B-7662, MARCH 18, 1940, 19 COMP. GEN. 785

B-7662: Mar 18, 1940

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IS SPECIFICALLY PLACED IN THE SECRETARY OF LABOR AND IT IS NOT FOR THE GENERAL ACCOUNTING OFFICE TO QUESTION THE SECRETARY'S DETERMINATION THAT A CONTRACTOR WAS LIABLE TO THE UNITED STATES IN A CERTAIN AMOUNT AS DAMAGES FOR BREACHES OR VIOLATIONS OF THE LABOR. 1940: I HAVE YOUR LETTER OF MARCH 1. AS FOLLOWS: I HAVE YOUR LETTER DATED FEBRUARY 23D IN REPLY TO MY LETTER OF NOVEMBER 21. IT IS MY CONTENTION THAT THE GENERAL RULE OF THE RIGHT OF SET OFF. WHICH SHOULD BE STRICTLY CONSTRUED AND I BELIEVE THAT IT WAS CLEARLY THE INTENT OF CONGRESS THAT SUCH WITHHOLDING COULD ONLY BE EFFECTED ON OTHER WALSH- HEALEY CONTRACTS. I NOTE YOU HAVE FAILED TO DETERMINE THE MERITS OF THE CLAIM OF THE LABOR DEPARTMENT AGAINST THE CONTRACTOR.

B-7662, MARCH 18, 1940, 19 COMP. GEN. 785

CONTRACTS - WALSH-HEALEY ACT VIOLATIONS THE PROVISION IN THE WALSH-HEALEY ACT, 49 STAT. 2036, FOR WITHHOLDING MONEYS DUE THE UNITED STATES BY REASON OF A CONTRACTOR'S VIOLATION OF ITS CONTRACT REPRESENTATIONS AND STIPULATIONS, FROM AMOUNTS OTHERWISE DUE ON ANY SUCH CONTRACTS, OR FOR RECOVERY BY SUIT, DOES NOT BAR THE EXERCISE BY THE GOVERNMENT OF THE COMMON-LAW RIGHT TO SET OFF AMOUNTS DUE THE CONTRACTOR UNDER OTHER CONTRACTS IN LIQUIDATION OF SUCH AN INDEBTEDNESS. THE RESPONSIBILITY OF ADMINISTERING THE WALSH-HEALEY ACT, 49 STAT. 2036, IS SPECIFICALLY PLACED IN THE SECRETARY OF LABOR AND IT IS NOT FOR THE GENERAL ACCOUNTING OFFICE TO QUESTION THE SECRETARY'S DETERMINATION THAT A CONTRACTOR WAS LIABLE TO THE UNITED STATES IN A CERTAIN AMOUNT AS DAMAGES FOR BREACHES OR VIOLATIONS OF THE LABOR, ETC., REPRESENTATIONS AND STIPULATIONS INCLUDED IN A CONTRACT PURSUANT TO THE SAID ACT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ATLANTIC TERRA COTTA CO., MARCH 18, 1940:

I HAVE YOUR LETTER OF MARCH 1, 1940 (ADDRESSED TO A CLAIMS EXAMINER OF THIS OFFICE), AS FOLLOWS:

I HAVE YOUR LETTER DATED FEBRUARY 23D IN REPLY TO MY LETTER OF NOVEMBER 21, 1939, RELATIVE TO THE ABOVE MATTER AND I NOTE YOUR INTERPRETATION OF THE LANGUAGE OF THE WALSH-HEALEY ACT "ON ANY SUCH CONTRACTS" TO PERMIT THE WITHHOLDING OF AMOUNTS DUE THE CONTRACTOR ON OTHER CONTRACTS NOT WITHIN THE PROVISIONS OF THE WALSH-HEALEY ACT, AND I ALSO NOTE YOUR RELIANCE ON THE CASE OF BARRY V. UNITED STATES, 229 U.S. 47. IT IS MY CONTENTION THAT THE GENERAL RULE OF THE RIGHT OF SET OFF, AS HELD IN THE BARRY CASE, DOES NOT APPLY UNDER THE PRECISE LANGUAGE OF THE WALSH-HEALEY ACT, WHICH SHOULD BE STRICTLY CONSTRUED AND I BELIEVE THAT IT WAS CLEARLY THE INTENT OF CONGRESS THAT SUCH WITHHOLDING COULD ONLY BE EFFECTED ON OTHER WALSH- HEALEY CONTRACTS.

MOREOVER, I NOTE YOU HAVE FAILED TO DETERMINE THE MERITS OF THE CLAIM OF THE LABOR DEPARTMENT AGAINST THE CONTRACTOR, ALTHOUGH I UNDERSTAND THE FILE OF THE LABOR DEPARTMENT WAS SUBMITTED TO YOU AND MY LETTER OF NOVEMBER 21, 1939, CONTAINS THE FOLLOWING:

"THE COMPANY CONTENDS THAT THE LABOR DEPARTMENT IS IN ERROR IN ITS INTERPRETATION OF THE PROVISIONS OF THE WALSH-HEALEY ACT AND HAS CONSEQUENTLY REFUSED TO COMPLY WITH THE DEMAND OF THE DEPARTMENT THAT A TOTAL SUM OF $3,035.15, ALLEGEDLY DUE TO EMPLOYEES ON BOTH CONTRACTS BE FORWARDED.'

THE DISPUTE BETWEEN THE LABOR DEPARTMENT AND THE CONTRACTOR IS SUBSTANTIALLY THE FOLLOWING: WHETHER OR NOT THE LABOR DEPARTMENT IS ENTITLED TO CHARGE THE CONTRACTOR WITH OVERTIME DONE DURING A CERTAIN PERIOD, WHICH WORK INCLUDED MANY MATTERS OF PRIVATE CONTRACTS AS WELL AS WORK DONE UNDER THE WALSH-HEALEY CONTRACT IS COMMINGLED WITH OTHER WORK DONE UNDER PRIVATE CONTRACTS, KNOWN AS COMMERCIAL WORK, CAN THE LABOR DEPARTMENT ASSESS THE CONTRACTOR OVERTIME ON ALL THE WORK DONE? I BELIEVE THIS IS A SERIOUS QUESTION FOR THE DETERMINATION BY YOUR OFFICE IN MUCH THE SAME MANNER AS YOUR RECENT DECISION IN THE MATTER OF THE RENTAL OF TRUCKS BY THE TENNESSEE VALLEY AUTHORITY. SURELY, THE QUESTION OF WHETHER THERE HAS BEEN A VIOLATION OF THE ACT MUST FIRST BE DETERMINED BEFORE ANY SOUND RULING AFFECTING THE INCIDENTAL RIGHT OF THE GOVERNMENT TO COLLECT THE PENALTIES BY SET-OFF OR OTHERWISE, CAN BE MADE.

SINCE THE COMPANY'S LEGAL RECOURSE IN A SITUATION OF THIS NATURE IS COMPARATIVELY LIMITED, IT WOULD APPEAR THAT THE ADMINISTRATIVE REMEDY MUST FIRST BE EXHAUSTED BEFORE ANY CONTEMPLATED ACTION IS TAKEN.

I, THEREFORE, RESPECTIVELY REQUEST THAT THE RULING, AS OUTLINED IN YOUR LETTER OF FEBRUARY 23RD BE HELD IN ABEYANCE UNTIL THE MATTER IS REVIEWED AND A DETERMINATION MADE AS TO WHETHER AN ACTUAL VIOLATION OF THE ACT IS INVOLVED AND WHETHER THE DECISIONS OF THE ADMINISTRATOR AND THE SECRETARY OF LABOR ARE IN ACCORD WITH THE SPIRIT AND INTENT OF THE WALSH-HEALEY ACT. SHOULD THE RATHER VOLUMINOUS RECORD OF THE CASE BE NOT SUFFICIENTLY CLEAR, I SHALL BE PLEASED, UPON REQUEST, TO SUBMIT ON BEHALF OF THE COMPANY A BRIEF OUTLINING MY CLIENT'S POSITION.

IN THE MEANTIME, I ALSO RESPECTIVELY REQUEST THAT THE AMOUNTS BEING WITHHELD PURSUANT TO YOUR LETTER OF FEBRUARY 23, 1940, BE NOT APPLIED TOWARD THE CLAIM OF THE LABOR DEPARTMENT, AND THAT A REVIEW BE MADE BY THE COMPTROLLER GENERAL AS PROVIDED IN FORM 40.

SECTION 236, REVISED STATUTES, AS AMENDED, 42 STAT. 24, PROVIDES THAT:

ALL CLAIMS AND DEMANDS WHATEVER BY THE GOVERNMENT OF THE UNITED STATES OR AGAINST IT, AND ALL ACCOUNTS WHATEVER IN WHICH THE GOVERNMENT OF THE UNITED STATES IS CONCERNED, EITHER AS DEBTOR OR CREDITOR, SHALL BE SETTLED AND ADJUSTED IN THE GENERAL ACCOUNTING OFFICE.

PURSUANT THERETO THIS OFFICE, IN SETTLEMENT NO. 10579666, DATED FEBRUARY 21, 1940, CREDITED THE SUM OF $1,235.12, OTHERWISE DUE YOU UNDER CONTRACT NO. ER-TPS-21-86354, DATED JUNE 28, 1939, AGAINST YOUR INDEBTEDNESS FOR A LIKE AMOUNT REPORTED BY THE DEPARTMENT OF LABOR TO BE DUE THE UNITED STATES BY REASON OF VIOLATIONS OF THE REPRESENTATIONS AND STIPULATIONS INCLUDED IN CONTRACT NO. ER-TPS-21-43141, DATED DECEMBER 22, 1936, AS REQUIRED BY THE WALSH-HEALEY ACT, 49 STAT. 2036.

IT APPEARS TO BE YOUR FIRST CONTENTION THAT IN THE COLLECTION OF DEBTS RESULTING FROM BREACHES OR VIOLATIONS OF THE REPRESENTATIONS AND STIPULATIONS IN CONTRACTS EXECUTED PURSUANT TO THE WALSH-HEALEY ACT, THE GOVERNMENT MAY NOT AVAIL ITSELF OF THE COMMON-LAW RIGHT OF SETTING OFF AMOUNTS DUE UNDER OTHER CONTRACTS. IN SUPPORT THEREOF YOU REFER TO THE FOLLOWING PROVISION OF SECTION 2 OF SAID ACT:

* * * ANY SUMS OF MONEY DUE TO THE UNITED STATES OF AMERICA BY REASON OF ANY VIOLATION OF ANY OF THE REPRESENTATIONS AND STIPULATIONS OF SAID CONTRACT SET FORTH IN SECTION 1 HEREOF MAY BE WITHHELD FROM ANY AMOUNTS DUE ON ANY SUCH CONTRACTS OR MAY BE RECOVERED IN SUITS BROUGHT IN THE NAME OF THE UNITED STATES OF AMERICA BY THE ATTORNEY GENERAL THEREOF. * * *

OBVIOUSLY, ANY SUM FOR WHICH A CONTRACTOR IS LIABLE BY REASON OF BREACHES OR VIOLATIONS OF THE REPRESENTATIONS AND STIPULATIONS OF SUCH CONTRACTS IS A DEBT DUE THE UNITED STATES AND, IN THE ABSENCE OF A CLEAR STATUTORY INHIBITION, WHICH IS NOT CONTAINED IN THE ABOVE ACT, THERE IS FOR APPLICATION THE COMMON-LAW RIGHT OF SET-OFF. THIS RIGHT MAY BE EXERCISED ON GENERAL PRINCIPLES AND WITHOUT THE AID OF A STATUTE. SEE GRATIOT V. UNITED STATES, 15 PET. 336, 370; MCKNIGHT V. UNITED STATES, 98 U.S. 179, 186. THE GOVERNMENT HAS ALWAYS HAD THE RIGHT TO SET OFF AGAINST AN AMOUNT DUE A CLAIMANT ANY SUM THE SAME PERSON OR CORPORATION OWES THE GOVERNMENT, EITHER UNDER THE SAME OR OTHER CONTRACTS OR OBLIGATIONS. EMERY V. UNITED STATES, 13 F./2D) 658; TAGGART V. UNITED STATES, 17 CT.1CLS. 322; 2 COMP. GEN. 579. "IT WOULD BE FOLLY TO REQUIRE THE GOVERNMENT TO PAY UNDER THE ONE CONTRACT WHAT IT MUST EVENTUALLY RECOVER FOR A BREACH OF THE OTHER.' BARRY V. UNITED STATES, 229 U.S. 47. CONSEQUENTLY THIS OFFICE, IN THE EXERCISE OF THE FUNCTION IMPOSED UPON IT BY SECTION 236, REVISED STATUTES, AS AMENDED, SUPRA, OF SETTLING AND ADJUSTING CLAIMS BY THE GOVERNMENT OR AGAINST IT, MUST CONSIDER BOTH DEBITS AND CREDITS, THAT IS, AMOUNTS DUE FROM A CLAIMANT AS WELL AS AMOUNTS DUE TO A CLAIMANT, IN DETERMINING WHAT NET AMOUNT, IF ANY, IS PAYABLE.

ALSO, YOU CONTEND THAT THIS OFFICE SHOULD DETERMINE WHETHER THERE HAS BEEN AN ACTUAL VIOLATION OF THE REPRESENTATIONS AND STIPULATIONS INCLUDED IN THE CONTRACT, AND "WHETHER THE DECISIONS OF THE ADMINISTRATOR AND THE SECRETARY OF LABOR ARE IN ACCORD WITH THE SPIRIT AND INTENT OF THE WALSH- HEALEY ACT.' SUCH A CONTENTION NECESSARILY IMPLIES THAT THE ACTION OF SAID SECRETARY, UNDER THE ABOVE ACT, IS SUBJECT TO REVIEW BY THIS OFFICE. HOWEVER, THE STATUTE PLACES NO SUCH RESPONSIBILITY OR AUTHORITY IN THIS OFFICE. THE RESPONSIBILITY OF ADMINISTERING THE WALSH-HEALEY ACT, AND THE AUTHORITY TO PRESCRIBE RULES AND REGULATIONS, TO CONDUCT HEARINGS, TO MAKE FINDINGS OF FACT AND DECISIONS THEREON, ALL AS ARE DEEMED TO BE NECESSARY TO ENFORCE THE PROVISIONS OF THE ACT, IS SPECIFICALLY PLACED IN THE SECRETARY OF LABOR. UNDER THE STATUTE IT WAS NOT FOR THIS OFFICE TO QUESTION THE DETERMINATION OF THE SECRETARY OF LABOR THAT YOU WERE LIABLE TO THE UNITED STATES IN THE AMOUNT OF $1,235.12 AS DAMAGES FOR BREACHES OR VIOLATIONS OF THE REPRESENTATIONS AND STIPULATIONS INCLUDED IN CONTRACT NO. ER-TPS-21-43141, PURSUANT TO THE WALSH-HEALEY ACT.

ACCORDINGLY, THE SETTLEMENT OF FEBRUARY 21, 1940, IN WHICH THE SET OFF WAS MADE, APPEARS TO HAVE BEEN CORRECT AND IS SUSTAINED.