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Vol. 63, No. 33                        September 1, 2021

Decisions

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¶ 261

Davis-Bacon Classification Decision Was Not Arbitrable, Tenth Cir. Holds 

Int’l Brotherhood of Elec. Workers v. T&H Servs., 2021 WL 3439108 (10th Cir. Aug. 6, 2021)

A dispute over the proper classification of workers under the Davis-Bacon Act was not arbitrable, the U.S. Court of Appeals For the Tenth Circuit has held in affirming the district court. 

T&H Services performed operation and maintenance services at an Army base in Colorado under a contract governed by the Davis-Bacon Act, 40 USCA §§ 3141–44, 3146–47 (DBA). The International Brotherhood of Electrical Workers represented T&H employees under a collective-bargaining agreement (CBA) that included a provision for arbitration of disputes “limited to matters of interpretation or application of express provisions of [the CBA].” 

Union members who repaired roofs at the Army base received the hourly rate for general maintenance workers under Schedule A of the CBA. The union, believing that the workers should have been classified as roofers under the DBA and paid the corresponding hourly rate under the Schedule, filed a grievance and sought arbitration. When T&H refused, claiming that the dispute was not arbitrable, the union sued in U.S. district court, which granted summary judgment for T&H. The union appealed.

Davis-Bacon Act—The DBA governs federally funded construction contracts and requires the contractor to pay each worker on the contract at least the prevailing wage in the locality for the type of work performed by the worker. 40 USCA § 3142.

The Department of Labor determines the prevailing wage for each type of work in each locality. Then the contracting officer for the contract determines the category for each of type of work to be performed. This establishes the minimum wage. 40 USCA § 3142(a)–(b); 29 CFR § 5.5(a). 

DOL has a robust system authorized by the DBA and DOL regulations for determining job classifications and resolving disputes over classifications. Category determinations and corresponding wage-rate calculations are made before contract award. See Univs. Research Ass’n v. Coutu, 450 U.S. 754 (1981); 29 CFR § 1.6. A potential contractor, worker or union can challenge a determination by requesting reconsideration or appealing to DOL’s Administrative Review Board(ARB), formerly the Wage Appeals Board (WAB).

Ordinarily, challenges to wage determinations must be made before contract award or the start of construction if there is no award. ICA Const. Corp. v. Reich, 60 F.3d 1495 (11th Cir. 1995). This rule ensures that “contractors competing for federally assisted construction contracts know their required labor costs in advance of bidding.” Unfairness to bidders would result if the awardee could challenge the contract’s wage determination after other competitors were excluded from participation. Modernization of the John F. Kennedy Fed. Bldg., WAB no. 94-09, 1994 WL 574115 (Aug. 19, 1994).

There are exceptions to this rule for certain circumstances, however, such as when a contractor requests a “conformance” to add a new wage classification to a contract after the contract has been awarded, 29 CFR § 5.5(a)(1)(ii), or when DOL exercises its strictly limited authority to incorporate a new wage determination “retroactive to the beginning of construction.” 29 CFR § 1.6(f). When DOL incorporates a new wage rate into a contract, the contractor typically will be “compensated for any increases in wages resulting from such change.” Id. 

DBA enforcement is the responsibility of the contracting agency and DOL. Employees can submit complaints regarding DBA violations to the CO, who can investigate and take action against an offending contractor. The CO can also refer disputes to DOL.

Complaints specifically on classification must be submitted to DOL for resolution. DOL procedures for those disputes include notification of the affected parties by the administrator of the DOL Wage and Hour Division, potential referral to an administrative law judge for factfinding, and eventual appeal of administrator decisions to the ARB. 29 CFR §§ 5.11, 7.19(b), 7.9(a). 

This elaborate administrative scheme seeks to provide consistency in administering and enforcing the DBA, and “balances the interests of contractors and their employees. Universities Research, 450 U.S. 754. Before bidding, contractors know their approximate labor costs, and employees can enforce the stipulated wages. The administrative scheme strictly limits changes to classifications or prevailing wage rates after construction has begun and provides for compensation to the contractor for changes. 

Arbitration—A court may order arbitration if the parties agreed to arbitrate that dispute. There is a presumption in favor of arbitrability. Granite Rock Co. v. Int’l Brotherhood of Teamsters, 561 U.S. 287 (2010). But the presumption applies only if the arbitration agreement is ambiguous about whether it covers the dispute. The court orders arbitration if the presumption is not rebutted. 

Thus, “the presumption favoring arbitration” applies in Federal Arbitration Act and labor cases, “only if it reflects, and derives its legitimacy from, a judicial conclusion that arbitration of a particular dispute is what the parties intended because their express agreement to arbitrate ... [is] best construed to encompass the dispute.” Id. This framework vindicates “the first principle that underscores all [the Supreme Court’s] arbitration decisions: Arbitration is strictly a matter of consent.” Id. 

Here, the CBA provides that “[g]rievances are limited to matters of interpretation or application of express provisions of this contract.” The union primarily argued that the dispute concerns the interpretation of Schedule A and Article 28 of the CBA. Schedule A contains the pay rates for work performed by various classifications of T&H employees at the Army base, including general maintenance workers and roofers. 

Article 28 provides that “the Davis-Bacon rates, as provided by the Contracting Officer at [the Army base], will be in effect until new Davis-Bacon wage rates are provided and will be paid to employees doing Davis-Bacon work.” 

The union also relied on (1) the CBA preamble, which states, “[i]t is the intent and purpose of the Company and the Union to set forth herein the entire Agreement with respect to wages, hours and working conditions as it relates to operation and maintenance activities ... and to facilitate peaceful adjustment of grievances,” and (2) CBA Article 30, which states,“[t]his Agreement ... shall be deemed to define the wages, hours, rate of pay and conditions of employment of the employees covered.“

The Tenth Circuit said that the union’s reliance on these CBA provisions was misplaced. The natural reading of the language of Article 28—“the Davis-Bacon rates, as provided by the Contracting Officer … will be in effect until new Davis-Bacon wage rates are provided and will be paid to employees doing Davis-Bacon work”—is that the Davis-Bacon rates come from the CO. Thus, the CO determines how to categorize the Davis-Bacon jobs performed under the contract and announces the wage rate for each job. The dispute here did not involve the wage rate for the general-maintenance or roofing category. Instead, it concerns how to categorize the roof-repair work. “[T]hat is the job of the Contracting Officer,” the Tenth Circuit said. See 29 CFR § 1.6(b) (“Contracting agencies are responsible for ... designating specifically the work to which ... wage determinations will apply”); 48 CFR § 22.404-2(a) (“The contracting officer... must designate the work to which each [wage] determination or part thereof applies”). 

Nothing in the CBA can reasonably be read as authorizing or imposing any duty on the union, T&H or the two together to determine the categorization of any job. In short, determining the categorization is not a matter of interpretation or application of any express provision of the CBA, the Tenth Circuit said. 

“Nor should we be surprised that the CBA declined to provide for arbitration of disputes regarding Davis-Bacon categorizations.” The task of categorizing jobs on federal construction projects under the DBA is a highly developed process under the guidance and ultimate control of DOL, the Tenth Circuit said. This process ensures national uniformity on which workers and employers rely. It reduces transaction costs and allows contractors to rely on rates set before contract awards. Without this system, contractors would likely have to raise their bids to protect against adverse decisions that might issue after construction begins. 

Thus, the Supreme Court stated that “disputes over the proper classification of workers under a contract containing Davis-Bacon provisions must be referred to [DOL] for determination.” The Supreme Court further held that if there are no such provisions in a contract because it was administratively determined that the contract does not call for Davis-Bacon work, an employee has no private judicial right of action under the DBA for back wages. Since then, because of the need for a uniform, reliable determination, the circuit courts have been virtually unanimous in holding that there is no private right of action to challenge worker classifications under the DBA. 

Arbitration of Davis-Bacon classification disputes would be even more problematic. The advantages of uniform, reliable determinations “would be completely undermined by leaving the decisions to the idiosyncrasies of a multitude of arbitrators,” the Tenth Circuit said. And contractors would need to adjust bids even higher because arbitration, which would not involve DOL, could not provide compensation to a contractor if it loses a classification dispute. 

The Court found more support in cases applying the primary-jurisdiction doctrine to prevent a federal court for resolving Davis-Bacon classification disputes in False Claims Act litigation even though a worker has the right to bring such litigation. The primary-jurisdiction doctrine provides that, in very limited circumstances, a court may refer a matter for initial resolution by an agency if referral will advance regulatory uniformity, enable the agency to answer a question within its discretion, or provide the court with the benefit of the agency’s expertise on technical or policy matters. U.S. ex rel. Wall v. Circle C, 697 F.3d 345 (6th Cir. 2012). When the issue in an FCA case is whether a contractor falsely certified compliance with the DBA, the courts distinguish a contractor’s misrepresentation of wages from its misclassification of workers. Determining whether the contractor has paid the wages it reported requires no agency expertise. But classification of workers requires deferral to DOL. Id. 

The Court also noted that a DBA regulation requires that covered contracts contain language that appears to bar arbitration of a claim such as the one at issue here. See 29 CFR § 5.5(a)(9). But because the parties did not provide a copy of the Army contract, the Court could not determine whether that contract contained the specified language.  

Finally, the Court said that the only relevant court or arbitral decision the Court was aware of concluded that DBA categorizations are not arbitrable. See Oil, Chem. & Atomic Workers Int’l Union v. EG & G Idaho, Inc., 769 P.2d 548 (Idaho 1989); Dyncorp v. Teamsters, Chauffeurs, Warehousemen Indus. & Allied Workers of Am., no. 93-0129-1264, 1993 WL 13767135 (Dec. 1, 1993) (Richman Arb.). 

The Court said that the cases cited by the union merely compelled arbitration of grievances arising under the CBA that had nothing to do with classification of work under the DBA. 

The Court was also unpersuaded by cases cited for the proposition that a dispute is arbitrable unless a specific CBA provision removes the grievance from the scope of arbitration. Here, the CBA dispute-resolution clause significantly constrained the disputes that are covered by limiting grievances to “matters of interpretation or application of express provisions of this contract.”

The only “express provision” that encompasses Davis-Bacon classifications implicitly assumes that the matter is left to the federal agency. CBA Article 28 provides that “the Davis-Bacon rates” will be “provided by the Contracting Officer.” 

In light of the strong policy in the DBA and the implementing regulations in leaving worker-classification decisions to the contracting agency and DOL, “it would be obtuse” to interpret the CBA as stating that Davis-Bacon worker classification is a matter of interpretation or application of an express provision of the CBA, the Court said in holding that the dispute was not arbitrable. 

Practitioner’s Comment—This is the case of the dog that didn’t bark. The Tenth Circuit issued a narrow ruling deciding the case on the text of the arbitration clause instead of taking on the issue of what the correct forum is for DBA classification disputes. The Court focused on whether the lower court correctly decided that an arbitration clause in a CBA did not cover a dispute over worker classification. The Court found that the union could not demand to arbitrate whether the roofers were owed Davis-Bacon wage rates and, thus could not challenge the rate of pay due the worker. In analyzing the threshold arbitration issue, the Tenth Circuit examined the doctrines and policy decisions inherent in the DBA enforcement scheme. The Court, however, limited its holding to the text of the CBA and left the larger question of DBA classification dispute resolution to a future case. But make no mistake, in holding that the arbitration clause did not cover worker classification disputes, the Court reached the correct outcome in the case. 

In its decision, the Court pointed to the specific text of the arbitration clause which stated that arbitration was “limited to matters of interpretation or application of express provisions of this [the CBA] contract.” The Court also stated that the natural reading of the contract attributed determination of DBA wage rates to the CO, which implicitly includes the categorization of job classifications. Finally, the Court concluded that nothing in the CBA could be read to impose this job classification duty on either the union or the contractor and therefore it was not a “matter[] of interpretation or application of express provisions of this contract.” 

Accordingly, the Tenth Circuit affirmed the lower court’s holding that this arbitration clause did not cover a DBA job classification dispute. The case is based on the narrow language of the arbitration clause and the Court’s interpretation of the parties’ intent. What this decision does not do is hold that an arbitration clause can never cover DBA job classification disputes. Different CBA language thus could yield a different result. The Court’s decision is limited to the terms of this agreement between the union and the contractor. 

The Court never reached the more interesting question: are Davis-Bacon job classifications arbitrable? Most courts which have considered DBA classification issues in non-arbitral contexts have found that the determination is committed to DOL. Even here, the Tenth Circuit explains that worker classification issues must be submitted to DOL for resolution, and that the DBA’s administrative scheme is meant to provide consistent adjudication of claims. The Court then says: “[n]or should we be surprised that the CBA declines to provide for arbitration of disputes regarding Davis-Bacon categorizations.” The Court’s narrow ruling on the CBA language, however, begs the issue of what would happen if the arbitration clause did expressly purport to cover Davis-Bacon classification issues. Would the union be able to compel the contractor to arbitrate? 

The answer to that, as the Tenth Circuit discusses but does not reach, is still likely no. The seminal case in determining Davis-Bacon dispute resolution is Universities Research, 450 U.S. 754, which was largely influential in the Tenth Circuit’s arguments. There, the Supreme Court stated that disputes over the classification of workers in a contract with DBA provisions must be referred to DOL for adjudication. Id at 762. Universities Research also held that Congress did not intend to create a private right of action for back wages under a contract that was deemed not to be covered by the DBA. Id at 784. This leaves parties only administrative avenues, specifically through the DOL investigatory process. 

The issue is similar to other cases where courts have found that the DBA does not confer a private right of action and that disputes must be committed to the DOL process, thus precluding litigation in the courts. See, e.g., Grochowski v. Phoenix Const., 318 F.3d 80 (2d Cir. 2003); U.S. for benefit of Glynn v. Capeletti Bros., Inc., 621 F.2d 1309 (5th Cir. 1980); Operating Eng’rsHealth & Welfare Tr. Fund v. JWJ Contracting Co., 135 F.3d 671 (9th Cir. 1998). If courts have stated that the disputes can’t be litigated, it stands to reason they can’t be arbitrated. Note that even where there is a state or local law (like in the District of Columbia) allowing prevailing wage suits to proceed as a private cause of action pursuant to a special statutory provision, courts have carved out classification issues from that right and found that classification disputes are still committed to the DOL investigatory process. See Garcia v. SkanskaUSA Bldg., Inc., 324 F. Supp. 3d 76 (D.D.C. 2018). 

In addition, in a footnote, the Tenth Circuit pointed to 29 CFR § 5.5(a)(9), which requires DBA covered contracts to contain a provision prohibiting disputes arising out of the labor provisions of a contract from being subject to the general disputes clause of the contract. The issue with the Tenth Circuit’s interpretation of 29 CFR § 5.5(a)(9) is that the regulation refers to labor disputes arising between the contractor/subcontractor and the Government agency they are contracting with. That Government contract disputes provision is not necessarily dispositive of the employee’s arbitral rights. Still, it does speak to the intention for DOL to resolve DBA classification disputes. 

The Court also pointed to one arbitrator who ultimately found that the classification issue was not arbitrable. Dyncorp, 1993 WL 13767135. But that is a thin reed to support the ruling. 

The lack of binding authority in any circuit on this subject is ultimately what makes this case interesting. The effect of the holding is limited to the specific arbitration clause directly at issue in this case. However, it is the analysis of the legislative history, case law, and regulations of the DBA that will provide the groundwork fora future dispute that will focus on the arbitrability of DBA classifications as a whole rather than in the context of a single CBA.

This Practitioner’s Comment was written for The Government Contract or by Kirby Rousseau, an attorney with Abrahams Wolf-Rodda, LLC. He can be reached at krousseau@awrcounsel.com or at (301) 637-3634.