William J. Lang Land v. Administrator, Wage

• Decision Date: 29 September 2007
• Docket Number: Civil Case No. 04-10336.
• Citation: 520 F.Supp.2d 870
• Parties: WILLIAM J. LANG LAND CLEARING, INC., Petitioner, v. ADMINISTRATOR, WAGE AND HOUR DIVISION, U.S. Department of Labor, and Administrative Review Board, U.S. Department of Labor, Respondents.
• Court: U.S. District Court — Eastern District of Michigan

Page 870

520 F.Supp.2d 870

WILLIAM J. LANG LAND CLEARING, INC., Petitioner, v. ADMINISTRATOR, WAGE AND HOUR DIVISION, U.S. Department of Labor, and Administrative Review Board, U.S. Department of Labor, Respondents.

Civil Case No. 04-10336.

United States District Court, E.D. Michigan, Southern Division.

September 29, 2007.

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OPINION AND ORDER SUSTAINING IN PART AND OVERRULING IN PART OBJECTIONS TO MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION, ADOPTING RECOMMENDATION IN PART AND REJECTING IN PART, GRANTING RESPONDENTS' MOTION FOR SUMMARY JUDGMENT, AND DENYING PETITIONER'S MOTION FOR SUMMARY JUDGMENT

DAVID M. LAWSON, District Judge.

Several Acts of Congress, most notably the Davis-Bacon Act, require that employers on federal projects pay employees a minimum wage equal to "the wages the Secretary of Labor determines to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the civil subdivision of the State in which the work is to be performed." 40 U.S.C. § 3142(b) (formerly cited as 40 U.S.C. § 276a). Under the Act and corresponding Department of Labor regulations, the compensation paid to workers is calculated by adding to the periodic wage payments credits for certain qualifying fringe benefits; the total must meet or exceed the "minimum wage" under the Act. The petitioner in this case, William J. Lang Land Clearing, Inc., performed work under several government contracts subject to the Act's minimum wage requirements. The petitioner filed an action in this Court under the Administrative Procedures Act challenging determinations by the Department of Labor's Wage and Hour Division disallowing credit for fringe benefits in three categories claimed by the petitioner against the minimum wage requirement; and a separate determination that certain workers were classified by the petitioner improperly in a lower prevailing wage category. The parties filed cross motions for summary judgment, which were referred to Magistrate Judge Charles E. Binder for a report and recommendation under 28 U.S.C. § 636(b)(1)(B). Judge Binder filed his report on March 28, 2006 recommending that the respondents' motion for summary judgment be granted in part and the Wage and Hour Division Administrator's decision be sustained as to disallowing credit against the minimum wage for non-qualifying fringe benefits. Judge Binder also recommended that the petitioner's motion be granted in part and the Administrative Review Board's (the Board) decision reversed as to the classification of workers. Both sides filed timely objections and the matter is before the Court for a de novo review of the matter presented. However, a court's review of an agency determination under the Administrative Procedures Act is highly deferential, and the Court now finds that the Board's decision in each of the four areas of challenge is supported by substantial evidence, and it is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Therefore, the Court will overrule the petitioner's objections to the report and recommendation, sustain the respondents' objection, grant the respondent's motion for summary judgment, deny the petitioner's motion for summary judgment, and affirm the Board's decision.

I.

The dispute in this case focuses on the Board's decision of four issues that underlie its determination that William J. Lang Land Clearing, Inc. (Lang, Inc.) did not pay minimum wage to its workers performing certain contracts as required by the Davis-Bacon Act, 40 U.S.C. § 3141-3148, and other related acts, including the Federal Aid Highway Act, 23 U.S.C. § 101, the Airport and Airway Improvement Act, 49 U.S.C. § 47112(b), Reorganization Plan No. 14 of 1950, 5 U.S.C.App., the Contract Work Hours and Safety Standards Act, 40 U.S.C. § 3701-3708, and the related regulations under 19 C.F.R. Part 5. The Administrator found that in calculating the wages it reported as having been paid to its workers, Lang, Inc. (1) took improper credit for meals and lodging provided to employees; (2) improperly used an annual across-the-board average of its health insurance premium payments to compute hourly fringe benefit credit; (3) improperly took prevailing wage credit for vacation payouts; and (4) misclassified power equipment operators to a lower paid group classification (Class IV instead of Class I, where the Administrator said they belonged).

The magistrate judge's report contains a brief factual summary, which the Court believes should be expanded to address the cross motions for summary judgment. Lang, Inc. is a construction contractor located in Beaverton, Michigan that performs land clearing work. The petitioner originally cleared mostly farmland and forests, primarily using bulldozers to clear the land. The petitioner categorized the bulldozer operators as Class I employees under the applicable wage determinations, which includes employees who use heavy earth-moving, highway construction, and paving equipment. The petitioner recently has focused more on clearing land around roads and highways. It uses different equipment for this work, including a recycler or "tub grinder," hydro-axes, skidders (used to drag bundles of trees to a chipper), chippers, and wheel grinders. The Board's opinion describes the various pieces of equipment in Lang, Inc.'s arsenal:

The hydro-ax is similar to an end loader and is a relatively large piece of equipment; it is 10 feet tall and approximately 20 feet long. Hydro-axes are used to cut down trees up to 20 inches in diameter and can also clear underbrush. Skidders also measure approximately 10 feet tall and 20 feet long. This type of equipment is used with a grappling attachment to pick up and transport trees that are cut by the hydro-axes.... The tree chipper is used to process felled trees (and brush) into wood chips; it is 30 to 40 feet long, 15 to 16 feet high, and is capable of reducing a 20-inch diameter tree to wood chips in less than one minute. The final piece of disputed equipment is the stump grinder, used to grind away the tree stumps which remain after the trees have been removed by the hydro-ax. The stump grinder, a modified excavator or backhoe, weights 70 to 80 thousand pounds and in less than two minutes can grind a stump up to 22 inches in diameter.

A.R. at 2005, Board's Final Decision and Order. The parties also used a "bulldozer in at least some capacity" on one project. A.R. at 1729, ALJ Decision and Order. The petitioner still keeps a few bulldozers as backup for other equipment or to retrieve equipment that gets stuck. The petitioner classifies all its operators as Class IV operators, which includes users of miscellaneous equipment such as farm, trucking, and forestry equipment.

The petitioner has worked as a subcontractor for five different prime contractors on six contracts that received federal funds. The cases under review involve the following work:

in Case No. 98-DBA-1 as a subcontractor under Peters Construction Company on a Michigan Department of Transportation (MDOT) new construction project in Kalamazoo County during mid-1996.

in Case No. 98-DBA-2 as a subcontractor under Zito Construction on a MDOT road-widening project in Genesse County during late 1996.

in Case No. 98-DBA-3 as a subcontractor under Kamminga and Roodvooets, Inc., on a MDOT road-extension project in Kent County from May 1995 through October 1996.

in Case No. 98-DBA-4 as a subcontractor under John Carlo, Inc. on a MDOT road construction project in Macomb County from June 1990 through August 1996.

in Case No. 98-DBA-5 as a subcontractor under John Carlo, Inc. on a MDOT road construction project in Macomb County from August 1996 through May 1998 in Case No. 98-DBA-6 as a subcontractor under Dan's Excavating, Inc., MDOT pavement reconstruction project in Oakland County from July 1996 through July 1998.

A.R. at 1725-26, ALJ Decision and Order.

Over the course of two years, the petitioner employed twenty-two employees on these six contracts. Class I employees were to receive between $17.85 and $21.13 per hour, with benefits valued between $8.15 and $10.28 per hour. Class IV were paid between $14.79 and $17.50 per hour, with fringe benefits valued between $8.15 and $9.89 per hour.

The petitioner also provided meals and lodging to its employees while they were working on federal projects. In addition, the petitioner provided health insurance to its employees and credited the cost towards its wage obligations. In 1995, it claimed a credit for $1.65 per hour per employee, which was increased to $1.91 in 1996. On July 13, 1995, August 3, 1995, and December 29, 1995, the petitioner made extra payments to its employees, the nature of which was vigorously disputed at the administrative hearing. The petitioner claimed a credit for all these payments as qualifying fringe benefits that were added to the actual wages to measure against the minimum wage required by the Davis-Bacon Act and other federal laws and rules.

In 1996, the United States Department of Labor, Wage and Hour Division (referred to by the parties as the Administrator) investigated the petitioner's practices regarding their obligation to pay prevailing wages under the relevant federal requirements. The investigation began after the Department of Labor received a complaint from some anonymous employees. As a result of its investigation, the respondent began proceedings against the petitioner. On May 18 through 20, 1999, a hearing was held before ALJ Daniel Roketenetz in Midland, Michigan. Several current and former employees of the petitioner testified as this hearing. The AM found that Lang, Inc. wrongfully had taken fringe benefit credit for bonus payments that it had improperly characterized as vacation payments. But he also found that Lang, Inc. did not classify its equipment operators as Class IV instead of I improperly; it...