Midwest Maintenance & Const. Co., Inc. v. Vela, 78-1694

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Citation621 F.2d 1046
Parties24 Wage & Hour Cas. (BN 696, 88 Lab.Cas. P 33,905, 27 Cont.Cas.Fed. (CCH) 80,391 MIDWEST MAINTENANCE & CONSTRUCTION CO., INC., a corporation and C. W. Curtis and Cecile Curtis, Plaintiffs-Appellants, v. Xavier M. VELA, Administrator, Wage and Hour Division (Successor to Ronald J. James, Resigned), and Ray Marshall, Secretary of Labor, United States Department of Labor, Defendants-Appellees.
Docket NumberNo. 78-1694,78-1694
Decision Date01 May 1980

Charles W. Ellis, Oklahoma City, Okl. (Ellis, Frates & Shotts, Oklahoma City, Okl., on the briefs), for plaintiffs-appellants.

Gail V. Coleman, Washington, D. C. (Carin Ann Clauss, Sol. of Labor, Ronald G. Whiting, Associate Sol., George E. Rivers, and Jack Diamond, Attys., U. S. Dept. of Labor, Washington, D. C., James E. White, Acting Regional Sol., Dallas, Tex., on the brief), for defendants-appellees.


BREITENSTEIN, Circuit Judge.

This action seeks review of decisions of the United States Department of Labor under the Service Contract Act of 1965, as amended, 41 U.S.C. § 351 et seq. After an administrative hearing, defendant-appellee James, as Administrator of the Wage and Hour Division, held that plaintiff-appellant Midwest Maintenance & Construction Co. had underpaid its employees working on a federal service contract by over $61,000. Defendant-appellee Marshall, as Secretary of Labor, ruled that Midwest was ineligible to bid on government contracts for three years. The district court sustained the departmental actions. We reverse.

Midwest is an Oklahoma corporation with its principal office in Oklahoma City. It performs contracts for repair and maintenance of government-owned equipment. On September 28, 1973, pursuant to a cross-service agreement with the United States Air Force, the General Services Administration, GSA, issued invitations to bid for the maintenance, repair, and overhaul of various types of equipment in ten service areas.

Midwest bid on, and was awarded the contract for, the repair and maintenance of four types of equipment. We are concerned with one designated as "Group G." The invitation to bid included a copy of the contract and nine wage determinations. One of these, No. 68-84 (Rev. 8), covered Bexar and Guadalupe counties, Texas. An amendment to the invitation included a successor wage determination, designated as No. 72-120 (Rev. 3), which included the same counties. The "Group G" equipment covered by the Midwest contract is known as "yellow iron." Midwest performed the work at Poteet, Atascosa County, Texas. No wage determination specifically covered Atascosa County.

The Service Contract Act, 41 U.S.C. § 351(a)(1) and (2) requires that a contractor such as Midwest pay its employees wages, and furnish them fringe benefits, "as determined by the Secretary, * * * in accordance with prevailing rates (and benefits) for such employees in the locality." Section 351(b)(1) says that no contractor shall pay less than the minimum wage specified under the Fair Labor Standards Act, FLSA, 29 U.S.C. § 206(a)(1). A contractor who violates the Act is placed on a three-year ineligibility list unless the Secretary otherwise recommends because of unusual circumstances. 41 U.S.C. § 354(a).

When the contract was about 80 percent performed, a Labor Department investigation disclosed Midwest was paying wages about $1.10 an hour less than the wage scale stated in wage determination No. 72-120 (Rev. 3) but more than the FLSA minimum. The Department requested the Air Force to withhold from payments to Midwest an amount sufficient to cover the alleged underpayments. Efforts to resolve the controversy failed, and the Department filed an administrative complaint against Midwest charging violations of the Service Contract Act. Midwest denied the allegations and contended that the bid and contract contained no wage determination for the locality in which the work was performed. Absent such determination, Midwest says that the FLSA minimum applies and it paid more than the minimum.

An Administrative Law Judge, ALJ, conducted an evidentiary hearing. He found that Midwest had arranged to take over a facility at Poteet, Texas for the performance of the "yellow iron" servicing, should it be awarded the contract, and that the work was performed at Poteet. He took judicial notice that Poteet is within 30 miles of San Antonio, which is in Bexar County and that Poteet is in Atascosa County which adjoins Bexar County. He also found that Midwest had paid $1.10 an hour less than the scale for Bexar County. The total underpayments by Midwest amounted to $61,337.24.

The ALJ did not directly decide the claim of Midwest that the wages were controlled by those in Atascosa County where the work was performed. Instead he held:

"Proceeding, however, on the assumption that Respondents' (Midwest's) interpretation of the applicable law and regulations was correct, the record shows that Respondents took no steps to remedy the situation until long after the award had been made and the contract largely performed. They thus acquired an unconscionable advantage over other bidders, and defeated the purpose of the Act. By failing to protest the wage determinations prior to the making of the award, they must be deemed to have relinquished any right to depart from the requirements of the Wage Determinations promulgated by the Secretary."

With regard to the ineligibility sanction, the ALJ recommended that it not be applied. He pointed out that Midwest maintained adequate records, made them available to the Compliance Officer, cooperated in the investigation, had performed many government contracts with no substantial violations and that Midwest's liability "turned on bona fide legal issues of doubtful certainty." These legal issues relate to the meaning of the Service Contract Act and of the GSA-Midwest contract. The issues were raised by Midwest and not decided by the ALJ.

The Administrator upheld the ALJ's decision on relinquishment. The Administrator's action, although not entirely clear to us, can be read as rejecting Midwest's claim that place of performance controls and holding that, when the place of performance is unknown, "locality" is the location of the contracting facility. On the ineligibility sanction, the Administrator disagreed with the ALJ, saying that Midwest interpreted the contract unilaterally at its peril and did not manifest an intent to comply with the Act. He concluded that the case did not involve "unusual circumstances" relieving Midwest from the ineligible list sanction. On the basis of the Administrator's decision, the Secretary imposed the ineligibility sanction.

The district court upheld the ALJ and the Administrator on "relinquishment" and said that it had no jurisdiction to review the Secretary's decision on the sanction.

Except for the sanction issue, the scope of judicial review presents no problem. The controlling standards appear in 5 U.S.C. § 706. The only change applicable here is that § 706(2)(E) refers to substantial evidence. The Service Contract Act, 41 U.S.C. § 353(a), provides that Sections 4 and 5 of the Walsh Healey Act, 41 U.S.C. §§ 38 and 39, govern. Section 39 provides that the Secretary's findings shall be conclusive if supported by the preponderance of the evidence. See United States v. Deluxe Cleaners & Laundry, Inc., 4 Cir., 511 F.2d 926, 927.

We do not know what is meant by "relinquishment." Perhaps waiver is intended. Waiver is the intentional relinquishment of a known right or privilege. Barber v. Page, 390 U.S. 719, 725, 88 S.Ct. 1318, 1322, 20 L.Ed.2d 255. Silence is not a waiver unless there is a duty or obligation to speak. Dalton v. LeBlanc, 10 Cir., 350 F.2d 95, 98-99. Midwest had the right, but not the obligation, to seek clarification of the bid invitation and contract. No evidence in the record even intimates that Midwest intended to forsake, abandon or renounce its position on locality. Midwest kept adequate and accurate wage records and was prepared to cooperate with the Department and defend its position.

Equitable estoppel is closely akin to waiver. Estoppel arises when a "party, by its words or actions, misrepresents a fact, and the other party reasonably relies upon such representations to its detriment." United Services Automobile Association v. Royal-Globe Insurance Co., 10 Cir., 511 F.2d 1094, 1097. Nothing in the record shows that Midwest made any misrepresentation of the basis for its bid.

The statements by the ALJ and the Administrator that Midwest took an "unconscionable" advantage over competing bidders are without record support. The record does not disclose what bids were received by GSA or the amount of those bids. All we know is that GSA awarded the contract to Midwest. We have no way of knowing whether the advantage, if any, was unfair. The ALJ made the assumption that Midwest's interpretation of the applicable law and regulations was correct and then said that Midwest "relinquished" its rights. The government suggests that Midwest should have sought a hearing before the Secretary under 41 U.S.C. § 353(c). The difficulty is that § 353(c) applies to a successor contract and we are concerned with an original contract. We reject the "relinquishment" ruling of the ALJ and the Administrator as without either legal or factual support.

This decision would end the matter if it were not for the alternate position apparently taken by the Administrator, i. e. the rejection of the Midwest claim that place of performance controls and his statements that "locality" is the location of the contracting facility. These issues require consideration of the statute and the contract.

The statute does not define "locality." To sustain its position each party refers to documents and reports which are not in the record and which are not available to us. We agree with the government...

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