Court Opinion

ID: 14473
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:36:06+00
Date Added: 2024-06-11T16:46:34.719403
License: Public Domain

REVISED, April 8, 1998

               IN THE UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT

                       ____________________

                           No. 97-50570
                         Summary Calendar
                       ____________________

FORT HOOD BARBERS ASSOCIATION;
HENRY TORREZ, JR.; and GILBERT
BARRATACHEA,

                                               Plaintiffs-Appellants,

                              versus

ALEXIS M. HERMAN, Secretary,
United States Department of Labor
and Any Successor; and NILA STOVALL,
Chief of the Branch of Service
Contract Wage Determination of
the United States Department of
Labor, and Any Successor,

                                               Defendants-Appellees,

GINO MORENA ENTERPRISES,

                                                          Intervenor.

        ________________________________________________

          Appeal from the United States District Court
                for the Western District of Texas
        ________________________________________________
                          March 30, 1998

Before WIENER, BARKSDALE, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:

     Plaintiffs-Appellants Fort Hood Barbers Association, Henry

Torrez, Jr., and Gilbert Barratachea (collectively plaintiffs)

appeal from the district court’s grant of summary judgment in favor

of Defendants-Appellees Alexis M. Herman, Secretary of the United

States Department of Labor and any successor, Nila Stovall, Chief
of the Branch of Service Contract Wage Determination of the United

States Department of Labor and any successor, and Intervenor Gino

Morena       Enterprises     (collectively     defendants),     affirming     the

decisions of the Department of Labor’s Administrator of the Wage

and Hour Division and the Administrative Review Board.               Plaintiffs

contend that the district court erred in concluding that (1) the

McNamara-O’Hara Service Contract Act (SCA)1 does not require the

application of wages and fringe benefits from a pre-existing

collective bargaining agreement to the full term of a successor

contract, and (2) the Department of Labor did not act arbitrarily

or   capriciously       in    holding   that    plaintiffs’     administrative

challenge to the Department’s 1993 wage determination was untimely.

     Following a de novo review of the record, the arguments of

counsel in the appellate briefs, and especially the thorough

explication of the district court in its order of May 14, 1997, we

conclude that the district court did not err in awarding summary

judgment on these claims.           We agree with the district court that

this is an extremely close case.         Considering the deference due the

Department’s      regulatory     approach2     ——   implemented    pursuant    to

specific statutory authority —— and its interpretation of its own

regulations,3 however, we are satisfied that the district court

reached the correct conclusion. Moreover, as the Secretary’s brief

notes,       adoption   of    the   plaintiffs’      position     would   create

     1
      41 U.S.C. §§ 351-358 (1992).
         2
      See Auer v. Robbins, 117 S. Ct. 905, 909 (1997); Clark v.
Unified Servs., Inc., 659 F.2d 49, 52 (5th Cir. 1981).
     3
      Auer, 117 S. Ct. at 911.
disincentives for collective bargaining.4   As the district court’s

order provides a comprehensive, well-reasoned analysis of these

issues, we adopt that court’s opinion as our own and append a copy

hereto.     Accordingly, the order of the district court is, in all

respects,

AFFIRMED.

ENDRECORD

      4
       The facts of this case aptly illustrate how a collective
bargaining process may be undercut: Plaintiffs had a collective
bargaining agreement (CBA) with the prior contractor to Gino Morena
Enterprises (Morena).    After Morena won the contract, the CBA
lasted through the first year of Morena’s contract before expiring,
and, as section 4(c) of the SCA mandates, the CBA’s provisions
applied to the first year of the Morena contract. Plaintiffs and
Morena were unsuccessful in reaching a new CBA, so that at the time
of the 1993 wage determination of which the plaintiffs complain, no
CBA was in effect. Because the expired CBA was more advantageous
to the plaintiffs than the 1993 wage determination, they now want
the CBA terms to apply to the entire, five-year duration of the
Morena contract. If section 4(c) were to create such a result for
the entire duration of the successor contractor, the successor
contractor (here, Morena) and the union would have little incentive
to negotiate a new CBA; the party relatively advantaged by the
existing or lapsed CBA (here, the plaintiffs) could obstruct
collective bargaining and insist that the expired CBA continue for
the duration of the contractor’s contract, thereby receiving a
better bargain than it could negotiate for itself. By contrast,
section 4(d) of the SCA and the Secretary’s regulation in question,
29 C.F.R. § 4.145(b), partially ameliorate the disincentives to
collective bargaining by providing for biannual wage determinations
and for each two-year period to be treated as a “wholly new
contract[],” at least where no CBA exists, thereby forcing the
parties to bargain or to pay and receive the prevailing wage rate.
Further, as the district court opinion correctly notes, § 4.145(b)
actually benefits workers in situations in which they receive less
than the prevailing wage rate by creating “new” service contracts
and hence, upward adjustments in their wages every two years.

                                  3
                              APPENDIX

                               ORDER

     Before the Court are Plaintiffs' Motion for Summary Judgment

[# 16], Defendants' Response to Plaintiffs' Motion for Summary

Judgment and Cross Motion for Summary Judgment [# 23], Plaintiffs'

Reply to Defendants' Response to Plaintiffs' Motion for Summary

Judgment and Cross-Motion for Summary Judgment [# 19], Gina Morena

Enterprise's Supplemental Response [# 26], Plaintiffs' Letter Brief

Filed February 6, 1997[# 25], Defendants' Letter Brief received by

the court February 13, 1997, Plaintiffs' Letter Brief received by

the Court February 20, 1997, and Defendants' Letter Brief received

by the court February 21, 1997.      Rarely does clarity shine its

calming face in a case with briefing of such order of magnitude,

and this case is certainly no exception.5

                      Contours of the Dispute

     Plaintiff Association represents barbers working at Fort Hood,

Texas.    The other plaintiffs are members of the Association.   In

1988, the barbers were employed at Fort Hood by Ollie Weaver

Enterprises ("Weaver").   On July 1, 1988, the barbers, through the

United Food and Commercial Workers Union, AFL-CIO, Local 540

("UFCW"), entered into a collective bargaining agreement ("CBA")

with Weaver covering compensation terms and prohibiting the taking

      5
       That is not to say, however, that the persistence of the
parties in tangling with a difficult issue is not appreciated.

                                 4
of tip credits against wages.        The CBA was a four-year agreement,

set to expire in 1992.         Weaver's contract with the Army and Air

Force   Exchange    Services    ("AAFES")   expired,   however,   in   1991.

Shortly before expiration of the contract, the AAFES opened the

bidding   process    and   awarded    the   new   contract,   a   five-year

concessionaire contract, to Gino Morena Enterprises ("Morena") on

January 31, 1991, with performance to commence on March 21, 1991.

The contract, a multi-year service contract not subject to annual

appropriations, was governed by the provisions of the McNamara-

O'Hara Service Contract Act of 1965 ("SCA"), Pub.L. No. 89-286, 79

Stat. 1034 (codified as amended at 41 U.S.C. §§ 351-58 (1994)).

     The parties dispute (1) the level of wages and fringe benefits

that the SCA obligated Morena to pay the barbers6 at various times

under the contract;     and (2) whether Morena could take tip credits

against wages.     Section 4(c) of the SCA 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).        In accordance with this provision and 41

    6
     It appears that the same barbers that had worked under Weaver
continued to work at Fort Hood under Morena.

                                      5
U.S.C. § 351(a),7 the Wage and Hour Division of the Department of

Labor issued, at the inception of the 1991 contract, a "wage

determination," WD 74-0110 (rev.8) ["1991 wage determination"],

stating that the wages and fringe benefits to be paid by Morena to

the barbers at Fort Hood were those contained in the UFCW-Weaver

CBA.       Two    years     later,   in    accordance        with   the    Secretary's

regulations that are here the primary subject of dispute, the Wage

and    Hour       Division    issued      WD       74-0110   (rev.11)     ["1993    wage

determination"] which, instead of incorporating the rates and

benefits         provided    under   the       UFCW-Weaver     CBA,     reflected    the

Secretary's determination of the prevailing rates and benefits for

the locality.         Morena apparently paid the barbers in accordance

with this wage determination through the remainder of the five-year

contract.

                               Administrative History

       On November 19, 1993, plaintiffs requested administrative

review of the 1993 wage determination, contending that (1) the

rates and benefits set in the 1991 wage determination, reflecting

the CBA rates and benefits, should apply to the full five years of

the Morena contract pursuant to Section 4(c) of the SCA;                       and (2)

       7
      41 U.S.C. § 351(a) provides that every contract subject to
the SCA shall contain provisions specifying the "minimum monetary
wages" and the fringe benefits to be paid to employees performing
services under the contract as determined by the Secretary in
accordance with the wages and benefits "prevailing" in the locality
"or, where a collective-bargaining agreement covers any such
service employees," in accordance with the wages and fringe
benefits provided for in such agreement. These determinations made
by the Secretary are known as "wage determinations."         In no
instance may a wage determination set wages lower than the minimum
wage set in the Fair Labor Standards Act. Id.

                                               6
Morena's practice of crediting tips against wages violated the SCA

and its accompanying regulations.            After relentless effort by the

plaintiffs, including resort to the Administrative Review Board and

institution of this lawsuit, the Administrator of the Wage and Hour

Division finally, and with inexcusable tardiness, rendered on July

24, 1996 a decision upholding both the 1993 wage determination and

Morena's   tip   credit    practice.         The    Administrator         also    ruled

untimely an argument made by the plaintiffs that the 1993 wage

determination,    even     assuming     it    was    properly      made    based    on

prevailing rates rather than the rates set in the UFCW-Weaver CBA,

did not accurately reflect wage rates prevailing in the locality.8

Plaintiffs     appealed     the    Administrator's           decision        to     the

Administrative    Review    Board,    which       upheld    the    Administrator's

ruling on November 12, 1996.

     The Administrator and the Administrative Review Board based

their decisions on the Secretary's regulation interpreting and

implementing     section    4(d)   of       the    SCA.    Under   that     section,

government service contracts

     may, if authorized by the Secretary, be for any term of years
     not exceeding five, if each such contract provides for the
     periodic adjustment of wages and fringe benefits pursuant to
     future determinations, issued in the manner prescribed in
     section 351 of this title9 no less often than once every two
     years during the term of the contract, covering the various
     classes of service employees.

    8
     Plaintiffs articulated this contention for the first time in
this federal court lawsuit filed May 17, 1996 and submitted the
question in their amended petition for review to the Administrative
Review Board prior to the ruling by the Administrator.
     9
      See supra note 3 (describing § 351 and the issuance of wage
determinations).

                                        7
41 U.S.C. § 353(d).       The regulation interpreting and implementing

this provision provides for biennial wage determinations which are

characterized as "amendments" to the contract.                   See 29 C.F.R. §

4.145(b) (1996). As such, a multi-year contract is "treated as [a]

wholly new contract[ ] for the purposes of the application of the

Act's provisions and regulations thereunder at the end of the

second year and again at the end of the fourth year, etc."                Id. The

Administrator reasoned that because the 1993 wage determination

issued at the end of the first two years of the Morena contract

created a new contract for purposes of the SCA, Morena became his

own successor contractor in the second two-year period of his

five-year government service contract.           See 29 C.F.R. § 4.163(e).10

The Administrator further reasoned that because Morena had not

entered into a collective bargaining agreement of his own with his

employees   during   the    first   two      year   term    (the    "predecessor

contract"), section 4(c) of the SCA did not apply to the second

two-year    term   (the    "successor       contract")     and    the   new   wage

determination reflecting locally prevailing wage rates was proper.

     With regard to the tip credit contention, the Administrator

concluded that Morena's practice of crediting tips against wages

was authorized under 29 C.F.R. § 4.6(q). That regulation provides:

     An employee engaged in an occupation in which she or he

     10
       This regulation emphasizes that "[t]he operative words of
section 4(c) refer to "contract' not "contractor' " and concludes
that "the statute is applicable by its terms to a successor
contract without regard to whether the successor contractor was
also the predecessor contractor."     29 C.F.R. § 163(e) (1996)
(emphasis omitted). Therefore, "[a] contractor may become its own
successor...." Id.

                                        8
     customarily and regularly receives more than $30 a month in
     tips may have the amount of tips credited by the employer
     against the minimum wage....

The regulation imposes certain conditions an employer must meet

before taking the credit, including a proviso that "[t]he use of

such tip credit must have been permitted under any predecessor

collective bargaining agreement applicable by virtue of section

4(c) of the Act." Id. § 4.6(q)(4).                The Administrator concluded

that because section 4(c) did not apply to Morena's second two-year

term of the five year contract, neither did this proviso apply.

     The Administrative Review Board affirmed the conclusions of

the Administrator in a Final Decision and Order which constitutes

a final decision by the Secretary.              See Secretary's Order 2-96, 61

Fed.Reg. 19978 (1996).           Plaintiffs' instant lawsuit, held in

abeyance until the Final Decision and Order issued, is now ripe for

decision.

     In their Motion for Summary Judgment, plaintiffs essentially

contend that   (1)   the    decision       of    the   Secretary      violates   the

statutory    requirements        of   the       SCA,     (2)    the    Secretary's

interpretation of its own regulations is erroneous, (3) even

assuming that the UFCW-Weaver CBA rates do not apply to the 1993

wage determination, the Department failed to properly determine the

prevailing   rates   in    the    locality,        and    (4)   the    Secretary's

determination that Morena's practice of taking tip credits is

statutorily permissible is erroneous.

                           Standard of Review

      In reviewing administrative action taken pursuant to a

                                       9
regulation issued to interpret and implement a federal statute, the

deference to be accorded the action is dictated by whether the

regulation at issue is "legislative" or "interpretive" in nature.

See Dresser Indus., Inc. v. Comm'r, 911 F.2d 1128, 1137 (5th

Cir.1990).      Where the regulation is legislative, that is, "issued

under a specific grant of authority to prescribe a method of

executing a statutory provision," Snap-Drape, Inc. v. Comm'r, 98

F.3d 194, 197 (5th Cir.1996) (internal quotations and citation

omitted), the Court may set aside the agency action only if the

regulation is "arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law" or if the action otherwise

failed     to    meet   statutory,    constitutional,   or   procedural

requirements. See 5 U.S.C. § 706(2); Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402, 414, 91 S.Ct. 814, 822, 28

L.Ed.2d 136 (1971).       Action taken pursuant to an interpretive

regulation, that is, one promulgated pursuant to a general grant of

authority to prescribe regulations, is accorded less weight but is

considered valid if it is reasonable and "harmonizes with the plain

language of the statute, its origin, and its purpose." Snap-Drape,

Inc., 98 F.3d at 197 (internal quotations and citation omitted).

         The Secretary promulgated the regulations at issue in this

case pursuant to specific statutory authority.          See 41 U.S.C. §

353(a) (1987) (providing that the Secretary's authority to make

rules, regulations, and decisions in enforcing the Service Contract

Act are coextensive with the Secretary's authority to enforce the

Walsh-Healey Public Contracts Act);        41 U.S.C. §§ 38, 39 (1987)

                                     10
(prescribing the extent of the Secretary's authority to enforce the

Walsh-Healey provisions).       This Court may therefore set aside the

decision of the Administrative Review Board only if the Board's

action was "arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law" or if the action otherwise

failed    to    meet     statutory,     constitutional,      or    procedural

requirements.

      Under this standard of review, where Congress has "directly

spoken to the precise question at issue," the Court must give

effect    to   the    "unambiguously   expressed   intent"    of   Congress.

Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,

467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984).

Where Congress has not directly addressed the issue, as in this

case, the Court must sustain the Secretary's regulatory approach so

long as it is "reasonable" and "based on a permissible construction

of the statute."       Auer v. Robbins, --- U.S. ----, ----, 117 S.Ct.

905, 909, 137 L.Ed.2d 79 (1997) (citing Chevron ).           In other words,

unless the Secretary's approach is "irrational and not reasonably

related to the purposes of the legislation," the Court must uphold

that approach.       Clark v. Unified Servs., Inc., 659 F.2d 49, 53 (5th

Cir.1981)      (reviewing    administrative    regulations        promulgated

pursuant to the SCA).        If the Secretary considered all relevant

factors and made no "clear error of judgment," the Court must

uphold the Secretary's decision regardless of the Court's view of

the wisdom of the decision.        Volpe, 401 U.S. at 416, 91 S.Ct. at

823-24;   Miranda v. National Transp. Safety Bd., 866 F.2d 805, 807

                                       11
(5th Cir.1989).

             Secretary's Interpretation of SCA Provisions

        Were Morena's service contract considered a single five-year

contract rather than three short period contracts, plaintiffs would

be entitled to the wages and benefits set in the UFCW-Weaver CBA

for the entire five-year term of the Morena contract.                      The plain

language of     the   Act    and    the   legislative        development    of    that

language certainly supports the plaintiffs' construction.                         The

legislative history of the amendments to the Act suggest, however,

that    while   Congress      did     not      specifically      contemplate       the

Secretary's     chosen     construction,        that   construction     adequately

accommodates the purposes behind passage of the amendments.                       For

this reason, the construction given by the Secretary is entitled to

deference.

Statutory Language

       The Secretary's regulation codified at 29 C.F.R. § 145(b),

which interprets and implements section 4(d) of the SCA, conflicts

with the clear language of section 4(d).               The regulation provides

for biennial wage determinations during a multi-year contract and

deems   those   periodic     wage     determinations      "amendments"       to    the

contract.    See 29 C.F.R. § 145(b).            The regulation states that the

wage determinations therefore create "wholly new contracts" for

purposes of the SCA and its other regulations.                      Id. The most

natural   reading     of    section    4(d)     does   not    comport   with      this

interpretation. The section allows for service contracts to be for

terms up to five years so long as wages and fringe benefits are

                                          12
adjusted pursuant to wage determinations "issued ... no less often

than once every two years during the term of the contract."               41

U.S.C. § 353(d) (emphasis added).           The statutory language clearly

contemplates the multi-year contract as being a single contract for

a term of years.    Moreover, wage determinations issued during the

term are characterized not as full-scale contract amendments, but

simply as the vehicles by which periodic adjustments of wages and

fringe benefits are to be made over the life of the contract.            See

id.   Congress could, however, have simplified the language of the

provision considerably by use of the term "amendment" had this been

what it contemplated.

      Because   Congress   has   not    directly   addressed   the   precise

question at issue, however, the inquiry does not end with analysis

of statutory language.       The Court must determine whether the

Secretary's construction of the statute is rational, reasonable,

and in accordance with legislative purpose, not simply whether the

Court agrees with the construction.          After reviewing and carefully

considering the legislative purpose and history of the Act and the

amendments, the Court is of the opinion that the Secretary's

construction of Sections 4(c) and 4(d), while somewhat creative, is

not irrational or unreasonable.

Evolution of Section 4(c)

      A careful study of the evolution of the Act supports, to some

extent, the plaintiffs' argument.            When section 4(c) was first

drafted and passed the House and Senate, it did not contain the

proviso for substantial variance hearings.          See S. 3827, 92d Cong.

                                       13
§ 3 (introduced July 21, 1972);              H.R. 15376, 92d Cong. § 3

(introduced June 7, 1972), reprinted in LEGISLATIVE HISTORY OF THE

SERVICE CONTRACT ACT AMENDMENTS of 1972 [hereinafter LEGISLATIVE

HISTORY],   at   1-9   (1972).     The    proviso    was   added   only   after

testimony before the House Committee on Education and Labor and the

Senate Subcommittee on Labor of the Committee on Labor and Public

Welfare raised concerns about the wisdom of binding government

contracting agencies to union contract wage rates that may often be

significantly higher than prevailing wages in the locality.                 See

H.R. 15376, 92d Cong. § 3 (reported with amendments Sept. 15,

1972), reprinted in LEGISLATIVE HISTORY at 55-60.            Richard Keegan,

the Deputy Under Secretary for Procurement in the Department of the

Air Force put the problem succinctly:

          The Department of Defense, which foots the bill, would be
     locked into a one-way ratchet situation of constantly rising
     service contract costs, with no resort to independent
     standards to correct any imbalance. There would be nothing to
     prevent service employee wages from escalating far beyond the
     wages of comparable employees in the locality.

Service Contract Act Amendments, 1972:              Hearings on S. 3827 and

H.R. 15376 Before the Subcommittee on Labor of the Senate Committee

on Labor and Public Welfare [hereinafter Hearings ], 92d Cong. 97

(1972).     Thus   the   only    mechanism   explicitly     contemplated    by

Congress for readjusting exorbitant union wages binding on a

successor contractor was the substantial variance hearing.                This

does not mean a fortiori, however, that the Secretary's adoption of

a regulation going beyond what Congress envisioned was an abuse of

authority. As noted earlier, Congress granted the Secretary a wide

girth of discretion with which to implement the Act. If the

                                     14
regulation reasonably comports with the purposes of the Act and the

amendments, it must be deemed valid.

Legislative Intent

      Congress enacted the McNamara-O'Hara Service Contract Act in

1965. See Pub.L. No. 89-286, 79 Stat. 1034 (codified as amended at

41   U.S.C.   §§   351-58    (1994)).        The   House    and   Senate   Reports

accompanying the measure indicate that the primary purpose of the

Act was to protect wage standards of employees:

      Since labor costs are the predominant factor in most service
      contracts, the odds on making a successful low bid for a
      contract are heavily stacked in favor of the contractor paying
      the lowest wages.     Contractors who wish to maintain an
      enlightened wage policy may find it almost impossible to
      compete for Government service contracts with those who pay
      wages to their employees at or below the subsistence level.
      When a Government contract is awarded to a service contractor
      with low wage standards, the Government is in effect
      subsidizing subminimum wages.

H.R.Rep. No. 89-948, at 2-3 (1965);                S.Rep. No. 89-798, at 3-4

(1965), reprinted in 1965 U.S.C.C.A.N. 3737, 3739.                   By requiring

service contractors to pay their employees the prevailing wage

rate,   Congress    sought    to   neutralize      the     federal   government's

inordinate purchasing power and its depressive effect on the

market's natural resolution of wage and benefit rates.                 See, e.g.,

Hearings at 96 (explaining that the Act "puts the Government in

precisely the same position as other users of contract services"

and "limit[s] the extent to which the Government can exert its

bargaining power.").        In short, Congress did not want the federal

purchasing power to play a role in suppressing wage rates.

      The statute failed to completely effectuate its intended

purpose, however.     See id. at 14 ("[W]e would expect our Government

                                        15
to be a model employer, but in this case, it is just the opposite.

Now, we have to pass a law to prevent that." (statement of Senator

Harrison A. Williams, Jr., Chairman of the Subcommittee on Labor

and     the   Committee        on    Labor          and   Public    Welfare)).             Wage

determinations         based    on     the       prevailing       wage     rate     prevented

government contracting from suppressing service workers' wages to

a "subsistence level."              But the nature of government contracting,

calling for frequent rebidding, combined with the SCA's sole

emphasis      and    reliance        on       the    prevailing     wage     rate     scheme,

effectively         diminished        the       bargaining        power     of      unionized

workforces.      A contractor without a CBA covering its employees, or

with a CBA setting comparatively low wage and benefit rates, was

able to easily outbid an incumbent contractor bound by a CBA with

higher wages and rates that would survive the commencement date of

the new contract.

      One     example    of    such       a    scenario    caught    the     attention       of

Congress not long after the enactment of the SCA and galvanized

support for an amendment to the Act. In June of 1970, the National

Aeronautics      and    Space       Administration         (NASA)    invited        bids    for

performance of particular services for a one-year period with

performance commencing on April 1, 1971.                            See Boeing Co. v.

International Ass'n of Machinists and Aerospace Workers, 504 F.2d

307, 309 (5th Cir.1974), cert. denied, 421 U.S. 913, 95 S.Ct. 1570,

43 L.Ed.2d 779 (1975).              Transworld Airlines, Inc. (TWA) performed

these services pursuant to a contract from 1964 through April of

1971.    See id.       At the time of rebidding, a collective bargaining

                                                16
agreement negotiated between TWA and the union representing TWA's

nonsupervisory    personnel,   the      International   Association   of

Machinists and Aerospace Workers (IAMAW), was in force.         See id.

This CBA was to "remain in full force and effect to and including

December 31, 1971."   Id. Four of the seven contractors bidding on

the new contract, including TWA, based their computations of labor

costs on the wages and fringe benefits provided for in the existing

TWA-IAMAW collective bargaining agreement.          One other bidder,

however, the Boeing Company (Boeing), based its computation of

labor costs on the wages and fringe benefits provided for in its

own existing CBA with the IAMAW, an agreement that covered several

employees engaged in substantially similar services at NASA. See

id.     This agreement provided for substantially lower wages and

fringe benefits than did the TWA-IAMAW agreement, and NASA awarded

the contract to Boeing.   See id.

      Congress added sections 4(c) and 4(d) to the SCA by amendment

in 1972, see Pub.L. No. 92-473, § 3, 86 Stat. 789 (1972), largely

in response to these events.   See Boeing Co., 504 F.2d at 311-12 &

n. 7;    see generally Hearings.     Section 4(d) contributed to wage

stability by allowing for longer term contracts.        See Hearings at

103 ("That is one of the purposes of this legislation, to get away

from those annual reopeners." (statement of Chairman Williams)).

The Senate Report on the 1972 amendments indicates that section

4(c) was enacted to "assur[e] that employees working for service

contractors under a collective bargaining agreement will have wages

and fringe benefits under a new service contract no lower than

                                   17
those under their current agreement."            S.Rep. No. 92-1131 (1972),

reprinted in 1972 U.S.C.C.A.N. 3534. "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."              Gracey v. International Bhd. of

Elec. Workers, 868 F.2d 671 (4th Cir.1989);                   see also, e.g.,

Hearings at 30 ("[T]he addition of subsection (c) to section 4,

which   recognizes    the    role     of    freely    negotiated   bargaining

agreements in establishing competitive and prevailing wages, should

counteract the cut throat bidding practices existing in certain

service industries.").

Conclusion

     This     objective,    the     minimization      of   cutthroat   bidding

practices in order to stabilize wages, can be effectuated even with

the regulation promulgated by the Secretary.               At bidding time for

a multi-year contract, all prospective contractors must calculate

their bids accounting for at least two years of wages and benefits

at the rates established in the CBA governing the predecessor

contract.     Thus, the bidding process does not work to undercut the

wages   and   benefits     bargained   for     by    employees.     Truly   the

regulation may, in some circumstances, disadvantage the incumbent

contractor.     If the incumbent contractor's CBA extends to a date

beyond two years from the inception of the new contract period,

that contractor will be obligated to pay the CBA wages and benefits

longer than a prospective contractor without a CBA or with a CBA

establishing lower wages and benefits.           This calculation may allow

                                       18
the prospective contractor to underbid the incumbent contractor.

As a result, contractors may have less incentive to enter into

long-term CBAs that would extend past the two-year mark of the

following contract term.11

     But it is clear that Congress did not intend to entirely

eradicate competitiveness in bidding—even where labor rates are at

stake.    For example, the Fifth Circuit has held that a successor

contractor is not bound to the successorship and seniority rights

acquired under the predecessor contractor's CBA. See Clark v.

Unified Servs., Inc., 659 F.2d 49 (5th Cir.1981).           The Court

acknowledged as "persuasive" the appellants' argument that leaving

successorship rights and seniority rights out of the definition of

"fringe benefits" in the Act emasculated the purposes of the SCA

since prospective contractors could underbid incumbents by simply

hiring employees with limited experience and fewer seniority rights

and thereby underbid an incumbent.      Id. at 52.   The Court felt

constrained, however, by the language of the Act, the determination

of the Secretary of Labor, and the silence of Congress to read the

statute otherwise, policy implications aside.        Id.;   see also

Trinity Servs., Inc. v. Marshall, 593 F.2d 1250 (D.C.Cir.1978)

(holding that severance payments and seniority rights are not

"fringe benefits" under the Act);     Service Employees' Int'l Union

v. General Servs. Admin., 443 F.Supp. 575 (E.D.Pa.1977) (holding

that a successor contractor is neither obligated to hire the

     11
      This problem is minimized, of course, by the fact that most
collective bargaining agreements are no longer than three years.
See Hearings at 103.

                                 19
predecessor contractor's employees nor to abide by an arbitration

clause in the predecessor's CBA).

      Although it may provide little comfort to the plaintiffs at

bar, the Secretary's regulation will sometimes serve to better

uphold the purposes of the Act than the plaintiffs' construction of

the statute.       At least one circuit court has held that section

353(c) was enacted not to protect workers under an unfavorable CBA

by enforcement of prevailing wage rates but simply to assure the

maintenance of negotiated wage rates and benefits-even if they are

lower than the prevailing rates.               See Gracey, 868 F.2d at 674-77.

Furthermore, the court held that the provision for a substantial

variance hearing applied only where the employer sought to lower

CBA-defined wages to a substantially lower prevailing wage rate and

not to those situations in which the employees sought to increase

the negotiated wage rates to the prevailing wage rate.                    See id.

Where such circumstances exist, the Secretary's regulation creating

"new" service contracts every two years works to the advantage of

workers.

      In short, the Secretary's regulation calling for a wage

determination that creates a "new contract" at the end of every

two-year period during a multi-year service contract, while not a

natural     construction      of   the   statute    textually,    is   acceptable

because     it   does   not    undercut    the     essential    purpose   of   the

legislation.      It is particularly reasonable as applied to the case

at bar, where the UFCW-Weaver CBA would have expired one year into

the   new    contract     (and     one    year     prior   to    the   1993    wage

                                          20
determination) anyway.       The Court must therefore give deference to

the regulation at issue.

          Secretary's Interpretation of His Own Regulations

        Plaintiffs alternatively contend that, assuming 29 C.F.R. §

4.145(b) was issued within the Secretary's authority, the Secretary

failed    to   interpret     the    regulation        properly    in     this    case.

Plaintiffs'    burden   on    this    claim      is   high;      the     Secretary's

interpretation of his own regulation is controlling unless it is

"plainly erroneous or inconsistent with the regulation."                        Auer v.

Robbins, --- U.S. ----, ----, 117 S.Ct. 905, 911, 137 L.Ed.2d 79

(1997) (citations omitted).

     To support their argument that negotiated rates and benefits

apply to the entire term of a service contract, rather than only

for the first two years, Plaintiffs make two arguments.                    First, in

their    brief,   Plaintiffs       point    to    various      other     regulations

promulgated by the Secretary to implement section 4(c). Plaintiffs

contend the regulations demonstrate the intention of the Department

to make CBA rates applicable to the entire term of any contract.

Plaintiffs urge that because the regulations specifically discuss

section 4(c), and 29 C.F.R. § 145(b) does not, they are controlling

and negate the Secretary's interpretation of § 4.145(b).

     For example, the plaintiffs note that 29 C.F.R. § 4.163(h)

gives    examples,   the     "basic    principle"         of     which    "is     that

successorship provisions of section 4(c) apply to the full term

successor contract " (emphasis added).                This section, however, is

entitled "[i]nterruption of contract services" and simply provides

                                       21
that an interruption in the provision of services—whether it be a

temporary cessation of contract services between the old contract

and new contract, a change in contracting agency, or the like—shall

not negate the application of section 4(c).               See id.        The substance

of    this    regulation       does    not    conflict   with      the    Secretary's

interpretation of § 4.145(b), despite the "full term contract"

language employed.

       Another     regulation         provides    that   if     certain       contract

requirements are, for whatever reason, broken out and placed into

new contracts, the wages and fringe benefits provided for in the

original contract under section 4(c) follow the new contracts. See

29 C.F.R. § 4.163(g).          It is not inconsistent, however, to make all

aspects      of   an    original      contract    subject     to    section     4(c)'s

successorship provision, yet to deem wage determinations made every

two years in the resulting contracts as amendments creating new

contracts.        Plaintiffs have not demonstrated that 29 C.F.R. §

4.145(b) or the Secretary's interpretation thereof is inconsistent

with its regulatory scheme.

       Neither have plaintiffs shown that the Secretary has given 29

C.F.R. § 4.163(e) a "plainly erroneous" interpretation.                        As the

Secretary notes in his response, the plaintiffs eliminated a

critical portion of § 4.163(e) in their citation.                        This section

specifically references § 4.145(b) in explaining how a contractor

may    become     its    own    successor.         In    sum,      the    Secretary's

interpretation of his regulations is neither plainly erroneous nor

internally inconsistent.

                                             22
       In their second argument, made after hearing before the Court,

Plaintiffs urge that even given the Secretary's interpretation of

section 4(d), section 4(c) can plausibly be read to entitle the

barbers to the UFCW-Weaver CBA wage rates and benefits for the

successor Morena contract as well as for the predecessor Morena

contract.      Pursuant to section 4(c), an employer under a successor

contract cannot pay its employees less than the "wages and fringe

benefits ... provided for in a collective bargaining agreement ...

to which such service employees would have been entitled if they

were employed under the predecessor contract." 41 U.S.C. § 353(c).

And    under   the   predecessor   Morena   contract,   the       barbers   were

"entitled" to the wages and benefits provided under the UFCW-Weaver

CBA.

       Ironically, the Secretary's own regulations seem to support

this reading of Section 4(c).             In 29 C.F.R. § 4.163(e), the

Secretary emphasizes that "[t]he operative words of section 4(c)

refer to "contract' not "contractor ' " in explaining that a

contractor may become its own successor contractor under the

language of this section.          The Secretary ignores its previous

emphasis on the statutory term "contract" when explaining that

"[s]ection 4(c) will be operative only if the employees who worked

on the predecessor contract were actually paid in accordance with

the    wage    and   fringe   benefit     provisions    of    a    predecessor

contractor's collective bargaining agreement."          Id. at § 4.163(f);

see also id. at §§ 4.52, 4.105 (both speaking in terms of the

"predecessor's" collective bargaining agreement).

                                     23
     The Secretary's decision not to interpret section 4(c) in this

manner, however, is not unreasonable.          The employees under a

service contract may be said to be "entitled" to wages and benefits

provided in the statutorily-mandated wage determination, bringing

us back to the initial inquiry already discussed. Furthermore, the

hearings and reports accompanying the amendments make clear that

Congress enacted section 4(c) to address the cutthroat bidding

practices employed by new contractors to compete with incumbent

contractors.

   The Secretary's Determination of the Prevailing Wage in the
Locality

     Plaintiffs contend that, assuming the second two-year period

of Morena's contract is properly considered a new contract, the

Secretary made its wage determination improperly. Where a CBA does

not apply, the minimum monetary wages to be paid on any service

contract are to be determined by the Secretary, or his authorized

representative, "in accordance with prevailing rates for such

employees in the locality."    See 41 U.S.C. § 351(a)(1). Plaintiffs

complain   that   the   Department,   before   issuing   the   1993   wage

determination, reviewed no evidence on prevailing wage rates and

improperly relied, in the Department's words, on wages "being paid

by Gino Morena due to lack of survey data for barber occupation in

the locality."    Plaintiffs note the conundrum of this rationale:

If the Department relied in 1993 on rates already being paid by

Morena, and Morena was at that time subject to the 1991 wage

determination incorporating the wages of the UFCW-Weaver CBA, why

does the 1993 wage determination reflect wages at a lower rate?

                                  24
The plaintiffs urge that the 1993 wage determination and all

succeeding determinations based on it be held null and void and the

Department of Labor ordered to issue new wage determinations.

      The plaintiffs raised this argument for the first time in

this lawsuit.   They also presented the argument in their Brief in

Response to the Statement of the Administrator in Opposition to

Petition for Review to the Administrative Review Board (Transcript,

p. 233 et seq.).     The Administrator rejected the challenge as

untimely, coming more than three years after issuance of the

challenged wage determination, two years after expiration of that

determination, and after expiration of the five-year contract. The

Administrative Review Board upheld the Administrator's decision,

citing 29 C.F.R. § 8.6(d) for the proposition that a decision by

the Board "shall not affect the contract after award, exercise of

option, or extension." Plaintiffs contend that they could not have

presented the issue earlier as the written wage determination was

missing the page specifying benefits.

     The   plaintiffs   have   standing   to   challenge   the   wage

determination in federal district court under the Administrative

Procedures Act. See 5 U.S.C. §§ 701-06;   United States v. Todd, 38

F.3d 277, 278 (6th Cir.1994); Expedient Servs., Inc. v. Beggs, No.

81-31-Orl-Civ-Y, 1982 WL 2003, at *8 (M.D.Fla. Oct.4, 1982).      The

Secretary's regulations provide that "[a]ny interested person may

seek reconsideration of a wage determination...." 29 C.F.R. § 1.8.

The request "shall be in writing accompanied by a full statement of

the interested person's views and any supporting wage data or other

                                 25
pertinent information."        Id. The regulation provides no time limit

for requesting reconsideration.             If reconsideration is sought and

denied, an interested person may appeal to the Administrative

Review Board for a review of the wage determination.                      Id. § 1.9.

Such an appeal "may, in the discretion of the Administrative Review

Board, be received, accepted, and decided in accordance with the

provisions of 29 C.F.R. part 7 and such other procedures as the

Board   may    establish."           Id.    "Requests     for    review     of    wage

determinations must be filed within 20 days of issuance of the

Wage-Hour Administrator's decision denying a request to make a

change in the wage determination."              29 C.F.R. § 8.3. "The Board may

decline review of any case whenever in its judgment review would be

inappropriate because of lack of timeliness, the nature of the

relief sought, the case involves only settled issues of law, the

appeal is frivolous on its face, or other reasons."                     Id. § 8.6.

     The   Court     is   of   the    opinion     that    the    decision    of    the

Department to reject this aspect of the plaintiffs' claim as

untimely is not "arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law."                   See 5 U.S.C. § 706(2);

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402,

414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971).                          Plaintiffs'

November      1993   letter    requesting        review     of    the    1993     wage

determination focused solely on the alleged misconstruction of §

353(c) and the plaintiffs' tip credit contention.                 Plaintiffs were

obviously dissatisfied with the wage determination, and they could

quite easily and prudently have requested review of the actual

                                           26
"prevailing wage" determination in the alternative.12                     Further,

although the Department of Labor did drag this case out over

several years, the plaintiffs apparently never raised the issue

directly to the Administrator.           Rather, they included it within a

petition for review filed to the Administrative Review Board.

Under       these   circumstances,    the    Department's    decision     to    deem

plaintiffs' argument as waived is not arbitrary or capricious.

                                  Tip Credits

        Finally, the plaintiffs contest the Secretary's determination

that    Morena's      practice   of   taking   tip    credits     is   statutorily

permissible.        The Secretary's regulations provide that an employer

may credit against the minimum wages owed under the Fair Labor

Standards Act (FLSA) so long as certain requirements are met.                    See

29 C.F.R. § 4.6(q).13        The Plaintiffs do not argue the requirements

were not met.        Rather, they argue the regulation is an erroneous

interpretation        and   implementation     of    the   Act.   Plaintiffs     can

succeed in challenging this regulation only if they find it is

"arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law" or if the action otherwise failed to meet

statutory, constitutional, or procedural requirements.                         See 5

       12
      Plaintiffs offer no reason why the fact that the second page
of the 1993 wage determination was blank is relevant to their
failure to make the argument.
       13
      The section reads in relevant part: "An employee engaged in
an occupation in which he or she customarily and regularly receives
more than $30 a month in tips may have the amount of tips credited
by the employer against the minimum wage required by [the SCA] in
accordance with section 3(m) of the Fair Labor Standards Act...."

                                        27
U.S.C. § 706(2);    Citizens to Preserve Overton Park, Inc. v. Volpe,

401 U.S. 402, 414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971).

     A simple review of the statute fairly supports the reading the

Secretary gives it.     The section providing for wage determinations

states that "[i]n no case shall ... wages be lower than the minimum

specified    in   subsection   (b)   of   this   section."    29   U.S.C.    §

351(a)(1).        Subsection   (b)    states     that   no   contractor     or

subcontractor subject to the SCA "shall pay any of his employees

engaged in performing work on such contracts less than the minimum

wage specified under section 206(a)(1) of Title 29."            29 U.S.C. §

351(b)(1).    That section, contained in the FLSA, spells out the

minimum wage.     See 29 U.S.C. § 206(a)(1).      The FLSA's definition of

"wage" explains, in part:

     In determining the wage of a tipped employee, the amount paid
     such employee by his employer shall be deemed to be increased
     on account of tips by an amount determined by the employer,
     but not by an amount in excess of 50 per centum of the
     applicable minimum wage rate, except that the amount of the
     increase on account of tips determined by the employer may not
     exceed the value of tips actually received by the employee.

29 U.S.C. § 203(m).

     Plaintiffs contend that the SCA, at § 351(b)(1), referenced

provisions of the FLSA "for a limited purpose" only and that

Congress intentionally failed to state that an employer can take a

tip credit against wages to satisfy the minimum monetary wage

requirements of the SCA. The Court does not agree that Congress

intended to incorporate a provision of the FLSA without the FLSA's

definition of a term contained in that provision.              At the very

least, the Secretary's understanding that Congress intended to

                                     28
incorporate the definition is neither arbitrary nor contrary to

law.

                                     Conclusion

       This   Court    has     no    authority    to     overturn    regulations

promulgated by federal agencies charged with enforcing federal

statutes unless they are unreasonable.                  Although the statutory

language makes the question close, the Court cannot affirmatively

hold the Secretary's regulations unreasonable given the particular

facts   of    this   case    and    the   legislative    purpose    of    the     SCA.

Furthermore,     the   Department's        determinations     with       regard    to

plaintiffs' arguments about the prevailing wage determinations and

the taking of tip credits are entitled to deference.                 Therefore:

       IT IS ORDERED that Plaintiffs' Motion for Summary Judgment [#

16] is DENIED;

       IT IS FURTHER ORDERED that Defendant's Cross Motion for

Summary Judgment [# 23] is GRANTED.

                                          29