JAK COMPANY, INC., WAB No. 89-10 (WAB June 28, 1991)

USDOL/OALJ Reporter

CCASE: JAK COMPANY DDATE: 19910628 TTEXT: ~1 [1] WAGE APPEALS BOARD UNITED STATES DEPARTMENT OF LABOR WASHINGTON, D. C. In the Matter of: JAK COMPANY, INC. and WAB Case No. 89-10 STEVE CALAS, President Proj. Nos. MA-23-1, B-82-AB-25-0064 and 25-MC-0035-2-2, Mass. BEFORE: Charles E. Shearer, Jr., Chairman Ruth E. Peters, Member Patrick J. O'Brien, Member DATED: June 28, 1991 DECISION OF THE WAGE APPEALS BOARD This matter raises the question of whether a surety known to the Department of Labor has standing to participate in a Wage Appeals Board proceeding determining back wage liability where that surety is a real party in interest. For the reasons contained herein, the Board rules in the affirmative. This case is before the Wage Appeals Board on the petitions of JAK Company and its president, Steve Calas (hereinafter "JAK") from Wage and Hour Division determinations of back wage liability and debarment that became final by operation of Department of Labor regulations. Insurance Company of North America ("INA") has filed a petition contesting the back wage liability claim. Wage and Hour, through the Solicitor's office, opposes JAK's petition on the basis of the regulations; and also opposes INA's petition on two grounds: first, that as surety "has no right to participate in such proceedings"; and second, that a surety's rights are limited to those of the insured party. [1] ~2 [2] I. BACKGROUND During 1987, DOL investigated wage underpayments by JAK on the three above-captioned contracts. As JAK was apparently in dire financial straights, the Department entered into contracts with INA on at least one of the projects (MA-23-1), whereby INA guaranteed the payment of any back wages and agreed to become the "completing contractor" (Record, Tab B). Despite the foregoing agreement, the Department gave notice of a back wage determination to JAK (but not to INA) in a letter of May 4, 1988 (Record, Tab C). In the May 4, 1988 letter, JAK was given the opportunity to seek a hearing on the back wage determination and the issue of potential debarment within 30 days in accordance with the terms of 29 C.F.R. 5.11 and 5.12. JAK did not respond to this letter until August 30, 1988, although the Wage and Hour letter was received on ay 11, 1988. (Record, Tab D). II. DISCUSSION As JAK ignored the notice of the Wage and Hour Division, and has not provided the Board with a justification of that oversight other than the pendency of settlement negotiations, its petition for review is denied. INA, however, was a contractor on at least one of the projects in question [,] a status evidenced by the plain language of the contract it signed with the Department of Labor. Thus, even under the restrictive interpretation of the Part 5 Regulations espoused by the Solicitor, INA should have had notice of and the opportunity to participate in the back wage determination proceeding relating to Project No. MA-23-1, and this matter is remanded for [] that purpose. If INA was a contractor on the other two projects, it would similarly have the rights to notice of and hearing on the two remaining back wage determinations. As a practical matter, a surety would have standing before the Board in matters of this nature. Under the Rules of the Wage Appeals Board, 29 C.F.R. Part 7, a surety would certainly be an "aggrieved person" entitled to file a petition for review where that surety suffers an economic loss from a back wage determination. (FOOTNOTE 1) As the surety would have standing in the review proceeding, the [2] � (FOOTNOTE 1) This point is reinforced by the sole case cited by the Solicitor, United States v. Powers Maintenance Co., 336 F.Supp. 819 (W.D. Okla. 1972), which stands for the proposition that the surety is bound by the outcome of the administrative process in the context of the McNamara-O'Hara Service Contract Act. [2] ~3 [3] Wage and Hour Division may wish to streamline the administrative process by allowing the surety to participate from the outset. (FOOTNOTE 2) III. CONCLUSION This matter is remanded with the following instructions: first, INA shall be given the full opportunity to participate in the back wage liability determina- tion attendant to Project No. A-23-1; second, if INA was a contractor with regard to the other two projects, it shall be given the full opportunity to participate in the back wage determinations attendant thereto; and, thirdly, if the back wage determinations are so thoroughly intertwined that liability must be determined on an overall basis, INA shall have the full right to participate in the liability determinations under all three contracts. The determination of the Wage and Hour Division with regard to the debarment of JAK Company and Steve Calas is affirmed. BY ORDER OF THE BOARD: Charles E. Shearer, Jr., Chairman Ruth E. Peters, Member Patrick J. O'Brien, Member ____________________________ Charles E. Shearer, Jr. Chairman [3] � (FOOTNOTE 2) By stating that INA has standing as a contractor even under the restrictive interpretation of the Part 5 Regulations espoused by the Administrator, the Board does not wish to imply that it agrees with that interpretation. The Board need not address the question of whether 29 C.F.R. 5.11 and 5.22 contain minimum or maximum notice and participation standards. [3]

Office of Administrative Law Judges