B-167000, JUN 26, 1969

B-167000: Jun 26, 1969

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WE HAVE OBSERVED THAT THE AMOUNTS WITHHELD HAVE BEEN APPLIED FIRST TO PAYMENT OF THE FULL AMOUNT OF LIQUIDATED DAMAGES ASSESSED. EVEN THOUGH THERE ARE NOT SUFFICIENT FUNDS AVAILABLE FOR FULL PAYMENT OF THE AMOUNTS DETERMINED TO BE DUE BOTH THE AGGRIEVED EMPLOYEES AS WELL AS THE GOVERNMENT. WHEN THERE ARE NOT SUFFICIENT FUNDS AVAILABLE TO PAY BOTH THE GOVERNMENT AND THE AGGRIEVED EMPLOYEES. BY SO DOING LESSEN THE AMOUNT THE EMPLOYEES WOULD HAVE OTHERWISE RECEIVED HAD THERE BEEN NO ASSESSMENT AND COLLECTION OF LIQUIDATED DAMAGES. WE FEEL THAT THE MAIN CONCERN EVIDENCED IN THE CONTRACT WORK HOURS STANDARDS ACT OF 1962 WAS TO PROTECT AND PROVIDE FOR THE ENFORCEMENT OF THE RIGHTS OF LABORERS.

B-167000, JUN 26, 1969

PRECIS-UNAVAILABLE

SECRETARY OF LABOR:

IN THE MATTER OF VIOLATIONS OF THE CONTRACT WORK HOURS STANDARDS ACT BY CLIMATROL COMPANY, SUBCONTRACTOR UNDER CONTRACTS NOS. DA-41-443-ENG 7963 AND 7974, REPORTED TO OUR CLAIMS DIVISION BY YOUR WAGE AND HOUR AND PUBLIC CONTRACTS DIVISION UNDER DATE OF APRIL 21, 1969, AS WELL AS IN OTHER SIMILAR CASES, WE HAVE OBSERVED THAT THE AMOUNTS WITHHELD HAVE BEEN APPLIED FIRST TO PAYMENT OF THE FULL AMOUNT OF LIQUIDATED DAMAGES ASSESSED, EVEN THOUGH THERE ARE NOT SUFFICIENT FUNDS AVAILABLE FOR FULL PAYMENT OF THE AMOUNTS DETERMINED TO BE DUE BOTH THE AGGRIEVED EMPLOYEES AS WELL AS THE GOVERNMENT.

IT SEEMS INCONGRUOUS TO US TO ASSESS AND COLLECT LIQUIDATED DAMAGES IN FULL AGAINST A CONTRACTOR FOR VIOLATING A STATUTE PASSED FOR THE BENEFIT OF LABORERS, WHEN THERE ARE NOT SUFFICIENT FUNDS AVAILABLE TO PAY BOTH THE GOVERNMENT AND THE AGGRIEVED EMPLOYEES, AND BY SO DOING LESSEN THE AMOUNT THE EMPLOYEES WOULD HAVE OTHERWISE RECEIVED HAD THERE BEEN NO ASSESSMENT AND COLLECTION OF LIQUIDATED DAMAGES.

WHILE THE LANGUAGE OF THE ACT APPEARS TO LEAVE ROOM FOR DOUBT AS TO THE PROPER PROCEDURE IN THIS RESPECT, WE FEEL THAT THE MAIN CONCERN EVIDENCED IN THE CONTRACT WORK HOURS STANDARDS ACT OF 1962 WAS TO PROTECT AND PROVIDE FOR THE ENFORCEMENT OF THE RIGHTS OF LABORERS, AND THAT THE ASSESSMENT OF LIQUIDATED DAMAGES WAS PROVIDED AS A PENALTY OR DETERRENT TO VIOLATORS, RATHER THAN TO BENEFIT THE GOVERNMENT FINANCIALLY. THE PROCEDURE FOLLOWED IN THE SUBJECT CASE SEEMS TO REACH AN OPPOSITE RESULT FROM THAT WHICH MAY BE INDICATED BY THE USE OF THE WORDS, IN SECTION 102(B)(2) OF THE ACT, "*** AND SHALL, IN ADDITION, BE LIABLE TO THE UNITED STATES ***," WHICH SUGGEST THAT PRIORITY IN SUCH SITUATIONS SHOULD BE GIVEN TO THE UNPAID WAGES. IN SENATE REPORT NO. 1722, 87TH CONGRESS, 2ND SESSION, TO ACCOMPANY H.R. 10786 (THE BILL WHICH BECAME LAW) IT WAS EXPLAINED:

"THE BILL WOULD MAKE IT CLEAR THAT CONTRACTORS AND SUBCONTRACTORS RESPONSIBLE FOR VIOLATIONS WILL BE LIABLE TO EMPLOYEES FOR THE UNPAID WAGES, AS WELL AS LIABLE TO THE GOVERNMENT FOR LIQUIDATED DAMAGES IN THE AMOUNT OF $10 FOR EACH CALENDAR DAY IN WHICH THE EMPLOYEE IS REQUIRED TO WORK IN EXCESS OF THE SPECIFIED HOURS WITHOUT PAYMENT OF THE STATUTORY OVERTIME COMPENSATION. THIS LATTER PROVISION CORRESPONDS TO THE PENALTY PROVISION OF THE 1912 ACT. ***"

WE RECOGNIZE THAT SECTION 104(B) PRESERVES THE RIGHT OF THE EMPLOYEES, IF THE ACCRUED PAYMENTS WITHHELD ARE INSUFFICIENT TO REIMBURSE ALL THE LABORERS AND MECHANICS FOR UNDERPAYMENTS TO AN ACTION AGAINST THE CONTRACTOR AND HIS SURETIES, BUT WE THINK THE LANGUAGE USED MAKES IT CLEAR CONGRESS INTENDED THAT THE FULL AMOUNT WITHHELD SHOULD FIRST BE APPLIED TO SUCH UNDERPAYMENTS BEFORE THE WORKERS SHOULD BE PUT TO THE BURDEN OF INSTITUTING THE ACTION AUTHORIZED. THIS RIGHT IN EMPLOYEES TO PROCEED AGAINST THE CONTRACTOR AND/OR HIS SURETY TO RECOVER DEFICIENCIES IN WAGES HAS LITTLE PRACTICAL BENEFIT FOR THE REASON THAT THE COST OF LITIGATION TO SUCH EMPLOYEES OFTEN EXCEEDS THE AMOUNT OF WAGES TO BE RECOVERED. ON THE OTHER HAND, THE GOVERNMENT IS IN A MUCH BETTER POSITION, SINCE ITS CLAIM FOR SUCH LIQUIDATED DAMAGES APPEARS TO BE ENFORCEABLE BY SET-OFF AGAINST ANY FUNDS OWED THE CONTRACTOR UNDER ANY OTHER CONTRACT, AS WELL AS BY JUDICIAL ACTION. SEE B-123227, DECEMBER 9, 1968, 48 COMP. GEN. 387.

SECTION 105 OF THE ACT AND THE REGULATIONS PROMULGATED THEREUNDER, 29 CFR SECTION 5.14, GIVE TO YOUR OFFICE THE RIGHT TO PROVIDE FOR REASONABLE LIMITATIONS, AND ALLOW VARIATIONS, TOLERANCES, AND EXEMPTIONS TO AND FROM ANY OR ALL PROVISIONS OF THE ACT WHENEVER YOU FIND SUCH ACTION TO BE NECESSARY AND PROPER IN THE PUBLIC INTEREST TO PREVENT INJUSTICE, OR UNDUE HARDSHIP, OR TO AVOID SERIOUS IMPAIRMENT OF THE CONDUCT OF GOVERNMENT BUSINESS.

WE THEREFORE BRING THIS MATTER TO YOUR ATTENTION, FOR CONSIDERATION OF THE PROMULGATION OF SUCH REGULATIONS AS YOU MAY CONSIDER APPROPRIATE TO CARRY OUT THE INTENT OF THE ACT IN CASES WHERE IT APPEARS THAT THERE ARE NOT SUFFICIENT FUNDS TO REIMBURSE THE AGGRIEVED EMPLOYEES AND ALSO COVER THE LIQUIDATED DAMAGES ASSESSED FOR THE SAME VIOLATIONS.

WE ARE FURNISHING COPIES OF THIS LETTER TO THE ARMED SERVICES PROCUREMENT REGULATION COMMITTEE AND TO THE FEDERAL PROCUREMENT REGULATIONS STAFF OF GENERAL SERVICES ADMINISTRATION, ON THE ASSUMPTION THAT YOU MAY WISH TO INVITE THEIR VIEWS ON THE MATTER.

ADVICE CONCERNING ANY ACTION FELT TO BE WARRANTED IN THE PREMISES, OR AN EXPRESSION OF ANY CONTRARY VIEWS, WILL BE APPRECIATED.