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B-123227, DECEMBER 9, 1968, 48 COMP. GEN. 387

B-123227 Dec 09, 1968
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THE SET-OFF TO COLLECT THE LIQUIDATED DAMAGES WAS PROPER. AS THERE IS MUTUALITY OF OBLIGATION BETWEEN THE AMOUNT DUE FOR WORK PERFORMED UNDER THE LATEST CONTRACT AND THE LIQUIDATED DAMAGES DUE ON ACCOUNT OF THE WAGE UNDERPAYMENTS UNDER THE EARLIER CONTRACTS. 1968: REFERENCE IS MADE TO THE LETTER DATED JULY 29. THESE CONTRACTS WERE FOR THE BILLETING OF ACTIVE DUTY ENLISTED MEN STATIONED AT MACDILL AIR FORCE BASE AND THEY ALL CONTAINED A CLAUSE REQUIRING THE CONTRACTOR TO COMPLY WITH THE CONTRACT WORK HOURS STANDARDS ACT. THAT BACK WAGES DUE WERE CALCULATED AT $642.80 FOR THE PERIOD OF CONTRACT NO. THAT LIQUIDATED DAMAGES DUE THE GOVERNMENT FOR THESE PERIODS WERE CALCULATED TO BE $1. WHICH IS NO.

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B-123227, DECEMBER 9, 1968, 48 COMP. GEN. 387

CONTRACTS - LABOR STIPULATIONS - WITHHOLDING UNPAID WAGES, OVERTIME, ETC. - MUTUALITY OF OBLIGATION REQUIREMENT THE WITHHOLDING FROM A CURRENT CONTRACT OF THE WAGE UNDERPAYMENTS DUE UNDER TWO CONTRACTS FOR PRIOR YEARS, TOGETHER WITH LIQUIDATED DAMAGES ASSESSED ON ACCOUNT OF THE VIOLATIONS--- ALL CONTRACTS CONTAINING A CONTRACT WORK HOURS STANDARDS ACT PROVISION AUTHORIZING SET-OFF FROM "MONEY" PAYABLE ON ACCOUNT OF WORK PERFORMED"--- MAY NOT BE RETAINED AS TO WAGE UNDERPAYMENTS, NO MUTUALITY OF OBLIGATION EXISTING BETWEEN THE COLLECTION OF THE UNDERPAYMENTS BY THE GOVERNMENT AS TRUSTEE AND ITS DIRECT DEBT LIABILITY UNDER THE CURRENT CONTRACT, BUT THE SET-OFF TO COLLECT THE LIQUIDATED DAMAGES WAS PROPER, AS THERE IS MUTUALITY OF OBLIGATION BETWEEN THE AMOUNT DUE FOR WORK PERFORMED UNDER THE LATEST CONTRACT AND THE LIQUIDATED DAMAGES DUE ON ACCOUNT OF THE WAGE UNDERPAYMENTS UNDER THE EARLIER CONTRACTS.

TO THE SECRETARY OF THE AIR FORCE, DECEMBER 9, 1968:

REFERENCE IS MADE TO THE LETTER DATED JULY 29, 1968, FROM YOUR DEPUTY GENERAL COUNSEL TRANSMITTING A REQUEST FOR OUR DECISION ON A MATTER INVOLVING THE CONTRACT WORK HOURS STANDARDS ACT, PUBLIC LAW 87 581, 40 U.S.C. 327, ET SEQ.

IT APPEARS THAT ON AUGUST 19, 1964, THE AIR FORCE ENTERED INTO CONTRACT NO. AF08/602/3243 WITH THE BAYSHORE ROYAL HOTEL IN TAMPA, FLORIDA, FOR THE PERIOD SEPTEMBER 1, 1964, THROUGH AUGUST 31, 1965; THAT ON AUGUST 5, 1965, THE AIR FORCE ENTERED INTO CONTRACT NO. AF08 /602/3537 WITH THE SAME HOTEL FOR THE PERIOD SEPTEMBER 1, 1965, THROUGH AUGUST 31, 1966; AND THAT ON AUGUST 9, 1966, THE AIR FORCE ENTERED INTO CONTRACT NO. AF08/602/0144 WITH THE SAME HOTEL FOR THE PERIOD SEPTEMBER 1, 1966, THROUGH AUGUST 31, 1967. THESE CONTRACTS WERE FOR THE BILLETING OF ACTIVE DUTY ENLISTED MEN STATIONED AT MACDILL AIR FORCE BASE AND THEY ALL CONTAINED A CLAUSE REQUIRING THE CONTRACTOR TO COMPLY WITH THE CONTRACT WORK HOURS STANDARDS ACT.

THE DEPUTY GENERAL COUNSEL SAYS THAT AN AIR FORCE INVESTIGATION OF THIS CONTRACTOR IN 1967 REVEALED THAT HE HAD FAILED TO COMPLY WITH THE CONTRACT WORK HOURS STANDARDS ACT DURING THE PERFORMANCE OF THE PRIOR TWO CONTRACTS; THAT BACK WAGES DUE WERE CALCULATED AT $642.80 FOR THE PERIOD OF CONTRACT NO. AF08/602/3243 AND $1,345.56 FOR THE PERIOD OF CONTRACT NO. AF08/602/3537; AND THAT LIQUIDATED DAMAGES DUE THE GOVERNMENT FOR THESE PERIODS WERE CALCULATED TO BE $1,930 AND $4,600, RESPECTIVELY. ON THE BASIS OF THESE FINDINGS, THE CONTRACTING OFFICER WITHHELD THE SUM OF $8,518.36 ON THE THIRD CONTRACT, WHICH IS NO. AF08/602/0144. THE CONTRACTOR QUESTIONS THE AUTHORITY OF THE CONTRACTING OFFICER TO WITHHOLD ON A CURRENT CONTRACT TO COLLECT SUMS DUE FOR CONTRACT WORK HOURS STANDARDS ACT VIOLATIONS UNDER CONTRACTS FOR PRIOR YEARS.

THE DEPUTY GENERAL COUNSEL SEEKS OUR GUIDANCE AS TO THE LEGALITY OF THIS WITHHOLDING.

SECTION 102 OF THE CONTRACT WORK HOURS STANDARDS ACT, 40 U.S.C. 328, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

(B) THE FOLLOWING PROVISIONS SHALL BE A CONDITION OF EVERY CONTRACT OF THE CHARACTER SPECIFIED IN SECTION 103 AND OF ANY OBLIGATION OF THE UNITED STATES, ANY TERRITORY, OR THE DISTRICT OF COLUMBIA IN CONNECTION THEREWITH:

(1) NO CONTRACTOR OR SUBCONTRACTOR CONTRACTING FOR ANY PART OF THE CONTRACT WORK WHICH MAY REQUIRE OR INVOLVE THE EMPLOYMENT OF LABORERS OR MECHANICS SHALL REQUIRE OR PERMIT ANY LABORER OR MECHANIC, IN ANY WORKWEEK IN WHICH HE IS EMPLOYED ON SUCH WORK, TO WORK IN EXCESS OF EIGHT HOURS IN ANY CALENDAR DAY OR IN EXCESS OF FORTY HOURS IN SUCH WORKWEEK EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT; AND

(2) IN THE EVENT OF VIOLATION OF THE PROVISIONS OF PARAGRAPH (1), THE CONTRACTOR AND ANY SUBCONTRACTOR RESPONSIBLE THEREFOR SHALL BE LIABLE TO SUCH AFFECTED EMPLOYEE FOR HIS UNPAID WAGES AND SHALL, IN ADDITION, BE LIABLE TO THE UNITED STATES (OR, IN THE CASE OF WORK DONE UNDER CONTRACT FOR THE DISTRICT OF COLUMBIA OR A TERRITORY, TO SUCH DISTRICT OR TO SUCH TERRITORY) FOR LIQUIDATED DAMAGES AS PROVIDED THEREIN. SUCH LIQUIDATED DAMAGES SHALL BE COMPUTED, WITH RESPECT TO EACH INDIVIDUAL EMPLOYED AS A LABORER OR MECHANIC IN VIOLATION OF ANY PROVISION OF THIS ACT, IN THE SUM OF $10 FOR EACH CALENDAR DAY ON WHICH SUCH INDIVIDUAL WAS REQUIRED OR PERMITTED TO WORK IN EXCESS OF EIGHT HOURS OR IN EXCESS OF THE STANDARD WORKWEEK OF FORTY HOURS WITHOUT PAYMENT OF THE OVERTIME WAGES REQUIRED BY THIS ACT. THE GOVERNMENTAL AGENCY FOR WHICH THE CONTRACT WORK IS DONE OR BY WHICH FINANCIAL ASSISTANCE FOR THE WORK IS PROVIDED MAY WITHHOLD, OR CAUSE TO BE WITHHELD, SUBJECT TO THE PROVISIONS OF SECTION 104, FROM ANY MONEYS PAYABLE ON ACCOUNT OF WORK PERFORMED BY A CONTRACTOR OR SUBCONTRACTOR, SUCH SUMS AS MAY ADMINISTRATIVELY BE DETERMINED TO BE NECESSARY TO SATISFY ANY LIABILITIES OF SUCH CONTRACTOR OR SUBCONTRACTOR FOR UNPAID WAGES AND LIQUIDATED DAMAGES AS HEREIN PROVIDED.

ALSO, SECTION 104 OF THE ACT, 40 U.S.C. 330, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

SEC. 104. (A) ANY OFFICER OR PERSON DESIGNATED AS INSPECTOR OF THE WORK TO BE PERFORMED UNDER ANY CONTRACT OF THE CHARACTER SPECIFIED IN SECTION 103, OR TO AID IN THE ENFORCEMENT OR FULFILLMENT THEREOF SHALL, UPON OBSERVATION OR INVESTIGATION, FORTHWITH REPORT TO THE PROPER OFFICER OF THE UNITED STATES, OF ANY TERRITORY OR POSSESSION, OR OF THE DISTRICT OF COLUMBIA, ALL VIOLATIONS OF THE PROVISIONS OF THIS ACT OCCURRING IN THE PERFORMANCE OF SUCH WORK, TOGETHER WITH THE NAME OF EACH LABORER OR MECHANIC WHO WAS REQUIRED OR PERMITTED TO WORK IN VIOLATION OF SUCH PROVISIONS AND THE DAY OR DAYS OF SUCH VIOLATION. THE AMOUNT OF UNPAID WAGES AND LIQUIDATED DAMAGES OWING UNDER THE PROVISIONS OF THIS ACT SHALL BE ADMINISTRATIVELY DETERMINED AND THE OFFICER OR PERSON WHOSE DUTY IT IS TO APPROVE THE PAYMENT OF MONEYS BY THE UNITED STATES, THE TERRITORY, OR THE DISTRICT OF COLUMBIA IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT WORK SHALL DIRECT THE AMOUNT OF SUCH LIQUIDATED DAMAGES TO BE WITHHELD FOR THE USE AND BENEFIT OF THE UNITED STATES, SAID TERRITORY, OR SAID DISTRICT, AND SHALL DIRECT THE AMOUNT OF SUCH UNPAID WAGES TO BE WITHHELD FOR THE USE AND BENEFIT OF THE LABORERS AND MECHANICS WHO WERE NOT COMPENSATED AS REQUIRED UNDER THE PROVISIONS OF THIS ACT. THE COMPTROLLER GENERAL OF THE UNITED STATES IS HEREBY AUTHORIZED AND DIRECTED TO PAY DIRECTLY TO SUCH LABORERS AND MECHANICS, FROM THE SUMS WITHHELD ON ACCOUNT OF UNDERPAYMENTS OF WAGES, THE RESPECTIVE AMOUNTS ADMINISTRATIVELY DETERMINED TO BE DUE, IF THE FUNDS WITHHELD ARE ADEQUATE, AND, IF NOT, AN EQUITABLE PROPORTION OF SUCH AMOUNTS.

(B) IF THE ACCRUED PAYMENTS WITHHELD UNDER THE TERMS OF THE CONTRACTS, AS AFORESAID, ARE INSUFFICIENT TO REIMBURSE ALL THE LABORERS AND MECHANICS WITH RESPECT TO WHOM THERE HAS BEEN A FAILURE TO PAY THE WAGES REQUIRED PURSUANT TO THIS ACT, SUCH LABORERS AND MECHANICS SHALL, IN THE CASE OF A DEPARTMENT OR AGENCY OF THE FEDERAL GOVERNMENT, HAVE THE RIGHTS OF ACTION AND/OR OF INTERVENTION AGAINST THE CONTRACTOR AND HIS SURETIES CONFERRED BY LAW UPON PERSONS FURNISHING LABOR OR MATERIALS, AND IN SUCH PROCEEDINGS IT SHALL BE NO DEFENSE THAT SUCH LABORERS AND MECHANICS ACCEPTED OR AGREED TO ACCEPT LESS THAN THE REQUIRED RATE OF WAGES OR VOLUNTARILY MADE REFUNDS.

UNDER THE FOREGOING STATUTORY PROVISIONS, THE CONTRACTOR RESPONSIBLE FOR VIOLATIONS IS LIABLE TO THE EMPLOYEES FOR UNDERPAYMENTS OF WAGES AND TO THE GOVERNMENT FOR THE LIQUIDATED DAMAGES, WITH AUTHORITY IN THE PERSON "WHOSE DUTY IT IS TO APPROVE THE PAYMENT OF MONEYS * * * IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT WORK" TO DIRECT THE WITHHOLDING OF SUCH AMOUNTS AS ARE DETERMINED TO BE NECESSARY TO SATISFY THE DEBTS TO THE AGGRIEVED EMPLOYEES AND TO THE GOVERNMENT.

SINCE THE AMOUNT DUE FOR UNDERPAYMENT OF WAGES UNDER THE PRIOR CONTRACTS IS COLLECTIBLE BY THE GOVERNMENT IN THE CAPACITY OF TRUSTEE FOR THE AGGRIEVED EMPLOYEES, AND THE AMOUNTS DUE THE CONTRACTOR UNDER CONTRACT NO. AF08/602/0144 REPRESENT A DIRECT DEBT OF THE GOVERNMENT ITSELF, THE MONEYS ARE OWED IN DIFFERENT CAPACITIES. THEREFORE, THERE IS NO SUCH MUTUALITY OF OBLIGATIONS AS IS NECESSARY TO AUTHORIZE SETOFF. FURTHERMORE, IN OUR VIEW THE LANGUAGE "PAYABLE ON ACCOUNT OF WORK PERFORMED" HAS REFERENCE TO PAYMENTS EARNED BUT NOT YET PAID AND WE BELIEVE THAT THE STATUTORY LANGUAGE CONFERRING THE WITHHOLDING AUTHORITY UPON THE PERSON AUTHORIZED TO APPROVE PAYMENTS IN CONNECTION WITH THE CONTRACT WORK IS INDICATIVE THAT SUCH WITHHOLDING WAS INTENDED TO BE MADE ONLY FROM SUCH PAYMENTS. THE OTHER HAND, SINCE THERE IS MUTUALITY OF THE OBLIGATIONS DUE THE CONTRACTOR FOR WORK PERFORMED UNDER THE LATEST CONTRACT AND SUMS DUE THE UNITED STATES FOR LIQUIDATED DAMAGES FOR VIOLATIONS INCURRED UNDER THE EARLIER CONTRACTS, SUCH DEBTS PROPERLY MAY BE SET OFF AGAINST EACH OTHER. SEE WHITNEY BROTHERS PLUMBING AND HEATING, INC. V UNITED STATES, 224 F.SUPP. 860.

ACCORDINGLY, THE AMOUNT REPRESENTING UNDERPAYMENTS TO EMPLOYEES WERE IMPROPERLY WITHHELD FROM THE CURRENT CONTRACT AND SHOULD BE RETURNED TO THE CONTRACTOR. THE ACTION TAKEN WITH RESPECT TO WITHHOLDING THE SUM REPRESENTING LIQUIDATED DAMAGES APPEARS TO HAVE BEEN PROPER.

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