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B-154837, AUG. 31, 1964

B-154837 Aug 31, 1964
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TO THE POSTMASTER GENERAL: REFERENCE IS MADE TO LETTER DATED JULY 29. OR ANY WORK ON HOLIDAYS OR OTHER DAYS WHEN POSTAL INSTALLATIONS ARE CLOSED. * * * THE CONTRACTOR SHALL BE COMPENSATED FOR OVERTIME WORK OF ITS TECHNICAL PERSONNEL ONLY TO THE EXTENT THAT WORK IS ACTUALLY PERFORMED BY ITS EMPLOYEES WITH THE APPROVAL OF THE CONTRACTING OFFICER. AS WELL AS HOURS WORKED ON HOLIDAYS AND OTHER DAYS WHEN POSTAL FACILITIES ARE CLOSED. SINCE ITS EMPLOYEES ENGAGED TO SERVICE THE INVOLVED CONTRACTS WERE COMPENSATED ON AN HOURLY BASIS. THEY WERE REQUIRED TO BE PAID TIME AND ONE-HALF FOR OVERTIME. 310.13 AND THE CONTRACTOR IN TURN NOTIFIED YOUR DEPARTMENT AND REQUESTED REIMBURSEMENT ON THE GROUND THAT THE INTENT OF THE CONTRACTS WAS TO REIMBURSE THE CONTRACTOR FOR ITS SALARY COSTS PLUS OVERHEAD.

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B-154837, AUG. 31, 1964

TO THE POSTMASTER GENERAL:

REFERENCE IS MADE TO LETTER DATED JULY 29, 1964, WITH ENCLOSURES, FROM THE DEPUTY POSTMASTER GENERAL REQUESTING DECISION WHETHER CONTRACTS WITH ARNOLD H. VOLLMER ASSOCIATES, NOS. NC 13-61, NC 14-62, AND RE 9-63, COVERING ENGINEERING SERVICES FOR THE PERIODS APRIL 14, 1961, TO APRIL 13, 1962; APRIL 14, 1962, TO APRIL 13, 1963; AND APRIL 14, 1963, TO APRIL 13, 1964, RESPECTIVELY, MAY BE REFORMED IN ACCORDANCE WITH ATTACHED DRAFT OF CONTRACT REFORMATION AGREEMENT.

THE INVOLVED CONTRACTS REQUIRED THE CONTRACTOR TO MAKE ENGINEERING STUDIES FOR THE PURPOSE OF DETERMINING AND RECOMMENDING OPTIMUM CONSTRUCTION, MECHANIZATION AND EQUIPMENT STANDARDS AND CRITERIA FOR POSTAL FACILITIES; PERFORM STRUCTURAL AND ARCHITECTURAL DESIGN, PREPARATION OF SCHEMATIC DRAWINGS AND DEVELOPMENT OF SPECIFICATIONS FOR CONSTRUCTION AND MODERNIZATION OF POSTAL FACILITIES; DEVELOP LAYOUTS, PREPARE SCHEMATIC DRAWINGS FOR, AND NARRATIVE DESCRIPTIONS OF, FIXED MECHANIZATION, WORK FLOW, AND EQUIPMENT ARRANGEMENTS FOR MODERNIZATION OF POSTAL FACILITIES; AND CARRY OUT SELECTED ENGINEERING STUDIES, AND PREPARE REPORTS AND RECOMMENDATIONS THEREON.

EACH OF THE INVOLVED CONTRACTS HAD A COST LIMITATION SUBJECT TO INCREASE BY THE DEPARTMENT UNDER THE CONDITIONS OF ARTICLE 2A. ARTICLE 2B PROVIDED FOR REIMBURSEMENT OF WAGES ACTUALLY PAID TO EMPLOYEES BY THE CONTRACTOR.

WITH RESPECT TO OVERTIME AND HOLIDAYS ARTICLE 3 PROVIDED:

"OVERTIME SHALL BE CONSIDERED THOSE HOURS IN EXCESS OF 40 IN ANY ONE WEEK, OR 8 IN ANY ONE DAY, OR ANY WORK ON HOLIDAYS OR OTHER DAYS WHEN POSTAL INSTALLATIONS ARE CLOSED. * * * THE CONTRACTOR SHALL BE COMPENSATED FOR OVERTIME WORK OF ITS TECHNICAL PERSONNEL ONLY TO THE EXTENT THAT WORK IS ACTUALLY PERFORMED BY ITS EMPLOYEES WITH THE APPROVAL OF THE CONTRACTING OFFICER. COMPENSATION FOR ALL HOURS WORKED BY CONTRACTOR'S TECHNICAL PERSONNEL, WHETHER WITHIN OR BEYOND NORMAL WORKING HOURS, AS WELL AS HOURS WORKED ON HOLIDAYS AND OTHER DAYS WHEN POSTAL FACILITIES ARE CLOSED, SHALL BE AT REGULAR RATES AS SET OUT IN ARTICLE 2, ABOVE, WITHOUT PREMIUM COMPENSATION. * * *

FOLLOWING COMPLETION OF THE CONTRACTS, THE CONTRACTOR NOTIFIED THE DEPARTMENT, IN EFFECT, THAT IT HAD BEEN INVESTIGATED BY THE UNITED STATES DEPARTMENT OF LABOR, WAGE AND HOUR AND PUBLIC CONTRACTS DIVISIONS; THAT IT HAD BEEN INFORMED THAT NOTWITHSTANDING THE PROVISIONS OF THE INVOLVED CONTRACTS, SINCE ITS EMPLOYEES ENGAGED TO SERVICE THE INVOLVED CONTRACTS WERE COMPENSATED ON AN HOURLY BASIS, THEY COULD NOT QUALIFY AS PROFESSIONAL EMPLOYEES EXEMPTED FROM COVERAGE OF THE FAIR LABOR STANDARDS ACT BY 29 CFR 541 (3), THAT THEREFORE, THEY WERE REQUIRED TO BE PAID TIME AND ONE-HALF FOR OVERTIME; AND THAT THE CONTRACTOR OWED $14,909.57 IN BACK WAGES FOR SUCH EMPLOYEES FOR THE PERIOD MARCH 12, 1962, TO MARCH 12, 1964. SUBSEQUENTLY, THE DEPARTMENT OF LABOR FURNISHED THE CONTRACTOR WITH A SUMMARY OF UNPAID WAGES UNDER THE INVOLVED CONTRACTS TOTALING $16,310.13 AND THE CONTRACTOR IN TURN NOTIFIED YOUR DEPARTMENT AND REQUESTED REIMBURSEMENT ON THE GROUND THAT THE INTENT OF THE CONTRACTS WAS TO REIMBURSE THE CONTRACTOR FOR ITS SALARY COSTS PLUS OVERHEAD, PLUS FEE.

IT IS STATED IN THE LETTER OF JULY 29 THAT BEFORE CONTRACT NO. NC 13-61 WAS EXECUTED, THE CONTRACTOR, THROUGH ITS MR. OSTROWER, RAISED THE QUESTION OF APPLICABILITY OF THE FAIR LABOR STANDARDS ACT, 29 U.S.C. 201, TO THE INVOLVED EMPLOYEES; THAT HE WAS ADVISED BY THE DEPARTMENT'S REPRESENTATIVE THAT OTHER CONTRACTORS WERE PERFORMING SIMILAR WORK UNDER CONTRACTS NOT CALLING FOR PREMIUM PAY FOR OVERTIME; THAT THE TECHNICAL EMPLOYEES OF THESE CONTRACTORS WERE IN FACT BEING PAID ON A SALARY BASIS AND THAT AS FAR AS KNOWN NO PROBLEM HAD ARISEN. IT IS STATED FURTHER THAT, WHILE THE CONTRACT NEGOTIATOR ADVISED MR. OSTROWER THAT PAYMENT ON A SALARY RATHER THAN ON A WAGE BASIS WAS A DETERMINING FACTOR, IT APPEARS THAT MR. OSTROWER UNDERSTOOD THE PURPORT OF THE CONTRACT NEGOTIATOR'S COMMENTS TO BE THAT THE EMPLOYEES IN QUESTION WERE EXEMPT WITHOUT REGARD TO THE METHOD OF PAYMENT.

SECTION 7 OF THE FAIR LABOR STANDARDS ACT, AS AMENDED, REQUIRES ONE AND ONE-HALF TIMES THE REGULAR RATE OF PAY FOR WORK IN EXCESS OF 40 HOURS A WEEK AND SECTION 13 (A) (1), 29 U.S.C. 213 (A) (1) STATES THAT THE WAGE AND HOUR PROVISIONS OF THE ACT SHALL NOT APPLY WITH RESPECT TO ANY EMPLOYEE EMPLOYED IN A BONA FIDE EXECUTIVE ADMINISTRATIVE PROFESSIONAL CAPACITY, ETC., AS DEFINED AND DELIMITED BY REGULATIONS OF THE ADMINISTRATOR. THE TERM "EMPLOYEE EMPLOYED IN A BONA FIDE * * * PROFESSIONAL CAPACITY" IS DEFINED IN 29 CFR 541.3 AS ONE WHO, AMONG OTHER THINGS, EXCEPT AS THEREIN PROVIDED, IS COMPENSATED ON A SALARY OR FEE BASIS OF NOT LESS THAN $150 PER WEEK, EXCLUSIVE OF BOARD, LODGING OR OTHER FACILITIES. THERE THUS APPEARS TO BE NO QUESTION AS TO THE APPLICABILITY OF THE FAIR LABOR STANDARDS ACT IN THIS CASE. SEE MITCHELL V. LUBLIN, MCGAUGHY AND ASSOCIATES, 358 U.S. 207.

THE ORIGINAL CONTRACT WHICH FURNISHED THE BASIS FOR THE SUCCEEDING CONTRACTS CONTEMPLATED THAT THE ACTUAL COST OF THE WORK AND THE RISK THEREOF WERE TO BE ASSUMED BY THE GOVERNMENT AND THE CONTRACTOR WAS TO BE REIMBURSED ALL EXPENSES ACTUALLY INCURRED INCIDENT TO THE PERFORMANCE OF THE WORK. SINCE IT APPEARS THAT THE ADDITIONAL LABOR COSTS INCURRED ARE LEGITIMATE COSTS WHICH MUST BE PAID BY THE CONTRACTOR TO ITS EMPLOYEES, WE THINK THAT THE GOVERNMENT PROPERLY SHOULD REIMBURSE THOSE COSTS, EVEN THOUGH THE CONTRACT REIMBURSEMENT PROVISIONS REGARDING LABOR COSTS DID NOT SPECIFICALLY SO PROVIDE. WE BELIEVE THIS IS PARTICULARLY TRUE WHERE AS HERE THE CONTRACTOR, IN A CONVERSATION WITH THE DEPARTMENT'S NEGOTIATOR BEFORE EXECUTING THE CONTRACT, RAISED A QUESTION AS TO THE APPLICABILITY OF THE FAIR LABOR STANDARDS ACT AND WAS LED TO BELIEVE THAT ITS TECHNICAL EMPLOYEES WERE EXEMPT FROM THE TIME AND ONE-HALF OVERTIME REQUIREMENTS OF THE ACT AND, THEREFORE, THAT PAYMENT FOR SUCH COSTS WAS NOT REQUIRED TO BE PROVIDED FOR IN THE CONTRACT.

WHILE IT IS PROPOSED TO EFFECT REIMBURSEMENT UNDER THE PROPOSED CONTRACT REFORMATION AGREEMENT, SINCE THE CONTRACTS HAVE NOW BEEN COMPLETED, THE MATTER OF REIMBURSEMENT FOR THE ADDITIONAL LABOR COSTS ACTUALLY INCURRED MUST BE REGARDED AS A CLAIM. ACCORDINGLY, THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO PAYMENT OF SUCH ADDITIONAL LABOR COSTS AS MAY BE FOUND DUE BY THE DEPARTMENT OF LABOR, IF OTHERWISE PROPER AND AS ARE ACTUALLY PAID BY THE CONTRACTOR.

REFERENCE TO THIS DECISION SHOULD BE MADE ON ANY PAYMENT VOUCHERS.

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