Gracey v. International Broth. of Elec. Workers, Local Union No. 1340, AFL-CIO

• Citation: 868 F.2d 671
• Decision Date: 01 May 1989
• Docket Number: No. 88-3074,88-3074
• Parties: 29 Wage & Hour Cas. (BN 241, 57 USLW 2530, 111 Lab.Cas. P 35,178, 35 Cont.Cas.Fed. (CCH) 75,628 Martin GRACEY, Klate Holt, John V. Hill, d/b/a The Klate Holt Company, Plaintiffs-Appellees, v. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL UNION NO. 1340, AFL- CIO, Defendant-Appellant, and Paula V. Smith, Administrator, Wage & Hour Division, Employment Standards Administration of the Department of Labor; Anne McLaughlin, Secretary, Department of Labor, Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

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868 F.2d 671 29 Wage & Hour Cas. (BN 241, 57 USLW 2530,
111 Lab.Cas. P 35,178,
35 Cont.Cas.Fed. (CCH) 75,628 Martin GRACEY, Klate Holt, John V. Hill, d/b/a The Klate
Holt Company, Plaintiffs-Appellees,
v.
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL UNION
NO. 1340, AFL- CIO, Defendant-Appellant,
and
Paula V. Smith, Administrator, Wage & Hour Division,
Employment Standards Administration of the
Department of Labor; Anne McLaughlin,
Secretary, Department of
Labor, Defendants. No. 88-3074. United States Court of Appeals,
Fourth Circuit. Argued Oct. 31, 1988.
Decided March 1, 1989.
Rehearing and Rehearing In Banc Denied May 1, 1989.

Page 672

Terry Russell Yellig (Maria Makris-Gouvas, Sherman, Dunn, Cohen, Leifer & Counts, P.C., Jonathan Kronheim, U.S. Dept. of Labor, Washington, D.C., on brief), for defendant-appellant.

Mark E. Levitt, Coral Gables, Fla. (James M. Blue, Hogg, Allen, Ryce, Norton & Blue, P.A., on brief), Tampa, Fla., for plaintiffs-appellees.

Before PHILLIPS and WILKINSON, Circuit Judges, and KNAPP, Senior United States District Judge for the Southern District of West Virginia, sitting by designation.

WILKINSON, Circuit Judge:

In this case we must determine if the Service Contract Act, 41 U.S.C. Secs. 351-58 (1987), permits the Secretary of Labor to set aside the wage and benefit provisions of a collective bargaining agreement if they are less than the prevailing rate in the locality for similar work. The district court held that the Act does not provide the Secretary authority to set aside the plain terms of a collective bargaining agreement, where the agreement provides for wages and benefits above or equal to those of its predecessor. We believe that the district court's interpretation of the statute is correct, and we affirm its judgment.

I.

The facts of this case are not in dispute. The plaintiffs, Martin Gracey, Klate Holt and John V. Hill, d/b/a The Klate Holt Company (Holt), entered into a government contract with the National Aeronautical and Space Administration (NASA) at Langley Research Center in Hampton, Virginia. The Service Contract Act, 41 U.S.C. Secs. 351-58 (1987), governed this contract.

Local Union No. 1340, International Brotherhood of Electrical Workers, AFL-CIO (IBEW Local) is the certified bargaining representative of all Holt employees who perform maintenance work assigned by NASA at the Langley Research Center. On May 14, 1987, the IBEW Local filed a request with the Secretary of Labor for a hearing pursuant to Sec. 353(c) of the Act to determine whether the wages specified in its collective bargaining agreement with Holt were substantially at variance with those prevailing for similar services in the locality. The IBEW Local claimed the wages in the collective bargaining agreement were less than the wages prevailing for similar services in the locality and that

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the Secretary should require the company to pay the increased wages and benefits.

Subsequent to this filing, and after arms-length negotiations in June and July, 1987, a collective bargaining agreement, dated August 1, 1987, was entered into between the IBEW Local and Holt for one year, to continue year by year unless terminated by sixty days' prior notice. Significantly, the agreement raised wages and fringe benefits above those of the prior collective bargaining agreement between the parties.

On September 3, 1987, the Administrator of the U.S. Department of Labor's Wage and Hour Division issued an order of reference for assignment of IBEW Local's request to an administrative law judge. On February 11, 1988, Holt simultaneously filed with the Administrator a motion to withdraw the order of reference, and with the administrative law judge a motion to dismiss the order of reference or, in the alternative, for an indefinite stay in the proceedings. Both motions were denied.

On March 11, 1988, Holt filed this suit in the Eastern District of Virginia seeking to enjoin the defendant, the Secretary and Administrator, from holding a variance hearing pursuant to Sec. 353(c). On April 1, the district court entered an order joining the IBEW Local as a party defendant and granting summary judgment to Holt. The court held that the Service Contract Act "does not confer authority on the Secretary of Labor to hold a hearing for the purpose of determining whether to set aside wage and fringe benefit provisions of an operative collective bargaining agreement which was bargained for at arms length, except as provided, either expressly or by reasonable implication, in Section 353(c)." Because the plain language of Sec. 353(c) addressed only the situation, not present here, in which wages and benefits in a successor agreement were below those contained in the predecessor agreement, the court held the Secretary was not empowered to disregard the bargain reached by the parties. The IBEW Local filed a notice of appeal, as did the Secretary. The Secretary, however, subsequently moved to dismiss her appeal and did not file a brief in this case nor participate in these proceedings.

II.

The Service Contract Act of 1965, 41 U.S.C. Secs. 351-58 (1987), was enacted to provide wage and safety protection for "employees of contractors and subcontractors furnishing services to or performing maintenance services for Federal agencies." S.Rep. No. 798, 89th Cong., 1st Sess. (1965), reprinted in 1965 U.S.Code Cong. & Admin.News 3737, 3737. When enacted, the service contract was the only remaining category of federal contracts to which comprehensive labor standards protection did not apply. Workers on federal construction contracts were protected under the Davis-Bacon Act, 40 U.S.C. Secs. 276a-276a-5 (1985), enacted in 1931, while those performing work under federal supply contracts were covered by the Walsh-Healey Public Contracts Act, 41 U.S.C. Secs. 35-45 (1985), passed in 1936.

A.

Section 353(c) of the Service Contract Act is the operative provision at issue. It 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

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which prevail for services of a character similar in the locality.

41 U.S.C. Sec. 353(c) (1987).

The union urges, relying primarily on the proviso, that Sec. 353(c) gives the Secretary the authority to convene a hearing and to adjust wages if she finds that collectively bargained wages and fringe benefits are below those prevailing for like services in the locality. It argues further that a hearing and upward adjustment of wages is proper here because IBEW Local members are paid wages and benefits below those prevailing in the locality for similar services. We hold, to the contrary, that the collective bargaining agreement governs wage and benefit levels in this case. ¹

Section 353(c) provides a wage and fringe benefit floor by requiring wages in a successor arms-length agreement to be "no less than the wages and fringe benefits, ... to which such service employees would have been entitled if they were employed under the predecessor contract." This obligatory floor for the successor contract is quite different from an obligation to pay at the wage rate prevailing in a particular locality. As the district court recognized, Sec. 353(c) only "proscribes the provision of lower wages and benefits in successor collective bargaining agreements than those wages and benefits contained in predecessor agreements thus providing a minimum wage and benefit rate." See also Locals 666 and 780 v. United States Dept. of Labor, 760 F.2d 141, 144 (7th Cir.1985) ("The status of predecessor employees is only relevant in establishing a wage and benefit floor for successor contracts.").

It is undisputed that Holt complied with its obligation under Sec. 353(c). Holt did not seek to reduce wages and benefits below this statutory minimum. The wages and benefits agreed upon in the successor agreement were higher than the amounts under the predecessor contract.

The union, however, focuses upon the proviso. The proviso states that the obligation to pay at or above the predecessor contract rates "shall not apply if the Secretary finds after a hearing ... that such wages and fringe benefits are substantially at variance with those which prevail for services of a character similar in the locality." IBEW argues that this language permits the Secretary to hold a hearing whenever wage rates are substantially at variance with those in the locality.

We disagree. The proviso by its terms speaks solely to the employer's basic obligation, viz. to provide wage and benefit levels equal to or above those of the predecessor agreement. The proviso then sets forth one situation in which this basic obligation shall not apply--namely, when the employer is already paying wages that exceed prevailing rates. The proviso thus permits the Secretary to suspend the wage and fringe benefit floor of the predecessor contract only when wages and benefits are already higher than local rates for similar services. The Secretary cannot require the contractor to pay more than the wage floor. In the instant case, the contractor had concededly met its statutory obligation, and so the proviso for suspension of that obligation simply does not operate.

The legislative...