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New Jersey Dep't of Labor and Workforce Development v. R.I.


August 12, 2008


On appeal from the New Jersey Department of Labor and Workforce Development, Docket Nos. PC-967-0805-ROM, PC-959-0805-ROM and PC-1009-0805-ROM.

Per curiam.


Submitted February 4, 2008

Before Judges A. A. Rodríguez, C. S. Fisher and C. L. Miniman.

R.I., Inc. d/b/a Seating Solutions, Lisa Suprina, Scott Suprina and Tony English (collectively "appellants") challenge the final agency decision of the Commissioner of the New Jersey Department of Labor and Workforce Development (DOL), ordering that appellants be debarred from public contracts for a period of three years and that they pay $27,937.18 in back wages; $5,028.70 in administrative fees and $25,000 in penalties. This action by the DOL was triggered by R.I.'s violations of the Prevailing Wage Act, N.J.S.A. 34:11-56.25 to -56-57 (PWA). We affirm in part and reverse in part.

The PWA is similar to a minimum wage for employers engaged in "public work." It requires that employers pay certain workers a minimum wage, known as the "prevailing wage." See N.J.S.A. 34:11-56.25 to -56.27. The DOL Commissioner establishes the prevailing wage based on collective bargaining agreements (CBA) of the majority of workers in a given trade in a given locality. N.J.S.A. 34:11-56.30. If an employer is unsure as to the classification of their work, a fact crucial for prevailing wage determination, the employer may contact the DOL for guidance or to receive a new classification.

R.I. is a New York corporation, whose primary business is the installation, assembly and maintenance of audience and spectator seating. R.I.'s principals are appellants: Lisa Suprina, President; Scott Suprina, Vice President; and Tony English, Secretary. R.I. employs approximately seventy workers.

In late 2004, some employees of R.I. decided to form a union. In 2005, R.I. gave voluntary recognition to the United Federation of Maintenance, Installers & Assemblers of Audience & Spectator Seating Systems (Union). R.I. and the Union entered into a CBA. Specifically relevant to the appeal is Appendix A to the CBA, entitled "Economic Waiver & No-Layoff-Guaranteed Fulltime Work Agreement." Given the nature of stadium seating installation, it was very common for R.I. to lay off a high percentage of its workforce during the winter months. The Union determined that it would be in its members' best interests, to waive the members' rights to prevailing wages pursuant to the PWA in exchange for the guarantee of full-time year-round work. Thus, R.I. agreed to refrain from laying off its unionized employees in exchange for the employees' agreement to waive receiving the prevailing wage and be paid the wages set forth in Article X of the CBA. However, by the terms of the CBA, this agreement would go into effect eighteen months after the execution of the CBA. The Union never submitted an application to the DOL for recognition of "stadium seating" as its own craft pursuant to the PWA.

In the early months of 2006, R.I. engaged in three public-work jobs at Saddle Brook High School, West Windsor Community Park and South Mountain Arena. The DOL determined that during these three projects R.I. committed a number of PWA violations. The DOL sent R.I. and its principals written notices of the violations and indicated that it was requiring R.I. to pay back wages, fees and penalties in the amount of $57,965.88. The DOL also indicated that it was considering debarment of R.I. and its principals. R.I. requested a hearing. This was the second time that R.I. had received such a notice. On April 18, 2004, R.I. agreed to pay the DOL $7,568 in back wages, fees and penalties in connection with a similar violation on a different project.

The Administrative Law Judge (ALJ) heard the following testimony. Ashleigh Chamberlain, a senior DOL field representative, testified that if multiple trades claim the work, then the contractor chooses either rate as the prevailing wage. Both the carpenters' union and the ironworkers' union claim installation of bleachers, and only the carpenters' union claims installation of stadium-style seating, the type of work R.I. engaged in at the jobs relevant to this appeal.

George B. Sanford, a Hearing and Review Officer with the DOL, testified that R.I. failed to classify their workers on their certified payroll sheets, a requirement of the PWA. He explained that putting the employee classification on the payrolls is extremely important. The DOL has debarred companies in the past for failing to do so. Although R.I. had been compliant in a request for documents by the DOL, the records were incomplete in that they did not include all dates worked and the employees were not paid the full prevailing wage.

Frank Romberger, a DOL Field Representative, testified that he conducted a random inspection of the West Windsor project job site. He spoke with two employees of R.I. installing aluminum bleachers. The two employees told Romberger that they were making $11 an hour and $125 a day, respectively, and Romberger knew that such amounts were well below the prevailing wage in Mercer County. Romberg's initial opinion was that the employees were engaged in "ironworking" based on the fact they were installing metal bleacher frames. However, the work was ultimately characterized as carpenter's work because both the carpenters' and the ironworkers' unions claimed such work and the carpenter's prevailing wage was lower. Thus, R.I. had underpaid nine employees, resulting in a total gross loss of $7,004.21.

David Harrington, a DOL Field Representative, testified that he went to the South Mountain project site as a result of a complaint filed by the carpenters' union. Harrington interviewed seven R.I. employees, all of whom said they were making different wages ranging from $12 to $15 an hour. One said he made "the prevailing rate," but did not know what that meant. The workers were installing seating, which, in Harrington's opinion, was carpentry work for prevailing wage purposes.

During a second inspection of the South Mountain project, Harrington found that one R.I. employee had worked for three weeks at the site, but had not yet been paid and did not know what his rate of pay was other than it was the "prevailing rate." Another two employees, when asked by Harrington their rate of pay, replied "the prevailing rate," but did not know the amount. Harrington ultimately concluded that R.I. failed to pay seventeen employees the prevailing wage, resulting in a gross loss of $19,535.21. According to Harrington, R.I. also failed to submit all of its payroll records, as required by the PWA.

The evidence reveals that the terms, conditions and applicability of the CBA and Appendix A caused much confusion. First, the DOL did not receive any information about the Union or its CBA or Appendix A until after the completion of the projects at issue in this case. Second, members of the DOL found the language of the no-layoff benefit provision to be unclear as to whether the benefit had to be given by R.I. or whether it was discretionary.

Scott Suprina, R.I.'s Vice President, testified that at the time of the hearing, negotiations between the company and the Union were still ongoing. However, he also testified that he was "absolutely" bound by the CBA as of February 10, 2005, the date to which he verbally agreed with the Union.

Randy M. Ligator, the Union president, testified that not one of the Union's members had yet become eligible for the no-layoff agreement because the eighteen-month wait period had not expired. Therefore, all of the Union's members were entitled to be paid the prevailing wage and were still subject to being laid off.

At the hearing, the DOL also produced evidence of the April 18, 2004 settlement of the prior PWA violation. The settlement was admitted in evidence without objection.

The ALJ found that R.I. failed to pay its employees the prevailing wage at the Saddle Brook, West Windsor and South Mountain projects. R.I. also failed to properly classify its employees in its certified payrolls on each project and it failed to submit certified payrolls for the West Windsor and South Mountain projects. Accordingly, the ALJ recommended: (1) dismissal of R.I.'s appeal; (2) payment of $27,937.18 in wages, and (3) $30,028.70 in fees and penalties. The ALJ also recommended debarment of R.I. and its three principals.

The ALJ rejected R.I.'s argument that the National Labor Relations Act, 29 U.S.C.A. §§ 151 to 169, preempts the PWA. The ALJ also found the DOL's classification of installation of seating as "carpentry" for the purpose of determining the prevailing wage rate was reasonable based on the earlier settlement. Regarding debarment, the ALJ found that, upon review of the factors set forth in N.J.A.C. 12:60-7.3, R.I.'s violations warranted debarment.

R.I. filed exceptions to the ALJ's initial decision. The DOL Commissioner adopted the findings and recommendations of the ALJ. Thus, R.I. and its principles were debarred and ordered to pay back wages, fees and penalties.

On appeal, R.I. argues that any violations that it may have committed occurred as a result of its good-faith reliance on the CBA, and such good faith must excuse any statutory violations. It also argues that the factors do not weigh in favor of debarment and the DOL's Commissioner's decision was arbitrary and capricious. We disagree.

Once the head of an agency issues a final agency decision, our review is a limited one. Clowes v. Terminix Int'l Co., 109 N.J. 575, 587 (1988). Our role is to "survey the record to determine whether there is sufficient credible competent evidence in the record to support the agency head's conclusions." Ibid. We must show deference to the decision of an agency head when he adopts the findings and conclusions of an ALJ, who had the benefit of hearing live testimony and judging witnesses' credibility. Id. at 587-88. So long as the decision is not "arbitrary, capricious or unreasonable," does not lack "fair support in the evidence," and does not violate the "legislative policies expressed or implicit in the act governing the agency[,]" this Court should not disturb it. Renan Realty Corp. v. Dep't of Cmty. Affairs, 182 N.J. Super. 415, 419 (App. Div. 1981) (citing Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963)). Such decisions carry with them a presumption of reasonableness. B&J Realty, LLC v. Dep't of Envt'l Prot., 381 N.J. Super. 52, 60 (App. Div. 2005). Even if we were to reach a different conclusion on the evidence before us, we must affirm if we are "satisfied after [our] review that the evidence and the inferences to be drawn therefrom support the agency head's decision . . . ." Clowes, supra, 109 N.J. at 588.

Our review, however, is not a "pro forma exercise" in which we merely "rubber stamp" findings unsupported by the evidence. B&J Realty, supra, 381 N.J. Super. at 61. Decisions of an administrative agency involving questions of law are afforded no special deference. Mayflower Secs. Co. v. Bureau of Secs., 64 N.J. 85, 93 (1973).

Since 1963, the PWA has served to protect both employers and employees from the unfair competition caused by the underpayment of wages. N.J.S.A. 34:11-56.25; Dep't of Labor v. Titan Constr. Co., 102 N.J. 1, 6 (1985). The Act requires employers to pay their workforce a minimum wage, known as a "prevailing wage," when engaged in a public-work contract in which a public body is a party. N.J.S.A. 34:11-56.27; Titan Constr. Co., supra, 102 N.J. at 6.

When a company does not pay its workers the prevailing wage, it is subject to a number of penalties, including criminal sanctions, N.J.S.A. 34:11-56.35, civil actions by workers or the DOL on their behalf, N.J.S.A. 34:11-56.40, or debarment from future public-works contracts, N.J.S.A. 34:11-56.37 and -56.38; N.J.A.C. 12:60-7.3.

The decision whether or not to order debarment rests in the discretion of the Commissioner of the DOL. Titan Constr., supra, 102 N.J. at 19. When making the determination whether to order debarment, the Commissioner must consider the following factors:

1. The record of previous violations by the person with the Office of Wage and Hour Compliance;

2. Previous cases of debarment by the Commissioner;

3. The frequency of violations by the person discovered in previous cases;

4. The significance or scale of the violations, consisting of shortfalls in wages or fringe benefits computed in audits;

5. The existence of outstanding audit(s) or failure(s) to pay;

6. Failure to respond to a request to produce records, forms, documents, or proof of payments; and

7. Submission of falsified or altered records, forms, documents, or proof of payment.

[N.J.A.C. 12:60-7.3(c).]

R.I.'s first argument is that its good faith reliance on the CBA between itself and the Union justified its PWA violations. This argument is unpersuasive.

First, R.I. fails to put forth any authority holding compliance with the PWA can be excused based on good-faith reliance on a CBA or any other contract. In fact, precedent suggests otherwise. In Cipparulo v. David Friedland Painting Co., 139 N.J. Super. 142 (App. Div. 1976), we explicitly stated that "any agreement between such workers and the employer to work for less than the prevailing rate is no defense to such an action." Id. at 144. Furthermore, the PWA itself notes that employers may agree to pay workers a wage which exceeds the prevailing wage. See N.J.S.A. 34:11-56.41 ("Nothing in this act shall be deemed to interfere with, impede, or in any way diminish the right of workmen to bargain collectively through representatives of their own choosing in order to establish wages in excess of any applicable minimum under this act." (emphasis added)). This provision makes clear that PWA intended to create a floor, not a ceiling. See also United States v. Binghamton Constr. Co., 347 U.S. 171, 176-77, 74 S.Ct. 438, 441, 98 L.Ed. 594, 599 (1954) (referring to the federal prevailing wage law as "fixing a floor under wages on Government projects.").

Second, the premise upon which R.I.'s good faith argument rests is faulty. In June 2006, the CBA, by its own terms, had not yet gone into effect.

The parties did not sign the CBA until April 30, 2005, after the completion of the Saddle Brook, West Windsor and South Mountain projects. Therefore, the no-layoff provision would not have been in effect until October 2006. Although Scott Suprina testified that he believed he was bound as of February 10, 2005, that date appears nowhere in the CBA including Appendix A.*fn1

Thus, any reliance on the CBA cannot be said to have been made in good faith, even if that were a defense.

Appendix A unquestionably calls for violation of the PWA. This provision is void because contractual provisions which violate statutes are against public policy and therefore void. Vasquez v. Glassboro Serv. Ass'n, 83 N.J. 86, 99 (1980). As a leading commentator has observed:

Statutes that confer special rights upon employees may have as principal purposes the maintenance of industrial peace, the promotion of production and commerce, and the protection of workers from exploitation. These rationales may explain why workers cannot waive or contract away rights that a collective bargaining agreement grants. In addition, workers' rights to minimum wages . . . conferred by wage and hour laws and statutes dealing with fair labor standards cannot be contracted away.

[15 Corbin on Contracts § 88.7 (Rev. ed. 2003).]

See also Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 704, 65 S.Ct. 895, 901, 89 L.Ed. 1296, 1307-08 (1945) ("Where a private right is granted in the public interest to effectuate a legislative policy, waiver of a right so charged or colored with the public interest will not be allowed where it would thwart the legislative policy which it was designed to effectuate."); Stampco Constr. Co. v. Guffey, 572 N.E.2d 510, 513 (Ind. Ct.

App. 1991) (voiding a contract where employee waived his right to the prevailing wage because it violated Indiana's prevailing wage statute, noting that to "[a]llow[] settlement or release of a claim would permit unscrupulous contractors to force employees to submit to economic pressures and accept lower wages.").

Article X of the CBA clearly thwarts the policy of the PWA, which is "to establish a prevailing wage level for workmen engaged in public works in order to safeguard their efficiency and general well being and to protect them as well as their employers from the effects of serious and unfair competition resulting from wage levels detrimental to efficiency and well-being." N.J.S.A. 34:11-56.25. Allowing employees to waive this protection forces them to accept lower wages for their work, in direct contrast to the express policy of the PWA.

R.I. further argues that the public entities involved in the three projects failed to comply with N.J.S.A. 34:11-56.28, which requires the public entities to state in the contract the prevailing wage for the public works job. R.I. is correct in its reading of the statute. However, such an omission does not relieve the employer from complying with the PWA. See Marr v. ABM Carpet Serv., Inc., 286 N.J. Super. 500, 506 (Law Div. 1995) (citing Male v. Pompton Lakes Borough Mun. Util. Auth., 105 N.J. Super. 348, 360 (Ch. Div. 1969), rev'd on other grounds, Male v. Ernest Renda Contracting Co., 122 N.J. Super. 526, 538 (App. Div. 1973)).

R.I. also challenges the Commissioner's weighing of the necessary factors and the conclusion that debarment was warranted. We perceive no error.

The first factor, the company's record of wage-law violations, is applicable here. N.J.A.C. 12:60-7.3(c)(1). R.I. incorrectly states that under this factor, previous violations must have been "significant." N.J.A.C. 12:60-7.3(c)(1) has no such requirement. The DOL introduced into evidence an internal printout of R.I.'s history of compliance. Sanford testified that in April 2004, the DOL cited R.I. for unpaid wages and failure to submit pay-rate records and ordered it to pay back wages, fees and penalties in the amount of $7,568.13. The parties reached a negotiated settlement on this matter in August 2004.

The second and third factors, previous cases of debarment by the Commissioner and the frequency of the violations in those cases, id. at 12:60-7.3(b)(2) & (3), can be discussed together. R.I. claims error by the Commissioner in not analyzing recent cases, stating that its violations, if any, are comparable to some recent cases rejecting debarment. However, the cases cited by R.I. are distinguishable.

In Dep't of Labor v. Kinder Constr., 95 N.J.A.R.2d 31 (Dep't of Labor 1995), the ALJ found debarment inappropriate where the company failed to pay one employee total back wages of $1,042.14 and the violation was the company's first PWA violation. Here, R.I. has both a very recent history of wage-law violations and present violations in which numerous employees were underpaid total wages exceeding $25,000.

In Dep't of Labor v. Thomas & Son Bldg. Contractors, Inc., 1998 N.J. Agen. LEXIS 577 (Dep't of Labor 1998), the ALJ found debarment unwarranted because the company only failed to pay wages on a single job and the DOL never adequately showed exactly what type of work the employees were doing. The ALJ also found the DOL failed to prove the company's previous violation, which allegedly occurred nine years earlier. Here, the ALJ found, based on the testimony and extensive documentary evidence, R.I. failed to pay over one dozen workers on three different job sites in three different counties. Their violations were not isolated incidents occurring almost a decade prior, but evidence of a pervasive scheme to underpay its employees. The ALJ also found R.I. violated the PWA less than one year before the violations at issue in this case, indicating a lack of concern over compliance with New Jersey wage laws.

In Dep't of Labor v. P&R Constr., Inc., 1999 N.J. Agen. LEXIS 123 (Dep't of Labor 1999), the ALJ found debarment inappropriate because each of the factors weighed in the company's favor, most notably the lack of any previous violations by the company and the fact that the total back wages due were only approximately $3,300.00. Here, R.I.'s violations were consistent over a period of months, came on the heels of a previous violation and the wages owed exceeded $25,000.

Lastly, in Dep't of Labor v. DeSapio Mgmt., Inc., 2004 N.J. Agen. LEXIS 506 (Dep't of Labor 2004), the DOL failed to present any live testimony or any other sufficient, competent or credible evidence supporting its allegation that wage violations occurred. This is in stark contrast to this case, where the ALJ held a two-day hearing at which the DOL presented four witnesses and thirty-seven pieces of documentary evidence, all admitted without objection from R.I.

The fourth factor, the "significance or scale of the violations," N.J.A.C. 12:60-7.3(c)(4), weighs heavily in favor of debarment. The ALJ found that R.I. underpaid its employees a total of $27,937.18. Although R.I. is correct that the ALJ did not make a specific finding that such an amount is "significant," it seems elementary that such a figure, in the context of employee wages, is in and of itself significant, even absent an ALJ stating so on the record. Also significant is that the ALJ found the four violations by R.I. in such a brief period (three months) to be sufficient "to outweigh any mitigating circumstances set forth by [R.I.]."

The fifth, sixth and seventh factors, which concern the cooperation put forth by the Company in paying existing penalties or producing documents, N.J.A.C. 12:60-7.3(b)(5)-(7), do weigh in favor of R.I. However, the ALJ found the balance of all seven factors in total weighed in favor of debarment.

The crux of R.I.'s argument is that these factors weigh against debarment. The Commissioner found otherwise. Because substantial, credible evidence in the record supports the Commissioner's conclusion, we are bound by it.

R.I. also contends that the Commissioner committed reversible error in finding R.I. failed to submit certified payroll records in violation of N.J.S.A. 34:11-56.29. The record supports the ALJ's decision.

N.J.S.A. 34:11-56.29 provides:

Every contractor and subcontractor shall keep an accurate record showing the name, craft or trade, and actual hourly rate of wages paid to each worker employed by him in connection with a public work and such records shall be preserved for two years from date of payment. The record shall be open at all reasonable hours to the inspection of the public body awarding the contract, to any other party to the lease or agreement to lease pursuant to which the public work is done, and to the commissioner. [N.J.S.A. 34:11-56.29.]

The DOL elicited testimony from Sanford, a Hearing and Review Officer, who said that R.I. did not submit certified payroll records for the West Windsor project and that R.I. improperly classified its employees in the few payroll records it did submit. Documents to the same effect were also admitted, without objection, into evidence. Such evidence is sufficient to show a violation of N.J.S.A. 34:11-56.29.

R.I. also contends that debarment was improper as to the individual appellants.

The applicable regulations grant the Commissioner the authority to debar any "person, after an investigation and determination that the person has failed or refused to pay the prevailing wage rate." N.J.A.C. 12:60-7.3(b). "Person" is defined as "any natural person, company corporate officer or principal . . . engaged in public works" projects. N.J.A.C. 12:60-7.2. The DOL must furnish written notice of intent to debar to such persons. N.J.A.C. 12:60-7.4. In Titan Constr., supra, 102 N.J. at 11, the Supreme Court explained why individual debarment is often necessary: "It is evident that if the Commissioner's powers to debar were limited to the contracting entity, thereby permitting the individuals responsible for the violation to form new enterprises to engage in public work projects, the deterrent effect of debarment would be seriously impaired."

In Titan Construction, the Court held that, pursuant to then-existing regulations, due process required that a separate hearing should have been awarded to the individual principals of Titan Construction "to ascertain their individual culpability." Id. at 17. The Court went on to say:

Conceivably, one or more of the debarred officers may have been entirely without knowledge of or culpability for the corporate violation. Fundamental principles of due process mandate that standards must be established to define the conduct that will result in individual debarment.

Procedural safeguards, including notice, hearing, the right to present evidence, and the right to cross examine an adverse witness must be afforded to those individuals facing debarment. [Ibid.]

In this case, all three individual appellants received written notice that the DOL intended to debar them for R.I.'s violations of the PWA at the Saddle Brook, West Windsor and South Mountain projects. The only issue is whether the evidence was sufficient to warrant their individual debarments.

Scott Suprina, R.I.'s vice president, testified at length that he was directly involved in the decision to not pay the Company's workers prevailing wage based on the CBA. This was even after Sanford told him and Ligator that the DOL did not recognize the Union and its CBA, including Appendix A. Scott Suprina's testimony is substantial, credible evidence that he was culpable in the violations alleged by the DOL and found by the Commissioner.

However, the same is not true of Lisa Suprina or Tony English. They did not testify at the hearing. The record does not indicate the role of either Lisa Suprina or English in CBA negotiations, in failing to pay prevailing wage or to submit accurate, certified payroll records.

We have not been directed to any statute, regulation or case which mandates that individuals be debarred automatically when their company is debarred and Titan Construction strongly suggests the antipode. Despite the overwhelming evidence against R.I. and Scott Suprina, there was no evidence to warrant debarment of Lisa Suprina or English. For these reasons we reverse the decision to debar Lisa Suprina and English. The debarment of R.I. and Scott Suprina are affirmed.

Affirmed in part, reversed in part.

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