B-123227, SEPTEMBER 14, 1955, 35 COMP. GEN. 144

B-123227, SEPTEMBER 14, 1955, 35 COMP. GEN. 144

CONSTRUCTION CONTRACTS - VIOLATION OF STANDARD LABOR PROVISIONS - RECOVERY OF PENALTIES AND WAGES PENALTIES ASSESSED AGAINST A CONTRACTOR FOR VIOLATION OF THE EIGHT HOUR LAW OF 1912 GIVE RISE TO INDEBTEDNESS TO THE GOVERNMENT IN ITS OWN RIGHT AND, THEREFORE SUMS REPRESENTING SUCH PENALTIES MAY BE WITHHELD FROM AMOUNTS DUE THE CONTRACTOR UNDER AN UNRELATED CONTRACT AND APPLIED TO THE INDEBTEDNESS. PAYMENTS WHICH WERE MADE TO A CONSTRUCTION CONTRACTOR WITHOUT DEDUCTION OF AMOUNTS SUFFICIENT TO COMPENSATE LABORERS AND MECHANICS FOR UNDERPAYMENTS OF WAGES AS REQUIRED BY THE DAVIS-BACON ACT MAY, TO THAT EXTENT, BE REGARDED AS OVERPAYMENTS AND MAY BE SET OFF FROM PAYMENTS DUE THE CONTRACTOR UNDER ANOTHER CONTRACT. TIME-AND-ONE-HALF PREMIUM WAGES DUE EMPLOYEES OF CONTRACTORS FOR WORK OVER EIGHT HOURS MAY NOT BE WITHHELD FROM PAYMENTS DUE THE CONTRACTOR, UNDER THE AUTHORITY OF THE DAVIS-BACON ACT, IN THE ABSENCE OF A SPECIFIC PROVISION IN THE CONTRACT PROVIDING FOR SUCH WITHHOLDING. AN AMOUNT REPRESENTING THE WAGES DUE BUT NOT PAID TO A CONTRACTOR'S EMPLOYEE FOR AN EIGHT-HOUR DAY WHICH HE WORKED MAY BE WITHHELD BY THE GOVERNMENT FROM PAYMENTS DUE THE CONTRACTOR AND SHOULD BE HANDLED IN THE SAME MANNER AS TRUST FUNDS. 21 COMP. GEN. 197, MODIFIED.

TO THE SECRETARY OF THE NAVY, SEPTEMBER 14, 1955:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 10, 1955, RELATIVE TO THE PROPOSED WITHHOLDING AND DISPOSITION OF FUNDS BY REASON OF VIOLATIONS OF THE LABOR STANDARDS PROVISIONS CONTAINED IN CONTRACT NO. NOY-26072, DATED JUNE 5, 1951, WITH THE M. A. GAMMINO CONSTRUCTION COMPANY. THE PROVISIONS IN QUESTION ARE ATTACHED TO YOUR LETTER AS APPENDIX "A," AND CONSIST OF THE CLAUSES EMBODYING THE REQUIREMENTS OF THE EIGHT-HOUR LAW AND THE DAVIS -BACON ACT.

YOU STATE THAT THE BUREAU OF YARDS AND DOCKS HAS FOUND THAT THE CONTRACTOR AND ITS SUBCONTRACTORS VIOLATED THE LABOR REQUIREMENTS OF THE CONTRACT, AS A RESULT OF WHICH CERTAIN SUMS OF MONEY ARE DUE EMPLOYEES AND THE GOVERNMENT, APPROXIMATELY AS FOLLOWS:

TABLE RESTITUTION DUE TO EMPLOYEES TO BRING WAGES TO SPECIFIED RATES

$6,284.98 TIME AND HALF PREMIUM FOR OVERTIME ON CORRECTED WAGE RATES

228.20 TIME AND A HALF PREMIUM FOR OVERTIME WHERE NO OVERTIME PREMIUM WAS PAID

32.12 EIGHT-HOUR LAW PENALTIES

460.00

SINCE IT APPEARS THAT YOUR DEPARTMENT HAS AVAILABLE ONLY $5,000 UNDER CONTRACT NO. NOY-26072, YOUR FIRST QUESTION IS WHETHER THE ADDITIONAL AMOUNT DUE AS PENALTIES AND RESTITUTION TO EMPLOYEES MAY BE WITHHELD FROM THE AMOUNTS DUE THE CONTRACTOR UNDER AN UNRELATED CONTRACT, NO. NOY- 85283.

ARTICLE 27 OF THE SUBJECT CONTRACT INCORPORATES APPLICABLE PROVISIONS OF THE EIGHT-HOUR LAW OF 1912, 40 U.S.C. 324, AS AMENDED, AND PROVIDES IN PERTINENT PART THAT FOR EACH VIOLATION OF ITS REQUIREMENTS "A PENALTY OF FIVE DOLLARS SHALL BE IMPOSED UPON THE CONTRACTOR * * * AND ALL PENALTIES THUS IMPOSED SHALL BE WITHHELD FOR THE USE AND BENEFIT OF THE GOVERNMENT.' SINCE SUCH PENALTIES CLEARLY GIVE RISE TO AN INDEBTEDNESS TO THE GOVERNMENT IN ITS OWN RIGHT, THE COMMON LAW RIGHT TO SET-OFF EXISTS AND IN THE CIRCUMSTANCES IT IS BELIEVED THAT THE SUM REPRESENTING PENALTIES FOR WHICH THE CONTRACTOR IS LIABLE SHOULD BE DEDUCTED FROM AMOUNTS DUE THE CONTRACTOR UNDER CONTRACT NO. NOY-85283. SEE 19 COMP. GEN. 785.

REGARDING THE QUESTION WHETHER ANY OF THE BALANCE REMAINING DUE UNDER CONTRACT NO. NOY-85283 MAY BE WITHHELD AND APPLIED AGAINST THE CLAIMS FOR WAGE UNDERPAYMENTS ARISING UNDER CONTRACT NO. NOY-26072, THERE IS FOR CONSIDERATION THE CLEAR LEGISLATIVE INTENT OF THE DAVIS BACON ACT, 40 U.S.C. 276A, THAT LABORERS AND MECHANICS EMPLOYED ON GOVERNMENT CONSTRUCTION CONTRACTS SHALL RECEIVE MINIMUM WAGES CONSISTENT WITH STANDARDS PREVAILING IN THE VICINITY OF THEIR EMPLOYMENT. MOREOVER, UNDER THE MANDATORY PROVISIONS OF THE CITED SECTION, INCORPORATED IN THE SPECIFIC TERMS OF CONTRACT NO. NOY-26072 ( ARTICLE 30), THERE ARE REQUIRED TO BE WITHHELD FROM PAYMENTS DUE THE CONTRACTOR AMOUNTS SUFFICIENT TO COMPENSATE LABORERS AND MECHANICS FOR UNDERPAYMENTS OF WAGES. IT WOULD APPEAR, THEREFORE, THAT PAYMENTS MADE UNDER THE CONTRACT WITHOUT SUCH WITHHOLDING MAY BE REGARDED AS OVERPAYMENTS TO THE EXTENT OF THE AMOUNTS WHICH SHOULD HAVE BEEN WITHHELD. ACCORDINGLY, IN THE ABSENCE OF JUDICIAL DECISION TO THE CONTRARY, WE ARE OF THE OPINION THAT A SUFFICIENT AMOUNT OTHERWISE DUE UNDER CONTRACT NO. NOY-85283 SHOULD BE WITHHELD TO COVER THE WAGE UNDERPAYMENTS DETERMINED UNDER CONTRACT NO. NOY-26072.

THE SECOND QUESTION RAISED IN YOUR LETTER IS WHETHER THE GOVERNMENT IS ENTITLED TO WITHHOLD AMOUNTS EQUIVALENT TO THE UNPAID BALANCE OF THE TIME- AND-ONE-HALF PREMIUM WAGES DUE EMPLOYEES FOR WORK OVER EIGHT HOURS IN A DAY. IN OUR DECISION OF APRIL 20, 1954, B-117954, 33 COMP. GEN. 496, IT WAS HELD (QUOTING FROM THE SYLLABUS):

THE WITHHOLDING PROCEDURES OF THE DAVIS-BACON ACT DO NOT GOVERN THE WITHHOLDING AND DISPOSITION OF AMOUNTS REPRESENTING OVERTIME WAGE DIFFERENCES AND, WHILE CONTRACTORS AND GOVERNMENT MAY AGREE THAT THERE MAY BE WITHHELD FROM MONEY OTHERWISE DUE A CONTRACTOR AMOUNTS REPRESENTING NON -PAYMENTS OF OVERTIME COMPENSATION, THERE IS NO AUTHORITY FOR DISTRIBUTION BY THE GOVERNMENT OF SUCH WITHHOLDINGS TO WORKERS WHO HAVE NOT BEEN PAID OVERTIME FOR WORK IN EXCESS OF 8 HOURS PER DAY. WHILE ARTICLE 30 OF THE SUBJECT CONTRACT AUTHORIZES THE CONTRACTING OFFICER TO WITHHOLD THE DIFFERENCE BETWEEN THE RATES OF WAGES REQUIRED TO BE PAID BY THE CONTRACT AND THE WAGES ACTUALLY RECEIVED, THAT ARTICLE IS REFERRED TO THE AUTHORITY OF THE DAVIS-BACON ACT AND PURPORTS TO DO NO MORE THAN TO CARRY OUT THE PROVISIONS OF THAT ACT, AND APPEARS TO BE IDENTICAL WITH THE CLAUSE UNDER CONSIDERATION IN 20 COMP. GEN. 233 ( ARTICLE 17 (A), STANDARD FORM 23, REVISED SEPTEMBER 17, 1938). THE HOLDING IN 33 COMP. GEN. 496, SUPRA, THAT OVERTIME PAY MIGHT BE WITHHELD PURSUANT TO EXPRESS AGREEMENT WAS BASED UPON THE NEW AND DIFFERENT WITHHOLDING CLAUSES PRESCRIBED BY THE ADMINISTRATOR OF GENERAL SERVICES BY GENERAL REGULATIONS NOS. 9 OF JULY 24, 1951, AND 13 OF MARCH 19, 1953, AND THEREFORE IS NOT APPLICABLE TO THE SUBJECT CONTRACT.

YOUR SECOND QUESTION IS ACCORDINGLY ANSWERED IN THE NEGATIVE, ON THE AUTHORITY OF 20 COMP. GEN. 233, WHICH IS HEREBY REAFFIRMED ON THAT POINT.

YOUR THIRD QUESTION IS WHETHER THE GOVERNMENT IS ENTITLED TO WITHHOLD AN AMOUNT EQUIVALENT TO THE DAILY WAGES OF AN EMPLOYEE WHO WAS NOT PAID AT ALL FOR AN EIGHT-HOUR DAY WHICH HE WORKED. IN 33 COMP. GEN. 496, SUPRA, IT WAS HELD THAT AMOUNTS REPRESENTING NON-PAYMENT OF ANY WAGES MAY BE WITHHELD AND ARE FOR HANDLING AS TRUST FUNDS IN ACCORDANCE WITH PROCEDURES PRESCRIBED BY CIRCULAR LETTER A-34106, DATED FEBRUARY 28, 1936, AND, TO THE EXTENT THAT THE DECISION IN 21 COMP. GEN. 197 IS INCONSISTENT THEREWITH, IT NO LONGER WILL BE FOLLOWED. ACCORDINGLY, THIS QUESTION IS ANSWERED IN THE AFFIRMATIVE.

IT IS ASSUMED THAT THE VIOLATIONS REFERRED TO WILL BE REPORTED BY YOU TO THE SECRETARY OF LABOR IN ACCORDANCE WITH SECTION 5.6 (B) OF THE REGULATIONS ISSUED PURSUANT TO REORGANIZATION PLAN NO. 14 OF 1950, 64 STAT. 1267, AND NO ACTION WILL BE TAKEN HERE PENDING RECEIPT FROM THE DEPARTMENT OF LABOR OF THE FORMAL REPORT CONTEMPLATED BY THOSE REGULATIONS.