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