CourtUnited States District Courts. United States District Court (Columbia)
Citation830 F. Supp. 5
Docket NumberCiv. A. No. 91-1628 (CRR).
Decision Date13 August 1993

Orrin Baird and Jonathan P. Hiatt, Service Employees Intern. Union, AFL-CIO, for plaintiff.

Daniel J. Standish, Asst. U.S. Atty., with J. Ramsey Johnson, U.S. Atty. and John D. Bates, Asst. U.S. Atty., for defendant.


CHARLES R. RICHEY, District Judge.


The Plaintiff Service Employees International Union, AFL-CIO, brings this action under the Administrative Procedures Act ("APA"), 5 U.S.C. § 701, et seq., alleging that the Defendant General Services Administration's ("GSA") regulation published at 57 Fed.Reg. 22664-68 (1992) is unlawful.

Before the Court is the Defendants' Motion for Summary Judgment and the Plaintiff's Motion for Summary Judgment.1 After

carefully considering the parties' Motions for Summary Judgment, the supporting and opposing memoranda, the underlying law, and the entire record in this case, the Court concludes that there is no material issue of fact in dispute precluding the entry of Summary Judgment and that the regulation at issue is arbitrary, capricious, and contrary to law under the APA. Accordingly, the Court shall grant the Plaintiff's Motion for Summary Judgment, and shall deny the Defendants' Motion for Summary Judgment.


The Service Contract Act ("Act") is a labor standards statute for service contracts that "regulates the contractual relationship between companies that provide services to the United States and their employees." A to Z Maintenance Corp. v. Dole, 710 F.Supp. 853 (D.D.C.1989) (Richey, J.). It provides that contracts must contain, inter alia, provisions specifying the minimum wage and fringe benefits to be paid to various classes of service employees by contractors. 41 U.S.C. § 351(a)(1) and (2). Under the Act, the Secretary of Labor determines the appropriate minimum wage and fringe benefit for employees based upon the prevailing rate for such employees in the locality. 41 U.S.C. § 351(a).

The Act also provides that, after a hearing, the Secretary of Labor may determine that the collectively bargained wage and fringe benefits in a particular service contract are substantially at variance with the prevailing wage and fringe benefits in the locality or are not the result of arms length negotiations. See 41 U.S.C. § 353(c).2 In that event, the Secretary shall order that the wages and fringe benefits in the service contract at issue be changed to conform with the rates in the locality, as determined by the Secretary. 29 C.F.R. § 4.1b(a) (1992).

The Secretary of Labor has issued a variety of regulations pursuant to his or her authority under the Act. These regulations are included in Federal Acquisition Regulations ("FAR"). See 48 C.F.R. Subpart 1.1 (1992). Under the FAR, individual agencies may also promulgate regulations related to its own unique contracting needs, so long as the agency's regulations are consistent with the Act and the FAR.

The Plaintiff in this case challenges a GSA regulation promulgated under the FAR. The regulation provides that contractors must retroactively reimburse GSA for any wage or fringe benefit increases paid by GSA which are later determined by the Secretary to be at substantial variance with the prevailing wage and fringe benefits in the area or which have not been arrived at in arms length negotiations. 57 Fed.Reg. 22664-68 (1992), 48 C.F.R. § 552.222-43 (Alternate I) (1992). The regulation applies to all multiple year contracts and contracts with options. Id.

The Plaintiff contends that this regulation is arbitrary, capricious and contrary to law under the Administrative Procedures Act ("APA"), 5 U.S.C. § 706, and requests declaratory and injunctive relief as well as monetary damages.3


The Defendants contend that the Plaintiff lacks standing to bring this action. The Court does not agree. For purposes of standing, a plaintiff must allege 1) a "personal injury" that is; 2) "fairly traceable to the defendant's allegedly unlawful conduct;" and 3) which is "likely to be redressed by the requested relief." Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984). It is undisputed that the regulation here is designed as a cost savings measure designed as an incentive for "effective negotiations" between service unions and federal contractors. Exh. 40, 57 Fed.Reg. 22665 (1992). While the Defendants contend that nothing in the regulation will affect a contractor's obligation to his employees under a collective bargaining agreement, id., any cost savings under the regulation can only be achieved at the expense of the union members whose wages and fringe benefits will be reduced by virtue of the regulation. Thus, there is a "distinct and palpable injury" that is "fairly traceable" to the regulation challenged here. Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 73, 98 S.Ct. 2620, 2630, 57 L.Ed.2d 595 (1978). The mere fact that causality may depend to some extent of the actions of a third party, in this case, the service contractors, is not a bar to standing. See International Ladies Garment Workers Union v. Donovan, 722 F.2d 795, 810-811 (D.C.Cir. 1983).

A. The regulation challenged here is contrary to the Secretary of Labor's expressed pronouncement that a new wage determination should apply prospectively.

The Secretary of Labor is given the authority to interpret and enforce the Act. See 41 U.S.C. § 353; Marine Transport Lines, Inc. v. Lehman, 623 F.Supp. 330, 335 (D.D.C.1985). The Secretary's interpretation of the Act has controlling weight unless plainly erroneous or inconsistent with the Act. Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801-802, 13 L.Ed.2d 616 (1965). Therefore, the Court must first determine whether GSA's regulation providing for the retroactive application of wage and fringe benefits is contrary to the Act as interpreted by the Secretary.

The current regulations issued by the Secretary of Labor state that:

the legislative history of the 1972 Amendments to the Act makes clear that the collectively bargained "wages and fringe benefits shall continue to be honored ... unless and until the Secretary finds, after a hearing, that such wages and fringe benefits are substantially at variance with those prevailing in the locality for like services" (S.Rept. 920-1131, 92nd Cong., 2d Sess. 5). Thus, variance decisions do not have application retroactive to the commencement of the contract.

29 C.F.R. § 4.163(c) (1992) (emphasis added). The Secretary has also noted that:

it is the Department's view that retroactive wage determinations, as suggested by the agencies and as practiced by the Department in the past in some circumstances, are not consistent with the Act. It is also our view that a uniform rule (unlike that observed in the past) is appropriate, and that neither the contractor nor the workers would be penalized by the retroactive application of the new wage determination.

48 Fed.Reg. 49736, 49737 (1983).

The Defendants claim that the Secretary has not actually spoken to the particular issue addressed in the GSA regulation. More specifically, the Defendants claim that the Secretary's statements regarding retroactivity concern the payment of wages and fringe benefits by employers to workers, whereas the GSA regulation concerns a contractor's obligation to repay the government for wages or fringe benefits struck down by the Secretary. Thus, the Defendants claim that GSA's regulation is proper as a "matter of procurement policy which is within the authority of GSA." Exhibit 40, 57 Fed.Reg. 22665 (1992).

The Court does not agree. The plain language of the Secretary's statements above clearly mandates that the Secretary's wage and fringe benefit determination does "not have application retroactive to the commencement of the contract." 29 C.F.R. § 4.163(c). Furthermore, the Secretary does not drawn any distinction between retroactivity regarding employees and contractors. In fact, the Secretary explicitly states that "neither the contractor nor the worker should be penalized for retroactive application" of a wage and fringe benefit determination. 48 Fed.Reg. 49736, 49737 (1983). The Defendants can point to no authority in the Act or the FAR in support of its regulation that would allow it to ignore the Secretary's pronouncements above concerning retroactivity.

Furthermore, the effect of the regulation, contrary to the description of it given by the agency, illustrates that there is a conflict between the Secretary's position and GSA's regulation. See Motor Coach Employees v. Lockridge, 403 U.S. 274, 292, 91 S.Ct. 1909, 1920, 29 L.Ed.2d 473 (1971) ("It is the conduct being regulated, not the formal description of governing legal standard, that is the proper focus of concern.") By disallowing certain wage and benefit provisions in a service contract and giving that decision retroactive effect, the regulation will inevitably alter the wage and fringe benefits of employees. While such a result may not be the primary thrust of the regulation, it is certainly an inevitable and foreseeable consequence. Under these circumstances, the Court cannot conclude that the regulation is simply a procurement policy that has no effect on the wages or fringe benefits of service contract employees.

Therefore, in light of the Secretary's clear and unambiguous position against retroactivity of wage and fringe benefit determinations, the Court concludes that GSA's...

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