American Waste Removal Company, a Corporation, and Joseph B. Jarvies, Individually and as President of American Waste Removal Company v. Raymond J. Donovan, Secretary of Labor, United States Department of Labor, and Employee

Citations: 748 F.2d 1406; 32 Cont. Cas. Fed. 73,083; 26 Wage & Hour Cas. (BNA) 1591; 1984 U.S. App. LEXIS 16533Docket: 83-2555

Court: Court of Appeals for the Tenth Circuit; November 22, 1984; Federal Appellate Court

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American Waste Removal Company and its president, Joseph Jarvies, sought judicial review of a decision by the Wage and Hours Division of the U.S. Department of Labor, which upheld an administrative law judge's (ALJ) ruling that the company violated minimum wage and fringe benefit requirements under the McNamara O'Hara Service Contract Act. The Secretary of Labor counterclaimed for unpaid wages and benefits. The district court affirmed the ALJ's findings as supported by a preponderance of the evidence and granted summary judgment in favor of the Secretary.

The case arose from a contract awarded to American Waste in June 1975 for refuse removal at Kirtland Air Force Base, with a contract value of $127,575, subject to the Service Contract Act due to its amount exceeding $2,500. An investigation in December 1978 revealed American Waste's failure to pay the mandated wages and benefits and to maintain proper records. During a March 1979 hearing, testimony from ten witnesses, including Air Force personnel and former employees, established the company's noncompliance. Due to inadequate pay records, the compliance officer provided a reconstruction of employee hours worked under the contract.

Reconstruction of American Waste's employment practices was based on employee interviews, witness testimonies, and documented hours provided by the company. The Secretary submitted a summary of unpaid wages supported by wage transcriptions for individual employees. Former employees testified about the presence of undocumented workers on the Kirtland contract, unable to identify them by name but confirming two were on-site regularly. The Secretary also provided signed statements from two undocumented workers arrested in a truck, detailing their hours and pay, which were corroborated by former employee testimony. These undocumented workers were deported after their statements.

American Waste challenged the government's evidence by presenting payroll records and testimony from its chief of Contract Construction Management, but did not contest the employment of two undocumented workers. The Administrative Law Judge (ALJ) evaluated the evidence and upheld back wage claims for six testifying employees, with modifications, while dismissing claims for three non-testifying employees due to insufficient evidence. The ALJ affirmed a back wage award for the unnamed undocumented workers, concluding that American Waste violated the Service Contract Act, resulting in a liability for underpayments totaling $33,601.85, plus interest. The ALJ mandated that unpaid wages to former employees within three years be paid into the U.S. Treasury.

On appeal, American Waste argued that the ALJ's findings were not supported by a preponderance of the evidence and contested the legality of awarding wages to undocumented employees. The company claimed the district court erred in granting summary judgment, asserting a genuine factual dispute existed regarding the ALJ's findings. However, the court clarified that judicial review does not allow for a trial de novo on factual issues, limiting its scope to whether the ALJ met the required standard of proof. The findings of fact by the ALJ are conclusive if supported by a preponderance of evidence, as established in relevant case law.

The ALJ conducted a detailed review of evidence to determine back wages and benefits based on the Anderson v. Mt. Clemens Pottery Co. standard, which establishes that employees must prove they performed work without proper compensation, while employers are required to maintain accurate records. If employers fail to keep accurate records, employees can demonstrate their claims through reasonable evidence, shifting the burden to employers to disprove or clarify the evidence. If employers do not contest the employee's evidence, damages, even if approximate, can be awarded without the employer contesting the lack of precision due to their record-keeping failures.

In this case, the Secretary presented testimony from six former employees regarding their work conditions, hours, and pay, corroborated by a compliance officer and documentary evidence. Testimony indicated two undocumented workers were regularly employed, revealing a pattern of violations under the Service Contract Act, which shifted the burden to American Waste. The ALJ and district court found that American Waste did not sufficiently rebut the Secretary's case. The ALJ’s calculations for wages and benefits were supported by a preponderance of evidence, and the approximations for damages were deemed reasonable.

American Waste contended that awarding back wages and benefits for unnamed employees constituted an unauthorized penalty under the Service Contract Act. The ruling clarified that the Act's primary aim is to protect all employees of contractors and subcontractors providing services to federal agencies, thus supporting the back wage award.

The Act aims to safeguard service contract competitors from unfair competition arising from employers paying subminimum wages. Its provisions are interpreted liberally to advance remedial goals. Section 354(b) empowers the Secretary to initiate legal actions for recovering back wages for all service employees under the Service Contract Act, with unclaimed funds within three years directed to the U.S. Treasury as miscellaneous receipts. The section does not differentiate between named and unnamed employees, and this interpretation aligns with other federal wage laws, particularly the Fair Labor Standards Act (FLSA). Damage awards for unidentified employees are permissible if evidence supports their existence, work hours, and wages. Similar to the FLSA, unclaimed wages under the Service Contract Act are not returned to violating employers but are instead deposited into the Treasury. This approach serves to protect workers and deter employer noncompliance, particularly when difficulties in locating employees stem from the employer's inadequate record-keeping. The awarding of back wages for unnamed and unlocated employees was deemed appropriate, affirming the judgment. The principles of the FLSA are applied within the Service Contract Act regulations, influencing determinations of hours worked, overtime pay, and applicable minimum wage standards.