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Cases decided in administrative proceedings brought under the instant Act have applied a similar standard without elaboration. See In the Matter of Superior Building Maintenance, Inc., Hearing Examiner, SCA-CWHSA-2, April 18, 1968; In the Matter of Phoenix Respiration and Ambulance Service, Inc., Hearing Examiner, SCA-39, October 9, 1969,
The Eight Hour Laws also contain a debarment provision which was applied if the Secretary took no affirmative action to relieve Government contractors who had violated these statutes from its application (40 U.S.C. sections 324-326). These laws have now been repealed and replaced by the Contract Work Hours Standards Act (76 Stat. 357), which does not contain a debarment provision be cause the statutes (Davis-Bacon and Service Contract Act) its supplements contain such a provision. It was unnecessary, therefore, to include the ineligible list sanction in the Contract Work Hours Standards Act. In a case arising under the old Eight Hour Laws Judge Fahy stated in Copper Plumbing & Heating Co. v. Campbell, 290 F. 2d 368 (C.A. D.C. 1961), that:
"We appreciate that the withholding of government business for three years may be a very serious blow to an enterprise specializing in such business. Nevertheless, we think the test started by the Supreme Court in Steuart & Bros. is satisfied in this case. Congress has explicitly used debarment for a period of time in implementing some labor acts, and so have contracting agencies. Though the Eight Hour Laws provide for civil and criminal penalties the teaching of Steuart & Bros. is that this does not negative the authority of an enforcement agency to use debarment as an additional means for accomplishing the congressional purposes. See also, Black v. Magnolia Liquor Co., 355 U.S. 24, 78 S.Ct. 106 2 L.Ed. 2d 5. In the instant case, moreover, the debarment is not absolute. Appellants petitioned the Secretary for removal from the Comptroller General's list, and upon a proper showing it appears relief would have been granted. It was not granted because the Department of Labor, after a hearing, could not conclude that appellants 'can be relied upon by the United States and Federal Agencies as responsible persons who will comply with the required standards.”
Although the Eight Hour Laws have been repealed, the rationale in the Copper Plumbing case is equally applicable to those situations involving the ineligibility list remedy under other statutes.
Under the Fair Labor Standards Act of 1938, as amended (52 Stat. 1060; 29 U.S.C. 201, et seq.) the Courts of Appeal have consistently reversed denials by the lower courts of injunctions prohibiting violations of the Act even though:
(1) There existed a good-faith belief that the Act was not applicable to their business (Walling y. Florida Hardware, 142 F. 2d 444, 445 (C.A. 5); Mitchell v. Hodges Contracting Company, 238 F. 2d 380 (C.A. 5); and Walling v. T. Buettner and Co., 133 F. 2d 306, 308 (C.A. 7).
(2) Advice of counsel was solicited and followed (Hodges and Buettner).
(3) Promises of future compliance were given (Walling v. Shenandoah-Dives Mining Company, 134 F. 2d 395, 396 (C.A. 10) and Buettner).
(4) Effective steps were taken to assure such compliance, (Shenandoal-Dives Mining Company; Hodges; and Buettner).
In one of the most recent decisions involving this point the Fifth Circuit Court of Appeals in Wirtz v. Mississippi Publishers Corp., 364 F. 2d 603, speaking through Judge, now Chief Justice, Burger commented as follows on the District Court's announced policy that injunctions "should not be employed in marginal cases involving innocent and almost unavoidable instances of violations of this Act which will most probably never occur again.":
This standard is incorrect. Walling v. Panther Creek Mines, Inc., 148 F. 2d 604, 5 WH Cases 155 (7th Cir. 1945). "This Court has many times ruled that when an employer, without excuse or explanation, violates the provisions of the Fair Labor Standards Act the district court as a general rule should issue an injunction restraining the employer from further violations.' Goldberg v. Dlathews, 303 F. 2d 814, Stat. (5th Cir. 1962), 'One unexplained offense is enough. The Wage and Hour Division cannot reasonably be charged with the responsibility of checking back on past violators to make sure that they are obeying the laws.' Goldberg v. Cockrell, 303 F. 2d 811, 814, 15 WH Cases 496 (5th Cir. 1962).
The fåcts already found by the District Court demonstrate that an injunction should have been issued as demanded by the Secretary of Labor. "The decision whether an injunction should issue to restrain an employer from future violations of the Fair Labor Standards Act lies initially in the discretion of the
district court. That discretion, however, is subject to certain firm limitations.' Goldberg v. Cockrell, supra, at 813.
While we realize that the ineligible list remedy is more severe than the injunction remedy, Congress chose to deal in this manner with Government contractors who violate the labor standards in the performance of contracts awarded to them. Nevertheless, we believe that the standards set up by the Courts, of Appeal for the issuance of injunctions under the Fair Labor Standards Act are equally a propos to administrative proceedings.
The past investigative history of respondent shows that it has approached its obligation under the Act with "such gross carelessness" and "indifference" (see PC Nos. 117 and 163 supra.) that the sanctions provided by section 5 of the Act should be permitted to attach. The firm's Vice President and General Operating Officer, George F. Marshall, concluded his testimony on whether the Hearing Examiner should recommend to the Secretary that he take affirmative action to relieve respondent from the ineligibility list sanctions by stating that:
"Our policies have always been those which were in compliance with the law in the best way that we believe and knew how. Our position concerning laundry was well thought out. We believed it and still do believe it that we were right. However, for various reasons, mainly that we have to run a business and we have competitive demands in this business, we can't spend too much time in the courtroom. For practical consideration we have agreed to accept the position of the Department of Labor and we will abide by it as completely as if we had originally believed it ourselves (R. 464)."
These are not the words of an employer who has admitted the errors of his ways and has repented, but are rather the "undependable contritions under pressure of legal action" which the Fifth Circuit rejected as a basis for denial of an injunction in Mitchell v. Blanchard, 272 F. 2d 574. We can only conclude on the basis of a respondent's past record that violations of the Act have resulted from such a carelessness and indifferent attitude toward its obligation as to constitute willfulness or that the violations were, indeed, the result of various schemes to avoid the full impact of the Act. In either case, we submit, the Government is entitled to the application of the ineligibility list sanctions provided by section 5 of the Act in order to protect the public interest, and in all fairness to employees and other Government contractors. Justice demands less.
If the ineligibility list sanctions are not imposed on the respondent and this case is permitted to stand as precedent for the requirement of supplemental investigations and administrative action in comparable circumstances, an unreasonable and pointless additional burden would be imposed on the Department's already hard-pressed investigative facilities. As the Supreme Court noted in Mitchell v. DeMario Jewelery, 361 U.S. 288, 292, a case arising under the Fair Labor Standards Act, the provisions of the statute "affect weekly wage dealings between vast numbers of business establishments and employees.” For practical reasons, therefore, the Department cannot undertake to enforce the Act by continuous surveillance of intransigent employers. “The Wage and Hour Division has already investigated the firm's employment practices in the performance of 18 or more contracts subject to the Act, all of which have revealed various violations. Hundreds of man-hours and thousands of dollars have already been spent investigating and litigating the activities of the respondent. Can the Government be asked to continue policing the respondent's employment practices? The obvious answer is no." As the Court of Appeals for the Eighth Circuit stated in Lenroot v. Interstate Bakeries Corporation, 146 F 2d 325, 327 :
"In this case [the Department's] agents are shown to have used their efforts by instruction, explanation, and persuasion, to prevail upon the corporation to put a stop to its (violations]. Having failed in these efforts and brought the suit and proved its violations, the [Department] is at the end of its function.” We submit that this language is particularly pertinent in the instant case. Respectfully submitted,
HAROLD C. NYSTROM, Associate Solicitor for General Legal Services.
BEVERLEY R. WORRELL,
WILLIAM O. McDANIEL, Supervisory Attorney for PCA and SCA Litigation. ROGER J. MARTINSON,
UNITED STATES OF AMERICA, DEPARTMENT OF LABOR
No. SCA-50 In the Matter of Dynamic Enterprises, Inc., Respondent. FINDINGS OF FACT, CONCLUSIONS OF LAW, AND DECISION OF THE HEARING
EXAMINER Before: E. West Parkinson, Hearing Examiner.
Appearances: Beverley R. Worrell, Regional Solicitor, Roger J. Martinson, Attorney ; 1371 Peachtree Street, N.E., Room 339, Atlanta, Georgia. 30309. (For the Government.) James M. Johnson, Esquire, Bryan, Jones & Johnson, Attorneys at Law, P.O. Box 387, Dunn, North Carolina, 28334. (For the Respondent.)
This is a proceeding under the Service Contract Act (79 Stat. 1034; 41 U.S.C. 351, et seq.), hereinafter referred to as the Act. It was initiated upon the issuance of a complaint by the Deputy Solicitor of Labor on August 4, 1969. The complaint originally charged that respondent, Dynamic Enterprises, Inc., performed services under a number of contracts at various military bases and therein failed to pay service employees engaged in the performance of said contracts in accordance with the monetary standards of the Act and regulations issued thereunder (29 CFR Part 4).
Answer was filed by said respondent in which it denied that it had violated the Act in any way. It admitted entering into and performing under contracts subject to the Act.
The matter was considered through several prehearing conferences and through some four days of testimony. On the fourth day of the hearing the following stipulation was entered into by the parties :
1. The Government charges that respondent failed to pay the requisite minimum wages under the Service Contract Act and under contracts held by respondent in that respondent required employees to launder their own uniforms and related items, failed to compensate for all hours of work by its employees by requiring in some instances early reporting, by failing to compensate idle periods in the course of a workday during which an employee could not effectively use the time for his own purposes exclusive of his employment, and failed to pay certain employees requisite vacation pay;
2. Respondent accepts the positions of the Government;
3. Respondent will pay on or before June 15, 1970, $50,000 to the Wage and Hour and Public Contracts Divisions, United States Department of Labor, for distribution to employees and former employees of respondent;
4. Respondent understands that disposition of this matter, as more fully described herein, does not in any way affect liability or damages which may be due or become due under the Contract Work Hours Standards Act. Furthermore, respondent understands that a report of the information held by the Wage and Hour and Public Contracts Divisions with regard to possible violations of the Contract Work Hours Standards Act may be furnished to the appropriate contracting officers with such recommendations as are deemed appropriate;
5. Respondent understands that investigation's now in progress, presently planned, or scheduled in the future are not limited or circumscribed by this agreement;
6. The Government in accordance with section 5(a) of the Service Contract Act will press for listing of respondent as a firm which has violated the Act and to that end will present evidence of prior investigations of respondent;
7. Respondent will present such evidence as it deems appropriate in opposition to its being listed under the provisions of section 5(a) of the Act; and
8. All matters in controversy under the contracts listed on Exhibit I hereto are disposed of by this agreement.
On June 15, 1970, the matter -reconvened at Atlanta, Georgia, for proceedings consistent with paragraph 7 of the foregoing stipulation. Testimony was taken from the executive-vice president of respondent and an accountant from the firm of certified public accountants which represents respondent.
Based on the entire record, I make the following findings of fact, conclusions of law and recommendation to the Secretary of Labor.
Respondent, Dynamic Enterprises, Inc., is and at all times material hereto was a corporation having its principal office and place of business at Dunn, North Carolina.
During the period since July, 1967, respondent has entered into and performed under some 13 or more contracts with the military services providing for the furnishing of food service activities all of which were or are subject to the Act.
In this case, it is stipulated that the Government charged respondent with failure to pay requisite minimum wages under the Act and under contracts held by respondent in that respondent required employees to launder their own uniforms and related items, failed to compensate for all hours of work by its employees by requiring in some instances early reporting, by failing to compensate idle periods in the course of a workday during which an employee could not effectively use the time for his own purposes exclusive of his employment, and failed to pay certain employees requisite vacation pay.
Respondent, by agreement with the Government, has paid to Wage and Hour and Public Contracts Divisions, United States Department of Labor, $50,000 for distribution to its employees and former employees. That sum is paid upon acceptance by respondent of the position taken in this case by the Government.
Respondent prior to the initiation of these proceedings had been investigated to determine its compliance with the Act in its performance of other contracts which were subject to the Act. Such investigations were terminated by payment by respondent to its employees of agreed amounts of wage underpayments :
(a) In November, 1968, respondent paid a substantial part of $25,904.47 due to 998 of its employees performing services for it at Fort Benning, Georgia.
(b) In November, 1968, respondent paid $6,316.89 to 86 of its employees performing service for it at Williams Air Force Base, Arizona.
(c) During March, April and May, 1968, respondent paid $7,933.00 to 122 of its employees performing service for it at the United States Naval Base, Charleston, South Carolina.
(d) In October, 1967, respondent paid $1,030.00 to 76 of its employees performing service for it at Jacksonville Naval Air Station, Jacksonville, Florida.
By reason of its aforesaid breaches of contract and violations of the Act and regulations, as evidenced both by prior investigation and by contentions in these proceedings, respondent, Dynamic Enterprises, Inc., has become subject to the provisions of section 5(a) of the Act whereby it and any firm, corporation, partnership or association in which it has a substantial interest, may be denied the awarding of any contract with the United States until three years have elapsed from the date of publication by the Comptroller General of the list naming it as having been found to have violated the Act, unless the Secretary of Labor recommends otherwise.
Even now, the respondent requests that the case be dismissed for failure to prove violations. In my opinion this is without merit. The testimony of Government witnesses establishes violations of contract provisions and also the requirements of the Act. As a consequence, fifty thousand dollars has been paid for distribution to employees as wages which they long ago were entitled to receive, and for which they have waited so long. This failure to pay wages required was widespread and continued for a substantial period of time. Moreover, previously, when investigated by the Department of Labor, the respondent belatedly paid substantial sums as wages which were required to be paid in the first place. Therefore, the record in this case does not permit the examiner to recommend that the Secretary of Labor take the necessary action to relieve the respondent from the ineligibility sanctions of the Act. In other words, where as here there has been a substantial history of noncompliance and where this noncompliance has been established at great expense of time and money to the Government of the United States, it is concluded by this hearing examiner that he cannot recommend a lifting of the ineligibility imposed by the Congress of the United States on firms who violate the wage provisions of their Government contracts.
Upon consideration of the entire record it is recommended : That the Secretary of Labor take no action to relieve respondent from the ineligible list provisions of section 5(a) of the Act. This recommendation rests upon the lack of reliance which may be reposed in respondent based upon its history of noncompliance with the Act and its contracts virtually during its entire existence.
E. WEST PARKINSON,
Hearing Examiner. Dated at Washington, D.C., this 24th day of September, 1970.
U.S. Department of Labor, Wage and Hour and Public Contracts Divisions
DECISION OF THE ADMINISTRATOR The Hearing Examiner, in a decision dated September 24, 1970, found, on the basis of stipulations agreed to by the parties and some four days of testimony, that respondent had violated the minimum wage requirements of the Service Contract Act of 1965. The violations were found to have resulted in underpay. ment of respondent's employees in the amount of $50,000, which sum has been paid in full by respondent to the Wage and Hour and Public Contracts Divisions for distribution to its employees.
By reason of the violations of the Act, respondent has become subject to the provisions of Section 5(a) of the Act whereby it and any firm, corporation, partnership or association in which it has a substantial interest, may be denied the awarding of any contract with the United States until three years have elapsed from the date of publication by the Comproller General of the list naming it as having been found to have violated the Act, unless the Secretary of Labor recommends otherwise. The Hearing Examiner recommended that the Secretary of Labor take no action to relieve respondent from the ineligible list provisions of Section 5(a) of the Act.
The duty of the triail examiner to ascertain the facts as to charged violations must be performed according to procedure outlined in the Rules of Practice, under which he has discretion to accept stipulations of fact. If his acceptance constitutes a reasonable exercise of such discretion, the stipulation is binding as to the facts contained therein. There is nothing in this record to suggest, nor does respondent suggest on appeal, that the Hearing Examiner's acceptance of the stipulation of fact in this case in any way constitutes other than a reasonable exercise of his discretion. The stipulation as to the occurrance of violations and the sum representing underpayments due, in the instant proceedings is accordingly binding on respondent and the Examiner's finding in this regard will be affirmed.
The only remaining issue before me is the question of whether I should concur in the Hearing Examiner's recommendation that the Secretary take no action to relieve respondent from the ineligible list provisions of Section 5(a) of the Act, which, in turn involves the question of whether, on the basis of this record, I believe respondent can be relied upon to comply with the Act in the future..
The record discloses that the violations related to hours worked for which compensation was not paid and through respondent's practice of imposing on its employees the expense of cleaning their uniforms.
With respect to hours worked, the record shows that certain employees were regularly required to shorten their meal breaks in order to feed early chow. When this occurred, the early feeding time was not entered on respondent's payrolls and was not, therefore, compensated.
The imposition of laundry expense to the extent that it impinged the minimum wage required by the contracts occasioned additional violations.”
141 U.S.C. 351 et. seq. 2 See Decision of the Administrator, dated April 30, 1970, in The Matter of Inland Service
in which the Government's position in this regard was for the first time considered and upheld in adminstratve proceedng under the Act.