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<![CDATA[
CCASE:
KLEEN-RITE CORP & HAROLD GREENSPAN
DDATE:
19921013
TTEXT:
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[1] BOARD OF SERVICE CONTRACT APPEALS
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
KLEEN-RITE CORPORATION and BSCA Case No. 92-09
HAROLD GREENSPAN, Individually
and as President of KLEEN-RITE
CORPORATION
BEFORE: Ruth E. Peters, Presiding Member
Anna Maria Farias, Member
DATED: October 13, 1992
DECISION OF THE BOARD OF SERVICE CONTRACT APPEALS
This case is before the Board of Service Contract Appeals on
the petition of Kleen-Rite Corporation and Harold Greenspan,
individually and as President of Kleen-Rite Corporation ("Kleen-
Rite" or "Petitioners") for review of the October 30, 1989 Decision
and Recommendation on Remand of Administrative Law Judge ("ALJ")
Peter McC. Giesey recommending that the Secretary of Labor take no
action to relieve Petitioners from the ineligibility list
provisions of Section 5(a) of the McNamara-O'Hara Service Contract
Act of 1965, as amended (41 U.S.C. [sec] 351 et seq.; "SCA"). For
the reasons stated below, the petition for review is denied and the
ALJ's decision debarring Petitioners is affirmed. [1]
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[2] I. BACKGROUND
In October 1976, Kleen-Rite was awarded a contract, subject to
the SCA, for cleaning numerous buildings at the Marine Corps Air
Station, Cherry Point, North Carolina. An investigation by the
Wage and Hour Division disclosed monetary and recordkeeping
violations. The violations resulted when certain employees were
not paid for all hours worked and for holiday vacation benefits.
Kleen-Rite paid $1,716.95 in back wages as requested by the Wage
and Hour Division prior to the hearing although an examination of
complete records at Kleen-Rite's main office following the hearing
disclosed that $1,211.83 was in fact due and owing. While finding
that violations had been committed, ALJ Giesey recommended against
debarment.
The Wage and Hour Administrator filed exceptions and on March
26, 1981, the Deputy Assistant Secretary for Employment Standards
issued a decision reversing the ALJ's recommendation against
debarment. Kleen-Rite then filed an application for relief from
the debarment sanction with the Secretary of Labor. On August 10,
1984, the Under Secretary of Labor issued the Department's final
agency action, denying Kleen-Rite's application.
Kleen-Rite filed an action against the Secretary in the
District Court for the District of Columbia. The parties submitted
a joint motion to remand the matter to the ALJ. A hearing was held
December 20 to 22, 1988, in Trenton, New Jersey, based upon a twice
amended complaint alleging violations of the SCA in 19 additional
SCA contracts not included in the original 1978 complaint. Joint
stipulations filed by the parties set forth each investigation, the
violations alleged, and the amount of back wages paid. Upon review
and consideration of the 20 contracts in which violations were
alleged, the ALJ found that violations had been committed and that,
under the regulations, debarment would be required based on any one
of these contracts unless unusual circumstances had been shown.
Accordingly, the ALJ specifically analyzed the contract at Fort
Monmouth, New Jersey, in which there were wage and fringe benefit
violations totaling $133,792. Concluding that Kleen-Rite had
failed to demonstrate any unusual circumstances, the ALJ
recommended debarment.
II. DISCUSSION
Section 5(a) of the SCA provides that "[u]nless the Secretary
otherwise recommends because of unusual circumstances" a violating
contractor shall be debarred from being awarded federal contracts
for a period of three years. The term "unusual circumstances" is
not defined in the SCA, but the regulations at 29 C.F.R. 4.188(b)
set forth a three-part test for determining when relief from
debarment is appropriate. This test clarifies and codifies the
criteria established [2]
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[3] in the leading case of Washington Moving & Storage Co., Case No.
SCA-168 (Dec. of the Secretary, Mar. 12, 1974) and other significant
cases defining what constitutes "unusual circumstances." At 29 C.F.R.
4.188(b)(3)(i), Part I of the test states:
[W]here the respondents' conduct in causing or permitting
violations of the Service Contract Act provisions of the
contract is willful, deliberate or of an aggravated
nature or where the violations are a result of culpable
conduct such as culpable neglect to ascertain whether
practices are in violation or not, or culpable failure to
comply with recordkeeping requirements (such as
falsification of records) relief from debarment cannot be
in order. Furthermore, relief from debarment cannot be
in order where a contractor has a history of similar
violations, where a contractor has repeatedly violated
the provisions of the Act, or where previous violations
were serious in nature.
The second part of the test lists prerequisites to relief such
as a good compliance history, cooperation in the investigation,
repayment of moneys due and sufficient assurances of future
compliance. Part III lists additional factors which must be
considered if the conditions of Parts I and II are met, such as
whether the contractor has previously been investigated for
violations of the Act, whether the contractor has committed
recordkeeping violations which impeded the investigation; whether
liability was dependent upon resolution of a bona fide legal issue
of doubtful certainty; the nature, extent, and seriousness of any
past or present violations, including the impact of violations on
unpaid employees; and whether the sums due were promptly paid.
Kleen-Rite argues in its petition that the ALJ (1) failed to
make specific findings of fact and conclusions of law with regard
to whether violations occurred, and whether unusual circumstances
existed and (2) failed to consider the whole record in determining
that unusual circumstances do not exist.
Petitioners' arguments are without merit. In his decision,
the ALJ states that findings, conclusions and recommendation were
based on "having considered the entire record, including the
transcript, exhibits, briefs of the parties and having observed the
demeanor of the parties." Decision at 2. The ALJ then examined
each of the contracts and alleged violations, identifying the type
and scope of violations, and setting out Kleen-Rite's defenses or
explanations. Kleen-Rite's contention that the ALJ assumed,
without any finding, that Kleen-Rite did violate the Act, is not
supported by the record. After considering the whole record, the
ALJ noted that numerous violations were admitted by Petitioners and
unless unusual circumstances were demonstrated in all of these
cases, there could be no relief from debarment. Id. at 12. [3]
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[4] The ALJ then focused on the contract at Fort Monmouth, New
Jersey, wherein he found that monetary violations of $133,792
occurred. Under Part I of the three part test to determine whether
debarment is appropriate, if the violations are willful, deliberate
or a result of culpable disregard of whether employers were in
violation or not, relief from debarment cannot be in order. Thus,
even if it were found that the prerequisites to relief in Parts II
and III were met and unusual circumstances existed regarding the
other admitted violations, it would not be enough to overcome the
failure to meet Part I. See A to Z Maintenance Corp. v. Dole, 710
F.Supp. 853, 855 (D.D.C. 1989), where it was held that if any of
the aggravating factors in Part I are present, the Secretary cannot
find "unusual circumstances," relief from debarment cannot be in
order, and further analysis is unnecessary.
Kleen-Rite was a subcontractor on the Fort Monmouth contract.
The contract term was July 1983 to September 1986. In May 1985 the
prime contractor, RCA, notified Kleen-Rite of a retroactive wage
determination. In early June 1985 Kleen-Rite made computations and
informed RCA of the effect of the wage determination. Kleen-Rite
did not begin paying its employees in accordance with the new wage
determination. Not until a Wage and Hour investigation disclosed
the underpayments did Kleen-Rite make restitution to the employees
consisting of two payments -- $118,000 in December 1985 and
approximately $15,000 in January 1986.
The ALJ found that Kleen-Rite's refusal to pay its employees
their rightful wages representing 1.9% of the contract amount for
over six months was a significant violation and could not be
characterized as de minimis as alleged by Kleen-Rite. Deeming it
unnecessary to precisely define de minimis the ALJ stated "with
certainty" that $133,792 would not qualify. We agree. Violations
affecting every employee and totaling nearly 2% of the contract
value in an industry where the cost of labor represents a
contract's major component and the employees are low wage service
workers is far from de minimis.
The ALJ also rejected Kleen-Rite's argument that delaying the
payment of wages over extensive time periods pending reimbursement
was a common payment practice in the industry. Not only was this
assertion unsupported in the record, the ALJ stated, but such a
practice, even if common, was clearly in violation of the SCA. The
Board agrees that delay of this magnitude -- six months -- termed
by the ALJ to be "for the fiscal convenience of the employer"
cannot support a finding of unusual circumstances. The purpose of
the SCA is to protect the rightful wages of service employees.
There is no provision in the statute or the regulations which
permits an employer to wait until being reimbursed by another party
before fulfilling its obligations to its employees. This
withholding of wages was willful and deliberate as well as
representing a culpable disregard of Kleen-Rite's obligations to
its employees. [4]
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[5] In sum, Kleen-Rite clearly fails the requirements of Part I of
the regulatory test for relief, making further analysis
unnecessary. Nonetheless, it is additionally found that the
requirements under Parts II and III are not met. Part II, as
noted, supra, requires that certain prerequisites to relief must be
met; these include a good compliance history and sufficient
assurances of future compliance. Petitioners' compliance history,
with 20 investigations reflecting a pattern of employee complaints,
allegations of wage violations by Wage and Hour Division
investigators, and payment of back wages cannot be characterized as
"good." Further, the oft repeated assurances of future compliance
lack credibility as, time after time, investigators were called
upon to respond to employee complaints (Transcript at 291).
Regarding Part III, i.e, being previously investigated for
violations, the extensive history of previous investigations is
well documented, as well as admitted violations. The record shows
that investigation under contracts designated as "A," "F," "O," and
"R" in the ALJ's decision disclosed violations that were either
undisputed or acknowledged by Kleen-Rite. Thus Kleen-Rite also
fails Part III of the test. We agree with the ALJ that relief from
debarment is not in order, given these violations and culpable
conduct.
Accordingly, it is, Ordered Petitioners' names shall be placed
on the list of ineligible bidders for a period of three years.
BY ORDER OF THE BOARD:
Ruth E. Peters, Presiding Member
Anna Maria Farias, Member [5]
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