Miscellaneous Service Workers, Drivers & Helpers, Teamsters Local No. 427 v. Philco-Ford Corp., WDL Div., PHILCO-FORD

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Citation661 F.2d 776
Docket NumberPHILCO-FORD,No. 78-1506,78-1506
Parties25 Wage & Hour Cas. (BN 185, 92 Lab.Cas. P 34,093 MISCELLANEOUS SERVICE WORKERS, DRIVERS & HELPERS, TEAMSTERS LOCAL # 427, Plaintiff, and Roger T. Abe, et al., Plaintiffs-Appellants, v.CORPORATION, WDL DIVISION, formerly known as Aeronutronic Ford Corporation, and now known as Ford Aerospace & Communications Corporation, Defendant-Appellee.
Decision Date16 November 1981

Lawrence I. Weisman, Honolulu, Hawaii, for plaintiffs-appellants.

Jared H. Jossem, Torkildson, Katz, Jossem & Loden, Honolulu, Hawaii, for defendant-appellee.

Appeal from the United States District Court for the District of Hawaii.

Before KENNEDY and HUG, Circuit Judges, and WILLIAMS *, District Judge.


The primary issue in this case is whether the Service Contract Act of 1965, as amended, 41 U.S.C. § 351 et seq., permits the employees of a successor contractor to a government service contract to maintain a private right of action under the Act against their employer for alleged violations of the Act. The secondary issues concern alleged fraud and a pendent state wage and hour claim.


Plaintiffs-appellants are former employees of Lockheed Missile and Space Company ("Lockheed") who worked at the United States Government's Kaena Point Missile Tracking Station, and became employees of defendant-appellees Aeronutronic Ford Corporation ("AFC") upon succession to Air Force contract for operation of the Kaena Point station in 1972. 1

Plaintiffs allege three basic causes of action against AFC: (1) for violations of the Service Contract Act of 1965 ("SCA"), as amended, 41 U.S.C. § 351 et seq., in failing to compensate plaintiffs at prevailing wage and fringe benefit levels under their previous contract with Lockheed; (2) for deceit and misrepresentation in falsely advising plaintiffs that the SCA did not apply to their contract; and (3) for violating statutory provisions of the Hawaii Wage and Hour Law, Haw.Rev.Stat. Chapters 387 & 388, in failing to pay fringe benefits due plaintiffs. The district court granted summary judgment in favor of AFC with respect to the first claim on the grounds that the SCA, as originally enacted, did not create a private cause of action against employers who violate the Act. The second claim was dismissed for failure to plead with particularity in accordance with Rule 9, Fed.R.Civ.P. The third claim was dismissed for failure to state a claim as required by Rule 12(b)(6), Fed.R.Civ.P. This appeal followed, and we affirm.

The missile tracking stations at Kaena Point, Hawaii and Kodiak, Alaska were operated by Lockheed under an Air Force contract prior to 1971. In May 1971, AFC was awarded the contract to staff and operate these tracking stations. However, an intervening legal dispute, 2 unrelated to the instant action, prevented AFC from assuming responsibility for operation of the stations, and Lockheed continued to operate the stations on a "month-to-month" basis on October 30, 1972. 3 After November 1972, AFC assumed full responsibility for maintenance and operation from Lockheed.

Concurrent with AFC's assumption of its duties under the Air Force contract, various labor organizations, including plaintiff, began negotiating with AFC over collective bargaining rights for the service employees of the tracking stations. The vast majority of AFC's employees were former Lockheed employees who opted to go to work for the successor contractor, AFC. While negotiations were ongoing in May 1973, "Wage and Hour Poster No. 1313" was posted at AFC's premises advising the station employees of certain rights under both the Walsh-Healey Act 4 and the SCA. The poster did not inform them which act governed their contract. The negotiations culminated in a collective bargaining agreement between AFC and the union on July 24, 1973. Plaintiffs concede that all wages, hours, and conditions of employment were set forth fully in that collective bargaining agreement. The AFC fringe benefit program as finally memorialized in the collective bargaining agreement varied somewhat from that of Lockheed. 5


Section 2 of the Service Contract Act requires the inclusion of specific provisions establishing minimum wage and fringe benefit levels in every contract entered into by the United States in excess of $2,500 6 "the principal purpose of which is to furnish services in the United States through the use of service employees." 41 U.S.C. § 351(a). A contract subject to the SCA must contain, for example, "a provision specifying the fringe benefits to be furnished the various classes of service employees..." 41 U.S.C. § 351(a) (2). This wage and fringe benefit determination is explicitly directed to the responsibility of the Secretary of Labor "in accordance with prevailing rates for such employees in the locality, or where a collective bargaining agreement covers any such service employees, in accordance with the rates for such employees provided for in such agreement..." 41 U.S.C. § 351(a)(1) (emphasis added).

In 1972, Congress, dissatisfied with the Secretary of Labor's inconsistent administration of the Act, amended the Act to strengthen enforcement of congressional objectives: "To provide assurance that employees working for service contractors under a collective bargaining agreement will have wages and fringe benefits under a new service contract no lower than those under their current agreement." 7 One addition, subsection, § 4(c), prohibits a successor contractor from paying service employees less than the wages and fringe benefits to which they would have been entitled under a predecessor's contract. The new subsection provides:

(c) No contractor or subcontractor under a contract, which succeeds a contract subject to this chapter and under which substantially the same service 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) (emphasis added).


The main thrust of plaintiffs' claim is: (1) the SCA applies to the Air Force contracts here in question, and (2) in consequence, AFC violated § 4(c) of the Act by refusing to recognize certain seniority rights held by plaintiffs by virtue of their previous employment with Lockheed, thereby altering their entitlement to pension benefits. Pension benefits, it is clear, are "fringe benefits" under the Act. See 41 U.S.C. § 351(a)(2).

The district court held that plaintiffs had no standing under the SCA, as originally enacted, to institute a private action for violations of the Act by their employer. We agree. Plaintiffs now are attempting to argue that the 1972 amendments 8 created such a private right of action, and with that, we disagree. The Act does not specifically grant a private right of action, and nothing in its language or history compels us to believe that such a right may be implied. On the contrary a plain reading of the statute evidences a clear legislative intent to restrict employee remedies under the Act to administrative channels. Section 3(a) provides that the government contracting agency may withhold such sums, as the Secretary of Labor deems necessary to compensate employees for violations of the Act, from amounts otherwise accrued on the service contract. 41 U.S.C. § 352(a). Subsection 3(b) provides either the Secretary of Labor or the agency head with authority to carry out the withholding remedy under the Act. 41 U.S.C. § 352(b). Alternatively, the United States may cancel a contract found to be in violation of the Act. 41 U.S.C. § 352(c). Violators of the SCA can be placed on blacklists circulated by the Comptroller General which would preclude their being awarded any further government contracts in a three-year period. 41 U.S.C. § 354(a). Finally, section 5(b) authorizes a limited governmental cause of action for underpayment:

(b) If the accrued payments withheld under the terms of the contract are insufficient to reimburse all service employees with respect to whom there has been a failure to pay the compensation required pursuant to this chapter, the United States may bring action against the contractor, subcontractor, or any sureties in any court of competent jurisdiction to recover the remaining amount of underpayments. Any sums thus recovered by the United States shall be held in the deposit fund and shall be paid, on order of the Secretary, directly to the underpaid employee or employees. Any sum not paid to an employee because of inability to do so within three years shall be covered into the Treasury of the United States as miscellaneous receipts. 41 U.S.C. § 354(b) (emphasis added).

The government has a contingent right to institute suit, but may do so only after first applying the prescribed administrative remedies, and then only if "the accrued payments withheld ... are insufficient to reimburse all service employees with respect to whom there has been a failure to pay the compensation required by this chapter." Id.

The question whether a private right of action is conferred by a federal statute is essentially one of interpreting congressional intent. Middlesex County Sewerage Authority v. National Sea Clammers Ass'n, ---...

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