BUILDING AND CONSTRUCTION UNIONS JOB TARGETING PROGRAMS, WAB No. 90-02 (WAB June 13, 1991)

USDOL/OALJ Reporter

CCASE: BUILDING AND CONSTRUCTION TRADES UNIONS DDATE: 19910613 TTEXT: ~1 [1] WAGE APPEALS BOARD UNITED STATES DEPARTMENT OF LABOR WASHINGTON, D. C. In the Matter of: BUILDING AND CONSTRUCTION TRADES UNIONS WAB Case No. 90-02 JOB TARGETING PROGRAMS BEFORE: Ruth E. Peters, Presiding Member Stuart Rothman, Senior Member Patrick J. O'Brien, Member DATED: June 13, 1991 DECISION OF THE WAGE APPEALS BOARD ember O'Brien, writing for the majority When Congress enacted the Davis-Bacon Act, it intended to remove labor as competitive element. Whether a governmental construction project is executed by a union signatory contractor or a nonsignatory contractor matters not: the employees are entitled to prevailing wages -- no more and no less. This matter concerns the legality of plans whereby deductions are made from the compensation of employees working on federally financed or assisted construction projects for the purpose of subsidizing bids on other projects. It is before the Wage Appeals Board on the petitions of the Building and Construction Trades Department, AFL-CIO ("Building Trades"), Local 595 of the International Brotherhood of Electrical Workers ("Local 595"), and groups of union [1] ~2 [2] signatory employers (hereinafter, collectively, "Petitioners"). Petitioners challenge a determination by the Administrator of the Wage and Hour Division that job targeting programs, generally, and Local 595's job targeting program, specifically, violate the Secretary's regulations at 29 C.F.R. Part 3. Statements generally supportive of the Administrator with minor disagreements were filed by the Associated Builders and Contractors, Inc. ("ABC") and the National Right to Work Committee. An extended oral argument was held before the Wage Appeals Board on March 6, 1991. There is but one issue before the Board: was the determination correct in finding that job targeting programs violate either the Davis-Bacon Act, the Copeland Act, or both? I. BACKGROUND A. The Nature of Job Targeting Job targeting programs, with variations in form rather than substance, essentially operate as follows: Union members agree, through the internal election process, to contribute some percentage of their wages into a "war chest" used by the union leadership (in conjunction with union signatory employers) to subsidize bids on "targeted" projects. This subsidy is designed to eliminate, reduce, or reverse any wage rate advantage enjoyed by nonsignatory construction firms competing for the targeted contract. The specific subsidy may be paid directly to the workers after the bid is awarded (in which case the signatory employer's bid contains reduced wage rates) or directly to the employer itself (in which case the bid would reflect collectively bargained wage rates). In the former case the reduced wage rates would presumably have a bearing on future prevailing area wage surveys (if any were due to be conducted), while in the latter the wage reduction may not become a part of the ongoing local wage rate survey process because the payment to the employer would not be reflected in the bid and contract documentation. In the absence of a job targeting program, unions would have two basic options: across the board wage reductions or individual project agreements. Exercise of either of these options would eventually be reflected in future area wage surveys, when and if conducted. The IBEW Local 595 job targeting program specifically under consideration appears to be typical. Local 595 described the financing of their program as follows: [2] ~3 [3] An amendment to the . . . Inside Wireman's Agreement increasing the vacation deduction from 12.4% to 15.4% . . . was executed on June 24, 1987. This amendment permitted the vacation deduction to be increased to accommodate increased dues assessment. Consistent with this amendment, contributions began flowing into the Union for the purpose of funding the Job Targeting Program. . . . . [T]he L.U. 595, IBEW-Northern California Chapter, NECA Labor Agreement specifically permits the practice of job targeting. This provision [precludes claims] that concessions of special treatment of an individual job be made available to all contractors bound by a Letter of Assent. Further, there has been no material alteration to the Agreement nor has the union granted more favorable conditions to any other employer given the fact that the Program consists solely of a special 3% dues assessment, a deduction under the Agreement, awarded by the Union to specific projects on a selective basis. (Record, Tab J; Attachment, p. 2). The current NECA-Local 595, IBEW collective bargaining agreement (Record, Tab C; Attachment 2) describes the funding of the vacation plan from which the job targeting funds are derived. Article VI ("Fringe Benefits"), Section 4 ("Vacation Plan") states in pertinent part: . . . . The Employer shall pay to each employee . . . as a vacation allowance an amount equal to fifteen percent (15%) of wages, plus 10 cents for each hour worked .... . . . . This vacation allowance shall be withheld from the employee's weekly pay . . . . B. Procedural History This matter came before the Wage and Hour Administrator on June 3, 1988, when the Associated Builders and Contractors complained of the effect of job targeting programs on nonunion firms. ABC claimed the programs violated the Copeland Act, 18 U.S.C. [sec] 874; could violate the Fair Labor Standards Act's overtime and recordkeeping requirements; and inflated the local prevailing wage rate. Three days later, Mr. Robert Janowitz asked for an opinion regarding a "hypothetical situation" involving job targeting programs. The request was made pursuant to 29 C.F.R. 5.13, which states that the Administrator's rulings under [3] ~4 [4] the Davis-Bacon Act potentially create a defense pursuant to the Portal-to-Portal Act, 29 U.S.C. [sec] 259. When the Administrator solicited the views of the IBEW and the Building Trades in response to these inquiries, the Building Trades denied any violation and forwarded two letters from Region 19 of the National Labor Relations Board ("NLRB"). Those letters closed investigations of IBEW job targeting programs, termed the funds collected "periodic dues," and opined that the union could invoke union security agreements against employees who refused to pay into the fund. The letters, dated April 22, 1987, were expressly premised on Detroit Mailers Union No. 40, 192 NLRB 951 (1971), which in turn denied any distinction between dues earmarked for collective bargaining purposes and those funds used for other union purposes. The ABC disputed the applicability of Detroit Mailers, supra, in light of the more recent Supreme Court decision in Communications Workers of America v. Beck, 487 U.S. 735, 108 S.Ct. 2641 (1988), wherein it was ruled that non-members paying agency fees to a union acting as the bargaining representative for all employees need only pay amounts necessary to underwrite core collective bargaining functions: contract negotiation, contract administration, and arbitration. On January 24, 1989, the Administrator issued her initial opinion (Record, Appendix D). It expressly constituted a final ruling under 29 C.F.R. 5.13, and implicitly denied the availability of a Portal-to-Portal Act defense to a Davis-Bacon Act violation charge. The letter was addressed to the General Counsel of the ABC, and also responded to the "hypothetical" contained in the Janowitz letter, supra. The first substantive section of that January 24, 1989 Wage and Hour determination considered the applicability of the Copeland "Anti-Kickback" Act, 18 U.S.C. [sec] 874, to job targeting programs ("JTP"). That statute states: Whoever, by force, intimidation, or threat of procuring dismissal from employment, or by any other manner whatsoever induces any person employed in the construction, prosecution, completion or repair of any public building, public work, or building or work financed in whole or in part by loans or grants form the United States, to give up any part of the compensation to which he is entitled under his contract of employment, shall be fined not more than $5,000 or imprisoned not more than five years, or both. [4] ~5 [5] Given the history of the criminal enforcement of the Copeland Act, the Administrator refused to find a criminal violation and declined to refer the matter to the Department of Justice for possible prosecution.(FOOTNOTE 1) The Administrator proceeded to consider whether the program violated the Regulations found at 29 C.F.R. Part 3. 29 C.F.R. 3.5 permits certain payroll deductions without the prior approval of the Secretary. Section 3.5(i) permits payroll deductions for union dues "not including fines or special assessments" made pursuant to a valid collective bargaining agreement and "not otherwise prohibited by law." 29 C.F.R. 3.9 specifies that deductions not provided for in Part 3 or found permissible by the Secretary are prohibited. The Administrator disagreed with the Building Trades' contention that deductions for job targeting programs constituted dues. Noting that the Regulations do not contain specific definitions of "dues or assessments," the Administrator relied upon the fundamental principle of the Regulations; i.e., that Davis-Bacon wages should not revert to the direct or indirect benefit of employers. The Administrator quoted Section 3.5(d), which states that fringe benefit deductions are prohibited where "profit or other benefit is otherwise obtained, directly or indirectly, by the contractor . . . ." The determination concluded: We have no information to suggest it was common practice to return union membership dues to contractors under JTPs or by some other means at the time section 3.5(i) was promulgated, and we perceive no need to expand the definition of membership dues to accommodate the financing of a program such as the JTP. Since deductions for JTPs are returned to and/or directly benefit contractors, they are not a permissible deduction. The Administrator rejected the Building Trades' contention that "periodic dues" could include any funds uniformly and periodically collected, regardless of their purpose (assuming that purpose was not contrary to public policy). Noting that Section 8(a)(3) of the National Labor Relations Act has specific purposes unrelated to the Copeland Act, the Administrator regarded the applicability of that statute to the JTP issue as being "at best, questionable." However, the Administrator reasoned that the definition of dues advocated by the Building Trades would cross the distinction made in Beck, supra (discussed infra). [5] (FOOTNOTE 1) That determination has been contested on appeal by the ABC. The Board regards this aspect of the Administrator's determination as an exercise of prosecutorial discretion and sees no basis for disturbing that determination. [5] ~6 [6] The Administrator relied on two decisions, NLRB v. Food Fair Stores, Inc., 307 F.2d 3 (3rd Cir. 1962), and Enterprise Publishing Company v. NLRB, 493 F.2d 1024 (1st Cir. 1974), for the secondary proposition that "dues" are regular payments for the "maintenance" of the union as opposed to "assessments," which are "charges in the nature of a tax for a special purpose." The Administrator determined that JTP deductions were not related to the maintenance of the union, but rather to a special purpose, and hence were assessments prohibited by 29 C.F.R. 3.5(i). Given the determination that JTP deductions violated the Regulations, the Administrator found it unnecessary to consider the effect of the programs on prevailing area wage rates. The Administrator further opined that where the JTP funds were paid to the employees rather than the subsidized contractor, that contractor's payrolls would reflect less than prevailing area wages: "Thus, the full amount of the prevailing wages must come from the contractor's payroll." Finally, the Administrator opined that the amount of the subsidy had to be used for overtime computations under the Fair Labor Standards Act. When the Building Trades and the National Electrical Contractors Association requested clarification, the Administrator issued another letter on September 5, 1989 (Record, Appendix A). In reaffirming her earlier determination, the Administrator addressed three contentions: first, whether the Local 595 JTP, wherein money flows to the targeting fund via a "vacation allowance" withholding pursuant to a collective bargaining agreement, is permissible; second, whether subsidies to Davis-Bacon projects are permissible; and third, whether the Department of Labor has jurisdiction to prohibit any JTP deductions. With regard to the use of the vacation fund as a conduit for the funding of JTP accounts, the Administrator refused to permit by indirection that which would be unlawful if done directly. The Administrator also noted the applicability of 29 C.F.R. 3.5(d), which prohibits fringe benefit deductions which inure to the direct or indirect benefit of employers. Secondly, the Administrator ruled that subsidization of Davis-Bacon projects was not unlawful, as the regulations only address the legality of deductions, not the subsequent use of union funds. Finally, the Administrator stated that her previous determination was "reasonably related to the purpose of the Anti-Kickback Act; i.e., to insure that workers on federal projects receive the full wages to which they are entitled from their employers." In addition, the Administrator noted that the Part 3 Regulations were also intended to assist in the enforcement of the requirements of the Davis-Bacon and Related Acts: that laborers and mechanics be paid full [6] ~7 [7] prevailing wage rates "without subsequent deduction or rebate on any account." 40 U.S.C. [sec] 276a. Petitions for review were filed. For the reasons stated herein, the Wage Appeals Board affirms the determination of the Administrator. The Board also finds that the Local 595 job targeting program (and others like it) violates the Secretary's Regulations at 29 C.F.R. Part 5. II. DISCUSSION A. Threshold Considerations The Board notes at the outset that the Janowitz letter of June 6, 1988 asked for a determination regarding a "hypothetical situation." A "hypothetical situation" is too vague to warrant a decision of the Wage Appeals Board. B. The Part 3 Regulations The Davis-Bacon Act requires the payment of prevailing area wages -- no more and no less; the Part 3 Regulations, as correctly characterized by the Administrator, are intended to effectuate that end. They are designed to protect the employees' right to prevailing wages, as well as to limit project costs paid by the public. The JTP programs under consideration violate both of these principles. Where a JTP deduction is taken from a worker's paycheck, his wages are manifestly reduced. The legality of that payroll deduction is governed by the Secretary's Regulations at 29 C.F.R. Part 3, which, by their own terms, are "intended to aid in the enforcement of the minimum wage provisions of the Davis-Bacon Act and the various statutes dealing with federally assisted construction that contain similar minimum wage provisions. . . ." 29 C.F.R. 3.1. These regulations generally prohibit payroll deductions unless specifically described in 29 C.F.R. 3.5 or approved by the Secretary of Labor pursuant to 29 C.F.R. 3.6 to 3.8. The unions and the signatory employers generally claim that JTP deductions are authorized by 29 C.F.R. 3.5(i), which allows: Any deductions to pay regular union initiation fees and membership dues, not including fines, or special assessments: Provided, however, That a collective bargaining agreement between the contractor or subcontractor and representatives of its employees [7] ~8 [8] provides for such deductions and the deductions are not otherwise prohibited by law. (FOOTNOTE 2) Prior to consideration of the arguments whether JTP deductions constitute dues or assessments within the meaning of the above regulations, the Board finds that JTP deductions from the paychecks of nonmember employees paying agency fees to their respective collective bargaining representatives are "otherwise prohibited by law" pursuant to Communications Workers v. Beck, supra. There the Supreme Court held that unions could collect agency fees only insofar as those fees represented reimbursement for the cost of core collective bargaining activities: contract negotiation, contract administration, and grievance adjustments. The Court further held that the expenditure of agency fees for political, charitable, and social functions violated Section 8(a)(3) of the National Labor Relations Act. Therefore consistent with Beck, supra, deductions from the wages of agency fee paying employees violate the Davis-Bacon Act. Beck, supra, is also instructive on the distinction between dues and assessments. Like the Administrator, the Board need not, for present purposes, rule that "dues," for purposes of Section 3.5(i), are limited to only those funds collected for "core" collective bargaining purposes; indeed, for purposes of this case, we can include those collections made for the maintenance of the organization, as espoused by the Administrator. The Board cannot conclude, however, that funds used for the purpose of work acquisition pursuant to a program that would be eliminated if ultimately successful, are "union dues" as that term is ordinarily understood. Like the Administrator, the Board determines that Section 8(a)(3) and relevant case law do not suggest or compel a contrary result. The Secretary's Part 3 Regulations are designed to effectuate the public policies of both the Copeland and the Davis-Bacon Acts, which are complementary statutes. The substantive provisions of the Copeland Act prohibit the return of wages to an employer, just as the Davis-Bacon Act requires the payment [8] (FOOTNOTE 2) Local 595 contends that the use of the vacation fund as a conduit for JTP monies results in the classification of the JTP fund as a fringe benefit. We agree with the Administrator that this artifice does not change the essential nature of the JTP deduction. We also agree that direct payments to fund a Job Targeting Program would constitute a "subsequent deduction or rebate" in co[]ntravention of the Davis-Bacon Act and 29 C.F.R. 5.5(a)(1). Further, 29 C.F.R. 3.5(d) permits fringe benefit payroll deductions only if the deduction is not otherwise prohibited by law; is voluntarily and [*individually*] consented to by the particular employee; and no direct or indirect benefit from the deduction redounds to the benefit of the employer. See also, discussion in Part II. C, infra. ~9 [9] of wages "without subsequent deduction or rebate on any account." 40 U.S.C. [sec] 276a. The Board therefore holds that the Local 595 JTP violates the Davis-Bacon prevailing wage rate requirements and the regulations contained at 29 C.F.R. 3.5. The Board also notes that the job targeting programs, generally, violate the public policy embodied in the Davis-Bacon Act. If funds were deducted from Davis-Bacon projects for use as subsidies on private sector projects, the prevailing wage surveys would be distorted to the extent the subsidy was distributed to any contractor on a private sector project. That subsidy would be non-public, unlike a project agreement, and would not affect future prevailing area wage determinations. Over time, the government would pay more on Davis-Bacon and Related Act projects than the actual area wage rate, a result clearly outside the public interest and definitely not contemplated by the Congress which enacted Davis-Bacon.(FOOTNOTE 3) C. Part 5 Considerations A contractor transmitting payroll funds into the Local 595 job targeting program (or other programs like it) would not satisfy its Davis-Bacon Act requirement to pay prevailing area wages because a JTP is not a bona fide fringe benefit plan within the meaning of the Part 5 Regulations or the Davis-Bacon Act. 29 C.F.R. 5.26 requires an irrevocably vested contribution; here, the contribution does not vest to the direct benefit of the employee in whose name it is made. Furthermore, 29 C.F.R. 5.26 states: The trust or fund must be set up in such a way that in no event will the contractor or subcontractor be able to recapture any of the contributions paid in or any way divert the funds to his own use or benefit. The Wage Appeals Board has recently considered a number of cases involving the legality of fringe benefit deductions under the Davis-Bacon and Related Acts. See Builders, Contractors, and Employees Retirement Trust and Pension Plan, WAB Case No. 90-28 (March 1, 1991); Rembrant, Inc., WAB Case No. 89-16 (April 30, 1991); Cody-Zeigler, Inc., WAB Case No. 89-19 (April 30, 1991); and Tom Mistick, Inc., WAB Case Nos. 88-25 and 88-26 (May 30, 1991). These cases collectively stand for the proposition that the Davis-Bacon Act and the fringe benefit regulations thereunder require vesting to the exclusive benefit of the particular employee whose work led to the plan [9] (FOOTNOTE 3) As the Board holds these programs illegal, it need not consider the possibility that these programs would raise construction costs to a supracompetitive level by virtue of the weakening or elimination of nonunion competitors. [9] ~10 [10] contribution. This irrevocable, particularized vesting is the sine qua non of legality under the Davis-Bacon Act and the fringe benefit regulations thereunder. Where an employer diverts compensation into a job targeting program which does not provide a direct, specific benefit to the employee on whose behalf the contribution is made, that employer cannot be said to pay prevailing area wages. Such a diversion of compensation could render the employer vulnerable to debarment under the Davis-Bacon Act or under the Related Acts. As was said in Builders, Contractors and Employees Retirement Trust and Pension Plan, WAB Case No. 90-28 (March 1, 1991)(Senior Member Rothman, writing separately): ". . . an employer at a particular Davis-Bacon project site who will pay or has paid into a plan . . . should recognize that it may be at risk of violating the Davis-Bacon Act. This depends on the particularized way in which the plan has been used. . . ." (Slip op., at p. 8). For the forgoing reasons, the determination of the Administrator is affirmed. BY ORDER OF THE BOARD: Ruth E. Peters, Presiding Member Patrick J. O'Brien, Member ember Peters, concurring I join in all of Member O'Brien's opinion, with one exception. Because I do not think it is necessary to rule on the application of Communications Workers v. Beck, 487 U.S. 735 (1988), to this matter, I do not join in the discussion of Beck at page 8, supra, regarding the propriety of including JTP monies with union "dues." However, the Administrator unquestionably is empowered to interpret the regulations at 29 C.F.R. Part 3, and in particular the term "membership dues" as that term is used in 29 C.F.R. 3.5(i). See Titan IV Mobile Missile Tower, WAB Case No. 89-14 (May 10, 1991), at p. 7. In light of the public policy considerations identified by the Administrator in support of her interpretation of the Part 3 regulations and noted in the majority opinion at pp. 7-9, supra, the Administrator's determination that JTP monies are not permissible "membership dues" deductions is reasonable and should be affirmed. [10] ~11 [11] Senior Member Rothman, concurring in part, dissenting in part and writing separately This case requires review of long established principles and procedures used to determine Davis-Bacon prevailing locality wage rates. The Board must, as the majority has done, look at the broader ramifications of the entangled web of problems before the Board raised by the job targeting program. The immediate issue before the Board is a narrow one arising out of Section 3.5(i) of the applicable Regulations, 29 C.F.R. Part 3. I do not agree with the majority affirming the Administrator on this narrow issue. Nor do I agree that to decide this case the Board has to go into National Labor Relations Act principles, or NLRB or judicial decisions in NLRA cases. True it is that the Board may look to other statutes and to basic law for the resolution of Davis-Bacon Act disputes. At times the Board must examine such statutes closely to also apply the Davis-Bacon Act. But when the wherewithal to decide a case is within the Davis-Bacon Act itself, within the rubric that has grown up around the Act and Reorganization Plan No. 14 of 1950 (5 U.S.C. App.), the regulations, the DOL interpretations, and the decisions of the Board itself, I see no need to go afield to what other agencies may have done in deciding their own cases. So that employees, contractors, labor organizations, governmental agencies and federal grant recipients have a better chance of knowing where they stand, the Davis-Bacon Act should be played on its own field as Reorganization Plan No. 14 of 1950 contemplates. It should not be played on the playing fields of agencies outside the Department of Labor and Davis-Bacon Act administering agencies. I see no need to get into the recent Supreme Court decision in Communications Workers of America v. Beck, 487 U.S. 735, 108 S.Ct. 2641 (1988), or other cited NLRB decisions. (FOOTNOTE 4) For the foregoing reasons, I write separately, accepting the majority's careful statement of the facts. The Administrator reached the only permissible result, but, in my view, did so for the wrong articulated reasons. 29 C.F.R. Part 3, Section 3.5, authorizes certain deductions from Davis-Bacon wages: [11] (FOOTNOTE 4) The Davis-Bacon Act enacted in 1931 is an older statute than either the Wagner Act (1935) or the Taft-Hartley Act (1948). [11] ~12 [12] Deductions made under the circumstances or in the situations described in the paragraphs of this section may be made without application to and approval of the Secretary of Labor: (i) Any deductions to pay regular union initiation fees and membership dues not including fines or special assessments: Provided, however, That a collective bargaining agreement between the contractor or subcontractor and representatives of its employees provides for such deductions and the deductions are not otherwise prohibited by law. The Building and Construction Trades Department, AFL-CIO, and Local 595, IBEW, have stated the issue before the Board to be whether the employee payment is dues or an assessment under Part 3, Section 3.5(i). If it is dues, it is not a violation of the regulations. If it is an assessment, it may be a violation but not necessarily. The regulation was intended to deal with Copeland Act problems when promulgated in 1964 and was not intended to deal with a plan such as the NECA/Local 595 job targeting plan. This is the only issue in this case. The Administrator states the issues to be whether the employee payment is dues or an assessment. If it is an assessment, it is in violation of the regulations. If it is dues, it is still a violation of the regulations because it is necessary to look at the purpose for which the payment is made and the purpose is to use the monies in violation of the Davis-Bacon Act. The Administrator points out, although the regulations rely on Reorganization Plan No. 14 as much as on the Copeland Act, the Administrator is not claiming that there is a violation of the Copeland Act by these employee payments, but only a violation of the regulations and of the Davis-Bacon Act. The ABC, the chief protagonist against the Local 595 plan states its position to cover four issues: (1) whether the regulation, Section 3.5(i), has been violated; (2) whether the Davis-Bacon Act has been violated; (3) whether or not these are dues or assessments within the meaning of Section 3.5(i); and (4) whether the Administrator erred in concluding that wage predeterminations are not involved in the operation or implementation of plans like Local 595's. No party has suggested that these payments may be neither dues or assessments, but payment not provided for in Section 3.5(i). Section 3.5(i) was promulgated in 1964. At that time and normally today dues in the construction industry are working dues based upon a specified amount per working hour. The 3% increase for the purpose intended paid through the vacation fund and mutually agreed to in negotiations by the local employers' ~13 association and the local union cannot be considered "regular" dues in the industry. This conclusion is reached without reference to general concepts concerning what are and what are not union dues under the NLRA but is reached within the context of the Regulations, Part 3, and the agreement between the local negotiating parties. This is not a "regular" union dues arrangement. Anyway, union dues are normally set by the union and not by mutual arrangement with an employers' association. This may not be an assessment. It was a negotiated 3% increase through the vacation trust fund but to be used for a specified non-vacation purpose. The Administrator used Section 3.5(i) as the peg upon which to hang an advisory to the local employers' association and the local union which negotiated the plan not to do it. But with respect to the immediate issue before the Board, although this 3%-increased payment into the "vacation" fund is not regular union dues, no violation of Section 3.5(i) is involved. Section 3.5(i) was intended to deal primarily with kickback situations under the Copeland Act. The employer under this plan is not withholding any wage payment from an employee. It is not making an illegal deduction from an employee's wages and paying it over to the union. The employer is not withholding anything pursuant to the normally applied concepts of withholding dues pursuant to a checkoff authorization. It increased the total wage and fringe package on Davis-Bacon Act jobs by a payment through the existing vacation fund. In my view, this plan, whatever its faults, has always been open and above board and does not involve a violation of the Copeland Act. Insofar as Section 3.5(i) has been invoked by the Administrator to bring the Local 595 plan and similar plans to an end the regulations do not even come close to dealing with this kind of matter. The plan as explained as in effect between IBEW Local 595 and the local NECA chapter does not violate the regulations. However, the discussion cannot end at this point. Assuming a local labor organization with such a job targeting plan observes the Administrator's letter determination and does not implement the plan, there will be no impact upon any local Davis-Bacon wage predetermination based on the negotiated rates. The result of what the Administrator has done is to tell the labor organizations, don't do it because if you do you are going to raise for Davis-Bacon administration the difficult question whether implementation of such plan breaks the DOL wage predetermination branch's past practice of accepting in your locality the locally negotiated wage rates as the equivalent of an independent Davis-Bacon wage survey. The Administrator's position is that the plan violates the purposes of the Act as well as the regulation. ~14 The Local 595 plan brings into question whether within the Oakland, California locality where the Davis-Bacon wage predetermination is set by the Local 595 negotiated wage rate, the predetermination should be changed to the wage rate which the local employer's association and labor organization which negotiated the Davis-Bacon wage predetermination gives selected employers. The Davis-Bacon Act does not permit a double standard in the locality, one wage rate negotiated by labor organizations for Davis-Bacon Act work and another wage rate to be applied either uniformly or on a selected basis on nongovernmental work. The purpose of Davis-Bacon Act administration is to protect the prevailing and predetermined wage rate (even when it is solely the locally negotiated wage as agreed upon between local contractors and local unions) from inroads by those contractors and employees who would depress the prevailing rate by working at lower wages. It would place the Administrator in an awkward position to uphold the prevailing wage rate in the case in which the parties that negotiated that rate themselves break the negotiated and prevailing wage by agreeing that it does not apply in this case or that case. It would be difficult in the administration of Davis-Bacon for a local labor organization with the approval of the local employers' negotiating group to approve the construction of a commercial building at less than their own negotiated prevailing wage at the same time General Services Administration, for example, must build the same type of building next door at higher labor costs -- several dollars per hour more per employee. It could be the same contractor doing both jobs. For this reason the Administrator has argued that not only the regulation, as the Administrator and the Solicitor's office see it, is violated, but also the Davis-Bacon Act itself is violated. I agree that the integrity of the Davis-Bacon Act administration would be impugned by such a plan. The indirect warning given by the Administrator in her decision to those labor organizations that would use the job targeting plan was unquestionably very good advice. It also redounded to the Administrator's and the wage predetermination branch's benefit since by finding the plan in violation of the regulation, the problem of the effect upon the wage predeterminations which heretofore were based solely on locally negotiated wage rates and fringes would not be brought into question. In summary, the job targeting plan of Local 595 on its face does not violate the regulations. Its implementation, however, appears to put into play deviations from the way in which the Davis-Bacon wage predetermination branch makes its wage determinations when based upon locally negotiated agreements. Implementation of any such plan therefore would require the Administrator to totally reassess the appropriateness of the Davis-Bacon wage predetermination in the locality where such a plan is used. ~15 Fidelity by the Administrator to the objectives of the Davis-Bacon Act and avoidance of a double standard of wages in the locality, one for private construction and a higher rate for construction financed at the public expense, should require the Administrator to consider whether the public interest requires that the taxpayers who finance the government job receive the same break that the local labor organization gives certain employers who agreed to the higher wage rate which they can get on Davis-Bacon work but who do not apply the same rate to their own private sector construction on a selective basis. In my view, that was not the intent of the Davis-Bacon Act when enacted in 1931 and amended in 1935 and it is not the intent and purpose of the Davis-Bacon Act today. In the case in which the prevailing wage rate for Davis-Bacon Act purposes is accepted by the Administrator to be the negotiated rate in the locality, that negotiated rate and the Davis-Bacon predetermined wage rate should be the lowest rate at which the local labor organizations and the local contracting associations agree to perform the work to be done. In short, when the local labor organizations and the local employers' associations negotiate a permissible lower wage rate to serve their own needs, those same needs should extend to the public which finances federal Davis-Bacon Act jobs and the federally assisted related act jobs. It is of interest that the labor organizations themselves asked for the Administrator's review of these local problems and were first to seek the review of the Board. I am sure that when an employers' association and a local labor organization negotiate one of these job targeting plans or the local union places one into effect unilaterally, its primary object is not to skew Davis- Bacon wage predeterminations and Davis-Bacon wage administration at all. But, as things sometimes not anticipated happen, such plans can very well run afoul of the Davis-Bacon administration for Davis-Bacon Act cases. Stuart Rothman, Senior Member ATTEST: Gerald F. Krizan, Esq. Executive Secretary [15]

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