In re J.D. Eckman, Inc., Panthera Painting, Inc., 446 Painting, and related respondents (agency decision, July 9, 2019)

Plain-English summary

The case concerned prevailing-wage violations on a federally aided highway contract involving J.D. Eckman, Panthera Painting, 446 Painting, and related individuals. The ALJ debarred Justin Hauth and 446 Painting for three years under the ordinary Davis-Bacon standard, which asks whether a contractor disregarded employee obligations. The Board held that this related-act contract instead required proof of a willful or aggravated violation, meaning voluntary, deliberate, intentional conduct rather than negligence. Evidence that Hauth signed the contract as a vice president and may have had constructive knowledge of payroll delays did not prove actual awareness of violations by a preponderance. The Board set aside the debarment and remanded for revised findings under the correct standard.

Decision snapshot

• Cited authorities: 23 U.S.C. § 113; 29 C.F.R. §§ 5.12(a) and 7.1; 5 U.S.C. § 557(b)
• Outcome: Three-year debarment of Justin Hauth and 446 Painting set aside; case remanded for revised findings.
• Key point: Debarment under a Davis-Bacon Related Act requires a willful or aggravated violation, not merely disregard of employee obligations.

Full text (DOL official public release)

U.S. Department of Labor Administrative Review Board
200 Constitution Avenue, N.W.
Washington, D.C. 20210

  IN THE MATTER OF:


  Disputes concerning the payment of                            ARB CASE NO. 2017-023
  prevailing wages and overtime pay by
                                                                ALJ CASE NO. 2015-DBA-030
  J.D. ECKMAN, INC.,
                                                                DATE: July 9, 2019
                  Prime Contractor,

  PANTHERA PAINTING, INC.,

                  1st – Tier Subcontractor

  ANDREW MANGANAS

                  President, 1st – Tier Subcontractor,

  BRUCE ROBERTS,

                  Secretary, 1st – Tier Subcontractor,

  446 PAINTING, and

  JUSTIN HAUTH,

                  President, 446 Painting
                  Former Vice President, 1st – Tier Subcontractor,

  and proposed debarment for labor standards violations by:

  PANTHERA PAINTING, INC.,

                  1st – Tier Subcontractor,

  ANDREW MANGANAS,

                  President, 1st – Tier Subcontractor,



  BRUCE ROBERTS,

         Secretary, 1st – Tier Subcontractor, and

  446 PAINTING, and

  JUSTIN HAUTH,

                  President, 446 Painting
                  Former Vice President, 1st – Tier Subcontractor,

                  RESPONDENTS.

  Appearances:

  For the Respondents:

         Christopher P. Furman, Esq.; Washington, Pennsylvania

  For the Administrator, Wage and Hour Division:

         Nicholas C. Geale, Esq.; Jennifer S. Brand, Esq.; William C. Lesser,
         Esq.; Jonathan T. Rees, Esq.; and Heather Maria Johnson, Esq.; U.S.
         Department of Labor, Office of the Solicitor; Washington, District of
         Columbia

  Before: William T. Barto, Chief Administrative Appeals Judge, James A.
  Haynes and Daniel T. Gresh, Administrative Appeals Judges


                         DECISION AND ORDER OF REMAND

        PER CURIAM. This matter is before the Administrative Review Board (the
  Board) pursuant to the Federal-Aid Highway Acts (FAHA or the Act),1 a Davis-
  Bacon Related Act (DBRA),2 and the implementing regulations at 29 C.F.R. Parts 5,
  6, and 7 (2018). 446 Painting and its President, Justin Hauth, seek review of an
  Administrative Law Judge’s (ALJ) Decision and Order (D. & O.) ordering their
  debarment for three years for violating the prevailing wage provisions at 29 C.F.R.

  1      23 U.S.C. § 101 et seq. (2015).

  2      See 23 U.S.C. § 113 (2012); 29 C.F.R. § 5.1(a)(12) (2018).



  § 5.5(a)(1) and (4). We reverse the ALJ’s decision ordering their debarment
  pursuant to 29 C.F.R. § 5.12(a)(2) and remand for the ALJ to consider whether
  Hauth or 446 Painting committed a willful or aggravated violation of the relevant
  DBRA under 29 C.F.R. § 5.12(a)(1), the proper debarment standard for DBRA cases.

                          JURISDICTION AND STANDARD OF REVIEW

         This Board has jurisdiction to hear appeals concerning questions of law or
  fact from final decisions of ALJs in DBRA cases.3 In reviewing an ALJ’s decision in
  a DBRA case, the Board acts “as the authorized representative of the Secretary of
  Labor” and “shall act as fully and finally as might the Secretary of Labor concerning
  such matters.”4 Pursuant to the Administrative Procedure Act, the Secretary or his
  designee, acting on behalf of the Department of Labor (DOL), “has all the powers
  which [the ALJ] would have in making the initial decision except as [the agency]
  may limit the issues on notice or by rule.”5 In light of this broad grant of appellate
  authority in DBRA cases,6 the Board reviews questions of law and fact de novo.7

        The scope of review on appeal is generally limited to the administrative
  record assembled by the ALJ below, and the Board will not receive new evidence




  3       See 29 C.F.R. § 7.1(b) (2018) (“The [Administrative Review] Board has jurisdiction to
  hear and decide . . . appeals concerning questions of law and fact from final decisions under
  part[] . . . 5 of this subtitle . . .”); id. § 7.1(e)(describing the Board’s function in DBRA cases
  as “an essentially appellate agency”); 29 C.F.R. Part 5 (regulations addressing Davis-Bacon
  and Davis-Bacon Related Act labor standards); id. § 5.12 (setting forth procedures for
  debarment proceedings); Secretary’s Order No. 1-2019 (Delegation of Authority and
  Assignment of Responsibility to the Administrative Review Board), 84 Fed. Reg. 13072-01
  (Apr. 3, 2019).

  4      29 C.F.R. § 7.1(d).

  5      5 U.S.C. § 557(b) (1976).

  6      29 C.F.R. § 7.1(e).

  7      See Interstate Rock Prods., Inc., ARB No. 15-024, ALJ No. 2013-DBA-010, slip op. at
  8-9 (ARB Sept. 27, 2016); Cody Zeigler Inc. v. Adm’r, Wage and Hour Div., ARB Nos. 01-014
  and 01-015, ALJ No. 1997-DBA-17, slip op. at 5-6 (ARB Dec. 19, 2003); Thomas & Sons
  Bldg. Contractors, Inc., ARB No. 00-050, ALJ No., 96-DBA-37, slip op. at 4 (ARB Aug. 27,
  2001).




  “except upon a showing of extraordinary circumstances.”8 When necessary, the
  Board also “may remand under appropriate instructions any case for the taking of
  additional evidence and the making of new or modified findings by reason of the
  additional evidence.”9

                                          DISCUSSION

         A contractor or subcontractor found to be in aggravated or willful violation of
  a DBRA is ineligible to receive any DBRA or Davis-Bacon Act (DBA) contracts or
  subcontracts for a period of up to three years.10 An “aggravated or willful” violation
  of a DBRA must be voluntary, deliberate, intentional, and not merely negligent.11
  By way of contrast, a contractor or subcontractor, or responsible officer of either,
  who is found to have merely “disregarded their obligations to employees” under the
  DBA is ineligible to receive any contract or subcontract of the United States or the
  District of Columbia for a fixed period of three years.12

         It is uncontroverted that the ALJ used the incorrect standard to determine
  whether Respondents should be barred. Notwithstanding the parties’ stipulation
  that the FAHA funded the contract and that the DBRA prevailing wage provisions
  applied,13 the ALJ initially applied the debarment standard for the DBA (requiring
  only a disregard of obligations for debarment),14 rather than the heightened


  8      29 C.F.R. § 7.1(e); cf. id. § 7.7 (allowing presentation of evidence and argument on
  appeal from “other interested persons”).

  9      29 C.F.R. § 7.1(e).

  10     29 C.F.R. § 5.12(a)(1).

  11   See Cody Zeigler Inc.., ARB Nos. 01-014 and 01-015, slip op. at 31 (quoting
  McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988)).

  12     See 29 C.F.R. § 5.12(a)(2).

  13     D. & O. at 4. As the Administrator notes in her brief, under the DBRAs, the DBA
  prevailing wage provisions apply. Response Brief of the Administrator at 3. See 29 C.F.R.
  §§5.2(h), 5.5(a)(1).

  14     29 C.F.R. § 5.12(a)(2) (“In cases arising under contracts covered by the Davis-Bacon
  Act, the Administrator shall transmit . . . the names of the contractors . . . who have been
  found to have disregarded their obligations to employees . . ..”).




  requirement for debarment for DBRA violations (requiring a willful or aggravated
  violation for debarment).15 D. & O. at 4, 26-28.

         But counsel for the Administrator essentially argues that the error was
  harmless because the ALJ ultimately found, as a matter of fact, that Respondent
  had willfully violated the Act.16 This finding may have been dispositive if supported
  by sufficient evidence; however, we conclude that it is not. The ALJ relied primarily
  upon two evidentiary factors to find willful violations on the part of Respondents:
  Respondent Hauth’s status as vice-president of Respondent Panthera and his
  inconsistent statements concerning that status. For the reasons noted below,
  neither provides sufficient support for the conclusion that she reached.

        The ALJ’s findings and some conclusions concerning Respondent Hauth’s
  status as vice-president are relatively concise and are reproduced here:

         In signing the subcontract, Hauth warranted that he and Panthera are
         familiar with the terms of the contract, including DBA requirements,
         even though he testified that he did not actually read the contract.
         (AX-4; Tr. 356). As vice-president with an essential role in the day-to-
         day management and supervision of the company, his obligations
         included awareness and compliance with DBA requirements. His
         failure to read the contract is no defense to debarment. Cody Zeigler,
         Inc., ARB Case Nos. 01-014 and 01-015. Similar to the vice-president
         in Ray Wilson who was debarred, Hauth did not read the DBA
         provisions in the contract and did not ensure compliance; therefore,
         Hauth has disregarded his obligations under the DBA. ARB Case No.
         02-086. Consequently, Hauth must also be debarred. Hauth currently
         operates his own painting company, 446 Painting. (Tr. 356). Because
         this is a company in which Hauth has an interest, 446 Painting must
         also be debarred. 29 C.F.R. § 5.12(a)(2).17

  15     29 C.F.R. §5.12(a)(1) (“Whenever any contractor or subcontractor is found by the
  Secretary of Labor to be in aggravated or willful violation of the labor standards provisions
  of any of the applicable statutes listed in §5.1 other than the Davis-Bacon Act, such
  contractor or subcontractor . . . shall be ineligible for a period not to exceed 3 years . . . to
  receive any contracts . . ..”).

  16     Response Brief at 16. The ALJ also asserted harmless error in her March 1, 2017
  post-hearing order denying as untimely the Administrator’s Motion to Amend the Decision
  and Order seeking to clarify that debarment in this case arose under the relevant DBRA
  rather than the DBA.

  17     D. & O. at 36.



         Willful or aggravated violation of the DBRA requires actual knowledge or
  awareness of the violation, and not merely one’s obligations under the DBRA or any
  applicable contracts.18 The closest the ALJ came to finding that Hauth had any
  knowledge of violations was “that he was at least on notice that there was a delay in
  Panthera’s payrolls” because of “paperwork requirements,” despite his and
  Respondent Manganas’ denials at the hearing that Hauth had anything to do with
  payroll.19 While these findings of constructive knowledge may tend to support a
  “disregard of obligations” debarment standard, they fall significantly short of
  satisfying the appropriate “aggravated or willful” standard. Indeed, the Assistant
  District Director for the district office of the Wage and Hour Division testified that
  other than the contract that originated the work in this case, he did not have any
  documentation that would support a contention that Hauth willfully violated the
  Act. Tr. at 146. He also testified that there was no evidence that Hauth knew about
  a violation other than that he represented himself as vice-president and signed the
  contract as such. Tr. at 147.20 Thus, we hold that the ALJ’s putative findingthat
  Hauth “committed willful violations of the DBA,” D. & O. 36, is not supported by a
  preponderance of the evidence of record.

         Disposition of this matter is somewhat complicated by the fact that the ALJ’s
  decision rests in part upon her credibility determinations. “This Board has endorsed
  the general principle that where a decision rests upon credibility findings made by a
  trier-of-fact, we will not reverse the decision in the absence of clear error.”21 In this


  18     See McLaughlin, 486 U.S. 128; Souryavong v. Lackawanna Cty., 872 F.3d 122, 126
  (3d Cir. 2017) (“Acting only ‘unreasonably’ is insufficient—some degree of actual awareness
  is necessary”) (quoting McLaughlin, 486 U.S. at 135 n.13.).

  19     D. & O. at 29; Hearing Transcript (Tr.) at 310, 366-67. Hauth’s testimony is also
  consistent with Manganas’ who testified that Hauth was never an officer, had no payroll
  responsibilities, never worked on employees’ hours, or certified payrolls. Tr. at 248, 306,
  310.

  20     We note that there is no strict liability for corporate officers when it comes to the
  DBRA willful or aggravated debarment standard. Facchiano Constr. Co., 987 F.2d 206 (3d
  Cir. 1993); see McLaughlin, 486 U.S. 128.

  21     In re Star Brite Constr. Co., Inc., ARB No. 98-113, ALJ No. 97-DBA-12, slip op, at 5
  (ARB June 30, 2000). Being a “general principle,” it is therefore subject to qualification in
  particular applications. An ALJ’s credibility determination will receive maximum deference
  from the Board when it is based upon observations of demeanor and physical conduct at the
  hearing that are not visible to an appellate reviewer. Less deference is due to



  instance, the ALJ found Respondent Hauth’s testimony to be less than “entirely
  credible” because of what the ALJ considered to be Hauth’s inconsistent statements
  concerning his status as vice-president at Respondent Panthera.22 The ALJ used
  this determination to support her findings that Respondent Hauth was a
  responsible officer with Respondent Panthera, that he knew of his obligations under
  the Act, and he nevertheless disregarded them.

         Under these circumstances, the ALJ’s credibility determination does not
  constrain our ability to reverse the decision below. As a threshold matter, Hauth’s
  credibility or lack of it is simply not relevant to the legal error the ALJ committed,
  which is the reason for our action. Moreover, the ALJ’s credibility determination
  was ambiguous in that it was not expressly linked to any specific findings of fact
  related to the error noted above; the only attempt at making such a link was her
  assertion that Hauth’s inconsistent statements “were sufficient to call his
  credibility, at least in part, into question, especially with respect to his position at
  Panthera.” D. & O. at 20. As we have not disturbed the ALJ’s findings as to Hauth’s
  “position at Panthera,” her credibility determination on this point is causally
  unrelated to our disposition of this appeal. And finally, to the extent that the ALJ
  referred to the DBA rather than the relevant DBRA in this case in her credibility
  determination, such reference is clearly erroneous and cannot be sustained in light
  of this ruling. Thus, the ALJ’s decision ordering the debarment of Respondents
  Hauth and 446 Painting pursuant to 29 C.F.R. § 5.12(a)(2 ) is reversed and this case
  is remanded for the ALJ to consider whether Hauth or 446 Painting committed a
  willful or aggravated violation of the relevant DBRA under 29 C.F.R. § 5.12(a)(1),
  the proper debarment standard for DBRA cases.




  determinations made in reliance upon factors that are within the capability of the Board to
  assess and weigh, such as a witness’ prior inconsistent statements or the inability of a
  witness to observe or recall relevant facts.

  22      D. & O. at 20. While Hauth acknowledged he was vice-president of Panthera in
  connection with another DOL investigation, Hauth testified in this case that he was never
  the vice-president of Panthera, Tr. at 352; he testified that he signed the contract as
  Manganas directed him to, Tr. at 352, 378; he testified that his title of “vice-president” was
  a joke, Tr. at 373); Hauth testified to the same in regards to the other matter, see Tr. at
  372-73, 377 (that his title as vice-president was not official, did not have any meaning to it,
  and that it was a joke, although he did admit he was second in command with regards to
  “office stuff.”). D. & O. at 14-15.




                                          CONCLUSION

         In light of our holding that the evidence is insufficient to sustain a finding
  that either Respondents Hauth or 446 Painting engaged in a willful or aggravated
  violation of the relevant DBRA,23 we hereby SET ASIDE the Order below
  purporting to debar Respondents Hauth and 446 Painting for a period of three years
  under the DBA and REMAND this matter for the ALJ to enter revised findings of
  fact and conclusions of law consistent with the administrative record, this decision,
  and the DBRA-implementing regulations at 29 C.F.R. § 5.12(a)(1).24

         SO ORDERED.




  23     In light of our present disposition of this matter, we need not address the other
  issues the Respondents raised in their Petition for Review or supporting Brief.

  24      See Hugo Reforestation, Inc., ARB No. 99-003, ALJ No. 97-SCA-20, slip op. at 10
  (ARB Apr. 30, 2001), citing A. Vento Constr., WAB No. 87-51, slip op. at 7 (Oct. 17, 1990)
  (“the Board and its predecessors typically have found an employer’s action to be ‘aggravated
  or willful’ if it meets ‘the literal definition of those terms - intentional, deliberate, knowing
  violations of the labor standards provisions of the Related Act.’”).