U.S. Department of Labor

U.S. Department of Labor

Administrative Review Board

200 Const1tution Avenue, N.W.

Washington, D.C. 20210

In the Matter of:

ARM'S-LENGTH PROCEEDINGS

REGARDING COLLECTIVE

BARGAINING BETWEEN GINO

MORENA ENTERPRISES, LLC

AND FORT BLISS BARBERS

ASSOCIATION FOR WORK

PERFORMED AT FORT BLISS,

TEXAS AND MCGREGOR

RANGE, NEW MEXICO UNDER A

CONTRACT WITH THE ARMY

AND AIR FORCE EXCHANGE

SERVJCE

ARB CASE NOS. 2017-0010

2017-0011

ALJ CASE SO. 2017-CBV-001

DATE:

FEB I 9 1010

Appearances:

For Petitioner Army and Air Force Exchange Service:

Ranti Okunoren, Esq.; Army and Air Force Exchange Service; Dallas,

Texas

For Petitioner Sheffield Barbers, LLC:

Kevin ,J. Dolley, Esq.; David Nowakowski, Esq.; Law Offices of Kevin

J. Dolley, LLC; St. Louis, Missouri

For Statement of Administrator, Wage and Hour Division:

M. Patricia Smith, Esq., Solicitor of Labor; Jennifer S. Brand, Esq.,

Associate Solicitor of Labor; Williain C. Lesser, Esq., Deputy

Associate Solicitor of Labor; Jonathan T. Rees, Esq., Counsel for

Contract Labor Standards; Mary E. McDonald, Esq.; United States

Department of Labor; Washington, District of Columbia

For Respondent, Gino Morena Enterprises, LLC:

David A. Grant, Esq.; Marc A. Antonetti, Esq.; Louis J. Cannon, Esq.;

Baker & Hostetler LLP; Washington, District of Columbia

2

Before: Thomas H. Burrell, Acting Chief Administrative Appeals Judge and

James A. Haynes and Heather C. Leslie, Administrative Appeals Judges

FINAL DECISION AND ORDER

This case ari»e8 under Section 4(c) of the McNamara.O'Hara Service Contract

Act of 1965. 41 U.S.C. § 6701, et seq. (2011) ("SCA"), and iLs implementing

regulations at 29 C.F.R. Parts 4, 6, and 8 (2016). The applicant. the Army and Air

Force Exchange Service (AAFES), petitioned the Administrator. Wage and Hour

Division of the Department of Labor for an inqui1y into negotiations underlying a

collective bargaining agreement (CBA) between Gino ::Vforena Enterprises, LLC, and

Fort Bhss Barbers AH~ociation. In a final ruling, the Administrator granted the

r<Jquest and issued an Order of Reference for an al'm's-length hearing to the Chief

Administrative Law Judge (ALJ) pursuant to the procedures set out in 29 C.F.R §§

4.l 1(c), (d). The ALJ assigned to the case determined that the request for a hearing

was untimely filed and that the Administrator failed to discuss or rule upon the

issue of extraordinary circumstances. Petitioners .W'ES and Sheffield Barbers

each filed a petition for review with the Administrative Review Board (ARB or

Board). We consolidate the petitions and affirm the },.LJ.

BACKCROUKJJ 1

A. April 16, 2015 Collective Bargaining Agreement

Gino .Morena Enterprises (GME) and the Fort Bliss Barbers Association

(Association) entered into a CHA in 2011, which was incorporated into a January

27, 2012 wage determination. On April 16, 2015, GME and the Association entered

into a new CEA. AAFES claims that it received the new CBA from GME on April

21, 2015, and submitted it to the Dupartment of Labor that same day.

On April 30, 2015, AAFES issued a bid Holicitation :-Jo. PS 14-004-Hi-208 for

the contract to manage barber services at Fort Bliss in Texas and McGregor Range

in New Mexico. AA.FJ<:S attached to the bid solicitation the April 16, 2015 CEA with

a notice that this was in lieu of a wage determination. Proposals on the contract

were due on May 21, 2015. 2 AAFES's contracting officer awarded contract BLS #

15-208 to GME on June 6, 2015.

We take these undisputed facts from the partie.s" claims and the Alad's Decision and

Order. We maku no findrngs of fact.

1

'

The AL.I rndicalc~ that May 21 was the date bids opened. D. & 0. at 2. AAFES

states that May 21 rn the date proposals were due. I\.,\FisS .PF.Ii at 3. \Ve adopt .\AFES'~

~haraclerizalion ofthe date.

3

On June 12, 2015, Sheffield Barbers, an unsuccessful bidder, submitted a

protest letter to AAFES. Claiming that the CBA does not comply with the SCA,

Sheffield asserted that the Association was orchestrated and directed by Morena

and that the "fictitious CHA" was drafted for Morena's benefit. D. & 0. at 2.

Sheffield's protest letter also claims that GME's tip credits procedure does not

comport with the SCA or the CBA. AAFES's Request for a Hearing, Att. Six. AAFES

invC=stigated and submitted an arm·s-lcngth hearing request on July 21, 2015, to the

Administrator per 29 C.F.R. § 4.1 l(b). On September 20, 2016, the Administrator

issued an Order of Reference to the Chief Administrative Law Judge for a hearing

to determine whether there were arm's-length no.Jgotiations. 29 C ..F.R. §§ 4.1 l(c), (d).

B. The ALJ's Decision

GME argued before the ALJ that AAFES's July 21, 2015 request for a

hearing was untimely becau;,e it was not issued prior to ten days before the June 6,

2015 contract award and no "extraordinary circumstance8'' exist under 29 C ..F.R. §

4. l l(b)(2) to justify a late filing. Regulation 29 C.F.R. § 4.ll(b)(2) provides the

following:

(2) Pursuant to section 4(b) of the Act, requests for a

hearing shall not be considered unless received as

specified below except in those situations where the

Administrator determines that extraordinary

circumstances exist:

(i) For advertised contracts, prior to ten days before the

award of the contract;

(ii) For negotiated contracts and for contracts with

provisions extending the term by option, prior to the

commencement date of the contract or the follow-up

option period, as the case may be.

In response, the ALJ issued a Show Cause Order asking why the matter

should not be dismissed as untimely. AAFES responded, conceding that the request

was submitted after the contract award and is untimely. AAFJ:<;S argued that the

Administrator implicitly excused the untimelmess by issuing the Order of Rcforence

and that the Al.J should have deferred tu the Administrator's discretion to do so.

AAFRS claimed that it was impossible for it to submit a timely request because it

did not have the necessary information by § 4.1 l(b)(2)(i)'s ten-day cut-off date.

AAFES PFH. at 5.

The Administrator also reHpOnded to the Show Cause Order, agreeing with

AAFES and arguing that "extraordinary circumstances" justify the untimely filing.

Prior to May 27, 2015, the last day to file a timely request, AAFES did not have

4

evidence of Morena's alleged control of the Association, which it first learned of on

June 12, 2015, and investigated after that time. Because AATES did not have the

information, the Administrator argues that a showing of "extraordinary

circumstances" was met.

On November 23, 2016, the ALJ found that the request for a hearing was

untimely. The ALJ noted that the Administrator's Order of Reference did not

discuss timeliness and did not mention "extraordinary circumstances." D. & 0. at 2.

The ALJ observed that th"' law governing arm's-length requests specifies that such

requests shall be made "prior to ten days before the award of the contract" unless

there arc "extraordinary circumstances" excusing untimely filings. 29 C.F.R. §

4.1 l(b)(2). The AL.I concluded that because the Order of Reference contained no

analysis on timeliness or exceptional circumstances. the Administrator did not

make this determination. D. & 0. at 2-3, The ALJ found, in the alternative, that

Sheffield had the necessary information before the ten-day cut off, citing U.S. Dep 't

of State, ARB No. 98-114 (ARB Feb. 16. 2000). Both AAFES and Sheffield appealed

the ALJ's decision to the ARR.

JURISDICTION AND STA.."!DARD OF REVIEW

Pursuant to 29 C.F.R. § 8.l(b), the Board has jurisdiction to hear and decide

"appeals concerning questions of law and fact from final decisions of the

Administrator of the Wage and Hour Division or authorized representative, and

from decisions of Administrative Law Judges" rendered under the SCA and its

implementing regulations. Secretary's Order No. 01·2019 (Delegation of Authority

and Assignment of Responsibility to the Administrative Review Board), 84 Fed.

&g. 13,072 (Apr, 3, 2019). The Board's review of the ALJ's final ruling is in the

nature of an appellate proceeding. 29 C.F.R. § 8.1 (d). In review of final

Administrator determinations, the Board is authorized to modify or set aside the

decision under review. 29 C.F.R § 8.6(e). The Board reviews questions oflaw de

novo. 29 C.F.R. § 8.l(c); United Gov't Sec. Officers of Am., Loe. 114, ARB Nos. 02012, •020, at 4-5 (ARB Sept. 29, 2003). The Board nonetheless dt,fers to the

Administrator's interpretation of the SCA when it is reasonable and con~istent with

the law. V-Tech Servs., Inc., ARB No. 05-100 (ARB Sept. 28, 2007).

DISCUSSION

A.

Overview ofthe SCA's Wage-Determination and Arm's-LcngthHearing Procedures

The SCA generally requires that every contract in excess of $2,500 entered

into by the federal government or the District of Columbia, the principal purpose cf

which is to provide services through the use of Hervice employees in the United

States, must contain a provision that specificrn the minimum hourly wage and fringe

5

benefit rates that arc payable to the various classifications of service employees

working on such a contract. 41 U.S.C. §§ 6702(a), 6703. These wage and fringe

benefit rates arc predetermined by the Wage and Hour Division acting under the

authority of the Administrator, who has been designated by the Secretary of Labor

to administer the Act.

The Administrator specifies the minimum monetary wages and fringe

benefits to he paid under the Act in two types of determinations. The first type is set

by the minimum monetary and fringe benefits determined to be prevailing m the

locality. 29 C.F.R. § 4.3, subpart B. A second type of wage determination is issued at

locations when there is a CBA between the service employees and an employer

working on a federal service contract. In this second type of determination. Section

4(c) of the SCA requires that a successo1· contractor, subject to the SCA and

providing substantially the same services, pay at least the wages and fringe benefits

the employees would have received under the predecessor's contract, including

accrued wages and fringe benefits and prospective increasos provided for in a CBA.

Section 4(c) provides the following:

(c) Preservation of wages and benefits due under

predecessor contracts.-(!) In general.--Under a contract which succeeds a

contract subject to this chapter, and under which

substantially the same services are furnished, a

contractor or subcontractor may not pay a service

employee less than the wages and fringe benefits the

service employee would have received under the

predecessor contract, 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.

(2) Exception.--This subsection does not apply if the

Secretary finds after a hearing in accordance with

regulations adopted by the Secretary that wages and

fringe benefits under the predecessor contract are

substantially at variance with wages and fringe benefits

prevailing in the same locality for services of a similar

eharacter.

41 U.S.C. § 6707(c).

Section 4(c) restricts the applicability of a predecessor's CBA in two cases.

First, collcctivdy bargained wage rates and fringe benefits must have been reached

·'as a result of arm's-length negotiations." Id. A party may challenge the bona {ides

of a collective bargaining agreement by requesting an "arm's-length hearing." 29

6

C.F.R. § 4.11 (procedure for arm's-length determinations), The purpose of an arm'slength hearing is to determine whether a CBA containing negotiated wage and

fringe benefit rates was reached by willing signatories, avoiding "collusive

arrangements intended to take advantage of the SCA scheme," 48 !<'ed. J{eg, 49,736,

49,740 (Oct. '27, 1983).

Second, the SCA's Section 4(c) proviso states that wages and fringe benefits

contained in a CAA shall not apply to a successor service contract "if the Secretary

finds after a hearing in accordance with regulations adopted by the Secretary that

wages and fringe benefits under the predecessor contract arc substantially at

variance with wages and fringe benefits prevailing in the same locality for services

of a similar charader." 41 U.S.C. § 6707(c); 29 C.F.R. § 4.10 (procedure for

substantial- variance determinations).

The regulations governing both requests for arm's-length and substantialvariance hearings include explicit time limitations for filing a hearing request. The

arm's-length-hearing provision at 29 C.F.R. § 4.ll(b)(2) states, in pertinent part:

(2) ... [R]equests for a hearing shall not be considered

unless rec<oived as specified below, except in those

situations where the Administrator determines that

extraordinary circumstances exist:

(i) For advertised contracts, prior to ten days before the

award of the contract:

(ii) For negotiated contracts and for contracts with

provisions extending the initial term by option, prior to

the commtlncement date of the contract or the follow-up

option period, as the case may be.

The time limitation provision for requesting a substantial-variance hearing is the

same. See 29 C.F.R. § 4.10(b)(3). For either a substantial-variance or arm's-lengthhearing requedt to be considered timely in connection with an advertised contract,

such as the contract at issue in this case. the request must be made ten days before

the award of the contract. The Administrator. however, may approve an untimely

heanng request when the Administrator "determines that extraordinary

circumstances exist" to justify a late filing. 29 C.F.R § 4. ll(b)(2); § 4.10(b)(3); [.T.S.

Dep't of State, ARB No. 98-114, at 13. Neither the statut"' nor the regulations define

"extraordinary circumstances.'' The ARB has held that the term '•extraordinary

circumstances" relates specifically to whether an applicant had adequate

information within sufficient time to request an arm's-length hearing. U.S. Dep't of

State, ARB .t\'o. 98-114, at 9, 12-14; V-Tech Servs., Inc., ARB No. 05-100.

7

B.

The Admini.:trator's Order of Reference was Untimely and the

Administrator Failed to Discuss "Extraordinary Circumstances"

Under 28 C.F.R. § 4.ll(b)(2), the last day to timely file a request for an arm'slength hearing was May 27, 2015, which was ten days before the contract award.

AAFES filed its request on July 21, 2015, subsequent to Sheffield's June 12, 2015

protest and after conducting further investigation. It is undisputed that AAFES's

request was untimely. The Administrator issued its Order of Reference on

September 20, 2016. The ALJ noted that the Administrator's Order of Reference did

not discuss AAFES's untimdy request and did not analyze or mention

"extraordinary circumstances."~ Dismissing the case, the ALJ concluded that

because the Administrator's Order of Reference contained no analysis on timeliness

or exceptional circumstances, the Administrator did not make a determination on

extraordinary circumstances to justify a late filing. D. & 0. at 2-3.

1. The ALJ's Authority to Review Timeliness and Extraordinary Circumstances

As a preliminary to our discussion of the Administrator's Order of Reference

and the ALJ's decision and order, we address Sheffield and AA.FES's argument that

the ALJ was not permitted to review the timeliness question because 29 C.F.R. §

4.1 l(c) provides for the designation of "an Administrntive Law Judge, who shall

conduct such hearings as may be necessary to render a decision solely on the issue

of arm's-length negotiations." Sheffield and AAFES argue that the regulations

permit the ALJ to consider solely whether arm's-length negotiations took place and

no other matter including the timeliness of the Administrator's Order of Reference.

We conclude that this argument is misguided as the language in question

merely precludes the ALI from considering other SCA issues. As noted above, the

timing language is included in both the substantial-variance and the arm's-lengthhearing provisions. The language "solely on the issue" is more fully explained in the

1983 Final Rule for 29 C ..F.R. Part 4, 48 Fed. Reg. 49,736 (Oct. 27, 1983), concerning

the scope of substantial-variance hearings, 29 C.F.R. § 4.10.

(c) Referral to the Chief Administrative Law Judge. When

the Administrator determines from the information

available or submitted with a request for a hearing that

there may be a substantial variance, the Administrator on

his/her own motion or on application of any interested

person will by order refer the issue to the Chiof

D. & 0. at 2. AAFES did not raise timelines~ or cxt.raordmary circumstances in its

nntimely July 21, 2015 request for hearing. A<\J<'J.;S Reply Br. Ex. 2 (AAFES's Request for a

Hearing). GME raised the timeliness issue on October 17, 2016, when it first became aware

of MFES's request and had the opportunity to do so. GME Opposition Br. at 14.

3

8

Administrative Law Judge, for designation of an

Administrative Law ,Judge who shall conduct such a fact

finding hearing as may be necessary to render a decision

solely on the issue of whether the wages and/or fringe

benefits contained in the collective bargaining agreement

which was the basis for the wage determination at issue

are substantially at variance with those which prnvail for

services of a character similar in the locality. However, in

situations where there is also a question as to whether

the collective bargaining agreement was reached as a

result of"arm's-length negotiations" (see§ 4.11), the

referral shall include both issues for resolution in one

proceeding. No authority is delegated under this section

to hear and/or decide any other issues pertaining to the

Service Contract Act.

48 Fed. Reg. 49.771. This paragraph is an excerpt from the ,;ubstantial-variance

procedure, but the language "solely on the issue" is also contained in the arm'slength- hearing provision, § 4.11, of the same regulation. Id. at 49,771 (designation

of an "Administrative Law Judge, who shall conduct such hearings as may be

necessary to render a decision solely on the issue of arm's-length negotiations").

This language survives in the current SCA regulations.

Considered in context, the language "solely on the issue" for substantialvariance and arm's-length-hearing requests was intended to restrict the ALJ from

adjudicating other SCA matters unrelated to the Order of Reference. Accordingly,

the SCA regulations providing for arm's-length hearings do not prohibit the ALJ

from considering timeliness and extraordinary circumstances and disposing of the

case on these grounds. The express timing requirement is part and parcel of the

hearing request and becomes a matter of record before the ALJ and the ARB on

review. In re Systs. Engineering Assocs. Corp. (SEACOR), 87-SCA-OM-3 (Sec'y July

26, 1988) (adjudicating timeliness of requests for hearing); U.S. Dep't of State, ARB

No. 98-114 (same).

2. The Need for Explicit Findings in the Administrator's Order of Reference

The Administrator, AAFES, and Sheffield argue on appeal that the

Administrator implicitly determined that "extraordinary circumstances" were

demonstrated when it submitted the Order of Reference. For Sheffield, the

Administrator's omission of language deciding and explaining "extraordinary

circumstances" was a clerical error. The Administrator filed a statement with the

ARB indicating that it was not required to state its holdings on timeliness or give

reasons supporting "extraordinary circumstances."

Wa find that the Administrator's lnrk of written explanation delineating its

reasoning on timing and extraordinary circumstances raises concerns, The

regulations concerning "extraordinary circumstances" provide that a request for s

hearing "shall not be considered" unless received prior to ten days bcfora the

contract awsrd or extraordinary circumstances justify a delay. 29 C.F.R. §

4.11 (b)(2). The acceptance of an untimely filing is a legal determination that is

subject to legal process nnd nppeal like any other determination of the

Administrator. Under the arm's-length procedure, parties mny nppeal the

Administrator's decision to an AI~J. The ALJ's hearing and determinntion follow the

Administrntor's initial determination in the nature of an appellate process. 29

C.F.R. §§ 4. ll(c), 6.51. If the Administrator's decision is uppealed to the A.LJ,

regulation 29 C.F.R. Part 6 provides that that the Administrutor submit to the

Chief Administrative J,aw J udgc attachments including the material submitted by

the applicant, other material the Administrator considers relevant, and a copy of

the Administrator's findings concerning the party's request for an arm's-length

hearing. § 6.51. Section 6.56, provides that "[t]he decision of the Administrative

Law Judge shall be based upon consideration of the v, hole record, and shall be in

accordance with the regulations and rulings contained in part 4 and other pertinent

parts of this title." The Administrative Procedure Act require8 that the

administrative record show tho ruling on each finding, conclusion, or exception

presented. All decisions are part of the record and shall include a statement of

findings and reasons on all material JSsues of fact. fi U.S.C. § 557(c) (2016). The

AL,J'a decision in turn is apponlablo to the ARB. We find nothing excluding

timeliness rulings from the appealable content concerning arm's-length hearings.

The Administrator ask;, in the nltornative that if the ARB determines that

findings of faci on "extraordinary circumstances" arc necessary, that we remand the

Order of Reference back to the AdminiHtrntor so that he may reissue the Order of

Reference with full support of its reasons, which will give the ARB a basis to review.

We decline to do so. Tho regulation provides that ''requesia for a hearing shall not

be considered unless received as specified below, except in those situations where

the Administrator determines that extraordinary circumstances exist." 29 C.F.H.. §

4.ll(b)(2). Stated another way, the Administrator had an affirmative obligation to

show extraordinary circumstances when hearing requests are untimely filed. This

finding of extraordinary circumstances would then enable the Office of

Administrative Law ,Judges to move fon¥ard with a hearing and failure to do so

proves fatal to the Administrator's case. Remand is not appropriate in this

circumstance.

10

CONCLUSION

The ALJ"s decision and order is AFFIRl\IED irnd the Petitioners' petitions

for review are DENIED.

SO ORDERED.