 5.5(b)(3) are instructive regarding the Department's
interpretation of Davis-Bacon and CWHSSA provisions as they relate
to the government's options in recovering unpaid wages and overtime
compensation. The Secretary explained (47 Fed. Reg. 23,658, 23,660
(May 28, 1982)):
Both the Davis-Bacon act and the CWHSSA require that all
covered contracts contain language to permit the
contracting agency to withhold funds to satisfy unpaid
wages. Because neither statute specifically provides for
cross-withholding, agencies generally have refrained from
doing so. Accordingly, many contractors and
subcontractors have escaped payment of back wages because
violations were not discovered until after final payment
on the contract had been made.
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The decision in Whitney Bros. precluded withholding from
another contract under the language of the contract
clause in the regulations as they existed at that time.
In Decision No. B-177554 (March 22, 1973), the GAO
recommended that the Department adopt regulations
specifically permitting cross-withholding. In addition,
GAO commented in favor of the cross-withholding
provisions contained in the stayed DOL regulations of
January 16, 1981, which were substantially identical to
the current proposal.
Thus, it is apparent from the text of both the regulation and
the Secretary's comments that the ALJ in this case, by determining
that the only administrative remedy for recovering wage
underpayments is withholding of sums due to the contractor from the
contract under which the wage violations occurred, made a ruling
that is inconsistent with both the letter and the spirit of the
Department's regulations. As the Board has noted, an ALJ is not
free to disregard applicable Department regulations. See Roderick
Construction Co., WAB Case No. 88-39 (Dec. 20, 1990), at p. 15.
III. ORDER
For the foregoing reasons, the decision and order of the ALJ
is reversed. This matter is remanded to the ALJ for further
proceedings consistent with this decision.
BY ORDER OF THE BOARD:
Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Anna Maria Farias, Member
____________________________
Gerald F. Krizan, Esq.
Executive Secretary
