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OAH 8-3001-17706-2 |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF TRANSPORTATION
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In
the Matter of the |
RECOMMENDATION ON MOTION FOR SUMMARY DISPOSITION |
The above-entitled matter came before
Administrative Law Judge Eric L. Lipman on Comstock Construction, Inc.’s
(“Comstock”) motion for summary disposition.
Comstock filed its motion on September 21, 2007. The Minnesota Department of Transportation (“MnDOT”)
filed a response memorandum in opposition to the motion for summary disposition
on October 8, 2007, and Comstock filed a reply memorandum on October 15,
2007. Based upon a stipulation by the
parties, oral argument was held on January 10, 2008.
Thomas
R. Revnew and Michael L. McCain, Attorneys at Law, Seaton, Beck & Peters,
P.A.,
STATEMENT OF ISSUES
1.
Is Comstock entitled to summary disposition on the
Department’s claims for additional wages because those claims are barred by the
doctrine of laches?
2.
Is Comstock entitled to summary disposition on the
Department’s claims for additional wages because the labor classification
determinations at issue were not based upon the U.S. Department of Labor Dictionary of Occupational Titles?
3.
Is Comstock entitled to summary disposition on the
Department’s claims for additional wages because the labor classification
determinations at issue operate as unpromulgated rules?
4.
Is Comstock entitled to summary disposition on the
Department’s claims for additional wages because the labor classifications at
issue are so indefinite as to deny state contractors due process of law?
FACTUAL
BACKGROUND
Based
upon the filing of the parties, the following facts are not genuinely disputed:
1.
On or about August 17, 2000, Comstock and MnDOT
entered into a contract that involved adding onto and remodeling MnDOT’s
Detroit Lakes District Headquarters. The
contract required Comstock to pay employees who worked on the project
prevailing wages that were consistent with Minn. Stat. §§ 177.41 through
177.44.
2.
Under the terms of the MnDOT – Comstock contract,
Comstock was required to submit certified payroll reports to MnDOT, and to make
certified payroll records available within three business days, if so requested
by MnDOT officials. The payroll records
were to contain, among other things, the employee’s name, applicable
classification code(s) under the prevailing wage law, hourly wage rates, and
daily and weekly hours worked in each classification.
3.
Comstock began construction on the project on or
about September 5, 2000. Kevin Koppang,
Comstock’s Project Manager on the
4.
On September 17, 2001, after more than a year of
contract performance, Roxanne Farnham, a Senior Labor Investigator with MnDOT,
sent a letter to Comstock. Farnham
notified the firm that the documentation it had submitted to date indicated
that the firm was in compliance with the prevailing wage law.[3] Based
upon this assessment, Comstock officials continued to classify and pay its
employees as it had since the beginning of the contract.[4]
5.
On or about October 31, 2001, MnDOT received a
prevailing wage complaint from a Comstock employee. MnDOT notified Comstock of the complaint on
or about February 19, 2002, and proceeded to conduct an investigation.
6.
On or about March 1, 2002, Comstock completed its
performance under the contract.
7.
On a number of occasions in 2002 and 2003, Mr.
Koppang asked Ms. Farnham to identify the specific claimed prevailing wage
law violations – namely, which tasks had been improperly classified by the
firm. Ms. Farnham did not provide
Comstock with additional detail on the alleged violations until September of
2003.[5]
8.
In a letter dated October 14, 2003, Ms. Farnham
directed Comstock to either: (a) submit all of its cancelled employee
paychecks, check ledgers and employee timekeeping records for each employee to
the Department, or (b) “conduct a self audit” and submit the results for her
review.[6]
9.
Between the two alternatives, Comstock chose to
conduct a self-audit. During this
process, Comstock officials reviewed employee timecards, daily reports and
payroll reports for all of the employees who worked on the Detroit Lakes
Project.[7] While conducting the self-audit, Comstock
asked Farnham for a list of claimed violations along with a list of governing
labor classifications. Comstock sought
to use the official materials in completing its audit.[8] On November 12, 2003, Ms. Farnham
responded to Comstock’s request by stating that she would fax to Comstock a
compilation of classification determinations received by MnDOT from the Department
of Labor and Industry (DOLI). Ms. Farnham cautioned, however,
that the determinations she was transmitting were not either a statute or a
rule, and should only be used “for reference” by the firm.[9]
10.
Whenever she is uncertain as to how to classify a
particular task in the construction industry, it is Ms. Farnham’s practice to
seek written clarification from Eric Oelker as to the proper trade
classification.[10] Mr. Oelker is a Senior Labor Investigator at
DOLI and is responsible for making labor classification determinations for the
State of
11.
Ms. Farnham retains Mr. Oelker’s writings (and
earlier classification determinations) in a file and uses these materials when
enforcing the prevailing wage laws against state contractors.[12] For example, pointing to Mr. Oelker’s 2003
determination that installing Venetian Blinds was properly categorized as
carpentry work, Ms. Farnham asserted that Comstock likewise was to pay the
workers it hired to install blinds the prevailing wage for carpenters.[13]
12.
In June 2004, Comstock completed the “self-audit”
and forwarded the results to Ms. Farnham.[14]
13.
In December 2004, Ms. Farnham requested additional
timekeeping and payroll documentation from Comstock.[15] MnDOT’s requests for additional information
continued over the succeeding months. In
May of 2005, some three years after completion of the
14.
On June 21, 2005, Ms. Farnham provided Comstock
with what she termed a “final” determination.
The determination stated that, as a result of a series of prevailing
wage violations, Comstock owed $113,138.88 in additional wages.[17]
15.
Notwithstanding the June 21, 2005 determination,
however, Ms. Farnham continued to ask Mr. Oelker of DOLI for further
clarification of the appropriate labor classifications for project-related
work. In October of 2005, Ms. Farnham
met with Mr. Oelker to discuss the appropriate labor classifications for
the work of 30 different Comstock employees.[18]
16.
On April 3, 2006, Ms. Farnham issued another
determination as to the amount of prevailing wages owed by Comstock. In this determination, MnDOT asserted that
Comstock owed $109,561 in additional wages for prevailing wage violations.[19]
17.
On August 10, 2006, Ms. Farnham issued yet a third
determination as to the amount of prevailing wages owed by Comstock. This third determination remains MnDOT’s
current position in the litigation. It
claims that Comstock owes $111,428.11 in additional wages for prevailing wage
violations.[20]
18.
On October 10, 2006, Comstock requested a contested
case hearing as to these claims.[21] The Notice and Order for Hearing was issued
by MnDOT on December 4, 2006.[22]
CONCLUSIONS
1.
The Administrative Law Judge and the Commissioner
of Transportation have jurisdiction over this matter pursuant to Minn. Stat. §§
14.50 and 177.44, subd. 7.
2.
The Notice of Hearing is proper in all respects and
the Department complied with all substantive and procedural requirements of law
and rule.
3.
The Minnesota Prevailing Wage Law is a minimum wage
law that applies to construction projects financed in whole or in part by state
funds. Its purpose is to ensure that
those who work on such projects are paid wages comparable to wages paid for
similar work in the community.[23]
4.
The Minnesota Prevailing Wage law is codified at
Minn. Stat. §§ 177.41 - 177.44. The
accompanying administrative rules are set forth at Minn. R. 5200.1000 -
5200.1120. Together, the statutes and
the rules govern the determination, certification, and payment of prevailing
wages to laborers, workers and mechanics working on state-funded construction
projects.
5.
Under the Minnesota Prevailing Wage Law, DOLI
establishes the labor classifications for workers and determines the prevailing
wage rate for the classifications.[24] Prevailing wage rates are determined by DOLI
following a review of wage surveys that it compiles for each of ten defined
areas of the state. As required by Minn.
Stat. § 177.44, subd. 6, and Minn. R. 5200.1060, the prevailing wage rate is
the surveyed rate paid to the largest number of workers engaged in the same
class of labor within these areas.
6.
Minn. R. 5200.1040 governs the determination of
labor classifications for purposes of the Prevailing Wage law. It provides that each class of labor must be
based upon:
the particular nature of the work performed with consideration given to
those trades, occupations, skills, or work generally considered within the
construction industry as constituting distinct classes of labor.
7.
Minn. R. 5200.1040 further provides that in
determining classes of labor, the Department of Labor and Industry must
consider:
work classifications contained in collective bargaining agreements, apprenticeship agreements on file with the department, the United States Department of Labor Dictionary of Occupational Titles, and customs and usage applicable to the construction industry.[25]
8.
Additionally, Minn. R. 5200.1100 lists the
master job classifications and provides contractors with the codes to use in
classifying work. Codes for various
classifications of laborers, power equipment operators, truck drivers, and
special craftsmen are listed – with over 140 distinct categories of work listed
in the regulation.
9.
While MnDOT has neither a policy or rate-setting
role under the prevailing wage laws, it does have a role in enforcing these
requirements. The Commissioner of
Transportation is authorized by state law to “require adherence” to the
provisions of the state prevailing wage laws from those with whom it contracts.[26]
10.
The consequences – in terms of corporate
reputation, profitability and opportunity for future work – can be severe if a
state contractor does not abide by the Prevailing Wage Act. These consequences may include misdemeanor criminal
sanctions (including imprisonment) and a $300 fine. Moreover, “[e]ach day that the violation
continues is a separate offense.” [27] Lastly, the Department may preemptively
reject the bids and proposals of any contractor that has a history of noncompliance
with the prevailing wage laws.[28]
11.
While MnDOT had shifting and uncertain demands for
recovery, Comstock was keenly aware that some amount of additional wages was
sought by the agency. Comstock was in a
position to preserve its defenses and evidence for a later hearing, and was not
unduly prejudiced by MnDOT’s admittedly slow progress in settling upon a
specific amount to demand for recovery.
12.
Likewise MnDOT, when making demands for additional
wages, was not pursuing payments for its own benefit or account. Instead, MnDOT’s demands arise out of a
regulatory enforcement role – presumably, on behalf of those workers whom it
claims were underpaid. Because MnDOT is
performing a governmental function when making claims that, under the
Prevailing Wage Act, certain workers should have been paid more, application of
the defense of laches is not appropriate.
13.
Minn. R. 5200.1040 (E) requires that in
“determining particular classes of labor, the department shall consider work
classifications contained in collective bargaining agreements, apprenticeship
agreements on file with the department, the ‘United States Department of Labor Dictionary of Occupational Titles,’
and customs and usage applicable to the construction industry.”
14.
While there is strong evidence in this record that
Mr. Oelker, and DOLI, entirely failed to consider the provisions of the U.S. Department of Labor Dictionary of
Occupational Titles when making labor classifications for the Detroit Lakes
project, as required by Minn. R. 5200.1040 (E),[29]
the deposition testimony of Mr. Oelker is simply too oblique to conclude that
Comstock is entitled to disposition as a matter of law. Comstock’s defense that the labor
classifications for its contract were established without use of the required
materials is not clearly established.
15.
A case-by-case adjudication seeks to apply an
extrinsic source of law – either a statute or a regulation – to the facts of a
particular case.
16.
If the agency seeks to establish a more general
proposition, not found in existing statutes or regulations, which the agency
will apply in future cases, the agency must undertake rulemaking under the Minnesota
Administrative Procedure Act (MAPA).
17.
In this case, Comstock has established that DOLI’s
past labor classification determinations meet the definition of a rule under
Minn. Stat. § 14.02, subd. 4. MnDOT’s
application of these determinations in assigning classification codes amounts
to unauthorized rulemaking and Comstock is entitled to summary disposition upon
this defense.
18.
Under both the state and federal constitutions,
administrative rules must meet certain due process standards of definiteness.[30] A rule is void for vagueness if it fails to
give a person of ordinary intelligence a reasonable opportunity to know what is
prohibited or fails to provide sufficient standards for enforcement by
executive branch officials.[31]
19.
Because Administrative Law Judges and agency heads
are charged with ensuring that laws, rules and ordinances are applied in a
constitutional manner, it is permissible for these officials to consider
whether application of a statute or rule, in a particular factual setting,
meets the constitutional standards that have been announced by our courts.[32]
20.
In this case, not only do the classification
categories fail to give a person of ordinary intelligence a reasonable
opportunity to know which designations are prohibited, the regulations fail to
provide sufficient standards for later enforcement by the agency. Because the prevailing wage classification
rules do not include sufficient language for readers to determine its intended
scope, they may not form the basis for a monetary claim by MnDOT against
Comstock.[33]
21.
The Administrative Law Judge adopts as Conclusions
any Findings that are more appropriately described as Conclusions.
22.
The Memorandum that follows explains the reasons
for these Conclusions, and the Administrative Law Judge therefore incorporates
that Memorandum into these Conclusions.
Based upon these
Conclusions, the written submissions of the parties, the affidavits and other
documents filed in this matter, and the argument of counsel, the Administrative
Law Judge makes the following:
RECOMMENDATION
(1)
The Commissioner should GRANT-IN-PART and
DENY-IN-PART Comstock’s Motion for Summary Disposition.
(2)
The Commissioner should DISMISS the Notice and
Order for Hearing in this matter.
Date:
February 7, 2008.
|
s/Eric L.
Lipman__________ |
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ERIC L. LIPMAN |
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Administrative
Law Judge |
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NOTICE
This report is a
recommendation, not a final decision.
The Commissioner of Transportation will make the final decision after a
review of the record and may adopt, reject or modify these Findings of Fact,
Conclusions, and Recommendation. Under
Minn. Stat. § 14.61, the Commissioner shall not make a final decision until
this Report has been made available to the parties for at least ten days. The parties may file exceptions to this
Report and the Commissioner must consider the exceptions in making a final
decision. Parties should contact Carol Molnau, Commissioner of Transportation,
If the
Commissioner fails to issue a final decision within 90 days of the close of the
record, this report will constitute the final agency decision under Minn. Stat.
§ 14.62, subd. 2a. In order to comply with this statute, the Commissioner must
then return the record to the Administrative Law Judge within 10 working days
to allow the Judge to determine the discipline to be imposed. The record closes
upon the filing of exceptions to the report and the presentation of argument to
the Commissioner, or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and
the Administrative Law Judge of the date on which the record closes.
Pursuant to Minn.
Stat. § 14.62, subd. 1, the Commissioner is required to serve its final
decision upon each party and the Administrative Law Judge by first class mail.
MEMORANDUM
The Notice of and Order
for Hearing alleges that Comstock committed violations of Minnesota’s Prevailing
Wage Law while it was under contract with the State to perform remodeling and construction
work on MnDOT’s regional headquarters in Detroit Lakes (the “Detroit Lakes project”). Comstock maintains that it properly
classified and appropriately paid its workers, and it requests dismissal of
MnDOT’s claims. Comstock argues that the
claims are based upon: (1) rights to
recovery that are barred by the doctrine of laches; (2) arbitrary and
capricious government actions; (3) unauthorized rulemaking by MnDOT or the
Minnesota Department of Labor and Industry (“DOLI”) and (4) unconstitutionally vague rules.
Summary
Disposition Standards
Comstock has moved
for summary disposition on the claim that it owes $114,065.47 in past-due wages. Summary disposition is the administrative
equivalent of summary judgment.[34] Summary disposition is appropriate when there
is no genuine dispute as to the material facts of a contested case and one party
necessarily prevails when the law is applied to those undisputed facts.[35]
The moving party
carries the burden of proof and persuasion to establish that there are no
genuine issues of material fact which would preclude disposition of the case as
a matter of law.[36] Further, when considering a motion for
summary disposition, the tribunal must view the facts in the light most
favorable to the non-moving party.[37]
With that said,
however, the party seeking to avoid summary disposition must detail how and where
material disputes exist. As Justice
Rehnquist once famously observed as to the Federal Rule providing for summary
judgment:
The Federal Rules
of Civil Procedure have for almost 50 years authorized motions for summary
judgment upon proper showings of the lack of a genuine, triable issue of
material fact. Summary judgment
procedure is properly regarded not as a disfavored procedural shortcut, but
rather as an integral part of the Federal Rules as a whole, which are designed
‘to secure the just, speedy and inexpensive determination of every
action . . . .’ Rule
56 must be construed with due regard not only for the rights of persons
asserting claims and defenses that are adequately based in fact to have those
claims and defenses tried to a jury, but also for the rights of persons
opposing such claims and defenses to demonstrate in the manner provided by the
Rule, prior to trial, that the claims and defenses have no factual basis.[38]
Because summary disposition is not a
“disfavored procedural shortcut,” but rather an integral part of our rules, the
party opposing the motion may not simply rely upon general statements or
allegations that material disputes exist.
Rather, in order to defeat an otherwise proper motion for summary
disposition, the non-moving party must show the existence of material facts that
are genuinely disputed.[39]
Comstock’s Arguments in Support of its Motion for
Summary Disposition
(1) Laches
Comstock argues
that MnDOT’s claims for payment of additional wages should be barred by the equitable
doctrine of laches.
The equitable
doctrine of laches is available to prevent one who has not been diligent in
asserting known rights from later recovering against a party who is prejudiced
by the delay in asserting claims for recovery.[40] The state courts employ a four-factor test
when assessing the defense of laches.
The courts consider: (1) the nature of the action and the availability
of defenses to the asserted claims; (2) the reasons for the delay in asserting
claims for recovery; (3) prejudice to the defending party; and (4) policy
implications that might follow from either permitting or barring the claims.[41] Laches is a doctrine that promotes a peaceful
society by discouraging the assertion of stale claims for relief.[42]
Comstock maintains
that MnDOT’s delay in investigating and pursuing claims for additional wage
payments has been unreasonable and has unduly prejudiced its defense of those
claims. Comstock contends that many of
the employees who worked on the
Comstock’s laches
defense falters on two scores. First, it
would not be accurate to state that MnDOT delayed in undertaking the prevailing
wage investigation in this case for a period of five years. A more complete description is that the
investigation itself, begun while contract performance was underway, continued
for a very long time. Accordingly, while
the policy of preventing the assertion of stale claims is a strong one, the
dispute over the amounts that were due was initiated at an early point by
MnDOT, continued to be the subject of communications between the parties and
never was abandoned by the agency.
Further, while MnDOT’s shifting and uncertain demands for recovery
invites other hazards, which are addressed below, Comstock was keenly aware
that some amount of additional wages was sought by the agency. Accordingly, Comstock was in a position to
preserve its defenses and evidence for a later hearing, and was not unduly
prejudiced by MnDOT’s admittedly slow progress in settling upon a specific
amount to demand for recovery.
Second, and likewise problematic for
Comstock, the doctrine of laches has ordinarily been applied against state
agencies only in those cases where the agency – like a private party in the
marketplace – was acting in a proprietary capacity. Indeed, in Leisure Hills v. Minnesota Department of Human Services,[45]
the Minnesota Court of Appeals held that the doctrine of laches was not
available to prevent the Department of Human Services from recouping payments
that an earlier government audit noted were then due and owing. As the Court reasoned, when administering the
Medical Assistance program – which included efforts to recoup payments from
health care providers – the agency was undertaking functions in the state’s
sovereign capacity. In such
circumstances, the defense of laches does not lie.[46]
While it is true that the obligation to
pay prevailing wages is, in this case, grounded in the terms of a state
construction contract,[47]
MnDOT, in making demands for additional wages is not pursuing payments for its
own account. Instead, MnDOT’s demands
arise out of a regulatory enforcement role – on behalf of those workers whom it
claims were underpaid.[48] Because MnDOT is performing a governmental
function when making claims that, under the Prevailing Wage Act, certain
workers should have been paid more, the holding in Leisure Hills prevents application of the doctrine of laches. Comstock is not entitled to summary
disposition on this defense to the agency’s claims.
(2) Arbitrary and Capricious Government
Action
Comstock likewise argues that MnDOT’s claims are
without a legal basis because the labor classification determinations upon
which MnDOT relies were made in violation of existing rules.
As noted above, Minn. R. 5200.1040 (E) requires
that in
determining particular classes of labor, the department shall consider
work classifications contained in collective bargaining agreements,
apprenticeship agreements on file with the department, the United States
Department of Labor Dictionary of Occupational Titles, and customs and usage
applicable to the construction industry.
Comstock asserts that the Department of Labor and Industry based the
classifications solely on the union
contracts and apprenticeship standards and that it failed to consider either the
U.S. Department of Labor Dictionary of
Occupational Titles or the customs and usages of contractors in the
By way of reply, MnDOT asserts that DOLI need not
consider each source of guidance before it can render a valid determination of
labor classifications.[51]
Under the Minnesota Administrative Procedures Act, a
key inquiry is whether the agency’s decision represents a reasonable judgment
under the circumstances and not merely the exercise of will.[52] So long as an agency engaged in reasoned
decision-making, reviewing tribunals will affirm the agency’s determination – even
in those cases where the reviewing judges might have reached a different
conclusion, had they been the decision-maker in the first instance.[53] In this way, the “arbitrary and capricious”
standard incorporates a high degree of deference toward agency determinations;
with the tribunal declining to substitute its own judgments for those entities
that work under a specific delegation of authority from the Legislature.[54]
An agency fails to undertake reasoned
decision-making when it:
relied on factors which the legislature had not intended it to consider,
if it entirely failed to consider an
important aspect of the problem, if it offered an explanation for the
decision that runs counter to the evidence or if the decision is so implausible
that it could not be ascribed to a difference in view or the product of agency
expertise.[55]
While there is
strong evidence in this record that Mr. Oelker, and DOLI, entirely failed to
consider the provisions of the U.S.
Department of Labor Dictionary of Occupational Titles when making labor
classifications for the Detroit Lakes project, as required by Minn. R. 5200.1040
(E), the deposition testimony of Mr. Oelker is simply too oblique on this point
to conclude that Comstock is entitled to disposition as a matter of law. While Mr. Oelker concedes that he has not
referred to the Dictionary of
Occupational Titles in “probably two or three years;” Comstock’s defense
that the labor classifications for its contract were established without use of
the Dictionary is only hinted at, but
not clearly established.[56]
Similarly, it is
not clear either from the text of the regulation, or other materials relied
upon by Comstock, that the regulatory phrase “customs and usage applicable to
the construction industry” is limited to a geographic area adjacent to the
project site. While this might be a
reasonable inference under the circumstance, it is not the only reasonable
inference one could draw from the regulation or the current record.
Accordingly,
notwithstanding the strength of Comstock’s proof to date, the record still
falls short of the standards required for summary disposition on this claim.[57] Comstock is not entitled to disposition as a
matter of law on its defense that the labor classification determinations upon
which MnDOT relies were made in violation of Minn. R. 5200.1040 (E).
(3) Unauthorized Rulemaking
Comstock also argues
that MnDOT’s claims should be dismissed because they are grounded upon wage
classification determinations that are not lawful or otherwise enforceable. Comstock asserts that the classification
determinations are unpromulgated rules and may not be given effect.
In support of its argument,
Comstock points to Ms. Farnham’s admission that she relied upon earlier
determinations from DOLI for the classifications of laborers, skilled laborers,
carpenters, iron workers, sheet metal workers, painters and roofers,[58]
and applied these earlier determinations when determining what pay rates were
due under the Comstock contract. As Ms.
Farnham earlier summarized this process for DOLI Senior Labor Investigator Eric
Oelker:
I included a list
of tasks applied to classifications on the Comstock Project for your
review. If I have assigned any the
classifications inappropriately, I need to know so that I can change them. I based my decisions or assignments on your
previous responses to our requests. Each
time you send a response, I add what you decide to a running document of
classification descriptions since we have nothing formal. It is the only way we
can keep track of what tasks are applied to each class.[59]
In Comstock’s view, because MnDOT is
applying classification determinations from DOLI, across contractors, and giving
these determinations future effect, the classification decisions should have
been developed through rulemaking.
MnDOT argues that
its claim that a particular construction task fits into one of the
earlier-announced labor classifications is not rulemaking, but rather case-by-case
enforcement of the Prevailing Wage laws.
Moreover, MnDOT argues that in carrying out these enforcement duties, it
is only logical and reasonable for the Department to be guided by Mr. Oelker’s
earlier classification decisions.
The Minnesota
Administrative Procedure Act defines a “rule” as:
every agency
statement of general applicability and future effect, including amendments,
suspensions, and repeals of rules, adopted to implement or make specific the
law enforced or administered by that agency or to govern its organization or
procedure.[60]
Further, those interpretations of existing
rules which “make specific the law enforced or administered by the agency,” and
are not either long-standing positions of the agency or within the plain
meaning of the regulation, are deemed to be “interpretative rules.”[61] Like
substantive rules, an agency’s interpretative rules are valid only if they are promulgated
in accordance with MAPA.[62]
Equally important in
this context is that Executive Branch agencies are granted considerable
discretion to decide whether to develop regulatory policy “deductively,” by
promulgating a new rule, or “inductively,” through a series of individual
adjudications.[63] The appellate courts have instructed that
every executive branch agency – and in the area of labor classifications, DOLI
in particular – has the “flexibility and discretion to depart from formal
rulemaking” when application of a given legal standard to a particular set of
facts seems clear.[64]
The
distinctions between rulemaking, on the one hand, and case-by-case
determinations, on the other, become still sharper in the light of
earlier-decided cases. In L&D Trucking v. Minnesota Dept. of
Transp.,[65]
for example, the Minnesota Court of Appeals considered whether, absent formal
rulemaking, MnDOT could seek to apply the provisions of Minn. Stat. § 177.44 in
an enforcement action against a particular construction contractor. Minn. Stat. § 177.44 exempts from the reach
of the prevailing wage laws the:
wage rates and
hours of employment of laborers or mechanics engaged in the processing or
manufacture of materials or products, or to the delivery of materials or
products by or for commercial establishments which have a fixed place of
business from which they regularly supply the processed or manufactured
materials or products.
The appellate panel concluded that it was
appropriate for MnDOT, in the context of a specific case, to seek to apply the
requirements of this statutory exemption to the facts of a particular
contractor’s operations. In L&D Trucking, this meant applying
the statutory requirement that contractors “have a fixed place of business from
which they regularly supply the processed or manufactured materials or
products,” to the facts of L&D Trucking’s temporary, transient and very mobile
facility for mixing asphalt.[66]
Likewise, in Reserve Life Insurance Co. v. Commissioner
of Commerce,[67]
the Minnesota Court of Appeals held that the Department of Commerce was
entitled to evaluate particular forms, drafted by insurance carriers, against
statutory provisions which prohibit such forms from including terms that are “unlawful,
unfair, inequitable, misleading, or encourage[] misrepresentation of the [insurance]
policy….”[68] Concluding that the Department of Commerce
could apply these statutory prohibitions, on a case-by-case basis, as the draft
forms were received by the agency for review, the panel wrote:
In this case the
legislature has given the Commissioner a great deal of discretion under section
61A.02 and 62A.02. The statutes' standards of ‘unfair, inequitable, misleading
(and) deceptive’ necessitate a certain amount of interpretation. It is
reasonable for the Commissioner to make such interpretations and decisions on a
case-by-case basis. It would be nearly impossible for the Commissioner to apply
additional rules in interpretation of these statutes in light of the various
situations which arise requiring department evaluation. Because the agency
decided the validity of these policies on a case-by-case basis, the rulemaking
requirements of the MAPA are inapplicable.[69]
In Reserve
Life Insurance, notwithstanding the lack of precision in the terms “unfair,
inequitable, misleading or encourages misrepresentation,” the Commerce
Department was intelligibly directed by a statute to confront a distinct type
of overreaching by insurance companies.
In
Sa-Ag, Inc. v.
When
read together, L&D Trucking, Reserve
Life Insurance, and Sa-Ag, Inc.
stand for two important propositions.
First, a case-by-case adjudication seeks to apply an extrinsic source of
law (either a statute or a regulation) to the facts of a particular case. Second, if the agency is to establish a more
general proposition, not found in existing statutes or regulations, which the
agency will apply in future cases, the agency must undertake rulemaking under the
MAPA.
In
this case, regardless of how MnDOT characterizes its regulatory action, the Department’s
underlying legal position fails. To the
extent that MnDOT seeks to establish, on a “case-by-case basis,” that the task
of installing Venetian Blinds is properly classified as the work of “Carpenters,”
it is not availing.
Because MnDOT states
that it is proceeding by way of a case-by-case determination, it has limited
maneuvering room. In a case-by-case
determination, MnDOT must confine itself to the application of existing sources
of law.
When one applies
the existing sources of law – and in this case, this is the unadorned
classification categories in Minnesota Rules[71] –
to the particular facts of the MnDOT-Comstock contract, nothing in the term
“Carpenters” naturally or plainly suggests that the installation of Venetian
Blinds is what these tradesmen necessarily do.
The Department’s contention does not follow from this classification
label any more than it would from the terms “Laborers,” or “Painters,” or “Sheet
Metal Workers” – which are likewise listed in Minn. R. 5200.1100.[72] When the very limited, pre-existing law is
applied to the facts of the
Further, in all
candor, rulemaking is what MnDOT intends here.
To the extent that the Department announces that the task of installing
Venetian Blinds triggers an obligation for state contractors to pay the then-prevailing
wage for carpenters, and maintains this view regardless of whether Comstock undertakes
the work, or it is done by some other firm,[73] this
is a “rule” that must be developed through MAPA procedures.
Comstock has established
that DOLI’s past labor classification determinations meet the definition of a
rule under Minn. Stat. § 14.02, subd. 4.
MnDOT’s application of these determinations in assigning classification
codes amounts to unauthorized rulemaking.
Comstock is entitled to summary disposition upon this defense.
(4) Prevailing Wage Classifications Lack the
Required Definiteness
Comstock also
asserts that the text of Minn. R. 5200.1040 and 5200.1100 fail to provide
sufficient guidance as to which work tasks fall within one or another labor
classifications – or how these classifications differ from each other. Comstock argues that without sufficient
definiteness, the rules fall below the required constitutional standards. The challenge is two-fold: First, Comstock contends that because
violations of the Prevailing Wage laws can result in criminal penalties, the
state labor classifications may not be so imprecise that “persons of common
intelligence must guess at its meaning or differ as to its application.”[74] Secondly, Comstock argues that the rules are
so incomplete that the classification determination process results in
decisions that are inconsistent, wholly subjective and arbitrary.[75]
As to whether
various labor classifications are sufficiently definite to be knowable by state
contractors, Comstock argues that the labor classifications of employees who
install chain link fences, lockers and metal panels on construction projects
have shifted and changed without warning.[76] Specifically, Comstock asserts that DOLI has
at times classified persons who install chain link fences as “Laborers” and at
other times, including the
For its part,
MnDOT disputes the characterizations that Comstock makes, but does not take
genuine issue with its description of the overall regulatory environment. As to the claimed lack of precision, MnDOT
argues that the correct labor classifications for particular tasks were known
to Comstock on the date that the underlying contract was signed because Comstock
had a listing of the Major Job Classifications, a copy of the contract
Statement of Work and – presumably – was a knowledgeable contractor. As the Department’s counsel summarized at the
oral argument on Comstock’s defenses, “any contractor that’s capable of doing a
12 million dollar project of this nature, is assumed to have a certain
expertise in bidding. They’re going to
know what different jobs are done by whom and what wage rates apply.”[79]
MnDOT disclaims
Comstock’s further charge of arbitrary enforcement with a bout of genuine
candor: The Department asserts that it
simply is not possible to charge it with arbitrary enforcement of the labor
classification rules, because there are no rules for MnDOT officials to apply. As the Department argues, without a regulatory
text to interpret, it cannot be said that the agency has applied this blank
slate inconsistently or incorrectly.[80]
Under both the
state and federal constitutions, administrative rules must meet certain due
process standards of definiteness.[81] A rule is void for vagueness if it fails to
give a person of ordinary intelligence a reasonable opportunity to know what is
prohibited or fails to provide sufficient standards for enforcement by
executive branch officials.[82] Thus, if a regulation defines an act in a
manner that encourages arbitrary enforcement, or is so indefinite that people
must guess at its meaning, it is impermissibly vague.[83]
The heavy burden
of proving that a regulation is impermissibly vague is upon the party challenging
the constitutionality of the regulation.[84] The Minnesota Supreme Court has instructed
that a rule “should be upheld unless the terms are so uncertain and indefinite
that after exhausting all rules of construction it is impossible to ascertain
legislative intent.”[85] Stated another way, a regulation is not
unconstitutionally vague merely because its terms could have been drafted with
greater precision.[86]
Likewise
important, in a contested case proceeding, neither an Administrative Law Judge
nor the head of an Executive Branch agency may declare a statute or rule
“facially unconstitutional.” The power
to declare a law unconstitutional in all settings is vested with the judicial
branch of state government.[87] Yet, it is also true that because Administrative
Law Judges and agency heads are charged with ensuring that laws, rules and
ordinances are applied in a constitutional manner, it is permissible for these
officials to consider whether application of a statute or rule, in a particular
factual setting, meets the constitutional standards that have been announced by
our courts.[88]
In
the view of the Administrative Law Judge, the lack of a reasonably definite set
of standards for applying labor classifications falls below the minimum process
that is guaranteed to Comstock. Using
the example discussed above, no amount of resorting to the rules of
construction would permit the ordinary reader to glean from the word
“Carpenters” that the task of installing Venetian Blinds is included in that
classification.
Significantly,
the Court of Appeals’ decision in AAA
Striping Service Co. v. Minnesota Dep’t of Transportation[89]
foreshadowed this exact dispute and is directly on point. In AAA
Striping Service, the Court addressed the minimum processes that a state contractor
might demand as to DOLI’s development of prevailing wage classifications. The panel noted:
To determine whether and to whom DOLI is
accountable for decisions not to follow through with rulemaking, we note the
importance of classification and the context in which such decisions are
made. Workers, labor unions,
contractors, subcontractors (including AAA), and perhaps even local units of
government, have a substantial interest in the classification process. Fair wages, workers’ livelihoods, the financial
feasibility of projects, and entrepreneurial opportunities for contractors may
be affected by these decisions. The
statutes mandate investigation and hearings necessary to define worker
classifications. This is strong
legislative directive to observe the basics of procedural due process in making
classification decisions. We conclude
that at a minimum, DOLI should engage in rulemaking as specified in its own
regulation, or, in the alternative, make available a reconsideration process
with a contested case proceeding when requested by an aggrieved party. . . . To
say that the decision to include striper and striper tenders in an existing
classification is entirely within the discretion of DOLI, that it can exercise
this discretion without a record or a hearing, and that there is no review
available is inconsistent with DOLI’s own rules, the statutes, and with the
principles of procedural due process.[90]
The circumstance
decried by the appellate panel is the precisely the one presented here: Not only do the classification categories
fail to give a person of ordinary intelligence a reasonable opportunity to know
which designations are prohibited, the regulations fail to provide sufficient
standards for later enforcement by the agency.
Indeed, the only boundary upon Mr. Oelker’s determinations as to what
tasks fall into which labor classifications, are those that are brought to bear
by Mr. Oelker’s own conscience. As noted
at the oral argument on Comstock’s defenses:
Administrative
Law Judge: Is there any boundary on
how [Mr. Oelker] puts folks into particular classifications?
MnDOT
Counsel: I don’t think
so. Common sense, experience.
Administrative
Law Judge: Can Mr. Oelker pick them
out of a hat?
MnDOT
Counsel: Realistically,
no. Mr. Oelker has been an employee of
the agency for 35 years. He’s evaluated
on a year to year basis. He’s considered
by the agency to have the appropriate expertise to make these determinations…. He’s a state employee and that’s his job.
Administrative
Law Judge: There isn’t any formal
boundaries about his….
MnDOT
Counsel: There are no
rules that apply to this. There are no
procedures. There may be some internal procedures, but I don’t represent that
agency [DOLI] and I’m not aware of any from prior cases.
Administrative
Law Judge: I’m just trying to
understand what are the constraints, if any…
MnDOT Counsel: There are none that I’m aware
of, so theoretically, he could draw them out of a hat. I don’t think that’s what he’s doing.[91]
Lastly, the
Department argues that a later evidentiary hearing will “flesh out the process”
by which accurate classification determinations could be made by construction
contractors, using publicly available documents. Yet, without accompanying affidavits or
documents to support this contention, these assurances are merely non-specific pledges
to produce evidence at trial. Such
promises are insufficient to create a genuine issue of material fact or
otherwise forestall summary disposition.[92]
Because the
prevailing wage classification rules do not include sufficient language for
readers to determine its intended scope, they may not form the basis for a
monetary claim by MnDOT against Comstock.[93]
Comstock
is entitled to summary disposition on its defenses.[94]
E. L. L.
[1] Koppang Affidavit, at 3.
[2] Koppang Aff. at 5.
[3] Farnham Deposition at 18, 63-64; Ex. 1.
[4] Koppang Aff. at 6.
[5] Farnham Deposition at 111-115; Ex. 6; Koppang Aff. at 10.
[6] Farnham Deposition at 117; Ex. 9.
[7] Farnham Deposition at 118.
[8] Farnham Deposition at 118; Exs. 10 and 11.
[9] Farnham Deposition at 122-124; Ex. 13.
[10] Farnham Deposition at 53-61 and 159-60; see also, Farnham Affidavit, Ex. D
[11] Oelker Deposition at 87.
[12] Farnham Deposition at 53-61.
[13] Farnham Deposition, Ex. 13.
[14] Bowman Affidavit, at ¶ 5.
[15] Farnham Deposition at 137; Ex. 22.
[16] Farnham Deposition at 139-140; Ex. 24.
[17] Farnham Deposition at 156-58; Ex. 27.
[18] Farnham Deposition at 157-159; Ex. 28.
[19] Koppang Aff., Ex. 2.
[20] Farnham Deposition at 172; Ex. 34. Comstock notes in its Memorandum that during a June 20, 2007 deposition, Ms. Farnham asserted that, in fact, $114,065.47 is owed by the firm. This number is greater than the sum demand in its Notice of and Order for Hearing. Compare, Comstock’s Memorandum in Support of Summary Disposition, at 23 with Notice of and Order for Hearing, at 3.
[21] Notice of and Order for Hearing, at 3.
[22]
[23]
[24] Minn. Stat. § 177.44, subds. 3 and 4.
[25]
[26] Minn. Stat. § 177.44, subd. 7.
[27] Minn. Stat. § 177.44, subd. 6.
[28] Minn. Stat. § 161.32, subd. 1d.
[29] Oelker Deposition, at 35-36, 41-47.
[30] Minn.
Chamber of Commerce v. Minn. Pollution Control Agency, 469 N.W.2d 100, 107
(Minn. App.), review denied (
[31] Grayned
v. City of Rockford, 408
[32] See,
[33] See, Dep’t. of Labor and Industry v. CBI Na-Con, Inc., OAH Docket No. 12-1901-12038-2 (2002) (http://www.oah.state.mn.us/aljBase/190112038.sd.smm.htm) (Because it was not clear whether the Department’s definition of “confined spaces” was discretionary, or prohibitive, the Administrative Law Judge found the rule void for vagueness).
[34] See, Pietsch
v. Mn. Bd. of Chiropractic Examiners, 683 N.W.2d 303, 306 (
[35] See, Sauter
v. Sauter, 70 N.W. 2d 351, 353 (
[36] See, Theile
v. Stich, 425 N.W. 2d 580, 583 (
[37] See,
id; Ostendorf v. Kenyon, 347 N.W.2d 834, 836 (
[38] Celotex
Corp. v. Catrett, 477
[39] See, Murphy
v. Country House, Inc., 240 N.W. 2d 507, 511-12 (
[40] Winters
v. Kiffmeyer, 650 N.W.2d 167, 169 (
[41] M.A.D.
v. P.R., 277 N.W.2d 27, 29 (
[42]
[43] Koppang Aff. at 21.
[44] See, Department of Human Rights v. Cold Spring Granite, OAH Docket No. 4-1700-863-2 (1986) (http://www.oah.state.mn.us/aljBase/1700863.86.htm).
[45] 480 N.W.2d 149 (
[46] Id, at 151; see also, State v. Brooks, 236 N.W. 316, 317 (Minn. 1931) ("The collection of taxes is a governmental or sovereign function of the state, and procrastination or delay on the part of its officers in the discharge of such function is not permitted to prejudice the state's right").
[47] Farnham Deposition, Ex. 26 – Contract No. 425783, Section 810, ¶ 1.24 (A)(1) and (B)(5).
[48] Compare, e.g., Notice of and Order for Hearing, at 2-4.
[49] See, Comstock’s Memorandum in Support of Summary Disposition, at 18-19.
[50]
[51] See, MnDOT’s Memorandum in Opposition to the Motion for Summary Disposition, at 12.
[52] See, Markwardt
v. Water Resources Bd., 254 N.W.2d 371, 374-75 (
[53] Cable
Communications Bd. v. Nor-West Cable Communications Partnership, 356 N.W.2d
658, 668-69 (
[54] See, In
the Matter of
[55] In re
Space Center Transport, 444 N.W.2d 575, 581 (Minn. App. 1989) (citing Motor Vehicle Mfgrs. Ass’n v. State Farm
Mutual Automobile Ins. Co., 463
[56] See, Oelker Deposition, at 35-36 and 41-47; compare also, Farnham Deposition, Ex. 12.
[57] Compare, DLH, Inc. v. Russ, 566 N.W.2d
60, 69 (Minn. 1997) (“We have held … that summary judgment is inappropriate
when reasonable persons might draw different conclusions from the evidence
presented”) (citing Illinois Farmers Ins.
Co. v. Tapemark Co., 273 N.W.2d 630, 634 (Minn. 1978)).
[58] Farnham Deposition, at 53-61.
[59] Farnham Deposition, Ex. 30.
[60] Minn. Stat. § 14.02, subd. 4.
[61] See, e.g., Cable Communications Bd. v. Nor-West Cable Communications P’ship, 356 N.W.2d 658, 667 (Minn. 1984) (“Generally, if the agency’s interpretation of a rule corresponds with its plain meaning, or if the rule is ambiguous and the agency interpretation is a long-standing one, the agency is not deemed to have promulgated a new rule”).
[62] See, In
re Application of Q Petroleum,
498 N.W.2d 772, 780 (Minn. App.), review
denied (
[63] See, Bunge
Corp. v. Commissioner or Revenue, 305 N.W.2d 779, 785 (
[64] See,
AAA Striping Service Co. v.
[65] L&D Trucking, supra.
[66] L&D Trucking, 600 N.W.2d at 737.
[67] 402 N.W.2d 631 (Minn. App.) review denied (
[68] Reserve Life Insurance, 402 N.W.2d at 633.
[69] Id, at 634.
[70] 447 N.W.2d 1 (
[71] See,
[72] Compare also, The American Heritage Dictionary, at 242 (2d ed. 1982) (“Carpenter – One whose occupation is constructing, finishing and repairing wooden objects”); Farnham Deposition, at 55 (A carpenter “is one who constructs – who works with wood”).
[73] See, Finding of Fact 11; Farnham Deposition, Ex. 13.
[74] See, Hard Times Café, Inc. v. City of Minneapolis, 625 N.W.2d 165, 171 (Minn. App. 2001) (An ordinance "is void due to vagueness if it defines an act in a manner that encourages arbitrary and discriminatory enforcement, or the law is so indefinite that people must guess at its meaning"); compare also, State v. Robinson, 539 N.W.2d 231, 236-37 (Minn. 1995).
[75] See, Comstock’s Memorandum in Support of Summary Disposition, at 17-18.
[76] Farnham Deposition at 134, Ex. 19; Oelker Deposition at 73, 77; Groshens Deposition at 14-23; MnDOT Ex. D; Revnew Demonstrative Exhibit 1.
[77] Farnham Deposition at 134, Ex. 19.
[78] Farnham Deposition at 60; Oelker Deposition at 88-89.
[79] See, Digital Recording of Oral Argument,
OAH Docket No. 8-3001-17706-2 at 1:28 (Jan. 10, 2008); accord, id., at 2:03 (“The task of installing hollow metal door
frames was in the contract. The wage
rates for the appropriate classifications were in the contract. There is an assumption that the contractor
has a minimal level of competency and as part of that they would know generally
that different trades, or skills, or titles, or different classifications do
certain types of tasks. We believe that
was known”).
[80] See, id., at 2:00 and 2:12 (“The rules can’t be vague and ambiguous when no rules exist. And there are no rules that apply to the assignment of classifications”).
[81] Minn.
Chamber of Commerce v. Minn. Pollution Control Agency, 469 N.W.2d 100, 107
(Minn. App.), review denied (
[82] Grayned
v. City of Rockford, 408
[83] See, Hard
Times Café, Inc. v. City of
[84] See, Essling
v. Markman, 335 N.W.2d 237, 239 (
[85] In re
N.P., 361 N.W.2d 386, 394 (
[86] Compare
generally, State v. Normandale Properties, Inc., 420 N.W.2d 259, 262 (Minn.
App.), review denied (
[87] See, Neeland
v.
[88] See, Conclusion 19, supra.
[89] 681
N.W.2d 706 (
[90] AAA Striping Service Co., 681 N.W.2d at 717 (emphasis added and citations and footnote omitted). It bears noting that, at different times over the past decade, both the Legislative Auditor and the Minnesota Court of Appeals have urged DOLI to undertake rulemaking to close gaps in the Prevailing Wage Act regulations. See, Prevailing Wages – Evaluation Report, at 63 (Office of the Legislative Auditor, 2007) (“The source of the problem is that the rules promulgated by the Department of Labor and Industry do not define the job responsibilities of the various job classes for either commercial or highway/heavy construction. In particular, there is no definition of the responsibilities of common or skilled laborers in comparison to those of skilled tradesmen…. The Department of Labor and Industry should promulgate rules that define the job responsibilities of workers in the various construction job classes listed in the department’s rules”) (http://www.auditor.leg.state.mn.us/ped/pedrep/prevailingwages.pdf); L&D Trucking, 600 N.W.2d at 737 (“This court is not unmindful of the problems that case-by-case enforcement of the prevailing-wage law creates for contractors who want to bid on state highway projects. We therefore encourage formal rulemaking by the Minnesota Department of Labor and Industry or other appropriate agency ….”)
[91] See, Digital Recording of Oral Argument,
at 2:00.
[92] See, Nicollet Restoration, Inc. v. City of
[93] See, Dep’t. of Labor and Industry v. CBI Na-Con, Inc., OAH Docket No. 12-1901-12038-2 (2002) (http://www.oah.state.mn.us/aljBase/190112038.sd.smm.htm) (Because it was not clear whether the Department’s definition of “confined spaces” was discretionary, or prohibitive, the Administrative Law Judge found the rule void for vagueness).
[94] While, in the view of the
Administrative Law Judge, Comstock is fully entitled to prevail upon its due
process defense, the Commissioner may wish, for prudential reasons, not to
ground her decision upon any particular reading of the state and federal
constitutions. It should be noted that,
in like circumstances, the state courts will avoid deciding a case on
constitutional grounds when other, non-constitutional bases for the judgment exist. See,
e.g., State v. Bourke, 718 N.W.2d
922, 926 (Minn. 2006) (“We generally avoid ruling under the constitution if
there is another basis upon which a case can be resolved”); Erlandson v. Kiffmeyer,
659 N.W.2d 724, 732 n.7 (Minn. 2003) (“Our general practice is to avoid a
constitutional ruling if there is another basis on which a case can be
decided”); In re Senty-Haugen, 583 N.W.2d 266, 269 n.3 (Minn. 1998) (“It
is well-settled law that courts should not reach constitutional issues if
matters can be resolved otherwise”).