Teco Mechanical Contractor, Inc.
2008-CA-000305 11/20/09 2009 WL 3877578
Opinion by Judge Keller; Judge Nickell and Senior Judge Lambert concurred.

The Court affirmed in part, and vacated in part and remanded, a summary judgment upholding the constitutionality of portions of KRS Chapter 337 and assessing back wages and civil penalties against the appellant contractor.

The Court first held that although the trial court cited to the wrong review process, it reached the correct conclusion that the Act provided a process for aggrieved parties to be heard.
The Court then held that although the Act did not specifically provide for the filing of a direct action in circuit court by an aggrieved party, that right was inherent that aggrieved parties could file an original action in circuit court, not an appeal from an administrative adjudication. Therefore, from a due process standpoint, the Act was constitutional.

The Court next held that the Act did not improperly delegate judicial power to the Cabinet as the Cabinet was performing an administrative function when it issued citations or sought back wages for employees. Further, KRS 337.505(1) and KRS 337.520(3) did not leave the Cabinet with unfettered discretion regarding job classifications. Even so, because the Act provided for judicial review of the Cabinet’s actions, even if the Cabinet were exercising judicial authority, there was a sufficient safeguard against abuse of discretion.

The Court next held that the trial court used the incorrect standard of review. Because appellant did not receive a full hearing at the Cabinet level, the court should have reviewed the matter de novo.

The Court next held that on remand the trial court must review de novo the Cabinet’s use of the “work incident to a trade” method to classify employees to determine whether or not it was reasonable. Although, the Court rejected appellant’s argument that the method ran afoul of statutes requiring certain tradesmen to be licensed because the legislature did not tie payment of various wage rates to licensing.

The Court finally held that the Cabinet’s audit reports were generated with the intent to make a case against appellant and although they did not contain quotes, statements, or opinions of third parties, they were based on information obtained from employees. As such the audit forms amounted to inadmissible hearsay as to the employees who did not testify.