Applicability of the Service Contract Act to Volunteer Workers at the National Oceanic and Atmospheric Administration

Applicability of the Service Contract Act to Volunteer Workers at the National Oceanic and Atmospheric Administration

Pursuant to 28 U.S.C. § 512, the Office of Legal Counsel has jurisdiction to resolve a legal dispute between the Departments of Commerce and Labor where the request for the opinion was made by the General Counsel of Commerce under authority delegated from the Secretary of Commerce.

The Service Contract Act prohibits contractors operating the National Oceanic and Atmospheric Administration library from using voluntary, uncompensated employees. Commerce may petition the Secretary of Labor for an exemption to permit the use of vol­ unteer employees under the NOAA contract

July 31, 1989

M e m o r a n d u m O p in io n for t h e g en er a l C ounsel D epartm ent of C om m erce

This letter responds to Robert H. Brumley’s request o f June 10,1988 for the opinion o f this Office as to the applicability o f the Service Contract A ct ( “SCA” or “Act”) to a contract to operate the National Oceanic and Atmospheric Administration ( “NOAA”) library in part by using voluntary, uncompensated help to perform tasks that fall within the type of services otherwise covered by the Act. For the reasons set forth below, we con­ clude that the Act applies to such contracts and that the contractor or subcontractor may not use volunteer employees to perform tasks associ­ ated with operating the library.

I. Background

Congress enacted the Service Contract Act in 1965 “to provide labor standards for the protection o f employees o f contractors and subconr- tactors [sic] furnishing services to or performing maintenance service for Federal agencies.” S. Rep. No. 798, 89th Cong., 1st Sess. 1 (1965). The Act, as codified at 41 U.S.C. §§ 351-358, implements this goal by requiring con­ tractors and subcontractors on contracts greater than $2,500 to pay workers at least the minimum wage. Section 351(a)(1) provides:

(a ) Every contract (and any bid specification therefor) entered into by the United States or the District of Columbia

in excess o f $2,500, except as provided in section 356 o f this title, whether negotiated or advertised, the principal pur­ pose o f which is to furnish services in the United States through the use o f service employees, shall contain the following:

(1) A provision specifying the minimum monetary wages to be paid the various classes o f service employ­ ees in the performance o f the contract or any subcon­ tract thereunder, as determined by the Secretary, or his authorized representative, in accordance with prevailing rates for such employees in the locality .... In no case shall such wages be lower than the minimum specified in subsection [351](b) o f this section.

41 U.S.C. § 351(a)(1). Section 351(b) mandates that in no circumstances shall wage levels fall below the national statutory minimum wage:

No contractor who enters into any contract with the Federal Government the principal purpose o f which is to furnish services through the use o f service employees and no subcontractor thereunder shall pay any o f his employ­ ees engaged in performing work on such contracts less than the m inim um wage specified under section 206(a)(1) o f title 29.

Id. § 351(b)(1) (emphasis added). “Service employee” is defined in the Act as “any person engaged in the performance o f a contract entered into by the United States and not exempted under section 356 o f this title, whether negotiated or advertised, the principal purpose o f which is to furnish services in the United States ... and ... include[s] all such per­ sons regardless of any contractual relationship that may be alleged to exist between a contractor or subcontractor and such persons." Id. § 357(b) (emphasis added).1 The Act prescribes penalties for noncompli­ ance ranging from payment o f compensation due underpaid employees to cancellation o f the contract. 41 U.S.C. § 352(a). The rationale for this unqualified approach to fair labor standards under the SCA was that service contracts represented “the only remain­ ing category o f Federal contracts to which no labor standards protections

1 The legislative history o f the SCA elaborates somewhat on this definition. According to the House Report, “‘Service em ployee’ means guards, watchmen, and any person engaged in a recognized trade or craft or other skilled mechanical craft, or in manual labor occupations, and any other em ployee for whom experience in such occupations is the paramount requirement ” H.R Rep. No. 948, 89th Cong., 1st Sess. 5 (1965); see also S. Rep. N o 798 at 2.

appl[ied].” H.R. Rep. No. 948, 89th Cong., 1st Sess. 1 (1965). Congress was concerned with preventing contractors from undercutting their competi­ tors for government service contracts by reducing labor costs. As the House Report explained:

The Federal Government has added responsibility in this area because o f the legal requirement that contracts be awarded to the lowest responsible bidder. Since labor costs are the predominant factor in most service contracts, the odds on making a successful low bid for a contract are heavily stacked in favor o f the contractor paying the lowest wage. Contractors who wish to maintain an enlightened wage policy may find it almost impossible to compete for Government service contracts with those who pay wages to their employees at or below the subsistence level. When a Government contract is awarded to a service contractor with low wage standards, the Government is in effect sub­ sidizing subminimum wages.

Id. at 2-3. The current disagreement between the Department o f Commerce ( “Commerce”) and the Department o f Labor ( “Labor”) arose when Commerce received a contractor’s proposal to use voluntary, uncom­ pensated employees to perform tasks covered by the Service Contract A ct in operating the NOAA library. Commerce initially determined that the A ct did not apply to such a contract.2 Labor then advised Commerce by letter that the Act covered such contracts.3 In reply, Commerce advised Labor that it had complied with Labor’s interpreta­ tion o f the SCA in awarding the NOAA contract. Commerce added, however, that its compliance required it to pay an additional $140,164 in the contract price, and that it intended to raise the issue with the Department o f Justice.4 On June 10, 1988, Commerce requested an opinion from this Office, stating that it believes Labor’s position on this issue to be in error and that “it is likely that this question will arise on other procurements or in the course o f recompetition o f [the NOAA library contract].”5

2Memorandum for William Matuszeski, Director, O ffice o f A-76 Activities, NOAA, from James K White, Assistant General Counsel fo r Finance and Litigation, Department o f Commerce (Nov. 16, 1987). 3 Letter fo r J. Curtis Mack, II, Acting Administrator, NOAA, from Paula V Smith, Administrator, Wage and Hour Division, Department o f Labor (D ec. 7, 1987) Smith reiterated this position in a letter to Mack dated January 22, 1988. 4 Letter fo r Paula V. Smith, Administrator, Wage and Hour Division, Department o f Labor, from William E Evans, Under Secretary, N O AA (Apr 15, 1988) 6 Letter fo r Charles J. Cooper, Assistant Attorney General, O ffice o f Legal Counsel, from Robert H Brumley, General Counsel, Department o f Com m erce at 2 (June 10, 1988).

II. Discussion

A. Jurisdiction

The authority of the Attorney General to resolve this dispute between the Departments o f Commerce and Labor is well-established. By law, “[t]he head o f an executive department may require the opinion o f the Attorney General on questions o f law arising in the administration o f his department.” 28 U.S.C. § 512.6 Here, there is no doubt that the question presented — whether Commerce, consistent with the SCA, can enter into a contract for the operation o f the NOAA library that provides for the use o f voluntary services — “aris[es] in the administration o f [the Commerce] department.” See, e.g., Applicability of the Davis-Bacon Act to the Veterans Administration’s Lease of Medical Facilities, 12 Op. O.L.C. 89, 91 n.4 (1988) ( “[Interpretation o f statute that will affect contracts entered into by department is a legal question ‘arising in the administra­ tion o f the department’ within meaning o f ... 28 U.S.C. 512.”).7 The Solicitor o f Labor challenges our jurisdiction to entertain Commerce’s request for an opinion under 28 U.S.C. § 512 on the grounds that, inter cilia, Commerce’s request was not made by the Secretary o f Commerce and addressed to the Attorney General. Letter for John O. McGinnis, Deputy Assistant Attorney General, Office o f Legal Counsel, from Monica Gallagher, Associate Solicitor, Fair Labor Standards Division, Department o f Labor at 2-4 (July 14, 1989).8 This argument, however, completely ignores the fact that agency heads execute many o f their important functions through delegation. A written request addressed from the General Counsel o f Commerce to the Assistant

c In addition to the statutory authonty set forth in 28 U.S C. § 512, Executive Order N o 12146, 3 C.F.R. 409 (1979), confers authonty on the Attorney General to resolve disputes between executive agencies Executive Order No. 12146 provides in pertinent part 1-4 Resolution o f Interagency Legal Disputes 1-401. Whenever two or more Executive agencies are unable to resolve a legal dispute between them, including the question o f which has junsdiction to administer a particular program or to regulate a particular activity, each agency is encouraged to submit the dispute to the Attorney General 1-402 Whenever two or more Executive agencies w hose heads serve at the pleasure o f the President are unable to resolve such a legal dispute, the agencies shall submit the dispute to the Attorney General pnor to proceeding in any court, except where there is a specific statu­ tory vesting o f responsibility for a resolution elsewhere 7 By statute, the NOAA is “under the jurisdiction and subject to the control o f the Secretary o f Com m erce " 15 U S C § 1511(a) 8The Solicitor o f Labor also contends that w e have no jurisdiction to respond to Com m erce’s request under Executive Order No. 12146 Executive Order No. 12146, however, augments the authority co n ­ ferred on the Attorney General under 28 U.S.C. § 512 by, among other things, em powenng the Attorney General to address questions raised by executive agencies not within one o f the executive departments. See Memorandum for the Secretary o f Housing and Urban Development, from Charles J Cooper, Assistant Attorney General, O ffice o f Legal Counsel at 6 & n 1 (Aug 6, 1987) Because w e conclude that w e have jurisdiction to entertain Commerce’s request under 28 U S C § 512, w e need not address the scope o f our authority under Executive Order N o 12146

Attorney General for the Office o f Legal Counsel may be entertained under section 512.9

B. Applicability o f the Service Contract Act to Volunteer Workers

We believe that the SCA applies to the contract at issue here because, although the Act does not expressly advert to volunteer workers, the plain meaning o f the Act’s unqualified proscription o f subminimum wages does not admit o f any such exception. The statutory command in the SCA is simple and direct: “No contrac­ tor ... shall pay any o f his employees ... less than the minimum wage.” 41 U.S.C. § 351(b)(1). The Senate Report accompanying the bill put the matter just as starkly: “Persons covered by the bill must be paid no less than the prevailing rate in the locality as determined by the Secretary, including fringe benefits as an element o f the wages. No less than the applicable minimum wage provided in the Fair Labor Standards Act, as amended, can be paid.” S. Rep. No. 798 at 2.10 Commerce contends that “the Act is not intended to apply to prohibit volunteer services” apparently because the Act is silent with respect to volunteer workers, and both the Act and its implementing regulations implicitly refer to the payment o f classes o f “wage earning employees.” Letter for Charles J. Cooper, Assistant Attorney General, Office o f Legal Counsel, from Robert H. Brumley, General Counsel, Department o f Commerce at 1 (June 10, 1988). In our view, although the Act does not mention volunteer workers per se, the plain meaning o f the statutory scheme that Congress has adopted does not permit such an exception. The SCA clearly directs that, with respect to “any contract with the Federal Government the principal purpose o f which is to furnish services through the use o f service employees,” no contractor “shall pay any o f his employees engaged in performing work on such contracts less than the minimum wage specified under section 206(a)(1) o f title 29 [the Fair Labor Standards Act].” 41 U.S.C. § 351(b)(1).11 In turn, the term “service

9The General Counsel o f Commerce has been delegated broad authority to “appear[] on behalf o f the Secretary’1in legal proceedings and to “prepar(e) ... all papers relating to matters on which the opinion o f the Attorney General is desired" Department o f Commerce, DOO No. 10-6 §§ 4.01(3), (5 ) (July 3, 1963). Th e Assistant Attorney General fo r the Office o f Legal Counsel has been charged with, among other things, “ rendering informal opinions and legal advice to the various agencies o f the G overnm ent" 28 C.F.R. § 0.25(a) (1989); see also 28 U.S.C. § 510. 10See also H R. Rep No 948 at 4 ( “No contractor holding a service contract shall pay any o f his em ploy­ ees perform ing the w ork on such contracts less than the minimum w age specified by section 6 (A ) 1 o f the Fair Labor Standards A ct o f 1938."). 11The command in the Fair Labor Standards Act, which covers employers providing contract services that are not covered by the SCA, is equally direct Notwithstanding the provisions o f section 213 o f this title (excep t subsections (a )(1 ) and ( f ) thereof), every em ployer providing any contract services (other than linen supply services) under a contract with the United States or any subcontract thereunder shall pay to each o f Continued

employee” is defined in relevant part as meaning “ any person engaged in the performance of a contract entered into by the United States and not exempted ... and ... inelude[s] all such persons regardless o f any con­ tractual relationship that may be alleged to exist between a contractor or subcontractor and such persons." Id. § 357(b) (emphasis added); see also 29 C.F.R. §§ 4.113, 4.150, 4.155. Commerce does not explain, nor can we discern, how an exception for volunteer workers can be carved out o f this broad definition o f “service employee” without doing violence to the plain meaning o f the Act. Under section 357(b), a “service employee” is defined as any person who per­ forms work on a service contract entered into by the United States. Furthermore, section 357(b) expressly provides that the nature o f an employee’s contractual relationship with his or her employer has no bear­ ing on the employee’s covered status for purposes o f the Act. Accordingly, we do not see any basis for ignoring the plain meaning o f the Act and interpreting it as implicitly applying only to wage-earning employees, particularly in light o f the maxim o f statutory construction that “remedial labor statutes like the Service Contract Act are to be lib­ erally construed.” Menlo Service Corp. v. United States, 765 F.2d 805, 809 (9th Cir. 1985). Indeed, as the Solicitor o f Labor points out, construing the SCA in this manner could potentially invite a range o f abuses: “permitting the use o f ‘volunteers’ removes equality from the competitive bidding process and encourages contractors, if they wish to be low bidder, to replace their employees with ‘volunteers’ or to induce their employees to accept some form o f ‘volunteer’ status.... These results are contrary to the intention o f Congress in enacting the SCA to increase the protection o f workers in the service industry and to discourage contractors from reducing the com­ pensation o f workers.” Letter for John 0. McGinnis, Deputy Assistant Attorney General, Office o f Legal Counsel, from Monica Gallagher, Associate Solicitor, Fair Labor Standards Division, Department o f Labor at 7-8 (July 14, 1989). Finally, we note that the use of volunteer workers under the SCA — such as Commerce proposes with respect to the NOAA library contract — may be considered on a contract-by-contract basis pursuant to a request for a variance or exemption from the Act’s minimum wage requirements in accordance with the standards set forth in 41 U.S.C. § 353(b) and the regulations at 29 C.F.R. § 4.123(b). See Letter for John O. McGinnis, Deputy Assistant Attorney General, Office o f Legal Counsel,

n (. continued) his employees whose rate o f pay is not governed by the Service Contract A ct o f 1965 .. or to whom subsection (a )(1 ) o f this section is not applicable, wages at rates not less than the [minimum wage] rates provided fo r in subsection (b ) o f this section 29 U.S.C. § 206(e)(1).

from Monica Gallagher, Associate Solicitor, Fair Labor Standards Division, Department of Labor at 8 (July 14, 1989).¹² Accordingly, the Secretary o f Commerce may petition the Secretary o f Labor for an exemption to permit the use o f volunteer employees under the NOAA contract.

III. Conclusion

Our review o f the Service Contract Act and its legislative history per­ suades us that the Act does not permit the implication o f an exemption for contracts that provide for services rendered by volunteer employees. Commerce remains free, of course, to petition the Secretary o f Labor for an exemption specifically relating to the NOAA contract.

WILLIAM P. BARR Assistant Attorney General Office o f Legal Counsel

Footnotes

[12] A ccording to the Solicitor, Commerce has neither requested such an exemption nor provided Labor with the information necessary to evaluate such a proposal. Id. at 8-9 & n 6