ARB CASE NO. 05-100
DATE: September 28, 2007
In the Matter of:
V-TECH SERVICES, INCORPORATED
Contract for Custodial Services
William J. Hughes Technical Center
Atlantic City International Airport
DTFACT-04-C-00020
BEFORE: THE ADMINISTRATIVE REVIEW BOARD
Appearances:
For Petitioner:
Brian F. Jackson, Esq., Richard L. Etter, Esq., McNees
Wallace & Nurick LLC, Harrisburg, Pennsylvania
For Respondent Administrator, Wage and Hour Division:
Mary J. Reiser, Esq., Ford F. Newman, Esq., William C.
Lesser, Esq., Steven J. Mandel,
Esq., Howard M. Radzely, Esq., U.S. Department of Labor,
Washington, D.C.
FINAL DECISION AND ORDER
V-Tech Services, Inc., requested
that the Deputy Administrator, Wage and Hour Division (Administrator), convene a
hearing to determine whether a collective bargaining agreement (CBA) between
Hiasun, Inc. (V-Tech’s predecessor on a Federal Aviation Administration service
contract) and the Teamsters Local 331, International Brotherhood of Teamsters,
AFL-CIO (Local 331) contained negotiated wage rates “substantially at variance”
with the locally prevailing wage rates for similar work within the meaning of
the McNamara-O’Hara Service Contract of 1965, as amended (SCA or Act), 41
U.S.C.A. § 351 et seq.(West
1987); see 41 U.S.C.A. § 353(c). In a final
ruling, the Administrator denied the request for a hearing as it was filed after V-Tech began to perform work on its
service contract and, therefore, was untimely under the regulations
implementing the SCA at 29 C.F.R. §§ 4.10(b)(3)(ii)(2005). Moreover, the
Administrator determined that V-Tech failed to demonstrate that “extraordinary
circumstances” existed that would justify waiving the timeliness requirement
under section 4.10(b)(3)(ii). V-Tech petitioned for review by the Administrative
Review Board. We find that the
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Administrator’s final ruling, denying V-Tech’s
untimely request for a substantial variance hearing, is in accordance with SCA
regulations and is reasonable.
Jurisdiction and Standard of Review
Pursuant
to 29 C.F.R. § 8.1(b) (2006), the Board has jurisdiction to hear and decide
“appeals concerning questions of law and fact from final decisions of the
Administrator of the Wage and Hour Division or authorized representative”
rendered under the SCA. See also Secretary’s Order 1-2002, 67 Fed. Reg.
64,272 (Oct. 17, 2002). The Board’s review of the Administrator’s final SCA rulings
is in the nature of an appellate proceeding. 29 C.F.R. § 8.1(d). The Board is
authorized to modify or set aside the Administrator’s findings of fact only
when it determines that those findings are not supported by a preponderance of
the evidence. 29 C.F.R. § 8.9(b). The Board reviews questions of law de novo.
United Gov’t Sec. Officers of America, Loc. 114, ARB Nos. 02-012 to
02-020, slip op. at 4-5 (Sept. 29, 2003); United Kleenist Org. Corp. &
Young Park, ARB No. 00-042, ALJ No. 99-SCA-018, slip op. at 5 (ARB Jan. 25,
2002). The Board nonetheless defers to the Administrator’s interpretation of
the SCA when it is reasonable and consistent with law. See Dep’t of the
Army, ARB Nos. 98-120/-121/-122, slip op. at 15-16 (Dec. 22, 1999).
Issue
Whether the Administrator reasonably determined that “extraordinary circumstances” did
not exist that would justify waiving the timeliness requirement for V-Tech to request a substantial variance hearing under 29 C.F.R. § 4.10(b)(3)(ii).
Background
I. Overview of the SCA’s wage determination procedures and substantial variance hearing procedures
The SCA generally
requires that every contract in excess of $2,500 entered into by the United
States, the principal purpose of which is to provide services through the use
of service employees in the United States, must contain a provision that
specifies the minimum hourly wage and fringe benefit rates that are payable to
the various classifications of service employees working on such a contract. See 41 U.S.C.A. § 351(a)(1)-(2). These
wage and fringe benefit rates are predetermined by the Wage and Hour Division
acting under the authority of the Administrator, who has been designated by the
Secretary of Labor to administer the Act.
Under the Act, there
are two types of SCA wage schedules, also known as wage determinations that are
prepared for inclusion in service contracts. The first type is a general wage
determination, and the wages and fringe benefits contained in such a
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schedule
are based on the rates that the Wage and Hour Division determines prevail in
the particular locality for the various classifications of service employees to
be employed on the contract. 41 U.S.C.A. § 351(a)(1)-(2). These wage
determinations sometimes are referred to as “prevailing in the locality” wage
determinations.
A second type of wage
determination is issued at locations where there is a CBA between the service employees
and an employer working on a Federal service contract. Under these
circumstances, the SCA mandates that the Wage and Hour Division specify the
wage and fringe benefit rates from the CBA (including prospective increases) as
the required minimum rates payable to the service employee classifications to
be employed on the procurement contract. Id. In
addition, Section 4(c) of the Act requires generally that the negotiated wage
rates (and prospective increases) must be incorporated into a successor contract’s
wage determination in those instances where a labor agreement has been
negotiated between the service employees and a contractor’s predecessor. 41
U.S.C.A. § 353(c).
Section 4(c), however,
contains provisions that restrict the applicability of CBA-based wage and
fringe benefit rates in wage determinations:
No contractor or subcontractor
under a contract, which succeeds a contract subject to this chapter and under
which substantially the same services are furnished, shall pay any service employee
under such contract less than the wages and fringe benefits, including accrued
wages and fringe benefits, and any prospective increases in wages and fringe
benefits provided for in a collective-bargaining agreement as a result of arm’s length negotiations, to which such service employees
would have been entitled if they were employed under the predecessor contract: Provided, That in any of the foregoing
circumstances such obligations shall not apply if the Secretary finds after a
hearing in accordance with regulations adopted by the Secretary that such wages
and fringe benefits are substantially
at variance with those which prevail for services of a character similar in the
locality.
41 U.S.C.A. § 353(c) (emphasis
added). As interpreted by the Secretary under the SCA regulations, the
successor provisions of Section 4(c) are subject to two limitations, both of
which involve hearings before Department of Labor Administrative Law Judges.
First,
collectively-bargained wage rates may only be incorporated into a covered service
contract if such rates were reached “as a result of arm’s-length negotiations
....” Id. A challenge to the bona fides of a collective bargaining
agreement can be brought by
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requesting a so-called “arm’s length hearing.” See 29 C.F.R. § 4.11.[1]
Second, the SCA’s Section 4(c) proviso states that wages and fringe benefits contained
in a CBA shall not apply to a service contract “if the Secretary finds after a
hearing in accordance with regulations adopted by the Secretary that such wages
and fringe benefits are substantially at variance with those which prevail for
services of a character similar in the locality.” 41 U.S.C.A. § 353(c). Therefore,
the collectively-bargained wage or fringe benefit rates negotiated between a Federal
service contractor and the union representing its employees may not be applied
to a successor procurement period if, following a challenge and hearing, it is
determined that the negotiated wages are substantially different from locally-prevailing
rates for similar work. See 29 C.F.R. § 4.10.
But the regulation
governing a request for a substantial variance hearing includes explicit
procedural time limitations for filing a hearing request. The substantial
variance hearing provision states in pertinent part:
(3) . . . [R]equests for a hearing
shall not be considered unless received as specified below, except in those situations
where the Administrator determines that extraordinary circumstances exist:
(i) For advertised contracts, prior
to ten days before the award of the contract;
(ii) For negotiated contracts and for contracts with
provisions extending the initial term by option, prior to the commencement date
of the contract or the follow-up option period, as the case may be.
29 C.F.R. § 4.10(b)(3) (emphasis added).
II. Factual and procedural background
The Federal Aviation
Administration (FAA) awarded a service contract to V-Tech on August 23, 2004, to
provide custodial services for the William J. Hughes Technical Center at the Atlantic City International Airport.
See Tab J. Hiasun, Inc., V-Tech’s
predecessor on the service contract, and Local 331 had previously negotiated a CBA
that established wage rates and fringe benefits for service employees at the
Center from October 2002 through September 2005. See Tab C. Before
commencing work on its service contract, V-Tech officials met with Local 331 representatives
“to discuss a collective bargaining agreement” and were informed that “the
Hiasun CBA would govern with no modifications, other than increases in wage and
benefits rates.” See Tab D, Jan. 4, 2005 letter at 5.
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V-Tech commenced full
performance on its service contract on August 25, 2004, providing an hourly
wage rate of $9.43 for its janitors, whereas the Hiasun CBA established an
hourly wage rate of $14.80 for janitors. See Tab C; Tab D, Jan. 4, 2005
letter at 2, 4-5. Subsequently, on January 4, 2005, V-Tech requested that the
Administrator convene a hearing to determine whether the negotiated wage rates
in the Hiasun CBA were “substantially at variance” with the locally prevailing
wage rates for janitors pursuant to SCA Section 4(c), 41 U.S.C.A. § 353(c).
Tab D. V-Tech does not dispute that its request for a substantial variance
hearing was untimely pursuant to 29 C.F.R. § 4.10(b)(3)(i)-(ii).
In its request,
however, V-Tech argued that “extraordinary circumstances” existed that would
justify waiving the timeliness requirement. Specifically, V-Tech contended
that the substantial “disparity” between the Hiasun CBA wage rates, which it
did not negotiate, and the locally prevailing wage rates was sufficient, “in
and of itself,” to allow a substantial variance hearing to further the purpose
of SCA Section 4(c). In addition, V-Tech contended that “extraordinary
circumstances” existed due to the urgency of the FAA’s request that V-Tech
begin full performance on the service contract and the difficulty V-Tech had in
processing its employees for required security clearances in time to begin
performing the contract. Moreover, V-Tech argued that “extraordinary
circumstances” arose in light of its interpretation of Executive Order 13204, i.e.,
that because the Executive Order relieved it of any obligation to offer a right
of first refusal of employment to its predecessor Hiasun’s employees, it also relieved
it of any obligation to pay its own employees in accordance with the Hiasun
CBA.[2]
See Tab D, Jan. 4, 2005 letter at 5-6.
On April 27, 2005, the
Administrator issued a final ruling denying V-Tech’s request for a substantial
variance hearing. Tab A. Specifically, the Administrator determined that, although
“V-Tech correctly concluded that [pursuant to Executive Order 13204] it was not
obligated to hire the employees who had performed . . . services for Hiasun,”
Executive Order 13204 “does not undermine any of the SCA requirements nor does
it in any way relieve a successor contractor of its obligations under Section
4(c) of the SCA.” Tab A at 2. Since V-Tech acknowledged that it “was aware of
the predecessor contractor’s CBA and wage rates and fringe benefits required
under that CBA,” the Administrator held that he “cannot conclude that the
existence of Executive Order 13204 or any other factors” V-Tech cited
“constitute extraordinary circumstances
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that would have reasonably prevented
V-Tech from filing a timely request for a substantial variance hearing.” Id.
V-Tech asks that we review the Administrator’s final ruling. The Administrator
has responded, urging us to affirm his decision.
III. V-Tech’s Arguments
In its Petition for Review, V-Tech argues
that the Administrator erred in concluding that just because V-Tech was aware
of the predecessor contractor’s CBA, V-Tech knew that the CBA applied to
V-Tech’s current service contract.[3]
V-Tech notes that its service contract with the FAA represents its first
government contract and that it did not become aware of any requirement to pay
the wage rates contained in the Hiasun CBA until the FAA informed them of the
requirement in December 2004.[4]
V-Tech contends that
when it previously met with Local 331 representatives before commencing work on
its service contract and was informed of the union’s position that the Hiasun
CBA would govern V-Tech’s current service contract, it believed it was “presumably”
because Local 331 asserted, contrary to Executive Order 13204, that V-Tech was
required to offer a right of first refusal of employment to its predecessor
Hiasun’s employees.[5]
Thus, because Local 331 was apparently misguided about any obligation V-Tech
had to offer a right of first refusal of employment to the Hiasun employees,
V-Tech states that it believed it had no obligation to pay its own employees in
accordance with the Hiasun CBA.[6]
V-Tech argues that its conclusion “was a reasonable, albeit incorrect,
interpretation of the law.”[7]
Similarly, V-Tech contends that as neither the FAA’s bid solicitation (or
“Notice of Intention to Make a Service Contract”) nor the service contract
contain a wage determination or indicate that V-Tech must pay the wage rates
set forth in the Hiasun CBA, V-Tech’s erroneous interpretation was reasonable.[8]
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IV. The Administrator reasonably determined that “extraordinary circumstances” did not
exist that would justify waiving the timeliness requirement for V-Tech to request a substantial variance hearing under 29 C.F.R. §
4.10(b)(3)(ii).
The term “extraordinary
circumstances” under 29 C.F.R. § 4.10(b)(3) relates specifically to whether or
not a complainant literally had adequate information within sufficient time to
file a timely request for a substantial variance hearing. U.S. Dep’t of
State, ARB No. 98-114, slip op. at 11 (Feb. 16, 2000). But because “[i]t
is well established that the privilege of contracting with the government
carries with it the responsibility to be aware of and follow the applicable
contractual and legal provisions governing contractual performance,” “[c]laims
of ignorance by governmental contractors are … not generally regarded with
favor.” U.S. Dep’t of Labor v. Dantran, Inc., ARB No. 93-SCA-26, slip
op. at 5 (June 10, 1997). “[T]he obligation to comply with contractual
requirements as well as the burden of obtaining the knowledge of how to comply
rests, at all times, with the government contractor.” Dantran, slip op.
at 6.
As a government
contractor, V-Tech has a legal obligation to comply with the SCA and the Act’s
implementing regulations governing its contractual performance which it “cannot
shirk by complaining that the violation should have been brought to [its]
attention at an earlier date.” Dantran, supra. Cf. Heckler v. Cmty. Health Serv., 467 U.S. 51, 63-64 (1984)(“those who
deal with the Government are expected to know the law” and have “a duty to
familiarize [themselves] with the legal requirements”); Gen. Eng’g &
Mach. Works v. O’Keefe, 991 F.2d 775, 780 (Fed. Cir. 1993)(“government
contractors are presumed to have constructive knowledge of federal procurement
regulations”); Am. Gen. Leasing, Inc. v. United States, 587 F.2d 54, 59
(Ct. Cl. 1978)(“parties contracting with the Government are charged with having
knowledge of the law governing the formation of such contracts”).
Although V-Tech contends that the FAA’s bid
solicitation or “Notice of Intention to Make a Service Contract” does not
indicate that V-Tech must pay the wage rates set forth in the Hiasun CBA, the
Notice does indicate that services provided under the contract are to be
performed under a CBA, as it names Local 331 as the relevant union. See
Tab G at 1. In
addition, V-Tech was informed of its predecessor Hiasun’s CBA, which was
effective until September 30, 2005, before
commencing work on its service contract. Tabs C, D, F. The SCA was also
specifically incorporated by reference into V-Tech’s service contract. See
Tab J, section 3.6.2-28, p. 59.
SCA Section 4(c) expressly
requires that a successor contractor, such as V-Tech, pay the wage rates
contained in a predecessor’s CBA, “irrespective of whether the successor’s
employees were or were not employed by the predecessor contractor.” 29 C.F.R.
§ 4.163(a); see also 41 U.S.C.A. § 353(c).[9]
Thus, we reject V-Tech’s contention
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that it reasonably believed that because it
did not employ any of its predecessor Hiasun’s employees, it had no obligation
to pay its own employees in accordance with the Hiasun CBA. Moreover, the
requirement that a successor contractor pay the wage rates contained in a
predecessor’s CBA under Section 4(c) “is not contingent or dependent upon the
issuance or incorporation in the contract of a wage determination based on the
predecessor contractor’s [CBA].” 29 C.F.R. § 4.163(b). Consequently, we also
reject V-Tech’s contention that it reasonably miscalculated the required wage
rate because its service contract did not contain a wage determination or specifically
indicate that V-Tech must pay the wage rates set forth in the Hiasun CBA.
For the reasons stated
above, we find that the Administrator’s final ruling, declining to order a
substantial variance hearing in response to V-Tech’s untimely request, is in
accordance with the SCA and its implementing regulations and is reasonable. Dep’t of the Army,
slip op. at 15-16.
Conclusion
The Administrator determined that “extraordinary circumstances” did not
exist that would justify waiving the timeliness requirement for V-Tech to
request a substantial variance hearing under the SCA and its implementing
regulations. Since the Administrator’s determination was reasonable and in
accordance with the SCA and its implementing regulations, V-Tech’s Petition for
Review is DENIED and the
Administrator’s final ruling letter of April 27, 2005, is AFFIRMED.
SO ORDERED.
M.CYNTHIA DOUGLASS
Chief Administrative Appeals Judge
DAVID G. DYE
Administrative Appeals Judge
[1] In its Brief in Support of Petition for
Review, V-Tech withdrew its request for an arm’s length hearing in this case. See
Brief in Support of Petition for Review at 1, n. 1.
[2] Executive Order 13204 revoked Executive
Order 12933, Nondisplacement of Qualified Workers Under Certain Contracts,
59 Fed. Reg. 53,559 (Oct. 24, 1994), and its implementing regulations, which
required that, with respect to contracts for public buildings, that successive
contractors offer a right of first refusal of employment to employees of the
prior contractor. See Executive Order 13204, Revocation of Executive
Order on Nondisplacement of Qualified Workers Under Certain Contracts, 66
Fed. Reg. 11,228 (Feb. 17, 2001). The Secretary of Labor subsequently
rescinded Executive Order 12933’s implementing regulations at 29 C.F.R. Part 9
(2000), effective as of March 23, 2001. 66 Fed. Reg. 16,126 (Mar. 23, 2001).
[3] Petition for Review at 2.
[4] Petition for Review at 2; Brief in Support
of Petition for Review at 4.
[5] Brief in Support of Petition for Review at
3.
[6] Petition for Review at 2; Tab D, Jan. 4,
2005 letter at 5; Brief in Support of Petition for Review at 3, 6.
[7] Brief in Support of Petition for Review at
6; see also Summit Investigative Serv., Inc. v. Wigfall, ARB No. 96-111,
ALJ No. 94-SCA-031, slip op. at 5 (ARB Nov. 15, 1996), citing J & J
Merrick Enter., Inc., BSCA No. 94-09 (Oct. 27, 1994)([w]hile ignorance of
the law or contract is not an excuse for an SCA violation, … a reasonable
misunderstanding regarding the terms of the contract may make the contractor
less culpable for a violation).
[8] Brief in Support of Petition for Review at
4, 7-8; Tab D, Jan. 4, 2005 letter at 3.
[9] V-Tech contends that under
traditional principles of labor law arising under the National Labor Relations
Act, V-Tech’s decision not to hire any of its predecessor Hiasun’s employees
would have severed any obligation it had to pay its own employees in accordance
with the Hiasun CBA. V-Tech’s contention is misplaced, as the National Labor
Relations Act governs labor-management relations that apply to private sector
employers, not service contracts entered into by the United States, which are
governed by the SCA. See 41 U.S.C.A. § 351; 29 U.S.C.A. §
152(2) (exempting “the United States or any wholly owned Government
corporation . . . .” from the National Labor Relations Act.