ARB CASE NO. 05-102
DATE: October 31, 2007
In the Matter of:
TESCO BUILDERS, INC.
BEFORE: THE ADMINISTRATIVE REVIEW BOARD
Appearances:
For Petitioner:
Alan G. Ross, Esq., Ross, Brittain & Schonberg Co., L.P.A., Cleveland, Ohio
For Respondent Administrator, Wage and Hour Division:
Joan Brenner, Esq., Ford F. Newman, Esq., William C.
Lesser, Esq., Steven J. Mandel, Esq., Howard M. Radzely, Esq., United States
Department of Labor, Washington, D.C.
DECISION AND ORDER OF REMAND
The
Deputy Administrator (Administrator) of the United States Department of Labor’s
Wage and Hour Division held that the higher of two wage rates applied for work
electricians had performed on a federally assisted town home construction project
in Cleveland, Ohio. The wages paid to the electricians are subject to the minimum
wage provisions of the Davis-Bacon Act (DBA or the Act).[1]
Tesco Builders, Inc., the contractor liable for the higher wages, requested
that we review the Administrator’s decision. We vacate the decision and
remand.
Jurisdiction and Standard of Review
The
Administrative Review Board (ARB or the Board) has jurisdiction to decide
appeals from the Administrator’s final decisions concerning DBA wage
determinations.[2]
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The Board’s review of the Administrator’s rulings is in the nature of an
appellate proceeding.[3]
We assess the Administrator’s rulings to determine whether they are consistent
with the DBA and its implementing regulations and are a reasonable exercise of
the discretion delegated to the Administrator to implement and enforce the Act.[4]
The Board generally defers to the Administrator as being “in the best position
to interpret [the DBA’s implementing regulations] in the first instance . . . ,
and absent an interpretation that is unreasonable in some sense or that
exhibits an unexplained departure from past determinations, the Board is
reluctant to set the Administrator’s interpretation aside.”[5]
Background
1. The Legal Framework
The
DBA applies to every contract of the United States in excess of $2,000 for
construction, alteration, and/or repair, including painting and decorating, of
public buildings or public works in the United States.[6]
It requires that contractors pay a minimum wage to the various classifications
of mechanics or laborers they employ.[7]
The Administrator determines these minimum wages and publishes them as “Wage
Determinations.”[8]
The minimum wage rates contained in the wage determinations derive from rates
prevailing in the area where the work is to be performed or from rates
applicable under collective bargaining agreements.[9]
“Prevailing” wages are wages paid
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to the majority of laborers or mechanics in
corresponding classifications on similar projects in the area.[10]
A contractor will be liable for its subcontractor’s failure to pay the minimum
wage.[11]
2. Chronology of Events
The Cuyahoga Metropolitan Housing Authority of
Cleveland (CMHA), Ohio, awarded Tesco a contract to construct 98 new homes in a
series of five attached town homes.[12]
Tesco subcontracted electrical work for the project to BBC Electric.[13]
The wage determination for the project was
designated General Decision OHO20022. This wage decision contained an hourly
wage rate of $31.18 plus $9.16 in fringe benefits for electricians who work on
projects “[n]ot including units built primarily for family residence, including
mobile home parks, but including Residences exceeding 4 units under one roof.”[14]
The wage determination also contained an hourly rate of $14.00 plus $4.02 in
fringe benefits for electricians who work on projects consisting of “[u]nits
built primarily for family residence, including mobile home parks. Residences
not to exceed 4 units under one roof.”[15]
The electrician wage rates derived from the rates contained in Local Union No.
38 of the International Brotherhood of Electrical Workers’ collective
bargaining agreement (CBA), which the
Wage and Hour Division determined were the prevailing residential wage rates in
the local Cleveland area.[16]
BBC Electric paid the lower rate to the electricians who worked on the project.[17]
The CMHA believed
that the higher rate applied. Thus, it sought the United States Department of
Housing and Urban Development’s (HUD) assistance in obtaining a final
determination from the Administrator as to which of the two wage rates applied.[18]
HUD requested that the Administrator make that determination.[19]
The Administrator
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contacted Local 38, requesting that it provide “wage payment
data from contractors who employed electricians at the higher Local 38 payrate”
for similar town house projects in the local Cleveland, Cuyahoga County area.[20]
In response, Local 38 forwarded five WD-10 forms (Report of Construction
Contractor’s Wage Rates) to the Administrator, all of which showed that
contractors had paid the higher rates on five other town house or apartment
projects.[21]
The Administrator
issued a final determination on March 21, 2005.[22]
Relying on the holding in Fry Bros. Corp., a 1977 Department of Labor
Wage Appeals Board (WAB) decision,[23]
the Administrator stated that where the relevant “wage determination rates are
derived from a CBA,” as in this case, “local area union practices … determine
the proper classification and wage rate applicable to the work in question.”[24]
The Administrator noted that Local 38 had provided evidence that showed that
electricians were paid the higher rate on four other similar town home
projects. Local 38 had also “explained that the higher rate should apply” to
the project at issue because it involved the construction of “more than four
units under one roof.” Furthermore, citing no authority, the Administrator
found that “although rooflines may vary, a row of town homes is a single
structure.” Consequently, the Administrator held that the higher rate applied.
Tesco timely petitioned the ARB to review the Administrator’s final
determination.[25]
Discussion
1. The Parties’ Arguments
In arguing that the
Administrator erred in deciding that the higher rate applies, Tesco points out that
the Administrator relied solely upon the information that Local 38 provided and
did not even request information or a response from Tesco. Tesco also quarrels
with the Administrator’s unsupported finding that even though their rooflines
varied, the various buildings comprising five attached town homes are single
structures under one roof, and, therefore, the higher rate applies.[26]
Tesco contends that since the
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Administrator did not rely upon an architect’s
expert opinion or even the architectural plans for the town homes, this finding
is unreasonable.[27]
In response, the
Administrator argues that “[i]n cases such as this, where union rates provide
the basis for establishing a wage determination rate, it was appropriate, under
Fry Brothers, for Wage and Hour to seek information from Local 38 as to
the rates paid on recent similar projects in the locality.”[28]
And since that information proved that the electricians received the higher
rate, the Administrator argues that he properly concluded that the higher rate
applied here.[29]
2. Fry Brothers does not apply.
As we noted
earlier, in his March 21, 2005 final determination letter, the Administrator
wrote that in cases such as this, “we must look to local area union
practices to determine the proper classification and wage rate applicable
to the work in question. See Fry Brothers Corp., WAB Case No. 76-6
(June 14, 1976).” (Emphasis added). And as noted above, the Administrator also
argued in his brief that, under Fry Brothers, it was appropriate to ask
Local 38 for information “as to the rates paid” to determine which rate applied.
But the Administrator
misreads Fry Brothers. The issue in Fry Brothers was which
classification of worker should perform a certain job, carpenters or laborers,
and thus whether the contractor was liable for carpenter wages or laborer wages.[30]
The Wage Appeals Board held that where, as here, prevailing wage rates
contained in a wage determination are based upon a CBA, proper classification
of work duties under the wage determination must be determined according to the
area practice of the unions that are party to the CBA.[31]
Fry Brothers does not instruct the Administrator to ask local union
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officials
which wage rate within a classification applies, but only to clarify which
classification applies. Thus, the Administrator’s argument that he “must
look to local area union practices to determine the proper classification and
wage rate applicable to the work in question” constitutes an
unwarranted extension of the Fry Brothers holding.
Here the parties do
not dispute the fact that the job at issue was properly classified as
electrician work. The issue here is not who is classified to do electrician
work, but rather which of the two electrician wage rates applies to the town
house project. Therefore, Fry Brothers, a classification case, does not
apply to this case, a wage rate case. As such, Fry Brothers cannot
support the Administrator’s determination.
3. Brunetti Construction
In Brunetti
Construction, the Wage Appeals Board addressed the same issue that this case
presents.[32]
A subcontractor performed electrical work on a Federal Housing Administration (FHA)
renovation project. The applicable wage determination contained two
electrician wage rates derived from collective bargaining agreements. One rate
for about $7.00 per hour was “applicable to the construction of all units built
primarily for family residence, not to exceed 4 unit apartments.” A higher
electrician’s wage of about $13.00 per hour applied for “other residential
construction.” The subcontractor paid the electricians the lower rate. The
Administrator determined that the higher rate applied. A Department of Labor
Administrative Law Judge ruled in favor of the subcontractor. The Department
of Labor Assistant Secretary for Employment Standards reversed the ALJ, and the
subcontractor appealed to the WAB.[33]
The contractor and
subcontractor argued that the lower rate applied because an FHA official had
advised the subcontractor at a preconstruction conference that according to the
FHA definition of “buildings,” the project consisted of family residences of 4
units or less. Therefore, the subcontractor argued, it was justified in paying
the lower rate. The WAB rejected this argument, stating that the FHA
definition of “building” does not “establish local area practice or contract
interpretation with respect to the meaning of ‘family residence not to exceed 4
units.’” The WAB refused to accept the FHA official’s definition of a
“building” when “such a declaration is unsupported by concrete on-site
construction data.”[34]
The Administrator
argued that since the electrician union’s business agent stated that the
project does not constitute family residence construction not to exceed 4
units,
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the subcontractor had to pay the higher rate to the electricians. The
WAB rejected this argument too:
[T]he Board does not accept the contention of the Wage and Hour Division here that in
its efforts to solve this problem by referring to an authoritative local
source, all that Wage and Hour had to do was to ask the local union business
agent how this definition was applied, and to accept an answer without concrete
project data.[35]
To resolve a dispute
as to the nature and characteristics of a construction project, and thus decide
which wage rate applies, the WAB suggested that the starting place is to
examine the project drawings or specifications.[36]
From there, the factfinder should consider other “concrete project data” such
as photographs and the “architectural, engineering, and structural elements of
a project.”[37]
Though Local 38
submitted wage payment data to the Administrator indicating that electricians
were paid the higher wage rate on other similar town home projects, this
evidence does not amount to “concrete project data.” And while Tesco did provide
some project data (“elevation and architectural drawings of the project”), the
Administrator relied solely upon the Local 38 wage payment data. In so doing,
the Administrator contravened the Brunetti Construction mandate that he
consider “concrete project data.”
Conclusion
The Administrator’s March
21, 2005 final determination that the higher electrician wage applies is
unreasonable because his determination is based upon a misreading of Fry
Brothers and ignores Brunetti Construction. Therefore, we VACATE the final determination and REMAND
this matter to the Administrator with instructions that he proceed in a manner consistent with
this opinion.
SO ORDERED.
OLIVER M. TRANSUE
Administrative Appeals Judge
M. CYNTHIA DOUGLASS
Chief Administrative Appeals Judge
[1] 40 U.S.C.A. §§ 3141-3148 (West Supp.
2003). The regulations that implement the Act are found at 29 C.F.R. Part 1 (2007).
29 C.F.R. § 7.1(b)(2007). See Secretary’s
Order 1-2002, 67 Fed. Reg. 64,272 (Oct. 17, 2002).
[3] 29 C.F.R. § 7.1(e).
[4] Miami Elevator Co. and Mid-American
Elevator Co., Inc., ARB Nos. 98-086, 97-145, slip op. at 16 (ARB Apr. 25,
2000). See also Millwright Local 1755, ARB No. 98-015, slip op. at 7
(ARB May 11, 2000); Dep’t of the Army, ARB Nos. 98-120, 98-121, 98-122,
slip op. at 16 (ARB Dec. 22, 1999) (under the parallel prevailing wage statute
applicable to federal service procurements, the Service Contract Act, 41
U.S.C.A. § 351 et seq (West 1987)), citing ITT Fed. Servs. Corp. (II),
ARB No. 95-042A (July 25, 1996) and Service Employees Int’l Union (I),
BSCA No. 92-01 (Aug. 28, 1992).
[5] Titan IV Mobile Serv. Tower, WAB No.
89-14, slip op. at 7 (May 10, 1991), citing Udall v. Tallman, 380 U.S. 1, 16-17 (1965).
[6] 40 U.S.C.A. § 3142(a).
[7] Id.
[8] 29 C.F.R. Part 1.
[9] 40 U.S.C.A. § 3142(b); 29 C.F.R. § 1.3.
[10] See 29 C.F.R. § 1.2(a)(1).
[11] See 29 C.F.R. § 5.5(a)(6).
[12] Tab K.
[13] Tab E.
[14] Tab I.
[15] Id.
[16] Tab A at 2; Tabs E-F.
[17] Tab E.
[18] Tab D.
[19] Tab C.
[21] Tab H.
[22] Tab A.
[23] WAB No. 76-06 (June 14,
1977).
[24] Tab A at 2.
[25] See 29 C.F.R. § 7.2.
[26] As noted earlier in the text, according to
the wage determination for this project, the $31.18/$9.16 electrician wage
applied for “Residences exceeding 4 units under one roof.” Tab I.
[27] Tesco Brief at 3-7.
[28] Administrator’s Brief at 9.
[29] Id. at 8-10.
[30] Fry Bros., slip op. at 1.
[31] Id., slip op at 17 (“When the
Department of Labor determines that the prevailing wage for a particular craft
derives from experience under negotiated agreements, the Labor Department has
to see to it that the wage determinations carry along with them as fairly and
fully as may be practicable, the classifications of work according to job
content upon which the wage rates are based.”) (emphasis added); see
also Lang Land Clearing, Inc., ARB Nos. 01-072, 01-079, ALJ Nos. 1998-DBA-001 through -006,
slip op. at 24 (ARB Sep. 28, 2004); Abhe & Svoboda, Inc., ARB Nos.
01-063, -066, -068 through -70, slip op. at 12 (July 30, 2004).
[32] Brunetti Constr. Co., WAB No. 80-09,
1982 WL 155899 (Nov. 18, 1982).
[33]Id., slip op. at 1-2.
[34] Id., slip op. at 4.
[35] Id., slip op. at 5.
[36] Id., slip op. n.2.
[37] Id., slip op. at 4.
