Opinion ID: 1934703
Heading Depth: 1
Heading Rank: 5

Heading: The Conflict of Interest on the Part of One Member of the Agency.

Text: One of the most serious objections to the wage order raised by petitioners relates to an asserted conflict of interest on the part of one of the three members of the Board, Joseph A. Beavers, identified in the majority opinion as business agent of the Cooks, Pantry and Kitchen Employees Union, Local 209, and a member of the joint executive board of the Hotel and Restaurant Employees and Bartenders International Union. The joint board in question is the bargaining representative for employees in the downtown hotels and negotiates in their behalf multiemployer contracts with the local hotel association setting wage scales and conditions of employment for the various occupations covered thereunder, including waiters, bartenders, culinary workers, chambermaids, bellmen, porters and office clericals. The local which he manages as business agent is also the principal union for kitchen employees in the numerous restaurants in this area. From the standpoint of tenure of union office, the salary and perquisites attached thereto, it is apparent that Member Beavers had a substantial personal stake in the outcome of any wage proceeding affecting hotels and restaurants. An object of all administrative law reform legislation, including § 1-1501ff. of the D.C.Code, is to subject to the searching light of judicial scrutiny any conduct on the part of an official or staff member of an administrative tribunal which compromises the integrity of any of its decisions. As a result of the Board's refusal in advance of hearing to grant the procedural rights of § 1-1509(b) to parties appearing at the hearing, [13] petitioners argue that they were deprived of an opportunity to prove all grounds for demanding the disqualification of Member Beavers and thereby establish a factual record to enable this court to review the issue. Petitioners say that if they had been allowed to develop the facts they could have shown that Mr. Beavers engineered the ultimate outcome. They point to his participation in the preliminary decision to revise that wage order applying primarily to occupations in his own constituency, his selection of only colleagues of his from the joint board as the employee representatives on the ad hoc committee which recommended the wage subsequently adopted by the Board, his attendance at meetings of such committee, and his sitting on the Board at the final hearing after ignoring a request to disqualify himself. They also say that the final order included major changes in conditions of employment which the union had vainly attempted to obtain from the hotels in grievance sessions. There is no material in the record which proves this last allegation, or discloses just what part Mr. Beavers played in executive sessions of the Board. The record does reveal, however, that the hourly minimum rate of $2.25 set in the challenged order was 15 cents in excess of the minimum contained even in the union contract with the Hotel Association. As this contract was to expire a few months after the hearing, petitioners assert that the resultant wage order was calculated to accord the joint board a considerable strategic advantage in the projected negotiations as it demands for a wage increase would start not from the contract floor but from $2.25, thereby increasing the pressure for proportionately higher wages in all occupations above the lowest level. Whether or not the challenged upward wage revision was indeed the product of such a strategem on the part of Member Beavers, on this state of the record, can only be a matter of speculation. The inexorable fact, however, that the decreed minimum was substantially higher than the corresponding union wagethe rate the Board found synonymous with the wage paid by fair employersrenders the agency action suspect. It can scarcely be reconciled with what the Board decision itself tells us was the primary objective of the 1966 Act  The people to be directly helped by this proposed legislation are what may be called the working poor who work at the most arduous and menial tasks. . . . They are not members of unions and are unable to bargain for a decent wage. [14] In short, even the most liberal sponsors of the revised Minimum Wage Act of 1966 did not envisage is as an instrument to jack up union wage levels. The majority opinion, apparently recognizing that petitioners were frustrated by the Board's own refusal to provide information relevant to the disqualification motion, accepted the gravamen of the charges against Member Beavers but concluded that even if proved, this aspect of the proceedings was irrelevant. Briefly summarized the reasoning of the majority is that while a pecuniary interest of a member of a quasi-judicial body in the outcome of a case on which he sits is indeed a ground for disqualification, a tripartite tribunal is an exception. The opinion cites a Kentucky case, Young v. Neale, 457 S.W.2d 358 (1970), holding that where a statute prescribes that an administrative board shall be composed of persons representing designated economic or social interests, an inquiry respecting the favorable bias of a Board member to the segment of society he was selected to represent is improper, as the legislature had determined that the varying interests would counterbalance each other. In applying the rational of this decision to the hypothetical facts of this case, the majority takes the position that however partisan Member Beavers' role was in the challenged proceedings, his conduct was proper as he was expected to be partisan in the interest of employees, just as Edward Austin, a third member, was expected to be partisan in the interest of employers. This thesis is expressly based on the administrative order creating the Minimum Wage Board stating: . . . As far as practicable, the members shall be so chosen that one will be representative of employees, one representative of employers, and one representing the public. . . . [15] Also quoted is a passage from an opinion, Arnold v. United Air Lines, Inc., 296 F.2d 191, 195 (7th Cir. 1961), commenting upon the bipartisan character of the System Board that arbitrates grievances of airline personnel, to the effect that members of such boards were supposed to be partial rather than neutral arbitrators. A more studied examination of this opinion would have revealed that there is a world of difference between the composition of the System Board and our local minimum wage board, for the court in Arnold noted that the members of the airline board were designated representatives of carrier and labor organizations. That is quite unlike the composition of the D.C. Minimum Wage Board, where the so-called employer member was neither the designate nor the representative of any management organization. Member Austin was identified as a fuel dealer (Ex. 38 at 360). While he may employ two, three, or more persons in his business, he is certainly not an officer or agent of an employer organization or a representative of employers in the sense that he acts as an industrial relations director or executive secretary of a trade association whose regular job it is to represent corporations at the bargaining table, vis-a-vis unions. He may, of course, meet the statutory requirement of being representative of employers in a narrow meaning of the term, i. e., typical of the hundreds of employers in this city who operate small retail and service establishments. In this sense, any individual wage earner not holding union office could be termed representative of employees. Mr. Austin obviously had no personal economic interest in the wage proceedings and was not employed by any person, either hurt or benefited by their outcome. In contrast, like the labor representatives on the airline board, Member Beavers is representative of employees in the broadest meaning of the term. He is an employee or officer of an employee organization whose full-time job is to represent employees in the very industry affected by MWO-10 in collective bargaining and grievance handling. His personal economic interest in these proceedings is manifest. The notion that this interest was counterbalanced by Member Austin's participation in the preliminary wage conferences, the hearing, and the final decision-making is pure theory. Only if one of his counterparts in the industry, e. g., the executive secretary of the hotel or restaurant association, had been his opposite number on the Board could such counterbalancing have been even theoretically possible. The record itself demonstrates that in actual fact there was no counterbalancing. Despite the expectation of partisanship in the interest of employers (presumably those affected by the proposed wage increase) attributed to Mr. Austin by the majority opinion, there is nothing in the transcript of the proceedings disclosing that he perceived this to be his role. In fact, all the indications are to the contrary. Although present at the ad hoc committee meeting when the recommendation for a 41% increase was denounced by the three employer members as reckless and beyond the power of the industry to absorb (Ex. 38, 36, 31) (all three voted against the proposal), he was apparently unsympathetic to their position. Even after listening further to their objections at the hearing, he joinedas the majority opinion concedesin the final decision which not only sustained the controversial wage recommendation but imposed additional onerous conditions upon the employers. One of these conditions, as the majority opinion reveals ( see n. 6), imposed by the three Board Members including Mr. Austin, even overruled a 5-3 recommendation of the ad hoc committee to grant a 20% subminimum rate for learners ( i. e., beginners) for a 60-day period. Instead, the Board reduced this figure to 25 cents ( i. e., 11%) and the learning period to 30 days. As anyone with even the most rudimentary knowledge of minimum wage proceedings knows, the occupations at the bottom of the wage scale largely consist of newlyhired employees, among whom there is a constant turnover. This is particularly true of the hotel and restaurant industry where such occupations are usually filled by casual help. Wage rates in these classifications are the only ones directly and immediately affected by a minimum wage order. Thus, this revision of the proposed wage order, concurred in by the supposed champion of industry, was plainly a major addition to payroll costs. In short, the record itself refutes the premise that in Member Austin the petitioners had a friend in court and consequently had no ground to complain about Member Beavers' adversary role. Judicial holdings with regard to the airline System Board, although referred to in the majority opinion, are really helpful to petitioners' case. They stand for the proposition that unless a bipartisan board is balanced, not just in theory but in fact, its composition is not immune from judicial examination. In the Arnold case, supra, it was held that the losing party was not aggrieved by the fact that the employer member of the tribunal represented a hostile interest, in view of a subsequent stipulation of deadlock between that member and the employee member, whereupon both withdrew from further consideration of the case and designated a neutral referee to hear it [296 F.2d at 195]. The court distinguished this situation from the one decided for this circuit in Edwards v. Capital Airlines, 84 U.S.App.D.C. 346, 176 F. 2d 755, cert. denied, 338 U.S. 885, 70 S.Ct. 186, 94 L.Ed. 543 (1949). There, the aggrieved workers had appeared before a board composed of two employer representatives, admittedly neutral in this particular case, and two employee representatives belonging to a rival union. In setting aside the award, which had rejected their grievance, the court noted: . . . Even in a National Adjustment Board proceeding directly under the statute itself, the courts may look at the actualities of a dispute and the adjudication of it and will not be foreclosed by either assumptions or provisions that the collective agent acts in complete protection of the rights of each and every employee. We think that those views apply with equal force to the proceeding before us. (Italics supplied.) [84 U.S. App.D.C. 346, 352, 176 F.2d 755, 761] The Edwards case is part of the law of this jurisdiction. Clearly under the Edwards holding condonation of Member Beavers' conflict of interest cannot be permitted on the undocumented assumption that Member Austin was expected to be partisan . . . in the interest of employers in the absence of any actual showing of such partisanship. Moreover, this is not the only jurisdiction to recognize that even on a tripartite board, there is a difference between a generally partisan point of view and a special interest in a particular case. This very distinction was treated in Board of Ed. v. International U. of Op. Eng., Loc. No. 68, 109 N.J.Super. 116, 262 A.2d 426 (1970), in which an attorney member of a Public Employment Relations Commission was found to have acted improperly by participating in a determination of that Commission which affected a union represented by his law firm. The court observed: It is true that [the statute] provides for the appointment of seven members, two to be representative of public employers, two representative of public employee organizations, and three representative of the public. It does not follow that the representatives thus chosen are intended to be anything more than representatives of the philosophy of their respective sides. A clear distinction must be made between representation of a general point of view ( i. e., public employers or public employees organizations) and advocacy on behalf of a client having a special interest in a case being decided by the tribunal of which the representative is a member. (Italics supplied.) [262 A.2d at 429.] The majority opinion not only fails to come to grips with this decision, but glosses over the clear prohibition in 18 U.S.C. § 208 of participation by any District employee in any decision concerning a proceeding in which the organization he is serving as an officer has a financial interest. [16] This section of the Code makes no exception for officers or employees of labor organizations who are special government [ i. e., per diem] employees. According to the majority, [i]f this had been a quasi-judicial proceeding and it were shown that a member of the Board conducting the proceeding had an interlocking employment, such as that possessed by Board member Beavers, we would reverse out of hand. But this was not an adjudicative proceeding. . . . I must confess that the proposition that the conflict of interest act is applicable to one kind of administrative proceeding (adjudicative) but has no application to another (rule-making) baffles me. For one thing, the statute itself, far from making such a distinction, refers to a judicial or other proceeding, application, request for a ruling or other determinationterms which seem to run the full gamut of administrative law. The use of the term quasi-judicial as referring only to an adjudicative proceeding is novel. Commissioners of administrative agencies, e. g., the Interstate Commerce Commission, the Federal Communications Commission, etc., are usually referred to as quasi-judicial officers. They might well be surprised to learn that they are acting in a quasi-judicial capacity when they sit on a case involving license revocation of a carrier but cease to act as such when they participate in a rate-making proceeding, even though the degree of impact upon the public in a rate determination, and hence the desirability of guarding the rate maker against improper private influences, would seem considerably greater. To bring the matter closer to home, it would appear that under the conflict of interest theory propounded by the majority, it would be highly improper for Member Beavers to sit with his colleagues on the Board on a minor wage claim filed by his union under D.C.Code 1973, § 36-606, on behalf of two or three workers even though the amount in controversy might be less than $100, but not improper to take an active part in the upward revision of a wage determination under § 36-406 in which that union had an interest in the neighborhood of several hundred thousand dollars. Agreeing that the obvious purpose of the [conflict of interest] statute is to insure honesty in the Government's business dealings, I do not embrace the notion that its objectives were limited only to official actions labelled adjudicative or quasi-judicial. I am authorized to say that Judge NEBEKER and Judge HARRIS join me in this dissenting opinion, and that Judge KERN concurs in Parts II and III thereof.