Similarly, in the instant case, I suggest that the payments were made to comply with prevailing wage requirements, and there was a one-to-one ratio between the contributions made by Lang and the benefit received by Lang's employees. Additionally, here, as in Mistick, receipt of the benefit was, at times, delayed from the work performed. The similarities end, however, at regularity of payment. In Mistick, the contributions were made in the form of irrevocable weekly contributions to the FBP. Lang, however, made payments on an irregular basis, in July, August,
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and December. Therefore, Lang's payments do not qualify as vacation pay fringe benefits under 29 C.F.R. § 5.5(a)(1)(i)(quarterly) nor do they qualify as cash payments in lieu of benefits under 29 C.F.R. § 5.5(a)(1)(i)(weekly). Accordingly, I suggest that the Agency's motion for summary judgment should be granted and Lang's motion denied on this ground.
b. Food and Lodging Payments
Under the applicable regulations, an employer may make payroll deductions without prior approval from the Secretary of Labor for wages and cash that the employee has "complete freedom of disposition" of and for "the ‘reasonable cost' of board, lodging or other facilities meeting the requirements of . . . part 531of this title...[and] when such a deduction is made the additional records required under 516.25(a) of this title shall be kept." 29 C.F.R. §§ 3.5(b) and (j), respectively. The regulations also provide that "[w]hile each situation must be separately considered on its own merits, payments made for travel, subsistence or to industry promotion funds . . . which are common in the construction industry . . . should not normally be regarded as bona fide fringe benefits . . ." because they are omitted from reference in the Act. 29 C.F.R. § 5.29(f).
Lang believes that it properly took credit for payment of meals and lodging expenses of its operators as a bona fide fringe benefit or cash payments that can be credited toward the hourly rate of each employee. The Agency responds that there was no proof that meals and lodging are customarily considered fringe benefits in the industry. (Resp't's Br., Dkt. 18 at13-14.) The Agency adds that meals and lodging were also not creditable as cash payments in lieu of prevailing wage obligations because they were not customarily furnished by Lang to its employees. (Id. at 14-17.)
The Agency Handbook provides:
Where an employer sends employees who are regularly employed in their home community away from home to perform a special job at a location outside daily
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commuting distances from their home so that, as a practical matter, they can return to their homes only on weekends, the assumption by the employer of the cost of board and lodging at the distant location, not customarily furnished the employee in their regular employment by the employer, and of weekend transportation costs of returning to their homes and reporting again to the special job at the end of the weekend, are considered as payment of travel expenses properly reimbursable by the employer and incurred for its benefit. Such payments are not considered bona fide fringe benefits within the meaning of the [Davis-Bacon and Related Acts], are not part of the employees' wages, and do not constitute board, lodging or other facilities customarily furnished which are deductible from the predetermined wage pursuant to [29 C.F.R.] 3.5j.
Administrator's Field Operations Handbook "FOH," Section 15f18. Lang argues that the instant facts do not present special circumstances under which room and board cannot be considered fringe benefits.
According to Mr. Lang, when speaking with potential employees, he made it "very clear to them that you [sic] will be gone all week and home only on weekends." (R. 48.) Employee testimony confirmed that they were to stay at a motel chosen by Lang during the work week (5 or 6 days) and could not return home until the weekend. (R. 62, 92, 114,132, 167-68, 187.)
In In the Matter of Calculus, Inc., No. 93-06, 1993 WL 537381 (DOL W.A.B. October 29, 1993), the employer ("Calculus"), required that its employees accept lodging during the work week so they could begin at 7 o'clock a.m. each day. Calculus gave each employee a per diem amount in addition to ordinary wages to cover food and lodging expenses. The ALJ concluded that Calculus had not underpaid its workers because Calculus was not obligated to pay the per diem amount it did its employees for food and lodging and because the employees received the same amount of money that they would have received had the total been called wages rather than per diem additions to wages. The Wage Appeals Board reversed, concluding that the per diem amount paid for food and lodging could not properly be credited toward the prevailing wage requirements because "Calculus did not customarily furnish board and lodging to its employees,
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but did so only on the contract involved in this case." Id. at 3. In addition, the Board noted that Calculus had failed to maintain additional records as required when food and lodging are "customarily provided" to the employees. Id.; 29 C.F.R. § 516.27. Finally, the Board concluded that since the employees had no choice but to stay at the work site all week and thus, accept the per diem in lieu of wages, the room and board were for the benefit and convenience of Calculus. Id. at 4.
After review of the record in this case, I cannot say that the Board's conclusion that the "facts in Calculus precisely mirror those presented by Lang" (R. 2016) is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law, nor can I say it is not supported by substantial evidence. Accordingly, I suggest that the Agency's motion for summary judgment should be granted and Lang's motion denied on this ground.
c. Health Insurance Benefit Calculation
"In determining cash equivalent credit for fringe benefits, the period of time to be used is the period covered by the contribution." (FOH, 15f11(a).) The Board determined that Lang should have calculated the health insurance fringe benefit individually and on a monthly basis because Lang paid for that coverage on a monthly basis and at varying rates. Instead, Lang calculated its health insurance fringe benefit by taking the annual health insurance cost in the previous year, divided by the number of hours worked in an employee classification in that year, to arrive at a cost per hour for each classification. (Resp't's Br., Dkt. 18 at17.)
Lang reasons that the Board's method is not reasonable because the true value of the insurance coverage is not related to the number of hours worked; rather, it has independent value based on the actual coverage the employee receives. Lang further points out that the Board's method would lead to the irrational result where the value of the fringe benefit would be very low
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in months that the employee worked the most hours and correspondingly high in months where the employee worked the least amount of hours. (Pet'r's Br., Dkt. 19 at 36-37.) Lang cites Mistick, supra, and Miree, supra in support of its position. However, while both of these cases considered annualization of benefits, neither of these cases dealt with health insurance costs. Mistick involved cash contributions made into a fringe benefit plan and Miree involved apprenticeship training costs. Consequently, neither of these cases, I suggest, are persuasive on the present question.
The Agency argues that using Lang's methodology, "single-insured employees received less than the prevailing wage because the average rate overstated the cash value of their insurance benefit." (Resp't's Br., Dkt. 18 at17.) The Agency adds that Lang's method would also inaccurately take credit for contributions made for employees during the waiting period when they are not eligible where no contribution was actually made. (Id. at 18-19.) This is prohibited by the Field Handbook at 15f12.
Although both parties have posed interesting analyses of the advantages and disadvantages of the various methodologies, I believe the issue is resolved by reference to section 15f11(d) of the FOH which provides:
In computing cash equivalents, it should be kept in mind that under certain kinds of fringe benefit plans the rate of contribution for employees may vary. For example, under a hospitalization plan, the employer often contributes at different rates for single and family plan members. In such situations, an employer cannot take an across-the-board average equivalent for all employees; rather, the cash equivalent can only be credited based on the rate of contribution for each individual employee.
Since Lang did not distinguish between single and family plan members in its across-the-board computation, Lang failed to properly calculate its fringe benefit according to Agency policy. Consequently, I suggest that the Agency's motion for summary judgment should be granted and Lang's motion denied on this ground.
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d. Classification of Power Equipment Operations
Lang originally cleared mostly farmland and forests and primarily used bulldozers to perform that work. As a result, Lang's operators were classified under Group 1 in the early 1970s and 1980s. (Pet'r's Br., Dkt. 19 at 3.) Since then, the demand for clearing farmland has waned, and Lang has focused more on clearing land around roads and highways which caused Lang to retool its operations. (Id.) Lang keeps a couple bulldozers as a backup for other equipment, and for retrieving equipment that gets stuck. The remainder of its equipment is forestry harvesting equipment. (Id. at 3-4.) Specifically, Lang points to a Morbark Waste Recycler (also referred to as a "tub grinder"), hydro-axes (with mower attachments, generally the first piece of equipment used to clear land), skidders (which are used to drag bundles of trees or skids to a chipper), chippers, and wheel grinders that Mr. Lang invented (which have replaced the tub grinders and which can grind a stump in place without having to uproot it). (Id.)
Generally, earth moving, highway construction and paving equipment operators are Group 1 operators, while farm, trucking and forestry equipment operators are Group 4. Lang contends that its equipment is virtually all forestry equipment; thus, Lang properly categorized its operators at Group 4. Lang relies on the fact that the Group 4 classification properly applies to "all mulching equipment" and "stump removers." (Id. at 5; R. 1001, 1234, 1489.)
Lang correctly notes that Group 4 expressly includes "all mulching equipment" and "stump removers" and that Group 1 does include operators of equipment that is used for highway and paving projects. For example, Group 1 includes "asphalt plant operator(s), crane operators(s), . . . paver operator(s)(5 bags or more), elevating grader operator(s), pile driving operator(s) . . ." (R. 1001, 1234, 1489.)
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The Agency makes the threshold argument that classification of power equipment is a wage determination that is not subject to judicial review, citing Universities Research Ass'n v. Coutu, 450 U.S. 754, 761 n.10, 101 S. Ct. 1451, 67 L. Ed. 2d 662 (1981); United States v. Binghampton Constr. Co., 347 U.S. 171, 177, 74 S. Ct. 438, 98 L. Ed. 594 (1954); and Mistick PBT d/b/a Mistick Construction v. Chao, No. 03-1767, 2004 WL 3517425 (D.D.C., July 27. 2004). (Resp't's Br., Dkt. 18 at 19-21.) Universities Research Ass'n, supra, does state that the correctness of wage determinations is not subject to judicial review, supra, n.10, but holds only that the Davis-Bacon Act confers no private right of action for back wages. The case expressly states, "we find it unnecessary to reach the broader question whether federal courts have any jurisdiction to review agency coverage and classification decisions." Universities Research Ass'n, 450 U.S. at 768. There have been several district court opinions that have held that the classification of workers is a wage determination that is not subject to judicial review, including Mistick PBT, supra, cited by the Respondent Agency. See also George Campbell Painting Corp. v. Chao, No. 3-05-cv-00716, 2006 WL 197375 (D. Conn. January 25, 2006), and cases cited therein.
"Federal courts may, however, review the Secretary's wage determination for violation of due process or statutory or regulatory violations." Id.. at 13; accord Fry Bros. Corp. v. The Dep't of Housing and Urban Dev., 614 F.2d 732, 733 (10th Cir. 1980)(finding plaintiff failed to sufficiently raise due process issue where the phrase was only mentioned in one paragraph noting the difference between the government's method of calculation and the plaintiff's own). Lang has not challenged the classifications based on due process grounds. On the other hand, both parties have presented and briefed the issue at all levels of administrative review, and to this Court. In addition, the APA confers upon this Court the obligation to independently review the Administrator's decisions. For these reasons, and for the sake of judicial economy on review, I
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will presume for the purposes of this analysis that the Court possesses the authority to review this determination of the Administrator.
The Agency argues that the Board's decision was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. (Resp't's Br., Dkt. 18 at 21.)3 I suggest that the Board's decision, in rejecting that of the ALJ, was arbitrary, capricious or an abuse of discretion.
The ALJ noted that the witnesses offered by the Agency testified that the equipment used by Lang should be classified as Group 1 but that they offered no consistent theory to support that conclusion. (R. 1737.) Four witnesses (Swartz, Hamilton, Hart, and Fox) opined that size, weight and power were the key factors to determine the proper classification. (Id.) Three of these four joined another two in proffering that the most important factor was the skill of the operator. (Id.) On cross-examination, many of these same witnesses conceded that some of the equipment in Group 4 is larger in size and power than those in Group 1, thereby defeating their own rationales. (Id.) Finally, the ALJ noted that the plain language of the categories themselves supported Lang's conclusion that its equipment fit into Group 4.
Group 4 expressly includes "all mulching equipment" and "stump removers" which by its ordinary meaning covers the forestry clearing equipment used by Lang, such as the skidders, chippers, and wheel grinders. (R. 1001, 1234, 1489, 1738.) The ALJ also noted that although
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Lang occasionally used bulldozers, which are classified as Group 1 equipment, such use was sporadic. The ALJ concluded that occasional use of a Group 1 piece of equipment would not justify raising the classification of the operators who used Group 4 equipment 95% of the time. (R. 1738.)
The Board's conclusion to the contrary is based on the fact that the Local 324 representatives' testimony consistently concluded that Lang's equipment should be considered Group 1 under local practices. (R. 2023.) The Board apparently was not disturbed by the fact that the theories behind the conclusion were not consistent and that the main theory was internally flawed. For instance, the Board found no fault in the testimony that Lang's equipment must be Group 1 because it is powerful and large even though those same witnesses admitted that some equipment in Group 4 was larger and more powerful than those in Group 1. (R. 2023.) The Board dismissed this problem by noting that the inconsistent examples represented only a small number of pieces of equipment. (R. 2023.)
The Board also relied on testimony that Lang's stump grinder was not the same as a "Group 4 ‘stump grinder,'" because the "Group 4 ‘stump grinder'" is a "very, very small one." (R. 2026.) However, if a contractor cannot be sure that a "stump grinder" means a "stump grinder," then the Agency is acting in an arbitrary manner, and its actions cannot be sustained. Accordingly, I suggest that Lang's motion for summary judgment should be granted and the Agency's motion denied on this ground.
III. REVIEW
The parties to this action may object to and seek review of this Report and Recommendation within ten (10) days of service of a copy hereof as provided for in 28 U.S.C. §
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636(b)(1). Failure to file specific objections constitutes a waiver of any further right of appeal. See Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed.2d 435 (1985); Howard v. Sec'y of Health & Human Servs., 932 F.2d 505 (6th Cir. 1991); United States v. Walters, 638 F. 2d 947 (6th Cir. 1981). The parties are advised that making some objections, but failing to raise others, will not preserve all the objections a party may have to this Report and Recommendation. See Willis v. Sec'y of Health & Human Servs., 931 F.2d 390, 401 (6th Cir. 1991); Smith v. Detroit Fed'n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Pursuant to E.D. Mich. LR 72.1(d)(2), a copy of any objections is to be served upon this Magistrate Judge.
s/ Charles E Binder
CHARLES E. BINDER
United States Magistrate Judge
Dated: March 28, 2006
CERTIFICATION
I hereby certify that this Report and Recommendation was electronically filed this date, electronically served on Janet L. Parker, Mark D. Sassak, Kraig M. Schutter and Honorable David M. Lawson.
Dated: March 28, 2006
By s/Mary E. Dobbick
Secretary to Magistrate Judge Binder
[ENDNOTES]
1 The ALJ did not find that Lang had: 1) improperly taken prevailing wage credit by treating subsistence payments as fringe benefits, or 2) improperly taken prevailing wage credit by averaging health insurance costs instead of calculating the actual amounts paid per employee per month, or 3) erroneously classified its power equipment operations as Group 4 rather than the higher paid Group 1.
2 Nor was the court persuaded to hold otherwise based on the Department's argument that the FBP plan was not traditional or that the FBP plan subsidized non-Davis-Bacon work because the contributions were not linked to actual cost of enumerated benefits. Mistick, 54 F.3d at 904.
3 Since this Court's review is limited, the burden of proof argument is not, I suggest, of overriding importance. However, I note that although Lang cites Trataros Construction Co., Inc., 94 1 B.C.A. (CCH) P26,592, 1993 ABSCA LEXIS 500, as support for its position that the "Administrator at all times bears the burden of proving her contention that Lang improperly categorized its equipment operators," (Dkt. 19 at 6), Trataros actually states the opposite: the "burden of proof is on the Appellant [Trataros] to establish that its proffered ‘or equal' functions as well in all the essential respects as the specified product." Id. at 11; accord Hook Constr., Inc. v. General Servs. Admin., 2005-1 B.C.A. (CCH) P32,862, 2005 GSBCA LEXIS 4 (if contractor cannot make required showing, agency not liable for rejecting proposed product).
