Gracey v. International Brotherhood of Electrical Workers, Local Union No. 1340

868 F.2d 671, 35 Cont. Cas. Fed. 75,628, 29 Wage & Hour Cas. (BNA) 241, 1989 U.S. App. LEXIS 2386, 1989 WL 16270

• Court: Court of Appeals for the Fourth Circuit
• Decided: March 1, 1989
• Docket: No. 88-3074
• Status: Published

Opinions

WILKINSON, Circuit Judge:

In this case we must determine if the Service Contract Act, 41 U.S.C. §§ 351-58 (1987), permits the Secretary of Labor to set aside the wage and benefit provisions of a collective bargaining agreement if they are less than the prevailing rate in the locality for similar work. The district court held that the Act does not provide the Secretary authority to set aside the plain terms of a collective bargaining agreement, where the agreement provides for wages and benefits above or equal to those of its predecessor. We believe that the district court’s interpretation of the statute is correct, and we affirm its judgment.

I.

The facts of this case are not in dispute. The plaintiffs, Martin Gracey, Klate Holt and John V. Hill, d/b/a The Klate Holt Company (Holt), entered into a government contract with the National Aeronautical and Space Administration (NASA) at Langley Research Center in Hampton, Virginia. The Service Contract Act, 41 U.S.C. §§ 351-58 (1987), governed this contract.

Local Union No. 1340, International Brotherhood of Electrical Workers, AFL-CIO (IBEW Local) is the certified bargaining representative of all Holt employees who perform maintenance work assigned by NASA at the Langley Research Center. On May 14, 1987, the IBEW Local filed a request with the Secretary of Labor for a hearing pursuant to § 353(c) of the Act to determine whether the wages specified in its collective bargaining agreement with Holt were substantially at variance with those prevailing for similar services in the locality. The IBEW Local claimed the wages in the collective bargaining agreement were less than the wages prevailing for similar services in the locality and that the Secretary should require the company to pay the increased wages and benefits.

Subsequent to this filing, and after arms-length negotiations in June and July, 1987, a collective bargaining agreement, dated August 1, 1987, was entered into between the IBEW Local and Holt for one year, to continue year by year unless terminated by sixty days’ prior notice. Significantly, the agreement raised wages and fringe benefits above those of the prior collective bargaining agreement between the parties.

On September 3, 1987, the Administrator of the U.S. Department of Labor’s Wage and Hour Division issued an order of reference for assignment of IBEW Local’s request to an administrative law judge. On February 11, 1988, Holt simultaneously filed with the Administrator a motion to withdraw the order of reference, and with the administrative law judge a motion to dismiss the order of reference or, in the alternative, for an indefinite stay in the proceedings. Both motions were denied.

On March 11, 1988, Holt filed this suit in the Eastern District of Virginia seeking to enjoin the defendant, the Secretary and Administrator, from holding a variance hearing pursuant to § 353(c). On April 1, the district court entered an order joining the IBEW Local as a party defendant and granting summary judgment to Holt. The court held that the Service Contract Act “does not confer authority on the Secretary of Labor to hold a hearing for the purpose of determining whether to set aside wage and fringe benefit provisions of an operative collective bargaining agreement which was bargained for at arms length, except as provided, either expressly or by reasonable implication, in Section 353(c).” Because the plain language of § 353(c) addressed only the situation, not present here, in which wages and benefits in a successor agreement were below those contained in the predecessor agreement, the court held the Secretary was not empowered to disregard the bargain reached by the parties. The IBEW Local filed a notice of appeal, as did the Secretary. The Secretary, however, subsequently moved to dismiss her appeal and did not file a brief in this case nor participate in these proceedings.

II.

The Service Contract Act of 1965, 41 U.S.C. §§ 351-58 (1987), was enacted to provide wage and safety protection for “employees of contractors and subcontractors furnishing services to or performing maintenance services for Federal agencies.” S.Rep. No. 798, 89th Cong., 1st Sess. (1965), reprinted in 1965 U.S.Code Cong. & Admin.News 3737, 3737. When enacted, the service contract was the only remaining category of federal contracts to which comprehensive labor standards protection did not apply. Workers on federal construction contracts were protected under the Davis-Bacon Act, 40 U.S.C. §§ 276a-276a-5 (1985), enacted in 1931, while those performing work under federal supply contracts were covered by the Walsh-Healey Public Contracts Act, 41 U.S.C. §§ 35-45 (1985), passed in 1936.

A.

Section 353(c) of the Service Contract Act is the operative provision at issue. It provides:-

No contractor or subcontractor under a contract, which succeeds a contract subject to this chapter and under which substantially the same services are furnished, shall pay any service employee under such contract less than the wages and fringe benefits, including accrued wages and fringe benefits, and any prospective increases in wages and fringe benefits provided for in a collective-bargaining agreement as a result of arm’s-length negotiations, to which such service employees would have been entitled if they were employed under the predecessor contract: Provided, That in any of the foregoing circumstances such obligations shall not apply if the Secretary finds after a hearing in accordance with regulations adopted by the Secretary that such wages and fringe benefits are substantially at variance with those which prevail for services of a character similar in the locality.

41 U.S.C. § 353(c) (1987).

The union urges, relying primarily on the proviso, that § 353(c) gives the Secretary the authority to convene a hearing and to adjust wages if she finds that collectively bargained wages and fringe benefits are below those prevailing for like services in the locality. It argues further that a hearing and upward adjustment of wages is proper here because IBEW Local members are paid wages and benefits below those prevailing in the locality for similar services. We hold, to the contrary, that the collective bargaining agreement governs wage and benefit levels in this case.¹

Section 353(c) provides a wage and fringe benefit floor by requiring wages in a successor arms-length agreement to be “no less than the wages and fringe benefits, ... to which such service employees would have been entitled if they were employed under the predecessor contract.” This obligatory floor for the successor contract is quite different from an obligation to pay at the wage rate prevailing in a particular locality. As the district court recognized, § 353(c) only “proscribes the provision of lower wages and benefits in successor collective bargaining agreements than those wages and benefits contained in predecessor agreements thus providing a minimum wage and benefit rate.” See also Locals 666 and 780 v. United States Dept. of Labor, 760 F.2d 141, 144 (7th Cir.1985) (“The status of predecessor employees Is only relevant in establishing a wage and benefit floor for successor contracts.”).

It is undisputed that Holt complied with its obligation under § 353(c). Holt did not seek to reduce wages and benefits below this statutory minimum. The wages and benefits agreed upon in the successor agreement were higher than the amounts under the predecessor contract.

The union, however, focuses upon the proviso. The proviso states that the obligation to pay at or above the predecessor contract rates “shall not apply if the Secretary finds after a hearing ... that such wages and fringe benefits are substantially at variance with those which prevail for services of a character similar in the locality.” IBEW argues that this language permits the Secretary to hold a hearing whenever wage rates are substantially at variance with those in the locality.

We disagree. The proviso by its terms speaks solely to the employer’s basic obligation, viz. to provide wage and benefit levels equal to or above those of the predecessor agreement. The proviso then sets forth one situation in which this basic obligation shall not apply — namely, when the employer is already paying wages that exceed prevailing rates. The proviso thus permits the Secretary to suspend the wage and fringe benefit floor of the predecessor contract only when wages and benefits are already higher than local rates for similar services. The Secretary cannot require the contractor to pay more than the wage floor. In the instant case, the contractor had concededly met its statutory obligation, and so the proviso for suspension of that obligation simply does not operate.

The legislative history and the administrative regulations support such a reading of § 353(c). That section was added as an amendment to the Act in 1972. The Senate Report on the 1972 amendments to the Act indicates the intent of Congress to make the predecessor contract a wage floor in order to “assur[e] that employees working for service contractors ... will have wages and fringe benefits under a new service contract no lower than those under their current agreement.” S.Rep. No. 1131, 92nd Cong., 2d Sess. (1972), reprinted, in 1972 U.S.Code Cong. & Admin.News 3534, 3534. Other language demonstrates that under § 353(c) Congress intended the predecessor contract to be the only wage floor. The Senate Report suggests that “[t]his provision should not be construed to confer windfall benefits,” id. at 3537, and that § 353(c) “[ofrdinarily requires successor contractors to pay service employees wages and fringe benefits that are no lower than their wages and fringe benefits under the current contract.” Id. at 3534 (emphasis added). The word “ordinarily” suggests that the Secretary can suspend the employer’s usual obligation to meet the wage levels of the predecessor contract only in the unusual circumstances where wages and benefits were reduced from pri- or levels but nonetheless remained above those prevailing in the locality.

The only relevant statements at the time § 353(c) was passed indicate that the purpose of that section was to remedy the practice of underbidding for government contracts by slashing wages. Senator Gurney of Florida stated that the bill accomplished this by “merely requir[ing] that a successful bidder on a service contract cannot pay employees less than they were receiving from their former employer unless his wages are out of line.” 118 Cong. Rec. 30949, 31282 (1972). There is no indication the Act was intended to protect workers under a bargaining agreement by the Secretary’s enforcement of prevailing wage rates; rather the Act requires “that any assuming contractor maintain the level of wages and fringe benefits which the workers have achieved.” (Statement of Senator Gurney on behalf of himself and Senator Williams of New Jersey, co-sponsor of the legislation and chairman of the Senate Committee on Labor and Public Welfare) 118 Cong.Rec. 23915, 24813 (1972).

Finally, Federal Regulation, 29 C.F.R. § 4.163(a) (1988), supports this interpretation of the statute. In discussing § 353(c), the Secretary states:

Under this provision, the successor contractor’s sole obligation is to insure that all service employees are paid not less than the wages and fringe benefits to which such employees would have been entitled if employed under the predecessor’s collective bargaining agreement.

Paying at or above the wage floor is the contractor’s “sole obligation.” There is no suggestion of an obligation to pay at the prevailing local rate in the Secretary’s own regulation.²

B.

The language and legislative history of § 353(c) illuminate the congressional intent. It is appropriate also to read § 353(c) in conjunction with the entire Service Contract Act and the other legislation addressing collective bargaining agreements and labor standards in federal contracting. A court must endeavor to see a statute whole, not to construe statutory sections or phrases in isolation. Stafford v. Briggs, 444 U.S. 527, 535, 100 S.Ct. 774, 780, 63 L.Ed.2d 1 (1980). Here the 1972 amendments in §§ 351(a)(1) and 351(a)(2) and § 353(c) “must be read in harmony to reflect the statutory scheme.” S.Rep. No. 1131, 92nd Cong., 2d Sess. (1972), reprinted in 1972 U.S.Code Cong. & Admin.News 3534, 3537; 29 C.F.R. § 4.163(d) (1988); Trinity Services, Inc. v. Marshall, 593 F.2d 1250, 1253 (D.C.Cir.1978).

Sections 351(a)(1) and 351(a)(2) provide in pertinent part:

(a) Every contract (and any bid specification therefor) entered into by the United States or the District of Columbia in excess of $2,500, ... the principal purpose of which is to furnish services in the United States through the use of service employees, shall contain the following:

(1) A provision specifying the minimum monetary wages to be paid the various classes of service employees in the performance of the contract or any subcontract thereunder, as determined by the Secretary, or his authorized representative, in accordance with prevailing rates for such employees in the locality, or, where a collective-bargaining agreement covers any such service employees, in accordance with the rates for such employees provided for in such agreement, including prospective wage increases provided for in such agreement as a result of arm’s-length negotiations. ...

(2) A provision specifying the fringe benefits to be furnished the various classes of service employees, engaged in the performance of the contract or any subcontract thereunder, as determined by the Secretary or his authorized representative to be prevailing for such employees in the locality, or, where a collective-bargaining agreement covers any such service employees, to be provided for in such agreement, including prospective fringe benefit increases provided for in such agreement as a result of arm’s-length negotiations.

41 U.S.C. § 851 (1987) (emphasis added).

The use of the disjunctive is critical. As the district court noted, if Congress “intended the collective bargaining agreements to be ineffective whenever the prevailing rate varies substantially, then it would not have disjunctively provided collective bargaining as an alternative method for establishing fair wages and benefits.” Recognizing that the National Labor Relations Act, 29 U.S.C. § 151 (1987), “encourages the practice and procedure of collective bargaining,” Congress drafted § 353(c) to permit the Secretary to disregard the bargaining agreement only when wages in a successor agreement fall below those of the predecessor contract. The statute does not encumber either the competitive bidding or the collective bargaining process to the extent appellant suggests. Certainly it does not contemplate that an arms-length bargaining agreement would be reached, only to be routinely abrogated in another forum. Instead, the collective bargaining agreement is explicitly assumed to establish the wage and benefit levels for service employees so long as the requirements of § 353(c) and the minimum wage established by the Fair Labor Standards Act, 29 U.S.C. § 206(a)(1) (1978) are met. The legislative history is just as explicit as the language of the statute. The analysis of § 351 in the 1972 Senate Report notes that subsection (a) provides “that, in cases where a collective bargaining agreement covers the service employees, the minimum monetary wages to be paid the various classes of employees shall be in accordance with the rates provided for in the collective bargaining agreement_” S.Rep. No. 1131, 92nd Cong., 2d Sess. (1972), reprinted in 1972 U.S.Code Cong. & Admin.News 3534, 3535.

The language of the Davis-Bacon Act, 40 U.S.C. §§ 276a-276a-5 (1985), and the Walsh-Healey Public Contracts Act, 41 U.S.C. §§ 35-45 (1985), further sustains this reading of the Act. The Davis-Bacon Act provides that workers will be paid “wages that will be determined by the Secretary of Labor to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the State in which the work is to be performed....” 40 U.S.C. § 276a(a) (1985). There is no provision, however, in that legislation for the collective bargaining process to operate as an alternative means for establishing wages and benefits.

Likewise, the pertinent section in Walsh-Healey provides that employees must be paid “not less than the minimum wages as determined by the Secretary of Labor to be the prevailing minimum wages for persons employed on similar work_” 41 U.S.C. § 35 (1985) (emphasis added). Again, Congress did not include in this legislation language comparable to the collective bargaining provisions of the Service Contract Act. The Service Contract Act is not, therefore, a strict prevailing wage statute; Congress intended a prevailing wage to be set by the Secretary only when a collective bargaining agreement had failed to make wage and benefit provisions.³

III.

The language, context, and legislative history of the Service Contract Act lead to but one conclusion: the wage and benefit levels of a successor agreement must at least meet those of its predecessor. If, as in this case, that obligation is met, no power vests in the Secretary to set aside an arms-length collective bargaining agreement solely because wages are below the prevailing rate. While the Secretary had advanced a different interpretation of this legislation in the district court, she has not participated in this appeal for reasons which do not appear in the record. Courts are in any event sworn to safeguard the clear and unambiguous intent of Congress, administrative interpretations to the contrary notwithstanding. Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). Because Congress has clearly expressed its intentions in this case, we affirm the judgment of the district court.

AFFIRMED.

1 . The defendant also attacks the district court’s subject matter jurisdiction over this action. It argues that plaintiffs are not entitled to "judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.” Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463-64, 82 L.Ed. 638 (1938). This argument is misplaced. If an agency acts in clear derogation of its statutory authority, a court need not wait for the underlying proceedings to conclude to intervene. Leedom v. Kyne, 358 U.S. 184, 188, 79 S.Ct. 180, 183, 3 L.Ed.2d 210 (1958); Mayor and City Council of Baltimore v. Mathews, 562 F.2d 914, 920 (4th Cir.1977).

2 . Our dissenting brother seizes upon the plural form of "obligations" and concludes that Congress had in mind multiple obligations when it drafted the proviso. This ignores, however, the fact that the proviso immediately follows the discussion of the employer’s obligation not to provide wages and benefits less than those of the successor contract. Indeed, the proviso is separated from the substantive obligation to which it refers only by a colon. To make the reference to the preceding duty even clearer, the word "obligations” is preceded by the word "such." Moreover, the plural form of the word "obligation" is readily understood as referring to the various payment obligations, i.e., accrued wages, fringe benefits, increases in wages and benefits, mentioned in § 353(c), without any need to distort the context of the proviso by having it apply to x, y, or z obligations (or any combination thereof) that may appear throughout the Act. It cannot be that Congress meant to suspend the obligation to pay minimum wages in accordance with the Fair Labor Standards Act under any circumstances. Yet the dissent somehow presumes that this is one of the obligations to which the proviso's suspension would apply.

With respect, the interpretation of our dissenting brother has simply overlooked the statutory context in which the proviso is set.

3 . Our dissenting brother would simply ignore the entire collective bargaining process whenever it produced a result which the Secretary determined to be at variance with "prevailing wages” in the community. We think a reading of the statute in its entirety indicates a fidelity to the collective bargaining process on the part of Congress and a preference for agreements reached through arms-length negotiations save in the narrow circumstance when wage and benefit levels fall below those of the predecessor contract. The legislative history, to which the dissent refers, pertains to collective bargaining agreements that were not at arms-length. See S.Rep. No. 1131, 92nd Cong., 2d Sess. (1972), reprinted in 1972 U.S.Code Cong. & Admin. News 3534, 3537. ("service employees should be protected against instances where the parties may not negotiate at arms length”). The collective bargaining process proceeded in good faith here. No question of a collusive agreement or unequal bargaining power has been raised. In such circumstances, Congress intended the commitment to collective bargaining, expressed in this and many other statutes, to operate.

The dissent states finally that the majority’s interpretation of the § 353(c) proviso is such that only the “interests of employers would thereby be served.” The dissent ignores the fact that the obligation at issue falls solely upon the employer. By definition, therefore, any statutory provision for the suspension of that obligation would inure to the benefit of an employer. The overall purpose and operation of the statute remains, of course, one of wage protection for service contract employees.