659 F. 2d 49 - Clark v. Unified Services Inc

The question before us is whether the 1972 Amendments to the Service Contract Act of 1965, 41 U.S.C. § 351 et seq., require a successor contractor to recognize the successorship and seniority rights acquired by a predecessor contractor's employees under a collective bargaining agreement with the predecessor. While this question is one of first impression in this circuit, it has, in large part1, been answered by the D. C. Circuit in Trinity Services, Inc. v. Marshall, 593 F.2d 1250 (D.C.Cir.1978), which held that the Act imposes no such obligations. Appellants, service workers previously employed at Kennedy Space Center who either were hired with less than their earlier seniority or were not rehired by the successor contractor, urge us to reject Trinity, upon which the court below relied in granting summary judgment for defendant, the successor contractor. We decline to do so and affirm.

Appellants are twenty-six service workers previously employed by Expedient Services, Inc. (ESI), which held the NASA contract for custodial services at Kennedy Space Center, Cape Canaveral, Florida, until September 1, 1978. On that date, ESI lost the contract because of unsatisfactory performance, and Unified Services, Inc. (USI) assumed it. Appellants are also members of District Lodge 166, International Association of Machinists and Aerospace Workers, AFL-CIO (the union), which represented ESI employees as exclusive bargaining agent.

Upon award of the contract, USI accepted applications from all interested ESI employees, and hired 78 of ESI's 98 previous employees. Several,2 however, were hired for positions of lower grade and/or pay. Since a majority of the employees hired were formerly employed by ESI, USI recognized the union as exclusive bargaining agent. After entering into negotiations for a collective bargaining agreement, USI and the union agreed on a contract. Included in the contract between the union and USI were provisions for seniority and successorship comparable to those in the ESI contract.3

Appellants brought suit contending, inter alia,4 that USI's failure to hire all interested former employees of ESI and to grant hired ESI employees seniority rights equal to those they previously enjoyed violated section 353(c) of the Service Contract Act, which requires that a successor contractor grant employees the same wages and fringe benefits as were provided under a predecessor collective bargaining agreement. The district court, relying primarily on Trinity, supra, held that the term "fringe benefits," as used in the Act, does not include successorship and seniority rights, and granted summary judgment for USI. Although the court heard argument on USI's contention that appellants as individual employees lacked standing to press their section 353(c) claim, it did not address that issue in its summary judgment order. While appellants have not addressed that question in their brief, USI urges alternatively that we affirm the judgment on the ground that appellants lacked standing.5 Since we agree with the district court's holding that seniority and successorship rights are not included within section 353(c)'s preservation of fringe benefits, we will assume, without deciding, that appellants have standing to assert that claim.6

Section 353(c) prohibits a successor contractor, who contracts to furnish substantially the same services as his predecessor, from paying any service employee under such contract "less than the wages and fringe benefits ... to which such service employees would have been entitled if they were employed under the predecessor contract."7 As defined in section 351(a)(2), fringe benefits for the purposes of the Service Contract Act:

include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor.

In essence, appellants argue that to read these provisions as not guaranteeing employees job security and equal seniority with successor contractors will emasculate the purposes of the Act, namely to improve and stabilize working conditions in an industry where competitive bidding provides employers a strong incentive to undercut other employers by reducing labor costs. This they may do by cutting wages, explicitly prohibited by the Act, or by hiring employees with limited experience, thereby allowing them to underbid an incumbent contractor whose employees have acquired greater seniority and who may not terminate such employees without cause.

Appellants' argument is persuasive, and were our resolution of the issue based solely on policy considerations we might agree.9 But the language of the Act, the determination of the Secretary of Labor, and the silence of Congress on this question lead us to conclude that even if strong arguments militate in favor of appellants' stance, the statute must be read otherwise.

We reach this conclusion first by examining the language of section 351(a) (2). If successorship and seniority rights are protected "fringe benefits," they are included within the phrase "other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor." We agree with the D. C. Circuit's conclusion in Trinity, supra, that the umbrella phrase does not embrace the rights in question. It is a well-settled principle of statutory construction that where general words follow an enumeration by words of particular and specific meaning, the general words are construed to embrace only subjects similar to those specifically described. See Weyerhaeuser Steamship Co. v. United States, 372 U.S. 597, 600-01, 83 S.Ct. 926, 928, 10 L.Ed.2d 1 (1963). Unlike the fringe benefits specifically enumerated in section 351(a)(2), seniority and successorship rights do not require an employer to incur a present cost or the risk of a future cost. Trinity, supra, at 1257. Moreover, seniority and successorship rights differ from section 351(a)(2)'s specifically enumerated benefits because their precise monetary value cannot be ascertained. They are "incapable of being actualized" because seniority is contingent on employee turnover and successorship depends on contract turnover, neither of which can be accurately predicted. Id. Because seniority and successorship rights differ from the benefits specifically enumerated in these ways, their inclusion within the phrase "other bona fide fringe benefits" would violate the principle of ejusdem generis.

In addition to the language of the Act itself, the ruling of the Secretary of Labor persuades us that the Act does not protect the sought-after benefits. In recently promulgated regulations codifying "longstanding policies, rulings and interpretations" of the Act, 46 Fed.Reg. 4320, the Department of Labor provided:

The obligation of the successor contractor is limited to the wage and fringe benefit requirements of the predecessor's collective bargaining agreement and does not extend to other items such as seniority, grievance procedures, work rules, overtime, etc.

46 Fed.Reg. 4362, codified at 29 C.F.R. 4.163 (1981) (emphasis added).10 This interpretation, while not binding on us, is entitled to great deference. It should be overturned only if irrational and not reasonably related to the purposes of the legislation. Mourning v. Family Publications Service, Inc., 411 U.S. 356, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973), Thorpe v. Housing Authority of Durham, 393 U.S. 268, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969); Udall v. Tallman, 380 U.S. 1, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965). We cannot say that exclusion of seniority and successorship rights from the safeguards Congress chose to provide employees in the custodial services industry is irrational or unreasonable under the legislation. Congress simply went so far and not further. The legislative history buttresses this conclusion.

While the House and Senate reports do not specifically mention the question of successorship and seniority rights, they do emphasize that the primary intent of the Act was to provide wage standards protection.

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 of the contractor paying the lowest wages. 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 subsidizing subminimum wages.

H.R.Rep.No.948, 89th Cong., 1st Sess. 2-3 (1965); S.Rep.No.798, 89th Cong., 1st Sess. 3-4 (1965); (1965) U.S.Code Cong. & Ad.News 3737, 3739. Moreover, one representative's comment during the debate on the 1972 amendments evidences his uncontroverted assumption that the Act does not require successor contractors to hire the predecessor's employees. Congressman Blackburn stated that the obligations enumerated in section 353(c) apply, "even if the successor contractor employs his own work force and does not retain any of the predecessor contractor's employees." 118 Cong.Rec. 17,139 (1972) (emphasis added). Indeed, this interpretation was the subject of subsequent congressional inquiry. In hearings entitled "Problems of Service Contract Act and Protection of Florida Cape Area Workers," NASA's Assistant Administrator for Procurement reminded his audience:

It should be kept in mind that, although wages and fringe benefits of service employees are protected under the Act, continued employment of service employees is not protected by the terms of the Act. In other words, the Act is neutral with regard to employment opportunities of service employees and no guarantees are extended that would assure continued employment of service employees with an incumbent contractor or a contractor succeeding an incumbent.

Hearings Before the Subcomm. on Federal Spending Practices, Efficiency, and Open Government of the Senate Comm. on Government Operations, 94th Cong., 2d Sess. 3 (1976).

In light of this record and Congress's failure to act, either to clarify that the intention of the Act was otherwise, thus correcting the Secretary of Labor's determination, or explicitly to include within the protected benefits of section 353(c) seniority and successorship rights, we cannot accept the position appellants urge. The Service Contract Act simply does not offer the relief sought. Accordingly, the judgment is AFFIRMED.