$142K DIR Fine - Failed To Employ Apprentices

Read the entire DIR Civil Wage Assessment against ZK Construction 5/23/16 here.

ZK Construction (ZK Construction) worked on the Ryan Park Restrooms Improvement and ADA Compliance Project (Project) for the City of Rancho Palos Verdes (City). The Determination found that ZK Construction failed to submit contract award information to applicable apprenticeship programs in accordance with Labor Code section 1777.5, subdivision (e), and failed to employ apprentices in accordance with Labor Code section 1777.5, subdivision (g). DLSE assessed an aggregate penalty of $7,740.00 under Labor Code section 1777.7.

A Hearing on the Merits occurred in Los Angeles, California on March 24, 2015, before Hearing Officer Richard T. Hsueh. Max D. Norris appeared for DLSE and Danny Ceron, Esq., of Ceron Law Office for ZK Construction. Prior to the commencement of the Hearing, the parties stipulated as follows:

The matter was submitted for decision on April 7, 2015, following the submission of legal briefs by the parties regarding the standard of review governing the penalty imposed by DLSE.

The issues for decision are as follows:

- Whether ZK Construction failed to notify the applicable apprenticeship program(s) of the award of public works construction contracts;
- Whether ZK Construction failed to contact apprenticeship program(s) for dispatch of apprentices on public works;
- Whether ZK Construction failed to employ apprentices on the Project in the minimum ratio required by section 1777.5 (20% of journeyman hours employed);
- Determination of the appropriate penalty for any violations of section 1777.5.

Based on the admissions, stipulation of the parties and the evidence/testimony presented at the Hearing, the Director finds that ZK Construction failed to properly notify and request dispatch of laborer apprentices from the applicable apprenticeship committee in the geographic area of the Project, and was not excused from the requirement to employ apprentices under section 1777.7. The Director affirms the Determination.

Facts

The Division of Apprenticeship Standards (DAS) promulgated a Public Works Contract Award Information form (DAS 140) for contractors' use in notifying the apprenticeship committee in the applicable geographical area of the public works contract. ZK Construction admitted it did not submit DAS 140 or its equivalent to the apprenticeship committee, nor did it contact the apprenticeship committee for dispatch of laborer apprentices to do work on the Project.

Consequently, no apprentices were employed on the Project. For purposes of the Project, on or about February 19, 2013, ZK Construction entered into a public works agreement with the City of Rancho Palo Verdes. ZK Construction executed a document entitled "Agreement to Comply with California Labor Law Requirements" that encompassed sections 1720, 1773.8, 1775, 1776, 1777.5, 1813, 1860, 1861 and 3700. Approximately 2,613 hours of journeyman laborer work occurred on the Project over 129 days.

ZK Construction Failed to Submit Contract Award Information to an Applicable Apprenticeship Program

Contractors must notify applicable apprenticeship programs or committees of the public works project, including expected work start date and estimated journeyman hours. (§ 230, subd. (a) and DAS 140.) ZK admitted that it did not submit DAS 140 or its equivalent to any apprenticeship program or committee.

ZK Construction Failed To Properly Request The Dispatch Of Laborer Apprentices.

All requests for dispatch of apprentices must be in writing and provide at least 72 hours' notice of the date on which one or more apprentices are required. (§ 230.1, subd.(a).) ZK Construction admitted that it did not request the dispatch of laborer apprentices in a timely manner in compliance with the regulation.

ZK Construction Failed To Employ Laborer Apprentices.

Laborer was the apprenticeable craft at issue in the Determination. With respect to the 1:5 ratio of apprentice hours to journeyman hours, the journeymen laborers that ZK Construction employed on the Project worked a total of 2,613 hours. As it admitted, ZK Construction did not employ any apprentices to work on the Project. Accordingly, the record establishes that ZK Construction violated section 1777.5 and the implementing regulation at section 230.1.

The Penalty for Noncompliance.

If a contractor "knowingly violated Section 1777.5" a civil penalty is imposed under section 1777.7. Here, DLSE assessed a penalty against ZK Construction under the following portion of section 1777.7, subdivision (a)(l):

A contractor or subcontractor that is determined by the Labor Commissioner to have knowingly violated Section 1777 .5 shall forfeit as a civil penalty an amount not exceeding one hundred dollars ($100) for each full calendar day of noncompliance. The amount of this penalty may be reduced by the Labor Commissioner if the amount of the penalty would be disproportionate to the severity of the violation.

The phrase quoted above -- "knowingly violated Section 1777.5" -- is defined in regulation, at section 231, subdivision (h) as follows:

For purposes of Labor Code Section 1777.7, a contractor knowingly violates Labor Code Section 1777.5 if the contractor knew or should have known of the requirements of that Section and fails to comply, unless the failure to comply was due to circumstances beyond the contractor's control.

ZK Construction "knowingly violated" the requirement of a 1:5 ratio of apprentice hours to journeyman hours for Laborer apprentices. ZK Construction admitted that it did not notify any applicable apprentice committee of the contract award nor did it request the dispatch of any laborer apprentices to work on the Project. ZK Construction also knowingly violated the requirement to notify the applicable apprenticeship committee of the contract award information.

The sole defense offered by ZK Construction at the Hearing was that awarding body did not make this requirement known to it. However, as the contractor performing public works, ZK Construction had the obligation to inquire and to know the various requirements imposed by section 1777 .5 concerning the employment of apprentices on the Project. Further, the Agreement to Comply with California Labor Law Requirements that ZK Construction signed at the beginning of the Project reinforced that the apprentice obligations fell to the contractor. That document also provided the statutory citations where ZA Construction could learn about the requirements, including an express reference to section 1777.5. Therefore, ZK Construction was plainly on notice of its apprenticeship obligations and knew, or should have known, of the requirements. It is well established that ignorance of the law is no excuse. (Hale v. Morgan (1978) 22 Cal. 3d 388, 396.) Moreover, ZK Construction had actually worked on least one other public works project before, which was the subject of a prior Civil Wage and Penalty Assessment. 5 Accordingly, its claim that the present section 1777.5 violations were not "knowing" is unpersuasive.

ZK Construction failed to meet its burden of proof by providing evidence of compliance with section 1777.5. Under limited circumstances beyond the contractor's control as defined in the regulation, a contractor may be excused from meeting the 1:5 ratio of apprentice hours to journeyman hours. (See§ 230.1, subd. (a).) In order to show that its failure to employ apprentices was due to circumstances beyond its control, ZK Construction had to demonstrate that it properly requested the dispatch of laborer apprentices from the applicable committee and that no apprentices were dispatched. The record establishes that Z~ Construction not only failed to submit the contract award information, it did not even request dispatch of any apprentices.

DLSE imposed a penalty upon ZK Construction on June 5, 2014. ZK Construction sought review of that penalty on June 20, 2014. Under the version of section 1777.7, in effect at both the time of the imposition of the penalty and the time of the request for review, subdivision (f)(2) requires the Director to decide the appropriate amount of the penalty de novo. In making this decision, the Director is to consider the factors stated in section 1777.7, subdivision (f)(l), stated as follows:

(A) Whether the violation was intentional.

(B) Whether the party has committed other violations of section 1777.5.

(C) Whether, upon notice of the violation, the party took steps to voluntarily remedy the violation.

(D) Whether, and to what extent, the violation resulted in lost training opportunities for, apprentices.

(E) Whether, and to what extent, the violation otherwise harmed apprentices or apprenticeship programs.

Under factor "A," the evidence establishes that the violation was intentional in that ZK Construction made no effort to comply with the requirement to submit contract award information to the applicable apprenticeship committee, request dispatch of apprentices from that committee, and employ laborer apprentices in the appropriate ratio to journeymen. The testimony and evidence establish that ZK Construction knew or should have known that it had to comply with the various Labor Code sections, including section 1777.5, because it had executed the Agreement to Comply with California Labor Law Requirements that encompassed section 1777.5. Further, ZK Construction offered no evidence to show what steps it took to acquaint itself with the legal requirements that it agreed to abide by. Under factor "B" there is no evidence that ZK Construction committed other violations of section 1777.5. 7 ZK Construction was not informed of the violation until after the Project was complete, so factor "C" is irrelevant to the consideration of penalty. There is some evidence of lost training opportunities for apprentices under factor "D" as there were approximately 2,613 hours of journeyman laborer work on the Project, and therefore, at a minimum, there should have been 522.60 hours of apprentice work.

Here, the consideration of these factors appears to favor the imposition of a higher penalty amount than the mitigated penalty amount assessed by DLSE, for the reasons stated above ZK Construction was on express notice that it must comply with section 1777.5, and a considerable amount of apprentice work was lost. ZK Construction previously worked on a public work project and had to comply with the California prevailing wage laws, including the obligation to hire and train apprentices. The Public Works Agreement between ZK Construction and the City in this case expressly required compliance with section 1777.5, among others. All the evidence points to a knowing violation of section 1777.5. Moreover, the loss of over five hundred hours of apprentice work, under the circumstances of this case, cannot be characterized as insignificant. That being said, in applying the other factors, because ZK Construction was not informed of a violation until after the Project and it had no prior apprentice violation; the Director concludes that a daily penalty of $60.00 is the appropriate penalty under section 1777.7.

FINDINGS AND ORDER

1. The Determination of Civil Penalty was timely served by DLSE on Zvi Kur doing business as ZK Construction (ZK Construction).

2. There was one applicable apprenticeship committee in the geographic area of the Project in the craft of laborer.

3. ZK Construction violated Labor Code section 1777 .5 by failing to employ laborer apprentices on the Project in the minimum ratio required by the law.

4. ZK Construction failed to properly inform the applicable apprenticeship committee in the geographic area of the Project of contract award information and request the dispatch of laborer apprentices from the applicable apprenticeship committee, and it was not excused from the requirement to employ apprentices under Labor Code section 1777.7.

5. Under Labor Code section 1777.7, a penalty is assessed upon affected contractor Zvi Kur, an individual doing business as ZK Construction, in the amount of $7,740.00, computed as $60.00 per day for the 129 days that journeymen laborer worked on the Project.

6. Penalties under section 1775 are due in the amount of $41,880.00 for 349 violations at the rate of $120.00 per violation.

7. Penalties under section 1813 are due in the amount of $400.00 at the rate of $25.00 per calendar day for one affected employee.

The amounts found due in the Assessment, as modified and affirmed by this Decision, are as follows:
Wages: $49,188.41
Training fund contributions: $1,769.60
Penalties under section 1775, subdivision (a): $41,880.00
Penalties under section 1813: $400.00
Liquidated damages: $49,188.41
TOTAL $142,426.42

The Determination of Civil Penalty is affirmed in full as set forth in the above Findings. The Hearing Officer shall issue a Notice of Decision and appeal rights which shall be served with this Decision on the parties.


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