Administrative Review Board Decisions

The following case summaries were created by the Administrative Review Board staff.

Administrator, Wage and Hour Div., USDOL v. The GEO Group, ARB No. 2022-0048, ALJ No. 2021-SCA-00006 (ARB May 30, 2024) (Decision and Order)

LOCAL PREVAILING WAGE; CONTRACTOR MUST PAY LOCAL PREVAILING WAGE PURSUANT TO APPLICABLE AREA-WIDE WAGE DETERMINATION, RATHER THAN LOWER CBA-BASED RATE DRAWN FROM INAPPLICALBE CBA-BASED WAGE DETERMINATION

In Administrator, Wage and Hour Div., USDOL v. The GEO Group, ARB No. 2022-0048, ALJ No. 2021-SCA-00006 (ARB May 30, 2024), Respondent entered into a contract with the Federal Bureau of Prisons (BOP) to operate a federal correctional institution in Michigan called North Lake. The contract was subject to the SCA and the CWHSSA. While Respondent and BOP agreed to apply the local prevailing wage rates identified in the applicable area-wide wage determination for most service employees engaged at North Lake, Respondent and BOP agreed to pay corrections officers a lower wage rate adopted from a collective bargaining agreement (CBA) applicable to corrections officers employed by Respondent at another facility in Georgia. To this end, BOP utilized the WDOL website to generate a CBA-based wage determination, which Respondent and BOP then incorporated into their contract, along with the area-wide wage determination. 

After work on the contract commenced, the Administrator determined that Respondent underpaid the corrections officers at North Lake. Specifically, the Administrator asserted that the CBA-based wage determination did not apply to corrections officers at North Lake, because there was no covered "predecessor contract" at that facility. The Administrator argued that Respondent had to pay the corrections officers the higher, local prevailing wage rate under the area-wide wage determination, instead. Respondent disagreed with the Administrator's determination and requested a hearing with an ALJ. The ALJ agreed with the Administrator and ordered Respondent to pay back wages under the SCA and the CWHSSA. Respondent appealed the ALJ's decision to the ARB.

The ARB affirmed the ALJ's decision. First, the ARB determined that the CBA-based wage determination did not apply to the corrections officers at North Lake. Under the SCA and, by extension, the CWHSSA, a CBA-based wage determination may only be used where the contract at issue "succeeds a contract subject to the [SCA] . . . in the same locality." It was undisputed that the contract between Respondent and BOP did not succeed another SCA-covered contract in North Lake's locality. Respondent never held a federal contract at North Lake before entering into the contract with BOP. Additionally, although Respondent and BOP adopted CBA-based wage rates from one of Respondent's facilities in Georgia, the Georgia contract was not in the same locality as North Lake in Michigan, several hundred miles away.

Instead, the ARB determined that Respondent should have paid the corrections officers the local prevailing rate under the applicable area-wide wage determination. The ARB observed that, in the absence of a predecessor contract in the same locality, the SCA and its implementing regulations mandate that a contractor must pay its employees the local prevailing rate.

Although Respondent appeared to concede that the CBA-based wage determination did not reflect the correct wage rate for its corrections officers at North Lake, it nevertheless argued that the CBA-based wage determination was properly incorporated into the contract. Accordingly, it argued that it remained the "effective" wage determination, unless and until the Administrator compelled Respondent and BOP to amend the contract to remove it. The ARB disagreed.

The ARB determined that the SCA and the CWHSSA do not permit contracting parties to agree to pay a lower, inapplicable CBA-based rate in lieu of a higher, applicable prevailing rate. To the contrary, the ARB noted that the SCA's implementing regulations explicitly provide that "[t]he fact that a successor contractor may have its own [CBA] does not negate . . . the application of a prevailing wage determination issued pursuant [to the SCA] where there was no applicable predecessor [CBA]."

The ARB also determined that the fact that BOP utilized the Department of Labor's WDOL system to generate the CBA-based wage determination did not make that wage determination effective. The ARB observed that although a contracting agency has the option to utilize the WDOL system to obtain wage determinations, the SCA's implementing regulations warn that the contracting agency remains "fully responsible for selecting the correct wage determination." In this case, the CBA-based wage determination was undeniably not the "correct wage determination" at North Lake.

Finally, the ARB rejected Respondent's argument that the Administrator's only remedy was to instruct Respondent and BOP to amend their contract to remove the CBA-based wage determination and to instruct Respondent to pay the corrections officers the local prevailing wage rate going forward, rather than to collect back wages. In support of its argument, Respondent cited 29 C.F.R. § 4.4(c)(1), which states that where the Administrator determines that the parties applied an incorrect wage determination generated through the WDOL system, "the contracting agency, in accordance with § 4.5, shall amend the contract to incorporate the correct wage determination." Section 4.5, in turn, similarly provides that where the Administrator determines that a covered contract "failed to include an appropriate wage determination," the contracting agency "shall include in the contract . . . any applicable wage determination." The ARB stated that these provisions did not apply to the circumstances presented in this case or restrict the Administrator's ability to recover back wages from Respondent. By their plain terms, the provisions require a contracting agency to amend a contract to "include" or "incorporate" an appropriate wage determination where one was previously omitted. In this case, however, the appropriate wage determination—the applicable area-wide wage determination—was already included in the contract. Thus, amendment pursuant to Sections 4.4 and 4.5 was not necessary. Additionally, the ARB observed that while both provisions require the contracting agency to amend a contract to include an appropriate wage determination where one was previously omitted, neither provision purported to make amendment the sole or exclusive remedy available to the Administrator or limit the Administrator's ability to also recover back wages.

Administrator, Wage and Hour Div., USDOL v. Vet Reporting, LLC, ARB No. 2022-0056 (ARB May 29, 2024) (Decision and Order)

SERVICE CONTRACT ACT; DENYING MOTION TO SEAL; CROSS-WITHHOLDING IS PERMITTED BY STATUTE AND REGULATION; DUE PROCESS IS SATISFIED; FACTUAL QUESTIONS ARE BEST DETERMINED BY AN ALJ

In Administrator, Wage and Hour Div., USDOL v. Vet Reporting, LLC, ARB No. 2022-0056 (ARB May 29, 2024), the ARB reviewed a final ruling of the Administrator of the Wage and Hour Division (WHD) on an SCA withholding determination. The case arose out of an WHD investigation into Alpha4 Solutions that found that Alpha4 violated the SCA's prevailing wage, fringe benefit, and recordkeeping requirements. Vet Reporting acquired Alpha4's court reporting contracts via Asset Purchase Agreement. Vet Reporting also entered into a novation agreement with the Department of Veterans Affairs, to assume Alpha4's court reporting contracts. After the completion of the investigation, WHD requested withholding from any of Alpha4's contracts. The VA determined that Vet Reporting was the same contractor as Alpha4 and initiated cross-withholding. Vet Reporting requested a ruling letter from WHD.

On appeal to the ARB, Vet Reporting argued that was not the "same contractor" or a successor in interest to Alpha4 and should not be subject to cross-withholding; WHD did not provide sufficient due process in their investigation; WHD made inaccurate assumptions about the asset purchase agreements and novation agreements; WHD made inaccurate hours and payment calculations; and WHD did not provide an opportunity for an adjustment due to errors made by the contracting agency.

The ARB affirmed the Ruling Letter with respect to the Administrator's conclusion that cross-withholding is legally permissible under the SCA and regulations, denied the petition to find the Administrator violated due process requirements, and dismissed without prejudice the remainder of the petition for review because it found that the factual arguments made by respondents were best suited to be heard in the concurrent proceeding before the ALJ.

MOTION TO SEAL DENIED; RECORDS ARE SUBJECT TO FOIA

The ARB found that the parties' submissions, including the corporate documents and contracts the parties moved to be sealed, are part of the record and subject to the Freedom of Information Act. In the absence of a FOIA request, it would be premature and inappropriate for the ARB to determine whether any exemption applies. If a FOIA request is received for the record in this case, the Department of Labor will follow the proper procedures for responding. The ARB found that sealing portions of the record was neither necessary nor appropriate and denied the Motion to Seal.

CROSS-WITHHOLDING IS PERMITTED BY STATUTE AND REGULATION AS A MATTER OF LAW

The ARB found that the issue presented was whether WHD's determination that Vet Reporting is the "same contractor" as Alpha4 is consistent with the law. The ARB also determined that resolving that dispute required thorough fact-finding regarding the APA and novation agreements at issue would be initially best conducted by the ALJ.

The SCA authorizes direct withholding from the contract on which violations may have occurred and cross-withholding from "any other contract between the same contractor and the Federal Government." The regulations allow for withholding of "the accrued payments due either on the contract or on any other contract […] between the same contractor and the Government." Withholding is permitted prior to a final order establishing liability. The amounts withheld are retained in a deposit fund and can only be released to underpaid workers upon a final order.

A plain reading of the statute and regulations show that WHD is permitted to request withholding from a different contract with the same contractor. Respondents argued that the contracts were for different services, however, other contracts do not even need to be SCA contracts to be eligible for withholding. While asset sales generally relieve the acquirer of the liabilities of its predecessor, there are exceptions. The general exceptions include when the buyer agreed to assume the liabilities, the transaction amounted to a de facto merger of the buyer and seller, the buyer is a "mere continuation" of the seller, or the transaction is entered into fraudulently in order to escape liability for such debts.

The ARB found that in cases where federal labor laws apply, courts apply federal common law successor liability, which imputes more liability than the traditional approach because of the policies underlying federal employment statutes. Courts look to the following factors:

(1) whether the successor employer had prior notice of the claim against the predecessor;

(2) whether the predecessor is able, or was able prior to the purchase, to provide the relief requested; and

(3) whether there has been a sufficient continuity in the business operations of the predecessor and successor.

The ARB found that factual arguments that Respondents made in their petition about whether Vet Reporting is a successor in interest are properly decided by the ALJ.

THE NOTICE AND OPPORTUNITY TO RESPOND AFFORDED TO VET REPORTING SATISFIES CONSTITUTIONAL DUE PROCESS

Vet Reporting argued that the Administrator failed to provide Respondents with due process at any step in the withholding process. Constitutional due process requires notice and an opportunity to be heard. Notice must be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Due process also requires the opportunity for "some form of hearing before an individual is finally deprived of a property interest." Importantly, a hearing is not required prior to a temporary deprivation of property rights – the hearing must occur prior to the final deprivation of property rights. The ARB found that an examination of the process due in this case under the SCA showed that it satisfies the Constitution.

The Respondents in this case received notice. An officer of Alpha4, one of the Respondents, was alerted to the WHD investigation in 2018. He was also alerted to the withholding request. Vet Reporting, too, was alerted of the VA's decision that it was the "same contractor" in October 2021. WHD's subsequent withholding request to the VA after completion of the second investigation named Vet Reporting specifically and was sent to the officer. WHD included in its correspondence a description of the administrative process. The Ruling Letter was further notice of the withholding, and provided more information to Respondents as to why the VA was cross-withholding from Vet Reporting's contracts. Respondents' petition to the ARB showed that they received the notice provided in the Ruling Letter.

The SCA and its implementing regulations provide for a full and fair opportunity for Respondents to challenge WHD's liability findings, underpayment assessments, and withholding determinations. The regulations specifically provide for review of the Administrator's investigative findings and remedies, with factual disputes to be resolved by the ALJ, with full hearing proceedings, and appellate review by the ARB. After the administrative process, judicial review is available under the Administrative Procedure Act.

In cases of withholding due to alleged SCA violations, the withheld funds are not disbursed until after completion of the administrative process. None of the withheld funds may be disbursed by WHD until there is a non-appealable final determination finding that Alpha4 workers are owed SCA back wages. The Act specifies that the amount withheld "shall be held in a deposit fund." It further specifies that "on order of the Secretary, the compensation found by the Secretary or the head of a Federal agency to be due an underpaid employee pursuant to this chapter shall be paid from the deposit fund directly to the underpaid employee." The regulations further echo the Act in directing that withholdings be held in a deposit fund until there is a final order from the Secretary or his or her authorized representative.

The procedures outlined in the SCA and its regulations satisfy due process. The Department of Labor has a substantial interest in ensuring compliance with the Act and, in accordance with that interest, withholding and cross-withholding are pursued before a final determination of liability. Respondents received notice and are granted an opportunity for a full evidentiary hearing, as well as appeal, before they may be finally deprived of the amounts withheld. Thus, the ARB found Respondents have both notice and an opportunity to be heard, satisfying the Due Process Clause of the Constitution.

THE REMAINING FACTUAL DISPUTES ARE BEST RESOLVED BY A DEPARTMENT OF LABOR ADMINISTRATIVE LAW JUDGE

The procedural posture of this case was distinct from many SCA cases that appear before the ARB. It is unusual for a case of this type – with a WHD investigation resulting in withholding and a complaint – to arrive at the ARB before there has been a hearing and the ALJ has issued a final Decision and Order. This procedure, while contemplated by the regulations, left the ARB in the position of an appellate body without the benefit of the fact-finding, record development, and other benefits of a hearing. In addition to the question of whether Vet Reporting is a successor-in-interest, Respondents' arguments about inaccurate assumptions about the APAs and novation agreements, inaccurate hours and payment calculations, and whether there was opportunity for an adjustment due to errors made by the contracting agency are each factual in nature and should be resolved by the ALJ for the reasons identified. 

The ARB found that all parties appeared to agree that the best place for a resolution of Respondents' factual disputes and the ultimate question of whether there were SCA violations is a hearing in front of an ALJ and agreed with the parties. The ARB found that without the benefit of a full hearing and fact-finding by a Department ALJ, the remainder of the case should be dismissed without prejudice until the completion of the OALJ Case.

Cole v. CSX Transportation, ARB No. 2024-0030, ALJ No. 2023-FRS-00071 (ARB May 28, 2024) (Decision and Order Dismissing Petition for Review)

ORDER OF DISMISSAL; COMPLAINANT FAILED TO FILE AN OPENING BRIEF AND RESPOND TO ORDER TO SHOW CAUSE

In Cole v. CSX Transportation, ARB No. 2024-0030, ALJ No. 2023-FRS-00071 (ARB May 28, 2024), the ARB dismissed the Complainant's Petition for Review for failure to file an opening brief as ordered by the ARB.

On March 13, 2024, Complainant filed a Petition for Review of the ALJ's Order Granting Respondents' Motion to Dismiss. The ARB issued a Briefing Order, and Complainant did not file an Opening Brief. Therefore, on May 7, 2024, the ARB issued an Order to Show Cause ordering Complainant to explain why the ARB should not dismiss the appeal for failure to comply with the ARB's orders and briefing requirements. Complainant did not respond or file an opening brief. Accordingly, the ARB dismissed the appeal.

Kreb v. Integra Aviation, LLC, ARB No. 2024-0027, ALJ No. 2023-AIR-00008 (ARB May 24, 2024) (Decision and Order Dismissing Petition for Review)

ORDER OF DISMISSAL; COMPLAINANT FAILED TO FILE AN OPENING BRIEF AND RESPOND TO ORDER TO SHOW CAUSE

In Kreb v. Integra Aviation, LLC, ARB No. 2024-0027, ALJ No. 2023-AIR-00008 (ARB May 24, 2024), the ARB dismissed the Complainant's Petition for Review for failure to file an opening brief as ordered by the ARB. On March 1, 2024, Complainant filed a Petition for Review of the ALJ's Decision and Order Dismissing Complaint. The ARB issued briefing orders, and Complainant did not file an opening brief. Therefore, on April 30, 2024, the ARB issued an Order to Show Cause ordering Complainant to explain why the ARB should not dismiss the appeal for failure to comply with the ARB's orders and briefing requirements. Complainant did not respond or file an opening brief. Accordingly, the ARB dismissed the appeal.

Administrator, Wage and Hour Div., USDOL v. Rivet & Sons, LLC, ARB No. 2024-0042, ALJ No. 2023-TAE-00011 (ARB May 24, 2024) (Order Dismissing Petition for Review)

ORDER OF DISMISSAL; INTERLOCUTORY APPEAL

In Administrator, Wage and Hour Div., USDOL v. Rivet & Sons, LLC, ARB No. 2024-0042, ALJ No. 2023-TAE-00011 (ARB May 24, 2024), the ARB denied Respondent's interlocutory Petition for Review of the ALJ's April 10, 2024 Order Granting a Motion to Quash (Subpoena Order).

The first step in the interlocutory appeal process is to request that the ALJ certify the interlocutory issue for appellate review as provided in 28 U.S.C. § 1292(b). Respondents failed to request certification from the ALJ.

The ARB may still consider reviewing an interlocutory order that meets the "collateral order" exception to 28 U.S.C. § 1291. Respondents failed to establish grounds for an interlocutory appeal under the collateral order exception. An essential element to satisfy the exception is that the disputed question is effectively unreviewable on appeal from a final judgement. The Subpoena Order is reviewable on appeal from a final judgement in this case. Accordingly, the ARB dismissed the Petition for Review.

Schooler v. Ford Motor Co., ARB No. 2024-0014, ALJ No. 2023-SOX-00015 (ARB May 6, 2024) (Order Granting Complainant's Request to Dismiss Petition for Review)

ORDER OF DISMISSAL; DISMISSAL BECAUSE COMPLAINANT INDICATED A DESIRE TO FILE A SUIT IN FEDERAL COURT

In Schooler v. Ford Motor Co., ARB No. 2024-0014, ALJ No. 2023-SOX-00015 (ARB May 6, 2024), the ARB dismissed the case after Complainant filed notice indicating a desire to file his claim in federal court, "[p]ursuant to 29 C.F.R. § 1980.114." SOX's regulations give the ARB the discretion to decide whether to grant a petitioner's request to withdraw a petition for review. The regulations also provide that "[i]n special circumstances not contemplated by the provisions of this part, or for good cause shown, the ALJ or the ARB on review may, upon application, after three days' notice to all parties, waive any rule or issue any orders that justice or the administration of the Act requires." Pursuant to the authority granted to the ARB by these regulations, and in recognition of Complainant's pro se status, his failure to file an Opening Brief, his expressed desire to exercise his right to proceed with a de novo action in federal district court, and the potential consequences of granting Complainant's request for dismissal before he actually filed a complaint in federal district court, the ARB concluded that immediately granting Complainant's request to dismiss his Petition for Review was not appropriate in the unique circumstances of this case.

Consequently, on April 5, 2024, the ARB issued a Notice of Order Granting Complainant's Request to Dismiss Petition for Review (Notice). In the Notice, the ARB noted that the SOX permits a complainant to file a de novo complaint in federal district court if the Secretary of Labor has not issued a final decision on the complainant's SOX claims within 180 days of the filing of the administrative complaint with the Department's Occupational Safety and Health Administration. To invoke this right, a complainant need only file the de novo complaint in the appropriate federal district court, and then file a file-stamped copy of the complaint with the Department within seven days. The ARB also noted that Complainant risked being barred from seeking de novo review if he withdrew his Petition for Review before filing a complaint in district court, and his only recourse would be to instead file an appeal with the appropriate United States court of appeals.

Accordingly, the ARB declined to immediately grant Complainant's request to withdraw his Petition for Review. Instead, in light of the unique circumstances of the case, and balancing the interests of the parties with the ARB's interest in achieving orderly and expeditious disposition of its cases, the ARB gave notice to the parties of its intent to grant Complainant's request to withdraw his Petition for Review and dismiss his appeal thirty days after the issuance of the Notice. The ARB also advised Complainant that if he filed a complaint for de novo review in district court before the ARB granted his request to withdraw his Petition for Review, he must file a copy of the file-stamped complaint within seven days of filing.

Thirty days passed since the ARB issued the Notice and Complainant did not file anything with the ARB. The ARB accordingly granted Complainant's request to withdraw his petition for review and dismissed Complainant's claim.