The Office of the Attorney General (OAG) issued a civil citation against Electrical Contractors, Inc. and Louis Bona for two violations of the prevailing wage law on a public works project, viz., improperly paying an apprentice's wage, instead of a journeyman's wage, to three employees and withholding pay from two other employees by means of a vacation deduction. Electrical Contractors, Inc. (ECI) and Mr. Bona appealed, pursuant to G.L. c. 149, § 27C(b)(4).
A hearing was held on September 24, 2008 at the office of the Division of Administrative Law Appeals, 98 North Washington Street, Boston. I admitted sixteen documents into evidence. (Exs. 1-16.) William Flynn, Vice President of ECI, testified on behalf of Petitioners. David Wallace, Director of the Division of Apprentice Training, and Scott Simpson, an OAG Fair Labor Inspector, testified on behalf of the Respondent. There is one cassette tape of the hearing. At the conclusion of the hearing, I agreed to keep the record open until November 12, 2008 to accept post-hearing briefs from the parties. Upon receipt of the parties' briefs, the record closed on November 12, 2008.
On January 20, 2009, the Petitioner filed a Motion to reopen the record to introduce a January 12, 2009, letter from David Wallace to ECI regarding its apprentice sponsor application, which was filed in May of 2008. The OAG filed its opposition to the Petitioners' motion on January 22, 2009.
Based upon the testimony and documents presented, I make the following findings of fact:
1. Electrical Contractors, Inc. is a Connecticut corporation with a principal office in Hartford, Connecticut. Louis Bona is the President and Treasurer of ECI, while William J. Flynn, Jr. is ECI's Vice President. (Exs. 2, 3, 4.)
2. From July 14, 2007 to November 10, 2007 five workers from ECI performed electrical work on a public works project at the University of Massachusetts in Amherst. (Testimony; Ex. 13)
3. Because the project was a public works project, the Division of Occupational Safety set prevailing wage rates for work under the contract, including a rate of $43.87 for the Electrician classification for the period July 1, 2007 to December 31, 2007. (Ex. 5.)
4. In late 2007, the OAG received a complaint that ECI was illegally paying some of its non-apprentice electricians at an apprentice's wage, which is only a percentage of the regular journeyman electrician's wage. (Testimony, Simpson.)
5. Scott Simpson, an OAG investigator, requested ECI's certified payroll records from the project's awarding authority. (Testimony, Simpson; Ex. 7.)
6. Mr. Simpson's examination of the certified payroll records revealed that three ECI employees, Craig Busca, Jeffrey Gustafson, and David Smith, were paid at rates less than the full journeyman's rate. Mr. Busca was paid $28.52 per hour; Mr. Gustafson was paid $30.71 per hour; and Mr. Smith was paid $26.32 per hour. (Testimony, Simpson; Exs. 6, 7.)
7. Based on the hours worked by these three men, Mr. Simpson calculated that Mr. Busca was underpaid $614.00, Mr. Gustafson was underpaid $2,526.72, and Mr. Smith was underpaid $517.73. (Testimony, Simpson; Exs. 6, 7.)
8. During the period relevant to this appeal, Messrs. Busca, Gustafson and Smith were registered as apprentices with the Connecticut State Apprenticeship Council of the Connecticut Department of Labor. (Testimony, Flynn; Exs. 8, 9, 10.)
9. During the period relevant to this appeal, Messrs. Busca, Gustafson and Smith were not registered as Massachusetts apprentices with the Massachusetts Department of Workforce Development, Division of Apprentice Training. (Testimony, Flynn, Wallace.)
10. In September 2006, the State of Connecticut and the Commonwealth of Massachusetts entered into an Apprentice Reciprocity Agreement. The Agreement required a copy of each non-resident apprentice's apprentice agreement to be filed with the appropriate state apprentice registration agency for verification before the apprentice begins work as a non-resident apprentice in that state. Under the Agreement, apprentices and employers who use apprentices must comply with the law and regulations in effect for the state in which the work site is located. (Ex. 1)
11. The Division of Apprentice Training has implemented a reciprocal apprentice registration procedure based on G.L. c. 23, §§ 11G, 11W. A company seeking to use out-of-state apprentices in Massachusetts must enroll with the Division of Apprentice Training and pay a $300.00 annual fee. Each apprentice who wishes to participate in the reciprocity agreement must obtain an apprentice identification card, which is good for the term of the apprenticeship, and pay a fee of $35.00. (Testimony, Wallace.)
12. The registration procedure and all of the necessary forms were posted on the website of the Division of Apprentice Training from October 2006 to April 2008. (Testimony, Wallace.)
13. Prior to or during the work that is the subject of this appeal, ECI did not enroll with the Division of Apprentice Training, nor did it pay the annual $300.00 fee. (Testimony, Flynn, Wallace.)
14. Prior to or during the work that is the subject of this appeal, none of the ECI employees who were registered as apprentices in Connecticut obtained Massachusetts apprentice identification cards, nor did any of them pay the $35.00 fee for an identification card. (Testimony, Flynn, Wallace.)
15. The fees collected by the Division of Apprentice Training are used to fund the apprenticeship program. (Testimony, Wallace.)
16. While he was reviewing the certified payroll records, Mr. Simpson also discovered that ECI was deducting small amounts of pay from two different employees, James Denis and Timothy Kularski. ECI deducted $2.02 per hour from Mr. Denis's pay and $1.11 per hour from Mr. Kularski's pay. (Testimony, Simpson; Exs. 6, 7.)
17. Based on the hours worked by Mr. Denis and Mr. Kularski, Mr. Simpson calculated that Mr. Denis was underpaid $693.49, and Mr. Kularski was underpaid $86.58. (Testimony, Simpson; Exs. 6, 7.)
18. The money that ECI deducted from Mr. Denis and Mr. Kularski was placed into a vacation fund at their request. (Testimony, Flynn.)
19. Employees of ECI do not receive paid vacation time. Instead, they may elect to contribute money to a vacation fund throughout the year. Employees who participate in the vacation fund are paid back all of their contributions on the anniversary of their hiring date. Employees do not receive interest on their vacation fund contributions. (Testimony, Flynn.)
ECI makes two challenges to the OAG's citation. First, ECI argues that it properly paid Messrs. Busca, Gustafson and Smith as apprentices, and not journeymen, and that the Division of Apprentice Training denied ECI due process. Second, ECI argues that it paid the full prevailing wage to Mr. Denis and Mr. Kularski and did not improperly deduct for vacation because the vacation fund program is voluntary and the pay deducted for vacation is paid back to participants each year.
Prevailing Wage and Apprentice Registration Law
The OAG's citation is rooted in Massachusetts prevailing wage law, which requires contractors and sub-contractors engaged in public works construction projects to pay certain workers-"mechanics and apprentices, teamsters, chauffeurs and laborers"-prevailing wages. G.L. c. 149, § 26; Teamsters Joint Council No. 10 v. Dir. of the Dep't of Labor & Workforce Dev., 447 Mass. 100, 102 (2006). It is the Commissioner's job to prepare a list of the jobs usually performed on public works projects. G.L. c. 149, § 27; Teamsters, 447 Mass. at 102. The Commissioner may revise the job classifications from time to time as he may deem advisable. G.L. c. 149, § 27. Prior to awarding a contract on a public works project, the awarding authority submits a list of jobs for which the prevailing wage must be paid; the Commissioner then determines the wage rate for each of the job classifications and issues a wage rate sheet for the project. Id. The job classifications and the wage rates for each classification are derived from local collective bargaining agreements in private industry. G.L. c. 149, § 26.
G.L. c. 149, § 27A provides an administrative mechanism for review of the Commissioner's wage determinations and job classifications. Teamsters, 447 Mass. at 102-03. At the conclusion of this administrative process, the decision of the Commissioner is final. Id. at 103. Because the prevailing wage law contains no provision for judicial review of the Commissioner's decisions, aggrieved parties may file an action in the nature of certiorari, pursuant to G.L. c. 249, § 4, if they wish to challenge any of the Commissioner's final decisions. Teamsters, 447 Mass. at 106; Felix A. Marino Co. v. Comm'r of Labor and Industries, 426 Mass. 458, 464 (1998).
While the Commissioner determines the job classifications and the corresponding prevailing wages, the Commissioner does not enforce the law; that task falls to the Attorney General. G.L. c. 149, §§ 26, 27. The OAG may initiate criminal proceedings against any contractor who does not comply with the prevailing wage law. G.L. c. 149, § 27C(a). In the alternative, the OAG may issue a written warning or a civil citation. G.L. c. 149, § 27C(b)(1).
Any person aggrieved by the OAG's enforcement of the prevailing wage law may file a notice of appeal with the OAG and DALA within ten days of receiving any citation or order. G.L. c. 149, § 27C(b)(4). DALA "may affirm or if the aggrieved person demonstrates by a preponderance of evidence that the citation or order was erroneously issued, vacate, or modify the citation or order." Id.
Normally, all workers on a public works construction project must be paid the full prevailing wage rate. G.L. c. 149, § 27. The law makes an exception for registered apprentices. Id. Registered apprentices are paid less because they are still learning a trade and benefit from on-the-job instruction from their employers. Apprentices are paid a percentage of the prevailing wage rate for journeymen based upon the length of the apprentice program and the number of years the apprentice has participated in the program. Contractors are limited in the number of apprentices they can use, based on the number of journeymen employed by the contractor.
The Massachusetts Apprenticeship Program is administered by the Division of Apprentice Training of the Department of Labor and Workforce Development. G.L. c. 23, § 11G. To use apprentices in Massachusetts a contractor must register as an apprentice program sponsor with the Division of Apprentice Training by filling out the application specified by the Division and paying a $300.00 annual fee. G.L. c. 23, § 11L; 2003 Mass. Acts c. 26, § 637. "The application shall describe the proposed program, giving the terms and conditions of the apprentices' employment, supervision of apprentices and provision of related instruction." G.L. c. 23, § 11L. The Division is also required to charge a fee of $50.00 for apprentice training program sponsor verification on public works projects. 2003 Mass. Acts c. 26, § 636. To participate in an apprentice training program, a potential apprentice must submit an application for an apprentice identification card and pay a one-time $35.00 fee. G.L. c. 23, § 11W. The funds collected by the Division are used to support the apprentice training program directly. Id. The funds are separately received by the state treasurer on behalf of the Commonwealth and deposited in a special trust account for the Division and can be expended, without further appropriation, under the direction of the Division. Id.
In September 2006, the State of Connecticut and the Commonwealth of Massachusetts entered into an agreement they called an Apprentice Reciprocity Agreement. The Agreement, however, does not exempt out-of-state employers and their employee apprentices from registering with the state in which they are planning to work. The Agreement requires apprentices and employers to comply with the law and regulations in effect for the state in which the job is located. In Massachusetts, that means that out-of-state employers and apprentices must still register themselves with the Division of Apprentice Training and pay the required fees, pursuant to G.L. c. 23, § 11W.
ECI Apprentice Registration
ECI admits that it did not register itself as an apprentice program sponsor with the Division. It also admits that its apprentices did not register with the Division or have Massachusetts apprentice identification cards. ECI's argument that it was improperly cited rests on other grounds. ECI argues that it was denied due process because the Division did not directly notify ECI of the terms of the Apprentice Reciprocity Agreement and that ECI effectively "recorded" the apprentices by notifying the contract's awarding authority that it would be using apprentices to complete the work.
In support of its argument, Bill Flynn, Vice President of ECI, testified that the company has completed several Massachusetts public works projects in the recent past, and the contracts for those projects contained no provisions requiring ECI to register its apprentices in Massachusetts; rather, registering the apprentices in their home state, Connecticut, was sufficient to meet the terms of the contracts. Even if this were true, ECI is still required to comply with Massachusetts law and regulations, which it failed to do in this case. ECI cannot rely on the fact that it was not cited for its practices in the past or that it complied with the terms of prior contracts to prove that it "recorded" its apprentices with Massachusetts and was, therefore, in compliance with Massachusetts law.
As for ECI's notice argument, the Division was not required to notify ECI directly of any changes in the relationship between Massachusetts and Connecticut apprenticeship authorities. ECI was put on notice of the Reciprocity Agreement and registration requirements and fees, as they were posted on the Division website from October 2006 to April 2008. The applicable law, G.L. c. 149, §§ 11E through 11W, has been in effect since 2002, giving ample notice to ECI of its requirements. Moreover, the Reciprocity Agreement did not alter the requirement that all employers wishing to sponsor apprentices and pay them as such must register with the Division as apprentice program sponsors and pay the required fees.
ECI further argues that the OAG's and the Division's enforcement of the apprentice registration law denies them due process because it does not bear a real and substantial relation to public health, safety or general welfare. See Blue Hills Cemetery, Inc. v. Bd. of Registration in Embalming and Funeral Directing, 379 Mass. 368, 373 (1979). To support this argument ECI maintains that it "recorded" its apprentices with the Division by notifying the contract's awarding authority that it had apprentices working on the project. The only requirement that ECI failed to complete, in its eyes, was the payment of the annual fee to the Division. ECI further insists that, once it became aware of the Massachusetts registration requirement in May 2008, it attempted to register with the Division and the Division refused to process ECI's application.
The Division is charged by the Legislature with the task of administering apprentice programs in the Commonwealth. G.L. c. 23, § 11G. In that work, it is granted great latitude. It sets the conditions for participation in the apprentice program. Id. One of those conditions is the completion of the application materials and payment of the $300.00 fee. ECI's attempt to register itself as a Massachusetts apprentice sponsor six months after the work in this case was completed does not remedy the fact that ECI, at the time the work was completed, was not properly registered. Proper registration allows the Division to keep tabs on program participants, and the fees help to fund the apprentice training program, which aids people interested in learning one of the building trades and assures that well-trained building tradesmen will be available to complete public works projects. See G.L. c. 23, § 11W. The instant law bears a reasonable relation to a permissible legislative objective. See Pinnick v. Cleary, 360 Mass. 1, 14 (1971). The law likewise "bears a real and substantial relation to the public health, safety, morals or some other phase of the general welfare." See Blue Hills Cemetery, Inc., 379 Mass. at 373.
ECI has not met its burden of demonstrating by a preponderance of the evidence that the citation for failure to pay the prevailing wage to Messrs. Busca, Gustafson and Smith was erroneously issued. That portion of the citation is, therefore, affirmed.
ECI Vacation Fund
ECI also challenges that portion of the citation that cites ECI for setting aside employee pay in a vacation fund and not paying it directly to the workers. ECI argues that it paid the full prevailing wage to Mr. Denis and Mr. Kularski and did not make an improper deduction for vacation pay. Bill Flynn, Vice President of ECI, gave uncontradicted testimony that the disputed amounts deducted from these journeymen's paychecks were set aside for them in a vacation fund. Employees at ECI receive no paid vacation; they are paid only for the hours they work. To encourage employees to take vacation, ECI established a vacation fund. The fund is a voluntary program that allows journeymen to set aside some of their pay to fund their vacations, or anything else that they want to spend the money on. Participating employees first choose whether or not they want to participate in the vacation pay fund; if so, then they choose the amounts that they want directed to the fund. On the anniversary of their hiring dates, participating employees get back all of the money that they have contributed to the fund. The company pays no interest on the money set aside.
The OAG asserts that G.L. c. 149, § 27 prohibits deductions for vacation benefits. As noted above, journeymen are generally entitled to the prevailing wage, as determined by the Commissioner. Section 27 provides, in relevant part: "The [prevailing wage] . . . shall include payments by employers to health and welfare plans, pension plans and supplementary unemployment benefit plans . . ., and such payments shall be considered as payments to persons . . . performing work . . . ." The OAG argues that the vacation deduction is not a health and welfare plan, pension plan or supplementary unemployment benefit plan and is, therefore, an impermissible deduction. To support its argument the OAG relies on two letters dated October 5, 1989 authored by James F. Snow, who was the Commissioner of the Department of Labor and Industries. Neither of the letters is in evidence, as they were merely attached to the OAG's post-hearing brief. In the letters, in response to two different contractor inquiries, Mr. Snow opines that employers may not deduct for vacations and a variety of other purposes, including travel, tools, uniforms, holiday pay, workers compensation insurance and unemployment insurance. The OAG argues that Mr. Snow's letters are entitled to deference because the successor department, the Department of Labor, is charged with administering the prevailing wage rate. See Teamsters Joint Council No. 10, 447 Mass. at 109-10.
The OAG's arguments would have some force if ECI's vacation fund wasn't voluntary and the contributions weren't paid to the participants on an annual basis. Each of the deduction examples cited in the 1989 letters are compulsory; whereas, in the case at bar, the workers chose to participate in the program. This means that Mr. Denis and Mr. Kularski could have chosen to be paid the funds that were set aside in the vacation pay fund right away, but they chose instead to set aside the money through the company-sponsored program. This is distinctive, as it shows that the vacation fund in this case differs from deductions for travel, tools and uniforms because those deductions return nothing to the employee. The funds set aside in the vacation fund, on the other hand, are paid to the employees. Similarly, ECI is already obligated to purchase workers compensation insurance and unemployment insurance, so ECI may not saddle employees with those costs. ECI is not similarly obligated to provide paid vacations or the vacation fund. The ECI vacation program is, therefore, not the kind of impermissible deduction addressed by Mr. Snow's letter or forbidden by the provisions of G.L. c. 149, § 27.
Granting the Department of Labor the deference it is due, ECI has met its burden of demonstrating by a preponderance of the evidence that the citation for withholding vacation pay from Mr. Denis and Mr. Kularski was erroneously issued. That portion of the citation is, therefore, vacated.
Finally, ECI challenges the $10,000.00 civil penalty that the OAG has levied against it. G.L. c. 149, § 27C(b)(2) provides that the maximum civil penalty that may be imposed upon an employer for its first offense, when the conduct was intentional, is $15,000.00 for each offense. In determining the amount of any civil penalty to be assessed, the OAG must take into consideration previous violations of chapter 149 or chapter 151 by the employer, the intent by such employer to violate the provisions of chapters 149 or 151, the number of employees affected by the present violation(s), the monetary extent of the violation(s), and the total amount of the public contract or payroll involved. G.L. c. 149, § 27C(b)(2).
There is no evidence in the record that the OAG took these factors into consideration when calculating the penalties for ECI's alleged violations. When considered in light of this decision, a $10,000.00 civil penalty is excessive. There is no evidence that ECI has been cited by the OAG prior to this citation. ECI did not demonstrate by a preponderance of the evidence that its conduct was not intentional; therefore, it shall be considered intentional for purposes of reviewing the civil penalty. Three employees were affected by ECI's failure to pay the full journeyman's prevailing wage, but the employees affected are still learning their trades and would be considered apprentices in their home state of Connecticut. The restitution that is due them under Massachusetts law, $3,658.45, is a windfall to them. It makes little sense to compound this anomaly by increasing the civil penalty based on the number of employees affected. Finally, no evidence of the total amount of the public contract or payroll involved was introduced at the hearing.
While a $10,000.00 penalty is permissible under G.L. c. 149, § 27C(b)(2), when the appropriate factors are considered, a $10,000.00 penalty in this case is excessive. It does not appear that the OAG considered the required factors in assessing the penalty. Considering that only three employees were affected, that this was ECI's first citation, and that the total restitution due is far less than the assessed penalty, a civil penalty of $2,000.00 is appropriate.
RULING ON PETITIONERS' MOTION TO REOPEN RECORD
The Petitioners' Motion to Reopen the Record is denied, as the letter being offered is not newly discovered evidence. The letter from Mr. Wallace was sent more than two months after the record in this case closed. Moreover, the letter is not relevant for the reasons stated in this forum's discussion of the prevailing wage, supra.
Civil Citation # PR080023 is hereby modified as follows. Restitution to Mr. Denis and Mr. Kularski is vacated, leaving restitution of $614.00 to be paid to Craig Busca, $2,526.72 to be paid to Jeffrey Gustafson, and $517.73 to be paid to David Smith. The civil penalty is reduced to $2,000.00.
DIVISION OF ADMINISTRATIVE LAW APPEALS
Kenneth J. Forton