B. The Administrative Hearing<\/span><\/h3>\nLusardi (I\u2019m not sure where Pro Works was at) filed a request for administrative review. At the hearing, Lusardi requested the appearance of Senior Deputy Labor Commissioner Michael Nagtalon, who it had subpoenaed because the penalty had been assessed by Nagtalon, but was informed by DLSE\u2019s counsel that he was out of the country. DLSE\u2019s counsel offered to stipulate to produce Nagtalon at a rescheduled hearing.<\/p>\n
Note:<\/strong> The hearing officer, correctly to my mind, applied the 2014 versions of Labor Code and implementing regulations.\u00a0<\/p>\nHowever, in an unusual series of events, Lusardi\u2019s counsel declined the offer and instead informed the hearing officer that, \u201cLusardi will rest without presenting any further evidence and will not move any of Lusardi\u2019s exhibits into evidence in this matter\u201d and, further, that \u201cWe are not going to present any evidence because we feel very strongly the Labor Commissioner has failed to meet its burden in this matter.\u201d My guess is that since Nagtalon did not testify, Lusardi\u2019s counsel\u2019s view was that the DLSE could not show how it arrived at the penalties imposed and therefore had not met its burden.<\/p>\n
C. The DLSE Decision<\/span><\/h3>\nFollowing the hearing, the Director of DLSE affirmed the hearing officer\u2019s findings that the DLSE had not only met its burden but that Lusardi knew of Pro Works\u2019 violations and was liable for the penalties. Among other things, the Director determined:<\/p>\n
\n- \u201cThere is no dispute that Pro Works failed to employ any apprentices on the Project.\u201d<\/li>\n
- \u201cPro Works had first assigned an Iron Worker journeyperson to work on the Project on December 23, 2014. In light of that evidence, it was reasonable for DLSE to infer that Pro Works knew of its apprentice needs by February 23, 2015. Indeed, given all the facts in the record, it is also reasonable to infer that Pro Works never had any intention of employing apprentices on this Project in December of 2014, in February of 2015, or even in May of 2015 when it finally submitted a complete and valid DAS 140 form. That Anderson did not directly inquire of Pro Works or make a finding as to the state of Pro Works'[s] knowledge of apprentice needs does not detract from the record of Pro Works'[s] violations in this case.\u201d<\/li>\n
- \u201cPro Works'[s] violations of apprentice requirements are deemed to be `knowing\u2019 within the meaning of [former] section 1777.7, subdivision (a)(1). This is so because, as reflected in DLSE records, Pro Works had previously been found to have violated [former] section 1777.5.\u201d<\/li>\n
- \u201cAccording to [DLSE staff] testimony and the penalty review, Nagtalon considered the five penalty factors, approved the penalty review prepared by [DLSE staff], and set the penalty rate at $200.00 per violation `due to the nature of the violations,\u2019 before returning the penalty review to [DLSE staff] for preparation of the assessment. These facts establish a prima facie showing that Nagtalon reviewed the summary of the investigation prepared by [DLSE staff], considered the statutory factors, and properly exercised his discretion in setting the penalty rate.<\/li>\n
- \u201cIn this case, DLSE produced prima facie evidence that Lusardi had knowledge of Pro Works'[s] apprentice violations, thus satisfying the first prong of [former section 1777.7,] subdivision (d). This conclusion could have conceivably been rebutted by Lusardi, but Lusardi did not deny it had knowledge. Had Lusardi denied knowledge, evidence may have been explored as to whether Lusardi failed to comply with the second prong of subdivision (d). However, in the absence of such evidence, it is reasonable to infer that Lusardi possessed knowledge, thereby depriving Lusardi of the safe harbor from liability for Pro Works'[s] violations.\u201d<\/li>\n
- \u201cGiven DLSE\u2019s evidence supporting a prima facie showing of Lusardi\u2019s knowledge of actual and ongoing apprentice violations by Pro Works during the course of the Project, and given the opportunity to be heard in the form of the hearing, Lusardi was not deprived of its due process rights. Lusardi was put on notice by the contents of DLSE\u2019s initial packet, and it cannot plausibly assert that its potential liability was not manifest from the start of DLSE\u2019s investigation. . . . Further, by virtue of section 1743 and former section 1777.7, Lusardi was on notice that its liability was at issue.\u201d<\/li>\n<\/ol>\n
Note:<\/strong> In general, under the Administrative Procedures Act, administrative agencies can accept, reject, or modify the findings of a hearing officer or Administrative Law Judge. Now I can hear many of you scream \u201cdue process!\u201d or the agency can\u2019t act as \u201cboth judge and jury!\u201d But parties do have appeal rights through the writ process described below as well as appeal to the Courts of Appeal as this case reflects.\u00a0<\/p>\nD. The Writ Proceeding<\/strong><\/span><\/p>\nLusardi filed a writ of administrative mandate with the superior court (again, where the heck is Pro Works) arguing that the Director\u2019s decision should be invalidated because the DLSE acted in excess of its authority and issued a civil penalty assessment against Lusardi. Lusardi further argued it was not afforded a fair hearing because Nagtalon did not attend the hearing and Lusardi was not provided an opportunity to examine how the penalty was determined.<\/p>\n
The superior court disagreed finding that the Director had a basis to find that Lusardi could be held liable for Pro Work\u2019s failure to hire apprentices \u00a0since Pro Work\u2019s certified payroll showed that it failed to hire any apprentices. The superior court further ruled that Nagtalon \u201cwas not the ultimate decision-maker concerning the amount of the penalty,\u201d and \u201c[w]hile the Court believes that the better practice for the DLSE . . . would have been to produce . . . Nagtalon for examination,\u201d \u201cthe Court is not persuaded that the failure to produce . . . Nagtalon resulted in a violation of Lusardi\u2019s due process rights.\u201d<\/p>\n
Lusardi appealed.<\/p>\n
The Appeal<\/h3>\n
On appeal, the Fourth District Court of Appeal noted that former Labor Code section 1777.7 (Note:<\/strong> current Labor Code section 1777.7 is essentially the same) provides for two avenues of liability of a prime contractor for a subcontractor\u2019s failure to employ apprentices: (1) if the prime contractor \u201chad knowledge of the subcontractor\u2019s failure to comply\u201d with Labor Code section 1777.5; or (2) if the prime \u201cfails to comply with [certain] requirements.\u201d<\/p>\nNote:<\/strong> Under those current version of Labor Code section 1777.7 those \u201crequirements\u201d include any of the following: (1) the prime contractor did not include in the subcontract a copy of Labor Code sections 1771, 1775, 1776, 1777.5, 1813 and 1815; (2) the prime contractor failed to continually monitor a subcontractor\u2019s use of apprentices, including, but not limited to, periodic review of a subcontractor\u2019s certified payroll; (3) upon becoming aware of a subcontractor\u2019s failure to employ apprentices, failing to take corrective action, including, but not limited to, retaining funds due to the subcontractor until the failure is corrected; or (4) prior to making final payment to a subcontractor, failing to obtain a declaration signed under penalty of perjury, that the subcontractor \u00a0employed the required number of apprentices.<\/p>\nHere, held the Court of Appeals, substantial evidence supported the Director\u2019s finding under the first prong of Labor Code section 1777.7, namely, that Lusardi \u201chad knowledge of [Pro Works\u2019] failure to comply\u201d with Labor Code section 1777.5 because Pro Works\u2019 certified payroll showed no hours for apprentices. The Court of Appeal further found that substantial evidence supported the amount of civil penalties since DLSE staff testified at the administrative hearing how the penalties were calculated. Finally, the Court held that Lusardi\u2019s due process rights were not violated by Nagtalon not appearing at the administrative hearing since Lusardi decided to rest its case without requesting a continuance to obtain Nagtalon\u2019s testimony.<\/p>\n
Conclusion\u00a0<\/h3>\n
While the Lusardi<\/em> case was decided under the former provisions of the Labor Code, the current version of Labor Code sections 1777.5 and 1777.7 remains substantially the same. The lesson here for prime contractors, is that you can<\/em> be liable for your subcontractor\u2019s failure to hire apprentices, and the evidence establishing your \u2018knowledge\u201d can be as simple as certified payroll records which do not show apprentice hours. However, I am a little ambivalent of the evidence relied upon, since Labor Code section 1777.5 only requires that a contractor request apprentices, not that a contractor must employ apprentices, and that if a subcontractor makes a request but no apprentices are provided no apprentice hours of course would show up on the subcontractor\u2019s certified payroll records.<\/p>\n\t\n\t\t\t\t<\/div>\n