JOSEPH C. KIRCHDORFER, ET AL., PETITIONERS V. SECRETARY OF LABOR No. 89-1938 In The Supreme Court Of The United States October Term, 1990 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Sixth Circuit Brief For The Respondent In Opposition TABLE OF CONTENTS Question Presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW The opinion of the court of appeals (Pet. App. A1-A3) /1/ is unreported. The district court's order (Pet. App. B1-B2) and the final memorandum decision (Pet. App. C1-C14) are unreported. The memorandum decision of the district court (App., infra, 1a-7a) denying a preliminary injunction is unreported. The final decision and order of the Deputy Secretary of Labor (Pet. App. D1-D34) is unreported. The decision and order of the administrative law judge (App., infra, 8a-34a) is unreported. JURISDICTION The judgment of the court of appeals was entered on March 30, 1990. The petition for a writ of certiorari was filed on May 17, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(a). QUESTION PRESENTED Whether the Deputy Secretary of Labor properly determined that a contractor violated the service contract act and should be barred from contracting with the federal government for a period of three years. STATEMENT 1. The McNamara-O'Hara Service Contract Act of 1965 (SCA or the Act), 41 U.S.C. 351 et seq., applies to those contracts between the United States and contractors "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). The Act requires each such contract in excess of $2500 to include provisions specifying the minimum wage and fringe benefits to be paid the various classes of service employees in the performance of the contract or any subcontract. 41 U.S.C. 351(a)(1) and (2). The Secretary of Labor determines the contract wage and fringe benefits based on the prevailing rate for such employees in the locality or, where applicable, in accordance with the rates provided in a collective bargaining agreement. Ibid. In general, a service contract providing substantially the same services as a predecessor contract must provide at least the same wages and fringe benefits as the predecessor contract, including payment of any accrued wages or fringe benefits. 41 U.S.C. 353(c). A party responsible for a violation of the Act is liable for the amount of the underpayment, and is also subject upon written notice to cancellation of the contract by the contracting agency. 41 U.S.C. 352(a) and (c). In addition, the Act directs that, "(u)nless the Secretary otherwise recommends because of unusual circumstances," any person or firm found to have violated the Act shall be included on a list distributed by the Comptroller General and rendered ineligible for any federal contract for three years from the date of publication on the list. 41 U.S.C. 354(a). The Secretary administers the SCA (41 U.S.C. 353(a)), and has issued regulations implementing the Act. 29 C.F.R. Pt. 4. One of these regulations sets forth criteria for evaluating the "unusual circumstances" exception to the debarment sanction. 29 C.F.R. 4.188. The regulation provides that a violator of the Act has the burden of establishing sufficient unusual circumstances to justify the exception. 29 C.F.R. 4.188(b)(1). It enumerates certain types of violations for which the "unusual circumstances" exception is unavailable -- those in which the violation is "willful, deliberate or of an aggravated nature or where the violations are a result of culpable conduct such as culpable neglect to ascertain whether practices are in violation, culpable disregard of whether they were in violation or not, or culpable failure to comply with recordkeeping requirements" (29 C.F.R. 4.188(b)(3)(i)); it also sets forth certain "prerequisites" to the exception (such as a "good compliance history, cooperation in the investigation * * * and sufficient assurances of future compliance"), but notes that the presence of these factors and the absence of aggravating circumstances must still be evaluated in the context of other factors to determine if the exception is available. 29 C.F.R. 4.188(b)(3)(ii). 2. The Air Force awarded petitioner Skip Kirchdorfer, Inc. two contracts -- a contract in September 1980 for the maintenance of military housing at Patrick Air Force Base in Florida, and a contract in September 1981 for the maintenance of military housing and appliances at Maxwell-Gunter Air Force Base in Alabama. Both contracts exceeded $2,500, referred explicitly to the SCA, and contained provisions specifying job classifications and the minimum wages and fringe benefits to be paid on the contract. The Maxwell-Gunter contract also referred to the Contract Work Hours and Safety Standards Act (CWHSSA), 40 U.S.C. 327 et seq. /2/ App., infra, 10a-11a. 3. In 1983 and 1984, the Wage and Hour Division of the Department of Labor filed complaints that petitioners had violated the SCA and CWHSSA in the performance of the two contracts. /3/ The Department charged petitioners with (1) the failure to pay accrued vacation benefits to one employee under the Patrick contract and three employees under the Maxwell-Gunter contract (Pet. App. D3; App., infra, 18a-23a); (2) the failure to pay overtime to two air conditioning mechanics under the Maxwell-Gunter contract (Pet. App. D6-D11; App., infra, 23a-25a); (3) the payment of six employees at rates below the wage determinations established for their job classifications under the Maxwell-Gunter contract (Pet. App. D14-D25; App., infra, 26a-30a); and (4) the misclassification of a quality control worker as a supply clerk under the Maxwell-Gunter contract (Pet. App. D11-D13; App., infra, 30a-31a). 4. After an evidentiary hearing, the administrative law judge ruled against petitioners in all respects. First, the ALJ found that the one Patrick employee and the three Maxwell-Gunter employees were entitled to accrued vacation pay as "continuous" employees from the predecessor contracts. App., infra, 18a-19a. Second, the ALJ found that, contrary to petitioners' "grossly inaccurate" payroll records (id. at 24a), the two air conditioning mechanics consistently worked well in excess of 40 hours per week and were thus entitled to overtime pay in accordance with the Wage and Hour investigator's calculations. Id. at 23a-25a. Third, the ALJ found that petitioners had failed to pay six employees the contract minimum wage specified for their job classifications in violation of the SCA, the contract, and applicable regulations (App., infra, 26a); the ALJ also noted that petitioner Joseph Kirchdorfer had been advised of the applicable requirements "on numerous occasions" (id. at 27a). Fourth, the ALJ found that, in addition to his work as a supply clerk, one employee performed quality control work at least 25% of the time and was consequently entitled to additional compensation for this misclassification. Id. at 30a-31a. In all, the ALJ determined that petitioners owed 13 employees a total of $15,135.54, plus interest, under the SCA and CWHSSA. App., infra, 33a-34a. Furthermore, the ALJ recommended the debarment of petitioners in accordance with Section 5(a) of the SCA, 41 U.S.C. 354(a). App., infra, 31a-33a. Applying the statutory and regulatory criteria, the ALJ found that there were "no unusual circumstances to warrant (petitioners') relief from the debarment sanction." Id. at 32a. To the contrary, the ALJ found that the violations were of "a deliberate nature"; that petitioner Joseph Kirchdorfer "had knowledge" of the relevant statutory requirements; that he had not cooperated with the Wage and Hour investigations; and that he had previously been enjoined for labor standards violations. Id. at 32a-33a. 5. On review, the Deputy Secretary, who issues final administrative determinations under the SCA in the absence of a Board of Service Contract Appeals (see 29 C.F.R. 8.0), affirmed. The Deputy Secretary adopted the ALJ's findings and conclusions, which he held were well supported by the evidence, based in large measure on credibility determinations for which the ALJ was uniquely qualified, and in accordance with the law. Pet. App. D6, D13, D24. The Deputy Secretary agreed that no "unusual circumstances" existed to warrant relief from debarment because "the violations were the result of (petitioners') culpable neglect to ascertain whether (their) practices were in violation of the Act and (their) culpable disregard of whether they were in violation." Id. at D28. In rejecting petitioners' claim that the vacation pay and job classification issues represented "bona fide legal issues of doubtful certainty," the Deputy Secretary explained that the classification obligation had been "repeatedly confirmed" to them by the Labor Department and the contracting agency (id. at D29), and that the vacation pay issue turned on a credibility determination, which the ALJ had resolved against petitioners (id. at D31-D32). The Deputy Secretary also found "evidence of culpable failure to maintain proper records, in particular for overtime pay purposes" (id. at D32), "fail(ure) to cooperate in the investigation" (id. at D33), and "no evidence of (petitioners') assurances of future compliance." Ibid. Petitioners then sought review in the district court. They contended that the ALJ's decision was based on insufficient evidence and on improper interpretations of the applicable regulations. Pet. App. C2-C3. The district court granted the Secretary's motion for summary judgment, holding that the ALJ's factual findings were supported by the evidence in the record, and that the legal conclusions were based on reasonable interpretations of the applicable regulations. Id. at C7-C12. The court also rejected petitioners' arguments concerning the existence of unusual circumstances to warrant relief from the debarment sanction (id. at C13); it determined that "there was more than a preponderance of the evidence to support (the ALJ's and Deputy Secretary's) findings that (petitioners') violations were of an aggravated nature, and did not constitute a good faith attempt to comply with the Act." App., infra, 5a. 7. In an unpublished per curiam decision, the court of appeals affirmed. It relied on the reasoning set out by the district court in its decisions denying a preliminary injunction and granting the Secretary's motion for summary judgment. Pet. App. A1-A3. ARGUMENT The decision of the court of appeals is correct and does not conflict with any decision of this Court or of any other court of appeals. Accordingly, no further review is warranted. 1. Petitioners' principal contention (Pet. 12-13, 17) is that the court of appeals' decision conflicts with McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988), but they do not elaborate the basis for their claim. The argument appears to be that Richland Shoe requires knowledge of a statutory violation or reckless disregard of a statutory prohibition to establish a "willful" violation; here, petitioners submit (Pet. 12), there was a "good faith effort to comply with the requirements of 29 C.F.R. Section 4.171(b)(2) (1982) (sic) establishing wage rates for employees in job classifications not identified on Respondent's prevailing wage lists," and thus petitioners should not have been placed on the debarment list. /4/ This contention is incorrect in several respects. Most basically, the decision below cannot be in conflict with Richland Shoe because Richland Shoe is wholly inapposite. Richland Shoe construed the Fiar Labor Standards Act, which imposes a two-year statute of limitations for ordinary violations and a three-year statute of limitations for "willful" violations. 29 U.S.C. 255(a); 486 U.S. at 129. The SCA lacks a comparable statute of limitations. /5/ Indeed, the SCA itself draws no distinction between ordinary violations and willful violations, either in the debarment provision or in any other provision. See 41 U.S.C. 352(a), 354(a). In the SCA context, relief from the debarment requirement is intended to be exceptional. While in the FLSA "Congress intended to draw a significant distinction between ordinary violations and willful violations" (486 U.S. at 132), the statutory language of the SCA clearly establishes that debarment is the required sanction in all but "unusual circumstances." 41 U.S.C. 354(a). And the legislative history leaves no doubt about the intended rarity of the exception. Congress amended the Act to include the "because of unusual circumstances" language in 1972. Act of Oct. 9, 1972, Pub. L. No. 92-473, Section 4, 86 Stat. 790. The Senate Report accompanying the amendment states that the debarment provision "imposes upon the Secretary the duty, where he does not otherwise recommend because of unusual circumstances, to forward to the Comptroller General the name of the individual or firm found to have violated the provisions of the act, within 90 days after a hearing examiner has made a finding of violation." S. Rep. No. 1131, 92d Cong., 2d Sess. 4 (1972) (emphasis added). The explicit purpose of the amendment was to circumscribe the Secretary's discretion to afford relief from debarment. See id. at 3-4; H.R. Rep. No. 1251, 92d Cong., 2d Sess. 5 (1972); 29 C.F.R. 4.188(b)(1). In this case, moreover, as the district court and the court of appeals held, the Deputy Director's determination that petitioner had not established "unusual circumstances" was entirely reasonable. The Deputy Director properly found, based on the evidence in the record, that petitioner had engaged in "culpable neglect," "culpable disregard," and "culpable failure to maintain proper records," as well as a failure to "cooperate in the investigation" and to provide "assurances of future compliance." Pet. App. D27-D28, D31-D33. Under the terms of the Secretary's regulation, such a contractor is plainly not entitled to "unusual circumstances" relief from the usual debarment sanction. 2. Petitioners further contend (Pet. 13-15) that the court of appeals' decision conflicts with Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). Petitioners claim that the Secretary failed to introduce into evidence the "service call cards," that these cards were the most accurate record of time worked by employees, and that the Secretary thus failed to carry the burden suggested by Mt. Clemens Pottery. This contention, which relates only to the overtime violations, is also incorrect. The Secretary clearly carried her burden by introducing credible and probative evidence of the time worked by the two air conditioning mechanics (Pet. App. C7, C10-C11, D6-D11, D13-D14; App., infra, 17a, 23a-25a); the decisions below thus are fully consistent with Mt. Clemens Pottery. The records used by petitioners to calculate hours worked, in contrast, were found to be "grossly inaccurate." App., infra, 24a. Although petitioners now attempt to rely on the service call cards, they failed to introduce the cards at the administrative hearing. Id. at 16a. Instead, they "provided no substantiation of the actual hours (they) claimed the employees had worked" (Pet. App. D11), and the ALJ properly determined that the Secretary's evidence was probative and sufficient. /6/ CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General ROBERT P. DAVIS Solicitor of Labor ALLEN H. FELDMAN Associate Solicitor NATHANIEL I. SPILLER Attorney Department of Labor AUGUST 1990 /1/ Petitioner's appendix contains (1) the court of appeals' decision, (2) the district court's order, (3) the district court's decision, (4) the Deputy Secretary of Labor's decision, and (5) pertinent statutes and regulations. We will refer to these decisions with pagination designations of A, B, C, D, and E, respectively. The district court's memorandum decision denying a preliminary injunction and the administrative law judge's decision are reproduced as an appendix to this brief. /2/ The CWHSSA applies to contracts involving the employment of laborers or mechanics for or on behalf of the United States; it sets forty-hour workweek and overtime requirements. 40 U.S.C. 328. /3/ The Wage and Hour Division is the organizational unit within the Department of Labor to which the Secretary has assigned the performance of her functions under the SCA. 29 C.F.R. 4.1a(c). Although the complaint was filed against the single entity of "Joseph C. Kirchdorfer d/b/a Skip Kirchdorfer, Inc.," we will adhere to petitioners' litigation caption and refer to the individual and his company in the plural. /4/ Petitioners mistakenly cite 29 C.F.R. 4.171(b)(2) and refer to "wage rates for employees in job classifications." Pet. 12. In fact, the cited regulation relates to the continuous employment requirement for vacation pay (see App., infra, 12a); the regulation concerning job classification for which petitioners were cited was 29 C.F.R. 4.6(b)(2). Pet. App. C11; App., infra, 26a. /5/ The source of the FLSA statute of limitations is the Portal-to-Portal Act of 1947, 29 U.S.C. 216, 251-262, as amended in 1966 (Pub. L. No. 89-601, Section 601(a) 80 Stat. 844). Richland Shoe, 486 U.S. at 131-132. As noted in Richland Shoe (id. at 131), the statute construed in that case also applies to the Equal Pay Act of 1963 (29 U.S.C. 206(d)(3)), the Davis-Bacon Act (40 U.S.C. 276a to 276a-5), the Walsh-Healey Act (41 U.S.C. 35-45), and the Age Discrimination in Employment Act of 1967 (29 U.S.C. 626(e)(1)). The Portal-to-Portal Act of 1947, however, does not apply to either the SCA or the CWHSSA. See United States v. Deluxe Cleaners & Laundry, Inc., 511 F.2d 926, 928-929 (4th Cir. 1975). Cf. Glenn Elec. Co. v. Donovan, 755 F.2d 1028, 1031-1033 (3d Cir. 1985) (Federal Housing Act). /6/ Petitioners' final contentions are that the ALJ "relied on alleged facts outside of the administrative record" (Pet. 15) and that "certain assessments" against petitioners were based on "a total absence of evidence" (Pet. 16). Petitioners do not indicate the "alleged facts" to which they are referring; to the extent that the reference is to the ALJ's post-hearing acceptance of documentary evidence regarding the vaction pay issue, the district court correctly rejected petitioners' claim of error (Pet. App. C8-C10). Petitioners also do not specify the basis for the claim of "a total absence of evidence"; it is clear that the ALJ's findings were supported by the evidence and that the adjudicative proceeding was conducted in full accord with the law and applicable regulations. See, e.g., Pet. App. C6-C11; id. at D5-D6. APPENDIX