Petition for Writ of Certiorari — Milwaukee County v. Brock

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85 a 1 1 0 ) 4

; Supreme Court, U.S.

7 FILED

No. | :

CLERK

DEC 8@ 1885

JOSEPH F. SPANIOL,

In The iN

Supreme Court of' the United States

October Term, 1985

ray

MILWAUKEE COUNTY, WISCONSIN,

Petitioner,

WILLIAM E. BROCK, SECRETARY OF THE UNITED

STATES DEPARTMENT OF LABOR,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

ray

Rosert H. F'rmsert

CHARLES D. CLAUSEN

Davip P. Lowe

Two Plaza East — Suite 1250

Milwaukee, Wisconsin 53202

(414) 271-0130

Attorneys for Petitioner

Of Counsel:

WrieBert, Finerty & St. Joun, S.C.

Two Plaza East — Suite 1250

Milwaukee, Wisconsin 53202

(414) 271-0130

COCKLE LAW BRIEF PRINTING CO., (800) 835-7427 Eat 333

QUESTIONS PRESENTED

Does Comprehensive Kmployment and Training Act

(“CETA”) § 106(b), which states that the Secretary

of Labor “shall’’ issue a final determinaiion within

120 days of a complaint alleging unlawful use of

CETA funds by a grant recipient, bar the Secretary

from recovering grant funds when the Secretary fails

to issue a final determination within the 120-day

period?

Did Milwaukee County, as a CETA grantee, vio-

late CETA’s prohibition against ‘‘the substitution of

Federal for other funds in connection with work that

would otherwise be performed’’ by reducing its local

expenditures in a county-funded ‘‘workfare’’ program

for welfare recipients by wage and hour reductions

made in response to National League of Cities v.

Usury, 426 U.S. 833 (1976), overruled Garcia v. San

Antonio Metropolitan Transit Authority, 105 S.Ct.

1005 (1985), and not in anticipation of CETA fund-

ing?

TABLE OF CONTENTS

Questions Presented

Opinions Below 0

sds nsec, MOET A

te, MM cS ee: nase

Reasons For Granting The Petition

oa, SL TWA

Appendix 000.

TABLE OF AUTHOR'TITES

Page

CASES:

Chrysler Corp. v. Brown, 441 U.S. 281 (1979) 000000. =-12

City of Edmonds v. United States Department of

Labor, 749 F.2d 1419 (9th Cir, 1984) 20. 10, 11, 12

Consumer Products Safety Commission v. GTE

Sylvania, Inc., 447 U.S. 102 (1980) ow 1]

Garcia v. San Antonio Metropolitan Transit Au-

thority, — U.S. —, 105 S.Ct. 1005 (1985) .... 8

Lehigh Valley Manpower Program vy. Donovan,

ee me Ue OPPOR GAR, BO ancien DD LD, 1D

Maryland v. Wirtz, 392 U.S. 183 (1968) 0... s

Mohasco Corp. v. Silver, 447 U.S. 807 (1980) _..... 13

National League of Cities v. Usury, 426 U.S. 835

Co 8, 9,10, 14, 19

Pierce County v. United States Department of

Labor, 759 F.2d 1398 (9th Cir. 1985) .... 10, 11

St. Regis Mohawk Tribe v. Brock, 769 F.2d 37

(2nd Cir. 1985) ................. tele AA St TR — 10

STATUTES AND REGULATIONS:

Comprehensive Employment and Training Act,

29 U.S.C. (Supp. V 1981) 801 et seq. ........... +

So 0. |)

25 U.S.C. (Supp. V 1981) 816(b) ........... a

2 wae. (cup. V 1961) 817 ........................ | 9

Job Training Partnership Act,

ET NEE ON OO asc namnsinncnenneenennee > +

ao USC. 1991 (e) ................

TABLE OF AUTHORITITES—Continued

20 U.S.C.A. § 1206(b) (1) oon eee

eek) ties 15

StAcs (ewes ee

SURCA. $80) aaa 16

20 U.S.C.A. § S280 (8) (4) eennecnennnenener en 18

Oa Cw eee 9

29 U.S.C.A. § 708 (1974) cceneenenrnenennennnnnernerneeed 6, 17, 18, 19

29 U.S.C.A. § T95(I) (1) (TE) cnn 16

UBL. sees SE Ln Pelien APOC eh PB an ve. Ae 13

42 U.S.C.A. § 3056(b) (1) (BI) cnn eR ERS 17

42 U.S.C.A. § 5108(D) (2) (HD) occ aimee 16

42 U.S.C.A. § 5801(€) ccnnncnenennne nmmnnnnnennnnnen 16

42 U.S.CLA. §6948(D) ooo eenncennnnnnnnnnmnnmmamnnnnn 16

Sts ae.

42 U.S.C.A. § 9835 (0) ecncnnnevenenennnneeninnnnninnennnnninnn 16

42 U.S.C.A. § 10608 (a) (2) (D) ecccecennnnnnnemnnnnnnnnn 16

42 US.CLA. §10706(0) (1) nn SAC er 16

Pub.L. 88-210, as added) Pub.L. 98-524, 98 Stat.

SIE brckdesicieecsd es anscincaularciobaetniasatchaloasceiia scsi iapapinisiindelibamempaitione . 1d

Pub.L. 89-10, as added Pub... 95-561, 92 Stat. 2168... 16

Pub.L. 89-10, as added Pub.L. 98-511, 98 Stat. 2874 00. 15

Pub.L. 89-73, as added Pub.L. 94-135, 89 Stat. 720 0000. 17

Pub.L. 89-272, as added Pub.L. 94-580, 90 Stat. 2818... 16

Pub.L. 89-750, 80 Stat. 1219 ..................... HU mee LPN See . 16

a Te, GO Ta TT risen 15

TABLE OF AUTHORITIES—Continued

Page

Pub.L. 93-112, as added Pub.L. 95-602, 92 Stat. 2989 17

Pub.L. No. 93-203, 87 Stat. 839 et seq. 3,4

Pub.L. No, 93-247, 88 Stat. 5 aes 16

Pub.L. 93-383, 88 Stat. 633 ; 16

Pub.L. 94-142, 89 Stat. 782 15

Pub.L. 95-542, 92 Stat. 1909 et seq. 4

Pub.L. 95-561, 92 Stat. 2359 : 16

Pub.L. 97-35, 95 Stat. 491 Se L7

Pub.L. 97-35, 95 Stat. 499 | . 16

Pub.L. 98-473, 98 Stat. 2171 SST ie GA a ee 16

Pub.L. 98-620, 98 Stat. 3342 16

20 C.F.LR.

Section 676.86(a)(1)(e) (1982) . gy |

Section 676.88(e) (1982) aa an 14

29 C.F.R. l

Section 676.91(f) (1983) 9

MISCELLANEOUS:

S. Rep. No. 95-891, 95 Cong., 2d Sess. 42, reprinted

in 1978 U.S. Code Cong. and Admin. News at

4522 ........ Sat Ee 4,1:

Sn ee

In The

Supreme Court of the United States

October Term, 1985

MILWAUKEE COUNTY, WISCONSIN,

Petitioner,

WILLIAM FE. BROCK, SECRETARY OF THE UNITED

STATES DEPARTMENT OF LABOR,

Respondent.

PETITICN FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Milwaukee County. Wisconsin by Friebert, Finerty &

St. John, S.C. its attorneys, petitions for a writ of cer

tiorari to review the judgment of the United States Court

of Appeals for the Seventh Circuit in this case.

0-—- ——_—_-

OPINIONS BELOW

The opinion of the Court of Appeals (App., 1-89) is

reported at 771 F.2d 983. The reported opinion reflects

an Order (App., 40) dated August 26, 1985, amending the

Slip Opinion, The opinion of “ae Administrative Law

Judge (App., 45-151) is unreported.

JURISDICTION

The judgment of the Court of Appeals (App., 42) was

entered on August 6, 1985. The Court of Appeals* order

denying petitioner's petition for rehearing and sugges-

tion for rehearing en bane (App., 43) was entered on Sep-

tember 9, 1985. On November 26, 1985, | wstice Stevens

extended the time within which to file this Petition for

Writ of Certiorari to and including January 2, 1986.

(App., 164) The jurisdiction in this court rests upon 2s

U.S.C, 1254(1).

STATUTES INVOLVED

Section 106(b) of the Comprehensive Employment and

Training Act, 29 U.S.C. (Supp. V_ 1981) 816(b), provides

in pertinent part:

Whenever the Seeretary receives a complaint

from any interested person or organization . . . which

alleges, or whenever the Secretary has reason to be

lieve (because of an audit, report, onsite review, or

otherwise) that a recipient of financial assistance un

der this chapter is failing to comply with the require

ments of this chapter, the regulations under this

chapter or the terms of the comprehensive employ

ment and training plen, the Secretary shall investi

gate the matter. The Secretary shall conduet suel:

investigation, and make the final determination re

————————OErrrerererorrererererreeee

quired by the following sentence regarding the truth

of the allegation or belief involved, not later than 120

days after receiving the complaint. If, after such in

vestigation, the Secretary determines that there ts

substantial evidence to support such allegation o1

belief that such a recipient is failing to comply with

such requirements, the Secretary shall, after due

notice and opportunity for a hearing to such recip

ient, determine whether such allegation or belict is

true.

The following are excerpts from the 19783 Act (Pub.

L.No, 93-203, 87 Stat. 839 ef seq.) pertaining to **main

tenance of effort’’:'

‘

03. Conditions applicable to all pregrams. The

Secretary shall not provide financial assistance for an)

program under this chapter unless—

(7) the program will not result in the displace

ment of employed workers or impair existing contracts

for services or result in the substitution of Federal

for other funds in connection with work that would

otherwise be performed ;

> » .

(11) funds will be used to supplement, to the ex

tent practicable, the level of funds that would other

wise be made available from non-Federal sourees Tor

the purpose of planning and administration of pro

’

grams within the scope of this chapter and not

supplant such other funds;

1 Cognate statutes and regulations pertaining to individual

Titles of CETA and repeating the language of § 703 are con-

tained in the Decision and Order of the Adninistrative Law

Judge (App., 110-113).

STATEMENT

1. The Comprehensive Employment and Training

Act (CETA), 29 U.S.C. (Supp. V 1981) 801 et seq., author-

ized the Secretary of Labor to grant federal funds to qual-

ified entities, principally states or units of local govern-

ment, for programs ‘‘provid[ing}' job training and em-

ployment opportunities for economically disadvantaged,

unemployed, or underemployed persons.’’ 29 U.S.C.

(Supp. V 1981) § 801. The statute originally was enacted

in 1973 (Pub.L.No. 93-203, 87 Stat. 839 et seq.) and was

amended substantially in 1978 (Pub.L.No. 95-524, 92 Stat.

1909 et seqg.). Lffeective October 18, 1982, CETA was re-

pealed and replaced by The Job Training Partnership Act,

29 U.S.C. 1501 et seg. (Pub.L.No. 97-300, $184 (a)(1),

96 Stat. 1857). However, CETA continues to govern ad-

ministrative or judicial proceedings pending on October

13, 1982, or begun between October 13, 1982 and Septem-

ber 30, 1984 (29 U.S.C. § 1591(e)).

2. As part of the 1978 CETA amendments, Congress

added the 120-day provision set forth in ¢ 106(b) of CETA.

(Pub. L.No. 95-524. 92 Stat. 1909 et seq.) The Senate

Report relating to the 1978 amendments noted, in pertinent

part, that: ‘‘In some cases grievances have been either

ignored, or there have been interminable delays.’’ S.Rep.

No. 95-891, 95 Cong., 2nd Sess. 42, reprinted in 1978 U.S.

Code Cong. and Admin. News at 4522. The Senate Report

further stated: ‘‘After a complaint is filed the Secretary

must make a determination on a complaint on the merits

of the case within 120 days’’ Id. at 4523.

3. Questions about the administration of CETA pro-

grams by a recipient of CETA funds can be raised by the

Secretary of Labor or by ‘‘any interested person or or-

ganization’’ alleging that a recipient of CETA funds is

failing to comply with CETA, its implementing regula-

tions, or the terms of the comprehensive employment and

training plan. CETA §106(b), 29 U.S.C. (Supp. V 1981)

§ 816(b). The same provision then provides that “not

later than 120 days after receiving the complaint’’ the See-

retary shall conduct an investigation “and ma-; the final

determination as to whether the allegation is true.”

4. CETA contained a number of sections, generally

referred to as ‘‘maintenance of effort’? provisions, which

required that funds made available through the Act be

used in ways that increased employment opportunities

without displacing currently employed workers, impairing

existing contracts for services, substituting Federal for

other funds in connection with work that would otherwise

be performed, or supplanting the level of funds that would

otherwise be made available from non-Federal sources for

the purpose of planning and administration of programs

within the scope of the Act. (See, App., 110-113)

5. Petitioner, Milwaukee County, for many years

prior to 1977, maintained and funded a work-training pro-

gram for welfare recipients, known as the Pay for Work

Program (‘‘PFWP’’). In June, 1977, Milwaukee County

started using CETA funds for work training programs

for welfare recipients who were not employed within

PFWP because of the unavailability of sufficient job

slots. Between January and March, 1978, Milwaukee

County terminated its PF WP by transferring all its work-

ers into a program known as the Work Assistance Pro-

gram (‘‘WAP’’). In an effort to comply with the main-

tenance of effort provisions, Milwaukee County contrib-

uted state and local monies to WAP in addition to the

lederal CETA monies used to fund the program. No

workers in locally fanded PF WP were transferred to the

jointly-funded WAP until January, 1978.

6 In 1976, Milwaukee County expended $3,014,580

on PFWP. In 1977, Milwaukee County expended

32,097,428 on PFWP. In 1978, Milwaukee County ex-

pended $333,277 on PE WP and $2,399,210 of non-Federal

funds on WAP. In each of the vears 1979 and 1980, non-

federal contributions to WAP were between $4,000,000

and $5,000,000.

7. The instant action arises out of proceedings be-

fore the United States Department of Labor (‘the De-

partment”) initiated by a series of complaints about WAP.

The principal complainant was a welfare rights organiza-

tion known as ‘*The Workfare Coalition’? or as ‘‘ Worker

Rights Institute.’’ The initial complaint was dated Feb-

ruary 20, 1978, and alleged, inter alia, that Milwaukee

County’s WAP program resulted in a prohibited substi-

tution of Federal funds for non-federal funds. (App. 2,

154) On May 25, 1978, the Workfare Coalition again com-

plained to the Department that WAP resulted in the sub-

stitution of Federal funds for other funds. (App. 2, 162

$ At some time prior to September 11, 1978, the

Department commenced an investigation of the complaint

against Milwaukee County. On September 11, 1978, Mil-

waukee County provided to the Department’s investigator

the PFWP and WAP funding figures stated in paragraph

6 above. Those figures have never been disputed by the

Department or the complainants, and they formed the

basis for all subsequent decisions concerning substitution

of funds by the Department Grant officer, the Adminis-

trative Law Judge, the Secretary, and the Court of Ap-

peals. (App., 124-125)

9% All the complaints against Milwaukee County were

investigated by the Grant Officer of the Department’s

Region V. While the February 20 and May 25, 1978 com-

plaints were being investigated, the Workfare Coalition

continued to file new complaints and inquiries on its own

behalf and on behaif of many participants in the CHTA-

funded program. These complaints and inquiries were

also directed by the Department to its Region V office.

(App., 136-137)

10. The Grant Officer issued his initial determina-

tion on all of the complaints, including those concerning

substitution of funds on May 29, 1979. The final deter-

mination was issued on January 4, 1980, almost two years

after the initial complaint about substitution of Federal

funds for local funds, more than fifteen months after Mil-

waukee County provided the Department with the relevant

information, and more than nine months after the effective

date of the 1978 amendment to CETA requiring the See-

retary to make this final determination within 120 days

after receiving the complaint.

11. In both the initial and final determinations, the

Grant Officer found that Milwaukee County had not sub-

stituted Federal funds for local funds, since Milwaukee

County spent more non-federal funds in 1978, the year

that PF WP was terminated, than in 1977.

12. An ALJ hearing on this issue and a large num-

ber of other issues addressed in the initial and final deter-

minations by the Grant Officer was requested by the

Workfare Coalition and certain individual complainants.

13. Eight weeks of hearings before the ALJ were

conducted between August 4, 1980 and March 138, 1981, on

most of the issues raised in the complaints, including

the allegation that Milwaukee County had improperly sub-

stituted Federal funds for non-federal funds in the WAP.

Before the ALJ, Milwaukee County and the Solicitor of

Labor, acting as attorney for the Grant Officer, jointly

defended the Grant Officer’s final deterinination that Mil-

waukee County ‘had not violated CETA’s prohibition

against substitution of Federal funds for local funds, and

that the appropriate ‘‘base’’ year for comparing levels

of non-federal expenditure was 1977.

14. The ALJ decision was not issued until Decem-

ber 5, 1983. The ALJ, rejecting the arguments both of

Milwaukee County and of the Solicitor of Labor attorney

representing the Grant Officer, reversed the ruling that

Milwaukee County had not substituted Federal funds for

local funds and held that the appropriate ‘‘base’’ year

for comparison purposes was 1976, not 1977. The ALJ

ruled that because Milwaukee County spent $1,199,245

less on its workfare program in 1977 and 1978 than it had

in 1976, the County should reimburse the Department

$1,199,245

15, Over $850,000 of the ‘‘shortfall’’? between 1976

County expenditures for PF WP and the expenditures in

1977 and 1978 for PF WP was attributable to wage and

hour reductions for PF WP participants undertaken by

Milwaukee County in reliance on this Court’s then-recent

decision in National League of Citries v. Usury, 426 U.S.

833 (1976), overruling Maryland v. Wirtz, 392 U.S. 183

(1968) and overruled in Garcia v. San Antonio Metro-

politan Transit Authoryty, 105 S.Ct. 1005 (1985). The

ALJ specifically found that those reductions were not

CET A-related, but rather a response to Nattonal League

of Cities. (App., 129-1380). Nonetheless, the ALJ held that

Milwaukee County was required to spend in its loeal

workfare program as much non-federal money in 1977

and 1978, after National League of Cities, as it had in 1976,

before National League of Cities.

16. The ALJ also found that Milwaukee County had

committed no underfunding of the workfare program in

1979 or 1980 and had in facet contributed between $4,000,000

and $5,000,000 of non-federal funds to the program during

each of those vears, substantially in excess of the $3,014,580

spent in the comparison year of 1976. (App., 127). Mil-

waukee County, however, received no credit for these ex-

cess contributions against the $1,199,245 liability to the

Department.

17. The ALJ determination became the Secretary

of Labor’s final action on January 4, 1984, pursuant to

29 C.F.R. § 676.91(f) (1983).

18. Petitioner sought judicial review in the Court

of Appeals pursuant to 29 U.S.C. (Supp. V 1981) 817. The

Court of Appeals denied in part and granted in part the

petition for review and ordered the case remanded to the

Secretary for further proceedings. With respect to the

‘substitution of funds’’ issue, a divided panel of the Court

of Appeals affirmed the Secretary’s conclusion, with the

dissenting judge noting that the majority refused to take

into account the fact that the County had reduced PF WP

wages and hours solely in response to National League of

Cities. The dissenter noted that the majority opinion re-

quiring Milwaukee County to spend as much in 1977 and

1978, notwithstanding the cost savings realized solely in

response to National League of Cities, actually would have

required that Milwaukee County increase its effort, not

merely maintain it. (App. 34-39)

i9. Respecting the effect of the statutory and regu-

latory requirement that the Secretary issue his final de-

termination within 120 days, the Court of Appeals held

that the requirement was not ‘‘jurisdictional.’’? (App.

4-15)

REASONS FOR GRANTING THE PETITION

A. Conflict in the Circuits.

The decision of the Court of Appeals below, holding

that §106(b) of CETA is not jurisdictional, and the deci-

sion in St. Regis Mohawk Tribe v. Brock, 769 F.2d 37 (2d

Cir. 1985). squarely conflict with the decisions in Pierce

County v. United States Department of Labor, 759 F.2d

~ 1398 (9th Cir.), cert. granted, 106 S.Ct. 308 (Nov. 4, 1985)

(No. 85-395), City of Edmonds v. United States Depart-

ment of Labor, 749 F.2d 1419 (9th Cir. 1984), and Lehigh

Valley Manpower Program v. Donovan, 718 F.2d 99 (3d

Cir. 1983). This jurisdictional question over which the

cireuits are in conflict was the sole issue raised by the

Secretary of Labor in his petition for a writ of certiorari

in the Pierce County case, and the Secretary relied extens-

ively on the decision of the Seventh Cireuit in this case

to support his petition. By granting certiorari in the

Pierce County case, this Court has already determined

that the question over which the Courts of Appeals have

split is worthy of certiorari review.

Moreover, the decision below is wrongly decided be-

cause it interprets § 106(b) in a manner that is contrary

to the express language of the statute and that weakens

the strong incentive Congress intended to give the Secre

tary of Labor to resolve promptly those cases awaiting

final determinations. The decision is also contrary to a

long line of cases holding that administrative agencies

must stay within the confines of the powers granted to

them by statute.

1. The language of the 120-day provision is un-

equivocally mandatory, requiring that the Secretary ‘‘ shall

. make the final determination ... not later than 120

days after receiving the complaint.’’ (emphasis added).

The Courts in City of Edmonds v. United States Depart-

ment of Labor, 749 F.2d 1419 (9th Cir. 1984) and Lehigh

Valley Manpower Program v. Donovan, 718 F.2d 99 (3d

Cir. 1983) found the plain meaning of this language to be

mandatory and jurisdictional. Even the court below

‘

grudgingly concedes that §106(b) ‘‘seems to require a

‘final determination’ within 120 days of the receipt of

the complaint’’. (App., 6) As the Court of Appeals noted

in City of Edmonds, a statute should be “construed accord-

ing to the plain meaning of the words used by Congress,

‘absent a clearly expressed legislative intention to the

contrary.’ Consumer Products Safety Commission v. GTE

Sylvania, Inc., 447 U.S. 102, 108 (1980).” 749 F.2d at 1421.

2. There is no such ‘‘clearly expressed legislative in-

in § 106(b) as anything oth-

tention’’ to construe ‘‘shal

er than mandatory and binding on the Secretary. In

reaching a contrary conclusion, the court below relied

principally upon the remarks of Congressman Obey, who

introduced the 120-day provision as an amendment during

the floor debates over the 1978 amendments to CETA.

(App. 6-7) The Court of Appeals for the Ninth Cireuit in

City of Edmonds considered Congressman Obey’s remarks,

but noted that the Joint Explanatory Statement of the Con-

ference Report makes no reference to Congressman Obey’s

floor-debate comments and that the Conference Report,

which was written after Congressman Obey’s comments,

‘‘eonstrued the proposed final draft of the statute to re-

quire that the Secretary ‘must’ make a final determination

within 120 days.” 749 F.2d at 1422. The court also noted,

as this Court observed in Chrysler Corp. v. Brown, 441

U.S. 281, 311 (1979) that the “remarks of a single legis-

lator, even the sponsor, are not controlling in analyzing

legislative history.’’ 749 F.2d at 1422.

3. Moreover, the Senate Report on the 1978 CETA

Amendments shows that Congress was concerned that the

Department was too slow in rectifying alleged abuses in

CETA programs: ‘‘In some cases grievances have either

been ignored, or there have been interminable delays.’’ S.

Rep. 95-891 95th Cong. 2nd Sess. (1978). Giving a juris-

dictional effect to the 120-day provision, thereby creating

an incentive to insure prompt action by the Secretary, is

entirely consistent with this legislative concern.

4. The decision of the court below is too broad be-

cause it fails to give binding effect to the 120-day provi-

sion of §106(b) even where the relief sought does not run

in favor of an aggrieved complainant, but rather to the De-

partment itself. It may be appropriate to find the 120-day

provision not to preclude relief, for example, where a

complainant alleges an|improper termination from a CETA

program and seeks reinstatement and back pay, but to

give the provision preclusive effect where the Department

seeks to disallow costs inenrred due to a substitution of

federal for local funds, as was alleged in this case. Indeed,

the illustrations used by the court below to support its

interpretation of the 120-day provision are those of pro-

gram participants seeking individual relief, rather than

cost disallowances by the Department. The court raises

the specter of the Department having the power of ‘‘pock-

et dismissal’? of an aggrieved participant’s eomplaint.

(App., 8-9) The court speaks of the ‘‘paradoxical hardship

on claimants by destroying their claims if the Secretary

does not aet expeditiously.’? (App., 11) Moreover, the

court distinguished this Court’s decision in Mohasco Corp.

v. Stlver, 447 U.S. 807 (1980) because the statutory time

limit there—42 U.S.C. § 2000e-5(e)—dealt with ‘‘the filing

of a charge by an aggrieved employee, which does not cor-

respond to the situation presented by CETA § 106(b),

where the claimants have filed a timely claim and only the

decisionmaker is responsible for the delay.’’ (emphasis

added) (App.. 18-14) Although the complainants in this

ease alleged a substitution of Federal for local funds, re-

lief for such a violation does not run in favor of the indi-

vidual complainants, but rather in favor of the Depart-

ment. Given Cengress’ purpose to insure prompt resolu-

tion of complaints by the Department, it is entirely con-

sistent with legislative intent to give the mandatory lan-

guage of § 106(b) preclusive effect where the relief sought

runs in favor of the Department.

5. Finally, as noted by the Third Cireuit Court of

Appeals in Lehigh Valley Manpower Program v, Donovan,

718 F.2d 99 (3d Cir. 1983), since the Department incorpor-

ated the 120-day limit into its own regulations, (see 20

C.FLR. 88 676.86(a) (1), (@), 676.88(e) (1982), the Depart

ment is bound by its own rules. 718 F.2d at 101-102. The

court below did not dispute that the Department had vio-

lated its own procedural rule by failing to comply with the

120-day provision, but would have found the regulation

invalid as inconsistent with its statutory source if it were

read as barring relief against grantees. (App., 13)

6. At least in those instances where the Department

seeks relief on its own behalf, as distinct from relief in

favor of program participants, a regulation adopted by

the Secretary imposing on the Department a jurisdictional

requirement would not be contrary to § 106(b) of the Act

in view of the aforementioned congressional purpose of

assuring prompt resolution of complaints.

B. The Decision Below Raises Significant and

Recurring Problems Concerning Compliance

by State and Local Governments with Federal

‘‘Maintenance of Effort’’ Requirements.

The Seventh Cireuit’s decision in this case raises im-

portant and recurring problems concerning compliance by

State and local governments with ‘‘maintenance of ef-

fort’? requirements in Federal grant programs. Definitive

guidelines should be provided by this Court for the proper

application of statutes prohibiting the substitution of Fed-

eral for non-Federal funds so that both Federal grantors

and State and local grantees may properly impiement stat-

utory requirements. The problem addressed in the deei-

sion below is very likely to be a recurring one, since there

are a great many Federal assistance programs which pro-

hibit the substitution of Federal for non-Federal funds for

program purposes, and fluctuations in levels of local spend-

ing are commonplace. By using as its base of comparison,

without statutory warrant, County expenditures during

the year preceding the use of CETA funds, rather than

during the year when CETA funds were first spent by the

County, and by ignoring the effect of local savings at-

tributable to wage and hour reductions implemented in

reliance upon National League of Cities v. Usury, supra,

the Seventh Circuit has transmuted common statutory lan-

guage intended to require maintenance of effort into a

requirement to increase effort.

A great number of Federal grant programs designed

for participation by State and local governments have

statutory restrictions requiring the State or local grantee

to use the Federal funds to supplement, rather than sup-

plant, the state and local level of funding that would oth-

erwise be devoted to program purposes. The statutory

sources of these programs are most commonly found in

Title 20 (Edueation)? and Title 42 (The Publie Health and

2 See, e.g., 20 U.S.C.A. § 1413(a)(9) (Pub.L. 91-230, Title VI,

§ 613, Apr. 13, 1970, 84 Stat. 179; Pub.L. 94-142, § 5(a), Nov. 29,

1975, 89 Stat. 782) (Federal assistance for education of handi-

capped children); 20 U.S.C.A. 2323(b)(16) (Pub.L. 88-210, Title

1, § 113, as added Pub.L. 98-524, § 1, Oct. 19, 1984, 98 Stat.

2445) (Federal assistance for vocational education); 20 U.S.C.A.

§ 3231(f)(4) (Pub.L. 89-10;Title Vii, § 721, as added Pub.L. 98-511,

Title Il, § 201, Oct. 19, 1984, 98 Stat. 2374) (Federal assistance

for bilingual education).

Welfare)’ of the United States Code. Although a few of

the statutes provide express stendards for determining

whether a grantee has mez the required level of

non-federal funding,* the vast majority of the statutes

simply provide that the grant recipient must use the Fed-

eral monies to supplement rather than supplant non-fed-

eral funding or, as with 29 U.S.C. § 703(7), prohibit the

substitution of Federal funds for non-Federal funds. A

number of Federal grant programs intended to create

employment opportunities or to enhance the employability

of certain target populations contain statutory mainten-

ance of effort restrictions that are identical to the CETA

restrictions that Milwaukee County was found to have

violated, i.e., ‘the substitution of Federal funds for other

funds in connection with work that would otherwise be

performed.’’ These include the Community Service Em-

ployment Pilot Program for Handicapped Individuals, 2°

3 See, e.g., 42 US.CA. § 5103(b)(2)(H) (Pub.L. %5-247, Jan. 31,

1974, 88 Stat. 5) (child abuse prevention and treatment); 42

U.S.C.A. § 5301(c) (Pub.L. 93-383, Title 1, § 101, Aug. 22, 1974,

88 Stat. 633) (housin’ and community development); 42 U.S.C.A.

§ 6948(b) (Pub.L. 89-272, Title I, § 4008, as added Pub.L. 94-580,

§ 2, Oct. 21, 1976, ~* Stat. 2818) (solid waste disposal); 42

U.S.C.A. § 9835(c) (Pub.L. 97-35, Tithe VI, § 640, Aug. 13, 1981,

95 Stat. 499) (‘Head Start’ program); 42 U.S.C.A. § 10603(a)(2)(b)

(Pub.L. 98-473, Title Hl, § 1403, Oct. 12, 1984, 98 Stat. 2171)

(crime victim assistance); 42 U.S.C.A. § 10706(d)(1) (Pub.L. 98-

620, Title Il, § 207, Nov. 8, 1984, 98 Stat. 3342) (State Justice

Institutes).

* See, e.g., 20 U.S.CA. § 1206(b)(1) (Pub.L. 89-750, Title I,

§ 307, Nov. 3, 1966, 80 Stat. 1219, as amended Pub.L. 95-561,

Title XI, § 1306, Nov. 1, 1978, 92 Stat. 2359) (adult basic educa-

tion); 20 U.S.C.A. § 2736(a)(1) (Pub.L. 89-10, Title |, § 126, as

added Pub.L. 95-561, Title I, § 101(a), Nov. 1, 1978, 92 Stat.

2168) (special educational needs of children).

U.S.C.A, § 795(b) (1) (B)5; the Older American Community

Service Employment Program, 42 U.S.C.A. § 8056(b) 01)

(E)*; and Community Economic Development Ubran &

Rural Special Impact Programs, 42 U.S.C.A. § 9807(a)

(10)’,

Among the questions that ar necessarily implicated

by these statutes but for which the statutes themselves

provide no guidance are:

(1) What are the appropriate periods of time to com-

pare levels of State or local spending?

(2) Under statutes like 29 U.S.C.A. ¢ 703(7), which

prohibit the substitution of Federal for non-Fed-

eral funds ‘‘in connection with work that would

otherwise be performed,’? may a State or local

grantee reduce non-Federal program expenditures,

without violating the statute, so long as no work

or worker is affected by the spending reduction?

(3. To what extent, if any, should State or local

grantees of Federal assistance be permitted to ef-

fect reductions in non-Federal spending levels, un

related to the availability of Federal funds?

(1) Base of Reference for Comparison.

The Seventh Cireuit rejected Petitioner's argument

that 29 U.S.C.A. § 708(7) could not be violated so long as

the level of local spending after the inception of the CRT A

funded program was not less than the level of local spend.

> Pub.L. 93-112, Title VI, §611, as added Pub.L. 95-602. Title

ll, § 201, Nov. 6, 1978, 92 Stat. 2989.

® Pub.L. 89-73, Title V, § 502, formerly Title IX, § 902, as added

Pub.L. 94-135, Title 1, § 113(a), Nov. 28, 1975, 89 Stat. 720.

” Pub.L. 97-35, Title VI, § 618, Aug. 13, 1981, 95 Stat. 491.

ing at the time the CETA monies were first committed

or spent by Milwaukee County. When Federal assistance

first becomes available in the middle or toward the end

of a year during which a State or local government has

reduced its local expenditures from the preceding year,

not in anticipation of Federal funding, the Seventh

Circuit approach will deter eligible grantees from partici-

pating in the assistance program during that year, since

acceptance of the Federal assistance will trigger a disal-

lowance of costs equal te the difference in program expen-

ditures between the first year of Federal assistance and

the preceding year, whether the spending reductions are

attributable to the availability of Federal assistance or

not. Indeed, it may be expected that those State and local

governments most in need of Federal assistance for certain

programs, because of substantial spending cuts unrelated

to the availability of Federal assistance, will be most hurt

by the Seventh Circuit’s approach to ‘‘maintenance of

effort’’. This in turn will frustrate Congressional pur-

pose in making the Federal assistance available in the

first instance. |

An approach that is less arbitrary, more rational and

consistent with Congressional purpose is to compare the

grantees’ non-Federal spending after the receipt of Fed-

eral assistance with the level that existed at the time of

receipt. not with the level of spending a year before. The

decision of the Seventh Cireuit will require State and

local grantees to increase their program expenditures in

the initial year of Federal assistance over what would

otherwise be spent in the absence of Federal assistance.

(2) Meaning of “work that would otherwise be

performed.”’

The majority opinion below denigrated the signifi-

cance of the reference in 29 U.S.C. § 703(7) to ‘‘work that

would otherwise be performed’’ by holding Milwaukee

County liable for expenditure decreases which were un-

related to CETA funding and which had no effect on work

that was being performed at the time the CETA-funded

program began. Even though Milwaukee County did not

discharge, lay-off or reduce the hours of any of its locally-

funded welfare recipients upon the creation of the supple-

mentary CET A-funded ‘‘workfare’’ program, the major-

ity opinion below held the County liable simply for its

failure to spend as much local money in its program as it

had during the year preceding the creation of the CETA-

funded program. This approach makes the words ‘‘in eon-

nection with work that would otherwise be performed’’

meaningless. Indeed, as the dissenter below pointed out,

the panel majority has effectively transmuted a ‘‘mainte-

nance of effort’? statute into an ‘‘enhancement of effort’’

statute.

Unless reversed or clarified by this Court, the decision

below will have a chilling effect on State and local partici-

pation in Federal work-related grant programs during any

vear in which, for any legitimate reason, the potential

grantee has substantially reduced its level of expenditures

from the preceding year. It is important to note that

neither the Secretary nor the Seventh Cireuit majority be-

low found that Milwaukee County had reduced its expendi-

tures ‘‘in anticipation of’’ Federal assistance but rather

that it had substituted Federal for non-Federal funds ‘‘in

connection with work that would otherwise be per-

formed.’’ Thus, regardless of the reason for loeal spend-

ing reductions, a state or local government which initiates

participation in a Federal work program during a year of

reduced spending but not reduced work, will do so at the

risk of being found to have substituted funds ‘‘in connec

tion with work that would otherwise be performed.”

(3) Effect of Cost-Efficiencies

By adopting an approach to determining maintenance

of effort violations that ignores the reasons for decreases

in local program spending from year to year and that ig-

nores the effects of cost efficiencies on program opera-

tions, the decision below will operate to discourage that

which should be encouraged: legitimate reductions in

state and local government spending levels not attributable

in fact to the availability of Federal assistance. With the

advantage of hindsight, it is clear that Milwaukee County’s

mistake, if there was one, was in creating a program for

CETA-eligible welfare recipients akin to its loeally-funded

program in the middle of a year when local expenditures

were below the previous year’s, in large measure due to

savings realized afier this Court decided National Leaque

of Cities v. Usury, supra. As the dissenting opinion be-

low pointed out, by requiring that these savings be reim-

bursed to the Federal government, ‘‘the majority decision

penalizes a community that effectuated cost-saving and

cost-efficient programs for the benefit of welfare re-

cipients and taxpayers as well.” (App., 39) Focusing as

it does exclusively on comparative annual expenditures,

the decision below vitiates the normal incentives to in-

creasing productivity and cost-effectiveness for state and

local governments participating in the manifold lederal

assistance program requiring maintenance of effort. It is

hard to believe that this is what Congress intended by pro-

hibiting ‘‘the substitution of Federal for non-Federal

funds in connection with work that would otherwise be

performed.’’

CONCLUSION

For these reasons, a writ of certiorari should issue

to review the decision and opinion of the Seventh Cireuit.

Respectfully submitted,

Rosert H. F'RIeBERT

CHARLES D. CLAUSEN

Davin P. Lowe

Attorneys for Petitioner

P.O. ADDRESS:

Friesert, Finerty & Sr. Jonn, S.C.

Two Plaza East - Suite 1250

330 East Kilbourn Avenue

Milwaukee, Wisconsin 53202

(414) 271-0130

December, 1985

tice.

App. 1

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

No. 84-1067

Mi.wavukkeE County, Wisconsin,

Petitioner,

Wintuam EK. Brock, SECRETARY OF THE

Unirep Stares DeparrMent or Lapor,

Respondent.

Gin ray

Petition for Review of an Order of the

United States Department of Labor

a o—

ARGUED SEPTEMBER 20, 1984—Decipen AvucGust 6, 1985*

ray

Berore Escupacu and Correy, Circuit Judges, and

Grant, Senior District Judge.**

* On July 17, 1985, while a draft of this opinion was being cir-

culated among all of the judges of this court in regular active

service pursuant to Circuit Rule 16(e) because Section II had

created a conflict with the decision of the United States Court of

Appeals for the Third Circuit in Lehigh Valley Manpower Pio-

gram v. Donovan, 718 F.2d 99 (3d Cir. 1983), and that of the

United States Court of Appeals for the Ninth Circuit in City of

Edmonds v. United States Department of Labor, 749 F.2d 1419

(9th Cir. 1984), the United States Court ot Appeals for the Sec- _

ond Circuit issued its opinion in St. Regis Mohawk Tribe, New

‘ = & v. Brock, No. 85-4042 (2d Cir. July 17, 1985) (Friendly, J.),

ini Which it held that the 120 day limitation of CETA § 106(b)

was not jurisdictional. The Rule 16(e) submission was, there-

fore, withdrawn.

** The Honorable Robert A. Grant, Senior District Judge for

the Northern District of Indiana, sitting by designation.

App. 2

Kscusacn, Circuit Judge. This dispute arises out of

the development aud administration by Milwaukee Coun-

ty, Wisconsin (‘*County’’ or ‘‘Petitioner’’) of programs

funded under the Comprehensive Employment and Train-

ing Act (“‘CETA”’ or ‘‘Act’’), 29 U.S.C. §§ 801-999 (Supp.

I] 1978). The County petitions for review of an order of

the Seeretary of the United States Department of Labor

(‘*Seeretary’’) in which it was determined, inter aliv that

(1) in 1977 and 1978, the County has substituted appr-.ci-

mately $1.2 million in federal CETA funds for County

funds in violation of CEHTA ‘‘maintenanee of effort’?

requirements; (2) the County, because of a violation of

CHTA wage and benefit regulations, was required to

perform a record review and provide backpay and benefits

to former participants; (8) costs associated with 17 in-

eligible CK'TA participants would be disallowed; and (4) a

former County employee was entitled to backpay for

wrongful discharge. In addition, the County now argues

that the Secretary was barred from ordering relief be-

cause he failed to observe the statutory time limits for the

processing of claims against CETA grantees. For the

reasons stated below, we grant in part and deny in part

the petition for review.

|. Procedural History

This action arose from the consolidation of a series of

complaints filed with the United States Department of

Labor (‘‘DOL’’). The first written complaint was received

by the DOL in February 1978. A second letter of com-

plaint, containing 57 issues and signed by 22 persons, was

received in May 1978. Most of the matters raised ir the

initial complaint were alleged in more detail in the second

complaint. A third complaint in December 1979 added 16

—— |

App. 3

new allegations. Two additional and independent com-

plaints were filed in May 1978 and Janaury 1980. These

five complaints were subsequently consolidated with other

individual complaints.

The Grant Officer issued his initial determination on

May 29, 1979. In response to a hearing request from the

representative of one of the parties filed on December 11,

1979, the Office of the Administrative Law Judges ordered

the Grant Officer to provide his final determination by

December 30; the final determination was in fact issued on

January 4, 1980.

Hearings before tlhe ALJ began on August 4, 1980,

and were coneluded on March 13, 1981, with the ALJ

issuing his decision on December 5, 1988. This petition for

review followed.!

1 The statutory source of our jurisdiction is 29 U.S.C. § 817(a)

(Supp. Il 1978). The decision of the ALJ became the final de-

cision of the Secretary under 20 C.F.R. § 676.91(f) (1983).

CETA was originally enacted in 1973 as Pub. L. No. 93-203,

87 Stat. 839, amende: in 1974 by Pub. L. No. 93-567, 88 Stat.

1845, in 1976 by Pub. L. No. 94-444, 90 Stat. 1476, and in 1977 by

Pub. L. No. 95-93, 91 Stat. 627, and substantially revised in 1978

by Pub. L. No. 95-524, 92 Stat. 1909. The Act was repealed,

effective October 13, 1982, by § 184 of the Job Training Partner-

ship Act (“JTPA”), Pub. L. No. 97-300, 96 Stat. 1322, 1357

(1982). However, JTPA § 181(e), 96 Stat. 1355, 29 U.S.C. § 1591(e),

provides that the new legislation ‘shall not affect administra-

tive or judicial proceedings pending on [October 13, 1982],

or begun between [October 13, 1982,] and September 30, 1984,

under [CETA].”

Because the events that gave rise to this petition for review

occurred before the effective date of the 1978 CETA amend-

ments, the substantive provisions of the 1973 version of the Act,

as amended prior to 1978, govern the resolution of this case.

Unless otherwise noted, however, the procedural and remedial

aspects of this action are controlled by the Act as amended in

7978.

App. 4

ll. Jurisdiction

Before considering the merits of the Secretary’s or-

der, we address the threshold argument presented by

Petitioner that, because the ‘‘final determination’’ of the

Grant Officer was not issued within 120 days of the receipt

of the initial complaint, the Seeretary was divested of

Jurisdiction under § 106(b) of the Aet, 29 U.S.C. § 816(b)

(Supp. IL 1978), and, therefore, was ‘‘barred from reecov-

ering agaist the petitioner.’’ After a thorough exam-

ination of the language of § 106(b), its legislative history,

and the general purpose behind the 1978 amendments to

the Act, we conclude that the 120-day limit of § 106(b) is

not jurisdictional and, therefore, that the Seeretary had

the authority to proceed against Petitioner?

We would initially note the well-established canon of

construction that a single provision will not be interpreted

2 In the context of this opinion, the term “jurisdictional” re-

fers to a statutory requirement that, if not complied with by the

agency, would divest that agency of all power to act on the

matter and that would not allow for any consideration of, for

example, equitable exceptions or prejudice to the litigants. A

parallel in federal litigation would be a requirement (such as

diversity) necessary to the district court’s subject-matter juris-

diction.

The term ‘‘mandatory” refers to a statutory requirement

that the agency should attempt to comply with as a matter of

course; however, the failure to comply does not automatically

divest the agency of power to act, but may provide the litigants

with, for example, the right to compel the agency to act. Cf. 5

U.S.C. § 706.

The term “directory” refers to a statutory provision that is

hortatory only and thus coniers no right on the litigants to

compel agency action.

Under the facts of this case, we need only determine wheth-

er § 106(b) is “jurisdictional” and, therefore, we express no

opinion on the question whether this provision is either ‘“man-

datory” o» “directory.”

App. 5

so as to defeat the general purpose that animates and

informs a particular legislative scheme. See Bob Jones

University v. United States, 461 U.S. 574, 586, 103 S. Ct.

2017, 2025-2 (1983); United States v. American Trucking

Associations, Inc., 310 U.S. 534, 543-44, GO S. Ct. 1059,

1063-64 (1940). We, of course, do not substitute our

judgment for that of Congress, but merely attribute to

that legislative body a general overriding intent to avoid

results that would undermine or vitiate the purposes of

specific provisions. Cf. Sorrells v. United States, 287 U.S.

435, 447, 53 S. Ct. 210, 214 (1982).

In addition, it is beyond dispute that the 1978 amend-

ments to the Aet were ‘‘remedial’’ in nature, in that they

were intended to give the Secretary greater power to

prevent and correct the fraud and abuse that had devel-

oped in CETA programs. See S. Rep. No. 891, 95th Cong.,

Yd Sess. 42-48 (1978). reprinted in 1978 U.S. Code Cong. &

Ad. News 4480, 4522-23; H.R. Rep. No. 1124, 95th Cong., 2d

Sess. 3, 5-6, 13 (1978); 124 Cong. Ree. 27,789 remarks of

Sen. Bellmon), 27,223 (remarks of Sen. Nelson), 25,183

(remarks of Rep. Myers), 25,182 (remarks of Rep. Leh-

man) 25,168 (remarks of Rep. Hawkins) (1978); see also

18 U.S.C. § 665; 29 U.S.C. §§ 816(d)(1), (e), (f), 825(g),

836 (Supp. II 1978). We acknowledge, of course, that the

term ‘‘remedial’’ does not have talismanie significance in

the construction of legislation. Cf. Zimmerman 'v. North

American Signal Co., 704 F.2d 347, 353 (7th Cir. 1983). It

does, however, affect the presumptions to be employed.

With reference to the 1978 CETA amendments, we must

in doubtful situations indulge in a presumption in favor of

the Seeretary’s jurisdiction and will construe the Act

accordingly.

eee

App. 6

Section 106(b) provides in relevant part:

Investigation Of Complaints By Secretary

Whenever the Secretary receives a complaint

from any interested person or organization .. . which

alleges, or whenever the Secretary has reason to

believe . . . that a recipient of financial assistance

under this chapter is failing to comply with the

requirements of this chapter, the regulations under

this chapter or the terms of the comprehensive em-

ployment and training plan, the Seeretary shall in-

vestigate the matter. The Secretary shall conduct

such investigation, and make the final determination

required by the following sentence regarding the

truth of the allegation or belief involved, not later

than 120 days after receiving the complaint. If, after

such investigation, the Secretary determines that

there is substantial evidence to support such allega-

tion or belief that such a recipient is failing to comply

with such requirements, the Secretary shall, after due

notice and opportunity for a hearing to such recipient,

determine whether such allegation or belief is true.

It should be noted that §106(b), when read as a

whole, is opaquely written and that the second sentence of

the provision, when considered in isolation, seems to

require a ‘*final determination’’ within 120 days of the

receipt of the complaint. It should also be noted that

§ 106(b) does not expressly address the situation present-

ed in the instant case, ?.e., the timing requirements for the

final determination after the consolidation of numerous

related complaints.

The second sentence did not in fact appear in the

original bill, but was proposed by Congressman Obey and

added as an amendment during the floor debates on the

1978 amendments to the Act. 124 Cong. Ree. 25,230-31

(1978). The Obey amendment actually contained two

(pp. 7

separate provisions. The first required that the prime

sponsor reach a decision on a grievance within 60 days

after the filing of the grievance; the second was the 120-

day provision at issue in the instant dispute. After the

reading of the amendments, the following colloquy oe-

curred:

Mr. OBEY. Mr. Chairman, I understand this

amendment will be accepted by the committee. It is a

very simple amendment. All it does is put a specific

period of time in the bill during which the prime

sponsor must answer a complaint lodged against it for

violations of the conditions under which the CETA

program exists in the first place, and also it estab-

lishes a 120-day time limit on the time during which

the Labor Department can consider a complaint be-

fore it has to proceed.

Mr. HAWKINS [sponsor of original bill}. Mr.

Chairman, we have seen the amendment. We accept

the amendment.

If [Mr. OBEY) would further yield, do 1 under-

stand from [him] that if the determination is not

made in a specified time it shall not affect the Secre-

tary’s jurisdiction in the matter?

Mr. OBEY. That. is correet.

Mr. HAWKINS. With that understanding we do

accept the amendment.

ld.

Thus, it is clear from this exchange that the author of

the 120-day provision and the sponsor of the original bill

did not consider it jurisdictional in any way. Of course,

these statements are not controlling; nevertheless, we

find them highly persuasive. They were made by the

———rrrrereee

App. 8

author of the amendment and the sponsor of the original

bill on the floor of the House during debates on the bill. In

addition, no contrary view of the jurisdictional effect of

the amendment was expressed, no objection was voiced,

and nothing in the record indicates that Congress may

have had an intent different from that expressed in this

exchange.

We also find further support for our position in the

general purposes of the 1978 amendments to the Act To

ensure that CETA funds would not be diverted from their

intended purposes, Congress sought to grant the Secre-

tary ‘‘maximum authority to protect the integrity of the

program.’’ S. Rep. No. 891, supra, at 21, reprinted in 1978

U.S. Code Cong. & Ad. News at 4501. It is also evident

that Congress was aware that the DOL commanded in-

sufficient resources to handle CETA investigations and

that there was a backlog in the Department. See id. at 42,

reprinted in 1978 U.S. Code Cong. & Ad. News at 4522;

H.R. Rep. No. 1124, 95th Cong., 2d Sess., 3, 5-6, 18; see also

124 Cong. Ree. 31,021 (1978) (remarks of Rep. Maguire) ;

id. at 31,026 (remarks of Rep. Collins). Thus, it would

indeed be incongruous to conclude that Congress would

have the Secretary divested ef jurisdiction under § 106(b)

when he does not render his final determination within

four months of the receipt of the complaint. Cf. Occidental

Life Insurance Co. v. EEOC, 432 U.S, 355, 369-71, 97 S.Ct.

3. The congressional reports that refer specifically to the 120-

day limit of the 1978 amendments are unilluminating, as they

merely track the language of § 106(b) and offer no elaboration.

See S. Rep. No. 891, 95th Cong., 2d Sess. 43, 80 (1978), reprinted

in 1978 U.S. Code Cong. & Ad. News 4480, 4523, 4560; H.R. Conf.

Rep. No. 1765, 95th Cong., 2d Sess. 123 (1978), reprinted in 1978

U.S. Code Cong. & Ad. News 4581, 4588.

App. 9

2447, 2496-57 (1977). In addition, suen an interpretation

would, in effect, give the DOL the power of ‘pocket

dismissal (analogous to the President’s ‘‘pocket veto’’), a

power entirely inconsistent with the duty to ferret out

fraud and abuse in the CETA system. Furthermore, the

argument for a jurisdictional bar is weakened by the fact

that the Act does not specify the consequences of the

Secretary’s failure to comply with the 120-day limit. See

Thomas v. Barry, 729 F.2d 1469, 1470 0.5 (D.C. Cir. 1984) ;

Usery v. Whitin Machine Works, Inc. 554 2d 498, 501

(Ist Cir, 1977); Tri-State Seceanteniathin: lune. v. Board of

Govornors, 524 F.2d 562, 565-66 (7th Cir. 1975): Fort

Worth National Corp. v. Federal Savinas & Loan lusur-

ance Corp,, 469 F.2d 47, 58 (Sth Cir. 1972); ef. Zipes v.

Trans World Airlines, Inc., 455 U.S. 385, 398-94, 102 S. Ct.

1127, 1132-33 (1982).

The instant case vividly illustrates why the 120-day

limit cannot be construed as jurisdictional. Counsel for

Respondent informed this court at oral argument that

this was the most elaberate and time-consuming CETA

dispute to date. As noted above, the Grant Officer was

confronted with over seventy separate ‘counts’ derived

from a series of complaints that were filed over an approx

imately two-year period. Of course, the proceedings

before the ALJ are not included in the 120-day period

* It should be noted that, under CETA § 106(b) and 20 C.F.R.

§ 676.86 (1984), the 120-day period begins to run from the date

the Grant Officer receives a complaint filed after the exhaustion

by the complainant of local administrative remedies. This in-

itial complaint, of course, may be amended, clarified, or ampli-

fied at any time during the proceedings and such modifications

(Continued on following page)

App. 10

We will refer to them, however, as they illustrate the

complexity of this dispute. Petitioner described the hear-

ing before the ALJ as follows: ‘‘This case, as presented to

the ALJ, involved a great number of issues. Thirty-nine

days were spent in evidentiary hearings, approximately

9,000 pages of transcript were generated, and hundreds of

exhibits were offered and received.’’ Petitioner’s Brief at

4. The ALJ described the allegations presented as an

‘‘almost unmanageable conglomerate mass.’’ See also Peti-

tioner’s Appendix at 68-69 (ALJ’s discussion of com-

plexity of dispute and reasons for Grant Officer’s delay).

His final order covered eighty single-spaced typewritten

pages. The requirement of a final determination from the

(Continued from previous page)

relate back to the original filing date, 20 C.F.R. § 676.86(b)(7).

The Grant Officer must first investigate the complaint and then

issue an “Initial Determination” that there is or is not sufficient

evidence to support the allegations of the complaint, id.

§ 676.86(c), § 676.88(a), (b); see also id. § 686.86(d)-(h). In this

case, for example, the Grant Officer was obliged to conduct a

lengthy investigation, which included interviews with approxi-

mately 67 individuals.

An opportunity for an informal resolution must then be

provided, id. § 676.88(d). If the parties cannot resolve the dis-

pute, the Officer must then issue a “Final Determination,”

which shall (1) indicate the efforts undertaken to resolve infor-

mally the matters contained in the initial determination, (2)

list those matters upon which the parties continue to disagree,

(3) list any sanctions and required corrective actions, and (4)

inform the parties of their opportunity to request a hearing

before an ALJ, id. § 676.88(e). It is this document that consti-

tutes the “final determination” required within 120 days under

§ 106(b). See 20 C.F.R. § 676.86(a) (1); cf. id. § 676.86(a)(2). Thus,

the final-determination process “consists of the non-criminal

investigation, the determination of substantial evidence (either

supporting or not supporting the allegations of the complaint

_..), and the procedures regarding notice, informal resolution

or lack of informal resolution, and notice of opportunity for

hearing,” id. § 676.86(a)(1), under the Act, but does not include

subsequent proceedings before the ALJ.

App. 11

Grant Officer in 120 days under these facts would be a

practical impossibility at best, and the effeet of such a

construction would be to remove completely disputes of

this kind from the Seeretary’s jurisdiction and to ex.

tinguish absolutely the claims of innocent complainants,

even though they were in no way untimely or at fault in

initiating the action.

Thus, we conclude that the 120-day limit is not

jurisdictional, for such a construction would be inconsist-

ent with the purpose of the 1978 amendments and would

frustrate the intent of Congress to accord the Secretary

‘‘maximum authority’’ to control abuse and fraud in

CETA programs. In addition, we believe that the 120-day

limit was intended to benefit claimants by ensuring that

their claims would be resolved expeditiously. If jurisdiec-

tional, the limit would impose a paradoxical hardship on

claimants by destroying their claims if the Secretary does

not act expeditiously. In effect, timely claims would be de-

feated by the Secretary’s failure or inability to process

those claims. Our conclusion is not only supported by the

specific cirevmstances of the 1978 CETA Amendmenis, but

also by the general rule that agency action should not be

set aside for delay, see, e.g., NLRB v. International Asso-

ciation of Bridge, Structural & Ornamental Ironworkers,

— U.S. —, 104 8S. Ct. 2081 (1984) (Administrative Pro-

cedure Act and National Labor Relations Act); NLRB v.

J.H. Rutter-Rex Mfg. Co., 396 U.S. 258, 263-66 & n.3, 90

S. Ct. 417, 420-21 & n.3 (1969) (same); Garvey Grain Co. v.

Director, 639 F.2d 366, 368 n.3, 372 (7th Cir. 1981)

(Longshoremen’s and Harbor Workers’ Compensation

Act); Ralpho v. Bell, 569 F.2d 607, 626-28 (D.C. Cir. 1977)

(Micronesian Claims Act of 1971); Usery v. Whittin Ma-

App. 12

chine Works, Inc., 554 F.2d 498, 501-03 (1st Cir. 1977)

(Trade Act of 1977); sce also Chromeraft Corp. v. EEOC,

465 F.2d 745 (5th Cir, 1972) (Administrative Procedure

Act); ef. Logan v. Zimmerman Brush Co., 455 U.S. 422,

102 S. Ct. 1148 (1982); ln re Grand Jury Proceedings, 757

I’.2d 108, 110-12 a1 (7th Cir.) (30-day limit of 28 U.S.C.

§ 1826(b) not jurisdictional), cert. denied, — U.S. —,

100 8S. Ct. 2025 (1985), as the contrary rule would place the

adverse consequences on the specific beneficiaries of the

legislation and on federal taxpayers generally and would

allow the alleged wrongdoer to escape liability merely

because of a procedural default on the part of the ageney.

We note that the Court of Appeals for the Third

Cireuit, in Lehigh Valley Manpower Program v. Donovan,

718 F.2d 99 (8d Cir, 1983), has considered the effect of the

Grant Officer's failure to comply with the 120-day limit of

§106(b). Although it did not expressly denominate

§ 106(b) as ‘‘jurisdictional,’’ the Third Cirenit did hold

that the Grant’s Officer's failure to comply with that pro-

vision divested the Secretary of all power to act and that

the question of prejudice to the litigants was irrelevant.

The Secretary’s order was then set aside. Thus, in the

context of this decision, see supra note 2, the court. in

Lehigh construed § 106(b) as ‘*jurisdictional.’’ Given our

own independent analysis of the question, we decline to

follow the Lehigh decision.

The Third Cireuit examined the language of § 106(b),

but did not consider its legislative history or the general

purpose of the 1978 amendments, even though the court

acknowledged that the ‘‘[i]nsertion of the Obey amend-

ment... resultfed] in a somewhat garbled provision.’’ 718

F.2d at 101. In addition, the court placed great weight on

Wiis tistics saat Mie

App. 13

the DOL’s ineorporation of the 120-day limit into the

CHTA regulations. See e.g., 20 C.F.R. §§ 676.86(a) (1),

(c), 676.88(e) (1983). The agency, according to the Third

Circuit, was bound by its own procedural rules. This is, of

course, usually the case, but the threshold question, which

the court in Lehigh did not exhaustively examine, is

whether the regulations were consistent with their statu-

tory source, as it is the enabling legislation that deter-

mines the scope of any corresponding regulatory provi-

sion.

More recently, the Court of Appeals for the Ninth

Circuit, in City of Edmonds v. United States Department

of Labor, 749 F.2d 1419 (9th Cir. 1984), has expressly

held that § 106(b) is jurisdictional. See also Pierce County

v. United States, 759 F.2d 1598 (9th Cir. 1985). For the

most part, the court in “dmonds simply adopted the rea-

soning of the Lehigh decision. In addition, the court in

Edmonds, focusing on the use of the word ‘‘shall’’? in

§ 106(b), conclude that this term was generally ‘* manda-

tory’’ and stated that there was no reason to depart from

this interpretation,

The court relied in part in reaching its conclusion on

the Supreme Court’s decision in Mohasco Corp, v. Silver,

447 U.S. 807, 100 S. Ct. 2486 (1980), which construed the

use of the term ‘‘shall’’ in 49 U.S.C. § 2000e-5(c) and (e) to

5 As indicated in the text, after our own independent analysis,

we have concluded that § 106(b) is not jurisdictional. If 20

C.F.R. §§ 676.86 and 676.88 could only be read as imposing a

jurisdictional requirement, we would also find that they con-

travene § 106(b) and were, therefore, invalid. However, as these

regulations merely follow the language of the statute, they must

be construed as imposing a time limit that is no more onerous

than that of § 106(b) itself. Thus, the Grant Officer’s failure to

comply with the DOL’s regulations did not divest the Secretary

of jurisdiction.

App. 14

impose a mandatory requirement of filing a charge with

the EEOC within the statutory time limits. We, of

of course, can distinguish Mohasco on the ground that

§ 2000e-5(e) deals with the filing of a charge by an ag-

grieved employee, which does not correspond to the situa-

tion presented by CETA §106(>), where the claimants

have filed a timely claim and uoniy the decisionmaker is re-

sponsible for the delay. However, cases subsequent to Mo-

hasco provide a definitive response to the Edmonds deci-

sion. It is true that the Court in Mohasco found the filing

requirement to be mandatory. It does not follow, however,

that all ‘‘mandatory’’ requirements are ‘‘jurisdictional.’’

The Mohasco decision itself is ambiguous on the jurisdic-

tional guestion. Compare 447 U.S. at 811-12, 100 S. Ct. at

2490 with ad. at 811 n.9, 100 8. Ct. at 2490 n.9. Any ques-

tions concerning the character of § 2000e-5(e), however,

were unequivocally dispelled in Zipes v. Trans World Air-

lines, Inc,, 455 U.S. 385, 393, 102 S. Ct. 1127, 1132 (1982), in

which the Supreme Court held that ‘‘filing a timely charge

of discrimination with the EEOC is not a jurisdictional

prerequisite to suit in federal court, but a requirement

that, like a statute of limitations, is subject to waiver,

estoppel, and equitable tolling.’’ The Court did not simply

rely on the use of the term ‘‘shall,’’ but considered the

specific context in which it appeared and concluded that

the imposition of a jurisdictional requirement would be

inconsistent with the legislative history and the remedial

purposes of Title VIL.

The Zipes decision aptiy illustrates that no universal

legislative lexicon has yet been developed and that the

App. 15

courts, therefore, must consider each provision against the

background of its enactment. Cf. Wirtz v. Local 153, Glass

Bottle blowers Ass’n, 389 U.S. 463, 468, 88 S. Ct. 643, 646

(1968). The legislature’s use of terms such as ‘‘shall’’ and

‘‘must,’’ rather than ‘‘may,’’ does not automatically re-

quire that the provision be construed as mandatory, muck

less jurisdictional. A variety of factors must be con-

sidered, including whether such a construction would pro-

duce an absurd or unnecessarily harsh result. See Bar-

tholomew v. United Staies, 740 F.2d 526, (7th Cir. 1984) ;

Ralpho v. Pell, 569 F.2d 607, 626-28 (D.C. Cir. 1977); see

also Walsh v. United States, 723 F.2d 570, 873-74 (7th Cir.

1983) (‘‘may’’ construed as mandatory); Thompson v.

Clifford, 408 F.2d 154, 158-60 (D.C. Cir. 1968) (same). In

the context of § 106(b), such an interpretation would lead

to ‘‘absurd’”’ and ‘‘harsh’’ results, in the sense that it

would undermine the general purposes of the 1978 CETA

amendments described above and the evident purpose of

the 120-day limit itself.

In conclusion, the Grant Officer’s failure to comply

with the 120-day deadline of §106(b) did not divest the

DOL of jurisdiction over this dispute. We will now con-

sider the merits of the Secretary’s decision.

Ill. ‘‘Maintenance of Effort’’ Violations®

As authorized by state law, the County has, since the

1930’s, maintained some form of work relief for general-

6 Pursuant to Fed. R. App. P. 17(b), the DOL filed a certified

list with this court in lieu of the administrative record. Although

the party seeking review is ordinarily responsible for assembling

the record, Trotter v. Klincar, 748 F.2d 1177, 1184 n.8 (7th Cir.

1984), Rule 17(b) represents a departure from this allocation of

responsibility, see J. Moore, B. Ward & J. Lucas, 9 Moore’s Fed-

eral Practice 9] 217.02[1], |3] (2d ed. 1982).

(Continued on following page)

App. 16

assistance recipients. See Wis. Stat. § 49.002. During the

1970’s, this program was known as the Pay for Work

Program (‘‘PFWP’’) and, prior to 1977, it provided 550 to

750 minimum-wage positions, primarily within the county

government, for individuals who would otherwise be re-

ceiving cash welfare grants. Both the general-assistance

program and the PF WP programs were funded by County

revenues.

During the period under consideration, Petitioner

made the following expenditures for PF WP:

YEAR EXPENDITURE

5 een nt $2,335,996

rr | ere $3,014,580

OT ce 2,097,428

en soccsilcasie ata $ 333,277

(Continued on following page)

We acknowledge the value of Rule 17(b) in that it allows

parties seeking review of agency action to forego the expense

associated with filing and transcribing the complete adminis-

trative record when an examination of the entire record may

not be necessary. Nonetheless, although technically permissible,

the filing of a certified list may be inappropriate, especially if

the Petitioner challenges the evidentiary basis of the agency’s

rulings. If the Petitioner is relying on some portion of the rec-

ord, it should at least provide it in an appendix to the court.

In any event, the County does not, for the most part, dis-

pute the Secretary’s findings of fact, but rather the application

of the relevant legal rules to those facts. To the extent that the

County disagrees with the Secretary’s findings, we have deter-

mined that these facts are not material to the resolution of this

dispute. Thus, we have proceeded to consider the Secretary’s

order on the basis of the briefs and appendices filed with this

court.

App. 17 |

Petitioner also made the following expenditures on

general-assistance grants:

YEAR EXPENDITURE

1976 $8,705,256

1977 $8,818,328

Petitioner had originally budgeted for 1977 over $4.2

million for PF WP in order to expand the program to 1200

positions. This goal, however, was never achieved. The

initial budget for general assistance for the same year of

$3.1 million was substantially less than the amount ac-

tually spent in 1976. The ALJ in fact found that the 1977

budget had been set at an ‘‘unrealistically low’’ level. In

early 1977, it became apparent that the original budget

for the general-assistance program was inadequate. The

County transferred during the latter half of 1977 $2.2

million from PF WP and $1.25 million from the County

contingency fund to general assistance and _ ultimately

spent $8.8 million for general assistance. By the middle of

1977, however, PF WP had approximately 682 participants

and a ‘‘backlog’’ of 2,000 individuals who were eligible for

the program, but for whom positions were not available.

During the first half of 1977, the County began

planning for a new CETA program that would provide

training and work experience to individuals eligible for

general assistance, /.e., the same class of individuals served

by PF WP. The result was the creation of two new CETA

programs. The first, Learn-to-EKarn (‘‘LTE”’’), which be-

gan in June 1977, was a training program in job-search

skills and was funded under Title I of the Act. The

original budget for LTE was $1,022.311 for the period

from June 7, 1977, to December 31, 1977. The second,

App. 18

Handicapped Serving the Hardicapped (‘‘HSH?’’), pro-

vided work-experience and _ public-service employment

positions in sheltered workshops and was funded under

Title VI of the Act. The original budget for HSH was

‘2,409,624 for the period from July 1, 1977, to June 30,

1978. By the end of 1977, 571 general-assistance eligibles

were enrolled in the work-experience segment of HSH.

In early 1978, LTE and HSH were combined and

renamed the Work Assistance Program (‘‘WAP”’’). Addi-

tional funding was obtained under Titles II (publie service

employment) and III (youth employment) of the Act, and

from the County. WAP, like its predecessors LTE and

HSH, was to benefit the general-assistance population.

Although it is not essential to the resolution of this

dispute, there are indications that, during the second half

of 1977, participation in PF WP began to decline and that

the County apparently reduced its referrals to PF WP and

began to refer eligible general-assistance applicants to

the CETA programs. Thus, it would appear that, in

January 1978, when the County transferred PF WP to the

CETA Work Assistance Program, the number of partici-

pants in the County-funded program was below 682.

The Grant Officer found that, because PF WP was

discontinued in January of 1978, the County’s ex-

penditures in 1977 should be used as the benchmark in

determining whether a violation of the CETA mainte-

nance-of-effort provisions had occurred. Thus, since the

total amount of non-federal funds expended for work-

experience positions for general-assistance eligibles in

1978 was greater than the corresponding amounts for 1977,

the Grant Officer found no violation. |

App. 19

The Secretary reversed this portion of the Final De-

termination. He first rejected the Grant Officer’s reason-

ing as too superficial, because it did not account for the

fact that CETA funds were initially expended in 1977.

After finding that WAP was the functional replacement

for PFWP, in that both programs provided work-

experience positions for the general-assistance population

in lieu of cash grants, the Secretary concluded that this

replacement began in 1977, when CETA funds were first

used for the LTE and 1ISH programs. He also found that:

The record leaves absolutely no doubt that the

major purpose of the WAP was to save County tax

levy dollars previously spent on both General Assist-

ance and the PF WP by creating a new employment

and training program for General Assistance eligibles

to be supported by Federal CETA dollars.

The Secretary concluded that Petitioner had violated

the maintenance of effort provisions in that it failed to

maintain its funding in 1977 and 1978 (when these CETA

programs were first implemented) at the 1976 level and

that the substitution of CETA funds resulted in the

substitution of federal for non-federal funds ‘‘in con-

nection with work that would otherwise be performed.”’

The year 1976 was chosen as the base year for comparison,

because this was the most recent year during which no

CETA money was expended for work-experience positions

for the general-assistance population. Thus, the extent of

the substitution was determined in the following manner:

NON-FEDERAL

YEAR EXPENDITURES “SHORTFALL”

Cea $3,014,580 N/A

ee $2,097,428 $ 917,152

ee $9 732,487 $ 282,093

TOTAL: $1,199,245

App. 20

The County was, therefore, ordered to pay $1,199,245 in

disallowed costs to the DOL.

CETA contains a number of ‘‘maintenance of effort’?

provisions designed, in general, to require CETA grantees

to use CHTA funds to create new employment and train-

ing opportunities, to guard against the displacement of

current civil-service employees, and to ensure that federal

grants are not substituted for local funding of the same

jobs or public services.’ Certain provisions prohibit ‘‘the

substitution of Federal for other funds in connection with

work thai would otherwise be performed.’’® Section 605(b)

of the Act® states that ‘‘{nJo funds for publie service

employment programs under this chapter may be used to

provide publie services, through a private or nonprofit

organization or institution, which are customarily pro-

vided by a State, a political subdivision, or a loeal eduea-

tional ageney in the area served by the project.’’ Other

provisions prohibit) the substitution of federal for

nonfederal funds."

7 See generally CETA § 205(c)(8), (25), 29 U.S.C. § 845(c)(8), (25)

(1976); CETA § 208(a)(1), 29 U.S.C. § 848(a)(1) (1976); CETA

§ 353(a), (b)(1)-(6), 29 U.S.C. § 895b(a), (b)(1)-(6) (Supp. | 1977);

CETA § 602(c), 29 U.S.C. § 962(c) (1976); CETA § 605(b), 29 U.S.C.

§ 965(b) (1976); CETA § 703(7), (11), 29 U.S.C. § 983(7), (11)

(1976); see also 29 C.F.R. §§ 96.24, 97.334, 97.719, 99.34 (1978).

8 See, e.g., CETA § 208(a)(1)(C), 29 U.S.C. § 848(a}(1)(C) (1976);

CETA § 353(b)(3), 29 U.S.C. § 895b(b)(3) (Supp. | 1977); CETA

§ 602(c), 29 U.S.C. § 962(c) (1976); CETA § 703(7), 29 U.S.C.

§ 983(7) (1976); see also 29 C.F.R. § 99.34(b)(3) (1978); cf. CETA

§ 205(c)(25), 29 U.S.C. § 845(c)(25) (1976).

® 29 U.S.C. § 965(b) (1976).

10 See, e.g., CETA § 205(c)(25), 29 U.S.C. § 845(c)(25) (1976);

CETA § 703(11), 29 U.S.C. § 983(11) (1976).

App. 2

The County does not dispute the factual findings of

the Secretary, and its attack is a narrow one that is

limited to the finding that the use of CE'TA funds resu!ted

in the substitution of federal for non-federal funds ‘*in

connection with work that would otherwise be per-

formed.’’ Petitioner argues that the Secretary mis-

construed the maintenance-of-effort provisions. The

County’s position is, in essence, that there was no ‘‘ work

that would otherwise be performed”? that was affected by

Petitioner’s expenditure of CITA funds in 1977. Petition-

er claims that no PE WP participant was transferred out

of that program in 1977; it does concede, however, that

‘certain CET A-eligible welfare recipients on the

‘[PF WP] backlog’ were enrolled in the CE'TA-funded

[LTE] and [ISH] programs.’’ Petitioner maintains, how-

ever, that, since these 1977 participants had not previously

been working in a County-funded program, their enroll-

ment in the CETA programs ‘‘cannot be viewed as sub-

stituting federal for ether monies in connection with work

that would otherwise be performed.”’

Petitioner’s position represents a misreading of the

maintenance-of-effort provisions and their implementing

regulations, as well as a misunderstanding of their pur-

pose. These statutes are phrased in the conditional, yet

Petitioner would have them reach only work that ‘*was

heing performed,’’ not work that ‘‘would otherwise be

performed.’’ Congress intended that CETA funds supple-

ment, not replace, non-federal funding. See Maine v.

United States Department of Labor, 669 F.2d 827 (1st Cir.

1982). A requirement of a ‘‘maintenance’’ of effort is

meaningless unless a benchmark is available to determine

the appropriate level of the ‘‘effort.’? In addition, even

App. 22

Petitioner’s own argument is an acknowledgment that

the inquiry must focus, not on the number of individuals

in a given program, but on the level of funding and that a

‘*benchmark’’ must be initially established. The crucial

issue, then, is whether 1976 or 1977 is the appropriate year

for determining the level of the County’s ‘‘effort.’’ Thus,

the question of whether there was participant ‘‘attrition”’

in PF WP during 1977 is, under these facts, of little

moment, as it is the level of funding, not the number of

participants, that is dispositive.

We agree with the Secretary’s conclusion that,

although Petitioner was entitled to use CETA funds to

provide training and work experience for the general-

assistance population, it was at the same time required to

maintain its local funding for substantially equivalent

County programs at the level of the most recent year in

which no CETA money was expended for these purposes.

Thus, 1976 provides the proper reference point. Had the

County maintained its funding at the 1976 level, some

portion of the work-experience positions and public serv-

ices provided by LTE, HSH, and WAP would otherwise

have been funded by non-federal money. Because the

County did not, work and services were performed as a

result of the substitution of federal funds for non-federal

funds.

In its reply brief, Petitioner counters with the argu-

ment that its reduction of the 1977 PF WP budget was not

due to the decrease in the number of participants or

substitution of federal for non-federal funds, but to the

fact that, after the Supreme Court’s decision in National

League of Cities v. Usery, 426 U.S. 833, 96 S. Ct. 2465

App. 23

(1976), overruled, Garcia v. San Antonio Wetropolitan

Transtt Authority, — U.S. —, 105 S. Ct. 1005, 1021 (1985),

the County decided to reduce the PF WP emplovees’ wages

and hours below the minimum federal requirements, In

1976, the County paid $2.20 an hour for a 40-hour work

week; in 1977, the County paid $2.00 an hour for a 32-hour

work week. Thus, assuming that the same number of

employees, t.e., 682, was participating in PF WP in 1976

and 1977 and that those employees worked 52 weeks a

vear, the County was able to “save” $851,186 in 1977."

We initially note that this figure represents only 93%

of the “shortfall” found by the ALJ for 1977 and only 71%

of the total deficiency for 1977 and 1978. Moreover, this

second argument suffers from the same fundamental de-

ficiency as the first, fur the relevant question under the

maintenance-of-effort provisions is not the number of

positions, but the level of non-federal funding before and

after the use of CETA funds. It is clear from the werding

of these statutes that Petitioner cannot discharge its

obligations under CETA by simply retaining the same

number of employees at a reduced annual salary while

using CETA funds to provide employment for similarly

situated individuals. Following Petitioner’s argument to

its logical extension would mean that, if the National

League of Cities decision had allowed the County to pay $1

1! As noted above, the record does not necessarily support the

conclusion that 682 participants remained in the PFWP through-

out 1977. We will assume for the sake of argument that this

level was maintained.

We also note that the County, presumably because of an

inadvertent mathematical error, overstated in its reply brief the

amount of this “savings” by 80°/o (i.e., $682,000).

App. 24

a year to each PF WP participant, then the County would

have discharged its obligations under CETA had it allo-

cated only $682 of County funds to PF WP in 1977. :

Quite to the contrary, we find that the National

League of Cities argument further undercuts Petitioner’s

position: in view of the availability of CETA funds, the

proper response to the wage-and-hour reduction after

National League of Cities would have been the creation of

more PF WP positions, especially in view of the backlog

of eligible applicants in 1977. The County did in fact

originally intend to expand PF'WP in 1977 with a consid-

erably larger budget, but subsequently reduced the pro-

gram with substantial transfers from PFWP to the

general-assistunce program after it was known that CETA

funds were available. The National League of Cities

decision may justify the wages and hours of PF WP par-

ticipants in 1977, but it does not explain why the original

1977 PF WP. budget of $4.2 million was ultimately reduced

to $2 million when approximately $2 million were spent

in the CETA programs in 1977.

We have considered all of the remaining arguments

raised by Petitioner in its challenge to the Secretary’s

finding of a violation of the maintenance-of-effort pro-

visions and have found them to be without merit. In

conclusion, we agree with the Secretary’s finding that

Petitioner did not meet its obligation under the mainten-

ance-of-effort provisions of the Act and that the “short-

fall” for 1977 and 1978 should be disallowed.

IV. Wage and Benefit Review

Regulations for CETA Titles I and VI that were in

effect from the inception of the County’s CETA programs

App. 25

in mid-1977 to April 1, 1979, provided that wages and

benefits for work-experience participants were to be

commensurate with such factors as the type of work per-

formed, the skill proficiency of the participant, the geo-

graphic region of the program, and the prevailing wages

and benefits for similarly employed employees. See 29

C.F.R. §§ 95.33(d)(4) (viii), 96.34, 98.24(b), 99.37(e)

(1978).'2 However, the base wage provided by the County

for work-experience participants in WAP was set at the

federal minimum wage.

In his Initial and Final Determinations, the Grant

Officér concluded that Petitioner had violated CETA

regulations by paying only minimum wage and by not

providing the proper benefits. The initial corrective ac-

tion proposed was an order to the County to classify all

work-experience positions in WAP by the factors enumer-

ated in the applicable regulations, to determine the proper

wages and benefits under the regulations, and to submit

the results to the DOL’s regional office for review. The

Final Determination modified this remedy to require that

the County first notify all former CETA participants, by

newspaper notices and mailings, to submit claims if they

believed they were underpaid. A representative of the

employees could also submit specific documentation on

individual participants. The claims would next be re-

viewed by an outside ageney, which would then notify

each participant of the results of the review and of the

right to appeal to the Office of Administrative Law

Judges. Costs for the record review, back wages, and

benefits could be paid from CETA funds.

12 20 C.F.R. § 676.26-1(b) (1984), which became effective on

April 1, 1979, see 44 Fed. Reg. 19,990, 20,014 (1979), allowed the

payment of the minimum wage to almost all work-experience

participants.

App. 26

The County did not appeal this portion of the Final

Determination and has thereby coneeded liability; the

complainants, however, in the proceedings before the ALJ,

did contest the corrective action ordered by the Grant

Officer on the ground that the burden of determining the

proper wages and benefits should be borne by the County,

not by the individual CETA participants.

The ALJ found that the record lacked the type of

~ detailed information needed to allow him to establish the

proper wages and benefits for each of the approximately

5,400 individuals enrolled in the County’s CETA programs

between July 1, 1977, and April 1, 1979. He also concluded

that the corrective action ordered in the Grant Officer’s

Initial Determination was more appropriate than that of

the Final Determination. He found that a requirement of

computation of the appropriate earnings prior to notifica-

tion to former employees was necessary because this

placed “the burden of evaluating jobs and calculating

wages on the prime sponsor, which could have avoided the

problem by following the regulations in the first place, and

which has better access to the necessary information than

former participants.” Thus, the ALJ ordered that the

County classify all CE'’TA work-experience positions ae-

cording to the factors enumerated in the regulations, de-

termine the proper wages and benefits, and submit the

results to the regional DOL office for review within 60

days of the date of his decision. The DOL office would

then have 30 days to review these submissions and the

County would have 30 days thereafter to compensate all

underpaid former CETA participants that could be located.

If, due to changed cireumstances, federal funds were not

available for the back wages, the benefits, and the expenses

associated with the record review, the County was required

App. 27

to defray these costs from its own funds. The Final De-

termination was affirmed in all other respects.

In its petition for review, the County contests the

corrective action ordered and argues that the Secretary’s

requirement of a comprehensive wage review was an abuse

of diseretion and not in aecordance with the applicable

law. We concur in the Seeretary’s observation that the

County, with superior access to the records and as the

party at fault, should bear the costs of the record review.

Furthermore, we recognize that, given the characteristics

of the class of former CETA employees, it is unreasonable

to assume that they will be able to recognize independently

whether they are entitled to additional compensation.

Nonetheless, it is not obvious that the appropriate

solution is to require Petitioner to complete the record

review for all former participants when a substantia] num-

ber of them will never be located. The former employees

bear the burden of coming forward after they have received

notice whether the record review is performed before or

after the notification. However, undertaking the revicw

before notification would require Petitioner to perform

many costly calculations that will never be used, when

the goal of the record review is to provide the proper com.

pensation to the former CETA participants at a reason-

able cost to all parties involved. Thus, to the extent that

the Secretary’s order requires Petitioner to incur substan-

tial expense in undertaking the wage review” prior to

13 At oral argument, the County represented to this court that

the wage review cannot be accomplished solely by computer

analysis en masse of the information the County now has at its

disposal and that the determination requires an examination of

the individual records for each former participant. We do not

understand the Secretary to argue to the contrary. In fact, at

oral argument, counsel for the DOL stated that the Secretary

would not object if notice were provided prior to the record

review.

App. 28

notification when it is almost certain that, despite reason-

able efforts at notification, a considerable number of for-

mer CETA participants will never be located, we agree

that the remedy constitutes an abuse of discretion. We

conclude that notice should first be sent to the participants

and that the reeord review should then be performed for

those individuals who come forward. To that extent, we

reinstate the corrective action set forth in the Grant Of-

ficer’s Final Determination.

We note, however, that the Final Determination re-

quired that the County notify all CETA participants to

submit claims if they believed they were wnderpaid. This

places an iiappropriate burden on the participants, as it

calls for a threshold determination on their part that they

are in fact entitled to additional compensation. Thus, the

initial notice must simply instruct those individuals who

participated in CETA programs during the relevant period

to come forward; the records of the individuals who are

located will then be analyzed by Petitioner. The Secretary

should determine the proper form of notice to be sent to

the former CETA employees and set the appropriate

procedure and schedules for the subsequent record review

and reimbursement. |

We have considered all of the remaining arguments

raised by Petitioner in its challenge to the reeord review

and have found them to be without merit. In conclusion,

this portion of the Secretary’s order is remanded for ac-

tion consistent with this opinion.

V. Disallowed Costs under CETA Title VI

The Secretary found, and Petitioner does not dispute,

that 17 WAP participants were originally enrolled under

App. 29

CETA Title VI following their transfer from PFWP in

1978 when they were in fact ineligible under that Title.

The County, however, claimed that any initial misalloca-

tion was “cured” when the costs associated with these

participants were subsequently “backed out” of Title VI

and applied to Title I, under which the participants were

eligible. The Secretary rejected this argument:

[EF }ligibility determinations should be made before a

participant is enrolled in CETA and the key eligibility

question is whether, at the time of application, a par-

ticipant is eligible for the title in which he or she is

then enrolled. See 29 CFR 99.42(a)(1). Adjustments

of the type made here by the prime sponsor cannot

retroactively create eligibility. Moreover, any at-

tempt to do so would be contrary to the cost principles

of Federal Management Cireular 74-4... , codified at

41 CFR Subpart 1-15.7, incorporated by reference in

the CETA regulations at 29 CFR 98.12(a). Aceord-

ing to 41 CFR 1-15.703-2(b):

“Any cost allocable to a particular grant or cost

objective under the principles provided for in this

subpart may not be shifted to other Federal grant

programs to overcome fund deficiencies, avoid

restrictions imposed by law or grant agreements,

or for other reasons.”

(emphasis in original)

Thus, Petitioner was ordered to pay the DOL the amount

of the disallowed costs for these 17 participants.

The County’s argument is unpersuasive, and its cur-

sory description of the proceedings below has not aided

our review. In addition, there are no citations to the

record on the issue of cost allocation. We, therefore, have

no information regarding the eryptic allusions to the sub-

sequent “backing out” of the costs associated with these

17 individuals.

App. 30

In any event, as we understand its contentions, the

County, with no citation to authority, maintains that, al-

though these individuals were initially improperly enrolled

under Title VI when thev were eligible under Title I, the

“backout” of costs was “a bookkeeping or accounting prac-

tice used to cure a bona fide human error in participant

enrollment, and not an evasive act designed ‘to avoid re-

999

strictions imposed by law.’” so that the costs should not

be disallowed. We disagree.

CETA Titles I and VI had different eligibility criteria.

Compare 29 C.F.R. § 95.382 (1978) (Title 1) with id. § 99.42

(1978) (Title VI). The requirements of Title VI were

more stringent. For example, under 29 C.F.R. § 99.42(a)

(1) (ii), the participant (1) must have been unemployed

or receiving unemployment compensation for 15 out of

the 20 weeks preceding his application and (2) must not

have obtained permanent, unsubsidized, full-time employ-

ment during that 20-week period. We gather from the

ALJ’s decision that he relied on the employee-record eval-

uation described in the affidavit of Helen Humphrey, a

“Manpower Development Specialist” for the DOL. With

reference to the 17 individuals under consideration, Ms.

Humphrey, because of the County’s inadequate documenta-

tion, found that none of these participants met the require-

ment of 29 C.F.R. § 99.42(a) (1) (i1).

29 C.F.R. § 99.43(a) (1978) provides that “[{p]rime

sponsors shall be liable for any payments made to partici-

pants determined ineligible during program audits or re-

views or otherwise.” See also 29 C.F.R. §§ 96.25, 99.42(¢)

(1) (1978). 29 C.F.R. §99.43(b) and (¢) set out proced-

ures that would allow prime sponsors to “protect their

liability [sie].” See also 20 C.F.R. § 676.88(¢e) (1983).

App. 31

Petitioner has in no way indicated that it followed those

procedures with reference to these 17 participants. Al-

though disallowance ef the costs may appear inflexible,

the regulations discussed above set out the limited cireum-

stances under which the County may escape liability.

Otherwise, it bears the risk that the associated costs will

be disallowed. The County is essentially arguing that it is

“unfair” to impose this sanction. Although the regula-

tions do not suggest that equitable exceptions are avail-

able, we need not decide this question, as the equities

clearly do not weigh in the County’s favor. We, therefore,

affirm the ALJ’s decision that the costs associated with

these 17 individuals be disallowed.

VI. Backpay Award to Cheryl Tucker

Ms. Tucker, a former PF WP staff mamber, was laid

off on May 8, 1978, due to the termination of that pro-

gram, and maintained no further communications with

Petitioner. The Secretary noted that it was undisputed

that Ms. Tucker was laid off due to the dissolution of the

County-funded PF WP, which was replaced by the CH TA-

funded WAP, and thus concluded that the layoff was a

displacement of a currently employed worker in violation

of the maintenance-of-effort and anti-displacement pro-

visions of the Act. The County was erdered to take

affirmative steps to locate Ms. Tucker, to offer her rein-

statement to a comparable position, and to award her

backpay plus interest from non-CETA funds; however, the

County could offset against this award, upon proof sub-

4 See, e.g., CETA § 208(a)(1)(B), 29 U.S.C. § 848(a)(1)(B) (1976);

§ 353(b)(2), 29 U.S.C. § 895(b)(2) (Supp. | 1977); § 602(c), 29

U.S.C. § 962(c) (1976); § 703(7), 29 U.S.C. § 983(7) (1976); see

also 29 C.F.R. § 99.34(b)(2) (1978).

App. 32

mitted to the Grant Officer, any amounts of wages earned

by Ms. Tucker or of general assistance paid to her by the

County after her layoff.

The County does not contest the finding of liability

and apparently does not challenge the reinstatement order.

[t does maintain, however, that (1) the award of backpay

should be remanded to the DOL due to the absence of

findings on the extent of Ms. Tucker’s injury and on her

efforts to mitigate those damages and (2) the Secretary

improperly limited the seope of offsetting payments for

the backpay award. Once again, there is little reliance on

relevant legal authority and xo citation to the record in

the County’s brief.

Because Ms. Tucker was terminated without cause in

violation of the maintenance-of-effort and anti-displace-

ment provisions of the Act, there is no serious question

that backpay was an appropriate remedy. See City of

Chicago v. United States Department of Labor, 753 ¥.2d

606, 607-08 (7th Cir. 1985). It is, of course, unreasonable

under these circumstances to require that the Secretary

set an exact amount on the backpay award, as this liability

continues to acerue until reinstatement. In any event,

the Secretary intended that a calculation of the precise

amounts be made by the parties, with the aid of the Grant

Officer, if necessary.

1S The Secretary represented to this court at oral argument

that Ms. Tucker has recently been in communication with the

County, that she has been reinstated with the County, and that

she is in the process of transmitting information to the County

with regard to the income she had earned since her layoff. The

Secretary has also suggested that Ms. Tucker has not been rein-

stated at the appropriate level; that question is not, however,

before us. Similarly, the issues raised in the amicus brief filed

by the Worker Rights Institute and John Kropp are not prop-

erly before us.

App. 33

The County had the burden of proving that Ms. Tucker

failed to make reasonable efforts to mitigate her damages.

Cf. Hanna v. American Motors Corp., 724 F.2d 1300, 1306-

O07 (7th Cir.), cert. denied, 104 S. Ct. 3512 (1984); Syvock

v. Milwaukee Boiler Manufacturing Co., Inc., 665 F.2d 149,

159 (7th Cir. 1981); NURB v. Nickey Chevrolet Sales, Inc.,

493 F.2d 108, 107-08 (7th Cir.), cert. denied, 419 U.S. 834

(1974). Petitioner, however, has in no way indicated that

it attempted to locate Ms. Tucker in order to determine

the extent of her damages or her efforts at mitigation.

In view of the County’s concession of liability and its fail-

ure of proof, a remand on the issue of imitigation is in-

appropriate in this protracted dispute.

Finally, we perceive no deficiency in the scope of the

payments that may be offset against the backpay award.

Petitioner has cited no authority in support of its position

and we find that the Secretary’s order was reasonable. As

the County is at fault, it would be inappropriate to allow it

to offset funds paid to Ms. Tucker by other governmental

entities, as these payments would constitute benefits from

a eollateral source and deducting them would in effect

relieve the County of its obligation to make the former

employee whole. The responsibility, if any, for repayment

to other governmental entities lies with Ms. Tucker. The

Secretary was simply permitting the County to offset pay-

ments that it may have already made to Ms. Tucker from

other sources after the layoff.

The ALJ’s order concerning Ms. Tucker will be af-

firmed,

VIL.

In conclusion, the petition for review is denied with

reference to the issues regarding (1) the Seeretary’s juris-

App. 34

diction, (2) the maintenance-of-effort violations, (3) the

disallowed costs under CETA Title VI for the 17 in-

eligible participants, and (4) the backpay award for Ms.

Tucker. With regard to the record review, the petition for

review is granted in part and the ease is remanded for

further proceedings consistent with this opinion.

IT IS SO ORDERED.

Correy, Circuit Judge, concurring in part and dis-

senting in part.

I concur in the majority’s well-reasoned analysis that

the 120-day time limit set forth in 29 U.S.C. §816(b) is not

a jurisdictional bar to actions taken by the Seeretary of

Labor after expiration of the 120-day time limit. I further

concur in Sections [V, V, and VI of the opinion. However,

Iam unable to agree with the majority’s resolution of the

alleged ‘‘Maintenance of Efforts’’ violations discussed in

Section III of the opinion. Although I agree that the ma-

jority is correct in using 1976 as the ‘‘benchmark’’ for pur-

poses of analyzing whether or not there has been a ‘‘ Main-

tenance of Efforts’ by county officials in funding the local

job training programs, I cannot agree that the County

should be liable for the entire.amount of the ‘‘shortfall’’

in funding since the County enacted cost-saving measures

in 1977 that explains, in part, why their funding in 1977

did not match their spending efforts in 1976. Thus, I

would remand this case to the administrative law judge

for an accurate determination of the ‘‘shortfall’’ in local

funding.

As set forth in the majority opinion, the non-federal

funding of the local job training program for the general

welfare recipients from 1976 through 1978, (the vears in

App. 35

question) was $3,014,580 in 1976, $2,097,428 in 1977, and

2,732,487 in 1978.' In 1977, CETA began to fund various

job training programs for general welfare recipients in

Milwaukee County, budgeting approximately $1 million in

1977 for the LTE program and approximately $2.4 million

for the HSH program from July 1, 1977 to June 30, 1978.

These programs, local and CETA, were geared toward

training general assistance welfare recipients for future

employment in the private sector.

Congress in enacting the CETA program sought to

create new employment and training opportunities for

welfare recipients. See 20 C.F.R. §675.1(a) (1979). In

order to ensure that CETA funds were not used to replace

local funding, Congress promulgated rules prohibiting

‘*the substitution of l’ederal funds for other funds in con-

nection with work that would otherwise be performed’’ by

local government entities and providing for annual audits

conducted by the Secretary of Labor. See, e.g., 29 U.S.C.

§845(e)(a) (25) (1976); 29 U.S.C. §848(a)(1) (1976); 29

C.F.R. §99.84(b) (3). In this manner, Congress sought to

ensure that local communities maintain their effort in pro-

viding job training programs when the CETA funding be-

came available. The majority chooses the funding level

provided in 1976 as the ‘‘benchmark’’ or focal point to de-

termine if Milwaukee County maintained their funding of

local job training programs once CETA funds became

available. It is proper to use 1976 as the focal point for

1 In 1978, the County’s job training program, PWFP, was elim-

inated; the County established a job-training program entitled

the Work Assistance Program (“WAP”), that was funded by the

County and the State in the amount of $2,732,487. CETA’s con-

tribution to the WAP program was approximately $200,000.

App. 36

purposes of comparison since 1976 is the year prior to

CE'TA funds becoming available for job training programs

for the general welfare assistance population in Milwaukee

County. In 1976, the level of non-federal spending was

$3,014,580, while in 1977, the year CETA funds became

available, the non-federal funding dropped to $2,097,428,

and rose slightly in 1978 to $2,732,487. However, based

upon these figures alone, the majority coneludes that there

was a ‘‘shortfall’’ in the effort by the County to train

workers under its programs. The majority agrees with the

AL.J’s finding that the County is responsible for the entire

difference in funding, totaling $1,199,245; but the majority

fails to consider much less weigh any information as to

how and why these figures necessarily differ.

At least as a starting point for the purpose of analysis

in establishing whether or not the County had maintained

its efforts in the local job-training programs, it is proper

to compare the level of spending between the years 1976,

1977 and 1978, and assessing the County $1,199,245 for the

alleged CETA violation would be appropriate if the

County was in fact unable to explain the reduced funding

in its local program. However, for some unknown reason,

the ALJ and now the majority fail to consider that the

County, beginning in late 1976 and through 1977, instituted

cost-saving measures in its local job-training program

when it reduced the workers’ wages and hours, and thus

the majority and the AL.J disregard the County’s sincere

efforts to operate the most cost-efficient program possible.

Specifically, relying on National League of Cities v. Usery,

426 U.S. 833 (1976), overruled Garcia v. San Antonio Met-

U.S. , 105 S.Ct. 1005

ropolitan Transit Authority,

(1985), the County reduced the wages and cut the hours of

App. 37

participants in its job training programs in an honest at-

tempt to save taxpayers some expense in providing these

programs. As the majority notes, these cost-saving meas-

ures saved the County approximately $850,000 in 1977 and

as the majority admits, this figure represents 93 percent

of the shorifall in fund'ag during 1977. However, the ma-

jority refuses to take this into account in computing the

potential liability of the County, and instead applies a

simplistic analysis using only the gross funding figures

without any inquiry whatsoever into the number of work-

ers employed in the loeally funded programs during the

years in controversy, 1976 through 1978. This analysis

penalizes the County for instituting cost-saving measures

to save taxpayer’s hard-earned dollars. The majority

boldly asserts that ‘‘the proper response to the wage and

hour reduction after National League of Cities would have

been the creation of more PF WP positions ....’* Thus,

the maj rity’s position is that the only way the County

could avoid liability was to have increased its efforts in

training more general assistance welfare recipients than it

was training in the previous year. But Unis position does

not espouse a maintenance of effort, consistent with the

requirement that federal funds not be substituted for work

that ‘‘would otherwise be performed’* by the County,

rather it requires the County to heve increased its job

training efforts with the employment of more workers and

to have spent funds at previous year’s levels regardless

of whether or not it was the most cost-efficient use of tax-

payer dollars. The County, on the other hand, logically

argues that it maintained its efforts in training general

welfare recipients in not transferring any workers em-

ploved in the PWFP program to the CETA funded pro-

grams and in replacing those workers who left the local

App. 38

program, after their training was completed, with persons

on the waiting list. Because the ALJ failed to make spe-

cific findings as to the number of welfare recipients em-

ployed in the program at any given time this case must in

ail fairness be remanded to the trier of facet to complete the

record for proper review. Nevertheless, the majority

penalizes the County for enacting cost-saving measures

when it adopts the position that the County, with the sav-

ings accumulated through pay-cuts, was required to use the

savings to employ more general assistance welfare recip-

ients in its own program. The majority fails to cite, nor

could | discover, any case law to support this gratuitous

theory of federal meddling in a local budgetary decision.

Because the record before us is sparse and unclear as

to the number of workers actualiy employed in the County

job-training programs for the years in question, see ma-

jority n.11,? this ease should be returned to the ALJ to

determine what portion of the County’s ‘‘shortfal!’’ in

funding is explained by the County’s legitimate cost-

saving measures. Further, the ALJ should determine

whether the County, in instituting the reduced wages and

shorter hours, was able to employ more trainees or employ

persons in the program for a longer period of time; thus,

enabling these persons to gain more experience and re-

main off the assistance roles. I am convinced that in fair-

ness to the community which implemented cost-saving

measures to benefit its taxpayers, that the community

should not be responsible for reimbursing the federal gov-

ernment for any amount of money resulting from these

2 The record-contains evidence that the number of workers

employed in PWFP ranged anywhere from 250 to 682 toward

the end of 1977.

as sinatiaba tee neeneenmceaitaae eaten

App. 39

cost-saving efforts. In this era of reductions in govern-

ment deficit spending and increased government economy

caused by bureaucratic mismanagement of the past, the

majority decision penalizes a community that effectuated

cost-saving and cost-efficient programs for the benefit of

the welfare recipients and the taxpayers as well.

Thus, I respectfully dissent from Section III of the

opinion.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

App. 40

United States Court of Appeals

lor the Seventh Cireuit

Chicago, Illinois 60604

August 26, 1985.

Before

Hon. JESSE KE. ESCHBACH, Cireuit Judge

Hon. JOHN L. COFFEY, Circuit Judge

Hon. ROBERT A. GRANT, Senior District Judge*

MILWAUKEE COUNTY, WISCONSIN,

Petitioner,

No. 84-1067 VS.

WILLIAM EK. BROCK, SECRETARY OF THE

UNITED STATES DEPARTMENT OF LABOR,

Respondent.

Petition for Review

of an Order of the

United States

Department of Labor

ORDER

On consideration of the ‘‘MOTION FOR ORDER

AMENDING PANEL OPINION”? filed herein on August

16, 1985, by counsel for petitioner,

IT IS ORDERED that said motion is GRANTED.

The following sentence, which appears on page 21 in the

* The Honorable Robert A. Grant, Senior District Judge for

the Northern District of Indiana, sitting by designation.

App. 41

second paragraph of footnote 11 of the opinion issued

August 6, 1985, in the above-captioned case is deleted:

‘‘We also note that the County, presumably be-

cause of an inadvertent mathematical error, overstated

in its reply brief the amount of this ‘savings’ by 80%

(i.e., $682,000).”’

App. 42

United States Court of Appeals

For the Seventh Cireuit

Chicago, Llinois 60604

August. 6, 1985

Before

Hon. JESSE KE. ESCHBACH, Circuit Judge

Hon. JOHN L. COFFEY, Cireuit Judge -

Hon. ROBERT A. GRANT, Senior District Judge*

MILWAUKEE COUNTY, WISCONSIN,

Petitioner,

No. 84-1067 vs.

RAYMOND J. DONOVAN, SECRETARY OF THE

UNITED STATES DEPARTMENT OF LABOR,

Respondent.

Petition for Review of an

Order of the United States

Department of Labor

This cause was heard on the reeord from the United

States Department of Labor, and was argued by counsel.

On consideration whereof, IT IS ORDERED AND

ADJUDGED by this Court that the petition for review

of an order of the Department of Labor is DENIED IN

PART, GRANTED IN PART, and the case is REMAND-

ED. in accordance with the opinion of this Court filed this

date. No costs are awarded in this Court.

* The Honorable Robert A. Grant, Senior District Judge for

the Northern District of Indiana, sitting by designation.

App. 43

United States Court of Appeals

For the Seventh Cireuit

Chicago, Llinois 60604

September 9, 1985.

Before

Hon. JESSE E. ESCHBACH, Circuit Judge

Hon. JOHN L. COFFEY, Circuit Judge

Hon. ROBERT A. GRANT, Senior District Judge*

MILWAUKEE COUNTY, WISCONSIN,

Petitioner,

No. 84-1067 VS.

WILLIAM E. BROCK, SECRETARY OF THE

UNITED STATES DEPARTMENT OF LABOR,

Respondent.

Petition for Review

of an Order of the

United States

Department of Labor

ORDER

On consideration of the petition for rehearing and :

suggestion for rehearing en bane filed in the above-

entitled cause by petitioner, no judge in active service has

requested a vote thereon, and all of the judges on the

* The Honorable Robert A. Grant, Senior District Judge for

the Northern District of Indiana, sitting by designation.

alist

App. 44

original panel have voted to deny a rehearing. <Accord-

ingly,

IT IS ORDERED that the aforesaid petition for re-

hearing be, and the same is hereby, DENIED.

+ acciill

App. 45

U.S. DEPARTMENT OF LABOR

Office of Administrative Law Judges

Suite 700-1111 20t) Street, N.W.

Washington, D.C. 20036

Case No. 80O-CETA-146

In the Matter of

THE WORKEFARE COALITION et al!

and

JOUN H. KROPP

Complainants

MILWAUKEE COUNTY (CETA prime sponsor)

and

REGION V, U.S. DEPARTMENT OF LABOR

Respondents

Mary B. Griswold, Executive Director and

John A. Plano, Associate Director

Worker Rights Institute

818 East Juneau Avenue

, Milwaukee, Wisconsin 53202

For the Complainant Workfare Coalition

John H. Kropp

2189 West Maine Ave.

Milwaukee, Wisconsin 53209

Pro Se

10On September 1, 1977 the Workfare Coalition was incor-

porated and changed its name to the Worker Rights Institute.

Prior to that time the coalition was composed of several mem-

ber agencies and individual: directed by a governing committee

that constituted itself as the board of directors when the cor-

poration, a non profit organization to provide information, legal

help, and organizing support to workers in welfare related work

programs, was formed.

App. 46

Charles D. Clausen, Esq.

David P. Lowe, Esq.

Mary J. Mountin, Esq. and

William 8. Roush, Jr., Esq.

Friebert & Finerty

710 North Plankinton Ave.

Milwaukee, Wisconsin 53203

and

James T. MeClutehy, Esq.

Office of Corporation Counsel,

Milwaukee County,

Room 303, Courthouse

Milwaukee, Wisconsin 53233

For the Respondent Milwaukee County (prime

sponsor)

Ellen L. Beard, Msq. and

Jonathan H. Waxman, Esq.

Office of the Solicitor

U.S. Department of Labor

Room N-2101

200 Constitution Avenue, N.W.

Washington, D.C. 20210

For the Respondent Region V and the Grant

Officer

Before: ROBERT S. AMERY

Administrative Law Judge

DECISION AND ORDER

This proceeding arose under the Comprehensive Em-

ployment and Training Act of 1973, as amended, 29 USC

801 et seq., hereinafter referred to as the Act or CETA,

and the regulations issued thereunder in 29 and 20 CFR.

The first written complaint to the Department of Labor

(DOL) Regional Administrator dated February 20, 1978

App. 47

was signed by Mary B. Griswold for the Complainant

Workfare Coalition. A second letter of complaint contain-

ing 57 numbered points or issues addressed to Assistant

Secretary of Labor Ernest Green dated May 25, 1978 was

signed by about 22 persons.? Most of the matters raised in

the February 20, 1978 complaint were also alleged in the

May 25, 1978 complaint in more detail. A third letter of

complaint dated December 11, 1979 signed by Ms. Griswold

added about 16 further allegations against the prime spon-

sor and Region V DOL. On May 4, 1978 Milwaukee Dis

trict Council 48 of AFSCME filed a complaint signed by

Executive Director Joe Robison alleging violations of

CETA’s maintenance of effort requirements, however this

coniplaint was not appealed at this level by the District

Council, but by John H. Kropp, a union member. Mr.

Kropp filed his separate complaint dated January 16,

1980 primarily pertaining to maintenance of effort issues.

These complaints were consolidated with several other in-

dividual complaints involving Lori Baker, Cherae Rose

2These included Wesley L. Scott, Director of Milwaukee

Urban League, John H. Kropp, member of Local 594 AFSCME,

Dismas Becker, state assembly 32d district, Cherae Rose and

Mildred Gillum, Work Assistance Program (WAP) participants,

Sarah Carr, President of Worker Rights Institute and WAP par-

ticipant, Arthur L. Waed, Milwaukee Coalition, Grace L. Mortier,

former WAP participant, Rose Peters, CETA participant, Stephen

R. Leopold, State Assembly 26th district, Marge Walcer, North-

cott Neighborhood House, Kay Metoxen, Workfare Coalition,

Jerry Thomas, WAP participant, Prentice McKinney, Branch

NAACP Coordinator, Ernesto Charon, Director of Latin Amer-

ican Union for Civil Rights, Mark Beil, President of Local 2748

State Employees Union, Jesus Mireles, 1.C.D.P. South, Lorraine

B. Baker, Local 594 member, Sandra B. Sanderson, Steward of

Local 594 AFSCME, Arthur H. Williams, Steward of Local 125,

Marcia P. Coggs, State Assembly 18th district and Mary Gris-

wold, Executive Director, Worker Rights Institute.

A pp. 48

and Mildred Gillam, Sarah Carr and Jerry Thomas into

one almost unmanageable conglomerate mass.3

In view of the vast number of issues involved in this

case and their variety and complexity I find it convenient

to take each issue or group of issues dealt with by the

Grant Officer in his final determinations in approximately

the same order he did and to designate each issue either

with the paragraph number from the 57 point complaint

letter of May 25, 1978 or as otherwise identified by date or

origin of the complaint. Following each issue listed, the

Grant Officer’s holding will be stated, then my analysis

and findings and ruling will be made. Some eight weeks

of hearings from August 4, 1980 to March 13, 1981 were

held in this case at Milwaukee, Wis., at which numerous

witnesses testified and extensive other evidence was pre-

sented on the record.

May 25, 1978 Complaints on Grievances and

Notification of Rights and Benefits*

1. The Work Assistant Program (WAP) has failec

to notify participants of their rights to hearings, to griev-

ances and to appeals to the CETA agency and to DOL.

3All parties filed briefs and some filed reply briefs in this

case. | am particularly: indebted to Ms. Ellen L. Beard, Grant

Officer’s counsel, for her exceptionally fine briefs which | found

to be thorough, in point and very well written with uccurate

citations to the record and exhibits. | have quoted extensively

from Ms. Beard’s briefs in this decision.

‘There was a complaint similar to these concerning griev-

ances in the February 20, 1978 letter. Unless otherwise speci-

fied all numbered complaints are from the May 25, 1978 letter.

App. 49

9. The WAP has not informed participants of their

rights and benefits since the program began in July, 1977

despite repeated requests for the establishment of due pro-

cess,

10. The WAP has failed to inform participants of the

identity of their employer prior to their entering the pro-

gram and while they are in it.

37. Decisions reached in grievance hearings affecting

an entire class of participants are not announced io other

participants and those decisions do not affect them or their

activities in any way.

46. The WAP has failed to establish a grievance pro-

cess from June, 1977 to February 1978. The written pro-

cess now promoted as a response to Federal regulations

doesn’t work. The grievance process as written requires

more than 7 separate meetings, hearings, conferences, ete.

of the participants, doesn’t clearly define procedures and

format, and does not have an impartial examiner.

56. The prime sponsor has refused to monitor sub-

contractors and subgrantees to insure that they in facet

possess grievance procedures and that CETA employees in

the subagencies have access to due process rights.

The Grant Officer found that Jewish Vocational Serv-

ices (J VS), which was the lead agency managing the WAP,

had developed a handbook entitled ‘‘Work Assistance Pro-

gram Comprehensive Employment and Training Act Work-

ers’ Handbook” outlining each participant’s rights, benefits

and responsibilities and the employer’s responsibilities.

Distribution of the handbooks began about February 1978.

The handbook outlined procedures for handling grievances

)

App. 50

at the JVS level, but lacked information on appeals to the

county or DOL. The Grant Officer found no specific viola-

tions of the regulations, however he directed that JVS must

assure that each CETA participant receives a copy of the

handbook as well as a copy of Milwaukee County’s griev-

ance procedure, that grievances be handled promptly, thet

participants be informed of the name of their employer, and

that adequate notification of a hearing must be given to

each complainant.

The Work Assistance Program was formed under the

leadership of Milwaukee County Executive William O’Don-

nell and Michael Galazan, then Executive Director of Jew-

ish Voeational Services, a private, non-profit rehabilita-

tion agency, to utilize funding from CETA and Title XX

of the Social Security Act to provide work experience and

social services to persons eligible for the County’s General

Assistance (welfare) program. The first stage of what

later became the WAP was a job search program called

Learn to Earn, funded under Title I of CETA, which be-

gan in June, 1977. Learn to Karn was operated by JVS,

the lead agency, the Opportunities Industrialization Cen-

ter (OIC) and the Service and Employment Redevelopment

Jobs for Progress Center (SER), providing an 8 to 10 week

classroom training course at the three agencies in job

search skills. The second stage of WAP came with the

implementation of a program initially known as Handi-

capped Serving the Handicapped, funded as a project under

Title VI of CETA to provide work experience positions to

persons who were not placed elsewhere after their comple-

tion of Learn to Earn. Handicapped Serving the Handi-

‘rapped began in July 1977 with a subgrant to the Rehabili-

organization of Milwaukee

tation Council, an ‘‘umbrella’

App. 51

area rehabilitation facilities with JVS again acting as the

lead administrative agency. The positions were located at

the rehabilitation agencies providing work that had been

performed by handicapped clients, including simple pro-

duction assembly, food service, maintenance and clerical

training. In late 1977 or early 1978 the program was ex-

panded with the addition of Title XX social services fund-

ing and it was called the Work Assistance Program. In

addition to the original funding under Titles I and VI of

CETA, youth money was added under Title ITT, and the

publie service employment (PSE) component was removed

from the WAP and shifted to Title II. Thus, during the

remainder of 1978, WAP provided work experience and

classroom job search training to a population composed of

Genera! Assistance (welfare) referrals, funded from Titles

I, [ff and VI of CETA.

The evidence at the hearing supported the Complain-

ants’ allegations that the WAP had sometimes failed to in-

form CETA participants of their rights and benefits and

grievance procedures, at least prior to February 1978, and

that this was in violation of 29 CFR 98.24(¢), and 98.26(a),

however the action taken by the Grant Officer on these mat-

ters seems appropriate here.

The Complainants did not appeal the Grant Officer’s

final determination on these complaints, but they did ve-

quest a hearing on 2 new complaints contained in the De

cember 11, 1979 complaint letter, as follows:

14. The Program Operator (JVS) deliberately dis-

mantled the grievance procedure and has refused to hold

requested hearings.

App. 52

15. The Program Operator denied grieving partici-

pants representation by advocates in meetings that affected

the participants’ program participation.

There was evidence at the hearing to the effect that

Kay Metoxen, who often assisted CETA participants in

obtaining their rights, was refused permission to represent

a client at a JVS grievance hearing. However, as the

Grant Officer has correctly pointed out in his brief, in this

case JVS was not joined as a party to this proceeding and

for that reason direct action cannot be taken against JVS

here. There was other evidence from Ms. Powers, the

CET A director, that the prime sponsor’s office endeavored

to see that each subgrantee had a written grievance pro-

cedure by early 1978 and Ms. Humphrey, the DOL federal

representative, testified that by the time of her 1980 assess-

ment the prime sponsor’s complaint system was in substafi-

tial compliance with 20 CFR 683. Accordingly, as to these

issues, the Grant Officer’s final determination pertaining

to grievances and notification of participants’ rights and

benefits is affirmed.

Complaint on Harassment

30. Participants have been harassed when they com-

plained about working conditions and when they have

asked for information of their rights and benefits.°

The Grant Officer held that it was not proven that eith-

er Milwaukee County or JVS purposely harassed partici-

‘One of the two examples of harassment presented to the

Grant Officer involved Mary Brown, whose complaint was made

a separate hearing in Brown v. Milwaukee County, 80-CETA-71.

There was also an allegation of harassment of participants in the

February 20, 1978 letter of complaint.

App. 53

pants. However, he cautioned the prime sponsor to be

guided in the future by 20 CFR 676.82(b) prohibiting dis-

crimination and harassment of participants.

At the hearing there was some evidence to the effect

that Julie Bock, a female participant monitoring a job

| search program at JVS, felt she had suffered sexual ha-

rassment when some co-participants made some improper

remarks to her. There was no indication that this was

authorized or condoned by the prime sponsor or JVS man-

| agement, however, and I find that there is insufficient evi-

dence to prove this allegation. The Grant Officer’s holding

on harassment is affirmed.

Complaint on Wrongful Termination

for Requesting Information

34. The WAP has terminated a participant when he

asked for information on the program.

On the oceasion cited to the Grant Officer, Elmer

Beirsdorf was allegedly terminated because he could not

read a form and he refused to sign it. He became abusive

when a JVS staff person refused to read it to him. The

(Girant Officer learned that Mr. Beirsdorf received a hear-

ing at JVS on May 12, 1978 at which it was determined that

he should be re-enrolled, lose no pay and be placed in the

academic skills program. The Grant Officer took no fur-

ther action.

At the hearing before me there was no evidence that

participants were terminated just for asking for informa-

tion about CETA programs. The Grant Officer is affirm-

ed on this issue.

Oates

App. 54

Complaint on Notice of Grievance Hearings.

36. Notices of grievance hearings frequently are not

mailed or are not delivered until the day of the hearing or

after the hearing is over.

The Grant Officer learned from Mr. Galazan that it

was JVS policy to send notices of hearing 10 days prior to

the date of the hearing and that grievants have always man-

aged to be present at their hearings. The Grant Officer

directed that adequate notification must be given to each

complainant of his hearing. I affirm.

Complaints on Results of Grievance Hearings.

36. Decisions reached in grievance hearings are not

earried out.

37. Decisions reached in grievance hearings affecting

an entire class of participants are not announced to other

participants and those decisions do not affect them or their

activities in any way.

The Grant Officer learned that in the examples cited,

Cherae Rose and Mildred Gillum had filed a grievance with

JVS which included an issue pertaining to the amount of

their wages during the week they were transferred from

Milwaukee County’s Pay for Work Program (PF WP)

funded with county funds to JVS’ WAP which was funded

with CETA funds. The Complainants felt that they and

others similarly situated should have received corrected

pay for that transition week. Michael Obletz, a financial

officer at JVS, informed the Grant Officer that Ms. Rose,

Ms. Gillum and some 31 other participants had received

correctional pay for the transition week and that he had

requested from the PF WP a list of participants and their

App. 55

hours worked during the transition week so any pay inequi-

ties could be adjusted. The Grant Officer took no further

action on this. I affirm.

Complaint on the WAP Director Holding Hearings

38. The WAP hearing officer is the WAP Director.

The Grant Officer learned that Michael Galazan, who

was then executive director of JVS, was the grievance hear-

ing officer for JVS cases. The Grant Officer took no ac-

tion on this issue. I can see no violation of the Act or reg-

ulations in this instance, provided that complainants who

are not satisfied with such a JVS director hearing can ap-

peal to higher levels at the prime sponsor, Grant Officer,

Administrative Law Judge and judiciary levels. I affirm.

Complaint on Eligibility

43. The WAP transferred participants into CET A

directly from other employment programs. These partici-

pants were not unemployed at the time of the transfer.

The Grant Officer stated:

‘*Until 1978, Miiwaukee County, as a condition for re-

ceiving general assistance welfare payments (G.A.),

required certain GA applicants to perform various

tasks for the county, such as assisting county em-

ployees in the county institution’s laundry room. Such

a requirement had been in effect in Milwaukee County

since the 1930’s. Prior to the inception of the CETA

funded Work Assistance Program (WAP), the County

program was called the Pay for Work Program....

The largest number of enrollees in the program at any

time was 682 on June 25, 1977. Those in the program

worked 32 hours a week at $2.00 an hour.

Chapter 50 of the County Ordinances stated that

‘... persons found eligible for general assistance ...

App. 56

will be referred to the Pay for Work Program.’ If the

persons were found eligible for assignment they were

referred to a ‘... department of the County for em-

ployment in the unclassified service or referred to a

verified position of employment in industry.’ Chapter

50 also provided that if the individual refused to ‘. ..

accept an offer of County or private employment...

or after accepting employment failed ... to report to

work...’ or failed to carry out the duties, the Project

Director would make a report to the Department of

Public Welfare. The Welfare Director would then

determine if the applicant would be refused general as-

sistance.

The County has taken the position that Pay for

Work participants were welfare recipients, not County

employees, and were therefore eligible for CETA. In

support of that position, the County supplied citations

to Wisconsin statutes and case law providing that

PF WP participants, unlike County employees, were

not eligible for unemployment compensation, were not

accorded collective bargaining rights, and were ac-

corded the same due process protections as general as-

sistance recipients upon termination from the Pay for

Work Program. In addition, PF WP participants were

uever paid more than the minimum wage, and were re-

quired to work or lose their welfare eligibility. In

the above respects, PF WP participants could be char-

acterized as welfare or workfare participants.

On the other hand, Chapter 50 of the County or-

dinances described PF WP participants as employees

in the County unclassified service, and a review of

payroll ledgers revealed that deductions were made

from PF WP participants’ paychecks for social seeur-

itv and federal and state income tax withholding. Fur-

thermore, payments received by PF WP participants

were larger than general assistance payments for

equivalent periods. In these respects, PF' WP partici-

pants partake of the characteristics of employees.’’

(ALJ Exhibit 52)

App. 57

According to the evidence, from about January to

March, 1978, hundreds of persons were transferred direct-

ly from the PF WP funded by Milwaukee County to the

WAP funded by Titles I, IT and VI of CETA and soon

thereafter the PF WP went out of existence.

The eligibility requirements for CETA participants in

the various Titles of CETA involved here were:

Title I. To be eligible for Title I, an individual

had to be economically disadvantaged, unemployed, or

underemployed. 29 CFR 95.32(a). ‘‘Eeonomically

disadvantaged” was defined to mean a person who “is

a member of a family which receives cash welfare pay-

ments under Federal, State or local welfare pro-

grams.’’ 29 CFR 94.4(S)(1).

Title III. Youth Employment and Training Pro-

grams (YETP). To be eligible for Title IIIf (YETP),

an individual had to be (1) unemployed as defined in

+94:4 (ggg), or underemployed as defined in #94.4

(fff), or in-school as defined in #97.702; and (2) 16-21

years of age: and (3) a member of a family with a to-

tal family income at or below 85% of the lower living

standard income level, as defined in #+94.4 (nnn), 29

CFR 97.714(a).

Title VI. To be eligible for Title VI projects, an

individual had to be (1) economically disadvantaged

as defined in #94.4(S) or a meinber of a family with

a total family income at or below 70% of the lower liv-

ing standard income level as defined in #94.4 (nnn);

and (2) must meet the residency requirements of

2299.38; and (3) must have been unemployed for 15 of

the 20 weeks immediately prior to application or be

a member of a family receiving Aid to Families with

Dependent Children (AFDC). 29 CFR 99.42(a).

The Grant Officer determined that,

‘*Because the County has shown that PF WP par-

ticipants were involved in a workfare program and

App. 98

were not regular County employees, it is my determi-

nation that they may be treated as welfare recipients,

and thus ‘unemployed’, for purposes of determining

CETA eligibility under federal law. It follows that

all participants transfered into Title I of CETA were

eligible under the ‘economically disadvantaged’ eri-

teria cited above, as recipients of cash welfare pay-

nents.

Receipt of cash welfare payments, however, is not

sufficient to demonstate eligibility for Title IIT YETP

or Title VI.”? (ALJ Exhibit 52)

As a result, the Grant Officer determined that all CETA

funds expended on PF WP transferees into Title III and

VI programs should be disallowed and reimbursed to the

U.S. Department of Labor unless the prime sponsor could

demonstrate the eligibility of those transferees through ac-

ceptable individual documentation.

During the hearing before me the record was left open

for additional evidence on this issue of eligibility from Ms.

Helen Humphrey, DOL federal representative, as well as

rebuttal evidence from the Respondent prime sponsor.

These have been received and Ms. Humphrey’s affidavit

is admitted in evidence as Grant Officer’s Exhibit 12 and

the affidavits of Linda Bell, Pamela Oliver and Michael

Obletz are admitted in evidence as Respondents’ Exhibits

VV, WW and XX respectively. In Ms. Humphrey’s affi-

davit she identified 45 ineligible participants out of a total

of 550 transferees. After receiving further evidence sub-

mitted by the prime sponsor consisting of supporting ade-

quate documentation, the Grant Officer has conceded that

7 of the 483 were eligible. This leaves some 36 participants

the Grant Officer continues to believe were ineligible.

The prime sponsor admits that the following 3 partici-

pants were ineligible for Title VI:

App. 59

David Gerald, SSN 390-64-1540

Henry MecFarling, SSN 393-70-4843

Lawrence J. Miller, SSN 393-72-2399

According to 29 CFR 96.25 (1978), made applicable to

Title VI by 29 CFR 99.42(c)(1), the prime sponsor is re-

sponsible for maintaining adequate documentation of par-

ticipant eligibility, which ‘‘shall consist of a signed and

dated complete application for employment, including the

last date of employment, which attests that the information

in the application is true, to the best of the applicant’s

knowledge.’’ In the event that no applications are avail-

able or not as described above, costs associated with those

participants should be disallowed.

The prime sponsor admits that eligibility cannot be

determined for the following 6 Title VI participants due to

lack of documentation:

Susan Cook, SSN 393-72-5872

Solomon Harris, SSN 397-64-6112

Catherine Jones, SSN 398-62-4841

Vanessa Lea, SSN 391-70-9602

Virginia Ramsey, SSN 397-64-6930

Ricky Simmons, SSN 397-64-7283

The prime sponsor and Grant Officer continue to dis-

agree as to the eligibility of the following 17 participants:

Dennis Chambers, SSN 392-72-8442

Jesse Cotton, SSN 389-68-9293

Cheryl Feleniak, SSN 393-70-2883

Lori Labucki, SSN 398-76-6782

Leon MeNeice, SSN 399-58-1595

Frederick Morris, SSN 388-66-1847

App. 60

Donnie Owens, SSN 399-64-2829

Millicent Ozier, SSN 388-66-2432

Annotia Parker, SSN 393-70-3720

Lori Rogers, SSN 394-74-7158

Phyilis Russell, SSN 395-72-7005

Diane Schmitz, SSN 395-58-8534

Steven Schneider, SSN 389-66-2652

William Smith, SSN 426-08-0185

Alfreida Spicer, SSN 390-70-4973

Tommy Williams, SSN 387-74-7347

William Yancey, SSN 390-64-1814

The prime sponsor concedes that these participants were

ineligible for Title VI, but claims that no costs were

charged to Title VI for them. The prime sponsor does not

deny that these participants were initially enrolled in Title

VI, ner does it claim that they were initially enrolled in

some other title for which they were eligible. The Grant

Officer maintains, however, that Ms. Humphrey determin-

ed that these 17 participants were initially enrolled in Title

VI and initially paid by JVS from that title. Although 16

of them appeared on a JVS payroll for Title III (YETP)

in February 1978, the first YETP subgrant from the Coun-

ty to JVS did not become effective until March 1, 1978, so

JVS charged the February YETP payroll to Title VI, thus

these costs were initially reported under Title VI. Ap-

parently the prime sponsor’s contention that no costs were

charged to Title VI for these participants is based on the

fact that they were part of a group for which costs were

later ‘‘backed out’’ from Title VI to Title I. The Grant Of-

ficer’s response to that is elizibility determinations should

be made before a participant is enrolled in CETA and the

key eligibility question is whether, at the time of applica-

tion, a participant is eligible for the title in which he or she

App. 61

is then enrolled. See 29 CFR 99.42(a)(1). Adjustments

of the type made here by the prime sponsor cannot retro-

actively create eligibility. Moreover, any attempt to do so

would be contrary to the cost principles of Federal Manage-

ment Circular 74-4 (Grant Officer’s Exhibit 11), codified at

41 CFR Subpart 1-15.7, incorporated by reference in the

CETA regulations at 29 CFR 98.12(a). According to 41

CFR 1-15.703-2(b) :

‘‘Any cost allocable to a particular grant or cost ob-

jective under the principles provided for in this sub-

part may not be shifted to other Federal grant pro-

grams to overcome fund deficiencies, avoid restric-

tions imposed by law or grant agreements, or for other

reasons.”’

The prime sponsor and Grant Officer continue to dis-

agree as to the eligibility of the following 2 participants:

Vanessa Davis, SSN 395-72-3336

Joseph Sornat, SSN 394-66-4906

Evidence from Ms. Bell for the prime sponsor was that

these participants were initially enrolled in Title VI per

JVS records, but she did not specify the enrollment dates

nor what JVS records were relied upon. Evidence from

Ms. Humphrey for the Grant Officer was that these partici-

pants first appeared on a JVS CETA payroll in March

1978 and the payroll was for Title III YETP. Both partici-

pants were ineligible for Title III because it could not be

determined if their respective family incomes were at or

below 85% of the lower living standard income level. There-

fore, the Grant Officer decided that associated costs should

be disaliowed.

App. 62,

The prime sponsor and the Grant Officer continue to

disagree as to the eligibility of the following 8 partici-

pants for Title VI.

Diane Smith, SSN 393-68-1564

Danieel Jablonski, SSN 390-56-3995

Reginald King, SSN 388-66-2380

Kzell Tillis, SSN 324-52-0709

Lawrence Hudson, SSN 394-68-6857

Frankie Jude, SSN 399-62-3869

Johnnie Reed, SSN 399-74-9646

Carol Wright, SSN 437-94-4077

The prime sponsor argues that some of these should be

eligible because their names appear on the Job Service list-

ing of Title VI eligibles and for other reasons. The Grant

Officer determined that all of these remained ineligible be-

cause of inadequate documentation to prove their eligi-

bility.

I agree with the contentions and reasoning of the Grant

Officer in his final determination on participant eligibility

as modified by his brief and reply brief. Therefore, I find

that all CETA funds expended on the 36 transferees from

the PFE WP into Titles II] and VI must be disallowed and

the prime sponsor will be ordered to reimburse the U.S.

Government by check payable to the U.S. Department of

Labor for those costs in an amount to be determined by the

Grant Officer or his designee and the Grant Officer is di-

rected to determine the amount of such disallowed costs

within 60 days.®

Sin determining the amounts to be disallowed the Grant

Officer should act in cooperation with the prime sponsor and

JVS and should take into account any subsequent transfers of

participants into new titles for which the participants may or

may not have been eligible.

App. 68

Complaints on Work Experience Wages and Benefits’

23. The Work Assistance Program does not pay pre-

vailing wages to Title VI participants.

24. Wage rates are uniformly minimum rate and do

not reflect the differing requirements of the jobs par-

ticipants are performing.

25. Work Assistance Program participants are per-

forming tasks of regular public service employees and

are still paid at the minimum rate.

2. The Work Assistance Program has failed to pro-

vide CETA VI participants with health coverage afforded

other employees.

3. The Work Assistance Program has denied CETA

VI participants the right to collectively bargain and be

covered by existing collective bargaining agreements.

4. The Work Assistance Program has denied CETA

participants the opportunity for advancement, cost of

living raises, promotion, and other benefits of regular

employees.

The Grant Officer found that all work experience par-

ticipants in Titles | and VI were paid the minimum wages,

$2.65 an hour in 1978 and $2.90 an hour in 1979. The Grant

Officer determined that, in establishing work experience

wage rates, Milwaukee County had not taken into account

factors such as the type of work performed, geographic

location, and skill proficiency, in violation of Section 95.33-

7Ms. Griswold made a similar complaint involving the fail-

ure of WAP to pay CETA participants prevailing wages in her

letter of February 20, 1978.

App. 64

(d)(4)(viii) of the 1976-1977 regulations. These provided

in part as follows:

‘*Participant benefits. Each participant in a work

experience activity shall receive wages. Wages shall

be commensurate with such factors as the type of

work performed, the geographic region of the pro-

gram, and the skill proficiency of the participant.’’

The Grant Officer found that the type of work per-

formed and the skill proficiency of the work experience

varied greatly and that in many cases the positions were

located in agencies where unsubsidized or public service

employees (PSE’s) were doing similar work.

The Grant Officer also decided, that the prime spon-

sor may have violated other regulations including 29

CFR 95.33(d) (4) (viii) (D), 98.24 and 96.34 of the 1977

regulations.®

8Section 95.33(d)(4)(viii)(D) provided:

“When a participant in a work experience activity is

performing the tasks of regular public service employment

type jobs, wages must be comparable to those paid for the

regular public service job, as specified in § 96.34.”

Section 98.24 provided in part:

“General benefits and working conditions for pro-

gram participants.

(a) Each participant in an on the job training work

experience or public service employment program under

the Act shall be assured of workmen’s compensation bene-

fits . . . or coverage~under a medical and accident policy

for injury or diseases resulting from such participation . . .

(b) Each participant in an on the job training, work

experience or public service employment program shall also

be assured of health insurance, unemployment insurance (to

(Continued on following page)

App. 65

With respect to benefits, the Grant Officer found

that WAP work experience participants had been entitled

(Continued from previous page)

the extent such benefits are allowable), coverage under col-

lective bargaining agreements and other benefits at the

same levels and to the same extent as other employees

similarly employed, and to working conditions and promo-

tional opportunities neither more nor less favorable than

such other employees similarly employed . . .”

Section 96.34 provided in part:

“Compensation for participants.

(a) Minimum wage for participants. Each participant

shall be paid at rate no iess than the highest of the following:

(1) Except where a participant is exempt under

sec. 13 of the Fair Labor Standards Act, the minimum

hourly wage set out in sec. 6(a)(1) of the Fair Labor

Standards Act of 1938, as amended. The exceptions

to Section 6(a)(1) shall not apply to public service em-.

ployment participants, except as provided in para-

graph (b).

(2) The State or local minimum wage for the most

nearly comparable covered employment;

(3) The prevailing rate of pay for persons em-

ployed in similar public occupations by the same em-

ployer (sec. 208(a));

(4) The minimum entrance rate for inexperienced

workers in the same occupation in the establishment,

or, if the occupation is new to the establishment, the

prevailing entrance rate for the occupation among

other establishments in the community or area, or

any minimum rate required by an applicable collec-

tive bargaining agreement; or

(5) The prevailing rate established by the Secre-

tary, in accordance with the Davis-Bacon Act, as amend-

ed, for participants involved in employment covered

wt the Davis-? >. Act as specified in £98.29 of this

es 6a

The regulations effective April 3, 1979 that apply to some

of these matters are 20 C.F.R. 676.25-4, 676.26-1, and 676.27.

App. 66

to workman’s compensation, public liability insurance, paid

holidays, 22 hours vacation per year, 22 hours sick leave

per year and medical services from the County Medical

Complex with a delayed payment system. However, more

generous benefits were provided to JVS employees cov-

ered under the collective bargaining agreement with

AFSCME. These included 12-25 vacation days per year,

depending on length of service, 144 working days per

month medical leave, hospitalization and medical surgical

coverage, iife insurance, a pension plan, 10 holidays, 4 or

5) personal days per vear, depending on length of services,

leaves of absence, unemployment insurance, workman’s

compensation insurance, automobile liability insurance and

professional liability insurance.

The Grant Officer’s initial determination ordered the

County to classify all work experience jobs in WAP by

job titles, duties, responsib'lities and supervision, deter-

mine the proper wage and benefits under the regulations,

and submit the results to the Regional Office for review.

The Grant Officer’s final determination modified the cor-

rective action to require the County to notify all former

CETA participants, by mail and newspaper advertising,

to submit claims if they believe they were underpaid. The

Worker Rights Institute conld also submit specifie docu-

mentation on individual participants’ pay. The claims

would then be reviewed by an outside agency, such as the

State Job Service or a contractor approved by Region V,

DOL, and the ageney would notify each participant of the

results of its review and the right to appeal to the Office

of Administrative Law Judges. Costs both for the record

review and baek wages could be paid from CETA funds.

The prime sponsor did not appeal the Grant Officer’s final

App. 67

determination. The Complainants did appeal the corree-

tive action ordered in the final determination, but pot the

findings of fact or conclusions of law upon which it was

based, since they felt that the burden of determining the

proper wages and benefits should more appropriately be

placed upon the prime sponsor inst2ad of the individual

CETA participants.

At the hearing the Complainants introduced a con-

siderable amount of evidence concerning wages actually

paid to WAP participants, as well as some evidence re-

lating to comparable wages in the community and some

evidence as to the type of wage records WAP consortium

agencies maintained for CETA participants. However,

the record definitely lacks the type of detailed evidence

needed to permit me to establish the proper wage for each

of the approximately 5,400 participants enrolled in WAP

between July 1, 1977 and April 1, 1979 (when the regula-

tions changed to permit payments of the minimum wage

in almost all work experience positions).

The evidence showed that at the beginning of the WAP

program all participants were paid the minimum wage

only. However, there was other evidence that a few WAP

participants were paid more than the minimum wage. Mr.

Obletz testified that beginning in October 1978, if a par-

ticipant in a production training area of JVS produced

enough on a piece rate to earn more than the minimum

wage, he was paid the minimum wage from CETA funds

plus a supplementary check from non-CETA sources for

the additional amount earned. However, according to

Messrs. Galazan and Lutzow, this was a rarity and Mr.

Dolberg testified that no WAP participants in the food

App. 68

services area were paid more than the minimum wage. At

the other WAP agencies, the participants from Goodwill,

Curative and De Paul Sertoma interviewed by Ms. Lorman,

a DOL investigator, in late 1978 were all paid minimum

wage. ‘Testimony from Goodwill employees indicated that

at some later date CETA checks for 22 hours at minimum

wage were sometimes supplemented by Goodwill, either

for additional pay based on an incentive piece rate, or for

additional hours. At Curative, participants could be paid

above the minimum wage from non-CETA funds if their

production leve! s» warranted, but the evidence indicated

that no wage supplementation occurred at De Paul.

According to Ms. Powers, the CETA Director, the

prime sponsor itself never classified jobs at the worksites

in order to set appropriate wage rates for either PSE

or work experience participants, but instead left that task

up to each employing agency. The prime sponsor approved

WAP subgrants which were budgeted on the basis of mini-

mum wage and it had no set standard on how additional

wages would be funded. The practice apparently varied

hetween agencies and over time, and there was no evidence

that the prime sponsor ever established or enforced a

uniform poliey based on anything other than minimum

wage,

The evidence also showed that the WAP consortium

agencies kept detailed individual records on the production

of each WAP participant assigned to a production train-

ing area which permit an individualized wage determina-

tion based on piece rate times productivity. Piece rates

were established based on a community norm for similar

work, which could be based on a time study of staff pro-

App. 69

auctivity and/or information from the State Job Service

or private employers. This system relied on the methed-

ology used to calculate wages for handicapped clients 1

sheltered workshops, who may be paid less than minimum

wage under certain conditions established by DOL’s Em-

ployment Standards Administration. No comparable ree-

ords were maintained for participants in nonproduction

areas, althorgh at JVS, evaluation forms were used to

estimate a percentage of the community norm at which

each participant was functioning.

There was some evidence as to community wage rates

for comparable work. With respect to food service wages,

Albert Grant, who provided senior citizens meals to the

County in competition with JVS, testified he paid his em-

ployees minimum wage plus workmen’s compensation and

unemployment compensation with a possible 50 cents an

hour raise after 6 months on the job. There was other

evidence on private industry wage rates from four com-

panies in the Milwaukee area: EK. KR. Wagner, Ben Turick,

Allen Bradley, and General Electric. Each of these had

had subcontracts with one or more of the WAP consortium

agencies. However. this evidence was not sufficiently spe

cifie to show that any particular group of CETA partici-

pants had performed a task identical to that performed by

regular com)any employees at a specified wage rate.

As in the case of eligibility requirements, the regula-

tions governing wages vary from title to title of CETA.

Since the Title III (YETP) regulations expressly en-

courage payment of the minimum wage ‘‘whenever fea-

sible,’’? Title III wages are not in controversy. For Title

Vi projects, wages must be the highest of the rates speci-

App. 7€

fied in 29 C.FLR, 95.33 (d) (4) (viii) or ‘‘the prevailing rates

of pay for persons employed in similar occupations by the

same employer.’? 29 CFR 99.37(e). As applied to WAP,

persons similarly employed by the same employer could

include handicapped clients, PSE’s, or ageney staff, a de-

termination which would have to be made on a case-by-case

basis. It should be noted that under this regulation, only

jobs within the same employing agency may be compared,

and thus wages at outside firms, such as Allen Bradley or

G.I... are irrelevant.

Under 29 CFR 95.33(d) (4) (viii), which applied to

Titles | and VI (if higher than the alternative just men-

tioned), wages ‘shall be commensurate with the type of

work performed, tle geographic region of the program,

and the skill proficiency of the participant,” with the mini-

mum wage as a floor. This standard does allow for com-

parisons with the private sector in the community. For

example, if entry level food service wages in the Milwaukee

area are generally minimum wage, it would be acceptable

to pay minimum wage to work experience parficipants

doing the same type of work. Another example is the G.E.

line. If WAP participants performed the same work as

‘*B” assemblers at the local G.E. plant, at the same level

of skiil and speed, they should be paid a commensurate

wage. On the other hand. if they only packed rather than

assembled an item; or performed a task by breaking it

down into a series of simple operations each done by one

person; or worked only half as fast, or were allowed twice

as many mistakes, or required 3 times as much super-

vision, they should probably be paid less. The evidence

in this ease does not contain the detailed information fe-

App. 71

quired for me to be able to make such individual wage

determinations.

With respect to benefits, the applicable regulation for

all 3 titles is 29 CFR 98.24(b), the so-called ‘‘ equal bene-

fits’? regulation. Applying this regulation involves identi-

fying similarly employed employees of the same employer,

whose benefits must also be afforded to CETA partici-

pants. The regulation lists certain factors to be considered

in making this determination: employment status, type

of work performed, job classification, and method of ap-

pol..tment to the position. Again, the evidence ix this case

is not sufficient for me to make this determination for each

of WAP’s work experience positions. As a matter of fact,

there was evidence that, at JVS, at least WAP partici-

pants were vot similarly emploved to regular JVS staff

and PSE’s.

In this case, in my opinion, the remedy proposed by

the Grant Officer in his initial determination is far more

appropriate than that contained in his final determina-

tion. the initial determination placed the burden of evalu-

ating jobs and caleulating wages on the prime sponsor,

which could have avoided the problem by following the

regulations in the first place, and which has better access

to the necessary information than former participants.’

*During the hearing there was evidence that the consortium

agencies had records confirming the details of the work per-

formed, the specific content and nature of the work, the dura-

tion of each contract, the number of units in the contract, the

cost of the contract, the number and name of each person work-

ing on each contract, the hours they spent on each contract and

their rate of production. Also maintained was the location of

(Continued on following page)

App. 72

Therefore, that portion of the Grant Officer’s final de-

termination pertaining to the corrective action is modified

to require the prime sponsor to classify all the work ex-

perience jobs in the WAP by job titles, duties, responsi-

bilities and supervision, determine the proper wages and

benefits under the regulations and submit the results to

Region V DOL for review within 60 days of the date of this

decision. The Regional office shall have 30 days after that

to review those results and the prime sponsor shall have

30 days thereafter to compensate all former CETA par-

ticipants who had been underpaid, as determined by DOL,

under provisions of the regulations who can be located.

If, due to changed circumstances, federal funds are not

ava'lable for back wages and the expenses involved in

determining the amount. of such wages, then the prime

sponsor must pay these out of its own funds. Except for

these modifications the Grant Officer’s determination on

work experience wages and benefits is affirmed.

Complaint on Failure to Pay WAP Participants.

5. The WAP has failed to pay many participants in

the program.'®

The Grant Officer discovered that while JVS paid

WAP participants in Titles II, III and VI programs by

check, for Title I participants. the checks were issued by

(Continued from previous page)

each outstationed job site, the type oi: work done there, the

number of slots at each site and the number and name of each

person there, as well as their hours for the duration of their

placement. All this information is readily retrievable through

several existing computer programs.

There was a similar complaint filed on February 20, 1978.

App. 73

the State of Wisconsin’s Department of Industry, Labor

and Human Relations. These Title I checks were mailed

from the state capital, Madison, Wis., to the Title | WAP

participants who lived in Milwaukee County. Checks

mailed from Madison in 1978 were frequently lost and

oceasionaily stolen from participants’ mail boxes. There

were also a few Title IT and VI paychecks from VS re-

ported lost, late, or stolen. JVS developed a procedure

for handling these cases by verifying that the participant

worked during the week in question, seeing that there is

documentation of the participant’s time in his file. and de-

termining from Madison whether and when a check was

issued, Tf the check was issued and the participant signed

an affidavit to the effect that he had not received the

check, JVS then issued an advance to the participant for

the amount of his wages out of non-CETA funds. .J.VS

also issued corrective (if the participant could verify the

hours he worked) and emergency (rent, eviction, death in

family, ete.) checks out of non-CETA funds. For Title

I participants repayment was handled as for a lost, stolen

or late check. For Title IIT and VI cases the amount ad-

vanced was deducted from the next pay period. The Grant

Officer decided that proper corrective action had been

taken and there was no violation of the Act, regulations

or grant. I affirm.

Complaiat on Pay Below Minimum Wage

6. The WAP has failed to pay some participants at

the minimum wage rate.

The Grant Officer found there were two problem

areas:

App. 74

a. In January and February 1978 when the

PF WP participants were transferred to WAP, the

PEFWP participants were paid $2. an hour, while the

WAP participants were paid the $2.65 minimum wage

for less hours. Some participants were mistakenly

paid only $2. an hour for the full transition week. Cor-

rective checks were sent to some 31 participants to

correct the improper, below minimum wage, payments

for hours worked under CETA during the transition

week.

b. Some work experience participants working

in sheltered workshops were allowed to work over-

time. The overtime was paid at a rate similar to regu-

lar, non-CETA handicapped clients of JVS, which

in some cases was

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