B-149607, OCT. 11, 1962

B-149607: Oct 11, 1962

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TO THE SECRETARY OF THE INTERIOR: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 1. WHILE THE RECORD OF IRREGULARITIES IS NOT YET AVAILABLE. YOUR OPINION IS REQUESTED ON WHETHER WAGE UNDERPAYMENTS DETERMINED TO BE DUE EMPLOYEES OF A PRIME OR SUBCONTRACTOR UNDER THE EIGHT-HOUR LAW SHOULD BE TREATED AS A CLAIM BY THE GOVERNMENT AGAINST THE CONTRACTOR. ARE INADEQUATE TO OFFSET ALL OR PART OF SUCH UNDERPAYMENTS. "IN THE EVENT YOUR OPINION IS IN THE AFFIRMATIVE WOULD IT BE APPROPRIATE TO DEPOSIT. IN THOSE INSTANCES WHERE CONTRACT EARNINGS DUE THE CONTRACTOR IN THE POSSESSION OF THE CONTRACTING OFFICER ARE WITHHELD TO OFFSET EIGHT-HOUR LAW WAGE UNDERPAYMENTS. IF YOUR DECISIONS ON THE PRECEDING TWO QUESTIONS ARE IN THE AFFIRMATIVE.

B-149607, OCT. 11, 1962

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 1, 1962, CONCERNING REPORTED VIOLATIONS OF THE TIME AND ONE-HALF PROVISIONS OF THE EIGHT HOUR LAWS, 40 U.S.C. 321 ET SEQ., UNDER CONTRACT 14-20-350-122 WITH THE R. R. ANDERSON CONSTRUCTION COMPANY FOR CONSTRUCTION OF CERTAIN ROADS ON THE STOCKBRIDGE INDIAN RESERVATION, WISCONSIN.

WHILE THE RECORD OF IRREGULARITIES IS NOT YET AVAILABLE, HAVING BEEN FORWARDED THROUGH THE DEPARTMENT OF LABOR PURSUANT TO THE SECRETARY OF LABOR'S REGULATION, 29 CFR, SUBTITLE A, PART 5, YOU REQUEST AN OPINION AS FOLLOWS:

"BECAUSE OF THE IMPORTANCE OF THIS MATTER TO CONTRACT ADMINISTRATION, YOUR OPINION IS REQUESTED ON WHETHER WAGE UNDERPAYMENTS DETERMINED TO BE DUE EMPLOYEES OF A PRIME OR SUBCONTRACTOR UNDER THE EIGHT-HOUR LAW SHOULD BE TREATED AS A CLAIM BY THE GOVERNMENT AGAINST THE CONTRACTOR, WHEN CONTRACT EARNINGS DUE AND IN THE POSSESSION OF THE CONTRACTING OFFICER, ARE INADEQUATE TO OFFSET ALL OR PART OF SUCH UNDERPAYMENTS.

"IN THE EVENT YOUR OPINION IS IN THE AFFIRMATIVE WOULD IT BE APPROPRIATE TO DEPOSIT, AS A REFUND TO THE CONSTRUCTION PROJECT APPROPRIATION, ANY AMOUNTS RECOUPED AS A RESULT OF COLLECTION ACTION?

"WOULD IT ALSO BE APPROPRIATE, IN THOSE INSTANCES WHERE CONTRACT EARNINGS DUE THE CONTRACTOR IN THE POSSESSION OF THE CONTRACTING OFFICER ARE WITHHELD TO OFFSET EIGHT-HOUR LAW WAGE UNDERPAYMENTS, TO PERMIT THOSE FUNDS TO REMAIN IN THE CONSTRUCTION PROJECT APPROPRIATION?

"FINALLY, IF YOUR DECISIONS ON THE PRECEDING TWO QUESTIONS ARE IN THE AFFIRMATIVE, COULD ANY REFUND RESULTING FROM COLLECTION ACTION OR ANY AMOUNTS WITHHELD FROM CONTRACTOR EARNINGS TO SATISFY THE EIGHT HOUR LAW WAGE UNDERPAYMENTS BE REUSED FOR THE SAME PURPOSES AS THE ORIGINAL CONSTRUCTION APPROPRIATION?

IN GENERAL, THE CONSEQUENCES OF A FAILURE TO OBSERVE A CONTRACTUAL UNDERTAKING TO PAY THE MINIMUM WAGES PRESCRIBED BY THE EIGHT HOUR LAW, 40 U.S.C. 325A, FOR OVERTIME WORK IN EXCESS OF EIGHT HOURS PER DAY, ARE SIMILAR TO THOSE OF ANY OTHER FAILURE TO COMPLY WITH A CONDITION OF PERFORMANCE INCORPORATED IN CONTRACT SPECIFICATIONS. THE GOVERNMENT IS DEPRIVED OF THE SPECIFIC ITEM WHICH WAS TO BE FURNISHED AND THE CONTRACTOR'S AGREEMENT TO FURNISH IT IS BREACHED. CONSEQUENTLY, THE VALUE OF THE ITEM INCLUDED IN THE CONTRACT PRICE IS NOT EARNED AND THE GOVERNMENT IS NOT LIABLE FOR ITS PAYMENT.

PRESUMABLY UNCERTAINTY IN THE MATTER HAS ARISEN BECAUSE OF STATEMENTS IN PRIOR DECISIONS, PRINCIPALLY 33 COMP. GEN. 496 AND 35 COMP. GEN. 144, INDICATING THAT THE WITHHOLDING PROCEDURES OF THE DAVIS-BACON ACT, 40 U.S.C. 276A, DO NOT GOVERN THE WITHHOLDING AND DISPOSITION OF AMOUNTS REPRESENTING OVERTIME WAGE DIFFERENCES AND THAT THERE IS NO AUTHORITY FOR THE GOVERNMENT TO WITHHOLD SUCH AMOUNTS FOR DISTRIBUTION TO AGGRIEVED EMPLOYEES. HOWEVER, NEITHER SUCH STATEMENTS NOR, AS WAS POINTED OUT IN 20 COMP. GEN. 233, THE FACT THAT THE EIGHT HOUR LAW DOES NOT REQUIRE THE PAYMENT OF TIME AND ONE-HALF, BUT MERELY PERMITS EMPLOYMENT IN EXCESS OF EIGHT HOURS PER DAY UPON THE PAYMENT OF TIME AND ONE-HALF AND PROVIDES FOR THE IMPOSITION OF A PENALTY FOR VIOLATIONS RATHER THAN A DAVIS-BACON ACT TYPE REMEDY, SHOULD BE REGARDED AS PRECLUDING REDUCTION OF A CONTRACT PRICE BY THE AMOUNT OF OVERTIME WAGE DEFICIENCIES IN ACCORDANCE WITH ITS TERMS.

SECTION 21 OF THE GENERAL PROVISIONS (STANDARD FORM 23A, MARCH 1953) OF CONTRACT 14-20-350-122, PROVIDING FOR EIGHT HOUR LAW COVERAGE, STATES THAT:

"* * * WORK IN EXCESS OF EIGHT HOURS PER DAY IS PERMITTED ONLY UPON THE CONDITION THAT EVERY SUCH LABORER AND MECHANIC SHALL BE COMPENSATED FOR ALL HOURS WORKED IN EXCESS OF EIGHT HOURS PER DAY AT NOT LESS THAN ONE AND ONE-HALF TIMES THE BASIC RATE OF PAY.'

SECTION 25 THEREOF PROVIDES THAT:

"THERE MAY BE WITHHELD FROM THE CONTRACTOR SO MUCH OF THE ACCRUED PAYMENTS OR ADVANCES AS MAY BE CONSIDERED NECESSARY TO PAY LABORERS AND MECHANICS EMPLOYED BY THE CONTRACTOR OR ANY SUBCONTRACTOR THE FULL AMOUNT OF WAGES REQUIRED BY THIS CONTRACT.' THIS LANGUAGE APPEARS TO ESTABLISH AN AGREEMENT TO PAY TIME AND ONE-HALF FOR OVERTIME WORK WHICH GOVERNS PERFORMANCE THE SAME AS ANY OTHER CONDITION OF THE CONTRACT.

HOWEVER, WHILE, AS INDICATED IN 35 COMP. GEN. 144, THE STATUTORY PENALTIES CONSEQUENT UPON VIOLATIONS GIVE RISE TO AN INDEBTEDNESS WHICH MAY BE FOR COLLECTION OUTSIDE THE CONTRACT IF NECESSARY, IT IS DOUBTFUL WHETHER THE CONTRACT UNDERTAKING SHOULD BE CONSIDERED TO EXTEND BEYOND AGREEMENT TO A DEDUCTION FROM BALANCES OTHERWISE EARNED OF OVERTIME WAGE DEFICIENCIES. IN THIS CONNECTION, IT SHOULD BE NOTED THAT THE WORK HOURS ACT OF 1962, PUBLIC LAW 87-581, APPROVED AUGUST 13, 1962, WILL CHANGE OVERTIME COMPENSATION REQUIREMENTS UNDER FUTURE CONTRACTS. YOUR FIRST QUESTION, THEREFORE, IS ANSWERED IN THE NEGATIVE. WITH RESPECT TO THE OTHER THREE QUESTIONS, SUMS WITHHELD SHOULD BE LEFT IN OR RETURNED TO THE CONTRACT APPROPRIATION, AND THEY MAY BE REUSED FOR THE PURPOSES OF THAT APPROPRIATION.