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Legislate a majority or average rule rather than the 30-percent rule: The Davis-Bacon Act provides that laborers and mechanics must be paid not less than the wages prevailing in the area in which the work is to be performed. The Labor Department has determined administratively that if there is not a majority of workers employed in a certain classification, it will consider the rate paid to the greatest number, provided it constitutes 30 percent of those employed.

This 30-percent rule is not legislatively authorized and it has led to many difficulties and criticisms. We recommend that the law specify use of a majority rate, or, where there is no majority rate, a weighted average rate.

When a uniform wage paid to only 30 percent of the workers in a particular classification is designated as the prevailing wage in the community, it is manifestly unfair to the remaining 70 percent of the workers in that classification in the area if the rate established is lower than the various rates they are receiving. On the other hand, it is unfair to a contractor in the area who employs a majority of the workers in a particular classification at a variety of rates due to degrees of worker skill to be required to pay a standard higher rate simply because a 30-percent minority receive a higher but uniform hourly rate.

Restrict the definition of "area" to county involved: Labor Department regulations define "area" as the city, town, village, or other civil subdivision of the State in which the work is to be performed. This is the statutory language.

It appears quite clear that the Labor Department must first look for a similar project in the city, town, or village in which the contract work is to take place.

Failing to find such a project, the Labor Department would then look for a similar project in the county. Thus far, we cannot disagree with this procedure. But, the Labor Department goes further.

It has, on a number of occasions, considered projects beyond the State line. This practice of going outside the county-often up to 100 miles away-has led to distortions in designations of wage levels that do not reflect wage levels that actually prevail at the proposed construction site.

We recommend that Congress change the act to restrict the Labor Department to determinations of prevailing rates based upon wage data within the county and no further.

If no rate exists in the county for a particular craft, then no wage determination should be made based upon wage data outside the county, artificially imported and applied.

Similar work classification should be left to contracting agency: That Davis-Bacon Act states that laborers and mechanics of Government projects shall be paid wages which the Secretary of Labor shall determine to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work.

In general, there are three types of construction work: building construction; highway construction; and heavy construction.

To complicate the matter, building construction is usually divided into large projects; such as, hospitals and office buildings, and much small construction work which is closer to residential housing. Each of these categories has its own set of wage rates.

Administration of the Davis-Bacon Act has bogged down because the determination as to which projects are similar to the proposed contract job is critical and crucial. On occasion, the Labor Department has classified a heavy construction job as "building construction” with the resulting higher rates required by the classification.

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On other occasions, a small residential construction job which ceives a classification belonging to a large commercial job materially increases costs.

We recommend an amendment to the Davis-Bacon Act so that determinations of what constitutes "similar" are made by contracting agency officials responsible for the construction. These officials are experienced in the actual construction and considerably more qualified than Labor Department personnel who are far removed from the project.

Conclusion: Since the Davis-Bacon Act was enacted in 1931 it has not been substantively amended. This subcommittee has a unique opportunity to restore balance and stability to the area of wage determinations under the Davis-Bacon Act.

Accordingly, we recommend that this subcommittee report out H.R. 9590 which will provide long-needed court review under the DavisBacon Act.

This proposal, however, should be implemented with other amendments to meet the need for a right to a fair and impartial hearing in all wage determination cases before the Department of Labor, abolition of the 30-percent rule, limitation on the area to be taken into consideration, and placing the responsibility for evaluating construction classifications on the contracting agency directly involved.

Thank you very much, Mr. Chairman. That is the complete state

ment.

Mr. ROOSEVELT. Thank you very much, Mr. Borth. We appreciate your constructive approach and the suggestions which you have made even though, perhaps, we may not agree with all of them. At least, all of us may not agree with all of them.

Mr. BORTH. Yes, sir.

Mr. ROOSEVELT. I think we might have a few questions. On pages 4 and 6, you speak of an amendment needed to give the contracting agencies a greater voice in initial designation of contract work. What constitutes "similar"? You probably are aware at least I assume you are that under recently issued regulations, specialized personnel have been added to the Labor Department staff who have had long experience in the construction industry; who can provide, on a regional basis, more accurate information with regard to wage determinations and classification of jobs.

Do you think that this method should at least be given the opportunity to operate to see that it provides adequacy of applications, so that the general thought that you have is carried out by this regulation, before we go so far as to give the contracting agency itself that determination and thereby splitting a basic responsibility involved? Mr. BORTH. I can't disagree with your observation. I am willing to give it a chance. I think anybody is. As a matter of fact, I think that when Mr. Donahue appeared before you on June 23, he had a lot of changes that he had made-a lot, of which, I might say, came out of the hearings that you held previously-and I think he rightfully took advantage of the thoughts and I would not be against

giving him a chance to operate in certain areas at all, and I think this

is one area.

There have been other changes that they have made down there, too, I might add, that I am in perfect agreement with. I have talked to Mr. Manger about it, and some of them are very constructive. I think the only point of disagreement, basically, is the old shoe, to you and to other members of the committee; and that is, the judicial review, and also the question of setting up this Wage Appeals Board within the Department of Labor.

Even you, in your recommendations, felt that it should be appointed by the President of the United States, and

Mr. ROOSEVELT. You said "even" I. That is correct. I am pleased that we are in agreement on some points. However, rather than write any amendments to the act at this time, I think we should allow the departmental regulations time to operate so that we may have the Department's experience under the regulations as a basis for such legislation. I know the Department is not in agreement with you and I on some points, but I feel as you do that there are some situations which should be legislated so that they are not subject to change.

I hope that this committee next year will take the experience of the Department, and will, based upon that experience, make such changes as then in its wisdom it feels are feasible and right.

Mr. BORTH. I was going to ask you, Mr. Chairman, what was your timetable. How long do you think is fair to give them a chance to operate? A year, 2 years? You mentioned a year, about.

Mr. ROOSEVELT. Yes; I would think even less than a year. I would think that early next year we could ask the Department to inform us as to their experience. Then, shortly after that consultation we could be prepared to present a bill reflecting the committee's judgment.

Mr. BORTH. I think it might be interesting also for the subcommittee to keep in mind that when they set this Wage Appeals Board up, as testified by Mr. Donahue on page 6, contrary to certain members of your committee objecting to judicial review, they themselves admit that judicial review is required, because in setting up the Wage Appeals Board it says, "The Board may make decisions, decide questions of fact and law arising in appeals from the following," and they list various things.

So, they themselves admit when they set this up under Messrs. Smith, Rothman, and Barker, that these three gentlemen shall have a right to decide judicial questions, and I think this is a little odd, and I think it would be very interesting to see how many judicial cases they have come before them.

They said part of it is that they will interpret the law, but it can't go any further. You can't go to any court, and seek any further appeal.

Mr. ROOSEVELT. That was the only part of your testimony that I disagree with. I don't think they are bound by previous rulings of the Department. They do have, as you say, the right to make a decision both as to law and

Mr. BORTH. Fact and law.

Mr. ROOSEVELT. Yes; fact and law. But I don't think that they are hamstrung.

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Now, it is simply a case of judgment here as to whether the existing court system, Federal court system, is better able to handle these kinds of review cases, or whether a special body should do it. After all, there is precedent, as you well know, for special types of courts. Mr. BORTH. Right.

Mr. ROOSEVELT. In the patent field, for instance. It may well be that because of the complexity of this and because of the time factors and other things which you have discussed here, that we may feel that a judicial body would not be the wisest procedure

As I am sure you know, I have stressed the need for the independence of the body, and I am not satisfied with the independence of it. On the other hand, the Board that is set up now, I would like to see how it works.

Mr. BORTH. Oh, yes.

Mr. ROOSEVELT. How much work it has, and as experience will show, whether we are justified in having a situation where part time people as against full time people should be involved.

I think you would agree that at least in the initial instance, they appointed qualified people to this Board. Wouldn't you?

Mr. BORTH. I agree. I can't complain. When it comes to the legal end of it, of course, they only have one lawyer on there. I am not a lawyer, but I know that Mr. Barker is not, and I know that Mr. Smith is not.

Stu is Mr. Rothman-because he is former Solicitor to the Department of Labor, and then later General Counsel of the National Labor Relations Board, so he has had plenty of experience in the legal aspects of it.

Mr. ROOSEVELT. So, I hope you wouldn't say we were unreasonable, in saying that rather than your recommendation of adopting Mr. Goodell's bill, we probably would be a little wiser to wait until we see the operation, and the need, and the total cases and types of cases which this Board will have handled by, let's say, next January or February.

Mr. BORTH. Yes. I couldn't take exception, because you, yourself, in accepting this procedure, have gone against your own report, where you, as I said, recommended eight legislative changes, and you are willing to sit back and wait now, and see, and with a lot of these, I might say, I agree.

It should be put in legislative language.

Mr. ROOSEVELT. Right.

With reference to pages 4 and 6, the recent regulations of the Department do also include consultation with all Federal and State agencies requesting rate determinations, and requesting recommendations as to types of construction involved, and available data reflecting wage rates on similar construction in the area, so that again, they are moving toward the basic thought that you have in mind that final determination should reflect the situation in the local area.

Now, whether this regulation is feasible, whether it actually works out in fact-whether they will actually get the requests that they are making, that they will come in in time, that they will be properly processed, that they will be followed-is something I think we are going to have to wait a few months and see how it actually operates, before we can really make a determination as to whether they are on the right track or not.

With respect to the 30-percent rule, isn't the use of an average rate really unfair and disruptive, Mr. Borth? It seems to me that it would tend to be automatically unfair, because it does not mirror any of the actual wages paid in the community.

For instance, your weighted average-might this not actually, in essence, mean that the people who were employed, instead of getting the wage rate to which they had been paid, would suddenly find themselves getting a lower rate because of the weighted average?

Mr. BORTH. But the same thing could work on a 30-percent rule, too, though, as I point out here in my testimony.

Mr. ROOSEVELT. Yes; but at least it would have rarely been lower. As you know, part of the problem here is that in actuality, as you know, it has been higher. That is why it has been under attack, and I would think that at least the requirement should be that if you use people on the job who had been paid or were being paid at a higher rate, that some consideration should be given not to lower their wages.

Mr. BORTH. I can't disagree with you, but somebody is going to be hurt under this system, no matter what. Even under the 30-percent rule, right? You will find cases where 30 percent would not cover a very high rate, maybe, several rates higher than the 30-percent rule. You would agree with that; would you not?

Mr. ROOSEVELT. Oh, Yes.

Mr. BORTH. Well, the weighted average, as a matter of fact, I think is as fair as any, because if you had 100 workers, at $2.50 an hour, any you had 3 at $1.40, and 10 at $1.70, you would take and multiply 100 times $2.50, and you would average that, and you would come out to $2.50 anyway.

All I want to do is to take into consideration the number of people in the classification as well as the rate.

Mr. ROOSEVELT. Yes; but now suppose you take the $2.50. Why should they work at the weighted average?

Mr. BORTH. Well, because it will come out to that. I mean, if there is a hundred of them at $2.50, and there is only 4 at $2.40, and 10 at $2.70, and you take this and average that out, you are going to come out around $2.50.

You can't help it. It is a weighted average, because you have got 100 people in this classification.

Mr. DENT. The prevailing rate would be the hundred.

Mr. ROOSEVELT. Under the situation you gave, the prevailing rate would be there.

Mr. BORTH. That is right.

Mr. ROOSEVELT. There wouldn't be any point.

Mr. BORTH. I was just giving a simple illustration of what I meant by a weighted average. I agree with you. It would come out to $2.50. I mean, that would be the prevailing wage, and you wouldn't have to go to your 30-percent rule or any other rule, because that is the prevailing rate.

Mr. ROOSEVELT. That is right.

Mr. BORTH. I was merely using this as an example.

Mr. ROOSEVELT. I don't think it is a very good one, if I may say. Mr. BORTH. Well, so many people want to take all the wages from the top to the bottom, and forget the number of people in those classifications just average the wages. Take from $5 down to $3, and just

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