ADMINISTRATIVE REVIEW BOARD UNITED STATES DEPARTMENT OF LABOR WASHINGTON, DC. In the matter of- WAGE AND HOUR DIVISION, Complainant, V. Case 2011-SCA-00002 GARCIA FOREST SERVICE, L.L.C., I and SAMUEL GARCIA, an individual, and FLOR GARCIA, an individual, Respondents. PETITION FOR REVIEW OF ADMINISTRATIVE LAW DECISION AND ORDER COME NOW, Respondents Garcia Forest Service, LLC, Samuel Garcia and Flor Garcia (hereinafter ?Respondents?), and pursuant to 29 C.F.R. 6.20, submits this Petition for Review to the Administrative Review Board for review of the Administrative Law Judge Kenneth A. Krantz?s Decision and Order in the above-captioned matter for the reasons set forth below. ISSUE PRESENTED Whether the ALJ erred in debarring Respondents Garcia Forest Service, LLC and Samuel Garcia from receiving federal government contracts for a three year period by ?nding that Respondents did not meet the ?unusual circumstances? legal standard under 29 C.F.R. BACKGROUND Respondent Garcia Forest Service, LLC is a small company based in Rockingham, North Carolina primarily engaged in reforestation work throughout the United States. (Trans. p. 19 and 392).1 The company has been engaged in business since 1995. (Trans. p. 18). The company primarily uses the visa program to recruit and employ foreign guest workers to perform seasonal reforestation work under its contracts. (Trans. p. 394). Respondent Samuel Garcia is the President of Garcia Forest Service, LLC and has a 100% ownership in the company. (Trans. p. 18 and 392). As part of his duties, Mr. Garcia oversees the general operations of the company including negotiating various contracts including those with the US. Department of Agriculture, National Forestry Service. (Trans. p. 18-19, 392-393). As president and sole owner of the company, Mr. Garcia?s job duties include obtaining contracts for the company and hiring laborers to perform the work on the jobs. (Trans. p. 18). In 2007, Respondent Garcia Forest Service, LLC entered into a contract with the U. S. Government for the performance of various forestry services in Minnesota. One of these contracts took place in the Superior National Forest in Tofte, Minnesota. (Trans. p. 21). To perform this contract, Respondent Garcia Forest Service sent a crew of about 12 workers, most of which were H-2B, along with one crew leader, Flavio Hernandez, to Minnesota (hereinafter referred to as ?Tofte Crew?) (Trans. p. 21). The 1 The transcript of the December 11 and 12, 2012 hearing before ALJ Krantz will be cited in this brief as ?Trans. p. [page number].? References to exhibits introduced at the hearing will be cited to as for Complainant?s exhibits or for Respondent?s exhibits, as apprOpriate. The Chief Administrative Law Judge is responsible for forwarding a copy of the record of the hearing to the Board. 29 C.F.R. 8.8. 2 H-2B workers were recruited and hired from Mexico and have not worked for Respondents since the 2007 season. (Trans. p. 435 and 459). In accordance with this federal contract, ReSpondent Garcia Forest Service agreed to pay its workers a certain guaranteed prevailing rate per hour worked, along with fringe bene?ts and any necessary overtime compensation as required under the Service Contract Act (41 U.S.C.A. 6701, et seq.) (hereinafter and the Contract Work Hours and Safety Standards Act (40 U.S.C.A. 3701, et seq.) (hereinafter (Trans. p. 78; CX-2, bates number 326-327). Although Respondent Garcia Forest Service typically paid its workers by the hour (Trans. p. 299 and 403; Deposition of Flavio Hernandez, p. 37 and 45), under this contract the company decided to pay the Tofte crew on a production basis to provide an incentive for the crew to work faster. (Trans. p. 24). Flavio Hernandez served as the crew leader for this contract and would record the daily hours, including start/stop times and breaks, worked by the crew. (Trans. p. 39, 54; (OX-143 Deposition of Flavio Hernandez, p. 16-17, 2023)). He also recorded the amount of trees planted or acres cleared by each worker, depending on the specific work that was performed by the crew. (OX 14: Deposition of Flavio Hernandez, p. 15- 16). He recorded the hours worked and production for each worker on his own personal notebooks but not on any formal company record keeping forms. (Trans. p. 55, 413; CX-143 Deposition of Flavio Hernandez, p. 17, 22-23, 27.) At the end of the week, Mr. Hernandez would call into Garcia Forest Services? main of?ce in North Carolina and would relay the production earnings for each worker and the total amount of hours worked by the crew for the week. (Trans. p. 56; OX 141 3 Deposition of Flavio Hernandez, p. 2627). Garcia Forest Service?s payroll clerk, Veronica Gardu?o Garcia, was then responsible for computing each employee?s earnings and issuing out their paychecks based on the information provided by Mr. Hernandez. (Trans. p. 19-20, 52 and 275). Based on the information provided by Mr. Hernandez, Veronica Gardu?o Garcia knew the amount that each worker earned based on their production and she also knew how many hours each employee on the crew worked during the week. (Trans. p. 284, 305). She would calculate and record the production earnings accumulated by each individual worker on ?Planting? worksheets. (Trans. p. 278-279; p. 1). On separate spreadsheets, Veronica Gardu?o Garcia would keep track of the actual work hours for each individual employee and would calculate the guaranteed hourly rate owed to each worker under the federal contract, including the fringe bene?ts, overtime earnings and any holiday pay. (Trans. p. 287, 302-303, 305-307). Veronica Gardu?o Garcia would take the total amount of hours worked and multiple it by the guaranteed contract rate and would add in the appropriate fringe bene?t and any overtime or holiday hours to determine the minimum amount the worker was due for the week. (Trans. p. 305-307, 325). Veronica Gardu?o Garcia would compare the hourly earnings to each worker?s production earnings to ensure that each worker made at least the minimum guaranteed rate including the necessary fringe bene?t and any overtime. (Trans. p. 285, 293-294, 305-307). This was done to ensure that the minimum hourly guarantee was met for each hour of work regardless of the production earnings for the worker. Id. If the production earnings did not ensure that a worker would receive the minimum hourly guarantee, the worker was then paid for his actual hours at the 4 guaranteed rate under the contract. (Trans. p. 283-285). If the worker?s production earnings at least equaled the minimum hourly guarantee, Veronica Gardu?o Garcia would create payroll checks for each worker using the company?s electronic payroll system. (Trans. p. 317). To pay the worker for production, Veronica Gardu?o Garcia had to add hours to the worker?s time until it covered the higher production earnings. (Trans. p. 283-284). Veronica Gardu?o Garcia believed it was necessary to create these formulated hours since Respondents? electronic payroll system was designed to process earnings based on hours and not on production. (Trans. p. 317-318). Veronica Gardu?o Garcia never paid workers for fewer hours than what they actually worked. (Trans. p. 315). Veronica Gardu?o Garcia always paid the worker the higher of their production earnings or their hourly earnings under the contract. (Trans. p. 315). Mr. Garcia did not come up with this pay system and was not involved in creating the system or spreadsheets. (Trans. p. 410-411). It was created and implemented by Veronica Gardufio Garcia. (Trans. p. 322-323). Mr. Garcia was not at the of?ce very much, and if he was he was busy attending to other matters, and thus he did not review the payroll computed by Veronica Gardu?o Garcia. (Trans. p. 334). Veronica Gardu?o Garcia was not aware that if she was paying the workers on a production basis that she would have to add in the fringe bene?t, overtime and holiday pay separately. (Trans. p. 323-324). Veronica Gardufio Garcia believed that she covered any holiday pay by adding in hours to the workers pay for that particular week before comparing it to the worker?s production earnings. (Trans. p. 325). On June 20, 2007, Wage Hour Investigators Kristin Tout and Corey Walton ?'om 5 the Minneapolis, Minnesota Wage Hour District Office were assigned to conduct a routine audit of Garcia Forest Service?s Tofte crew (referenced as Case ID No. 148917) (Trans. p. 40, 76-77). Based on the interview statements taken by Ms. Tout and Mr. Walton, the workers knew that they were being paid on a production basis for this particular contract. (Trans. p. 155, 160). On the ?rst day of the investigation, Ms. Tout was also made aware from one of the workers that the hours re?ected on the payroll records were not the actual hours worked and that these hours were calculated by the main of?ce to pay the workers on a production basis. (Trans. p. 161-163; OX- 21). One worker explained that the hours re?ected on their pay stub were not the actual hours that the crew worked but rather was the product of some accounting work to pay the workers based on production for this contract. (OX-21). During his ?rst interview, Mr. Hernandez explained that he keeps track of the daily hours worked by his crew, records lunch breaks, and that he sends it in to the main of?ce to be used to calculate the workers pay. (OX-15, p. 3). He also stated that he would send in information related to production/hours to the company?s of?ce in North Carolina by mail. 15, p. 2). On the following day, Ms. Tout and Mr. Walton went to the hotel where the crew was staying to get some additional information and records from Mr. Hernandez in relation to the crew. (Trans. p. 101). During his second interview taken the very next day on June 22, 2007, Mr. Hernandez detailed the production earning rate set for this particular contract and also provided the investigators with a sample record he maintained recording the amount of acres cleared for brush clearing for each worker. (OX-15, p. 7; Trans. p. 101). At the conclusion of her investigation, Ms. Tout concluded that the company did 6 not maintain accurate payroll records including hours worked and failed to pay the appropriate guaranteed prevailing rate for each hour worked, including fringe bene?ts and overtime. (Trans. P. 124- 125). Using weekly hours that were reconstructed based on her interview statements with the Tofte crew, Ms. Tout calculated that the crew was owed a little over $27,000 in back wages under the SCA and (Exhibit CX-81 Summary of Unpaid Wages). Some workers were only assessed back wages of $112.00 where they may have only worked a week or two. (Trans. p. 354). The back wage assessment only covered 10 weeks, or two and a half months. (OX-72 covering the weeks of 5/4/2007, 5/11/2007, 5/18/2007, 5/25/2007, 6/1/2007, 6/8/2007, 6/15/2007, 6/22/2007, 6/29/2007 and 7/6/2007). The back wage assessment was only about 3% of the total value of Respondents? contract with the federal government which was extremely labor intensive. (Trans. p. 77-78; CX-2, bates number 265 and 284; Exhibit CX-8I Summary of Unpaid Wages). Despite not fully understanding the nature of the violations and also having some concerns with the accuracy of the hours worked and wages owed calculated, Mr. Garcia paid all of the assessed back wages timely and all of the payments were veri?ed. (Trans. p. 45, 48, 142, 428, 433-434). After the closing conference, Mr. Garcia agreed to future compliance and stated that he would just go back to paying by the hour since it was much easier and would not led to any issues. (Trans. p. 433). Since the conclusion of this investigation, all crews have been paid by the hour. Id. As part of her investigation, Ms. Tout acknowledged that Respondents had a good compliance history, fully cooperated during the investigation and paid the amount claimed by Wage and Hour. (Trans. p. 21 1 and 218; RX-2 and This 7 history including a prior Wage and Hour Investigation covering the period of January 30, 3005 through January 27, 2007 (SCA Narrative Case ID3 1445902). In that case, the investigator noted that ?If employees work more than 40 hours per week, the employer pays these hours at time and a half the employee?s regular rate. The employer has a lead employee at each site where they have a Federal contract which will tally the hours worked weekly and forward that information to the main office.? (RX-4, p. 3). On the following page, the investigator noted there was ?No violations found? for minimum wage, fringe bene?ts or recordkeeping. (RX-4, p. 4). There was a violation of the holiday pay and the investigator reported that the company was under the impression that these employees had to work a 40'hour work week in order to receive the holiday pay bene?t. Id. This violation amounted to back wages owed of $5,393 to 66 employees which worked out to $81.71 per employee. (Trans. p. 212). The Summary noted that the comp any paid the full back wage holiday pay even before the ?nal conference with the investigator and that this was the ?rst investigation of the company. (RX-4, p. 10). On the next page of the narrative report the investigator also noted that ?the employer agreed to pay all wages and has in fact, paid in full? and that ?the Employer has given assurances of the full future compliance.? Id. at 11. The investigator also noted that ?There is no record of prior investigations or violations of labor standards by this employer? and ?no evidence of falsi?cation? and that the company maintained accurate records.? Id. The investigator also noted that ?both Mr. and Mrs. Samuel good faith and cooperation? during the entire course of the investigation and that once the laws and regulations were explained, they 8 were followed and necessary steps were taken to achieve compliance and back wages were paid immediately. Id. Ms. Tout also noted two other prior investigations Case ID3 1500737 and 1522467. (Trans. p. 214; and Ms. Tout noted that both of these subsequent investigations disclosed no violations against the company. (Trans. p. 215; RX-2 and Under the SCA Narrative (Case ID: 15007 37) covering the period of March 12, 2006 through March 9, 2008, the investigator noted as part of the investigation of Garcia Forest that the ?foreman at the maintains the employees? hours? and that no violations of the SCA minimum wage, fringe bene?ts or recordkeeping were found. (Trans. p. 406; RX-6, p. 23). Also, the investigation found that the employer paid all holidays and the investigator stated that since ?no violations were found and the company agreeing to continue compliance in the future, I recommend that the ?le be administratively closed.? (Trans. p. 407; RX-6, p. 3). The investigation also discovered no FLSA violations. (RX-6). On October 18, 2010, the Administrator of the Department of Labor-Wage and Hour Division (hereinafter ?Administrator?) ?led a Complaint against Respondents seeking to bar them from bidding or working on federal government contracts for a three year period for the violations identi?ed by Ms. Tout of the provisions of the SCA and ReSpondents ?led a timely Answer defending against disbarment averring, among other things, that ?unusual circumstances? as set forth under 29 C.F.R. 4.188(b) exist in this case which warrant relief from the debarment sanction. A two-day hearing on this disbarment action was held before the Honorable Kenneth A. Krantz on December 11 and 12, 2012 in Charlotte, North Carolina. On March 27, 2014, ALJ Krantz issued a Decision and Order ?nding that while Respondents may have acted in good faith in attempting to comply with the law and contract requirements, Respondents Garcia Forest Service, LLC and Samuel Garcia committed certain SCA and violations and failed to meet the higher standard of ?unusual circumstances? to avoid debarment. Separately, ALJ Krantz held that Flor Garcia, Mr. Garcia?s wife, was not a ?party responsible? for violations in this case and thus not subject to disbarment. Respondents do not seek review of the ?nding with regards to Flor Garcia. PETITION FOR REVIEW ALJ Krantz erred in his Decision and Order where the facts and evidence presented during the hearing demonstrated that Respondents met the three-part test to establish ?unusual circumstances? along with mitigating factors which weigh against imposing the ultimate penalty against Respondents. 29 C.F.R. ALJ Krantz acknowledged that none of the alleged violations of the SCA or were shown to be deliberate or willful based on aggravated culpable conduct to violate the law or to intentionally deprive the workers of their wages and earnings. ALJ Krantz accepted that any issues related to paying the workers on a production basis and manipulating the hours was based on the ?good faith effort to incentivize the workers with more pay for more work.? p. 6). It is also undisputed that this pay system was used for only 10 weeks during one particular contract in 2007 for one crew. 10 As soon as the company learned about some issues with this pay system during a Wage and Hour investigation, it immediately paid the full amount of back wages assessed without question despite some issues with the accuracy of the hours worked and wages owed calculated by the Wage Hour Investigator. The company also went back to paying its crew simply by the hour to avoid any further issues. The SCA regulations speci?cally allow the payment of production earnings but the company and payroll clerk simply did not understand that fringe bene?ts, overtime and holiday pay had to be paid separately. (29 C.F.R. 4.166; CX-2, bates number 326). This was an inadvertent and technical violation that led only to a minor and de minimis withholding of wages for a short period of time. There was also no evidence that these technical violations were designed to evade Respondents? legal or contractual obligations or to deprive the workers of their proper earnings. While it can be argued that Respondents were negligent in failing to ascertain whether the production pay system complied with its legal obligations, such mere negligence is insuf?cient to uphold a ?nding of culpable conduct. Elaine's Cleaning Service, Inc. v. US. Dept. of Labor, 1995 WL 1612534, *6 (S.D.Ohio 1995). In total, the assessed back wages was only about 3% of the total value of Respondents? contract with the federal government which was extremely labor intensive. Even taking into account that the back wage calculations were severely overestimated by using an unreasonable estimate of hours worked, violations that amount to only 3% of the total value of a labor intensive contract is minor and de mim'mus. Elaine's Cleaning Service, Inc., 1995 WL 1612534, And Respondents 11 immediately paid the assessed back wages without question as soon as they were ?nalized by the compliance of?cer. ALJ Krantz also erred in ?nding that the foreman, Mr. Flavio Hernandez, misled the investigators during the initial interviews. From the very beginning of her investigation, Ms. Tout was made aware that the company was paying the one Tofte crew on a production basis and that the hours re?ected on the payroll summaries and . weekly worksheets were formulated to pay the workers more for their production earnings. (Trans. p. 155, 160-163; On the very ?rst day of her investigation, Mr. Hernandez explained that he kept an accurate account of the daily hours worked by his crew which he sent in to the main of?ce to be used to calculate the workers pay. (Trans. p. 191; p. 3). On the very second day of the Wage Hour Investigation, Mr. Hernandez detailed the production earning rate set for this particular contract and also provided the investigators with a sample record he maintained recording the amount of acres cleared for brush clearing for each worker. (OX 15, p. 7; Trans. p. 101). When requesting further records as part of her investigation, Ms. Tout speci?cally asked for production earning records. (Trans. p. 109; And in an email only a few months after the investigation began, Ms. Tout con?rmed her understanding that the crew in question were paid by production. (Trans. p. 186- 187; bates number 47). Ms. Tout acknowledges that after her follow up email, Mr. Garcia produced the requested production worksheets. (Trans. p. 195). On February 6, 2008, Mr. Garcia participated in a telephone interview with Ms. Tout again stating that the Tofte crew was paid on a production basis where all other crews were paid by 12 the hour. (Trans. p. 206207; CX-22). Ms. Tout was thus aware the crew was paid on a production and not an hourly basis from the very beginning of her investigation. (Trans. p. 188, 206-208). The Wage Hour Investigators knew from the beginning about the payment system and the created hours used to pay the workers on a production basis. While some of the payroll records were inadvertently lost or destroyed, there was no deliberate effort on the part of Respondents or its employees to mislead or hide how it paid the Tofte crew. The mitigation factors also weight against debarment for Respondents Where it was established that Respondents have a good compliance history, fully cooperated during the investigation and paid the amount claimed by Wage and Hour. 29 C.F.R. In fact, Garcia Forest Service works extensively on federal contracts and utilizes the H-2B visa program and thus has been subject to numerous Wage Hour and other audits that either found no violations or only minor iSSues that were quickly remedied. During these audits it was noted that the company fully cooperated in all investigations, immediately paid any back wages due and that the company had no history of recordkeeping violations or falsi?cation of records. See 9. g. Case ID: 1500737 and 1522467 RX-6). ALJ Krantz erred by failing to take into account Respondents? good compliance history with no evidence of falsi?cation of hours or serious violations of the law. ALJ Krantz only relied on the general boiler-plate notice of disbarment language which in no way was directed speci?cally at the actions of Respondent and in no way supported disbarment in this case. 13 Beyond these factors, disbarment against Respondents does not serve a legitimate public interest and instead is only designed to punish this small family run business that relies almost exclusively on government contracts. Not only would disbarment negatively affect Respondents, but it would also signi?cant hurt the company?s innocent employees by threatening their employment. ALJ Krantz simply erred by not taking into account these mitigating factors when making his decision to disbar Respondents. See Dantran, Inc. v. US. Dept. of Labor, 171 F.3d 58, 68, 73 (1st Cir. 1999) (court rescinded debarment order and reversed decision of district court, holding that although the plaintiffs violated certain portions of the SCA unusual circumstances were present to relieve the contractor from disbarment Where there was a lack of culpability, the contractor paid the back wages, there was confusion over the wage requirements, and the contractor had a good history of compliance). Debarment is inappropriate where the violations are insigni?cant or minor because ?debarment against innocent and petty violations was not intended.? Summitt Investigative Service. Inc. v. Herman, 34 F.Supp.2d at 20 (citing Federal Food Serv., Inc. v. Donovan, 658 F.2d 830, 834 1981)). Likewise, under Federal Acquisition Regulations the federal government has acknowledged the serious nature of debarment or suspension and cautions that such sanctions be imposed only in the public interest for the Government's protection and not for purposes of punishment. See 48 C.F.R. As these facts demonstrate, none of the alleged violations can be considered willful, deliberate or of an aggravated nature based on culpable conduct and thus disbarment in this case would be Wholly disprOportionate to the offense. Relief from 14 disbarment is speci?cally provided for under the implementing regulations and was designed precisely to address this situation where the alleged violations were minor, technical and inadvertent, and where the company has a good compliance history, fully cooperated during the investigation, paid back all wages assessed and has made suf?cient assurances of future compliance. Consequently, ALJ Krantz?s decision to disbar Respondents was contrary to the law and should be reversed. CONCLUSION For the foregoing reasons, Respondents respectfully request that the Administrative Review Board grant this Petition for Review and issue a brie?ng schedule. Respectfully submitted, this 5th day of May, 2014. arry StiV/g WIMBERLY LAWSON STECKEL eorg?ia Bar 0. 682555 SCHNEIDER STINE, P.C. Ray Perez, Esq. 3400 Peachtree Road, NE, Suite 400 Georgia Bar No. 142466 Atlanta, Georgia 30326 Attorneys for Respondents phi (404)365-0900 fx: (404)261-3707 jls@wimlaw.com rp@wimlaw.com 15 ADMINISTRATIVE REVIEW BOARD UNITED STATES DEPARTMENT OF LABOR WASHINGTONthe matter of: WAGE AND HOUR DIVISION, Complainant, V. 1 Case No.3 2011-SCA-00002 GARCIA FOREST SERVICE, L.L.C., and SAMUEL GARCIA, an individual, and FLOR GARCIA, an individual, Respondents. CERTIFICATE OF SERVICE I hereby certify that I have on this date served RespondentS?Petition fereVieW Law Judge? Decision and Order to the following parties by US. Mail: Administrative Review Board United States Department of Labor Suite S-5220 200 Constitution Ave., NW. Washington, DC 20210 Joan E. Gestrin, Regional Solicitor Linda J. Ringstad, Attorney United States Department of Labor Of?ce of the Solicitor 230 South Dearborn Street, Room 844 Chicago, IL 60604 Honorable Stephen L. Purcell Acting Chief Administrative Law Judge Of?ce of Administrative Law Judges 800 Street, N.W., Suite 400N Washington, DC 20001'8002 Administrator Wage and Hour Division United States Department of Labor Room FPB 200 Constitution Ave., NW. Washington, DC 20210 Associate Solicitor and Counsel for Trial Litigation Division of Fair Labor Standards United States Department of Labor Room 200 Constitution Ave., NW. Washington, DC 20210 This 5th day of May, 2014. WIMBERLY LAWSON STECKEL SCHNEIDER STINE, RC. 3400 Peachtree Road, NE, Suite 400 Atlanta, Georgia 30326 ph: (404)365-0900 fx: (404)261-3707 jls@wimlaw.com rp@wimlaw.com Honorable Kenneth A. Krantz Administrative Law Judge Of?ce of Administrative Law Judges 11870 Merchants Walk, Suite 204 Newport News, VA 23606 Mr. Samuel Garcia Garcia Forest Service, LLC P. O. Box 789 Rockingham, NC 28380 .Lar Stine Ge rg' 82555 Ray erez, Esq. Georgia Bar No. 142466 A (Eton: eys for Respondents