UNITED HEALTHSERV, INC., 1989-CBV-1, et al. (Dep. Sec'y Feb. 4, 1991)
CCASE:
UNITED HEALTHSERV, INC.
DDATE:
19910204
TTEXT:
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[1] U.S. DEPARTMENT OF LABOR
DEPUTY SECRETARY OF LABOR
WASHINGTON, D.C.
20210
DATE: February 4, 1991
CASE NOS. 89-CBV-1
89-CBV-5
89-CBV-7
89-CBV-10
89-CBV-11
89-CBV-12
89-CBV-16
89-CBV-17
IN THE MATTER OF
APPLICABILITY OF WAGE RATES COLLECTIVELY
BARGAINED BY UNITED HEALTHSERV, INC., AND
LABORERS' INTERNATIONAL UNION OF NORTH AMERICA,
AFL-CIO, TO EMPLOYMENT OF SERVICE EMPLOYEES UNDER A
CONTRACT FOR HOSPITAL ASEPTIC MANAGEMENT SERVICES AT:
WRIGHT-PATTERSON AIR FORCE BASE IN
MONTGOMERY COUNTY, OHIO,
MAXWELL AIR FORCE BASE IN
MONTGOMERY COUNTY, ALABAMA,
TYNDALL AIR FORCE BASE IN BAY
COUNTY, FLORIDA,
EGLIN AIR FORCE BASE IN OKALOOSA
COUNTY, FLORIDA,
SHAW AIR FORCE BASE IN SUMTER
COUNTY, SOUTH CAROLINA,
ALTUS AIR FORCE BASE, OKLAHOMA,
CARSWELL AIR FORCE BASE, TEXAS,
LACKLAND (WHILFORD HALL AND MEDIAN ANNEX),
RANDOLPH, BROOKS, AND KELLY AIR FORCE BASES,
BEXAR COUNTY, TEXAS.
BEFORE: THE DEPUTY SECRETARY OF LABOR /FN1/
DECISION AND ORDER OF REMAND
This proceeding is before me pursuant to the McNamara-O'Hara
Service Contract Act of 1965, as amended (MOSCA or the Act), [1]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN1/ The Deputy Secretary has been designated by the Secretary to
perform the functions of the Board of Service Contract Appeals
pending the appointment of a duly constituted Board. 29 C.F.R.
[sec] 8.0 (1989). [1]
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[2] 41 U.S.C. [secs] 351-358 (1988), and its implementing
regulations, 29 C.F.R. Parts 4, 6 and 8 (1989). The primary issue
on review of Administrative Law Judges (ALJs) Daniel J.
Roketenetz's and Alfred Lindeman's Joint Decision and Order (J.D.
and O.) of July 21, 1989, is whether the ALJs employed an
appropriate standard under MOSCA Section 4(c) in upholding the
successorship obligation in these cases.
In granting the Laborers' International Union of North
America, AFL-CIO's (LIUNA's) motion for summary decision, the ALJs
held that, absent allegations of certain "unusual circumstances"
described in the legislative history of Section 4(c), and where the
majority of collectively-bargained rates fall between greater
Federal wage board rates and lesser area wage rates, there can be
no substantial variance. /FN2/ J.D. and O. at 27. In its Petition
for Review, the contracting agency, the Department of the Air
Force, argues that the Wage and Hour Administrator's area wage
determination /FN3/ establishes [2]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN2/ United Healthserv, Inc., provided hospital aseptic management
(housekeeping) services at the captioned facilities. Initially, it
performed what became predecessor contracts. Thereafter, it became
a successor contractor during exercise of contract options. The
wage determination for the predecessor contracts incorporated
collectively-bargained rates. See J.D. and O. at 3-5.
/FN3/ In the absence of an applicable collective bargaining
agreement, the Administrator, in setting minimum monetary wages and
fringe benefits for service contract wage determinations, relies
significantly on area surveys conducted by the Bureau of Labor
Statistics, U.S. Department of Labor (BLS). 29 C.F.R. [sec] 4.51.
By comparison, in Section 4(c) proceedings consideration is not
confined to the Administrator's wage determination, BLS surveys, or
other factors. See. e.g., In the Matter of (continued...)[FN3
CONTINUED ON PAGE 3](...continued) Applicability of Wage Rates
Collectively Bargained by Big Boy Facilities, Inc., and the
National Maritime Union to Employment of Service Employees under a
Contract for Mess Attendant Services at Fort Richardson, Alaska
(Big Boy Facilities), Case No. 88-CBV-7, Final Decision and Order
of the Dep. Sec. issued January 3, 1989, slip op. at 9-14, 29, Wage
& Hour Cas. (BNA) 356, 360-363 (1989). [END FN3] [3]
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[3] conclusively the prevaIling rate in the locality for purposes
of determining the existence of a substantial variance.
The ALJs have applied the following standard: (1) a finding of
substantial variance requires proof of non-arm's-length negotiation
or rates having become disproportionate over a long period of time;
and (2) negotiated rates which do not exceed analogous Federal wage
board rates occupy a protected zone and cannot be held
substantially at variance with prevailing rates absent proof of
non-arm's-length negotiation. /FN4/ While I disagree with this
precise formulation, I do not reject the ALJs' analysis in its
entirety. Rather, the ALJs are substantially correct in their
identification of congressional intent and, in particular, of the
roles accorded collectively-bargained and Federal wage board rates
under the MOSCA. /FN5/
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN4/ This component derives from the ALJ's premise that wages
equal to or less than the Federal wage board rate assertedly are
"justifiable," and that a finding of "unjustifiability" thus
arguably is requisite to a finding of substantial variance.
/FN5/ While it is not necessary to restate and address each
discrete argument advanced by each party, I have considered all
aspects of the parties' respective positions thoroughly in
rendering my decision. [3]
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[4] I. BACKGROUND
A. The Facts of the Case
The Department of the Air Force contracted with United
Healthserv to perform housekeeping services at the captioned Air
Force bases. These (successor) contracts contained wage
determinations which incorporated rates from predecessor contracts
for the immediately preceding contract period. The predecessor
rates, which had been collectively bargained by the LIUNA on behalf
of United Healthserv's employees, generally exceeded the
Administrator's area wage rates. The following constituted the
collectively-bargained rates, Federal wage board rates, and area
wage rates in effect:
Federal Area
Negotiated Wage Board Wage
Wage Rate Rate Rate
Wright-Patterson AFB
Dayton, Ohio
Housekeeping Aide I $8.27 $9.56 $7.33
Group Leader 8.77
Maxwell AFB
Montgomery, Alabama
Housekeeping Aide I 5.50 5.73 4.52
Housekeeping Aide II 5.50 4.88
Group Leader 6.02
Tyndall AFB
Panama City, Florida
Housekeeping Aide I 6.03 6.89 5.22
Housekeeping Aide II 6.03 5.66
Group Leader 6.57
Eglin AFB
Pensacola, Florida
Housekeeping Aide I 7.42 7.62 5.22
Group Leader 7.97 9.28 [4]
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[5] Shaw AFB
Sumter, South Carolina
Housekeeping Aide I 6.39 6.74 4.17
Group Leader 6.99 7.70
Altus AFB
Altus, Oklahoma
Housekeeping Aide I 6.60 6.00 5.69
Group Leader 7.12
Carswell AFB
Ft. Worth, Texas
Housekeeping Aide I 7.47 7.13 5.08
Group Leader 7.99 7.75
Lackland AFB
San Antonio, Texas
Housekeeping Aide I 6.89 7.47 4.48
Housekeeping Aide II 6.89 4.92
Housekeeping Aide III 6.99
Group Leader 7.21 8.40
B. Statutory Framework
MOSCA Section 2 requires every Federal government service
contract to contain a provision specifying minimum monetary wages
to be paid and fringe benefits to be furnished to the various
classes of service employees engaged in performing the contract.
The [*] wages [*] are "determined by the Secretary . . . in
accordance with prevailing rates for such employees in the locality
...." The [*] benefits [*] specified are those determined by the
Secretary "to be prevailing . . . ." 41 U.S.C. [sec] 351(a)(1) and
(2). In addition, the contract must state, inter alia, the Federal
wage board rates which would be paid to the classes of employees
under the Prevailing Rate Systems Act, 5 U.S.C. [secs] 5341-5349
(1988), and the Secretary must "give due consideration to [these]
rates in making the wage and fringe benefit determinations
specified in this section." 41 U.S.C. [sec] 351(a)(5). However,
in the event [5]
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[6] that the service employees performing the contract are covered by an
arm's-length collective bargaining agreement, this "prevailing rate"
procedure does not apply. Instead, the wage determination would specify
the negotiated wages and fringe benefits, including any prospective
increases, provided by the collective bargaining agreement. 41 U.S.C.
[sec] 351(a)(1) and (2).
MOSCA Section 4(c), 41 U.S.C. [sec] 353(c), imposes on[*] successor [*]
contracts an obligatory floor for wages and
fringe benefits in the event that the predecessor contract has
specified collectively-bargained rates. Wages paid and benefits
furnished under a successor contract must be greater than or equal
to those provided under the predecessor contract. The employer
obligation reads:
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 ....
Section 4(c) also contemplates circumstances in which the
obligation may be suspended. Its proviso specifies that the
successorship obligations do not apply "if the Secretary finds
after a hearing . . . that such wages and fringe benefits are [*]
substantially at variance [*] with those which prevail for services
of a character similar in the locality." [*](Emphasis added.)[*][6]
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[7] The collective-bargaining rate alternatives were incorporated
into Section 2(a)(1) and (2) through the MOSCA's 1972 amendment,
and Section 4(c) also was enacted at that time. The Senate Report
explains:
Section 2(a)(1) and 2(a)(2) of the act have been amended,
and a new subsection (c) has been added to section 4 to
explicate the degree of recognition to be accorded
collective bargaining agreements covering service
employees, in the predetermination of prevailing wages
and fringe benefits for future such contracts for
services at the same location....
The committee appreciates the importance of decasualizing
the service contract industry -- a labor intensive and
otherwise casual and transient industry.
S. Rep. No. 1131, 92nd Cong., 2d Sess., reprinted in 1972 U.S.
Code Cong. & Admin. News (USCAN) at 3537 (emphasis omitted). /FN6/
Thus wages and benefits in effect as the result of arm's-length
negotiation initially govern Section 2(a) wage
predeterminations. [7]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN6/ The Senate Report states: "Sections 2(a)(1), 2(a)(2), and
4(c) must be read in harmony to reflect the statutory scheme. It
is the intention of the committee that sections 2(a)(1) and 2(a)(2)
and 4(c) be so construed that the proviso in section 4(c) applies
equally to the above provisions." Accordingly, in the event that
successor rates, based on predecessor collectively-bargained rates,
are found to be substantially at variance with those prevailing in
the locality, the wage determination contained in the successor
contract would be altered in accordance with prevailing rates. If
the wage determination "minimum" rate is reduced below the
collectively-bargained rate, the contractor certainly could
continue to honor his labor agreement by paying the negotiated
rate. However, upon resolicitation of the service contract, other
contractors could submit bids based on the new minimum rates
specified in the wage determination because the obligation to pay
at least the predecessor rate would no longer apply. [7]
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[8] The Senate Report also makes clear that Congress intended
that the successorship obligation would attach in the usual
circumstance.
[*] Ordinarily [*], where service employees are covered
by a collective bargaining agreement, a successor
contractor furnishing substantially the same services at
the same location will be obligated to pay to such
service employees no less than wages and fringe benefits
required by such agreement. This requirement would
likewise apply to prospective wages and fringe benefits.
The term "accrued . . . fringe benefits" is interpreted
to mean those benefits, such as accrued vacation pay or
sick leave, to which an employee has become entitled by
virtue of employment on predecessor contracts ....
There are certain [*] unusual circumstances [*] where
predetermination of wages and fringe benefits contained
in such a collective agreement might not be in the best
interest of the worker or the public.
Thus, service employees should be protected against
instances where the parties may not negotiate at arms
length.
Id. [*](emphasis added)[*]. The report thereafter cites
circumstances resulting from collusion or unequal bargaining power
and observes that predetermined rates possibly might tend to
deviate substantially from actual prevailing rates "over a long
period of time ...." It concludes by stating that the dual
objectives of protecting service contract workers and safeguarding
other legitimate government interests is best achieved by requiring
the Secretary to predetermine collectively-bargained wages and
fringe benefits, [*] except [*] where she finds, after notice to
interested parties and a hearing, a "clear showing" of substantial [8]
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[9] variance. /FN7/ Big Boy Facilities, slip op. at 3-10, 29
Wage & Hour Cas. (BNA) at 358-360.
Imposition of a successorship obligation pertaining both to
wages and fringe benefits was exceptional, in light of the
judicially circumscribed treatment accorded this principle under
the National Labor Relations Act. Burns Detective Agency v. NLRB,
406 U.S. 272 (1972) (successor employer obliged to
bargain [9]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN7/ After conducting five days of oversight hearings in 1974, the
House subcommittee reported continued problems in the operation of
Section 4(c). The subcommittee's discussion reinforces the case
for construing the successorship obligations as the ordinary
circumstance.
In order to maintain continuity of service to the Federal
government and to ensure that employees would not lose
their bargained-for benefits, the Congress enacted
section 4(c) .... The clear intent of the Congress was
to prevent wage undercutting by establishing a wage and
fringe benefit floor -- the predecessor collective
bargaining agreement -- for successor contractors.
Mr. O'HARA. It is that sort of problem [wage
undercutting] which prompted us to include in the bill
that in no event shall the new contractor be permitted to
pay less than what the existing rate was under the old
contract....
Despite the passage of [sec] 4(c), problems still remain.
The GAO has advanced an interpretation ... that [[sec]
4(c)] is to be applied only where the same employees and
the same locality continue under a succeeding contract
.... The Subcommittee rejects this interpretation ....
The Subcommittee also rejects any interpretation of [sec]
4(c) which places a time limit on the duration of the
successorship requirements.
Congressional Oversight Hearings: The Plight of the Service Worker
Revisited; Report of the Subcommittee on Labor-Management Relations
of the U.S. Congress, House Committee on Education and Labor
(Plight Revisited), 94th Cong., 1st Sess. 7-8 (Comm. Print
1975). [9]
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[10] with predecessor union only if hiring substantial number of
predecessor workforce; even so, successor not obliged to honor
predecessor collective bargaining agreement).
Section 4(c) overruled Burns to the extent that the
Supreme Court refused to impose any of the terms of a
prior contract on a successor employer. While Burns is
based upon a policy of not imposing terms of an agreement
upon parties who have not themselves bargained for those
terms, the Congress recognized that this policy must give
way in the field of service contracts to achieve any
degree of labor stability and economic security for
employees who most often face a new employer annually.
Plight Revisited at 8.
C. Prior Proceedings
The captioned cases arose when the Air Force requested that
the Administrator initiate Section 4(c) proceedings. The Air Force
alleged the existence of substantial variances between wage rates
prevailing in the locality for similar housekeeping services and
those collectively bargained between the LIUNA and United
Healthserv, Incorporated in the instant wage determinations. The
Administrator issued an Order of Reference in each case upon
determining that there may have been a substantial variance between
prevailing rates and some or all of the collectively-bargained
rates, 29 C.F.R. [sec] 4.10(b)(2), and the cases were referred to
the Chief Administrative Law Judge for hearing.
The cases were consolidated, with five being assigned to ALJ
Roketenetz and three being assigned to ALJ Lindeman. The ALJs
scheduled a consolidated prehearing conference for April 25, [10]
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[11] 1989. On March 7, the LIUNA filed a motion to dismiss and
a motion for continuance of hearing pending consideration of the
dismissal motion. ALJ Roketenetz denied the motion for continuance
on March 8. The LIUNA then filed a motion for summary decision on
March 10 and a supplemental memorandum in support of its
dispositive motions on March 16. On March 29, the Air Force filed
a motion for summary decision, and the LIUNA filed a motion for
continuance of the evidentiary hearings pending consideration of
the dispositive motions. The Administrator responded to the
LIUNA's motions to dismiss and for summary decision on April 6. On
May 6, the LIUNA's motion for continuance was granted by joint ALJ
order.
On July 21, 1989, the ALJs issued a Joint Decision and Order
on Motion to Dismiss and Cross Motions for Summary Decision (J.D.
and O.). That decision denied the motion to dismiss and granted the
LIUNA's motion for summary decision. The ALJs held that, as a
matter of law, substantial variances did not exist in the cases
because (1) arm's-length negotiations had taken place between
United Healthserv and the LIUNA, and there were no "unusual
circumstances" affecting the bargaining process; and (2) six of the
eight sets of collectively-bargained wage rates involved were less
than the Federal wage board rates for the locality in which the
contracts were performed. The ALJs constructed this standard with
reference to portions of the MOSCA's legislative history, after
they determined that the statutory language of the Section 4(c)
proviso was "ambiguous at best and contain[ed] such inherent [11]
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[12] difficulty . . . as to be almost meaningless." J.D. and O.
at 14. The Air Force thereafter petitioned for review of the ALJs'
J.D. and O.
II. ANALYSIS
The ALJs' standard for showing the existence of a substantial
variance contemplates first the presence of the "unusual
circumstances" mentioned in the 1972 Senate Report's Section 4(c)
discussion. Two of these circumstances were cited in that report
as "example[s]" of non-arm's-length negotiation, in particular
that:
a union and an employer may enter into a contract,
calling for wages and fringe benefits substantially lower
than the rates presently prevailing for similar services
in the locality [and that] a union and employer may reach
an agreement providing for future increases substantially
in excess of any justifiable increases in the industry.
1972 USCAN at 3537. /FN8/ The third unusual circumstance cited in
the report embodies the observation that "it is possible that over
a long period of time, predetermined contractual rates might become
substantially at variance with those actually prevailing...."
The MOSCA does not define the term substantial variance,
specifying only that the Secretary must find, after a hearing in
accordance with her regulations, "that such [negotiated] wages [12]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN8/ The ALJs also state: "An example of an 'unusual circumstance'
that would trigger invocation of the substantial variance proviso
... would be an assertion and proof that the collectively-bargained
wage rate was agreed to by a 'lame duck' contractor, near the end
of its contract, in order to avoid a strike or workforce slowdown."
J.D. and O. at 28. [12]
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[13] and fringe benefits are substantially at variance with those
which prevail for services of a character similar in the locality."
The plain meaning of these terms is that a considerable disparity
in rates must exist before the successorship obligation may be
avoided.
Accordingly, I disagree with the ALJs that Section 4(c) is
incomprehensible. Its language contemplates a comparison of the
negotiated rates with those which prevail in the locality.
Substantial variance determinations are highly factual, turning on
an evaluation of all evidence presented. See Big Boy Facilities,
slip op. at 10-14, 29 Wage & Hour Cas. (BNA) at 360-361. No
discrete comparison rate is conclusive. Rather, if upon
comprehensive examination the negotiated rates are shown to be out
of line with the rest of the rates, then a substantial variance may
well exist. See infra at 16-19.
The focus then, in gauging the propriety of the ALJs' initial
criterion, is on the degree to which the examples of unusual
circumstances may establish a variation between negotiated and
prevailing rates. At most, the correlation is inferential in the
sense that collusion, unequal bargaining power, or the passage of
time might tend to explain disparity. On the other hand, an
explanation is not strictly necessary. A large difference is
itself evidence that rates are "out of line." 118 Cong. Rec. 31,282
(daily ed. September 19, 1972) (statement of Senator Gurney). To
elevate these illustrations to requisite [13]
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[14] elements of proof would be arbitrary, and I decline to do so. I
reject this aspect of the ALJs' standard.
Of course, proof of non-arm's-length negotiation could
strengthen a case that wage rates are "substantially" substandard,
that increases "substantially" exceed those common in the industry,
or that predetermined increases have deviated "substantially" over
time. See 1972 USCAN at 3537. However, whether arm's-length
negotiation has occurred is a separate issue. Compare 29 C.F.R.
[sec] 4.10 with 29 C.F.R. [sec] 4.11. As the Administrator
correctly notes, Admin. Statement at 22-23, that consideration
bears on imposition of the successorship obligation in the first
instance, rather than arising under Section 4(c)'s proviso which
creates an exception to the obligation. See Trinity Services, Inc.
v. Marshall, 593 F.2d 1250, 1259 (D.C. Cir. 1978). Additionally,
under the Department's regulations the absence of arm's-length
negotiation is not a consideration in substantial variance
proceedings unless so designated by the Administrator. 29 C.F.R.
[secs] 4.10(c), 4.11(c)(1). Since a substantial variance may be
found in the absence of irregular bargaining, the ALJs' standard
would contravene the regulations.
The ALJs' remaining criterion incorporates the Federal wage
board rates. In particular, under the ALJs' standard a presumption
of legitimacy would extend to negotiated rates equal to the Federal
rates or to wage rates falling between the Federal rates and the
rates otherwise predetermined by the Secretary [14]
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[15] under Section 2(a) in accordance with prevailing rates in the
locality. The ALJs state:
we hold that it would be antithetical to the intent of
Congress in enacting Section [4(c)] to find that a wage
equal to or less than the Federal Wage Board rate is
"unjustifiable," and [we hold] that such a finding [of
unjustifiability] is required for a "substantial
variance" to exist....
To allow wages at or below the Federal Wage Board level
to be challenged, and possibly rolled back even lower,
would call into question the validity of wage rates set
by Congress for work of the same description. Moreover,
since the intent of Congress was explicitly to narrow or
eliminate the wage gap between federal employees and
service contract employees performing the same work, we
hold that wages falling within the parameters of those
rates are in a protected zone and cannot be substantially
at variance with prevailing wages ... absent an
allegation of less than arm's length negotiation.
J.D. and O. at 27-28. Under this criterion only collectively-
bargained rates which exceed Federal wage board rates are
"unjustifiable" and thus subject to a substantial variance finding.
Again, the ALJs' formulation does not comport with the plain
meaning of the statute. The impetus under the Section 4(c) proviso
is disparity between negotiated rates and rates prevailing in the
locality for similar services. Like the examples of "unusual
circumstances," "unjustifiability" vis-a-vis Federal wage board
rates is not strictly requisite to a showing of substantial
variance, and I do not approve this aspect of their standard.
However, I am persuaded that Federal wage rates constitute evidence
of prevailing rates and that they warrant consideration in the
Section 4(c) context. Moreover, I reject [15]
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[16] emphatically the Air Force position that Section 2(a) area wage
determinations should serve as the only benchmark for Section 4(c)
findings. /FN9/
Since the inception of the MOSCA, congressional attention has
focused on the wages paid service workers employed directly by the
Federal government.
Mr. O'Hara, the author of the act in the House, described
during a colloquy with a witness the situation at the
time the subcommittee first considered this legislation,
and the way in which the Government's purchasing power
was being used to depress wage levels.
Mr. O'Hara. [The practice] of service contracting did not
begin really until the 1950's; until then the Government
did very little contracting-out of services on Federal
installations. [The] practice ... came to my attention in
the late 1950's. What disturbed me was that it appeared
to me that almost invariably when a function that had
been performed by Federal blue-collar wage board
employees was shifted over to a service contractor, the
people that ended up doing the work would be getting less
than the blue-collar wage board employees they replaced.
The savings to the Government were due almost entirely to
the fact that they were paying the people who worked
there less than they used to pay the wage board . . .
employees.
The Plight of Service Workers under Government Contracts; Report
of the Special Subcommittee on Labor of the U.S. Congress,
House [16]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN9/ The Administrator's area wage determination sets a minimum
rate in accordance with that which prevails among a largely
unorganized workforce. Prevailing rates can result from unequal
bargaining postures, i.e., individual employees "negotiating" terms
with their employers or prospective employers. As the ALJs point
out, J.D. and O. at 10-11, collectively-bargained rates often can
be expected to exceed service industry "prevailing" rates in these
circumstances. Here, where some variance should be the norm, a
finding of "substantial" variance would require a
collectively-bargained rate clearly to fall out of line when
compared to a comprehensive mix of rates, including those achieved
after full and free interaction of market forces. See J. D. and O.
at 9-10. [16]
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[17] Committee on Education and Labor (Plight), 92nd Cong., 1st
Sess. 2-3 (Comm. Print 1971). See also Plight Revisited at 1.
Prior to passage of the 1972 amendments, the subcommittee commented
on a perceived increase in the gap between Federal wage board and
service contract rates, reiterating its original intent.
The rates of pay for blue-collar Federal employees are
determined under the coordinated Federal wage system, a
mechanism for determining the prevailing rates for
similar work in private industry. When we passed the
Service Contract Act, we intended to bring about a rough
equivalence between the pay rates of these Wage Board
employees and the pay rates of service contract workers.
Plight at 18. After nine days of oversight hearings, the
subcommittee issued, as one of its major findings: "Wage Board
employees and service contract employees doing similar work were
receiving markedly different wages and fringe benefits. The
Department's failure to issue determinations had served to depress
the wages of service contract employees, while those of Wage Board
employees had kept pace with the rest of the economy." Plight
Revisited at 3. The congressional intent in providing the "due
consideration" mechanism set forth in section 2(a)(5) was to
eliminate the differential. Id. at 6-7, 15.
Under the Prevailing Rate Systems Act, 5 U.S.C. [secs]
5341-5349 (1988), pay rates periodically are fixed and adjusted in
accordance with prevailing rates, an object being "equal pay for
substantially equal work for all prevailing rate employees who are
working under similar conditions in all agencies within the same
local wage area ...." 5 U.S.C. [sec] 5341(1). Rate levels [17]
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[18] are to be "maintained in line with prevailing levels for comparable
work within a local wage area ...." 5 U.S.C. [sec] 5341(3).
Surveys are taken of private industry in the local labor market
area within a certain radius of Government activity. S.Rep. No.
791, 92nd Cong., 2d Sess., 1972 USCAN at 2981-2982. Full-scale
wage surveys must be scheduled every two years with interim surveys
scheduled more frequently. 5 U.S.C. [sec] 5343(b).
Differences in BLS and Federal wage board surveys engendered
discussion during the 1974 MOSCA oversight hearings:
Prevailing wage determinations under the [MOSCA] begin
with wage and fringe benefit data collected annually by
the Bureau of Labor Statistics in 85 metropolitan areas
.... BLS surveys jobs in a number of fields: office
clerical, professional and technical, maintenance and
powerplant, and custodial and material movement. The
Bureau [collects] data about workers ... in six types of
industry: manufacturing and transportation;
communications and public utilities; wholesale trade;
retail trade; finance, insurance and real estate; and
services.
Oversight Hearings on Service Contract Act of 1965 as amended:
Hearings before the Special Subcommittee on Labor of the U.S.
Congress. House Committee on Education and Labor on H.R. 14371,
93rd Cong., 2d Sess. 219 (1974) (statement of Richard F. Schubert,
Under Secretary of Labor). Federal wage board rates reportedly are
based on annual surveys conducted within 137 defined localities.
Certain nonmanufacturing industries, including service
industries, are excluded from the scope of wage board
surveys. This results in a greater representation of
data from the high wage manufacturing sector.... Wage
schedules developed from the ... localities may be
extended beyond the specific surveyed locality. The area
of application of a particular schedule usually includes
some counties contiguous to the survey area [18][19] and,
where the surveyed areas are widely separated, may
include many counties or an entire State.... The actual
survey data [are] refined in order to arrive at uniform
pay differentials that can be applied to successive wage
board pay levels.
Id. at 219-220.
Differences notwithstanding, the Federal wage board rates and
surveys represent an important measure in gauging whether a given
variance is "substantial," as do the BLS surveys and other relevant
wage data, including evidence of other collectively-
bargained wages and fringe benefits. For purposes of Section 4(c)
determinations, it would appear necessary to examine at least this
combination of information. If a comparison of the predecessor
negotiated rates with such information clearly shows the former to
be "out of line," then a finding of substantial variance could be
appropriate. /FN10/ In reaching this conclusion, I have considered
of particular import the special significance attached by Congress
to successorship in attempting to "decasualize" the service
contract industry so that workers may preserve gains previously
achieved. See 118 Cong. Rec. 24,813 (daily ed. July 21, 1972)
(statement of Senator Gurney on behalf of himself and Senator
Williams, cosponsor of legislation and (then) chairman of Senate
Committee on Labor and Public Welfare).
I do not address here any "due consideration" issue pertaining
to the Administrator's use of Federal wage board
rates [19]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN10/ This result assumes lack of a successful showing that the
surveys are outdated or imprecise, that a different locality should
be considered, that other data should be accorded greater weight,
or that classifications are incomparable. [19]
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[20] in making wage and fringe benefit determinations under Section
2(a) of the Act. Moreover, whatever consideration the
Administrator deems due these rates in making these determinations
would not reasonably delimit their use and that of their underlying
surveys in Section 4(c) proceedings. This conclusion derives from
the different language and objects of the wage determination and
successorship provisions, respectively.
The statutory language supports use of the Federal wage board
information under Section 4(c). If service employees are subject
to a wage agreement, the Administrator is required to predetermine
the collectively-bargained terms. Otherwise, the Administrator
makes a determination in accordance with prevailing rates for
"such" employees, giving Federal wage board rates "due
consideration." 29 C.F.R. [sec] 4.51(d). The pertinent language
under Section 2(a)(1), for example, is that the service contract
must contain "[a] provision specifying the minimum monetary wages
to be paid the various classes of service employees in the
performance of the contract or any subcontract thereunder, as
determined by the Secretary . . . in accordance with prevailing
rates for such employees in the locality . . . ."
In contrast, the Section 4(c) inquiry requires measurement of
negotiated levels against wages and fringe benefits which prevail
for similar services. Specifically, in order for the successor
obligation to lapse, the Secretary must find that the predecessor
"wages and fringe benefits are substantially at variance with those
which prevail for services of a character [20]
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[21] similar in the locality." No reference appears here to rates which
prevail exclusively as among service contract employees or in the
service industry. Rather, Section 4(c) focuses on the character or
nature of the services, including the type of work performed. In other
words, a janitor at a private manufacturing plant likely performs
services similar in character to those performed by a janitor working
under a service contract at a similar defense manufacturing facility.
This construction comports with the general definition of "service" in
terms of "employment" and "work done or dut[ies] performed for another
...." Webster's New World Dictionary (3d College ed. 1988) at 1226.
Accordingly, the Section 4(c) language does not militate against
comparative use of data derived from nonservice industries.
The primary purpose of Section 2(a)(1) and (2) is to ensure
that employees under a given service contract are compensated in
accordance with prevailing industry standards, whereas Section 4(c)
is directed at achieving a degree of "labor stability and economic
security" for employees frequently confronting replacement
contracts and contractors. Separate considerations understandably
bear on (1) providing a threshold standard, and (2) maintaining
bargained-for levels in the provision of ongoing services in the
peculiar circumstance of successive contracts and employers. See
J.D. and O. at 11-12. A fundamental Section 4(c) consideration is
whether the bargained terms are so atypical that [21]
~22
[22] their continuation under a successor contract would be
unreasonable.
Reference to Federal wage board information appears
appropriate in gauging deviation. The Federal wage board rates and
surveys provide a measure of rates which prevail among the private
industry employees surveyed and among the Federal employees who are
not displaced by service contracts and who are compensated
according to these rate schedules. These rates and surveys are
significant in establishing a frame of reference against which to
assess whether a variance exists and, if so, whether it is
substantial. Moreover, this function of identifying variation
differs from the wage determination function of reaching a discrete
number, and the use of the various rates and surveys in each of
these processes similarly may differ.
Accordingly, the ALJs' Joint Decision and Order on Motion to
Dismiss and Cross Motions for Summary Decision IS REVERSED, and [22]
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[23] these consolidated cases are remanded for any appropriate
further proceedings, in accordance with this Decision and
Order. /FN11/
SO ORDERED.
[Roderick DeArment]
Deputy Secretary of Labor
Washington, D.C. [23]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
/FN11/ The Administrator represents that "a remand is not
appropriate in light of the expiration of the contracts at issue."
Admin. Statement at 4 n.2. Examination of the record, however,
reveals a lack of definitive evidence that all contracts in fact
have expired, and, I thus am unable to adopt the Administrator's
suggestion. [23]