Department of Labor Decision against Tony Alamo

Contract Act of 1965, as amended (MOSCA or the Act), 41 U.S.C. [secs] 351-358 (1988), and the implementing regulations at 29 C.F.R. Parts 4 and 6 (1982). /FN2/ Respondents have filed exceptions to the Decision and Recommended Order (D.and O.) /FN3/[1]

/FN1/ Previously the Deputy Secretary was designated by the Secretary to perform the functions of the Board of Service Contract Appeals pending the appointment of a duly constituted Board. 29 C.F.R. [sec] 8.0 (1990). As there presently is a vacancy in the Office of Deputy Secretary, I have reassumed the Board's functions pursuant to 29 C.F.R [sec] 8.0.

/FN2/ The MOSCA regulations in effect at the time of Respondent's service contracts are those applied here, unless otherwise noted.

/FN3/ Under current rules of practice governing MOSCA proceedings, in cases where violations are found, the ALJ shall issue an order (continued...) [FN3 CONTINUED ON PAGE 2]( ... continued) of debarment, not a recommendation. 29 C.F.R. [sec] 6.19(b)(2) (1990). Thus, the ALJ's decision will be referred to here as a Decision and Order (D. and O.) [END FN3]

[2] issued by the Administrative Law Judge (ALJ) following an evidentiary hearing. The ALJ found that Respondents failed to keep accurate records and to pay wages at least monthly as required under the Act and the regulations, and that no unusual circumstances were present to warrant withholding Respondents' names from the list of ineligible bidders. On review, Respondents apply for relief from the list of ineligible bidders on the ground that no violations of MOSCA occurred in this case.

I. Background

This case arose from a complaint filed by the Regional Solicitor, United States Department of Labor, against Respondents for violations of MOSCA. Respondent Rob Sweat and Associates, now defunct, was a partnership entity of the Tony and Susan Alamo Christian Foundation (the Foundation). Hearing Transcript (T.) 46-47. Respondent Rob Sweat is one of the variable number of partners of Rob Sweat and Associates who had authority to sign and did sign service contracts on behalf of the partnership. T. 58; Complainant's Exhibits (CX) 4, 5. Respondent Alamo Construction Company, which also entered into service contracts, is another name used by the Foundation. T. 35. Respondent Tony Alamo is the President of the Foundation and has exclusive control over the Foundation's principal accounting and financial arm, the Southwest Business Management Company (Southwest). [2]

[3] T. 25, 30-31.

Rob Sweat and Associates, through Rob Sweat individually, entered into two service contracts with the United States Department of Agriculture, Forest Service. Both contracts involved the hand planting of tree seedlings on government property. /FN4/ Alamo Construction Company entered into a service contract with the Forest Service for the mechanical site preparation of 344 acres of land (bulldozing, drum chopping, etc.) in Ouachita National Forest, Oklahoma. /FN5/ Alleged MOSCA violations in performing these three contracts are the bases for the complaints in these consolidated cases.

The complete record in this case has been reviewed. It discloses that individual associates, or members, of the Foundation and Rob Sweat and Associates, who performed the work under the service contracts, shared equally in the contracts' proceeds. T. 66; CX 1, 2, 3. Neither the Foundation nor Rob Sweat and Associates took a share. Accordingly, total funds paid [3]

/FN4/ Specifically, Contract No. 53-447U-0-3467 (the Holly Springs contract) required the planting of 542 acres in Holly Springs National Forest, Mississippi, and was completed by Rob Sweat and Associates at a cost of $29,365.99 to the government. CX 2, 4. Contract No. 52-4146-0-14 (the Talladega contract) required 228 acres to be planted in Talladega National Forest, Alabama, and was completed for $11,295.74. CX 1, 5. The alleged violations of MOSCA by Rob Sweat and Rob Sweat and Associates on these contracts form the basis of the Solicitor's complaint in Case No. SCA-1387.

/FN5/ This contract, No. 52-7A86-9-51, also was known as the Idabell contract and was completed by Foundation associates at a cost of $7,9543.48 to the government. CX 3, 10. The alleged MOSCA violations under this contract are the bases of the Solicitor's complaint in Case No. SCA-1388. [3]

[4] by the government on the contracts ultimately were distributed equally to the employees according to the number of hours each worked. The amount of control service employees had over wages paid under the contracts was unclear because of the distribution scheme. Each service employee apparently had agreed voluntarily that Southwest could handle all personal finances, including incoming monies, disbursements (food, rent, clothing, medical expenses, donations to the Foundation, etc.) and taxes. T. 25, 27, 29-30. Southwest charged each individual $10-$15 per month for these services. T. 32. Much of the evidence in the case consists of hundreds of Southwest business ledgers showing receipts and disbursements for associates on a weekly basis. While disbursements are reflected in dollar amount deductions from each account, the evidence and pleadings indicate that the Foundation provided most, if not all, of the facilities for which deductions were made. Respondents' Exceptions (R. Exp.) at 4; T. 126-127. There was testimony that individual employees had full authority to direct disbursements in their respective accounts, T. 38, but the situation never occurred where an employee chose to close the account and receive its credit balance. T. 31-32.

The payroll journals, CX 1, 2, 3, are the records purportedly reflecting Respondents' compliance with the recordkeeping and monthly payment requirements, 29 C.F.R. [secs] 4.6(g) and 4.165(b). The payroll journals show, inter alia, on a weekly basis, the identity of the service employees, their [4]

[5] hours worked, their purported rate of pay and the total compensation purportedly paid that week. Whether these records comply with the MOSCA recordkeeping requirements, and whether the employees were paid at least monthly are the issues of the case on review before the Secretary.

II. Wages not paid at least monthly. 29 C.F.R. [sec] 4.165(b).

Respondents first contend that the ALJ's finding that wages were not paid to service employees at least monthly pursuant to 29 C.F.R. [sec] 4.165(b) conflicts with unrefuted evidence (consisting chiefly of the payroll journals and business ledgers) showing that pay periods were at the very least monthly.

The ALJ found, on the basis of the hearing testimony, that the hourly rate of pay shown on the records was established after completion of the contract when the total hours and total contract money was known. D. and O. at 2; T. 99-100. It follows that, although the government's progress payments on each contract may have been deposited promptly with Southwest, the crediting to individual accounts could not take place until the final progress payment was made when the total "job monies" and total hours worked by service employees were known. T. 99-100. With respect to the Idabell contract, the ALJ noted that the progress payments were received on November 25, 1979; January 12 and 25 and April 15, 1980. D. and 0. at 3; CX 3. The payroll journal shows that work by service employees on this contract began on September 16, 1979, and was completed on January 12, 1980. CX 3. Since the final progress payment was not made until [5]

[6] April 15, -- the earliest the individual employee accounts could have been credited -- service employees' pay was credited at significantly greater intervals than the one month maximum permitted by the regulations. Although the exact dates of the progress payments on the Talladega and Holly Springs contracts, CX 1, 2, do not appear in the record, the number and amount of those progress payments strongly suggest a payment period similar to the Idabell contract. /FN6/ Thus, I find that the ALJ's finding that service employees were not paid at least monthly is supported by substantial evidence, 29 C.F.R. [sec] 6.10(b), and I reject Respondents' argument that the weight of the evidence is otherwise.

Respondents further allege that their records illustrate that service employees were receiving food, lodging and other "facilities," pursuant to 29 C.F.R. [sec] 4.167, on a daily basis as the equivalent of wages. The records to which Respondents refer, see, e.a., Respondents' Exhibits (RX) 6, 7, reflect weekly deductions in dollar amounts from service employees for such things as food, rent, laundry and medical expenses.

Regulatory section 4.167 of Part 29 permits an employer a credit against wages for the "reasonable cost" or "fair value" (as determined by the Administrator of the Wage and Hour Division, Department of Labor) of furnishing service employees [6]

/FN6/ The Talladega payroll journal, CX 1, indicates four progress payments: $2,741.22; $2,977.54; $2,126.82; and $3,450.16. The Holly Springs payroll journal, CX 2, shows six progress payments: $2,857.26; $3,850.15; $8,188.35; $6,496.95; $5,493.85; and $2,479.43. [6]

[7] with board, lodging or other "facilities." The determination is made in accordance with the regulations at 29 C.F.R. Part 531, promulgated pursuant to the Fair Labor Standards Act of 1938, as amended (FLSA), 29 U.S.C. [sec] 203(m) (1988). /FN7/ These regulations provide substantive criteria and specific procedures for a determination by the Wage and Hour Administrator of reasonable cost or fair value, including notice in the Federal Register giving interested persons an opportunity to participate. 29 C.F.R. [sec] 531.4 (1990). /FN8/ Respondents do not claim, nor does the record show, that they ever petitioned the Administrator for a determination of reasonable cost or fair value, nor has the Administrator upon his own motion made such a determination. See 29 C.F.R. [sec] 531.4(a).

It is well established that it is the employer's burden to prove the reasonable cost of facilities provided to workers. See Donovan v. New Floridian Hotel, Inc., 676 F.2d 468, 474-475 (11th Cir. 1982); accord Donovan v. Williams Chemical Co., Inc., 682 F.2d 185, 190 (8th Cir. 1982). Accordingly, an employer must produce records establishing the actual cost to the employer of the facilities provided, which cost may not include any profit to the employer or to any affiliated person. 29 C.F.R. [sec] 531.3(a) and (b). [7]

/FN7/ MOSCA and FLSA are mutually supplemented statutes. See Masters v. Maryland Management Co., 493 F.2d 1329, 1332 (4th Cir. 1974).

/FN8/ The Part 531 regulations in effect at the time of the hearing in this case are identical to those presently codified. [7]

[8] Respondents' records here show weekly deductions for various "facilities" purportedly provided to service employees. /FN9/ The record contains no substantiation, however, of Respondents' actual cost for the amounts deducted. Where, as here, the employer has not requested a Part 531 determination of "reasonable cost" of "facilities," and the Administrator has made no determination, and where the record contains only employer's unsubstantiated cost estimates without any attempt to identify or segregate permissible credits from impermissible ones, employer's burden has not been satisfied. New Floridian Hotel, Inc., 676 F.2d at 475; See also Brennan v. Veterans Cleaning Service. Inc., 482 F.2d 1362, 1370 (5th Cir. 1973). /FN10/ Respondents' "facilities" argument fails.

Respondents further contend that, because under the Holly Springs contract, CX 5, the government was required to make progress payments at least monthly, if, as the Idabell payroll journal shows, CX 3, progress payments were made at greater than one-month intervals, then the MOSCA pay intervals violation was caused by the government. Respondents' obligation to pay its employees timely is not, however, contingent on the timing of the [8]

/FN9/ Respondents do not contend on review that these deductions represented weekly cash advances to the employees. Rather, Respondents contend that actual "facilities" in the form of food, clothing, lodging, etc. were being provided on a daily basis, for which a deduction in dollar amounts appears on the ledger. R. Exp. at 4; T. 126-127.

/FN10/ Even if "facilities" were provided daily, there is no showing that the balance of payments constituting wages were paid at least monthly as required under 29 C.F.R [sec] 4.165(b). [8]

[9] government's payments to Respondent. 29 C.F.R. [sec] 4.165. Moreover, the service employees' accounts were not credited when the government progress payments were made, but at the end of the contract when the final progress payment was made. T. 99-100. This argument, too, must be must be rejected.

III. Failure to maintain required records. 29 C.F.R. [sec] 4.6(g).

Respondents next contend that the ALJ's finding that accurate payroll records pursuant to 29 C.F.R. [sec] 4.6(g) were not maintained is not supported in the record. The ALJ noted that the payroll journals, business ledgers and other documents in evidence /FN11/ reflected weekly payment of wages to service employees, but he determined that these records were made or changed after such purported dates in an effort to show compliance with the law. D. and O. at 3. Upon thorough review of the record, I conclude that the ALJ's finding that Respondents violated the recordkeeping provisions of the regulations is sound.

The regulation at 29 C.F.R. [sec] 4.6(g) (1982), in effect at the time of the hearing, requires that contractors make records, inter alia, of each employee's rate of monetary wages and total weekly compensation. These records must be kept for each workweek during the performance of the contract. 29 C.F.R. [sec] 4.185. There was substantial, probative evidence here that the hourly rate of pay for each employee was not determined until the [9]

/FN11/ CX 1, 2, 6, and 7; RX 5 and 9. ALJ D. and O. at 3. [9]

[10] end of the contract when all employees' total hours worked were known and the total government payment was known. T. 62-63, 66, 99-100, 102. Therefore, employer's records purporting to reflect, on a weekly basis, rates of compensation and total compensation paid were not genuine. The ALJ's conclusion that these records were belatedly and intentionally altered or reconstructed to show compliance with the regulations is compelling and supported in the record. T. 68.

Respondents assert, however, that the accuracy of the "amounts" reflected in the records was conceded by the government at trial, T. 121-122, 124, and this accuracy was further supported by unrefuted testimony. I find this argument unpersuasive. The government's position was consistently that the "accuracy" of the records, meaning really, whether the records were being properly maintained as required by the regulations, depended on when and how the entries were made. T. 122. That the final dollar amounts belatedly entered may have been "correct" in value does not alter the fact that the records were not being properly maintained. The regulatory language of Section 4.6(g) does not mention "accuracy" but simply defines what kinds of records are required to be made and maintained by service contract contractors. These requirements must logically be interpreted to mean that the records must be maintained contemporaneously with wage payments. See, e.g, Dole v. Bishop, 740 F. Supp. 1221, 1227 (S.D. Miss. 1990). If not, records made even years after employees performed work and were compensated [10]

[11] would satisfy the recordkeeping requirements. I refuse to interpret the regulations to permit such an illogical result.

For all of the foregoing reasons I affirm the ALJ's determination that Respondents violated the Act. Respondents do not contend on review that they should be relieved from the list of ineligible bidders because of the presence of unusual circumstances. See 29 C.F.R. [sec] 6.12. Moreover, I agree with the ALJ's finding that no unusual circumstances are present in this case for the reasons he gave, including the finding of culpable conduct by Respondents to cover up noncompliance with the Act. D. and O. at 6. Accordingly, my Final Decision and Order shall be forwarded to the Comptroller General so that he may place Respondents' names on the list of ineligible bidders pursuant to Section 5(a) of MOSCA. 41 U.S.C. [sec] 354(a) /FN12/

SO ORDERED.

[Lynn Martin]

Secretary of Labor

Washington, D.C.[11]

/FN12/ In their reply brief Respondents assert that, as of January 22, 1985, their names have appeared on the list of ineligible bidders and request that they be removed. Taking official notice of the List of Debarred, Suspended and Ineligible Contractors (GSA) for the years 1983 to 1985, inclusive, and the List of Persons or Firms Currently Debarred (GAO, Office of General Counsel) for the same years, I note that none of Respondents' names has appeared on the list. I must conclude, therefore, that Respondents' names have not appeared on the debarred bidders list and, specifically, have never so appeared by reason of the present action. [11]