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DOL Debars Seattle-Based Federal Contractor for Violating Minimum Wage, Overtime and Record-Keeping Laws
The U.S. Department of Labor has debarred HWA Inc., President John Wood and Vice President Barbara Wood from future government contracts for three years, due to significant and repeated violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act. Seattle-based HWA provided security services as a contractor to various federal facilities, government offices and public works projects in the states of Washington, Oregon, Idaho, Missouri and New York.
“The Labor Department will not allow federal contractors to misuse public funds and exploit hardworking laborers by denying their rightful wages,” said Secretary of Labor Hilda L. Solis. “Debarring violators such as HWA from future contracts ensures a level playing field, so that honest companies are not placed at a competitive disadvantage for playing by the rules, and paying their workers full and fair prevailing wages.”
According to a DOL press release:
“Most recently, in 2009, the company defaulted on seven federal contracts and failed to meet its payroll obligations, resulting in nearly $1 million in unpaid wages for 206 employees. The division ordered an emergency withholding of funds on several of the company’s federal contracts and secured the full payment of these wages. All SCA contracts held by the HWA were terminated shortly thereafter.”
The Service Contract Act (SCA) contract clauses, present in all Federal contracts, require contractors and subcontractors performing services under prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates contained in a predecessor contractor’s collective bargaining agreement, including prospective increases. The Labor Department issues SCA wage determinations for contracting agencies to incorporate into covered contracts, along with the required contract clauses. The fringe benefit requirements — usually vacation and holidays, known as “health and welfare” benefits — are separate and in addition to the hourly monetary wage requirement under the SCA. In addition, employers with prime contracts in excess of $100,000 under the CWHSSA must pay workers at least one and one-half times their regular rates of pay for all hours worked over 40 in a week.
Although violations of the primary federal wage and hour law, the Fair Labor Standards Act (FLSA), may be pursued by aggrieved employees in private lawsuits, alleged violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act, may only be pursued by the DOL. Largely due to the fact that under the prior republican leadership, the employer-friendly DOL pursued very few of these cases, such violations are commonplace on Federal worksites, despite the various laws prohibiting them. Hopefully, as the current DOL pursues these cases more frequently, workers will once again be assured of the protections of the laws that are on the books.
N.D.Ill.: FLSA And SCA Supplement One Another; FLSA Allows For A Private Right Of Action Despite The SCA’s Applicability
McDonald v. Eagle Exp. Lines, Inc.
The issue before the Court was whether an employee working under a federal contract, governed by the Service Contract Act (“SCA”), may bring a private cause of action under the FLSA. Defendant contended that the court lacked jurisdiction because the contract between Defendant and the USPS is a federal contract explicitly governed by the administrative procedures available in the SCA. Denying Defendant’s Motion to Dismiss for lack of jurisdiction, the Court explained that the SCA supplements the FLSA and does not bar private lawsuits by employees working under contracts governed by the SCA.
“The SCA provides that any work conducted pursuant to federal service contracts must pay wages and fringe benefits consistent with those established by the Secretary of Labor. 41 U.S.C. §§ 351, 358. Those established wage and benefit rates are found in the Secretary’s Register of Wage Determinations. The Secretary of Labor has sole jurisdiction to enforce the SCA. 41 U.S.C. §§ 352(b), 353. The SCA does not provide for an explicit or implicit private right of action. Dist. Lodge No. 166, Int’l Ass’n of Machinists & Aerospace Workers, AFL-CIO v. TWA Servs., Inc., 731 F.2d 711, 714-16 (11th Cir.1984); Miscellaneous Serv. Workers, Drivers & Helpers, Teamsters Local # 427 v. Philco-Ford Corp., 661 F.2d 776, 779-81 (9th Cir.1981); Oji v. PSC Envtl. Mgmt. Inc., 771 F.Supp. 232, 233-34 (N.D.Ill.1991). Eagle contends that McDonald is a service employee within the meaning of the SCA and is therefore not entitled to bring a private claim under the FLSA for overtime wages. Instead, Eagle argues that McDonald must file a complaint with the Secretary of Labor and proceed along the administrative channels prescribed by the SCA. Furthermore, Eagle asserts that McDonald’s state claims must be dismissed, as no basis for original jurisdiction would exist if the FLSA claim is not proper.
Both parties agree that subject matter jurisdiction in this case, including supplemental jurisdiction for McDonald’s quantum meruit and unjust enrichment state claims, is contingent on the propriety of the FLSA claim. Therefore, the issue is whether McDonald may bring a claim under the FLSA for overtime compensation despite the fact that the SCA governs the work he performed. For the reasons stated below, the court concludes that the court has jurisdiction over McDonald’s FLSA claim.
Eagle relies on Nichols v. Mower’s News Service, Inc., 492 F.Supp. 258 (D.Vt.1980), and Oji v. PSC Envtl. Mgmt. Inc., 771 F.Supp. 232, 233-34 (N.D.Ill.1991), in support of its motion to dismiss. Nichols involved the same fact pattern as here. In a briefly articulated decision, the court concluded that claims for overtime pay are regulated by the SCA and dismissed plaintiff’s claim for lack of subject matter jurisdiction. Id. Oji involved a suit by an employee for unpaid retirement benefits clothed as an action by a third-party beneficiary for breach of a contract to pay the benefits. The court inferred that the plaintiff was seeking to recover under a federal government contract subject to the SCA. Oji, 771 F. Supp at 233-34. As such, the plaintiff’s claim was under the SCA. Because there is no private right of action under the SCA, the court dismissed the lawsuit. As in Nichols, Eagle argues that consideration of legislative intent underlying the SCA and FLSA is unnecessary because the SCA plainly governs. The argument is unpersuasive in light of substantial authority to the contrary on which plaintiff relies. Indeed, Nichols is an outlier.
In the background, Powell v. U.S. Cartridge Company presents an important parallel. There, munitions workers operating under government contracts controlled by the Walsh-Healey Act sued their employers for overtime compensation under the FLSA. 339 U.S. 497 (1950). The United States Supreme Court characterized the broad sweeping nature of the FLSA as indicating “congressional awareness that the coverage of the Fair Labor Standards Act overlaps that of other federal legislation affecting labor standards.” Powell, 339 U.S. at 518. The Court noted that the FLSA specifically exempts certain employees from coverage but does not exempt employees of private contractors under public contracts. Id. at 517. Thus, the Court held that the Walsh-Healey Act did not preclude application of the FLSA. Id. at 519-20.
The SCA, like the Walsh-Healey Act, also deals with the wage rates of and benefits due to employees of government contractors. Courts have looked to Powell in determining whether the FLSA can supplement the SCA, have concluded that the FLSA and SCA can indeed supplement one another, and have held that the FLSA allows for a private right of action despite the SCA’s applicability.
For example, in Lee v. Flightsafety Services Corp., the court affirmed a judgment under the FLSA in favor of firefighters and engineers working under an SCA contract, reasoning from the parallel to Powell and asserting that Congress intended the FLSA to “overlap” with other federal legislation, including the SCA. 20 F.3d 428, 431 (11th Cir.1994). Similarly, in Masters v. Maryland Management Co., the Fourth Circuit concluded that the SCA can be supplemented by the FLSA where they are not in direct conflict. 493 F.2d 1329, 1332-33 (4th Cir.1974). The court affirmed the judgment in favor of the employees, reasoning that because the overtime computation rate was the same under both the FLSA and the SCA, the two acts did not conflict, permitting the employees to file a suit under the FLSA. Id.; see also Mersnick v. USProtect Corp., No. C-06-03993 RMW, 2006 WL 3734396, at *3-5 (N.D.Cal. Dec. 18, 2006) (FLSA overtime claim was not precluded by the SCA or a settlement entered into between the Department of Labor and the plaintiff’s employer under the SCA regarding unpaid compensation); Koren v. Martin Marietta Services, Inc., 997 F.Supp. 196, 211, 214-17 (D.P .R.1998) (summary judgment denied on FLSA claims because the SCA did not impliedly repeal the FLSA’s private enforcement provisions for unpaid overtime compensation); Brown v. Luk, Inc., No. 95-CV-1780, 1996 WL 280831 (N.D.N.Y. May 10, 1996) (wage rate and holiday pay claims dismissed because the SCA does not provide a private right of action to enforce these claims, but claims for certain overtime compensation could proceed under the FLSA); Dowd v. Blackstone Cleaners, Inc., 306 F.Supp. 1276, 1278-79 (N.D.Tex.1969) (a claim for overtime can be filed under the FLSA despite the SCA).
Both the FLSA and the SCA were enacted to guarantee employee rights, and the United States Supreme Court has made clear that rights under the FLSA may overlap with other labor laws without being conflicting. The reasoning of the Fourth and Eleventh Circuits and a variety of district courts is more persuasive than Nichols, the single district court decision Eagle cites. The SCA is designed to ensure that employees working on federal contracts receive, at minimum, the same prevailing wages and benefits as other employees, government and non-government alike, in their respective localities. To this end, § 351(a) of the SCA provides that each federal contract shall contain a provision specifying the minimum monetary wage to be received as well as fringe benefits.FN5 41 U.S.C. § 351(a). Although § 351(a) does not require overtime compensation for federal contracts, § 355 provides that overtime pay may be determined under any applicable federal law, including the FLSA. Id. § 355. Moreover, Department of Labor regulations make clear that the SCA “does not provide for compensation of covered employees at premium rates for overtime hours of work …. however, … other Federal laws may require such compensation.” 29 C.F.R. § 4.180 (2009).
Given the supplemental nature of the FLSA, combined with the SCA’s failure to explicitly guarantee overtime compensation in all federal contracts but referencing the availability of other governing law as well as Department of Labor regulations stating that other laws may be applicable to claims for overtime compensation, the court concludes that McDonald and similarly situated employees may proceed under the FLSA for unpaid overtime despite being covered by the SCA. As such, the court has subject matter jurisdiction over McDonald’s claim.”