ENERGY ENGINEERING & CONTROLS, INC., WAB No. 92-19 (WAB Mar. 31, 1993)

USDOL/OALJ Reporter

CCASE: ENERGY ENGINEERING & CNTRLS INC & S.C. WAGNER DDATE: 19930331 TTEXT: ~1 [1] WAGE APPEALS BOARD UNITED STATES DEPARTMENT OF LABOR WASHINGTON, D. C. In the Matter of: ENERGY ENGINEERING & WAB Case No. 92-19 CONTROLS, INC. & STEPHEN C. WAGNER BEFORE: Charles E. Shearer, Jr., Chairman Ruth E. Peters, Member Anna Maria Farias, Member DATED: March 31, 1993 DECISION OF THE WAGE APPEALS BOARD This matter is before the Wage Appeals Board on the petition of Energy Engineering and Controls, Inc. and Stephen C. Wagner ("Petitioners" or "EEC"), seeking review of the September 22, 1992 Decision and Order issued by Administrative Law Judge ("ALJ") Paul H. Teitler. In his Decision and Order ("ALJD"), the ALJ found that EEC had committed violations of the prevailing wage provisions of the Davis-Bacon Act (40 U.S.C. [sec] 276a et seq.; "the Act") and submitted to contracting agencies falsely certified payrolls which reflected payment consistent with the Act's requirements. The ALJ concluded that these wage and recordkeeping violations were a "disregard of [Petitioners'] obligation to their employees within the meaning of Section 3(a) of the Davis-Bacon Act." ALJD at p. 53. Based on his findings and conclusions, the ALJ ordered that Petitioners be debarred from federal and federally-assisted contracting eligibility for a period not to exceed three years. Id. Petitioners seek reversal of the ALJ's findings and conclusions on numerous grounds, enumerated and discussed infra at pages 3 and 4-7. For the following reasons, the Petition for Review is denied and the ALJ's Decision and Order is affirmed, as modified herein, to conform to applicable law. [1] ~2 [2] I. BACKGROUND Petitioners were the successful bidders on eight federal construction contracts -- awarded between September 1987 and June 1988 -- which were subject to the prevailing wage requirements of the Act /FN1/. Each of the contracts was for the construction, alteration or repair of a federal public work and was for an amount in excess of $2,000, the Act's threshold dollar limit for coverage. Further, the contracts were subject to various wage determinations issued pursuant to the Act, specifying the rates of wages and fringe benefits for various classifications of employees performing construction work on the projects. ALJD at pp. 43-46. Two Senior Investigators of the Wage and Hour Division conducted investigations of Petitioners' compliance with the Act. Both investigators reported similar practices which they alleged to be violations. Specifically, the investigators determined that employees on the respective federal construction projects were not paid in accordance with the requirements of wage determinations which were made a part of each of the eight contracts. See ALJD at pp. 43-46, 50. Generally, employees were paid at wage rates far below the requirements of the Act and the applicable wage determinations. The investigators alleged that Petitioners' employees were paid actual hourly earnings equal to the amounts shown on internal company payroll records which were known as "Individual Payroll Certifications." However, both investigators reported that Petitioners submitted certified payrolls to the various federal contracting agencies which purported -- in most cases -- to show much higher hourly wage payments which were in compliance with the requirements of the Act and the wage determinations. Both investigators further determined that the certified payrolls were falsified to show payment of hourly rates which simulated compliance with the Act. ALJD pp. 51-52. Further, it was reported that certain of EEC's employees were alternately listed in the certified payrolls as employees or independent contractors, while performing the same work under the contracts. [2] /FN1/The ALJ rejected Petitioners' contention that two of the contracts were subject to the prevailing wage provisions of the cNamara-O'Hara Service Contract of 1965, as amended (41 U.S.C. [sec] 351 et seq.). This question was not preserved on appeal and we decline to address it. [2] ~3 [3] At the conclusion of the investigations, EEC was presented with computations for back wages allegedly owed for work under the contracts. Restitution in excess of $6,600 was made and paid to affected employees as back wages owed pursuant to the Act. /FN2/ Following the investigation, an Order of Reference was issued by the Wage and Hour Division, commencing an administrative hearing process under 29 C.F.R. 5.12(b). Three-year debarment for disregard of obligations to EEC's employees -- within the meaning of section 3(a) of the Act -- was sought. After prehearing discovery, a hearing was conducted before ALJ Teitler May 4-6, 1992. Witnesses were called and five testified for the government and one for EEC; documentary evidence and post-hearing briefs were submitted by both sides. In his September 22, 1992 Decision and Order, the ALJ found that wage underpayments in violation of the Act and contracts had been committed by EEC. He further found that certain employees were misclassified and that EEC had failed to post applicable wage determinations at the respective job sites. Finally, the ALJ found that EEC had deliberately falsified certified payrolls to simulate compliance with the requirements of the Act. Petitioners sought Board review of the ALJ's decision, alleging several grounds for appeal. First, the credibility determinations made by the ALJ were challenged as "inherently contradictory." Petitioners protest the Wage and Hour Division's decision to seek their debarment as contrary to "longstanding operating procedure of the Wage and Hour Division - i.e., to forego debarment proceedings in return for an uncontested payment of back wages allegedly due." Petitioners further challenge the propriety of the ALJ's "overturn[ing] the settlement agreement reached by the parties." Petitioners also object to the debarment proceeding as an abuse of prosecutorial discretion. Finally, Petitioners seek review of the ALJ's use of an improper legal standard in ordering their debarment. Oral argument of the issues raised by the Petition for Review was conducted on March 2, 1993. Both parties were represented by counsel. II. DISCUSSION Initially we address several preliminary matters raised by the parties. First, we reject the Acting Administrator's suggestion that this matter should be summarily dismissed, given the lack of statements of specific factual or legal [3] /FN2/ A nominal amount -- less than $20.00 -- was assessed and paid as restitution for violation of the overtime provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. [sec] 327 et seq.). [4] ~4 [4] reasons in support of the petition for review. See, 29 C.F.R. 6.34, 7.9(b). The petition for review in this case admittedly could have been more specific in citing grounds for review; however, we do not conclude that the petition was so unspecific that the case should be summarily dismissed. Secondly, Petitioners have requested the Board to compel the production of four broad categories of documents -- dealing specifically with the settlement purportedly reached in this case and generally with respect to Wage and Hour Division policy regarding settlement of back wage and debarment cases. No authority has been cited for the proposition that the Board may compel the production of documents. Assuming for the sake of argument, that the Board did possess such inherent power, we would decline to order production of investigative documents -- otherwise subject to protection under the Freedom of Information Act /FN3/ -- based only "[u]pon information and belief . . . that it is standard Wage and Hour practice not to seek debarment upon voluntary payment of back wages." Petitioners' Second Request for Production of Documents, p. 1. Our experience as the appellate forum for Davis- Bacon enforcement cases is that debarment is often sought in situations where, as here, voluntary restitution of back wages has been made. See, e.g., G & O General Contractors, Inc., WAB Case No. 90-35 (Feb. 19, 1991); Jen-Beck Associates, Inc., WAB Case No. 87-02 (July 20, 1987). We also reject Petitioners' efforts to add to the record two letters (dated October 20 and October 26, 1989 and addressed to Petitioners by the Wage and Hour Division). These letters, after all, [*] were addressed to Petitioners [*], and there is no claim that these letters were not in the possession of Petitioners at the time of the evidentiary hearing [*emphasis in text*]. Petitioners, however, did not introduce the letters into evidence, nor did they make any reference to these letters at the hearing. The Board concludes that there are no "extraordinary circumstances" within the meaning of the Board's regulation at 29 C.F.R. 7.1(e) which would warrant either accepting these letters into evidence at this late date, or remanding this matter to the ALJ for consideration of additional evidence. Petitioners' exception to the ALJ's credibility findings as being inherently contradictory and therefore subject to reversal is not persuasive. Apparently this point of appeal is based on the ALJ's findings that EEC's president, Stephen C. Wagner (as well as his bookkeeper), admitted that the certified payroll information submitted to contracting agencies was known by them to be false at the time the certified payrolls were prepared. The certified payrolls were known by these witnesses to be false. They knew that the wages actually paid employees [4] � /FN3/ To the extent that these unspecified documents are public information or otherwise subject to disclosure, the Board is not the proper forum for such requests. See 29 C.F.R. 70.4(a), 70.19(a). ~5 [5] by EEC and the actual hours worked by employees were substantially different from those certified to the contracting agencies by EEC as true and accurate. EEC maintained records of actual wages paid and hours worked in separate internal company documents. The ALJ accepted the testimony -- amounting to admissions -- by Wagner that the certified payrolls were false. However, the ALJ did not find credible Wagner's testimony to the effect that Wage and Hour Investigator Brennan agreed with Wagner to drop further action with respect to possible debarment in exchange for EEC's voluntary payment of assessed back wages. Wagner testified that Wage and Hour Investigator Brennan told him that debarment was less likely upon voluntary payment of the back wages assessed during the investigation. However, Investigator Brennan denied making any such representation; the other investigator testified that she specifically notified Petitioners of the possibility of debarment where her conclusion was that certified payrolls -- as in this case -- had been falsified. Finally, Investigator Brennan's testimony that decisions to proceed with debarment were made in the Wage and Hour Division's National Office persuaded the ALJ that the investigators' testimony was more credible than Wagner's on this point and he found that there had been no promise made by the investigators that debarment would not be sought if the assessed back wages were paid. The ALJ is in the unique position to judge the quality of testimony and the demeanor of witnesses during a hearing. In the absence of clear error on the part of an ALJ, the Board is reluctant to set aside "credibility resolutions and factual findings and the weight [] accorded to the record evidence." Milnor Construction Corporation, WAB Case 91-21 (Sept. 12, 1991), slip op. at p. 4. Accordingly, we find no error in the ALJ's determination of credibility on this issue. Several of EEC's challenges to the ALJ's Decision and Order rest upon Petitioners' contention that the Wage and Hour Division entered a settlement agreement with them and agreed to forgo debarment upon payment of the back wage assessment. As noted above, we reject Petitioners' direct submission to the Board: copies of two Wage and Hour Division letters (dated October 20 and October 26, 1989) proffered as evidence of the government's agreement to forgo debarment proceedings in this case. However, even if we were to accept this belated attempt to introduce these letters into the record, we would be compelled to conclude that neither letter supports Petitioners' argument; the letters merely reference the Wage and Hour investigation and recite the parties' agreement to conclude allegations of wage violations by payment of certain amounts due employees pursuant to the Act. No mention whatsoever is made of debarment. We find no basis in the record for estopping the government's debarment proceeding. As we noted, supra, there is no basis -- given the ALJ's credibility [5] ~6 [6] determinations -- to find that any oral promise to forgo debarment was ever made. Nor is there support in the record for the existence of a written agreement. Thus, the case of Northwest Foam Systems, Inc., WAB Case No. 88-15 is not on point with the facts of the instant matter. In Northwest Foam, the parties had specifically agreed that the legal standards required for debarment had not been met; the Board therefore properly reversed the ALJ's debarment order in that case as an improper usurpation of the parties' consent findings. Finally, we reach several substantive issues raised by the ALJ's conclusions of fact and law with regard to debarment in this case. In this case, the ALJ's findings that wage underpayments were committed and certified payrolls were falsified to simulate compliance with the Act are well supported by the testimony of employee witnesses, the admissions of the Petitioners' president and bookkeeper, and documentary evidence establishing the wage underpayments and falsity of the certified payrolls. Petitioners have not, in fact, contended during this appeal that wage violations were not committed; nor have they argued that the certified payrolls were not falsified. Accordingly, the findings of prevailing rate violations and certified payroll falsification are unchallenged before us and we affirm the ALJ's findings of fact in their totality. It has long been settled that underpayment of prevailing wages coupled with falsification of certified payrolls constitutes disregard of a contractor's obligations to employees. As held in R. J. Sanders, Inc., WAB Case No. 90-25 (Jan. 31, 1991), the submission of falsified payrolls raises a prima facie case that the violations were intentional. See generally, J & L Janitorial Services, Inc., WAB Case No. 86-10 (Nov. 13, 1986); Marvin E. Hirchert d/b/a M & H Construction Company, WAB Case No. 77-17 (Oct. 16, 1978); and C.M. Bone, Acme Painting Co., WAB Case No. 78-04 (June 7, 1978), reconsideration denied, Sept. 13, 1978. Petitioners finally claim reversible error in their exception to the ALJ's application of an improper legal standard in determining and ordering their debarment. The ALJ apparently did consider whether there were "extraordinary circumstances in the case sub judice which would warrant anything less than a three-year debarment." ALJD at p. 53. The ALJ ordered debarment "not to exceed three years," citing as authority 29 C.F.R. 5.12(a)(1). This was error /FN4/ but we conclude that it was harmless error. The ALJ clearly and specifically [6] /FN4/ Debarment under the Davis-Bacon Act is for a mandatory three- year period given a finding of "disregard of obligations" to employees. G & O General Contractors, Inc., supra. A shorter period of debarment -- authorized under 29 C.F.R. 5.12(a)(1) -- for violations of the so-called Davis-Bacon Related Acts may be in order if there is a finding of "extraordinary circumstances." See, e.g., A. Vento Construction, WAB Case No. 87-51 (Oct. 17, 1990) (29 WH 1685), at p. 15, and cases cited therein at p. 7 n.4. ~7 [7] made the findings requisite to debarment under the Davis-Bacon Act: wage violations were committed and false certified payrolls -- simulating compliance with the Act -- were submitted to the federal contracting agencies. More important than the ALJ's allusion to the Related Acts' debarment standard, in our opinion, was that the ALJ agreed with the government's contention that the wage and payroll violations were a "disregard of obligations" to EEC's employees within the meaning of Section 3(a) of the Act. See generally, ALJD at pp. 51-53. This is the correct legal standard for determining whether debarment is appropriate under the Davis- Bacon Act. The fact that the ALJ may have considered a shorter debarment period possible does not affect the ALJ's application of the "disregard of obligations" standard. For the foregoing reasons, the ALJ's Decision and Order is affirmed, with the following proviso to the ALJ's Order: It is hereby Recommended that the names of Energy Engineering & Controls, Inc. and Stephen C. Wagner be placed on the ineligible list pursuant to 29 C.F.R. 5.12(b) for a period of three years. BY ORDER OF THE BOARD: Charles E. Shearer, Jr., Chairman Ruth E. Peters, Member Anna Maria Farias, Member Gerald F. Krizan, Esq. Executive Secretary [7]

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