November 10, 2008
NEW JERSEY DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, RESPONDENT,
JOHN H. MORLEY, JR., APPELLANT.
On appeal from the Department of Labor and Workforce Development, Docket No. PC-1233-1005-BOI.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted August 26, 2008
Before Judge Messano and Chambers.
John H. Morley, Jr., appeals from the final agency decision of the Department of Labor and Workforce Development (DOL) that assessed a penalty of $1250 for failing to register pursuant to the Public Works Contractor Registration Act, N.J.S.A. 34:11-56.48 to -56.56 (the CRA). We glean from the record, including the testimony before the administrative law judge (ALJ), the following facts which were essentially undisputed.
In December 2002, Morley was hired by C.J. Schmidt and Sons (Schmidt), a general contractor performing public work on the Monroe Township Williamstown Middle School, as a sub-contractor to install a fire-protection sprinkler system. The sub-contract amount was $26,600. Schmidt executed its contract with the school system in January 2003, and at that time, Morley had a valid certificate of registration issued pursuant to N.J.S.A. 34:11-56.54. On April 9, 2003, Schmidt obtained permission to install the fire protection system in the project, and Morley commenced his work.
Morley's business is located in Pennsylvania. He employs no other workers and on this occasion performed all the contract work himself. The design phase of the work continued until sometime in August when Morley submitted his "shop drawing" for review. Thereafter, he "fabricated" the components of the system and "beg[a]n installation." He substantially completed his work in September 2003, and tested the system as installed sometime in December 2003.
In the interim, on May 3, 2003, Morley's certificate of registration expired. DOL does not routinely notify a registrant that renewal is required and did not notify Morley in this case. However, on September 22, 2003, Morley submitted an application for renewal of his certificate. Though subsequent testimony before the ALJ revealed that DOL deemed the application to be incomplete, Morley was not notified, nor were any insufficiencies actually identified.
More than two years later, in November 2005, DOL issued Morley a notice of violation for failing to register. John Callahan, a Hearing and Review Officer for DOL familiar with the administrative process that followed the issuance of the violation, testified before the ALJ that the citation was occasioned by an inspection DOL conducted in September 2005. Callahan could not say what prompted the inspection, but noted that it could have resulted from "a complaint," "a routine [inspection]," or from "a wage claim." In response to the ALJ's question as to why there was such a delay between completion of the work, and the notice of violation, Callahan noted "we do have jurisdiction going back several years to anything within that time frame . . . that would be under our jurisdiction to do an inspection." He continued, "[U]nder our wage payment law, we can go back six years."*fn1
The initial penalty assessment was in the amount of $2500. Morley filed an administrative appeal and a pre-hearing conference was held in an attempt to resolve the issue. It was not resolved and DOL issued a final order assessing the penalty on July 20, 2006. When Morley appealed, the matter was transferred to the Office of Administrative Law on February 15, 2007 as a contested matter. The hearing held before the ALJ on April 17, 2007 was limited to Morley and Callahan's testimony, and the admission of various documents.
In a written opinion issued on May 9, 2007, the ALJ essentially reviewed the evidence we have cited above. He found it to be "undisputed that Morley violated the [CRA]" because "[h]e was engaged in public work without a contractor registration after May 2002 (sic) when his registration expired." Citing N.J.A.C. 12:62-2.5, the ALJ concluded that DOL could assess the penalties available for violations of the PWA to any violation of the CRA. Although DOL sought to impose the maximum allowable penalty against Morley, $2500, the ALJ noted that any penalty assessed under the PWA must consider the factors set forth in N.J.A.C. 12:60-8.3(c). After consideration of those factors, the ALJ determined that the appropriate penalty was $1250.
On June 26, 2007, DOL issued its "Final Administrative Action" adopting the ALJ's decision and approving "the terms of the settlement." While it is unclear from the record what transpired immediately thereafter, DOL then issued another Final Order, dated July 23, 2007, which ignored the fact that Morley had appealed the original notice of violation. On August 29, 2007, DOL sent Morley a third letter notifying him that he was being debarred from further public work for failing to comply with the prior administrative order and paying the penalty.
Morley filed this appeal on August 30, 2007. On September 7, 2007, DOL sent Morley yet another notice advising that both the July 23 Final Order and the August 29 letter of debarment were sent in error, and that the notice of Final Administrative Action dated June 26 was the agency's ultimate decision.
Morley argues that the CRA does not authorize the imposition of a financial sanction for a failure to register, and that any interpretation to the contrary cannot be squared with the legislative intent of both the CRA and the PWA.
Secondly, Morley argues that he was actually registered when the contract was executed and work began, thus, he did not violate the CRA. He also contends that the administrative action is barred by the "statute of limitations" or estoppel, or, alternatively, the violation was de minimis and ought not to have resulted in financial penalties. DOL contends that the CRA specifically permits it to sanction any contractor who violates the statute with any sanction available under the PWA, and that none of the other arguments advanced by Morley are significant.
We have considered these arguments in light of the record and applicable legal standards. We affirm DOL's finding that Morley violated the CRA, however, for the reasons expressed below, we vacate the imposition of any monetary penalty.
In enacting the CRA, the Legislature clearly stated its findings and purpose:
a. There is a growing concern over the increasing number of construction industry workers on public works projects laboring under conditions which violate State labor laws and regulations concerning wages, unemployment and temporary disability insurance, workers' compensation insurance, and the payment of payroll taxes;
b. Contractors and subcontractors receiving the benefit of public tax dollars for their work should not be allowed to exploit their workers by denying them benefits and pay mandated by law;
c. It is therefore necessary and proper for the Legislature to establish a registration system for contractors and subcontractors engaged in public works projects in order to better enforce existing labor laws and regulations in the public works industry. [N.J.S.A. 34:11-56.49.]
As a result, contractors cannot bid on a public works project, and sub-contractors cannot be included in a bid proposal, unless they are registered. N.J.S.A. 34:11-56.50. They also are prohibited from "engag[ing] in the performance of . . . a public work" if not registered. Ibid. It is undisputed that Morley performed work on the school project when he was not properly registered under the CRA.
The Legislature's response to the Supreme Court's affirmance of our decision in R.C.G. Constr. Co. v. Mayor of Keyport, 346 N.J. Super. 58 (App. Div. 2001), aff'd 175 N.J. 68 (2001), answers Morley's second contention. In R.C.G. Constr. Co., we made it clear that the contractor or sub-contractor must be registered when work is performed. 346 N.J. Super. at 63-67. Subsequent to our decision, in amending N.J.S.A. 34:11-56.51, the Legislature explicitly provided that "[n]o contractor or subcontractor . . . shall engage in the performance of any public work subject to the contract, unless the contractor or subcontractor is registered pursuant to that act." (Emphasis added). As a result, we must affirm DOL's determination that Morley violated the CRA.
The CRA provides that any contractor who: (1) willfully hinders or delays the commissioner in the performance of his duties in the enforcement of th[e] act; (2) fails to make, keep, and preserve any records as required under the provisions of the [PWA]; (3) falsifies any such record, or refuses to make any such record accessible to the commissioner upon demand; (4) refuses to furnish a sworn statement of such records or any other information required for the enforcement of this act to the commissioner upon demand; (5) pays or agrees to pay wages at a rate less than the rate prescribed by the [PWA]; or (6) otherwise violates any provision of this act, shall be guilty of a disorderly persons offense. [N.J.S.A. 34:11-56.56(a).]
"As an alternative to or in addition to sanctions provided by the [PWA]," however, DOL may also "[d]eny renewal, revoke or suspend the registration of a contractor," "[r]equire a contractor . . . to provide a surety bond payable to the State," or "order the immediate suspension of a contractor's registration[.]" N.J.S.A. 34:11-56.56(b) and (c).
Morley argues that since he committed no violation of the PWA, the sanctions available thereunder cannot be imposed upon him. The language of the CRA, however, makes it clear that the available sanctions affecting the contractor's registration or renewal--revocation, suspension, or the denial of any renewal application--are "alternative[s] to" and "in addition to" administrative remedies available under the PWA. To the extent the statute is ambiguous, we may consider the legislative history and sponsor's statements as extrinsic evidence of the Legislature's intent. See R.C.G. Constr. Co., supra, 346 N.J. Super. at 62-63 (interpreting provisions of the CRA by reference to legislative committee reports). Here, the sponsor's statement that accompanied the CRA made it clear that the Legislature intended the penalties under the PWA to be available sanctions for violations of the CRA. See Sponsor's Statement, Assembly Bill No. 2161 (1999)(" A violation of [the CRA] would be considered a disorderly persons offense, and the violator would be subject to a fine of $500 and a term of imprisonment not to exceed six months. Additionally, the commissioner could impose sanctions available under [the PWA]").
The regulations adopted by DOL mirror these cross-references in the enabling statutes. N.J.A.C. 12:62-2.5 provides, "Any or all of the administrative penalties set forth in N.J.A.C. 12:60-9.3*fn2 for violations of the [PWA], may also be imposed . . . upon a finding that a registrant . . . has . . . committed any of the acts set forth at N.J.A.C. 12:62-2.4(a)." This includes "perform[ing] work pursuant to a public works contract without having fully complied with the registration requirement set forth in [the CRA]." N.J.A.C. 12:62-2.4(a)(2).
The administrative penalties available under N.J.A.C. 12:60-8.3 include a fine in the maximum amount of $2500 for the first offense. However, as the ALJ noted, DOL must consider a number of factors in determining the proper amount of the penalty including, "[t]he seriousness of the violation[,] [t]he past history of previous violations by the employer[,] [t]he good faith of the employer[,] [t]he size of the employer's business[,] and [a]ny other factors . . . deem[ed] to be appropriate . . . ." N.J.A.C. 12:60-8.3(c)(1-5). Here, it was Morley's first offense, he clearly operated in good faith and merely forgot to renew his registration, he had no workers, and his work on the project was limited. Recognizing these factors, the ALJ modified the penalty by reducing it to $1250.
However, we find merit in Morley's contention that under the unusual facts of this case, the imposition of financial penalties available only under the PWA, two years after a single, de minimus violation of the CRA, and without any actual violation of the PWA, was unfair and inconsistent with the legislative purposes of the CRA. For this, and other equitable reasons, we are compelled to vacate the penalty imposed.
We acknowledge that "[i]n reviewing decisions of administrative agencies, '[o]ur function is to determine whether the administrative action was arbitrary, capricious or unreasonable.'" Seigel v. Dept. of Envtl. Prot., 395 N.J. Super. 604, 613 (App. Div.), certif. denied, 193 N.J. 277 (2007)(citations omitted). "Unless . . . the agency's action was arbitrary, capricious, or unreasonable, the agency's ruling should not be disturbed." Brady v. Bd. of Review, 152 N.J. 197, 210 (1997). "The Court 'can intervene only in those rare circumstances in which an agency action is clearly inconsistent with its statutory mission or with other State policy.'" Ibid. (quoting George Harms Constr. Co. Inc. v. Tpk. Auth., 137 N.J. 8, 27 (1994)). "As far as review of agency imposed sanctions is concerned, there is no doubt of a court's power of review under the tests of illegality, arbitrariness or abuse of discretion and of its power to impose a lesser or different penalty in appropriate cases." Mayflower Sec. Co., Inc. v. Bureau of Sec., 64 N.J. 85, 93 (1973).
We have already noted that the CRA was intended to address "a growing concern over the increasing number of construction industry workers on public works projects laboring under conditions which violate State labor laws and regulations concerning wages, unemployment and temporary disability insurance, workers' compensation insurance, and the payment of payroll taxes." N.J.S.A. 34:11-56.49a. Morley had no workers and clearly did not violate any law or regulation except the requirement to renew his registration. The CRA was also intended to prohibit the "exploit[ation] [of]  workers by denying them benefits and pay mandated by law." N.J.S.A. 34:11-56.49b. Again, Morley's conduct had no adverse impact upon any workers because he had no employees. Lastly, the CRA was intended to allow DOL "to better enforce existing labor laws and regulations in the public works industry." N.J.S.A. 34:11-56.49c. While DOL's general ability to enforce this State's labor laws is beyond peradventure, we must question whether imposing a substantial fine upon Morley enhances the enforcement of those statutes, particularly since there was no violation of the PWA.*fn3
The Supreme Court has noted that "[a]ny administrative agency in determining how best to effectuate public policy is also limited by applying principles of fundamental fairness." Dep't of Envtl. Prot. v. Stavola, 103 N.J. 425, 436 n.2 (1986). "When specific parties are particularly affected . . ., fair play and administrative due process dictate that an agency must conscientiously concern itself with and make reasonable efforts to accommodate the rights and interests of the affected individual and genuinely account for the individualized effect of its proposed action." Bally Mfg. Corp. v. New Jersey Casino Control Comm'n., 85 N.J. 325, 345 (1981) (Handler, J., concurring). We think the equitable concerns in favor of Morley in this particular case are legion and, when the actual offense is considered in conjunction with the regulatory factors governing the imposition of any fine, N.J.A.C. 12:60-8.3(c)(1-5), we conclude no financial penalty was warranted.
DOL did not cite Morley for a violation until nearly two years after he last performed any work under the contract with Schmidt. While we disagree with Morley's assertion that the one-year statute of limitations applicable to disorderly persons offenses, N.J.S.A. 2C:1-6b(2), serves to bar agency action, we are concerned, as was the ALJ, with the unexplained reason for the delay and its inherent unfairness. This is particularly true in this case for two other corollary reasons.
First, Morley completed his work in December 2003 and did not perform public work in this State thereafter. Thus, DOL was not confronted with a situation in which a contractor violated the CRA and was continuing to take advantage of the public funding associated with public works projects.
Second, Morley attempted to bring himself into compliance with the CRA by submitting an application for re-registration, but DOL never responded or advised him why his attempt was deficient. We acknowledge that "[e]quitable estoppel is rarely invoked against a governmental entity[,]" Middletown Twp. Policemen's Benevolent Ass'n Local No. 124 v. Twp. of Middletown, 162 N.J. 361, 367 (2000) (internal quotations omitted), and we do not accept Morley's assertion of the doctrine in this case. However, it has long been recognized that "equitable considerations are relevant in evaluating" conduct of an agency if a claimant's interests are affected by a delay in agency action and there has been substantial reliance. Skulski v. Nolan, 68 N.J. 179, 198-99 (1975).
In sum, the imposition of a monetary fine upon Morley for his limited violation of the CRA was arbitrary, capricious and unreasonable. The initial fine imposed, $2500, was nearly ten percent--the final penalty imposed was nearly five percent--of Morley's entire contract with Schmidt. Morley had no workers and therefore imposition of the fine did not serve the statutory purposes of the CRA or the PWA; because there was no violation of the PWA, resort to the penalties available under that act were inappropriate. We reach this conclusion based upon the unique facts presented and our holding should not be construed as imposing any restriction upon DOL's vigorous enforcement of the CRA and the PWA in other circumstances.
We affirm DOL's finding that Morley violated the CRA. However, for the reasons stated, we vacate that portion of the Final Administrative Action that imposed a $1250 administrative penalty.
Affirmed as modified.