Trinity Services, Inc. v. Marshall, 77-1217

• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)
• Citation: 593 F.2d 1250,193 U.S.App.D.C. 96
• Docket Number: No. 77-1217,77-1217
• Parties: 24 Wage & Hour Cas. (BN 216, 193 U.S.App.D.C. 96, 85 Lab.Cas. P 33,731, 25 Cont.Cas.Fed. (CCH) 82,955 TRINITY SERVICES, INC., a Florida Corporation, et al., v. F. Ray MARSHALL, Secretary of Labor, et al., Appellants.
• Decision Date: 27 December 1978

Page 1250

593 F.2d 1250

24 Wage & Hour Cas. (BN 216, 193 U.S.App.D.C. 96,

85 Lab.Cas. P 33,731,

25 Cont.Cas.Fed. (CCH) 82,955

TRINITY SERVICES, INC., a Florida Corporation, et al., v. F. Ray MARSHALL, Secretary of Labor, et al., Appellants.

No. 77-1217.

United States Court of Appeals,

District of Columbia Circuit.

Argued March 30, 1978.

Decided Dec. 27, 1978.

Michael F. Hertz, Atty., Dept. of Justice, Washington, D. C., with whom Earl J. Silbert, U. S. Atty., Leonard Schaitman, Atty., Dept. of Justice, Donald S. Shire, Associate Sol., and Eric Schwartz, Atty., Dept. of Labor, Washington, D. C., were on the brief, for appellants.

Albert Millar, Jr., Jacksonville, Fla., a member of the bar of Supreme Court of Florida pro hac vice, by special leave of Court with whom Gordon P. MacDougall, Washington, D. C., was on the brief, for appellee, Trinity Services, Inc.

Malcolm A. Goldstein, New York City, with whom Gerald I. Sommer, Washington, D. C., was on the brief, for appellee, Transport Workers Union of America, AFL-CIO, et al.

Asher W. Schwartz, New York City, entered an appearance for appellee, Transport Workers Union of America et al.

Before LUMBARD, ^* Senior Circuit Judge for the Second Circuit, and MacKINNON and WILKEY, Circuit Judges.

Opinion for the court filed by Circuit Judge MacKINNON.

Dissenting opinion filed by Senior Circuit Judge LUMBARD.

MacKINNON, Circuit Judge:

The issue in this case is whether severance and seniority provisions are Bona fide fringe benefits required to be included in wage determinations issued by the Secretary of Labor pursuant to the Service Contract Act of 1965, 41 U.S.C. § 351 Et seq.

I. THE STATUTE

The Service Contract Act requires the inclusion of specific provisions in every contract entered into by the United States in excess of $2500 (with certain exceptions not applicable here) ¹ "the principal purpose of which is to furnish services in the United States through the use of service employees." ² A contract subject to the § 351(a) requirements must contain, for example, "a provision specifying the minimum monetary wages to be paid the various classes of service employees in the performance of the contract or any subcontract thereunder." ³ This amount is to be determined by 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, including prospective wage increases provided for in such agreement as a result of arm's length negotiations." ⁴ In no event can these "minimum monetary wages" be lower than the federal minimum wage. ⁵

This case focuses on the Act's requirement that all service contracts covered by the Act include a provision specifying the fringe benefits to be furnished the various classes of service employees. This subsection requires that a contract covered by the Act contain:

(2) A provision specifying the fringe benefits to be furnished the various classes of service employees, engaged in the performance of the contract or any subcontract thereunder, as determined by the Secretary or his authorized representative to be prevailing for such employees in the locality, or, where a collective-bargaining agreement covers any such service employees, to be provided for in such agreement, including prospective fringe benefit increases provided for in such agreement as a result of arm's-length negotiations. Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. The obligation under this subparagraph may be discharged by furnishing any equivalent combinations of fringe benefits or by making equivalent or differential payments in cash under rules and regulations established by the Secretary.

41 U.S.C. § 351(a)(2). This section must be read with a 1972 amendment which provides that no contractor who succeeds to a contract subject to the Act and provides substantially similar services shall pay any service employee less than the wages and fringe benefits to which he would have been entitled if employed under the predecessor's contract. This part of the Act provides:

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

It was the intent of Congress that the Secretary of Labor make determinations of the minimum monetary wages and fringe benefits for the various classes of service employees working under contracts covered by the Act. ⁶ Thus, any wage determination issued must contain the wage and fringe benefit provisions of any collective bargaining agreement between the incumbent employer and any union representing the service employees to the extent that sections 351(a)(1) and 351(a)(2) require their inclusion. The successor contractor must pay the wages and provide the benefits unless "the Secretary finds after a hearing . . . that such wages and fringe benefits are substantially at variance with those which prevail for services of a character similar in the locality." ⁷ The Secretary is also empowered to "provide such reasonable limitations and . . . make such rules and regulations allowing reasonable variations, tolerances, and exemptions" from the provisions of the Act, "but only in special circumstances where he determines that such limitation, variation, tolerance, or exemption is necessary and proper in the public interest or to avoid the serious impairment of government business, and is in accord with the remedial purpose of this chapter to protect prevailing labor standards." ⁸ The Secretary of Labor has also issued regulations to implement the Act. ⁹

II. BACKGROUND

The material facts of this case are not disputed. Trinity Services, Inc. ("Trinity") is a service contractor holding two janitorial service contracts, one at Patrick Air Force Base and the other at Cape Canaveral Air Force Station. To perform these contracts, Trinity employed members of the Transport Workers International Union ("TWIU") and Service Employees International Union ("SEIU"), and entered into collective bargaining agreements with their respective locals. Trinity's contracts were due to expire on November 30, 1976; therefore, the Air Force filed with the Department of Labor notices of its intentions to enter into new contracts. ¹⁰ On October 22, 1976, in accordance with these notices and 29 C.F.R. § 4.3, ¹¹ the Department of Labor issued Wage Determination No. 73-794 for the Patrick Air Force Base contract ¹² and Wage Determination No. 73-535 for the Cape Canaveral contract. ¹³ The Secretary's wage determinations, as required by the Act, specify the minimum monetary wages and fringe benefits to which all bid and contracts accepted by the Government must conform.

The services to be furnished under the new contracts for which bidding was opened would be substantially the same as the services previously being performed by Trinity. The wage rates and fringe benefits paid by Trinity to its service employees were contained in the two collective bargaining agreements entered into on August 13, 1976 between Trinity and the two unions. ¹⁴ Thus, according to the statute and the applicable regulations, ¹⁵ the Secretary was required to issue wage determinations for the successor contracts which set forth for the various classes of employees the wage rates and fringe benefits contained in the existing collective bargaining contract, and the wage determinations did include most of the wage and fringe benefits included in the agreements.

This dispute arises primarily because each wage determination excluded a severance pay provision, which required the successor contractor to make a payment to employees of the predecessor contractor which it did not hire The provision set forth in Section 10, Article 26 (Severance Allowance), of the predecessor contractors (sic) collective bargaining agreement is deemed outside the perveiw (sic) of the obligations imposed on a successor contractor under Sections (2)a (2(a)) (41 U.S.C. § 351(a)) and 4(c) (41 U.S.C. § 353(c)) of the Service Contract Act.

J.A. 12, 18. The excluded provision of the collective bargaining agreements, Art. 26, § 10, provided as follows:

It is the intention of this Article that any successor to the instant contract, whether it be Trinity Services, Inc. or any other contractor shall be in exactly the same position with respect to severance pay liability for any employees that it may elect to terminate for reasons other than permitted by this Article. The incumbent contractor and its successor shall be deemed the same for the purpose of determining severance pay liability and lose (sic) of the contract to a successor shall...