NORSAIRE SYSTEMS, INC., WAB No. 94-06 (WAB June 27, 1994)
CCASE:
NORSAIRE SYSTEMS
DDATE:
19940627
TTEXT:
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WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
NORSAIRE SYSTEMS, INC., WAB CASE NO. 94-06
BEFORE: David A. O'Brien, Chair
Ruth E. Peters, Member
DATED: June 27, 1994
DECISION OF THE WAGE APPEALS BOARD
This matter is before the Wage Appeals Board on the petition of Norsaire
Systems, Inc. ("Petitioner" or "Norsaire") for review of a January 25,
1994 ruling by the Deputy Assistant Administrator of the Wage and Hour
Division. In the ruling the Deputy Assistant Administrator determined
that employees of Norsaire were covered by the prevailing wage
requirements of the Postal Reorganization Act, 39 U.S.C. [sec]
410(b)(4)(C) (a Davis-Bacon Related Act), for time spent on the
construction site performing work on air cooling units which had been
manufactured and supplied by Norsaire. For the reasons stated below,
the ruling is reversed, and this matter is remanded for further
proceedings consistent with this decision.
I. BACKGROUND
PCL Construction Services, Inc. ("PCL"), was the prime contractor
on a contract (Contract No. 16982-89-B-0031) with the United States Postal
Service ("USPS") to construct a new "General Mail Handling Facility" at
Stapleton Airport in Commerce City, Colorado. The project was subject
to the labor standards provisions of the Postal Reorganization Act and
the Department of Labor's regulations at 29 C.F.R. Part 5. Among other
things, the prime contract [1]
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called for installation of air cooling units into the facility./FN1/
PCL subcontracted this portion of the contract to Natkin & Company
("Natkin"). On March 31, 1989, Norsaire entered into a purchase
agreement with Long & Associates, Inc. ("Long") to provide 19
indirect/direct air handling units to Natkin./FN2/ The purchase order
agreement entered into by Norsaire did not contain Davis-Bacon labor
standards provisions. Subcontractor Natkin employed Chavez
Construction, a lower-tier subcontractor, to install the air cooling
units.
The Wage and Hour Division conducted a compliance investigation of
the project during the period from February 4, 1990 to May 27, 1990. Wage
and Hour informed Norsaire by letter dated January 25, 1994 that the
investigation had disclosed that Norsaire failed to pay the prevailing
wage rate for the hours that Norsaire employees performed construction
work on the job site. The letter stated that according to information
provided by Norsaire's attorneys, the cooling units were turned on
prematurely and were damaged by construction dust. Norsaire then sent
employees to the job site to do on-site warranty work on the units. To
ensure the continued performance of the air handling units, the Wage and
Hour letter stated, Norsaire employees returned to the job site at least
three times to clean and maintain the air handling units and to replace
key parts. Wage and Hour stated that Norsaire employees "puttied and
caulked inside the units and the duct work, and made minor repairs due
to damage caused by leaking water." In addition, the letter stated,
"the investigation disclosed that, for several months beginning in early
1990, your employees were lining belts and sheaves on fans; installing
filters, dampers and gears; soldering pipe; and making adjustments to
the unit parts." Thus, Norsaire employees "were performing any
remaining work on the units necessary to complete the manufacturing
process and ensure that the units were working and functional prior to
the acceptance of the building as complete in 1991."
Wage and Hour determined that Norsaire employees who were performing
the work of sheet metal workers at the job site were entitled to receive
$22.77 per hour including fringe benefits, employees performing
electricians' work were entitled to receive $20.11 including fringe
benefits, and employees performing steamfitters' work were entitled to
$21.20 per hour including fringe benefits. [2]
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[3] Norsaire, the letter stated, paid employees doing sheet metal work
from $5.00 to $10.90 per hour including fringe benefits, and paid
electricians and steamfitters from $7.27 to $10.38 per hour.
Wage and Hour rejected Norsaire's argument that the firm was not
subject to Davis-Bacon requirements because Norsaire was a manufacturer whose
employees were performing on-site service and maintenance work pursuant
to a warranty agreement. The Deputy Assistant Administrator stated that
although Davis-Bacon labor standards ordinarily do not apply to the
employees of manufacturers or material suppliers, "the prevailing wage
requirements do apply where a material supplier or manufacturer
undertakes to perform a part of a construction contract as a
subcontractor." The Department of Labor, he added, "has consistently
held that employees of a manufacturer who perform more than an
incidental amount of construction work in any work week at the site of
the work prior to completion of the construction project are covered by
the Davis-Bacon provisions and are due the applicable wage rate for the
classification of work performed. This includes warranty and/or repair
work."
The Deputy Assistant Administrator examined the regulatory definitions
of pertinent statutory terms, noting that the terms "construction,
prosecution, completion or repair" are defined at 29 C.F.R. 5.2(j) as
encompassing "all types of work done on a particular building or work at
the site thereof . . . including without limitation, altering,
remodeling, installation (where appropriate) on the site of the work of
items fabricated off-site. . . ." He also noted that the definition of
the terms "building" and "work" at 29 C.F.R. 5.2(i) "may generally
exclude servicing or maintenance work, [but] it does not exclude repair
work that is conducted on equipment in connection with and at the site
of such a building or work. Unlike routine or regular service or
maintenance work that is preventative in nature, the tasks performed by
your employees were directed to correcting a problem that had already
occurred and were more akin to repair work than to service or
maintenance work."
The investigation disclosed, stated the Deputy Assistant Administrator,
that during the period from February 4, 1990 to May 27, 1990, Norsaire
had 24 employees performing repair work on the air cooling units at the
construction site, and that the employees spent from 8 to 40 hours on
the job site in any given work week./FN3/ "Given your firm's agreement
to repair the cooling units and the [3]
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[4] amount of time that your employees were engaged in construction
activities on the job site," the Deputy Assistant Administrator stated,
"the Department maintains that your firm had undertaken a portion of the
construction contract that was both contractually required and necessary
for the prosecution and completion of the contract." Consequently, he
concluded Norsaire was a subcontractor within the meaning of the
Davis-Bacon Act and Norsaire's employees were entitled to be paid
Davis-Bacon prevailing wages. Wage and Hour assessed back wages
totaling $21,933.97.
The Deputy Assistant Administrator stated that since there did not
appear to be a dispute over relevant facts, his letter constituted a
final ruling under 29 C.F.R. 5.11(c)(1). If Norsaire believed relevant
facts were in dispute, he stated, the firm should inform Wage and Hour
within 30 days, for purposes of determining whether the matter should be
referred to the Chief Administrative Law Judge for a hearing. If
Norsaire did not respond within 30 days, he added, the back wage
findings would become final with respect to Norsaire; if subcontractor
Natkin and prime contractor PCL also failed to request a hearing, Wage
and Hour would notify the contracting agency to disburse the withheld
funds to the affected employees. Wage and Hour also notified PCL and
Natkin of the results of the labor standards investigation by letters
dated January 25, 1994. Norsaire subsequently filed a petition for
review with this Board.
II. DISCUSSION
The Deputy Assistant Administrator of the Wage and Hour Division
determined that employees of Norsaire were covered by prevailing wage
requirements for time spent performing work on air cooling units which
had been manufactured by Norsaire and installed in the USPS mail
handling facility under construction at Stapleton Airport. Upon review,
the Board concludes that this matter must be remanded to the Wage and
Hour Division for completion of the record and for reconsideration of
whether the work performed by Norsaire employees at the construction
site was covered by prevailing wage requirements.
In the Wage and Hour ruling in this case, the Deputy Assistant
Administrator stated that the" Department maintains that [Norsaire] had
undertaken a portion of the construction contract that was both
contractually required and necessary for the prosecution and completion
of the contract" (emphasis supplied). Our problem upon review of this
determination is that the administrative record submitted to this Board
does not contain a copy of the prime [4]
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[5] contract between PCL and USPS (see note 1, supra), nor does it
contain a copy of the subcontract between PCL and Natkin. In previous
cases/FN4/ the Board has emphasized the importance of including the
contract in the administrative record in Davis-Bacon cases. Similarly,
in this case the Board finds it difficult to review a coverage
determination -- which is based, at least in part, on contractual
requirements -- without access to the relevant contracts. Accordingly,
this case must be remanded for completion of the administrative record
by the inclusion of the prime contract and the PCL/Natkin subcontract.
The Deputy Assistant Administrator also based his ruling on an
examination of Department regulations and of Board precedent. Thus, he
noted that the definition of the terms "construction, prosecution,
completion or repair" at 29 C.F.R. 5.2(j) includes "all types of work
done on a particular building or work at the site thereof . . .
including without limitation, altering, remodeling, installation (where
appropriate) on the site of the work of items fabricated off-site . . .
." He also took note of the definition of "building" and "work" at 29
C.F.R. 5.2(i), which states that those terms "generally include
construction activity, as distinguished from manufacturing, furnishing
of materials, or servicing and maintenance work." The Deputy Assistant
Administrator stated that although the definition "may generally exclude
servicing or maintenance work, it does not exclude repair work that is
conducted on equipment with and at the site of such a building or work."
He distinguished between "routine or regular service or maintenance work
that is preventative in nature" and the tasks performed by Norsaire's
employees, which he stated "were directed to correcting a problem that
had already occurred and were more akin to repair work than to service
or maintenance work." Wage and Hour is directed upon remand to
reconsider and/or further explain the proffered distinction between work
that comes within Davis-Bacon coverage according to the definition of
"construction, prosecution, completion or repair" at 29 C.F.R. 5.2(j)
and "servicing and maintenance work" which is excluded from coverage by
the definition of "building" and "work" at 29 C.F.R. 5.2(i). As a
practical matter, it seems difficult to confine service and maintenance
work to only those tasks that are "preventative in nature," and to
exclude all tasks that are "directed to correcting a problem that had
already occurred"; without further explanation, this Board does not have
a basis for affirming the distinction drawn by Wage and Hour.
The Deputy Assistant Administrator also relied upon Board precedent
-- namely, Alcoa Construction Systems, Inc., WAB Case No. 75-06 (Sept. 1,
1975); The Griffith Company, WAB Case No. 64-03 (July 2, 1965); and
S.D.F. Inc., WAB Case No. 92-12 (Aug. 31, 1993). However, this case is
not squarely controlled by that precedent. In Alcoa, the supplier of
factory prefabricated kitchen and bathroom modules came upon the
construction site to do some repair [5]
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[6] work on the modules. Most of the work involved correcting defects
in the coating on door jambs, adjusting door jamb installations,
touching up drywall and repairing or replacing wet drywall. The Board
turned aside the supplier's argument that the work was done pursuant to
warranty provisions of the contract, stating that it "attach[ed] no
significance to the label " `warranty.' " The Board held that
"adjustment, alignment and plumbing, including loosening and fastening
of a door jamb on the construction site, in our view, is clearly
construction work in every sense of the word . . . ." Likewise, the
Board stated that "repair or replacement of damaged drywall, including
nailing, taping and painting can only be regarded as on-site
construction." The Board cautioned, however, that "[t]his is not to say
that some factory installed components of modern day residential
equipment (e.g., the internal control mechanisms of a dishwasher or a
clothes washing machine) may not be repaired or replaced on-site without
reference to Davis-Bacon Act requirements." Thus, rather than dictating
the result reached by the Deputy Assistant Administrator in this matter,
Alcoa at least suggests that there is a distinction to be drawn between
traditional construction work which -- if performed on-site -- would be
covered by prevailing wage requirements, and the work involved in
repairing or replacing components of equipment which has been installed
in the facility under construction./FN5/
In addition, we note that in a 1973 Wage and Hour opinion letter
(Opinion WH-206 (Mar. 9, 1973) the Wage and Hour Division determined
that substantial on-site repair work performed on prefabricated bathroom
and kitchen units was construction activity "rather than ordinary
warranty work." Although the opinion letter did not define or describe
"ordinary warranty work," like Alcoa the letter does suggest that there
are some types of on-site work, performed under warranty, that may not
be covered by prevailing wage requirements. On remand, the Wage and
Hour Division must reconsider and explain whether the work performed by
Norsaire employees on the air cooling equipment is covered in light of
this opinion letter and the Board's decision in Alcoa.
Finally, the Board notes that the record contains only scant information
on the types of work actually performed on-site by Norsaire's employees.
Additional information would be helpful, and perhaps necessary, to
reaching an appropriate determination in this matter. It is possible,
for example, that some of the tasks performed by the Norsaire employees
were covered by prevailing wage requirements, and that other tasks they
performed were not covered. It is not possible, however, to make or to
review such a determination based on the record currently before the
Board. In its decision on remand, Wage and Hour must set forth further
information on the types of work performed by the Norsaire employees.[6]
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[7] This matter is remanded to the Wage and Hour Division for further
proceedings consistent with this decision. The Wage and Hour Division
shall issue its ruling on remand within 60 days of the date of this
decision. On the date of issuance, the Administrator shall provide the
Board a copy of the ruling upon remand.
BY ORDER OF THE BOARD:
David A. O'Brien, Chair
Ruth E. Peters, Member
Gerald F. Krizan, Esq.
Executive Secretary[7]
FOOTNOTES
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ Counsel for the Administrator of the Wage and Hour Division states
(Statement of the Administrator in Opposition to Petition for Review
("Statement"), at p. 2 n.3) that the Administrator has been unable to
obtain a copy of the prime contract. Counsel further states, however,
that it is undisputed that the prime contract was subject to labor
standards requirements, and that the prime contract required
installation of air cooling units.
/FN2/ Counsel for the Administrator describes Long as a sales agent.
Norsaire, on the other hand, claims that Long is not a sales agent.
This Board agrees with counsel for the Administrator (Statement, at p. 2
n.2) that the dispute over whether Long is a sales agent is not material
to the issue of whether labor standards provisions are applicable to
Norsaire's employees for the time spent on the construction site.
/FN3/ In a September 10, 1990 memorandum transmitting the file in this
matter from the Denver Regional Office (which conducted the
investigation) to the national office of the Wage and Hour Division, the
Regional Wage Specialist did not state that Norsaire was involved in
repair of the cooling units; instead, he stated in the transmittal memo
that Norsaire "helped to install" the cooling units, and that Norsaire
"refuses to recognize the installation of the coolers as covered DBRA
work" (Record, Tab E). The decision letter from the Deputy Assistant
Administrator to [FN3 CONTINUED ON P. 4] Norsaire, however, does not
contain a determination that Norsaire was involved in the installation
of the cooling units, but does contain a determination that Norsaire was
involved in on-site repair of the units.
/FN4/ See Cat Construction, Inc., WAB Case No. 88-36 (May 17, 1991);
Martin Marietta Manned Space Systems, WAB Case No. 90-08 (May 31, 1991).
/FN5/ S.D.F., Inc., like Alcoa, involved coverage of on-site work
(touchup painting) which would be considered traditional construction
activity. The Griffith Company, unlike the instant matter, involved
coverage of on-site repair of tractors used in the construction process.
