Slater v. U.S.

• Decision Date: 22 December 1976
• Docket Number: No. 75-1241,75-1241
• Parties: 83 Lab.Cas. P 33,632, 24 Cont.Cas.Fed. (CCH) 82,150 James SLATER, Defendant, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 58

562 F.2d 58

83 Lab.Cas. P 33,632, 24 Cont.Cas.Fed. (CCH) 82,150

James SLATER, Defendant, Appellant, v. UNITED STATES of America, Appellee.

No. 75-1241.

United States Court of Appeals First Circuit.

Argued Sept. 14, 1976.

Decided Dec. 22, 1976.

Robert K. Lamere, Boston, Mass., by appointment of the Court, with whom Sullivan & Worcester, Boston, Mass., was on brief, for appellant.

Charles E. Chase, Asst. U.S. Atty., Boston, Mass., with whom James N. Gabriel, U.S. Atty., Boston, Mass., was on brief, for appellee.

Before COFFIN, Chief Judge, CLARK ^*, Associate Justice, U.S. Supreme Court (Ret.), and CAMPBELL, Circuit Judge.

COFFIN, Chief Judge.

The appellant was convicted on two counts. The first count charged him with conspiring to defraud the United States, 18 U.S.C. § 371, and the second with violating the Kickback Act, 18 U.S.C. § 874. On appeal, he makes two arguments: that the Kickback Act cannot be applied to the facts of his case, and that the two statutes are so inherently contradictory that he cannot be convicted of violating both. He does not otherwise challenge his conviction under § 371. We do not find the statutes contradictory, but we agree that the Kickback Act does not apply to this case.

In 1969, the City of Boston entered into a contract with the federal government. The city agreed to set up and administer a Model Cities program, which would, among other things, make grants to low income homeowners who wished to repair their dwellings. The federal government agreed to pay for all of the grants and four-fifths of the administration costs. See 42 U.S.C § 3301 et seq. The appellant helped to administer the program by inspecting the work of contractors hired to carry out repairs. If he was not satisfied with a contractor's work, he could stop future "progress payments" for the work he was inspecting and make it difficult for the contractor to get other jobs under the program. In August of 1971, appellant took a contractor whose work he was supervising to a home in need of rehabilitation. The Model Cities administration had already agreed to pay $5,000 for the work that needed to be done. Appellant asked the contractor whether he could do the work for $4500 and give the remaining $500 to appellant. The contractor said he could and he was awarded the job. The contractor paid appellant $300 when the first progress payment was made.

Appellant's first argument is that this payment did not violate the Kickback Act. The act, using extraordinarily broad language, makes a criminal of

"(w)hoever, by force, intimidation, or threat of procuring dismissal from employment, or by any other manner whatsoever induces any person employed in the construction, prosecution, completion or repair of any public building, public work, or building or work financed in whole or in part by loans or grants from the United States, to give up any part of the compensation to which he is entitled under his contract of employment . . . ." 18 U.S.C. § 874.

Appellant argues that an independent contractor is not "employed" and does not have a "contract of employment" within the meaning of this statute. Although he failed to make this argument below, he did move for a judgment of acquittal at the close of the government's case and at the close of all the evidence. This put the sufficiency of the evidence in issue and preserved that question for appeal. See United States v. Jones, 174 F.2d 746 (7th Cir. 1949); United States v. Perplies, 165 F.2d 874 (7th Cir. 1948); see also United States v. Leach, 427 F.2d 1107, 1111 (1st Cir.), cert. denied sub nom. Tremont v. United States, 400 U.S. 829, 91 S.Ct. 57, 27 L.Ed.2d 59 (1970). ¹

The language of § 874 hardly provides a crystal clear answer to the question raised by appellant's argument. A "contract of employment" most accurately describes contracts exchanging services for wages; but appellant's victim had agreed to supply materials and the labor of others, as well as his own services. Moreover, in applying the statute, we must bear in mind the canon that criminal defendants are entitled to a reasonably strict construction of the law they are accused of breaking. United States v. Fruit Growers Express Co., 279 U.S. 363, 369, 49 S.Ct. 374, 73 L.Ed. 739 (1929). The very breadth of the statutory language gives us pause as well. It applies to " whoever" induces "(by) intimidation . . . or by any other manner whatsoever" an employee on a federally subsidized project to pay over part of his wages. Read literally, the statute would punish a construction worker's wife if she induced her husband to hand over his pay check. It would make every petty blackmail scheme a federal crime if the victim happened to work on a federally subsidized building project. The federal courts have uniformly rejected a literal reading of the statute. See United States v. Carbone, 327 U.S. 633, 637, 66 S.Ct. 734, 90 L.Ed. 904 (1946); United States v. Laudani, 320 U.S. 543, 544-46, 64 S.Ct. 315, 88 L.Ed. 300 (1944); United States v. Price, 224 F.2d 604, 607 (6th Cir. 1955) (Stewart, J.), cert. denied, 350 U.S. 876, 76 S.Ct. 121, 100 L.Ed. 774 (1955). The Supreme Court has pointed out that "not every person or act falling within the literal sweep of the language of the Kickback Act necessarily comes within its intent and purpose. That language must be read and applied in light of the evils which gave rise to the statute and the aims which the proponents sought to achieve." United States v. Carbone, supra, 327 U.S. at 637, 66 S.Ct. at 736.

These considerations suggest to us that independent contractors are not protected by § 874; but the suggestion is not free from ambiguity. In these circumstances we must look behind the statutory language for other indications of Congress's intent. We do this, not to modify the plain meaning of § 874, but to confirm and refine a conclusion derived from reading the statute itself. Our decision to seek external evidence of congressional purpose is buttressed by the consistency and clarity of this evidence. The Kickback Act was passed on June 13, 1934. ² It was styled "An Act to effectuate the purpose of certain statutes concerning rates of pay for labor, by making it unlawful to prevent anyone from receiving the compensation contracted for thereunder, and for other purposes." 48 Stat. 948. The committee reports elaborate on this theme. "It has been a common practice for contractors constructing Federal buildings to pay the employees the prevailing rate as determined by the Secretary of Labor and then have them return a certain amount to the contractor. That is a most vicious practice." S.Rep. No. 803, 73d Cong., 2d Sess. (1934) (adopting the language of a labor leader). "This bill is aimed at the suppression of the so-called 'kick-back racket' by which a contractor on a Government project pays his laborers wages at the rate the Government requires him to pay them, but thereafter forces them to give back to him a part of the wages they have received." H.Rep. No. 1750, 73d Cong., 2d Sess. (1934).

The government wage standards to which these materials refer stemmed primarily from the Davis-Bacon Act, 40 U.S.C. § 276a, which was passed in 1931 to regulate wages on government construction projects. In essence the act requires that workers on government projects be paid the prevailing wage for similar work in the area. The theory of Davis-Bacon and its many progeny ³ is that the federal government ought not to be a party to the lowering of wages in communities where private sector jobs are scarce. This could easily happen where the government is the only source of work. ⁴ By mandating the payment of locally prevailing wages, the act ensures that the market power of the federal government will not be exerted against the worker, but will rather create a wage floor which other employers must meet to obtain labor. Section 874 is closely allied with the Davis-Bacon Act. ⁵ The act's intention would be quite negated if a private contractor on a federal project could take advantage of a weak labor market to demand kickbacks as the price of continued employment. The Congress's intention to prevent such a borrowing of government market power acts as a limit on the otherwise unrestrained language of § 874. Thus the section has been applied to anyone in a position to take advantage of a weak local job market by "selling" jobs on federal construction sites. See United States v. Laudani, supra, 320 U.S. 543, 64 S.Ct. 315, 88 L.Ed. 300 (section applies to foremen with power to discharge workers); see also United States v. Price, supra, 224 F.2d 604. It does not, however, apply to lawful union efforts to collect dues, United States v. Carbone, supra, 327 U.S. 633, 66 S.Ct. 734, 90 L.Ed. 904, although union officials who abuse their economic power by extorting payments from workers may be charged under § 874. United States v. Alsup, 219 F.2d 72 (5th Cir.), cert. denied, 348 U.S. 982, 75 S.Ct. 572, 99 L.Ed. 764 (1955).

Later legislative references to § 874 add weight to our narrow view of that section. 42 U.S.C. § 1459 says "In order to protect labor standards . . . the provisions of (section 874) . . . shall apply to work financed in whole or in part with funds made available . . . pursuant to this (urban renewal) title." (Emphasis added.) And the Housing Act of 1937 took a similarly limited view of § 874: "In order to protect labor standards . . . (t)he provisions of (section 874) . . . shall apply to contracts in connection with the development or administration of Federal projects, and the furnishing of materials and labor for such projects". 50 Stat. 894, 896-97. ⁶ (Emphasis added.) These references confirm our view that § 874, despite its sweeping language, merely serves to enforce federal wage standards in federally subsidized projects.

With this principle in mind, we return to appellant. The transaction out of which this prosecution grew was based on the federal...