A-47531, MAY 4, 1933, 12 COMP. GEN. 615

A-47531: May 4, 1933

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DO NOT PROVIDE FOR THE WITHHOLDING OF COMPENSATION EARNED BY A CONTRACTOR IN COMPLETING HIS CONTRACT WORK EVEN THOUGH THE CONTRACTOR AND/OR HIS SUBCONTRACTOR MAY HAVE FAILED TO PAY THE PREVAILING RATE OF WAGES. THAT THERE WAS INCORPORATED IN THE CONTRACT THE TERMS OF THE ACT OF MARCH 3. THAT THE CONTRACTOR IS REPORTED NOT TO HAVE POSTED A CLEARLY LEGIBLE STATEMENT OF THE RULES PAYABLE UNDER THE CONTRACT. YOU HAVE REQUESTED DECISION WHETHER FINAL PAYMENT MAY BE MADE TO THE CONTRACTOR. IS THAT EVERY CONTRACT FOR THE CONSTRUCTION. OR OTHER CIVIL SUBDIVISION OF THE STATE IN WHICH THE BUILDINGS ARE LOCATED. THAT "IN CASE ANY DISPUTE ARISES AS TO WHAT ARE THE PREVAILING RATES OF WAGES FOR WORK OF A SIMILAR NATURE APPLICABLE TO THE CONTRACT WHICH CANNOT BE ADJUSTED BY THE CONTRACTING OFFICER.

A-47531, MAY 4, 1933, 12 COMP. GEN. 615

CONTRACTS - PREVAILING RATE OF WAGES THE ACT OF MARCH 3, 1931, 46 STAT. 1494, AND THE EXECUTIVE ORDER OF JANUARY 19, 1932, DO NOT PROVIDE FOR THE WITHHOLDING OF COMPENSATION EARNED BY A CONTRACTOR IN COMPLETING HIS CONTRACT WORK EVEN THOUGH THE CONTRACTOR AND/OR HIS SUBCONTRACTOR MAY HAVE FAILED TO PAY THE PREVAILING RATE OF WAGES.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, MAY 4, 1933:

THERE HAS BEEN RECEIVED YOUR LETTER OF MARCH 24, 1933, TO THE EFFECT THAT UNDER CONTRACT W-6347-QM-1, DATED OCTOBER 25, 1932, FRANK M. KENNEY AGREED, IN CONSIDERATION OF THE SUM OF $38,118 TO CONSTRUCT DOUBLE NONCOMMISSIONED OFFICERS' QUARTERS AT FORT LOGAN, COLO.; THAT THERE WAS INCORPORATED IN THE CONTRACT THE TERMS OF THE ACT OF MARCH 3, 1931, 46 STAT. 1494, AND THE EXECUTIVE ORDER OF JANUARY 19, 1932, FOR ITS ENFORCEMENT; THAT THE CONTRACTOR HAS COMPLETED THE WORK, AND IT HAS BEEN ACCEPTED AS IN ACCORDANCE WITH THE TERMS OF THE CONTRACT; BUT THAT THE CONTRACTOR IS REPORTED NOT TO HAVE POSTED A CLEARLY LEGIBLE STATEMENT OF THE RULES PAYABLE UNDER THE CONTRACT; THAT HE DID NOT PAY THE PREVAILING RATE OF WAGES AS DETERMINED BY THE SECRETARY OF LABOR; AND THAT HE ACCEPTED REBATES FROM SOME OF HIS EMPLOYEES. YOU HAVE REQUESTED DECISION WHETHER FINAL PAYMENT MAY BE MADE TO THE CONTRACTOR, AND HIS EMPLOYEES INSTRUCTED TO SEEK REMEDY IN THE MANNER PRESCRIBED BY THE HURD ACT OF AUGUST 13, 1894, 28 STAT. 278, AS AMENDED BY THE ACT OF FEBRUARY 24, 1905, 33 STAT. 811, 812, OR WHETHER THE FINAL PAYMENT VOUCHER SHOULD BE DRAWN WITH A DEDUCTION EQUAL TO THE TOTAL AMOUNT OF KNOWN REBATES AND FORWARDED TO THIS OFFICE FOR SETTLEMENT.

THE MATERIAL REQUIREMENT OF THE ACT OF MARCH 3, 1931, IS THAT EVERY CONTRACT FOR THE CONSTRUCTION, ALTERATION, OR REPAIR OF A PUBLIC BUILDING OF THE UNITED STATES SHALL CONTAIN A STIPULATION TO THE EFFECT THAT ALL LABORERS AND MECHANICS EMPLOYED BY THE CONTRACTOR OR ANY SUBCONTRACTOR ON THE PUBLIC BUILDING COVERED BY THE CONTRACT SHOULD BE PAID NOT LESS THAN THE PREVAILING RATE OF WAGES FOR WORK OF A SIMILAR NATURE IN THE CITY, TOWN, VILLAGE, OR OTHER CIVIL SUBDIVISION OF THE STATE IN WHICH THE BUILDINGS ARE LOCATED, AND THAT "IN CASE ANY DISPUTE ARISES AS TO WHAT ARE THE PREVAILING RATES OF WAGES FOR WORK OF A SIMILAR NATURE APPLICABLE TO THE CONTRACT WHICH CANNOT BE ADJUSTED BY THE CONTRACTING OFFICER, THE MATTER SHALL BE REFERRED TO THE SECRETARY OF LABOR FOR DETERMINATION, AND HIS DECISION THEREON SHALL BE CONCLUSIVE ON ALL PARTIES TO THE CONTRACT.' BY AN EXECUTIVE ORDER OF JANUARY 19, 1932, THE PRESIDENT DIRECTED THAT THERE BE INCLUDED IN ALL CONTRACTS WITHIN THE TERMS OF THE SAID ACT OF MARCH 3, 1931, AND THERE WERE INCLUDED IN THIS CONTRACT THE FOLLOWING STIPULATIONS:

B. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THE AFORESAID WAGES SHALL BE PAID UNCONDITIONALLY IN FULL NOT LESS OFTEN THAN ONCE A WEEK AND IN LAWFUL MONEY OF THE UNITED STATES, TO THE FULL AMOUNT ACCRUED TO EACH INDIVIDUAL AT THE TIME OF PAYMENT AND WITHOUT SUBSEQUENT DEDUCTION OR REBATE ON ANY ACCOUNT.

C. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT FOR THE PURPOSE OF SAID ACT EVERY PERSON, WHILE PERFORMING WORK OF A LABORER OR MECHANIC ON THE PUBLIC WORK COVERED BY THIS CONTRACT, IS TO BE REGARDED AS EMPLOYED AS A LABORER OR MECHANIC BY THE CONTRACTOR OR SUBCONTRACTOR, REGARDLESS OF ANY CONTRACTUAL RELATIONSHIP ALLEGED TO EXIST BETWEEN THE CONTRACTOR OR SUBCONTRACTOR AND SUCH LABORER OR MECHANIC.

D. IT IS UNDERSTOOD AND AGREED THAT THE PAY ROLLS OF THE CONTRACTOR AND ALL SUBCONTRACTORS AND AGREEMENTS MADE BY THE CONTRACTOR OR SUBCONTRACTOR OR ANY OTHER PARTY RELATING TO THE EMPLOYMENT OF LABORERS OR MECHANIC-S, OR THE PERFORMANCE OF THE WORK OF LABORERS AND MECHANICS ON SAID BUILDING, AND TO THE WAGES OR COMPENSATION TO BE PAID THEREFOR, ARE TO BE OPEN TO INSPECTION BY THE CONTRACTING OFFICER AT SUCH TIMES AS THE LATTER MAY ELECT, PROVIDED THAT SUCH INSPECTION SHALL NOT INTERFERE WITH THE PROPER AND ORDERLY PROSECUTION OF THE WORK, AND THAT A CLEARLY LEGIBLE STATEMENT OF THE RATES PAYABLE AS AFORESAID UNDER THIS CONTRACT SHALL BE POSTED BY THE CONTRACTOR IN A PROMINENT AND EASILY ACCESSIBLE PLACE AT THE SITE OF THE WORK SO THAT SUCH STATEMENT MAY BE SEEN AT ANY TIME BY PERSONS ENGAGED ON THE WORK.

E. IT IS FURTHER EXPRESSLY UNDERSTOOD AND AGREED THAT IF IT SHALL BE FOUND BY THE CONTRACTING OFFICER THAT ANY LABORER OR MECHANIC EMPLOYED BY THE CONTRACTOR OR ANY SUBCONTRACTOR ON THE PUBLIC WORK COVERED BY THIS CONTRACT HAS BEEN OR IS BEING PAID A RATE OF WAGES LESS THAN THE PREVAILING RATE OF WAGES AS AFORESAID, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE HIS RIGHT TO PROCEED WITH THE WORK, OR SUCH PART OF THE WORK AS TO WHICH THERE HAS BEEN A FAILURE TO PAY SAID PREVAILING WAGES. IN SUCH EVENT IT IS UNDERSTOOD AND AGREED THAT THE GOVERNMENT MAY TAKE OVER THE WORK AND PROSECUTE THE SAME TO COMPLETION BY CONTRACT OR OTHERWISE, AND THAT THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY.

THERE WAS BEFORE THIS OFFICE IN 12 COMP. GEN. 27 ANOTHER SITUATION ARISING UNDER A WAR DEPARTMENT CONTRACT WHERE IT WAS ALLEGED THAT THE CONTRACTOR HAD FAILED TO PAY THE PREVAILING RATE OF WAGES AS FIXED BY THE SECRETARY OF LABOR. THE CONTRACTOR ALLEGED THAT HE HAD PAID WAGES FIXED BY THE SECRETARY OF LABOR IN EXCESS OF WHAT WERE, IN FACT, THE PREVAILING RATES OF WAGES AND CLAIMED THE EXCESS FROM THE UNITED STATES. HIS EMPLOYEES ALLEGED THAT HE HAD NOT PAID THE PREVAILING RATE OF WAGES AND CLAIMED THE DEFICIENCY FROM THE UNITED STATES. IT WAS POINTED OUT IN THE DECISION OF JULY 14, 1932, 12 COMP. GEN. 27, THAT APPROPRIATED MONEYS WERE NOT AVAILABLE FOR THE PAYMENT OF EITHER CLASS OF CLAIMS, AND THAT THERE WAS NO AUTHORITY CONFERRED BY THE ACT OF MARCH 3, 1931, TO WITHHOLD BALANCES OTHERWISE DUE A CONTRACTOR FOR PAYMENT TO MECHANICS AND LABORERS EVEN THOUGH THEY MIGHT BE ABLE TO ESTABLISH THAT THE CONTRACTOR HAD NOT PAID THE PREVAILING RATE OF WAGES.

THEREAFTER, ON FEBRUARY 24, 1932, THERE WAS INTRODUCED SENATE BILL 3847 TO AMEND THE ACT OF MARCH 3, 1931, TO PROVIDE, AMONG OTHER THINGS, THAT IN EVENT A CONTRACTOR OR SUBCONTRACTOR SHOULD FAIL TO PAY THE PREVAILING RATE OF WAGES, OR SHOULD ACCEPT REBATES FROM HIS EMPLOYEES, THE SECRETARY OF LABOR SHOULD ASCERTAIN THE FACTS AND THE COMPTROLLER GENERAL OF THE UNITED STATES SHOULD DEDUCT ANY AMOUNTS TO BE FORFEITED AS PROVIDED IN THE BILL FROM ANY SUMS DUE THE CONTRACTOR, OR IF NOTHING REMAINED DUE THE CONTRACTOR THE MONEY SHOULD BE RECOVERED IN A SUIT AGAINST EITHER THE CONTRACTOR AND HIS SURETY OR HIS SUBCONTRACTOR, WITH A FURTHER PROVISION THAT SO MUCH OF THE AMOUNTS SO FORFEITED OR RECOVERED AS MIGHT BE NECESSARY SHOULD BE APPLIED TO THE PAYMENT TO THE LABORERS AND MECHANICS OF ANY DIFFERENCE BETWEEN THE AMOUNT FOUND BY THE COMPTROLLER GENERAL TO HAVE BEEN PAID THEM AND THE PREVAILING RATE OF WAGES OR THE AMOUNTS WHICH THE EMPLOYEES WERE REQUIRED TO REFUND.

THIS BILL WAS PASSED BY THE SENATE AND HOUSE AND SENT TO THE PRESIDENT. THE PRESIDENT RETURNED THE BILL JULY 1, 1932, WITHOUT HIS APPROVAL,ACCOMPANIED BY A MEMORANDUM DATED JUNE 30, 1932, FROM THE SECRETARY OF LABOR, WHEREIN IT WAS STATED THAT THE BILL SHOULD NOT BE APPROVED; THAT IT WAS OBSCURE AND COMPLEX AND WOULD BE IMPRACTICAL OF ADMINISTRATION; AND THAT IT WAS A MANDATORY SUBSTITUTE FOR THE EXISTING ACT OF MARCH 3, 1931,"WHICH IS A CLEAR AND SUFFICIENT LAW," WHICH LAW ,HAD BEEN CLARIFIED AND REENFORCED BY THE EXECUTIVE ORDER ISSUED LAST JANUARY REQUIRING CERTAIN STIPULATIONS IN PUBLIC CONTRACTS TO MAKE EFFECTIVE THE MANIFEST PURPOSE OF THE STATUTE.'

IT IS TO BE PARTICULARLY NOTED THAT THE ACT OF MARCH 3, 1931, DOES NOT PROVIDE FOR ANY PENALTY ON THE CONTRACTOR FOR FAILURE TO OBSERVE ITS TERMS, NOR IS THERE ANY PROVISION IN SAID ACT OF MARCH 3, 1931, WHEREBY AMOUNTS DUE A CONTRACTOR MAY BE USED BY THE UNITED STATES TO PAY THE EMPLOYEES THE PREVAILING RATE OF WAGES OR TO REFUND TO SUCH EMPLOYEES REBATES WHICH THE CONTRACTOR MAY HAVE COLLECTED FROM THEM AS A CONDITION OF THEIR EMPLOYMENT. IT IS LIKEWISE TO BE NOTED THAT THE EXECUTIVE ORDER OF JANUARY 19, 1932, WHICH WAS INCORPORATED IN THIS CONTRACT OF OCTOBER 25, 1932, WITH FRANK M. KENNEY, DOES NOT PROVIDE FOR THE WITHHOLDING OF ANY COMPENSATION FROM THE CONTRACTOR TO BE APPLIED IN PAYMENT OF ANY DEFICIENCIES IN THE PREVAILING RATE OF WAGES OF THE EMPLOYEES. THE SOLE AND ONLY PENALTY PROVIDED FOR IN THE EXECUTIVE ORDER AND INCORPORATED IN THE CONTRACT IS FOR THE TERMINATION OF THE CONTRACTOR'S RIGHT TO CONTINUE WITH THE WORK IN WHOLE OR IN PART IN EVENT THE CONTRACTOR FAILS TO OBSERVE THE TERMS OF THE ACT OF MARCH 3, 1931, AND SAID EXECUTIVE ORDER.

THE ADMINISTRATIVE OFFICERS OF THE WAR DEPARTMENT DID NOT TERMINATE THE RIGHT OF FRANK M. KENNEY TO CONTINUE THE WORK UNDER THIS CONTRACT, AND HE WAS PERMITTED TO CONTINUE THE WORK TO COMPLETION. HENCE, IT IS NOW TOO LATE TO INVOKE THE ONLY PENALTY PROVIDED FOR UNDER THE CONTRACT. THE RIGHT OF THE CONTRACTOR TO PROCEED CANNOT BE TERMINATED AFTER THE CONTRACT HAS BEEN COMPLETED.

THIS OFFICE APPRECIATES THE FACT, AS HAS BEEN STATED IN A NUMBER OF DECISIONS, THAT A RIGHT IN EMPLOYEES TO PROCEED AGAINST THE CONTRACTOR AND/OR HIS SURETY TO RECOVER DEFICIENCIES IN WAGES MAY BE OF LITTLE PRACTICAL BENEFIT FOR THE REASON THAT THE COST OF LITIGATION TO SUCH EMPLOYEES MIGHT EXCEED THE AMOUNT OF WAGES TO BE RECOVERED, BUT NOT ONLY IS THERE NO AUTHORITY IN THE ACT OF MARCH 3, 1931, AS POINTED OUT IN THE DECISION OF JULY 14, 1932, OR IN THE EXECUTIVE ORDER OF JANUARY 19, 1932, INCORPORATED IN THE CONTRACT, FOR WITHHOLDING AMOUNTS FROM THIS CONTRACTOR TO BE PAID TO EMPLOYEES AS DEFICIENCIES IN THE PREVAILING RATE OF WAGES, BUT ANY ATTEMPT TO MAKE SUCH WITHHOLDING FOR PAYMENT TO THE EMPLOYEES WOULD BE AN ATTEMPT TO ACCOMPLISH BY ARBITRARY ACTION, WHICH DOUBTLESS COULD NOT BE SUSTAINED, THE PROCEDURE PRESCRIBED IN S. 3847, WHICH MET EXECUTIVE DISAPPROVAL ON JULY 1, 1932, ON THE RECOMMENDATION OF THE SECRETARY OF LABOR. OBVIOUSLY, THIS CANNOT LEGALLY BE DONE, AND, THE RIGHT OF THE CONTRACTOR TO PROCEED NOT HAVING BEEN TERMINATED AS PROVIDED IN THE EXECUTIVE ORDER OF JANUARY 19, 1932, INCORPORATED IN THE CONTRACT, INSOFAR AS SUCH PHASE OF THE MATTER IS CONCERNED, THE CONTRACTOR IS ENTITLED TO PAYMENT OF THE BALANCE OF THE CONTRACT PRICE FOR THE WORK COMPLETED AND ACCEPTED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT.