Updated February 15, 2021

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SCA Benchbook

Updated February 15, 2021

McNamera-O’Hara Service Contract Act

•

Enacted 1965, codified at 41 U.S.C. §§ 6701-6707 (it was formerly at 41 U.S.C. §§ 351-358)

29 C.F.R. Parts 4, 6

Contract Work Hours and Safety Standards Act

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Enacted 1962, codified at 40 U.S.C. § 3701 et seq.

29 C.F.R. Parts 5, 6

Table of Contents

II.

III.

IV.

Generally

A. Purpose

B. Proceedings exempt from automatic stay provisions of the bankruptcy code

Jurisdiction

A. Motion for reconsideration

1. By the ARB

2. By the ALJ

B. Untimely challenge

1. Administrator has discretion to waive procedural requirements in the interest of

justice

2. Appeal dismissed as untimely

3. Appeal dismissed after not having received a petition for review or other

communication from the Administrator for several months

C. Premature challenge

D. Petition for review not filed prior to award, exercise of option, or extension of contract

E. Unavailability of ALJ and reassignment for decision

F. Portal-to-Portal Act inapplicable

G. District court jurisdiction – no authority to remand further proceedings absent holding

that ALJ’s findings were not supported by a preponderance of the evidence

H. Tennessee Valley Authority covered

I. Department of Homeland Security, Federal Protective Services covered

J. Jurisdiction over a contract to operate a ship outside US territorial waters

K. ARB discretion to decide whether to review an expired contract where no practical relief

is available

Standard of review

Evidence

A. Burden of proof

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VI.

VII.

1. Preponderance of the evidence

2. Reconstruction of payroll records

B. Limitations on evidence held to be improper

1. Exclusion of evidence on remand

2. Limitation on cross-examination too arbitrary

C. Testimony regarding documentation not in the record

D. ALJ assessment of statement of work versus job skills required; where collectivelybargained wage rates are not available for locality

E. Sequestration of funds for payment of SCA-required health and welfare benefits as

evidence of SCA violations

F. Due process – evidentiary hearing

G. Reliance on advice from contracting agency officials not a defense against liability for

SCA back wages

H. Statements of former employees

Discovery

A. Interrogatories

B. Protective order

1. Informant’s privilege

2. Deliberative process privilege

3. Work product privilege

C. Compelling electronic discovery

Exempt employees

A. No coverage for certain types of employees

1. Service employee defined, generally

2. Certain contracts for public buildings: public tariffs; Postal Service

3. Executive, administrative, or professional exemptions at 41 U.S.C. § 356

B. Application of exemptions

1. Application proper

a. Courier service-published tariff rates in effect

b. Airline pilots

2. Application improper

a. Employer primarily performed janitorial duties

b. Airline pilots

c. Ownership interest in company irrelevant

d. Contracts between federal agencies and contract agencies

C. Contract between private individual and Native American Tribe

Party responsible

A. Party responsible

1. Generally

2. Examples

a. Manager jointly and individually liable

b. Joint venture company liable

c. Individual in “de facto control” of daily operations liable

d. Employer and its officers liable for acts of subordinate

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VIII.

IX.

e. Owner

B. Successor contractor

1. Determination of status as successor liable for predecessor’s contract

a. Generally

b. Liability not affected by successor’s collective bargaining agreements

c. One contract period only

d. Minor change in job duties between predecessor and successor insufficient

to avoid contract obligations

e. More than one predecessor collective bargaining agreement

Compensation

A. Collateral estoppel inapplicable; no affirmative misconduct

B. Suspension of payment of wages or delay in increase in wages held to be improper;

waiting for DOL approval or reimbursement

C. Where successor contract requires preliminary training

D. Fringe benefits

1. Not contingent on full-time status of employee

a. Health and welfare benefits

b. Holiday pay

2. Cross-crediting is permitted

3. Proper records must be maintained

4. Offset wages to credit against fringe benefits

E. Credit for tips

F. Right to overtime pay cannot be waived by employee or bargained away

G. Prevailing wage determination; challenge to

1. No collective bargaining agreement

2. Misclassification of employees

H. Standard for determining whether hours worked are compensable – “principal activity”

test

1. “Bobtail” time

2. Time spent waiting for mail is compensable

3. Rest periods compensable; meal breaks not compensable

I. Overpayments to employees cannot be used to offset back wages or fringe benefits

owed

J. Substantial variance proceedings can be used both to raise or lower rates

K. Substantial variance request – burden of proof

Arm’s-length hearing – 29 C.F.R. § 4.11(c) and (d)

A. Timeliness

Relief

A. Debarment

1. Generally

2. Scope and consequences of debarment

3. CWHSSA and SCA violations – different debarment standards

4. Company and individual debarment; “party responsible”

5. Injunction against debarment not permitted

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6. Violation was willful (culpable neglect or culpable disregard); debarment mandatory

a. Established

i. Poor business judgment; failure to pay wages

ii. Employer’s reliance on expired collective bargaining agreement

iii. Widespread and continuing violations

iv. Failure to maintain payroll records

v. No “bona fide legal issue of doubtful certainty”

vi. Failure to honor terms of predecessor’s contract

vii. Failure to cooperate with investigation

viii. Ignoring the government’s advice

ix. Ignorance of the law

x. Failure to comply with consent findings

xi. Mitigating and aggravating factors

1. Mitigating factor of payment of monies found to be owed to

employees does not prevent debarment where there were

other aggravating circumstances

2. Not established

7. “Unusual circumstances” defined

a. Established

i. Deficiencies corrected; debarment would cause employer’s demise

ii. De minimus violations

iii. Immediate corrective action

iv. Reasonable mistake in judgment; no prejudice to employees

v. Unexpected expenses

vi. ALJ’s decision not to interpret respondent’s decision to litigate as

evidence of contumacious noncompliance

b. Not established

i. Unexpected costs required by contract and law

ii. Difference between wage determination and bid solicitation

immaterial

iii. Discrimination against small, minority-owned business untimely

presented and unpersuasive

iv. Proficiency in the English language

v. Multiple investigations; continuing violations; falsification of

records, misleading investigators

vi. Respondent bears burden of proving no prior violation and not

merely that prior violation was technical in nature

vii. Retirement of respondents does not make issue of debarment moot

8. Commencement of term of debarment

9. ALJ without authority to lessen three year debarment term

B. Withholding employee’s wages by contractor improper

C. Unnamed employees who could not be located; award of back wages against contractor

held proper

D. Pre-judgment interest properly awarded

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XI.

E. Liquidated damages not permitted under the CWHSSA

F. No interest assessment against government without its consent

Types of dispositions

A. Default Judgment

1. Missing contractor

2. Uncooperative contractor

3. Unnamed employees who could not be located; award of back wages against

contractor held proper

4. Unrepresented party; special considerations

5. Failure of respondent to timely file answer

B. Consent findings

C. Summary decision

Generally

A. Purpose

In Marlys Bear Medicine v. United States, 47 F. Supp. 1172 (D. Mon. 1999), rev’d on other

grounds, 241 F.3d 1208 (9th Cir. 2001), the court noted that the Service Contract Act was enacted in

1965 for the purpose of providing “wage and safety protection to employees working under service

contracts with the United States government, where the contract amount exceeds $2,500 and the

contract is performed within the United States.” See also Alcatraz Cruises, LLC, ARB No. 07-024 (ARB

Jan. 23, 2009) (federal contractors with service contracts yielded more than $2,500 in gross receipts

must pay prevailing wages and fringe benefits determined by the Secretary of Labor or by a collective

bargaining agreement); Pony Express Courier Corp., 1995-SCA-45 (ALJ Feb. 29, 1996) (“[t]he SCA was

specifically designed to prevent the challenging of government service contract business to those whose

competition is based on paying the lowest wages. An exemption was provided to ‘regulated industries’

subject to published tariff rate because there did not exist the competitive situation faced in service

contract cases generally”).

As noted by the ARB in James A. Machos, ARB No. 98-117 (ARB May 31, 2001), under the SCA

the “Secretary of Labor is responsible for determining the minimum hourly wage and fringe benefit rates

to be paid to various classifications of service workers who may be employed on service procurement

contracts in excess of $2,500 entered into by the United States, the principal purpose of which is to

provide services through the use of the service employees in the United States.”

In Russian and East European Partnerships, Inc., ARB No. 99-025 (ARB Oct. 15, 2001), the Board

noted that the “SCA requires that every service procurement contract in excess of $2,500 entered into

by the United States, the principle purpose of which is to provide services through the use of service

employees in the United States, contain a provision specifying the minimum hourly wage and fringe

benefit rates payable to the various classifications of service employees working on the service

contract.”

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In Administrator, Wage and Hour Div. v. MESA Mail Service, LLC, ARB No. 2017-0071, ALJ No.

2009-SCA-00011 (ARB Sept. 30, 2020), the ARB noted that the Secretary of Labor has broad authority to

enforce the SCA and to investigate alleged violations. Respondents argued that DOL had overreached,

having continued to search for employees who were not paid even after it had been determined that

the employee whose complaint caused the investigation to be initiated had been overpaid. The ARB was

not persuaded and noted the Secretary of Labor’s has broad authority to enforce the SCA and to

investigate alleged violations. Further, the ARB found that the record “demonstrates WHD’s

investigation was entirely driven by complaints from employees, and that there is no evidence that the

WHD investigator was abusive towards the Respondents, was less than courteous or was

confrontational, imposed unreasonable production of documents deadlines, or otherwise ranged

beyond his governmental authority under the SCA.” Id. at 11 (footnote omitted).

B. Proceedings exempt from automatic stay provisions of the Bankruptcy Code

In Smith Real Estate Investments, Inc., 1998-SCA-9 (ALJ Dec. 3, 1998), the ALJ issued default

judgment against the contractor for failure to pay the proper wages and fringe benefits to its

employees. Previously, the ALJ issued an Order to Show Cause stating that, pursuant to 11 U.S.C. §

362(b)(4), the SCA proceeding was exempt from the automatic stay provisions of the Bankruptcy Code

and the contractor was requested to state why default judgment should not be issued for its failure to

comply with the ALJ’s prehearing order. No response was received and, pursuant to the provisions at 29

C.F.R. § 18.6(d)(2)(v), the ALJ issued default judgment against the contractor.

In Johnson v. U.S. Dep’t of Labor, 2005 WL 1970742, Case No. 2:04-CV-0775 (S.D. Ohio Aug. 16,

2005), aff’d, Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.) (aff’g, in relevant part, Rasputin, Inc.,

ARB No. 03-059, 1997-SCA-32 (ARB May 28, 2004)) the district court concluded that an officer of the

company, who was properly deemed a “party responsible” for violations of the Act, could not seek relief

from debarment based on 11 U.S.C. § 525 of the Bankruptcy Code. In essence, the officer maintained

that his debarment was based, in part, on his failure to repay his wage obligations under the Service

Contract Act. In this vein, the officer argued that the debt had been discharged in bankruptcy and,

therefore, it should not have been used to support his debarment. The court disagreed and stated:

In this case, debarment was based upon [the officer’s] failure to demonstrate ‘unusual

circumstances,’ only one of which was the failure to repay the obligation. Even if he had

repaid the obligation, because the ARB found that he engaged in culpable conduct, it

would still have debarred him from further contractual proceedings for a period of three

years. Thus, the decision was not based solely upon Mr. Johnson’s failure to repay an

obligation discharged in bankruptcy, and his claim for discrimination under 11 U.S.C. §

525 cannot stand.

In Rasputin, Inc., ARB No. 03-059, ALJ No. 1997-SCA-32 (ARB May 28, 2004), the ARB found that SCA

proceedings are exempt from the automatic stay provisions at 11 U.S.C. § 362(a) because of the police

powers exemption. The ARB held that the exemption enabled the determination of liability, back wage

violations, and eligibility for debarment. Id. at 2-3. See also Frontline Security Services, LLC, 2018-SCA-

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00013 at 1-2 (ALJ Nov. 14, 2018) (order finding that the “police power” exception to the automatic stay

provision of the Bankruptcy Code, 11 U.S.C. § 362(b)(4), applies).

II.

Jurisdiction

A. Motion for Reconsideration

By the ARB

In Thomas & Sons Building Contractors, Inc., ARB No. 98-164, 1996-DBA-33 (June 8, 2001), a case

arising under the Davis-Bacon Act, the ARB held the following:

The Davis-Bacon Act has no explicit grant of authority to reconsider; therefore, if the

Board has authority to reconsider, it perforce must be based on an ‘inherent authority’

theory. To determine whether the Board has such inherent authority in this debarment

case, we would need to examine the statute underlying the decision to determine

whether reconsideration would adversely affect its enforcement provisions or statutory

purposes. Significantly, even if we were to conclude that we had reconsideration

authority, any party seeking reconsideration by this Board would need to make the

request within a reasonable period of time.

From this, the Board noted its concern in accepting motions for reconsideration in debarment matters

because of the “possible conflicts between the Board’s authority and the responsibilities of other Federal

officials such as the Comptroller General” who maintains the debarment list. The Board stated that the

question of its authority in non-debarment cases “may follow a different analysis from the analysis used

in debarment cases.” Nevertheless, the Board concluded that it did not have to resolve the issue because:

In this case, Thomas and Sons filed their request for reconsideration more than five

months after we issued our October 1999 D&O. No new evidence or changed

circumstances have been cited by Thomas and Sons in support of their request, which

essentially raises the same argument that was considered and squarely rejected by this

Board in our prior decision. Moreover, no good cause has been shown for the delay. We

therefore find that the request is untimely.

Slip op. at 7.

By the ALJ

In TDP, Inc., 1994-SCA-23 (ALJ Apr. 12, 1995) (Order Denying Motion for Reconsideration), the

ALJ noted that, although the implementing regulations did not provide for the filing of a motion for

reconsideration in a SCA or CWHSSA case, it was “well-settled that the administrative agencies have the

power to reconsider their own decisions absent unreasonable passages of time or legislation to the

contrary.” In support of his holding, the ALJ cited to Bookman v. United States, 453 F.2d 1263, 1265 (Cl.

Ct. 1972), Belville Mining Co. v. United States, 763 F. Supp. 1411, 1420 (S.D. Ohio 1991), and Faircrest

Site Opposition Committee v. Levi, 418 F. Supp. 1099, 1105 (N.D. Ohio 1976), and Federal Rule of Civil

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Procedure 59(e). The ALJ nevertheless denied Respondent’s motion for reconsideration as the

contractor merely argued that it did not understand the nature of the proceeding.

In Summit Investigative Service, Inc. v. Herman, 34 F. Supp. 2d 16, 26 (D.D.C. 1998), the district

court noted the following:

[U]nlike some statutes that require as a condition precedent to seeking judicial review

that a party petition for reconsideration before an agency board, see, e.g., 47 U.S.C. §

405(a), the SCA imposes no such obligation. Thus, once the ARB issues its final decision

reviewing the ALJ, the agency process is complete and there exists a final agency action

from which a party may seek judicial review.

ARB DECLINES REVIEW OF ALJ'S DECISION IN SCA CASE WHILE A MOTION FOR

RECONSIDERATION IS PENDING BEFORE THE ALJ

In Material Movement, LLC, ARB No. 16-061, ALJ No. 2015-SCA-1 (ARB May 17, 2016),

the ALJ granted summary decision, and the Respondents requested ARB review. In the request

for review, the Respondents stated that they had requested the ALJ to reconsider his decision,

and that the ALJ had not yet responded to that request. The ARB stated: “Until the ALJ issues an

order in response to the request for reconsideration, the Board does not consider his decision to

be final and subject to review.” The ARB thus denied the petition for review, but stated that the

Respondents could file a new petition within 40 days of the date on which the ALJ issues his

decision on reconsideration.

B. Untimely challenge

Administrator has discretion to waive procedural requirements in the interest of

justice

In Amcor, Inc. v. Brock, 780 F.2d 897 (11th Cir. 1986), the court noted that the ALJ issued a

decision on December 1, 1978 requiring that the contractor repay certain back wages owed and that the

contractor be placed on the debarment list. Exceptions to the decision were due by February 15

pursuant to 29 C.F.R. § 6.10(b), but the Administrator did not receive the government’s exceptions until

February 22. The Administrator waived the regulatory deadline for filing exceptions and concluded that

the ALJ’s decision was erroneous, thus modifying the amount owed by the contractor in back wages.

The contractor objected to state that the Administrator was without jurisdiction to review the ALJ’s

decision given the untimely filing of exceptions. The court held that “the administrator was entitled to

waive the filing deadline in the interest of justice,” which was a procedural requirement, as long as the

opposing party will not suffer prejudice. The court then summarily concluded that no prejudice was

suffered by the contractor in this case.

Appeal dismissed as untimely

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In United Gov’t Security Officers of America, ARB Case No. 98-154 (ARB Oct. 2, 1998), the ARB

dismissed a petition for review, which was filed one year after the contractor’s receipt of the

Administrator’s ruling letter.

Appeal dismissed after not having received a petition for review or other

communication from the Administrator for several months

In Administrator, Wage and Hour Div., USDOL v. Southwest Security Services, Inc., ARB No. 12007, ALJ No. 200-SCA-11 (ARB Feb. 4, 2013) (Order Closing Case), the ARB had granted the Administrator

of the Wage and Hour Division an enlargement of time to file an appeal to the ALJ’s SCA decision.

Several months later, having received no petition for review or other communication from the

Administrator, the ARB closed the matter.

C. Premature challenge

AUTHORITY TO REVIEW SCA WAGE DETERMINATION DECISION WHILE MATTER IS STILL UNDER

INVESTIGATION

In Veteran National Transportation, LLC, ARB No. 17-043 (ARB June 13, 2017), the ARB

dismissed the petitioner’s request for review because it failed to respond to the ARB’s order to show

cause why the ARB should not dismiss the petition for review on the ground that the ARB lacks authority

to consider an appeal in the absence of a final ALJ decision. See 29 C.F.R. § 8.1(b) (2016). The ARB had

noted in the order to show cause that no DOL ALJ had issued a final decision for the ARB to review,

apparently because DOL had not yet completed 29 C.F.R. Part 6 investigatory procedures.

D. Petition for review not filed prior to award, exercise of option, or extension of contract

ARB DECLINES REVIEW OF WHD ADMINISTRATOR’S SCA WAGE DETERMINATION AND CLASSIFICATION

WHERE THE PETITON FOR REVIEW WAS NOT FILED PRIOR TO ANY AWARD, EXERCISE OF OPTION, OR

EXTENSION OF A CONTRACT

In MLB Transportation Inc., ARB No. 2016-0078 (ARB July 23, 2019), the ARB had docketed

Petitioners’ petition for review of a SCA wage determination and classification by the Administrator,

Wage and Hour Division. Upon reviewing the record, however, the ARB set aside its Notice of Appeal

and Order Establishing Briefing Schedule, and denied the Petition for Review because it concluded that

“the Petitioners did not file their Petition for Review prior to any ‘award, exercise of option, or extension

of a contract ’ on any of these service contracts as they must in order for the Board to review the wage

determination they seek to challenge here. 29 C.F.R. § 8.6(d). In sum, the record demonstrates no

exception to the regulatory rule that the ARB will not review a wage determination after award. It

follows that this case should not have been docketed for review.” Slip op. at 4 (footnotes omitted)

(emphasis as in original).

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E. Unavailability of ALJ and reassignment for decision

In Houston Building Services, Inc., ARB No. 95-041A, 1991-SCA-30 (ARB Aug. 21, 1996), the ALJ

who conducted the hearing retired before issuing a decision and the case was transferred to another

ALJ. Since the adjudication of the case was based on legal issues and involved no credibility

determinations, the respondents’ objections in regard to the reassignment were “inconsequential.”

F. Portal-to-Portal Act inapplicable

The six year statute of limitations period contained at 28 U.S.C. § 2415 governs an action by the

United States government against a government contractor for the failure to pay its employees the

minimum wage as required by the terms of its contract. As a result, the two year statute of limitations

period under the Portal-to-Portal Act at 29 U.S.C. § 255 was inapplicable. United States v. Deluxe

Cleaners and Laundry, Inc., 511 F.2d 926 (4th Cir. 1975).

In Administrator, Wage and Hour Div., USDOL v. Northwest Title Agency, Inc., ARB No. 20170055, ALJ No. 2014-SCA-00011 (ARB June 12, 2020) (per curiam), the ARB rejected Respondents’

contention that the complaint was untimely under the two-year statute of limitations in the Portal-toPortal Act – the ARB stating that this statute does not apply to proceedings under the SCA. The ARB

also rejected Respondents’ contention that a state statute of limitations should apply. In a footnote, the

ARB declined to adopt the ALJ’s conclusion that the six-year statute of limitations applicable to contract

actions brought by the United States, 28 U.S.C. § 2415(a), applied. The ARB stated that this statute does

not apply to administrative proceedings.

G. District court jurisdiction – no authority to remand for further proceedings absent

holding that ALJ’s findings were not supported by a preponderance of the evidence

In United States v. Todd, 38 F.3d 277 (6th Cir. 1994), the Department of Labor pursued an

enforcement action in the district court for underpayments which the ALJ determined were made to

non-government service employees of the contractor. Initially, the district court denied the

enforcement motion and remanded the case to the ALJ for reopening of the record to allow the

contractor another opportunity to be heard. On appeal, the circuit court held that the trial judge

exceeded the scope of his jurisdiction. The circuit court concluded that, in order for a remand to be

upheld, the district court must have determined that the ALJ’s findings were not supported by a

preponderance of the evidence. Absent this finding, the district court was without authority to remand

the case for reopening of the record.

H. The Tennessee Valley Authority covered

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The Tennessee Valley Authority is covered by the SCA. Tennessee Valley Authority, ARB Case

No. 01-024 (ARB Mar. 31, 2003).

Department of Homeland Security, Federal Protective Services covered

In United Government Security Officers of America et al. v. Chertoff, Civ. Act. No. 07-173 (CKK)

(D.D.C. Nov. 24, 2008), the district court held that federal agency defendants (U.S. Department of

Homeland Security and Federal Protective Services) was obliged to comply with ALJ Mape’s Decision and

Order and the Department of Labor’s new wage determination for security officers by incorporating the

“increased wage and benefit rates into the Service Contract with USProtect.” The court noted that the

regulatory provisions at 29 C.F.R. § 4.163 and 48 C.F.R. § 52.222-41(f) required that Defendants amend

their service contracts to incorporate the newly issued wage determinations and that this was a “clear,

non-discretionary duty” on the part of the federal government agencies. As a result, the court

emphasized that the onus was not on the private contractor alone to amend the service contracts at

issue.

Jurisdiction over a contract to operate a ship outside US territorial waters

In Ocean Shipholdings, Inc., ARB No. 11-066, ALJ No. 2011-CBV-1 (ARB Jan. 23, 2013), the Board

held that the Department of Labor lacks jurisdiction to conduct a substantial variance hearing under the

Service Contract Act on a contract to operate a ship outside U.S. territorial waters. The fact that bidders

had to pay at least the Wage and Hour Division’s wage determination did not create jurisdiction.

The Military Sealift Command (MSC) had issued a request for proposals (RFP) for the operation

and maintenance of tanker ship. The Wage and Hour received a request for a substantial variance

hearing on the RFP from a union that represents mariners on U.S-flagged vessels. MSC issued an

amendment indicating that the Service Contract Act (SCA) was not applicable to the RFP because the

ship was to be forward deployed for the entire contract period. MSC also announced that although SCA

compliance was not applicable to the contract, RFP offerors would be required to pay at a minimum the

wage and fringe benefit rates contained in the Department of Labor Wage Determinations attached to

the RFP. Wage and Hour denied the union's request for a substantial variance hearing as untimely, and

the union submitted a second request, which was referred to OALJ for a hearing. During a telephone

conference call with the ALJ, the bidder who was awarded the contract raised the issue of the SCA's

applicability and DOL's jurisdiction to conduct the substantial variance hearing. Following briefing by the

parties, the ALJ concluded that the SCA did not apply to the RFP because the work under the contract

would be performed outside the United States. The ARB affirmed.

The ARB cited the SCA statutory language, and the implementing regulation at 29 C.F.R. §

4.112(a). That regulation provides that “Services to be performed exclusively on a vessel operating in

international waters outside the geographic areas named in this paragraph would not be services

furnished ‘in the United States' within the meaning of the Act.” The ARB further found that the union

had not adequately refuted the contractor's assertion that the SCA does not govern the RFP. The union

did not contest the contractor's statements before the ALJ that the tanker in question would not be

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providing services within the United States. Rather, the union relied on an argument that the SCA

applied because the parties agreed to apply SCA wages to the contract. The ARB found, however, that

the contractor incorporated a wage determination into the RFP to establish a minimum level of wages

successful bidders would be expected to pay to workers. The ARB stated that the parties “may agree to

pay SCA-level wages, but SCA coverage applies only as described in the statute (41 U.S.C.A. 6701(d)),

and the implementing regulations (29 C.F.R. 4.112(a)).” USDOL/OALJ Reporter at 5 (footnote omitted).

The ARB was not persuaded by the union's arguments that the RFP was a successor contract and that

the tanker in question had been within U.S. territorial waters during the performance of the contract.

K. ARB discretion to decide whether to review an expired contract where no practical relief

is available

The ARB may dismiss an appeal where no practical relief is available, but alternatively may choose to

decide a moot appeal if it presents significant issues of general applicability.

In National Aeronautics and Space Administration (NASA), ARB No. 12-027, ALJ No. 2011-CBV-3

(ARB Dec. 19, 2013), NASA sought a variance from the collectively bargained wages for custodial services

at the Johnson Space Center. The contract had expired by the time the ARB issued its decision, but the

ARB went ahead and decided the appeal. The ARB explained:

The ARB has held that once the contract at issue expired, the case becomes moot because

the relief accorded under the SCA is prospective only. See 29 C.F.R. § 4.163(c) (“variance

decisions do not have application retroactive to the commencement of the contract.”); In

re Ceres Gulf Inc., ARB No. 96-192, ALJ Nos. 1993-CBV-001, 1995-CBV-001; slip op. at 2

(ARB Jan. 6, 1998). In this case, NASA’s contract with INC expired on February 28, 2013,

at the end of the second, one-year option. The ARB has dismissed appeals under the SCA

where no practical relief is available because review would be nothing more than an

advisory opinion. In re Am-Gard, Inc., ARB Nos. 06-049, 06-050; ALJ No. 2006-CBV-001,

slip op. at 4 n.14 (ARB July 31, 2008). Nonetheless, we will address the issues NASA raises,

which are “significant issue[s] of general applicability.” 29 C.F.R. § 8.6(d).

USDOL/OALJ Reporter at n.2.

III. Standard of review

In Dantran, Inc. v. Dep’t of Labor, 171 F.3d 58, 71 (1st Cir. 1999), the circuit court held that factfinding under the SCA must be performed in accordance with the preponderance of the evidence

standard at 41 U.S.C. § 39. A reviewing tribunal must uphold the ALJ’s findings in the absence of “clear

error.” Id. at 72.

The court in J.N. Moser Trucking, Inc. v. U.S. Dep’t of Labor, 306 F. Supp. 2d 774 (N.D. Ill. 2004),

held that it was not required to defer to the ARB’s decision where the ARB’s “sole basis for reversing the

hearing officer is because it has simply come to a different conclusion as to the credibility of witnesses

(person whom it has neither seen nor heard) in the absence of such other evidentiary support.” See

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Groberg Trucking, Inc., ARB No. 03-137, 2001-SCA-22 (ARB Nov. 30, 2004) (the Board noted that its

“general practice” is to “defer to the ALJ’s credibility findings, and accept all the ALJ’s findings of fact

based on those credibility determinations.”).

See Rasputin, Inc., ARB No. 03-059, 1997-SCA-32 (ARB May 28, 2004), aff’d in relevant part sub

nom, Johnson v. U.S. Dep’t of Labor, 205 WL 1970742, Case No. 2:04-CV-0775 (S.D. Ohio Aug. 16, 2005),

aff’d, Case No. 05-4355 (6th Cir. Aug. 16, 2006) (unpub.) (court held that it consistently accords

“substantial deference to the credibility determinations of the ALJ”).

See also R&W Transportation, Inc., ARB Case No. 06-048 (ARB Feb. 28, 2008) wherein the Board

noted that it would follow its general practice and “defer to the ALJ’s credibility findings, and accept all

the ALJ’s findings of fact based on those credibility determinations.” With regard to a judge’s rulings on

evidentiary and procedural issues, the Board held that it would utilize the “abuse of discretion standard”

and determine whether the ALJ “abused the discretion vested in him to preside over the proceedings.”

See also Fields and W/D Enterprises, Inc. v. Chao, Case No. 6:08-cv-1119-JTM (Feb. 19, 2009),

recon. Denied (D. Kan. Mar. 19, 2009) (the district court’s scope of review is limited to the legal question

of whether the ALJ applied and satisfied the standard of proof required to find a violation of the SCA;

the court is “bound to review the agency’s final decision under the ‘preponderance of the evidence’

standard”); 41 U.SC. § 353 (the Secretary’s factual findings are conclusive if supported by a

preponderance of the evidence).

However, in a case of first impression, the Southern District Court of New York determined that

it “must undertake an independent or plenary review of the administrative record as a whole” that must

be “tinged with a significant degree of deference to the agency,’ particularly where the questions

implicate their expertise.” Karawia and International Services, Inc. v. Dep’t of Labor, Case No. 08-CV5471 (HB) (S.D.N.Y. May 7, 2009) (unpub.). The court acknowledged that this standard “is slightly more

exacting than the ‘clear error’ standard other courts have used to review DOL decisions . . . .” Moreover,

the court determined that because the ARB is authorized to conduct an independent review of the

record to decide mixed questions of fact and law, the court’s deference would be owed to the “ARB’s

application of law to the facts” and not the ALJ.

IV. Evidence

A. Burden of proof

Preponderance of the evidence

In Dantran, Inc. v. Dep’t of Labor, 171 F.3d 58, 71 (1st Cir. 1999), the circuit court held that factfinding under the SCA must be performed in accordance with the preponderance of the evidence

standard at 41 U.S.C. § 39. A reviewing tribunal must uphold the ALJ’s findings in the absence of “clear

error.” Id. at 72.

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Reconstruction of payroll records

In D’s Nationwide Industrial Services, ARB Case No. 98-081, 1995-SCA-38 (ARB Nov. 24, 1999),

the ARB held that, because the respondent failed to maintain records demonstrating the actual number

of hours worked under a contract with the United States Postal Service, the records of the Postal Service

constituted sufficient proof of the hours worked for back wage reconstruction purposes. In support of

its holding, the ARB cited to Ray v. Dep’t of Labor, 26 WH Cases 1244, 1246 (C.D. Ill. 1984).

In Amcor, Inc. v. Brock, 780 F.2d 897 (11th Cir. 1986), the court held that, where an employer

fails to maintain work records in compliance with the regulations, the Supreme Court’s decision in

Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88 (1946) is useful:

When the employer has kept proper and accurate records, the employee may easily

discharge his burden by securing the production of those records. But where the

employer’s records are inaccurate or inadequate and the employee cannot offer

convincing substitutes, a more difficult problem arises. The solution, however, is not to

penalize the employee by denying him any recovery on the ground that he is unable to

prove the precise extent of uncompensated work. Such a result would place a premium

on an employer’s failure to keep proper records in conformity with his statutory duty; it

would allow the employer to keep the benefits of an employee’s labors without paying

due compensation as contemplated by the Fair Labor Standards Act. In such a situation

we hold that an employee has carried out his burden if he proves that he has in fact

performed work for which he was improperly compensated and if he produces sufficient

evidence to show the amount and extent of that work as a matter of just and reasonable

inference. The burden then shifts to the employer to come forward with evidence to

negative the reasonableness of the inference to be drawn from the employee’s evidence.

If the employer fails to produce such evidence, the court may then award damages to the

employee, even though the result be only approximate. (citation omitted).

In Administrator, Wage and Hour Div. v. Chae S. McFarland d/b/a SK Gateway Cleaners, ARB

No. 12-046, ALJ No. 2010-SCA-23 (ARB Jan. 15, 2014), the ARB found that the ALJ properly credited the

Wage and Hour investigator's calculations of back wages owed under the Service Contract Act based on

the investigator's testimony and the records presented by the investigator, and the Respondent's failure

to offer probative evidence to rebut the reasonableness of the investigator's calculations. The

Defendant had failed to maintain accurate and complete records. See Anderson v. Mt. Clemens Pottery

Co., 328 U.S. 680 (1946) (evidentiary principles when employer's records are inaccurate or inadequate).

The ARB also affirmed the ALJ's debarment order where the Respondent failed to show unusual

circumstances that would relieve her company from debarment. The Respondent's owner's own

testimony indicated that she had only paid the minimum wage and no fringe benefits, admitted that her

payroll records were incomplete, and that she never agreed to pay any back wages owed.

B. Limitations on evidence held to be improper

Exclusion of evidence on remand

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Despite numerous errors in excluding admissible evidence, the ARB determined that a remand

for a new hearing was not required where the evidence which was admitted was sufficient to reverse

the ALJ’s opinion. Summitt Investigative Service, Inc., ARB No. 96-111, 1994-SCA-31, slip op. at 6 (ARB

Nov. 15, 1996), aff’d, 34 F. Supp. 2d 16 (D.D.C. 1998). If, however, the record of evidence supported the

ALJ’s decision, then a remand would be necessary. The ARB suggested that ALJs take disputes as to the

admissibility of evidence under advisement and sift through them later, avoiding prolonged discussions

on the record.

Limitation on cross-examination too arbitrary

In Summitt Investigative Service, Inc., ARB No. 96-111, 1994-SCA-31, slip op. at 5-6 (ARB Nov.

15, 1996), aff’d, 34 F. Supp. 2d 16 (D.D.C. 1998), the ARB stated that, although there are situations in

which a time limitation on the completion of cross-examination would be in order, the arbitrary

placement of such a limitation by the ALJ in this case was error. Questioning on direct examination

encompassed 122 pages of hearing transcript, and after sixty pages of questioning on crossexamination, the ALJ cited interminable delays between questions and granted counsel ten minutes in

which to finish cross-examination. The ARB noted that half of the pages devoted to cross-examination

included statements by the ALJ and opposing counsel. Thus, the short time limit imposed was in error.

C. Testimony regarding documentation not in record

In Hugo Reforestation, Inc., ARB No. 99-003, 1997-SCA-20 (ARB Apr. 30, 2001), the ARB held

that it was proper for the ALJ to permit the Assistant Director of the Portland Office of the Wage and

Hour Division “to testify about information contained in Wage and Hour Division records about prior

investigations of, and past contacts with, Petitioners without introducing the documents themselves.”

Initially, the Board noted that the record did not indicate that Petitioners objected to admission of the

testimony at the hearing. However, even if a timely objection had been made, the ARB stated the

following:

The underlying rationale for the hearsay rule is to avoid prejudice by protecting against

the admission of unreliable evidence and by insuring that an opposing party can have

effective cross-examination. Had Yerger testified about meetings or events unknown to

Petitioners, it could be argued that her testimony would have affected a ‘substantial right’

guaranteed to them. In the instant case, however, Yerger’s testimony recounted the

results of investigations, meetings and actions taken that were fully within Petitioner’s

knowledge, and thus within Petitioner’s ability to effectively counter or rebut.

The ARB held that Petitioners failed to demonstrate that they were prejudiced by the testimony.

Moreover, although Petitioners argued that documents underlying the testimony were requested

through discovery but not produced, Yerger’s testimony was not precluded. The Board noted that

Petitioners failed to file a timely motion to compel and failed to request introduction of the documents

at the hearing, noting that the Wage and Hour Administrator’s attorney had brought the documents to

the hearing.

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D. ALJ assessment of statement of work versus job skills required; where collectivelybargained wage rates are not available for locality

In National Aeronautics and Space Administration (NASA), ARB No. 12-027, ALJ No. 2011-CBV-3

(ARB Dec. 19, 2013), NASA sought a variance from the collectively bargained wages for custodial services

at the Johnson Space Center in a contract between Integrity National Corporation (INC) and the

International Association of Machinists and Aerospace Workers, District Lodge 377, Local Lodge 1786.

The positions in question were custodian/janitor service worker; custodian/janitor crew leads; recycling

specialist; and warehouse clerk.

Section 4(c) of the Service Contract Act (SCA) imposes a successorship obligation: where service

employees are covered by a collective bargaining agreement (CBA), a successor contractor furnishing

substantially the same services at the same location ordinarily will be obligated to pay those employees

no less than wages and fringe benefits required by the CBA. The SCA, however, provides for an

exception where, after a hearing, it is determined 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 character." 41 U.S.C.A. § 6707(c); 29 C.F.R. § 4.10(a). In the instant case,

the ALJ denied NASA's petition for a collective bargaining variance.

On appeal, NASA first argued that that the ALJ erred because its Statement of Work (SOW)

specifying the basic required services is the sole basis for comparing similar services in the locality. The

ALJ had found that NASA's sole reliance on the SOW ignored significant differences required of custodial

personnel at NASA as compared to other known work sites in the locality (such as, security clearances,

language proficiency, reading/writing ability, educational requirements and people skills). The ARB held

that "contrary to NASA's contention, the Act permits the ALJ to analyze the actual job duties and skills of

custodial workers employed at NASA for purposes of determining 'services of a character similar in the

locality.' 41 U.S.C.A. § 6707(c)." USDOL/OALJ Reporter at 7 (emphasis as in original). Reviewing the

evidence of record, the ARB found that a preponderance of the evidence supported "the ALJ's

determination that NASA failed to compare the services of INC custodial workers at the Johnson Space

Center with jobs of a similar character in the locality as required by the Act." Id. at 9.

NASA also argued that the ALJ erred in determining that it misapplied the wage measure charts

by comparing an average of wage-based rates and surveys. NASA asserted that there is no set statutory

or regulatory methodology required to prove substantial variance. The ARB held that the ALJ did not err.

The ARB cited Wage and Hour Division All Agency Memorandum (AAM) No. 166, which directs parties

seeking a wage variance to include information and analysis concerning the differences between the

collectively-bargained rates issued and the rates contained in (1) federal wage board rates and surveys;

(2) relevant BLS surveys and comparable SCA wage determinations; (3) other relevant wage data such as

what other employers pay for similar services; and (4) other collectively-bargained wages and benefits in

the locality. Slip op., quoting AAM No. 166 at 2-3. The ARB noted that the Department recognizes that a

party seeking a variance "may not be able to submit complete data at the time the hearing request is

made," but the Department expects that this information will be available prior to a decision on the

variance request. Slip op., quoting AAM No. 166 at 3. The ARB noted that "Merely providing a statement

that data is not available is not sufficient." Slip op., quoting AAM No. 166 at 3. "The request must

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adequately demonstrate the effort made to obtain or develop such information." Slip op., quoting AAM

No. 166 at 3.

In the instant case, NASA witnesses testified that NASA could not obtain any collectivelybargained wage rates in the Houston locality. Moreover, a labor economist expert testified that NASA

relied on measures of central tendency to compare wage rates of custodial service employees at the

Space Center with the average wage rates of custodial employees in the locality, and that this resulted in

a misleading conclusion with respect to assessing a substantial variance. The expert further testified that

NASA's evidence compared collectively-bargained wages at NASA with a market that is mostly nonunionized, and collectively-bargained wages are generally higher than non-collectively bargained wages.

Accordingly, the ARB held that the preponderance of evidence supported the ALJ's determination that

NASA relied on inadequate wage measurement charts.

VARIANCE FROM CBA WAGES FOR TELECOMMUNICATIONS WORKERS DENIED WHERE PETITIONER

FAILED TO SHOW THAT WAGE DEFERENTIALS WERE BASED ON EMPLOYEES IN THE LOCALITY

PERFORMING SERIVCES SIMILAR TO THOSE IN THE CBA

In BAE Systems, ARB No. 12-056, ALJ No. 2012-CBV-1 (ARB May 19, 2014), the Department of

the Navy sought a variance from the collectively-bargained wages for telecommunications services in a

contract between BAE Systems, Incorporated (BAE), and the International Brotherhood of Electrical

Workers, Local 1260 (Union). The ALJ denied the variance. The ARB affirmed the ALJ's decision, finding

that "[t]he Navy advances its substantial variance argument principally on wage differentials for each of

17 CBA job classifications and very little else. A substantial variance showing requires not only evidence

of a wage differential between CBA wages and other local rate wages, but also a prior showing that

other employees in the locality are performing services similar in character to those in the CBA. The ALJ

correctly determined in this case that the Navy's evidence falls short. While the Navy sought to advance

its case at hearing and in its opening brief before the ARB that a substantial variance existed with

respect to ET IIs, the Navy failed to provide any evidence (and failed to advance any argument in its brief

to the ARB) that other employees in the locality were performing similar services in character for the

remaining 16 CBA job categories, and thus failed to show a relevant mix of rates to determining a

prevailing wage. For these reasons, the Navy failed to meet its burden under SCA section 4(a)."

USDOL/OALJ Reporter at 6.

On appeal, the Navy argued that the ALJ erred in rejecting comparison of the position

descriptions in the SCA and Salary.com data with position descriptions for labor classifications in the

CBA. The ARB noted first that the Navy did not provide position descriptions for four of the labor

classifications in the CBA, and such absence of evidence foreclosed providing a substantial variance for

those positions. The Navy next argued that that workers under the CBA job classifications perform work

that is the same or similar to that of other workers in the locality. The ARB noted that the Navy had only

advanced that argument as to one classification, but advanced that argument solely as to one

classification for an Electronics Technician II (ET II) position. The ARB found that the Navy waived the

argument as to the remaining 12 classifications as it had not advanced that argument as to those

positions in its brief (or even before the ALJ). The ARB further found, that even if there was no waiver,

the ALJ did not find that the data presented by the Navy from Salary.com were sufficient to establish a

prevailing wage rate. Citing the U.S. Department of Labor Prevailing Wage Resource Book, 4(c) Hearings,

Administrative Hearings Regarding Application of Section 4(c), the ARB found that "the use of

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Salary.com data would not fall within the scope of other relevant wage data anticipated under the

regulations, and indeed Salary.com data has been characterized as an “informal source[] and

estimate[]." USDOL/OALJ Reporter at 8 (quoting Beyond the Payment Fairness Act: Mandatory Wage

Disclosure Laws “A Necessary Tool for Closing the Residual Gender Wage Gap," 50 Harv. J. on Legis. 385,

432 (Summer 2013); see also "Money, Sex, and Sunshine: A Market-Based Approach To Pay

Discrimination," 43 Ariz. St. L. J. 951, 990 (Fall 2011) ("Websites such as salary.com and glassdoor.com

collect anonymous information about compensation and benefits from employees, but this information

is incomplete and often inaccurate.")).

Turning to the Navy's central argument “that there is a similarity of services in the locality for ET

IIs,” the ARB noted that this category of workers appeared to represent the vast majority of CBA

workers at issue. The ARB found that substantial evidence supported the ALJ's finding that ET IIs under

the CBA perform duties unique to the contract.

The Navy argued that that the ALJ erred in failing to give great weight to the SCA Area Wage

Data for determining the prevailing wage in the locality. The ARB found that the ALJ correctly

determined that the Navy failed to demonstrate a comprehensive mix of rates that show a prevailing

wage in the locality. The ARB noted that All Agency Memorandum No. 166 (Oct. 8, 1992) "does not limit

a comparison to the SCA area wage data in assessing the prevailing wage in a locality for purposes of a

substantial variance proceeding. Instead the DOL recognizes that the SCA is a "minimum monetary

compensation required to be paid to the various employees . . . usually listed in the wage determination

as hourly wage rates." DOL Prevailing Wage Resource Book 2010 at 3." USDOL/OALJ Reporter at 11. The

ARB found that the Navy had not presented any other wage rates from CBAs or civil wage rates for

similar services in the locality, but only argued that proper comparison data constituted wage data

derived from the Economic Research Institute (ERI) and Salary.com. The ARB found, however, that the

Navy's appellate brief did not dispute the ALJ's discrediting of that evidence because ERI and Salary.com

processes and methodology was not established.

The Navy argued that a comparison of wage rates must include premiums to portray actual

wages paid. The ARB found that while the Navy failed to show services of similar character performed in

the locality, the record nonetheless supported the ALJ's finding that a shift premium is paid to only one

lead employee per shift and that 60 percent of BAE employees under the CBA do not work shifts. The

ARB found therefore that the ALJ reasonably concluded that including premiums "artificially inflated"

the CBA wage rate when compared with the SCA rate.

The Navy argued that a comparison of wage rates must include premiums to portray actual

wages paid. The ARB found that the record supported the ALJ's finding that a shift premium is paid to

only one lead employee per shift and that 60 percent of BAE employees under the CBA do not work

shifts, and that including premiums "artificially inflated" the CBA wage rate when compared with the

SCA rate.

E. Sequestration of funds for payment of SCA-required health and welfare benefits as

evidence of SCA violations

In E&S Diversified Services, Inc., ARB No. 13-019, ALJ Nos. 2011-SCA-8 and 9 (ARB Mar. 20,

2015), the ARB affirmed the ALJ's finding that the Respondent failed to timely pay health and welfare

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benefits required by the SCA to their contract employees, and that the Respondent had failed to

establish that "unusual circumstances" merited relief from debarment. The ARB noted that the

Respondent had admitted to holding funds it would have paid to service contract employees and

sequestering those funds in its payroll and general accounts. The ARB found that the Respondent

therefore admitted affirmative conduct violative of the SCA's health and welfare provisions. The

Respondent argued that the ALJ erred in relying on the district director's testimony about prior

violations where that witness also testified that the violations were technical in nature. The ARB found

that this argument ignored the fact that 29 C.F.R. § 4.188(b)(1) places the burden on the contractor of

showing no evidence of prior violations.

F. Due process – evidentiary hearing

IN-PERSON, EVIDENTIARY EVIDENCE ORALLY WAIVED BY RESPONDENTS’ LEGAL REPRESENTATIVE IN

SCA DEBARMENT CASE; WAIVER UNENFORCEABLE BECAUSE IT WAS NOT IN WRITING AS REQUIRED BY

THE THEN APPLICABLE PROCEDURAL REGULATION AND WHERE RESPONDENTS ARGUED

PERSUASIVELY THAT WAIVER CAUSED THEM PREJUDICE

In Administrator, Wage and Hour Div., USDOL v. Mesa Mail Service, LLC, ARB No. 14-075, ALJ

No. 2009-SCA-11 (ARB Jan. 21, 2016), the ALJ decided the case on the record, without an in-person

evidentiary hearing, based on the parties’ oral agreement that because the dispute was primarily a legal

one, the ALJ could decide the case on the written record. This oral agreement was made on behalf of the

Respondents by its legal representative. On appeal to the ARB, the Respondents argued that they had

clearly made it known to their legal representative and the ALJ that they wanted an in-person hearing

and were entitled to such. The Respondents contended that their representative had waived the inperson hearing against the best interests of the Respondents, “and/or wrongfully induced Respondents

to do so based on the alleged fact that the ALJ could properly adjudicate the case upon a paper hearing.

Cf. 29 C.F.R. [§] 18.39.” USDOL/OALJ Reporter at 2-3. Id. at 4. The Respondents alleged prejudice,

asserting that they denied the opportunity to demonstrate a good faith compliance defense and

“unusual circumstances” in order to avoid debarment. The ARB vacated the ALJ’s decision and

remanded for an evidentiary hearing “absent a valid written waiver.” The ARB found that “[t]he

regulation in effect when the ALJ cancelled the hearing required that a party’s waiver of his or her right

to present evidence at a hearing be submitted in writing. 29 C.F.R. § 18.39 (2013). Thus, absent a valid

written waiver, the ALJ must hold a hearing, given the factual disputes in this matter.” Id. at 3-4.The ARB

noted that the SCA regulations entitled the Respondents to a hearing before the ALJ, stated that it was

persuaded by the Respondents’ argument “that being denied a hearing prejudiced their case because

they were denied the opportunity to testify about circumstances that may warrant relief from any

debarment order under the SCA.” Id. at 4.

G. Reliance on advice from contracting agency officials not a defense against liability for

SCA back wages

In Administrator, Wage and Hour Div., USDOL v. Puget Sound Environmental, ARB No. 14-068,

ALJ No. 2012-SCA-14 (ARB May 4, 2016), the ARB affirmed the ALJ’s order granting the Administrator’s

motion for summary decision, with relief in the form of $1,409,409.98 in back wages and benefits for

violations of the terms of contracts subject to the Service Contract Act for general housekeeping,

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painting, maintenance, and health and safety services on ships and shore facilities primarily at the Puget

Sound Naval Shipyard.

On appeal, the Respondents asked that the ARB consider their claim that the contracting

agency—the Naval Supply Center—failed to include the proper wage determination in the contracts.

The ARB construed this as an estoppel argument. The ARB was not persuaded. First, the Respondents

misconstrued the Administrator’s complaint. It did not charge that the contracts failed to include an

appropriate wage determination; the wage determinations were correct. The charge was that the

Respondents placed employees into the wrong wage categories. Thus, the Respondent’s reliance on 29

C.F.R. § 4.5(c) was unpersuasive. Second, assuming that the Naval Supply Center made a mistake in

advising the Respondents which employees belonged in which categories, the regulations explicitly state

that “[r]eliance on advice from contracting agency officials . . . is not a defense against a contractor’s

liability for back wages under the Act.” 29 C.F.R. § 4.187(e)(5).

H. Statements of former employees

PARTIAL RELIANCE ON STATEMENTS OF FORMER DRIVERS BY WAGE AND HOUR DIVISION DID NOT

UNDERMINE ALJ’S FINDING THAT WHD CALCULATION OF BACK WAGES WAS RATIONAL

In Administrator, Wage and Hour Div. v. MESA Mail Service, LLC, ARB No. 2017-0071, ALJ No.

2009-SCA-00011 (ARB Sept. 30, 2020), the ARB affirmed the ALJ’s finding that Respondents, who were

mail hauler contractors for the USPS, violated the recordkeeping requirements of the SCA and failed to

establish unusual circumstances to warrant relief from debarment.

The ARB found that substantial evidenced supported the ALJ’s determinations that

“Respondents violated the record-keeping requirements of the SCA because they relied on the USPS

contract time as the default working hours and had no system for recording the actual hours employees

worked. The ALJ further opined it was clear in at least some instances that drivers worked in excess of

the USPS contract time, did not always claim extra time, and Respondents had no policy that required or

encouraged drivers to report extra time.” Slip op. at 5. Although Respondents contested these

determinations, the ARB stated: “However, it is the employer’s responsibility to keep accurate records,

not the employee’s. If an employer knows or has reason to know an employee is working, then

compensation is due.” Id. at 6 (footnotes omitted).

In determining the amount of back wages owed, the Wage and Hour Division partly relied on

statements by former drivers, and gave Respondents credit where it provided documentation; the ALJ

determined that the WHD’s calculation was rational. On appeal, Respondents argued that the former

drivers’ statements should be barred as hearsay, and should be found unreliable as being from

disgruntled former employees. The ARB noted, however, that rules of evidence are relaxed in SCA

administrative proceedings, and that the ALJ had acknowledged the possible propensity for bias and the

fact the former workers had not been subject to cross-examination, but found the WHD’s inspector’s

testimony had been very credible. The ARB dismissed Respondents’ argument that drivers were often

overpaid because Respondents had no records to establish this, and because even if overpayments were

made, they did not offset instances when drivers were underpaid.

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V. Discovery

A. Interrogatories

In U.S. Dep't of Labor v. Stewart, 1992-SCA-49 (ALJ, July 11, 1995) (Pre-Hearing Order), the ALJ

applied Federal Rule of Civil Procedure 33, which limits the number of written interrogatories allowed

propounded on an opposing party to 25 without leave of the court or written stipulation. The ALJ

further noted that the rule provides that a subpart is counted as a single interrogatory only when that

subpart represents a discrete and separate subject matter that can stand alone.

B. Protective order

1. Informant’s privilege

In S.C. Security, Inc., 1998-SCA-26 (ALJ, June 29, 1999), the ALJ was confronted with a motion for

a protective order, which she found was actually a motion to compel discovery:

Turning to Respondents' Motion for a Protective Order, I note that, in actuality, it is a

motion to compel discovery. However, Respondents have sought for the responses to

discovery for which the Department of Labor has made of claim of privilege to be provided

to their counsel, who would then be bound by a Protective Order which would prevent

the information and documents from being provided to Respondents. While, despite my

misgivings, I might have considered such an approach if it were agreed to by both parties,

I find the approach likely to be unworkable and I decline to adopt it. In this regard, the

actions taken by Respondents' counsel after obtaining the requested information and

documents would provide Respondents with some inkling as to the nature of the

information provided, and making counsel subject to a protective order would inhibit

their frank discussion of the merits of the case and litigation strategy with their clients.

Accordingly, I will, instead, construe Respondents' Motion as a motion to compel.

The ALJ then noted that the Department of Labor asserted the informant's privilege, the

deliberative process privilege, and the work product privilege and declined to produce documents

requested by Respondents. With regard to the informant's privilege, the ALJ cited to Roviaro v. United

States, 353 U.S. 53, 59 (1957) and stated that the privilege may be asserted by the government "to

withhold the disclosure (of) the identity of persons who furnish information of violations of law to

officers charged with enforcement of that law." In this vein, the ALJ noted that the "scope of the

privilege is limited by its underlying purpose" and that it is inapplicable where the informer’s identity has

been disclosed or when the documents sought to be produced will not reveal the informer’s identity.

The ALJ stated that the privilege also “must give way when essential to a fair determination of the case.

Citing to Martin v. Albany Business Journal, Inc. , 780 F. Supp. 927 (N.D.N.Y. 1992), the ALJ found that

the informant's privilege was applicable to Fair Labor Standards Act (FLSA) cases and that "FLSA cases

are analogous to the instant case, with the important exception that the instant case involves claims for

back wages and the employee informants have a pecuniary interest in the outcome." The ALJ analyzed

the holdings in Albany Business Journal as well as Brock v. Gingerbread House, Inc., 907 F.2d 115 (10th

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Cir. 1989), Reich v. Great Lakes Collection Bureau, Inc., 172 F.R.D. 58, 60 (W.D.N.Y. 1997), and BAC Steel

Products, 312 F.2d 14, 16 (4th Cir. 1962).

The ALJ found that Great Lakes Collection Bureau, in particular, "set forth a sound analysis of the

principles applicable to the informer's privilege" and she stated the following:

Applying these principles (considered along with the regulation discussed above) to the

instant cases, I find that the statements of employees interviewed by Wage and Hour

investigators, together with any documents that cannot have identifying information

redacted, are protected by the informer's privilege and do not need to be produced at

the present time. The Respondent's need for the statements at the present time in order

to present its case is outweighed by the need of the Department of Labor to protect the

confidentiality of the employees interviewed during the course of its investigation, to

ensure that employees will not be reluctant to come forward in the future. However, the

Department of Labor must identify its witnesses as ordered by the undersigned

administrative law judge and, at the time each witness is called, will be required to

provide the requested statements related to each such witness. Those employees who

agree to testify no longer have any interest in protecting the confidentiality of their

statements, but those employees who do not testify will retain their anonymity. In this

regard, I note that the employees concerned here have a pecuniary interest in the

outcome of this case which requires that Respondents not be hampered in cross

examining them. I understand that having to wait until the time of trial to obtain these

statements may put the Respondents at a disadvantage. However, I will allow the

Respondents whatever additional time is necessary to combat any prejudice. Absent

unfair surprise, it would appear that a brief recess some time prior to the cross

examination for the purpose of allowing the Respondents an opportunity to read the

subject statements would be sufficient. If necessary due to unfair prejudice, the trial could

be recessed and (only if absolutely necessary) discovery could be reopened.

Slip op. at 5-6.

In Assisted Transportation, Inc. 2014-SCA-00010 (ALJ Aug. 12, 2015), the ALJ found that the

informant’s privilege was appropriately raised to protect the confidentiality of employees interviewed

during the investigation. The ALJ based her ruling on the Administrator of the Wage and Hour Division’s

assertion that disclosure “would interfere with Wage and Hour’s enforcement and undermine the

agency’s ability to conduct future investigations.” The ALJ further found that the respondents’ need for

the statements to prepare its case was outweighed by the WHD’s interests in “ensur[ing] that

employees will not be reluctant to come forward in the future.” Id. at 5-6.