Court Opinion

ID: 9465581
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:50:10.655164+00
Date Added: 2024-06-11T17:39:15.289265
License: Public Domain

LUMBARD, Senior Circuit Judge,
dissenting:
I dissent from my brother’s conclusion that a collective bargaining agreement pro*1263vision requiring successor contractors to afford severance pay to any of the incumbent contractor’s employees that are not retained is not a “fringe benefit” within the intendment of the Service Contract Act, 41 U.S.C. § 351 to § 358 (the Act). The relevant portions of the Act state generally that successors to government service contracts must pay their employees no less than the wages and fringe benefits required by their predecessors’ collective bargaining agreements. By excluding severance pay from the fringe benefits that successor contractors must provide, the majority effectively scuttles the Act’s clear purpose to protect government service employees from job disruptions that all too commonly attend the awarding of a new service contract.
Trinity Services, Inc. (Trinity) provided janitorial services at Cape Canaveral Air Force Station and Patrick Air Force Base in Florida under two contracts that expired November 30, 1976. In performing its duties at the two Air Force facilities Trinity employed members of the Transport Workers International Union (TWIU) and the Service Employees International Union (SEIU), with both of whom Trinity had collective bargaining agreements. Article XVI, section 10 of each of these agreements provided that
any successor to the instant contract, whether it be Trinity Services, Inc. or any other contractor shall be in exactly the same position with respect to severance pay liability for any employees that it may elect to terminate for reasons other than permitted by this Article. The incumbent contractor [(Trinity)] and its successor shall be deemed the same for the purpose of determining severance pay liability and loss of the contract to a successor shall not be considered a severance. Conversely, refusal to hire by a successor for reasons other than permitted by this Article shall be considered a severance for which the successor shall be liable.
Shortly before Trinity’s service contracts were due to expire, the Air Force filed with the Department of Labor notices of its intention to enter into new contracts, as required by 29 C.F.R. § 4.4 (1977). Thereafter, on October 22, 1976, the Labor Department issued “wage determinations” setting forth the minimum wages and fringe benefits that any contract covering the janitorial work at the two Florida Air Force bases would have to include. See 41 U.S.C. § 358; 29 C.F.R. § 4.3 (1977). Although these wage determinations included a general provision concerning seniority for employees at the bases,1 the Secretary of Labor determined, without first holding a hearing, that article XVI, section 10 should not be included within the wage determinations as it did not provide a “bona fide fringe benefit” under the Act.
On October 27, 1978, Trinity filed this action seeking declaratory and injunctive relief against the Department of Labor and the Air Force. Trinity argued that article XXVI, section 10 of its collective bargaining agreements should be included within the wage determinations since the section provided “fringe benefits” required to be included in successor contracts by virtue of 41 U.S.C. § 353(c). The district court agreed, finding that the policy behind the Service Contract Act suggests that “fringe benefits” should be given a broad enough meaning to include the seniority benefits conferred by article XXVI, section 10. See Trinity Services, Inc. v. Usery, 428 F.Supp. 318 (D.D.C.1976). Accordingly, the district court enjoined the Air Force from soliciting bids for a new custodial services contract without the provisions of article XXVI, section 10. 41 U.S.C. § 353(c) provides in relevant part that
[n]o contractor . . . under a contract which succeeds a contract subject to *1264this 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 ... to which such service employees would have been entitled if they were employed under the predecessor
It is conceded that Trinity’s contracts were subject to the Act and that the new contracts are for substantially the same services. Thus, the only question on appeal is whether the district court correctly concluded that article XXVI, section 10 of the Trinity contracts provided “fringe benefits” within the meaning of § 353(c).2
Fringe benefits are defined in 41 U.S.C. § 351(a)(2) to include:
medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. (Emphasis supplied.)
The very language of § 351(a)(2) indicates the liberality with which Congress used the words “fringe benefits”; after a nearly exhaustive list of benefits traditionally provided in collective bargaining agreements, § 351(a)(2) goes on to include all “other bona fide fringe benefits.”3 Moreover, it would be anomalous indeed if employees were given the power to retain the numerous types of negotiated benefits mentioned in §351(a)(2) if they are fortunate enough to keep their jobs, but were not given the obviously crucial power to negotiate collective bargaining agreements that would guarantee that they would keep their jobs. By embracing this anomaly, the majority allows a successor employer to vitiate the requirements of the Act by refusing to hire any of Trinity’s workforce and thereby avoiding payment of all the seniority-based benefits mandated under the unions’ collective bargaining agreements with Trinity.
Beyond the language of the statute, the legislature history of the Service Contract Act, as amended in 1972, provides strong evidence that Congress intended to require provisions such as article XXVI, section 10 to be included in successors’ contracts. When initially passed in 1965, the Act was meant “to provide labor standards for the *1265protection of employees of contractors and subcontractors furnishing services to or performing maintenance service for Federal agencies.” 1965 U.S.Code Cong. & Admin. News, p. 3737. The House Education and Labor Committee’s report concerning the Act emphasized that “[t]he Federal Government has added responsibility in this area because of the legal requirement that contracts be awarded to the lowest bidder.” Id. at 3739. Since labor costs are often the most susceptible to adjustment by employers, the competition engendered by federal law requiring that contracts be awarded to the lowest bidder encouraged artificial depression of wage rates and other fringe benefits. See 111 Cong.Rec. 24388 (Sept. 20, 1965). Thus, the 1965 Act required the Secretary of Labor to establish “wage determinations” setting minimum levels for wages and fringe benefits in government service contracts.
After observing the Act’s operation for seven years, Congress in 1972 amended the Act to require that successors to government service contracts pay no less than the wages and fringe benefits set forth in their predecessors’ collective bargaining agreements. See 41 U.S.C. § 353(c). Discussion on the floor of the House of Representatives at the time of the enactment of the 1972 amendments demonstrates Congress’ concern that the Service Contract Act of 1965 had not adequately protected service employees from substantial disruptions in their employment situation with the issuance of each new contract. See 118 Cong.Rec. 27136-37 (Sept. 19, 1972).
Indeed, the nature of government contract bidding is such that, without a provision similar to article XXVI, section 10, employees will invariably lose their status when new contracts are issued. As salary rates and many fringe benefits are based upon seniority, it will always be in the best interest of a successor contractor to replace his predecessor’s workforce to the greatest extent practicable. In this way contractors other than the incumbent can trim their labor costs and reduce their bids below that of the incumbent. Such economizing at the cost of job security for government service employees is precisely what Congress has sought to avoid in the Service Contract Act. See, e. g., 118 Cong.Rec. 27139 (Aug. 7, 1972)4
In the instant case, the collective bargaining agreements between Trinity and the unions guarantee employees of Trinity job security despite changes in the government service contract under which they are employed. By refusing to include these guarantees within the class of fringe benefits enforceable against successors, the majority deprives the workers of the means to avoid through collective bargaining the very evil Congress has repeatedly sought to prevent: the loss of substantial benefits that often follows reissuance of government service contracts.5
In sum, the language of the Service Contract Act, the Act’s purpose and its legislative history all strongly support the district court’s conclusion that the negotiated job security guarantees of Trinity’s collective bargaining agreements are among the fringe benefits that Congress has chosen to impose on contractors who succeed to *1266government service contracts.6 Accordingly, I would affirm the order of the district court.

. Each wage determination provides:
Where eligibility for a fringe benefit listed herein depends upon an employee’s length of service, i. e. [severance pay] [sick leave], vacation, etc., credit must be given to an employee’s total length of service defined as the whole span of continuous service with the present (successor) contractor wherever employed, or predecessor contractors) in the performance of similar work at the Federal facility.

. Trinity does not argue, and the district court did not find, that the Service Contract Act itself requires that employees of a predecessor contractor be hired by a successor contractor. Rather, the question is whether article XXVI, section 10 of Trinity’s agreements, as part of collective bargaining agreements subject to 41 U.S.C. § 353(c), must be applied to all successors of Trinity. Thus, if Trinity’s collective bargaining agreements had not included article XXVI, section 10, there would be no question whether Trinity’s successors were obligated to hire Trinity’s employees. This explains why the Subcommittee on Labor-Management Relations of the House Committee on Education and Labor has found the Service Contract Act ineffective in protecting employees from being fired when a new employer receives a government contract; only by making continued employment of a predecessor’s employees a specific requirement of the Act could Congress protect employees whose collective bargaining agreements do not include provisions such as article XXVI, section 10. See Subcommittee on Labor-Management Relations of the House Committee on Education and Labor, Plight of Service Worker, 94th Cong., 1st Sess. 8-9 (Comm.Print, April 1975). See also Subcommittee on Federal Spending Practices, Efficiency, and Open Government of the Senate Committee on Government Operations, May 17, 1976, Problems of Service Contract Act and Protection of Florida Cape Workers, 94th Cong., 2d Sess. 3 (1976).

. In the instant action the Secretary of Labor determined that the job security benefits of article XXVI, section 10 are not “other fringe benefits” for purposes of the Act. Although in other contexts such an administrative determination might be entitled to some weight, the history of the Service Contract Act indicates that we should carefully scrutinize any decision of the Secretary of Labor which conservatively interprets the reach of the Act. Indeed, it appears that the Secretary’s recalcitrance in enforcing the Act to the benefit of government service workers was a major motivating factor behind Congress’ action in amending the Act in 1972.

. Ironically, it appears that the specific situation that prompted Congress’ 1972 amendments to the Service Contract Act was the plight of government service workers at Cape Canaveral (then Cape Kennedy) and Patrick Air Force Base. See 118 Cong.Rec. 27137 (Aug. 7, 1972). Thus, Congress was not only concerned with precisely the type of situation presented in the instant case — it was concerned about the way job insecurity affected the very employees here involved.

. Appellant argues and the majority seems to agree that the severance pay obligation imposed by article XXVI, section 10 would serve to enhance Trinity’s competitive position by saddling any potential successor contractor with liabilities that Trinity as the incumbent would never face. What that argument disregards is that Trinity itself, as stated explicitly in article XXVI, section 10, faces severance pay liability if it prevails in the bidding for a new contract and attempts to replace the senior and more expensive employees in its workforce. All article XXVI, section 10 does is establish competitive parity by placing other contractors in the same position as Trinity.

. An additional factor militating against the majority’s interpretation of the Act is that fringe benefits not honestly negotiated can be stricken from the Secretary of Labor’s wage determinations if they are found to be at variance with those prevailing for other employees similarly situated. Thus, if it is true in the instant case, as the majority suggests it is, that the severance pay obligation was not the product of actual bargaining, that fact should emerge in a comparison of Trinity’s collective bargaining agreements with those governing related employment in the private sector. If the point were pressed by the Secretary of Labor, I would remand this case to allow him an opportunity to decide, after holding a hearing as required by the Act, whether the guarantees of article XXVI, section 10 deviate significantly from the terms of other employees similarly situated. See 41 U.S.C. § 353(c).