“If you can’t convince them, confuse them.” 

-- Harry S. Truman

The Administrative Review Board (“ARB”) of the U.S. Department of Labor (“DOL”) recently published an opinion concerning a request to establish a “substantial variance” between a predecessor collective bargaining agreement (“CBA”) and the current local wage and benefit rates under the Service Contract Act (“SCA”). In United Government Security Officers of America, Local 315, ARB CASE NOS. 2016-074, 2016-075 (APR 18, 2019), the United Government Security Officers of America (UGSOA) sought relief from their wage rates that were collectively bargained with the Corrections Corporation of America (“CCA”) (newly renamed CoreCivic, Inc.). https://www.oalj.dol.gov/PUBLIC/ARB/DECISIONS/ARB_DECISIONS/CBV/16-074.CBVP_SLIP_OP.PDF. The security officers on the contract were working as detention guards at Elizabeth Detention Center. The bargained wage rate covered the period of March 2013 to September 2016. The guards wanted to change the deal they had negotiated with their employer, on the basis that it paid them too little, and they wanted to impose in its place a higher SCA prevailing wage rate. This happens when the union bargains an improvident deal with the employer.  

The pivotal issue in this case was whether the DOL can rescue the workers from an improvident CBA and can raise rates in that CBA if they are at “substantial variance” with the rates prevailing in the locality where the work is performed. The ruling also specifies what kind of evidence needs to be furnished in order to determine the prevailing wage rates in a locality.  

Under 41 U.S.C. § 6707, successor contractors cannot pay less than the rate specified in a previously bargained and enforceable CBA. This is the so-called section 4(c) or successor contractor of the SCA. But sometimes the prevailing wage or benefit rates end up exceeding the collectively bargain rates. At that point, the employees naturally want to be paid the prevailing rates and not the CBA rates. But the CBA based wage determination has displaced the prevailing rates, creating a conundrum.

The solution to the conundrum is found in the exception in the statutory and regulatory provisions which allow the Secretary, or an appointed representative, to grant relief from the predecessor CBA if the rates are at substantial variance to those prevailing in the locality. Id. CCA argued that the statute does not allow the DOL to replace the CBA with higher wages. This is the rule in the 4th Circuit, but no where else. What UGSOA sought here is the opposite of the usual substantially unjustified challenge — they asked DOL to release them from a currently active CBA because the rates were too low compared to those prevailing in the locality. The ARB began and ended with the language of the statute and determined that there was no text or other reason to believe that the exception only applied if the rate was too high and that the operative words were substantial and variance. Corrections Corporation of America, ARB CASE NOS. 2016-074, 2016-075 at 6. To hold otherwise would be to read “variance” out of the statute which is in direct conflict with the canon of statutory interpretation.  

Despite succeeding on those grounds, the UGSOA went on to lose the appeal. The ARB determined that they did not provide enough evidence to establish that the CBA rate was at a substantial variance to the prevailing wage rates in the locality. UGSOA appealed specific determinations by the ALJ because these determinations are “highly factual” and involve an evaluation of all of the relevant information. In re United HealthSeru, 1989-CBV-001, slip op. at 6. They define a “substantial variance” to mean a clear showing of a substantial disparity with ‘prevailing wages for services of similar character in the locality.’ 41 U.S.C. § 6707(c)(2); 29 C.F.R. § 4.l0(a).” The ARB states that analysis of and information pertaining to the following sources should be included in their appeal:                       

(1) federal wage board rates and surveys; (2) relevant BLS surveys and comparable SCA wage determinations; (3) other relevant wage data such as what other employers pay for similar services; and (4) other collectively-bargained wages and benefits in the locality.

All Agency Memorandum No. 166. at 2-3.

In addressing each appeal, the ARB made several legal determinations as they apply to the facts. In the first instance, they determined that UGSOA had not included the job duties or information pertaining to the job duty when making a comparison to a wage rate in the locality. As such, the actual wage was rightfully excluded from consideration because they could not determine if the duties performed were similar. The second point of appeal was over the weight given to a comparable detention facility at Delaney Hall. UGSOA hadn’t provided enough rates to accord this detention facility any weight at all, which shows that there must be enough wage rates provided from a locality for the ALJ to make a decision about what the prevailing wage is. Third, the ARB wrote that evidence of a lack of arm’s length negotiation for the CBA is not relevant to determining a “substantial variance” which compares two numbers, not the circumstances surrounding them. The fourth point is that while “locality”, in reference to where the wage rate data should be from, does not have a fixed definition and is often “elastic”, it is often limited to a county or a cluster of counties and was rightfully determined. The last point argued by the UGSOA was that the list in AAM No. 166 is not necessary to determine a substantial variance; however, the Board disregarded this argument because the UGSOA did not explain why the information it provided was sufficient to establish a substantial variance.

What the ARB reveals in this case is that to determine whether the wages are at a substantial variance to the locality, DOL needs enough evidence to make the decision. They need to be able to make a responsible decision as to the state of wages in the locality. To do so DOL needs both quality information and a quantity of information. Just one or the other will not do. For example, in this case the quality of information garnered from a source was sometimes lacking, like where they had not provided the job duties for another detention center in the locality. By omitting the information, the Administrator could not compare the two positions. In other instances, the quantity of information was lacking, where there was not enough information to compare the Delaney Hall facility to other facilities in the locality. There the issue was comparing Delaney Hall to other facilities, where in the first instance the ALJ could not compare the facility to the UGSOA’s facility.  

From this decision, we can gleam that the burden of proof for establishing an upward adjustment under the substantial variance rule is high, and that a petitioner must come to the DOL with as much information as possible. The ARB has made it clear that in the absence of sufficient evidence, DOL cannot find make an informed decision that wage and fringe benefit rates are substantially at variance to those prevailing in the locality.