Remember, I cut and paste excertps, sometimes rearrange or paraphrase, citations are generally left out, etc. This is not a legal citation but only an educational general procurement blog post. Read the original authority if you need to be precise in your understanding.
Ogundare v. Dep't of Indus. Relations, 214 Cal.App.4th 822, 154 Cal.Rptr.3d 369 (Cal. App., 2013)
Pacific was a general engineering construction company based in Bakersfield, California, that performed concrete (flat) and underground (water, soil and sewer) construction work. Ninety-nine percent of the projects undertaken by Pacific were public works projects. Pacific was owned and managed by Ayodeji A. Ogundare (Ogundare), who was a licensed contractor.This case is interesting from a Guamanian's perspective because it clearly shows that debarment authority arising from a labor law requirement is vested in the department of labor, which is also alone vested with power to enforce labor laws. California's labor laws therefore do not muddy it procurement laws. On Guam, the law has confusingly split the authority, with the result that a matter such as this could easily, and does continually, fall through the cracks in the system.
In 2007 and 2008, DLSE [the State of California, Department of Industrial Relations, Division of Labor Standards Enforcement] conducted investigations regarding public works projects on which Pacific was a subcontractor, including a project in Delano for sewer and sidewalk construction (the Delano project), a project in Madera to build a youth center (the Madera project), and a project in Exeter to construct a school building (the Exeter project). As a result of these investigations, DLSE notified Pacific of apparent violations of laws relating to public contracts and issued civil wage and penalty assessments against Pacific. Additionally, DLSE initiated the instant debarment proceedings against Pacific based on particular allegations that Pacific violated prevailing wage laws in a manner that was allegedly willful and with intent to defraud.
[After hearing} the DLSE statement of decision stated that Pacific committed willful violations with intent to defraud, and a one-year debarment of Pacific was ordered by DLSE therein. The statement of decision stated the following principal conclusions: ―[Pacific] willfully‘ and with intent to defraud‘ violated the public works laws in not paying prevailing wages to one worker, Laborer Miguel Ibarra and [in not paying] prevailing overtime to two workers, Laborers Javier Perez (on the Madera project) and Juan Ramirez (on the Exeter project). Although the DLSE argued that [Pacific] had a pattern and practice of failing to pay prevailing wages and prevailing overtime on the three projects at issue as well as on previous projects ... the evidence simply was not presented at this hearing to establish this was the case.
Further, as to the alleged inadequacy of Pacific's payroll records, the statement of decision stated that Pacific willfully violated provisions of section 1776 by submitting certified payroll records to DLSE, prime contractors, awarding bodies and others, that were ―not accurate. However, Pacific's failures to provide adequate payroll records, although willful, were not sufficient in themselves to show intent to defraud.
On the specific issue of intent to defraud, the statement of decision elaborated: ―[Miguel] Ibarra's testimony that he was always paid $15.00 per hour on the Delano project and worked 61 hours during the week ending August 4, 2007 is credible especially since he provided a copy of a paycheck corroborating his testimony. [Pacific] knew that payment to this individual was not in compliance with the public works laws as evidenced by the fact that the check shows payment at $15.00 per hour for 61 hours worked yet [Pacific] submitted to the DLSE certified payroll records listing the correct prevailing wage rate that should have been paid and listing only 25 hours worked for the week ending August 4, 2007. In this regard, [Pacific] willfully‘ violated the public works laws. [Pacific] also violated the public works laws with intent to defraud‘ evidenced by the fact that he put the required amount of payment on the certified payroll records he signed under penalty of perjury knowing that he paid a much lower rate. Additionally, the statement of decision indicated that Pacific's intent to defraud was further corroborated by the failure to pay overtime prevailing wages to Javier Perez and Juan Ramirez, since it appeared that Pacific ―was attempting to split the total hours worked by Perez and Ramirez, so as not to have to pay or report prevailing overtime that was in fact worked by both workers. As a consequence of the violations and of the finding of intent to defraud, the statement of decision ordered that Pacific ―shall be ineligible to, and shall not, bid on or be awarded a contract for a public works project, and shall not perform work as a subcontractor on a public work ... for a period of one (1) year....
[Pacific appealed to court, and the trial court ruled in its favor, overturning the DLSE decision. DLSE then appealed to the Appellate Court, which issued this decision. The case turned on technical legal issues concerning the standard of review of an appellate court and the requirements of the form in which the matter was appealed, here a writ of mandate. This may differ in other jurisdictions.]
Section 1094.5 of the Code of Civil Procedure governs judicial review by administrative mandate of any final decision or order rendered by an administrative agency. A trial court's review of an adjudicatory administrative decision is subject to two possible standards of review depending upon the nature of the right involved. If the administrative decision substantially affects a fundamental vested right, the trial court must exercise its independent judgment on the evidence. The trial court must not only examine the administrative record for errors of law, but must also conduct an independent review of the entire record to determine whether the weight of the evidence supports the administrative findings. If, on the other hand, the administrative decision neither involves nor substantially affects a fundamental vested right, the trial court's review is limited to determining whether the administrative findings are supported by substantial evidence.
Looking to the character and quality of the right involved, we conclude that Pacific's one-year debarment from being able to bid or work on public projects did not implicate a fundamental vested right. Pacific was not prevented from bidding or working on all construction projects, but only from certain kinds of work (i.e., public projects). Hence, it appears that the interest affected was purely economic in this case. It follows that the trial court applied the wrong standard. It should have reviewed DLSE's administrative decision under the substantial evidence test rather than under the independent judgment standard of review.
In order to impose debarment in the present case, it was necessary for DLSE to establish intent to defraud under section 1777.1. That statute provides, in relevant part, as follows: ―Whenever a contractor or subcontractor performing a public works project pursuant to this chapter is found by the Labor Commissioner to be in violation of this chapter with intent to defraud, ... the contractor or subcontractor ... is ineligible for a period of not less than one year or more than three years. "'Intent to defraud‘ means the intent to deceive another person or entity, as defined in this article, and to induce such other person or entity, in reliance upon such deception, to assume, create, transfer, alter or terminate a right, obligation or power with reference to property of any kind."
DLSE's position is that intent to defraud was established by the evidence, in particular Ibarra's testimony that he was paid $15 per hour as confirmed by the paycheck for the week of August 4, 2007, and the certified payroll records for that same week showing that Ibarra was paid prevailing wages of $36.10 per hour and only worked 25 hours that week. No satisfactory explanation was ever provided by Pacific for this glaring discrepancy between Ibarra's actual paycheck reflecting $15 per hour and the contrary representations by Pacific to DSLE. A reasonable conclusion from this evidence is that Pacific violated the prevailing wage law with intent to defraud. We agree with DLSE.
Although the Guam Department of Labor has authority to enforce prevailing wage laws, it does not have the independent authority to debar or suspend a government contractor for violation of the law. The "government of Guam may" terminate the contractor's right to proceed with the part of the work to which the violation is concerned (5 GCA § 55102), but there being no obligation to do so, and often no means by which a contracting officer would discover the violation, there is no effective enforcement of this provision.
Moreover, "the Treasurer is further authorized and is directed to distribute a list to all departments of the government of Guam giving the names of persons or firms whom he has found to have disregarded their obligations to employees" and "No contract shall be awarded to the persons or firms appearing on this list, or to any firm, corporation, partnership, or association in which such persons or firms have an interest, until three years have elapsed...." (5 GCA § 55103(a)) But the Treasurer is not likely to ever make such a finding; that is a Department of Labor obligation. No such list is likely to ever be produced because it requires too much coordination between agencies to enforce.
Guam Procurement Law contemplates that action may be taken by an agency to suspend or debar a contractor, and gives the Public Auditor administrative review of such an action. (5 GCA § 5426.) Thus, this power does not directly reside within the authority of the Department of Labor. The procurement law power to suspend and debar lists a few justifiable reasons to suspend or debar, but none specifically based on a violation of the prevailing wage law. The closest enumerated cause is "any other cause [an agency] determines to be so serious and compelling as to affect responsibility as a territorial contractor" (§ 5426(b)(5)).
Bill 224-32 is currently pending in the Guam Legislature, and includes an amendment to the causes for suspension or debarment based on prevailing wage law violations; one based "upon a petition of the Department of Labor, failure [of a contractor] to pay employees engaged on the contract in violation of Wage Determination law or contract conditions". There is no requirement that such failure be based on "intent to defraud" as found in the California statute and case reported above.
Time will tell, if this provision is enacted, whether the Department of Labor will seek to enforce this requirement through the available auspices of the procurement law.
US SENATE REPORT
In the federal arena, a United States Senate Health, Education, Labor, and Pensions Committee recently issued a Majority Staff Report, "Acting Responsibly? Federal Contractors Frequently Put Workers' Lives and Livelihoods At Risk".
It declares the mandate of government contract law in summary form:
Federal law is intended to prevent taxpayer dollars from increasing the profits of companies with a record of violating federal law in two ways: by requiring contracting officers to assess a prospective contractor’s responsible compliance with federal law prior to awarding a contract, and by allowing agencies to suspend or debar contractors for certain behavior, including violations of federal law, in order to protect the integrity of taxpayer dollars.
It frames the issue this way
The Federal Government Frequently Contracts with Companies that Violate Federal Labor LawsThe report responds that contractor responsibility is in part an issue of integrity, but labor issues do not come to the attention of contracting officers. These determinations, it says, "suffer from flaws that allow taxpayer dollars to be awarded to companies that do not abide by federal labor law." It cautions,
The fact that a company is among the recipients of one of the largest wage or safety penalties does not suggest that any particular company is not responsible or that a company should have limitations placed on its ability to obtain contracts. Rather, the record of non-compliance laid out below suggests that not enough is being done to ensure that compliance with multiple labor laws is being tracked, considered or evaluated as a part of the contracting practice. While the companies that appear below are those that publicly available enforcement data indicates have some of the worst records of compliance with labor laws, more needs to be done to evaluate the gravity, severity and repeated nature of violations to determine if a particular company is indeed a responsible actor.On the matter of suspension and debarment, the report states:
As previously discussed, in order to best protect the public, agency officials have discretion to debar or suspend contractors under a number of circumstances, including when a contractor is convicted of or found civilly liable for a lack of business integrity or for "any other cause of so serious or compelling a nature that it affects the present responsibility of a contractor." These provisions of the Federal Acquisition Regulation provide the Department of Labor with authority to suspend or debar a federal contractor that has a record of non-compliance with federal labor law if the Department were to find that this record of non-compliance was so severe as to demonstrate a lack of business integrity that would impact the present responsibility of the contractor. However, while the Department suspends and debars companies using the statutory authority provided by the Service Contract Act and the Davis-Bacon Act, the Department does not appear to have debarred a company as a result of OSHA or other wage-related violations, or attempted to cross reference repeat or willful violators of multiple laws.All in all, add labor law issues to the bundle of matters a contracting officer will have to consider apart from but equal to the business of acquiring the things and services the government needs to function.
Additionally, the suspension and debarment process suffers from a number of more widespread problems, including the lack of standardization across the government. Agencies structure and perform their exclusion functions in very different ways, and this affects the degree to which agencies exclude contractors. Moreover, even when a contractor is debarred or suspended, agencies are authorized to waive a contractor’s exclusion if they determine “there is a compelling reason for such an action.” Some agencies have regulations that define what constitutes a “compelling reason” while others do not. Further, these waivers are agency-specific and are not always communicated to other agencies.
Unfortunately, the existing suspension and debarment process is underutilized and inconsistent. At the same time, the debarment process tends to focus directly on conduct related to a specific contract rather than on the overall labor practices of federal contractors. If Federal agencies are given more tools and encouraged to look to solutions short of debarment or suspension, they could more effectively deter companies that fail to comply with federal labor laws from future violations.