Tariff Applicability to SCA.pdf

§4.117 for construction work subject to the Davis-Bacon Act and for services of a different type to be performed by serv-ice employees, the contracting officer may include separate specifications for each type of work in a single contract calling for the performance of both types of work. For example, a con-tracting agency may invite bids for the installation of a plumbing system or for the installation of a security alarm system in a public building and for the maintenance of the system for one year. In such a case, if the contract is principally for services, the exemption provided by section 7(1) will be deemed applicable only to that portion of the contract which calls for construction activity subject to the Davis-Bacon Act. The contract documents are re-quired to contain the clauses pre-scribed by §4.6 for application to the contract obligation to furnish services through the use of service employees, and the provisions of the McNamara- O'Hara Act will apply to that portion of the contract.

(2) Service or maintenance contracts in-volving construction work. The provi-sions of both the Davis-Bacon Act and the Service Contract Act would gen-erally apply to contracts involving construction and service work where such contracts are principally for serv-ices. The Davis-Bacon Act, and thus the exemption provided by section 7(1) of the Act, would be applicable to con-struction contract work in such hybrid contracts where:

(i) The contract contains specific re-quirements for substantial amounts of construction, reconstruction, alter-ation, or repair work (hereinafter re-ferred to as construction) or it is ascer-tainable that a substantial amount of construction work will be necessary for the performance of the contract (the word "substantial" relates to the type and quantity of construction work to be performed and not merely to the total value of construction work (whether in absolute dollars or cost percentages) as compared to the total value of the contract); and

(ii) The construction work is phys-ically or functionally separate from, and as a practical matter is capable of being performed on a segregated basis

29 CFR Subtitle A (7-1-11 Edition) from, the other work called for by the contract.

[48 FR 49762, Oct. 27, 1983; 48 FR 50529, Nov. 2 1983]

§4.117 Work subject to requirements of Wash-Healey Act.

(a) The Act, in paragraph (2) of sec-tion 7, exempts from its provisions "any work required to be done in ac-cordance with the provision of the Walsh-Healey Public Contracts Act" (49 Stat. 2036, 41 U.S.C. 35 et seq.). It will be noted that like the similar provision in the Contract Work Hours and Safety Standards Act (40 U.S.C. 329(b)), this is an exemption for "work", i.e., specifica-tions or requirements, rather than for "contracts" subject to the Walsh- Healey Act. The purpose of the exemp-tion was to eliminate possible overlap-ping of the differing labor standards of the two Acts, which otherwise might be applied to employees performink work on a contract covered by the Service Contract Act if such contract and their work under it should also be deemed to be covered by the Walsh- Healey Act. The Walsh-Healey Act ap-plies to contracts in excess of $10,000 for the manufacture or furnishing of materials, supplies, articles or equip-ment. Thus, there is no overlap if the principal purpose of the contract is the manufacture or furnishing of such ma-terials etc., rather than the furnishing of services of the character referred to in the Service Contract Act, for such a contract is not within the general cov-erage of the Service Contract Act. In such cases the exemption in section 7(2) is not pertinent. See, for example, the discussion in §§4.131 and 4.132.

(b) Further, contracts principally for remanufacturing of equipment which is so extensive as to be equivalent to manufacturing are subject to the Walsh-Healey Act. Remanufacturing shall be deemed to be manufacturing when the criteria in paragraph (b)(1) or

(2) of this section are met.

(1) Major overhaul of an item, piece of equipment, or materiel which is de-graded or inoperable, and under which all of the following conditions exist:

(i) The item or equipment is required to be completely or substantially torn down into individual components parts;

and

Office of the Secretary of Labor

(ii) Substantially all of the parts are reworked, rehabilitated, altered and/or

:ilaced; and H 11) The parts are reassembled so as to furnish a totally rebuilt item or piece of equipment; and '-(iv) Manufacturing processes similar to those which were used in the manu-facturing of the item or piece of equip-ment are utilized; and

(v) The disassembled componets, if usable (except for situations where the number of items or pieces of equipment involved are too few to make it prac-ticable) are commingled with existing inventory and, as such, lose their iden-tification with respect to a particular piece of equipment; and .(vi) The items or equipment over-hauled are restored to original life ex-pectancy, or nearly so; and

(vii) Such work is performed in a fa-cility owned or operated by the con-tractor.

"(2) Major modification of an item, piece of equipment, or materiel which is wholly or partially obsolete, and under which all of the following condi-tions exist:

(i)The item or equipment is required to be completely or substantially torn down; and

(ii)Outmoded parts are replaced; and (iii)The item or equipment is rebuilt or reassembled; and (iv)The contract work results in the furnishing of a substantially modified

- item in a usable and serviceable condi-tion; and

(v)The work is performed in a facil-ity owned or operated by the con-tractor.

(3) Remanufacturing does not include the repair of damaged or broken equip-ment which does not require a com-plete teardown, overhaul, and rebuild as described in paragraphs (b)(1) and (2) of this section, or the periodic and rou-tine maintenance, preservation, care, adjustment, upkeep, or servicing of equipment to keep it in usable, service-able, working order. Such contracts typically are billed on an hourly rate (labor plus materials and parts) basis.

Any contract principally for the work described in this paragraph (b)(3) is subject to the Service Contract Act.

Examples of such work include:

§4.118

(i) Repair of an automobile, truck, or other vehicle, construction equipment, tractor, crane, aerospace, air condi-tioning and refrigeration equipment, electric motors, and ground powered industrial or vehicular equipment;

(ii) Repair of typewriters and other office equipment (see §4.123(e));

(iii) Repair of appliances, radios tele-vision, calculators, and other elec-tronic equipment;

(iv) Inspecting, testing, calibration, painting, packaging, lubrication, tune-up, or replacement of internal parts of equipment listed in paragraphs (b)(3)(i), (ii), and (iii) of this section;

and

(v) Reupholstering, reconditioning, repair, and refinishing of furniture.

(4) Application of the Service Con-tract Act or the Walsh-Healey Act to any similar type of contract not de-cided above will be decided on a case-by-case basis by the Administrator.

§4.118 Contracts for carriage subject to ublished tariff rates.

The Act, in paragraph (3) of section 7, exempts from its provisions "any con-tract for the carriage of freight or per-sonnel by vessel, airplane, bus, truck, express, railway line or oil or gas pipe-line where published tariff rates are in effect". In order for this exemption to be applicable, the contract must be for such carriage by a common carrier de-scribed by the terms used. It does not, for example, apply to contracts for taxicab or ambulance service, because taxicab and ambulance companies are not among the common carriers speci-fied by the statute. Also, a contract for transportation service does not come within this exemption unless the serv-ice contracted for is actually governed by published tariff rates in effect pur-suant to State or Federal law for such carriage. The contracts excluded from the reach of the Act by this exemption are typically those where there is on file with the Interstate Commerce Commission or an appropriate State or local regulatory body a tariff rate ap-plicable to the transportation involved, and the transportation contract be-tween the Government and the carrier is evidenced by a Government bill of lading citing the published tariff rate.

An administrative exemption has been

§4.119 provided for certain contracts where such carriage is subject to rates cov-ered by section 10721 of the Interstate Commerce Act and is in accordance with applicable regulations governing such rates. See §4.123(d). However, only contracts principally for the carriage of "freight or personnel" are exempt.

Thus, the exemption cannot apply where the principal purpose of the con-tract is packing, crating, handling, loading, and/or storage of goods prior to or following line-haul transpor-tation. The fact that substantial local drayage to and from the contractor's establishment (such as a warehouse) may be required in such contracts does not alter the fact that their principal purpose is other than the carriage of freight. Also, this exemption does not exclude any contracts for the transpor-tation of mail from the application of the 'Act, because the term freight does not include the mail. (Fin' an adminis-trative exemption of certain contracts with common carriers for carriage of mail, see §4.123(d).)

§ 4.119 Contracts for services of com-munications companies.

The Act, in paragraph (4) of section 7, exempts from its provisions "any con-tract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communica-tions Act of 1934." This exemption is applicable to contracts with such com-panies for communication services reg-ulated under the Communications Act.

It does not exempt from the Act any contracts with such companies to fur-nish any other kinds of services through the use of service employees.

§4.120 Contracts for public utility services.

The Act, in paragraph (5) of section 7, exempts from its provisions "any con-tract for public utility services, includ-ing electric light and power, water, steam, and gas." This exemption is ap-plicable to contracts for such services with companies whose rates therefor are regulated under State, local, or Federal law governing operations of public utility enterprises. Contracts entered into with public utility compa-nies to furnish services through the use of service employees, other than those

29 CFR Subtitle A (7-1-11 Edition) subject to such rate regulation, are not exempt from the Act. Among the con tracts included in the exemption woulil be those between Federal electri, power marketing agencies and inveF tor-owned electric utilities, Rural Electrification Administration co-operatives, municipalities and State agencies engaged in the transmission and sale of electric power and energy.

(See H. Rept. No. 948, 89th Cong., let sess., p 4)

§4.121 Contracts for individual serv-ices.

The Act, in paragraph (6) of section 7, exempts from its provisions "any em-ployment contract providing for direct services to a Federal agency by an indi-vidual or individuals." This exemption, which applies only to an "employment contract" for "direct services," makes it clear that the Act's application to Fed-eral contracts for services is intended to be limited to service contracts en-tered into with independent contrac-tors. If a contract to furnish services (to be performed by a service employee as defined in the Act) provides that they will be furnished directly to the Federal agency by the individual under conditions or circumstances which will make him an employee of the agency in providing the contract service, the exemption applies and the contract will not be subject to the Act's provi-sions. The exemption does not exclude from the Act any contract for services of the kind performed by service em-ployees which is entered into with an independent contractor whose indi-vidual services will be used in per-forming the contract, but as noted ear-lier in §4.113, such a contract would be outside the general coverage of the Act if only the contractor's individual serv-ices would be furnished and no service employee would in any event be used in its performance.

§4.122 Contracts for operation of post-al contract stations.

The Act, in paragraph (7) of section?, exempts from its provisions "any con-tract with the Post Office Department, [now the U.S. Postal Service], the prin-cipal purpose of which is the operation of postal contract stations." The ex-emption is limited to postal service

Office of the Secretary of Labor contracts having the operation of such stations as their principal purpose. A provision of the legislation which would also have exempted contracts with the U.S. Postal Service having as their principal purpose the transpor-tation, handling, or delivery of the mails was eliminated from the bill dur-ing its consideration by the House Committee on Education and Labor (H.

Rept. 948, 89th Cong., 1st sess., p. 1).

§4.123 Administrative limitations, variances, tolerances, and exemp-tions.

(a) Authority of the Secretary. Section 4(b) of the Act as amended in 1972 au-thorizes the Secretary to "provide such reasonable limitations" and to "make such rules and regulations allowing reasonable variations, tolerances, and exemptions to and from any or all pro-visions of this Act (other than §10), but only in special circumstances where he determines that such limitation, vari-ation, tolerance, or exemption is nec-essary and proper in the public interest or, to avoid the serious impairment of Government business, and is in accord with the remedial purpose of this Act to protect prevailing labor standards."

This authority is similar to that vested In the Secretary under section 6 of the Walsh-Healey Public Contracts Act (41 U.S.C. 40) and under section 105 of the Contract Work Hours and Safety Standards Act (40 U.S.C. 331).

(b) Administrative action under section 4(b) of the Act. The authority conferred on the Secretary by section 4(b) of the Act will be exercised with due regard to the remedial purpose of the statute to protect prevailing labor standards and to avoid the undercutting of such standards which could result from the award of Government work to contrac-tors who will not observe such stand-ards, and whose saving in labor cost therefrom enables them to offer a lower price to the Government than can be offered by the fair employers who maintain the prevailing standards.

Administrative action consistent with this statutory purpose may be taken under section 4(b) with or without a re-quest therefor, when found necessary and proper in accordance with the stat-utory standards. No formal procedures have been prescribed for requesting

§4.123 such action. However, a request for ex-emption from the Act's provisions will be granted only upon a strong and af-firmative showing that it is necessary and proper in the public interest or to avoid serious impairment of Govern-ment business, and is in accord with the remedial purpose of the Act to pro-tect prevailing labor standards. If the request for administrative action under section 4(b) is not made by the head-quarters office of the contracting agen-cy to which the contract services are to be provided, the views of such office on the matter should be obtained and submitted with the request or the con-tracting officer may forward such a re-quest through channels to the agency headquarters for submission with the latter's views to the Administrator of the Wage and Hour Division, Depart-ment of Labor, whenever any wage payment issues are involved. Any re-quest relating to an occupational safe-ty or health issue shall be submitted to the Assistant Secretary for Occupa-tional Safety and Health, Department of Labor.

(c) Documentation of official action under section 4(b). All papers and docu-ments made a part of the official record of administrative action pursu-ant to section 4(b) of the Act are avail-able for public inspection in accord-ance with the regulations in 29 CFR part 70. Limitations, variations, toler-ances and exemptions of general appli-cability and legal effect promulgated pursuant to such authority are pub-lished in the FEDERAL REGISTER and made a part of the rules incorporated in this part 4. For convenience in use of the rules, they are generally set forth in the sections of this part covering the subject matter to which they relate.

(See, for example, §§4.5(b), 4.6(o), 4.112 and 4.113.) Any rules that are promul-gated under section 4(b) of the Act re-lating to subject matter not dealt with elsewhere in this part 4 will be set forth immediately following this para-graph.

(d) In addition to the statutory ex-emptions in section 7 of the Act (see §4.115(b)), the following types of con-tracts have been exempted from all the provisions of the Service Contract Act of 1965, pursuant to section 4(b) of the Act, prior to its amendment by Public

U.S. Department of Labor Administrative Review Board 200 Constitution Avenue, N.W.

Washington, D.C. 20210

In the Matter of:

PONY EXPRESS COURIER

CORPORATION,

RESPONDENT.

ARB CASE NO. 96-114

AUJ CASE NO. 95-SCA-45

DATE: July 17, 1997

BEFORE: THE ADMINISTRATIVE REVIEW BOARD

DECISION AND ORDER OF REMAND

This matter is before us pursuant to the McNamara-O'Hara Service ContractAct of 1965, as amended, 41 U.S.C. §351 et seq. (SCA or the Act), and the regulations of the Department of Labor at 29 C.F.R. Part 8. The United States Department of Labor (DOL) alleges that the Administrative Law Judge (AU) erred in granting Respondent Pony Express Courier Corporation's (Pony Express) Motion for Summary Decision dismissing the complaint. In a February 29, 1996 Decision and Order (D. and 0.), the AU J concluded that Pony Express's contract with the Federal Reserve Bank of Richmond, Charlotte Branch (FRB, Charlotte Branch) was exempt from the SCA. For the following reasons, we reverse the AU, dismiss Respondent's Motion for Summary Judgment, and grant DOL 's Motion for Partial Summary Decision.

BACKGROUND

Pony Express is a motor courier holding a 48 state general commodity authority to operate as a motor common carrier. Since 1975, Pony Express has provided courier service for various branches of the Federal Reserve Bank (FRB) pursuant to written transportation contracts.

Respondent has thousands of customers, in addition to the FRB, that it services on an ongoing basis. Its FRB shipments are commonly commingled with non-FRB shipments. D. and 0. at 3.

In 1993 Pony Express entered into a contract with theFRB, Charlotte Branch, to perform transportation services. The contract states that:

On the days and at the time or times shown on Schedule (or Schedules) (annexed hereto), Carrier will call for and pick up at those locations designated certain non-negotiable cash letters, letters of transmittal, checks, drafts, notes, money orders, travelers' checks, and other media for the exchange and transmittal of credit, but not including food stamps, all of which will have one or more restrictive endorsements, together with accompanying records or forms and other

USDOL/OALJ REPORTER PAGE 1

documents incidental to the operation of the Federal Reserve System (all of which may be hereinafter referred to as Items) and deliver them to the consignee Federal Reserve office in accordance with said Schedule. Packages are to be securely sealed and clearly marked or tagged with the name and locations of the sender and the consignee to which they are to be delivered. Carrier will receipt for Items accepted from Customer at its premises for transportation and delivery hereunder.

Timely and safe pick up and delivery of the Items are of the essence of this Agreement.

Respondent performed these services for the FRB, Charlotte Branch, continuously between March 1993 and February 1996. Affidavit (A ff.) of Mr. George J. Nero (Nero), Pony Express's Vice-President for Operations, 1f14. The contract states that "it is understood and agreed that this Agreement is subject to the provisions of the Service Contract Act of 1965," and incorporates eight separate wage determinations. Nero Aff. Exhib. 1, pp. 5-6. The contract also states that the FRB Request for Proposal (RFP) "is incorporated into and shall be a part of this Agreement to the extent that it is not inconsistent herewith." D. and 0. at 5, n. 4. The FRB RFP indicates that "a wage determination has been requested from the Department of Labor and shown in Attachment VIII. All vendors should review the provisions of the Service Contract Act of 1965 and be prepared to comply with them under any agreement with the Federal Reserve." Nero Aff., Exhib. 5, p. 12.

At the time the shipments at issue began, Pony Express had on file with the Interstate Commerce Commission (ICC) published interstate common carrier tariff rates.' The rates charged to FRB, Charlotte Branch under the contract were submitted to the FRB in response to the RFP as a sealed bid. D. and 0. at 8.

In October 1994, DOL's Wage and Hour Division conducted an investigation and concluded that Pony Express had violated the SCA by failing to (1) pay its employees the minimum monetary wages in accordance with prevailing wage rates determined by the Secretary of Labor, as required by §2(a)(1) of the SCA and the regulations found at 29 C.F.R. §§4.6 and 4.161; and (2) furnish employees the fringe benefits required by §2(a)(2) of the SCA and the Regulations found at 29 C.F.R. §§4.6 and 4.162. Thereafter, on March 3, 1995, DOL instructed the FRB, Charlotte Branch to withhold monthly payments due to Pony Express for services provided. On May 8, 1995, Pony Express filed suit against DOL, alleging that the withholding of payments was unlawful. Pony Express filed a motion for a preliminary injunction, seeking

Until recently, motor common carriers were required to file tariffs with the Interstate Commerce Commission that disclosed their transportation rates. See 49 U. S.C. §10762(a) (1994).

Effective on January 1, 1996, the ICC Termination Act of 1995, Pub. L. No. 104-88, §101, 109 Stat.

803, 804, abolished the ICC. The tariff filing requirement was eliminated for most forms of trucking transportation with the passage of the ICC Termination Act of 1995. In re Olympia Holding Corp., 88 F .3d 952, 955 (11th Cir. 1996). The requirement remains intact only in a limited number of situations, none of which are pertinent here. See 49 U. S.C. A. §13702 (West 1996).

USDOL/OALJ REPORTER PAGE 2

an order directing the release of all withheld payments and prohibiting any future withholding of payments, as well as a motion for summary judgment.

On July 27, 1995, DOL filed this administrative complaint alleging that Pony Express violated the SCA and owed its employees an estimated total amount of $261,112.30. Pony Express denied the allegation and submitted a Motion for Summary Decision, alleging that it is exempt from coverage under the Act pursuant to Section 7(3) of the SCA. DOL opposed Pony Express's motion and submitted its own Motion for Partial Summary Decision on February 8, 1996. On February 29, 1996, the AUJ issued a Decision and Order Granting Respondent's Motion for Summary Decision and Dismissing Complaint. DOL requested reconsideration, and on March 28, 1996, the All issued a Decision and Order Denying DOL's Motion for Reconsideration.

DISCUSSION

I. Exemption

The SCA requires that contracts for services with the United States specify minimum wages and fringe benefits to be paid employees performing services under the contract. 41 U.S.C. §351(a). Section 7(3) of the SCA provides that for "any contract for the carriage of freight. . . by truck [or] express. . . where published tariff rates are in effect," such contract is exempt from the provisions of the Act. 41 U.S.C. §356(3). In order to qualify for this exemption, Pony Express is required to establish that it: 1) has a contract for carriage of freight with the U.S. Government; 2) is both an express service and utilizes trucks to provide service to the FRB; and 3) has "published tariff rates in effect." Additionally, Pony Express must prove that the contract in question is "actually governed" by the published tariff pursuant to 29 C.F.R.

§4.118.2

2 29 C.F. R. 4.118 states that:

The Act, in paragraph (3) of section 7, exempts from its provisions "any contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line or oil or gas pipeline where published tariff rates are in effect." In order for this exemption to be applicable, the contract must be for such carriage by a common carrier described by the terms used. It does not, for example, apply to contracts for taxicab or ambulance service, because taxicab and ambulance companies are not among the common carriers specified by the statute. Also, a contract for transportation service does not come within this exemption unless the service contracted for is actually governed by published tariff rates in effect pursuant to State or F ederal law for such carriage. The contracts excluded from the reach of the Act by this exemption are typically those where there is on file with the Interstate Commerce Commission or an appropriate State or local regulatory body a tariff rate applicable to the transportation involved, and the transportation contract between the Government and the carrier is

(continued... )

USDOL/OALJ REPORTER PAGE 3

It is well established that "exemptions from remedial legislation such as the Service Contract Act should be narrowly construed against the party asserting the applicability of the exemption." Williams v. United States Department of Labor, 697 F.2d 842, 844 (8th Cir. 1983).

We agree with the AL's conclusions that Pony Express had a contract for carriage of freight with the U.S. Government, was an express service utilizing trucks to provide service to the FRB and had published tariff rates as required under 41 U.S.C. §356(3). D. and 0. at 2-5. Although Pony Express has shown that it had published tariff rates on file with the ICC, D. and 0. at 4-5, it has not proven that its contract with the FRB, Charlotte Branch, was actually governed by those tariff rates, as required by the regulations.

Under published common carrier tariff rates, carriers must offer services to the general public at a uniform rate. Because of the nature of the published tariff, carriers whose rates are set by tariff are not motivated to reduce their employees' wages in order to undercut other bidders and obtain business. If the tariff does not control the price at which a shipper's goods will be carried, but merely becomes an "asking price" subject to reduction by the carrier, the tariff no longer protects employees from wage discrimination on federal service contracts. This function is only served where the tariff actually governs the business relationship between the parties to the contract. The purpose underlying the SCA and its provision for the payment of prevailing wages can only be served by giving effect to the Department's regulation, particularly given the practical and regulatory changes that have taken place in the transportation industry over the last 15 years. Since 1983, contract carriers have not been required to file tariffs with the ICC for work performed pursuant to contracts. In Ex Parte MC-165, the ICC exempted motor contract carriers from all tariff filing requirements, effective September 28, 1983. See

Central & Southern Motor Freight Tariff Ass 'n v. U.S., 757 F.2d 301 (D.C. Cir. 1985), cert.

denied, 474 U.S. 1019 (1985). Therefore, any transportation provided by a contract carrier since September 23, 1983 that has not actually been governed by published tariff rates has not been exempt under Section 7(3).

The All also misunderstands the distinction between a contract carrier and a common carrier. Motor contract carriers of property provided "motor vehicle transportation of property for compensation under continuing agreements" with one or more shippers, by dedicating equipment or by meeting the shippers' distinct needs. 49 U.S.C. §10102(16) (1994). 3 Motor common carriers, by contrast, held themselves "out to the general public to provide motor vehicle transportation for compensation over regular or irregular routes, or both." 49 U.S.C.

2( .continued) evidenced by a Government bill of lading citing the published tariff rate . . . (emphasis added).

3 "Because most filing requirements have been abolished, most transportation will now be provided under private agreements, and therefore the distinction between common and contract carriers is no longer meaningful." In re Olympia Holding Corp., 88 F.3 d at 955 n.4. The term "motor common carrier" has been deleted by the ICC Termination Act. Compare 49 U.S. C.A.

§13102 (West 1996) with 49 U. S.C. §10102(15) (1994).

USDOL/OALJ REPORTER PAGE 4

§10102(15) (1994). The rates provided in its published tariff are those it held out to all corners.

A common carrier, such as Pony Express, may also be a contract carrier and carry freight at a different rate under contract.

Whether a motor carrier is operating as a contract carrier or a common carrier is a factual inquiry. The mere existence of a published tariff is not determinative. Resolution of this issue turns on whether the parties' legal obligations are established by the tariff or by a separately negotiated contract. In this case, the rates were determined by Pony Express's bid in response to the RFP and then memorialized in a contract. Even if the rates were identical to those in its tariff, Pony Express would not be providing service pursuant to its tariff, but pursuant to its written contract with FRB.

Pony Express does not dispute this essential fact. Pony Express failed to introduce any evidence to show that the contract services were governed by the common carrier tariffs it submitted in evidence. Nero's affidavits, on which the AU J relied, do not establish that the contract work was actually governed by any of the tariffs submitted. Nero stated only that "in calculating the rate to be utilized in our bid for work on the FRB Richmond, Charlotte Branch, which is the subject of the present action, I utilized the rate formula for determining charges pursuant to the dedicated service tariff." Nero Aff. 'if 24. No portion of the contract was submitted which indicated the contract work was subject to any published tariff, and Pony Express submitted no evidence that it adhered to the tariff rates in the contract. More importantly, Pony Express offers no evidence that its legal obligations to the FRB flowed from its published common carrier tariffs rather than from its written contract with the FRB.

As further evidence that the contract was not governed by published tariff rates, it is evident that the contract provided for adjustments to the fee schedule based on fuel costs. Nero Aff., Exhib. 1, XIII. These adjustments to the fees were clearly set by the contract rather than controlled by a tariff. Where published tariffs do not actually govern the activities at issue, but at most are only utilized in some manner to formulate a bid, a carrier is not acting in a common carrier capacity. Operating as contract carrier, Pony Express cannot point to the existence of published common carrier tariffs to relieve it of SCA obligations. To allow a carrier to use non-binding tariffs to qualify for the exemption would defeat the purposes of the statute. Non-binding tariffs do not provide protection against wage competition and do not fall within the exemption. In such situations the parties are not constrained from underbidding competitors by diminishing the wages of their workers. If Pony Express did not believe that the wage determination accurately reflected the prevailing wages in the areas covered, then it was incumbent on Pony Express to challenge the wage determination. Only by following the prescribed procedures and challenging the wage determination could fairness to all bidders be assured and the statutory protection of service employee wages be effectuated. By failing to do so, Pony Express ran the risk that it would be compelled to pay its employees performing on the relevant contracts wages consistent with the wage determination.

Summary Judgment

USDOL/OALJ REPORTER PAGE 5

As Pony Express is not exempt from the SCA and has not averred in its answer to DOL' s complaint that it did pay its employees the minimum monetary wages and fringe benefits in accordance with the SCA, we must grant DOL' s request for summary judgment. Title 29 of the Code of Federal Regulations and Federal Rule of Civil Procedure 56 set out the procedure for summary judgment. The Code states that "where no genuine issue of a material fact is found to have been raised, the [AU] may issue a decision to become final as provided by the statute or regulations under which the matter is to be heard." 29 C.F.R. §18.41. The U.S. Supreme Court has held that "the mere existence of some alleged factual dispute will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).

The burden of demonstrating that there are no material facts in issue is upon the par& seeking summary judgment. See, e.g., Williams v. United States Department of Labor, supra at 844. DOL satisfied this test by demonstrating that Pony Express had failed to pay its courier workers the SCA rates established for work they performed on the service contract with the FRB. Although Pony Express maintained that its practices were lawful, it failed as a matter of law to establish that it was entitled to the exemption. Pony Express does not contend that it paid its employees in compliance with the SCA. DOL is therefore entitled to summary decision because Pony Express failed to make a showing sufficient to establish the existence of an element essential to [its] case, and on which [it] will bear the burden of proof at trial. In such a situation, there can be no 'genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

III. Estoppel

Pony Express also alleges that DOL' s failure to appeal the decision in US. Department of Labor v. Lanter Courier Corporation, No. 91-SCA-52 (CCH) II 32,247 (April 23, 1993) precludes DOL from challenging the applicability of the Section 7(3) exemption in this case.

As noted above, whether a tariff actually governs a transportation service contract is a factual inquiry that can only be decided in the context of a particular case. In Lanter, DOL did not contest the applicability of various published tariff rates which were claimed by the Respondent in that case. Even if DOL had, it would have no effect on this case. The issue of whether Pony Express's published tariffs actually governed its contract with the FRB can only be decided in the context of the facts of this case. Whether the AU J properly decided a similar issue inLanter has no bearing on our decision in the instant matter. Thus, Pony Express's suggestion that DOL is collaterally estopped from challenging its motion is incorrect.

USDOL/OALJ REPORTER PAGE 6

CONCLUSION

DOL 's Motion for Summary Decision is granted because there are no genuine issues of material fact remaining as to whether or not the contract at issue was subject to published tariff rates. Entitlement to the exemption at issue requires that published tariff rates must actually govern the contract, and in this case they do not.

As a result of the aforementioned violations of the SCA, Pony Express owes an estimated total of $261,112.30 to the affected employees for violations during the period from March 1, 1993 through December 31, 1994. Because it is believed that the violations may have continued through the remaining term of the contract, this matter is remanded to the AU J for a computation of any additional amounts due.

SO ORDERED.

DAVID A. O'BRIEN

Chair

KARL J. SANDSTROM

Member

JOYCE D. MILLER

Alternate Member

USDOL/OALJ REPORTER PAGE 7

FROM: MARIA ECHAVE

Administrato

U.S. Department of Labor

SEP 2 8 KM

iEm loyment Standards Administration Wade And Hour Diyision Wa hington, D.C. 20210

MEMORANDUM NO. 185

TO: All Government Contracting Agencies of the Federal Govetnment and the District of Columbia

SUBJECT: Application cf Section 7(3) of the McNamara- O'Hara Servi e Contract Act to Motor Carriers

The McNamara-O'Hara Service Contract Act (SCA), 41 U.S.C. 351 et seq., applies to all service contracts entered into by the Federal government and District of Columbia "the principal purpose of which is to furnish services in the United States through the use of service rnployees." The SCA requires that contractors and subcontract rs with contracts (and any bid specification) in excess of $2,500 pay their service workers no less than the wages and fringe benefits specified by the Secretary of Labor. Hovevei, section 7 of the Act (41 U.S.C.

356) provides for several e emptions from the Act's coverage.

Section 7(3) of the SCA pro ides that "any contract for the carriage of freight or perscinnel by vessel, airplane bus, truck, express, railway line or oDI or gas pipeline where published tariff rates are in effect" will not be subject to the Act's coverage. The regulations at 29 C.F.R. 4.118 further elaborate that:

a contract for transportation service does not come within this xemption unless the service contracted for is actually governed by published tariff rates in e feet pursuant to State or Federal law for such carriage. The contracts excluded from the reach of the Act by this exemption are typically those where there is on file with the Interstate Commerce Commission or an appropriate a tariff rate app involved, and the the Government an Government bill o tariff rate.

State or local regulatory body icable to the transportation.

transportation contract between the carrier is evidenced by a lading citing the published

In 1994, Congress enacted two pieces of legislation the Trucking' Industry Regulatory Reform Act of 1994 (TIRRA), Pub. L.

103-311 (effective August 2 1994), and the Federal Aviation .

Administration Authorizatio Act of 1994 (FAA Authorization Act), Pub. L. No. 103-305, (effective January 1, 1995) -- which amend certain provisions of the 13iterstate Commerce Act (ICA). As a consequence-, interstate and intrastate motor common carriers providing transportation of I property, other than household goods, are no longer requi ed to tile tariff rates with the ICC or any State. See 49 U.S.0 10761 and 10762. On an administra-tive basis, the ICC had earlier exempted motor contract carriers from such filing requirements, and TIRRA codified this regulatory rates includes motor carries providing express service in action. See 49 U.S.C. 1074(a)(1). This exemption from filing transporting property. Therefore, motor carriers, with very limited exceptions,' clearlY can no longer qualify for the statutory exemption.

These changes in the transp rtation law are the result of the increasingly competitive na ure of the transportation of property or freight in the industry. Consequently, the basis for the SCA's section 7(3) exemption with regard to such motor carriers, is no longer compatible witI the SCA's mission to protect service employees from the payment of, substandard wages. the exemption was provided to "regulated dustries" subject to published tariff rates because there 4id not exist the competitive situation faced in service contract cases generally. Ens Congressional Record, Vol. 111, 89th Cong., let Sees., 24387 (September 20, 1965) (stat ent by Rep. O'Hara). Under published tariff rates, contractors wCre required to offer services to the general public at a uniform rate. Because of the nature of the published tariff, contractorjs were not motivated to reduce their employees' wages in order tc undercut bidders and obtain business. Conversely, howeujer, the further deregulation of motor carriers providing transportation of property may induce some contractors to engage in su tandard labor practices.

I -Generally, household oods are "personal. effects and property used or to , be used n a dwelling," but they may also include "furniture, fixtures, equipment, and the property of stores, offices, museums, in titutions, hospitals. or other establishkents when a part o the stock, equipment, or supply of such stores, offices, ... 49 U.S.C. 10102(11)(A) and (8).

that engage in the transportation of are presently still required to rates with the ICC. Also, motor re of rate bureaus, which are now relatively few in number, may still be subject to tariff rates filed with the ICC by the bureau. See 49 U.S.C. 10706(b)(2).

2 Motor common carriers household goods or passenger publish and file their tarif common carriers who are m

-3-

Therefore, contracts perform d by a motor carrier, including those providing express serv ce, for the interstate carriage of freight other than household goods awarded, or entered into beginning August 26, 1994, a • such contracts for the intrastate carriage of freight other th- , household goods awarded, or entered intcLbeginning Janua 1, 1995, fail to qualify for the section 7(3) exemption of th Service Contract Act. It is important to remember in appl ing this guidance that an option period or contract extension is normally a new contract for SCA purposes. See 29 C.F.R. 4.143 - 4.145.

Concerning whether another type of contract, such as a contract by a motor carrier for the carriage of personnel, personnel and freight, household goods, or a contract involving carriage by both a motor carrier and some other fora of transportation, qualifies for the section 7(3) exemption will depend on the facts of each case. The Wage and H ur Division of the Department of Labor should be contacted concerning any question in that regard or with respect to the guidanCe provided in this memorandum.