Herman Taylor Constr. v. Barram

• Decision Date: 15 February 2000
• Parties: (Fed. Cir. 2000) HERMAN B. TAYLOR CONSTRUCTION CO., Appellant, v. David J. Barram, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, Appellee. 99-1028 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 808

203 F.3d 808 (Fed. Cir. 2000)

HERMAN B. TAYLOR CONSTRUCTION CO., Appellant, v. David J. Barram, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION Appellee.

99-1028

United States Court of Appeals for the Federal Circuit

DECIDED: February 15, 2000

Appealed from: General Services Administration Board of Contract Appeals

George R. Diaz-Arrastia, Schirrmeister Ajamie, L.L.P., of Houston, Texas, argued for appellant.

Deborah P. Samuel, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for appellee. With her on the brief were David W. Ogden, Acting Assistant Attorney General; David M. Cohen, Director; and Robert E. Kirschman, Assistant Director. Of counsel on the brief was Sharon J. Chen, Assistant General Counsel, Office of General Counsel, U.S. General Services Administration, of Washington, DC.

Before NEWMAN, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and RADER, Circuit Judge.

FRIEDMAN, Senior Circuit Judge.

The General Services Administration Board of Contract Appeals ("Board") terminated a contract for default because it determined that the contractor had violated the labor standards provisions of the contract. The Board concluded that the United States Department of Labor, which had sole authority to determine compliance vel non with those requirements, had in fact found noncompliance. We hold that the Labor Department had not so found and therefore reverse the Board's affirmance of the default termination.

I

A. In 1992, the appellant Herman B. Taylor Construction Company ("Taylor") entered into a contract for extensive renovations of a government building. The contract required Taylor to comply with several labor standards provisions, including one tracking the Davis-Bacon Act standards, which provided:

All laborers and mechanics employed or working upon the site of the work will be paid unconditionally and not less often than once a week . . . the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof.

Federal Acquisition Regulations, 48 C.F.R. § 52.222-6.

The contract also incorporated certain requirements of the Contract Work Hours and Safety Standards Act, 48 C.F.R. § 52.222-4, governing overtime pay. The parties and the government agencies have applied the same governing principles under the two statutes and we do likewise. We sometimes refer to these provisions collectively as the "labor provisions."

The contract provided that violation of these labor provisions was a ground for termination of the contract. See 29 C.F.R. § 5.12.

The contract further provided that any dispute concerning these labor provisions was to be resolved by the Labor Department:

The United States Department of Labor has set forth in 29 C.F.R. Parts 5, 6, and 7 procedures for resolving disputes concerning labor standards requirements. Such disputes shall be resolved in accordance with those procedures and not the Disputes clause of this contract. Disputes within the meaning of this clause include disputes between the Contractor . . . and the contracting agency, the U.S. Department of Labor, or the employees or their representatives.

B. Early in 1994 the Labor Department began an investigation of Taylor's compliance with the contract's labor provisions. In June 1994 a Labor Department investigator informed the General Services Administration ("GSA") that he believed Taylor had violated the Davis-Bacon Act. Five months later, the Labor Department reported to GSA the results of its investigation: "Our investigation revealed that [Taylor] did not pay the proper prevailing wage rate and fringe benefits; misclassified employees; did not pay proper overtime compensation; and did not maintain accurate time and payroll records. Our investigation disclosed [more than $67,000] in . . . back wages due [twenty-one] employees." The Department requested GSA "to withhold the total of [more than $67,000] from funds due and owing [Taylor]," which GSA did.

On December 20, 1994, the Labor Department notified Taylor of its conclusions. The Department summarized the results of its investigation, which "revealed violations of the labor standards provisions which, if not satisfactorily explained, would appear to constitute a disregard of your obligations to your employees within the meaning of . . . the Davis-Bacon Act." The Department informed Taylor that it could "request a hearing before one of the Department of Labor's Administrative Law Judges pursuant to [29 C.F.R. §§ 5.11(b) and 5.12(b)] for a determination of the issues in this case."

Taylor did so by letter dated January 11, 1994, which stated:

[W]e at Taylor Construction company hereby take exception to the allegations encompassed in your letter of 12/20/94 and further deny any deliberate violation of the Davis Bacon Act.

. . . .

By this letter we ask that this matter be brought before a Law Judge in the proper jurisdiction to determine the facts of these aforesaid allegations.

The hearing before the administrative law judge began on November 3, 1997. On the second day of the hearing, the parties settled the case and entered into "consent findings," which provided that the Labor Department would give half of the funds it had withheld to Taylor, and pay the other half to Taylor's employees. Taylor also represented that it would not contract with the federal government and would be ineligible for up to three years to do so. The consent findings also provided:

The Department of Labor enters this agreement with the position that Davis-Bacon and Contract Work Hours and Safety Standards Act violations occurred. The contractor enters this agreement with the position that Davis-Bacon and Contract Work Hours and Safety Standards Act violations did not occur; and, neither this agreement to release back wages nor execution of this agreement shall constitute or be construed as liability or an admission on the part of the Contractor of any violation of the Davis-Bacon Act and Contract Work Hours and Safety Standards Act or its' [sic] implementing regulations.

On December 17, 1997, the administrative law judge approved the settlement. He concluded that "the agreement justly resolves all issues in this matter. Upon consideration of the records and the Consent Findings, I hereby order and approve such findings. The Consent Findings constitute my findings of fact and conclusions of law and represent a full, final and complete adjudication of this proceeding."

C. Prior to completion of the Labor Department's investigation, GSA's contracting officer terminated the contract for default on two grounds: (1) Taylor had "fail[ed] to timely perform and to make progress on the contract"; (2) "[t]he Department of Labor has also noted Davis-Bacon Act violations on the subject contract." Taylor appealed the default termination to the Board, seeking to convert the default termination into one for the convenience of the government. The Board upheld the default termination.

The Board first rejected the contracting officer's ruling that Taylor had not met the performance time requirements of the contract. It stated that the government "has not proven" that Taylor "was properly terminated for . . . failure to prosecute the work with diligence that would ensure its completion within the time specified in this contract." The government has not challenged this conclusion in this appeal, and we do not address the issue.

The Board affirmed the default termination, however, on the ground that Taylor had violated the contract's labor provisions. The Board ruled that the contracting officer's default termination on this ground was "supported . . . with specific and detailed findings of appellant's Davis-Bacon Act and Contract Work Hours and Safety Standards Act violations from DOL's Employment Standards Administration's Wage and Hour Division."

II

Under the Federal Acquisition Regulations specifying the labor provisions that certain federal procurement contracts must include, "disputes arising out of the labor standards provisions of the contracts are not to be subject to the Contract Disputes Act, but are to be resolved 'in accordance with the procedures of the Department of Labor' (which clearly means by the department)." Emerald Maintenance v. United States, 925 F.2d 1425, 1428 (Fed. Cir. 1991). A board of contract appeals must accept the Labor Department's adjudication of such a dispute; the Board has no jurisdiction itself to determine a labor provisions dispute or to review the Labor Department's ruling on that issue. See id. at 1429; Collins Int'l Serv. Co. v. United States, 744 F.2d 812, 815 (Fed. Cir. 1984).

Since a Labor Department determination that a contractor has violated the labor provisions may result in a default termination of the contract, it is essential that before the Board approves a contracting officer's default termination on that ground, it is clear and beyond question that the Labor Department in fact has found under its established procedures that the contractor has committed such a violation. Cf. J.D. Hedin Constr. Co. v. United States, 408 F.2d 424, 431 (Ct. Cl. 1969) ("[A] default termination is a drastic sanction which should be imposed . . . only . . . on solid evidence.") (citation omitted). In the present case, the record does not support the Board's conclusion that the Labor Department so found.

A The government first refers to the statements in the December 20, 1994 letter from the Labor Department's Wage and Hour Division Regional Administrator to Taylor that the Department's investigation "revealed violations of the labor standards provisions which, if not satisfactorily explained, would appear to constitute a disregard of your obligations to your employees within the meaning of Section 3(a) of the...