Fort Hood Barbers Ass'n v. Herman, 97-50570

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation137 F.3d 302
Docket NumberNo. 97-50570,97-50570
Parties135 Lab.Cas. P 33,672, 4 Wage & Hour Cas.2d (BNA) 769 FORT HOOD BARBERS ASSOCIATION; Henry Torrez, Jr.; and Gilbert Barratachea, Plaintiffs-Appellants, v. Alexis M. HERMAN, Secretary, United States Department of Labor and Any Successor; and Nila Stovall, Chief of the Branch of Service Contract Wage Determination of the United States Department of Labor, and Any Successor, Defendants-Appellees, Gino Morena Enterprises, Intervenor. Summary Calendar.
Decision Date30 March 1998

Randall C. Doubrava, Hilgers & Watkins, Austin, TX, for Plaintiffs-Appellants.

Matthew Miles Collette, Barbara C. Biddle, U.S. Dept. of Justice, Civil Div., Appellate Staff, Washington, DC, for Defendants-Appellees.

Lisa Howard Pennington, Baker & Hostetler, Houston, TX, for Intervenor.

Appeal from the United States District Court for the Western District of Texas.

Before WIENER, BARKSDALE and EMILIO M. GARZA, Circuit Judges.


Plaintiffs-Appellants Fort Hood Barbers Association, Henry Torrez, Jr., and Gilbert Barratachea (collectively plaintiffs) appeal from the district court's grant of summary judgment in favor of Defendants-Appellees Alexis M. Herman, Secretary of the United States Department of Labor and any successor, Nila Stovall, Chief of the Branch of Service Contract Wage Determination of the United States Department of Labor and any successor, and Intervenor Gino Morena Enterprises (collectively defendants), affirming the decisions of the Department of Labor's Administrator of the Wage and Hour Division and the Administrative Review Board. Plaintiffs contend that the district court erred in concluding that (1) the McNamara-O'Hara Service Contract Act (SCA) 1 does not require the application of wages and fringe benefits from a pre-existing collective bargaining agreement to the full term of a successor contract, and (2) the Department of Labor did not act arbitrarily or capriciously in holding that plaintiffs' administrative challenge to the Department's 1993 wage determination was untimely.

Following a de novo review of the record, the arguments of counsel in the appellate briefs, and especially the thorough explication of the district court in its order of May 14, 1997, we conclude that the district court did not err in awarding summary judgment on these claims. We agree with the district court that this is an extremely close case. Considering the deference due the Department's regulatory approach 2--implemented pursuant to specific statutory authority--and its interpretation of its own regulations, 3 however, we are satisfied that the district court reached the correct conclusion. Moreover, as the Secretary's brief notes, adoption of the plaintiffs' position would create disincentives for collective bargaining. 4 As the district court's order provides a comprehensive, well-reasoned analysis of these issues, we adopt that court's opinion as our own and append a copy hereto. Accordingly, the order of the district court is, in all respects,




Before the Court are Plaintiffs' Motion for Summary Judgment [# 16], Defendants' Response to Plaintiffs' Motion for Summary Judgment and Cross Motion for Summary Judgment [# 23], Plaintiffs' Reply to Defendants' Response to Plaintiffs' Motion for Summary Judgment and Cross-Motion for Summary Judgment [# 19], Gina Morena Enterprise's Supplemental Response [# 26], Plaintiffs' Letter Brief Filed February 6, 1997[# 25], Defendants' Letter Brief received by the court February 13, 1997, Plaintiffs' Letter Brief received by the Court February 20, 1997, and Defendants' Letter Brief received by the court February 21, 1997. Rarely does clarity shine its calming face in a case with briefing of such order of magnitude, and this case is certainly no exception. 1

Contours of the Dispute

Plaintiff Association represents barbers working at Fort Hood, Texas. The other plaintiffs are members of the Association. In 1988, the barbers were employed at Fort Hood by Ollie Weaver Enterprises ("Weaver"). On July 1, 1988, the barbers, through the United Food and Commercial Workers Union, AFL-CIO, Local 540 ("UFCW"), entered into a collective bargaining agreement ("CBA") with Weaver covering compensation terms and prohibiting the taking of tip credits against wages. The CBA was a four-year agreement, set to expire in 1992. Weaver's contract with the Army and Air Force Exchange Services ("AAFES") expired, however, in 1991. Shortly before expiration of the contract, the AAFES opened the bidding process and awarded the new contract, a five-year concessionaire contract, to Gino Morena Enterprises ("Morena") on January 31, 1991, with performance to commence on March 21, 1991. The contract, a multi-year service contract not subject to annual appropriations, was governed by the provisions of the McNamara-O'Hara Service Contract Act of 1965 ("SCA"), Pub.L. No. 89-286, 79 Stat. 1034 (codified as amended at 41 U.S.C. §§ 351-58 (1994)).

The parties dispute (1) the level of wages and fringe benefits that the SCA obligated Morena to pay the barbers 2 at various times under the contract; and (2) whether Morena could take tip credits against wages. Section 4(c) of the SCA provides:

No contractor or subcontractor under a contract, which succeeds a contract subject to this chapter and under which substantially the same services are furnished, shall pay any service employee under such contract less than the wages and fringe benefits, including accrued wages and fringe benefits, and any prospective increases in wages and fringe benefits provided for in a collective-bargaining agreement as a result of arm's-length negotiations, to which such service employees would have been entitled if they were employed under the predecessor contract: Provided, That in any of the foregoing circumstances such obligations shall not apply if the Secretary finds after a hearing in accordance with regulations adopted by the Secretary that such wages and fringe benefits are substantially at variance with those which prevail for services of a character similar in the locality.

41 U.S.C. § 353(c). In

accordance with this provision and 41 U.S.C. §


3 the Wage and Hour Division of the Department of

Labor issued, at the inception of the 1991 contract, a "wage determination,"

WD 74-0110 (rev.8) ["1991 wage

determination"], stating that the wages and fringe benefits to be paid by

Morena to the barbers at Fort Hood were those contained in the UFCW-Weaver


Two years later, in accordance with the Secretary's regulations that are here the primary subject of dispute, the Wage and Hour Division issued WD 74-0110 (rev.11) ["1993 wage determination"] which, instead of incorporating the rates and benefits provided under the UFCW-Weaver CBA, reflected the Secretary's determination of the prevailing rates and benefits for the locality. Morena apparently paid the barbers in accordance with this wage determination through the remainder of the five-year contract.

Administrative History

On November 19, 1993, plaintiffs requested administrative review of the 1993 wage determination, contending that (1) the rates and benefits set in the 1991 wage determination, reflecting the CBA rates and benefits, should apply to the full five years of the Morena contract pursuant to Section 4(c) of the SCA; and (2) Morena's practice of crediting tips against wages violated the SCA and its accompanying regulations. After relentless effort by the plaintiffs, including resort to the Administrative Review Board and institution of this lawsuit, the Administrator of the Wage and Hour Division finally, and with inexcusable tardiness, rendered on July 24, 1996 a decision upholding both the 1993 wage determination and Morena's tip credit practice. The Administrator also ruled untimely an argument made by the plaintiffs that the 1993 wage determination, even assuming it was properly made based on prevailing rates rather than the rates set in the UFCW-Weaver CBA, did not accurately reflect wage rates prevailing in the locality. 4 Plaintiffs appealed the Administrator's decision to the Administrative Review Board, which upheld the Administrator's ruling on November 12, 1996.

The Administrator and the Administrative Review Board based their decisions on the Secretary's regulation interpreting and implementing section 4(d) of the SCA. Under that section, government service contracts

may, if authorized by the Secretary, be for any term of years not exceeding five, if each such contract provides for the periodic adjustment of wages and fringe benefits pursuant to future determinations, issued in the manner prescribed in section 351 of this title 5 no less often than once every two years during the term of the contract, covering the various classes of service employees.

41 U.S.C. § 353(d). The regulation interpreting and implementing this provision provides for biennial wage determinations which are characterized as "amendments" to the contract. See 29 C.F.R. § 4.145(b) (1996). As such, a multi-year contract is "treated as [a] wholly new contract[ ] for the purposes of the application of the Act's provisions and regulations thereunder at the end of the second year and again at the end of the fourth year, etc." Id. The Administrator reasoned that because the 1993 wage determination issued at the end of the first two years of the Morena contract created a new contract for purposes of the SCA, Morena became his own successor contractor in the second two-year period of his five-year government service contract. See 29 C.F.R. § 4.163(e). 6 The Administrator further reasoned that because Morena had not entered into a collective bargaining agreement of his own with his employees during the first two year term (the "predecessor contract"), section 4(c) of the SCA did not apply to the second two-year term (the "successor contract") and the new wage determination reflecting locally...

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