Contractor Seeks to Overturn ARB Debarment Ruling for Its Repeated Violations of the Service Contract Act

On July 23, 2012, Tri-County Contractors, Inc. (“Tri-County”) filed a complaint in a federal district court in Mississippi, Case No. 3:12-cv-522, challenging the decision of the U.S. Department of Labor’s Administrative Review Board (“ARB”) to debar it from receiving government contracts for three years due to its alleged failure to comply with the Service Contract Act and fulfill its contract to provide trailers to victims of Hurricane Katrina.

In April 2006, Tri-County was awarded a contract for hauling, deactivation and installation of mobile homes and travel trailers. Later that same year, the Wage and Hour Division of the U.S. Department of Labor (“Wage and Hour Division”) conducted an investigation of Tri-County and found it violated prevailing wage, fringe benefit, and and Contract Work Hours and Safety Standards Act (“CWHSSA”) violations totaling $52,994.42. At the closing conference held at the conclusion of the first investigation in December 2006, a Wage and Hour Division investigator told Tri-County that it must keep accurate records of actual hours worked, pay proper prevailing rates, and pay overtime wages in the future. The Wage and Hour Division conducted a second investigation of Tri-County and again found prevailing wage, fringe benefits, and CWHSSA overtime violations, this time in the amount of $49,015.39, as well as evidence that Tri-County did not keep accurate records of actual hours worked.

In 2008, the Administrator for the Wage and Hour Division of the U.S. Department of Labor (“Administrator”) filed an administrative complaint against Tri-County for violating the prevailing wage and fringe benefit requirements under the Service Contract Act. After a hearing, on February 12, 2009, an administrative law judge (“ALJ”) ordered that Tri-County be debarred for three years because Tri-County failed to prove there were “unusual circumstances” that would preclude the ALJ from ordering debarment. The ALJ noted that the overwhelming evidence supported the conclusion that the repetitive nature of Tri-County’s violations “can be seen as culpable conduct requiring debarment under the Act.” Specifically, the ALJ was persuaded by evidence that the second investigation uncovered the same type of prevailing rate, fringe benefit, recordkeeping, and overtime violations as those uncovered in the first investigation.

Tri-County appealed the ALJ’s decision, and on June 29, 2012, the ARB affirmed to ALJ’s decision. The ARB found that:

while it is true that Tri-County paid the money due its employees, nevertheless, as the ALJ properly noted, the ‘Respondents impeded the second investigation by failing to keep accurate time records and by denying for several months that employees’ hours had been computer-generated when this was in fact the case.’ . . . it is noted that Tri-County had prior violations that were serious in nature, thereby running afoul of the third part of the “unusual circumstances” test.

In Tri-County’s complaint filed on July 23, it argued that the ARB’s decision was arbitrary and capricious, and not supported by substantial evidence because under the SCA there were “unusual circumstances” that would preclude debarment. Whether Tri-County can convince the federal district court to overturn the ARB’s decision is yet to be seen.

Regardless of the outcome, this case demonstrates that it is critical for contractors to “learn from their mistakes,” and avoid repeat violations and failing to cure prior violations.  In those circumstances DOL is substantially more likely to seek the relatively rare penalty of debarment against a contractor.

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Filed under Department of Labor, Service Contract Act (SCA)

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