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agency head administers would cause delay in construction,” and so forth, and therefore that the review should be stopped. Now, this provision puzzles me slightly. Does that
mean, then, that any agency that is handling Federal work can, in effect, stop review of a wage determination merely by this certification, and does that not somehow diffuse the authority under the act ?
Mr. SHERMAN. I think it is a question of how you interpret the word, the Board shall decline the review. Perhaps that should be given consideration. Both President Haggerty and I have discussed about the discretionary matter of right. In other words, I cannot see any objection to the agency head making a certification of that sort but it seems to me the power should be in the Board as to whether it wishes to decline or not.
You see, the difficulty in this area is that you have such a volume of individual decisions that may be the subject of review that unless you take that into account and give your appellate body-assuming a matter of reasonable discretion and good faith, and I am sure there will be—some power to sift out what is important from what is unimportant, they can get submerged in a mass of detail and also the process of contracting
Mr. Gill. I know that, but the point that bothers me is that the discretion is not with the Board to refuse but with the agency head to certify and remove the case from the Board's decision.
Mr. SHERMAN. I wonder whether the draftsman really meant that, whether he did not really mean the Board is authorized to decline.
Mr. ROOSEVELT. Will the gentleman yield?
I think the primary problem here was one of national defense. Let's say in a missile area a matter of this kind came up and it was certified by the Department of Defense that any delay in the proceeding or construction would result in stopping it and it was of such urgent nature that it would affect national defense.
I think the thought was that it should be the ability to take care of such an emergency. However, I would agree that I think an amendment would well apply here which would say that the Department should have a right to present this to the Board as such an urgent matter that the Board should make the final decision, and I think that was what was meant.
Mr. SHERMAN. I rather read it that way, even though dramatically.
I notice it says "the certification would seriously impair the national defense or welfare."
Perhaps this is broadler than just defense.
Mr. SHERMAN. Well, in the terms of what we were talking about, which implies really a broad power on the part of the Board to decide what kind of appeals it would take into account, as long as they are the ones that are making the determination, you can be fairly loose about it.
Mr. GILL. Yes.
One final question, Mr. Haggerty, in relation to your comment on page 6 of your statement that
The liquidated damage penalty may serve as the deterrent to those who are
willing to take such risk.
It does not mean risks of violation of the act. I wonder whether it really is a deterrent or whether it would be just added into the bid
Mr. HAGGERTY. Well, that is a possibility, but I doubt it very much.
What we are talking about here is the suggestion made in the presentation that too often a contractor will violate the Davis-Bacon Act by paying less than the rate of pay on the hope that he won't get caught, and if he is caught later on then he is just penalized the differences of the rate he should have paid against what he did pay and that is the end of that.
Now, if he should fold up and decide to do nothing about it, there is no other recourse; that is the end of it. This was suggested as another added safeguard, I think, in the whole picture.
Mr. Gill. How would you collect liquidated damages if a man folded up? Would there have to be a bond posted? Mr. HAGGERTY. There generally is a bond posted. Mr. SHERMAN. Well, I think that
Mr. ROOSEVELT. When you say generally, if there is not now, you mean on
Mr. SHERMAN. Each contractor files a bond, as President Haggerty says, under which the employees can sue as can material men and other contractors under the Miller-Herd Act.
Mr. ROOSEVELT. How would you judge how much the bond would have to be to provide for liquidated damages?
Mr. SHERMAN. I think there is a bond of pretty substantial amount that may not—I don't think they would have to vary it much as far as liquidated damages are concerned. I think we have a pretty clear answer to Congressman Gill.
Take an area where it is highly organized and the union rate would actually and, in fact, and all that sort of thing, be the prevailing rate. A union contractor that bids on that basis, he has not got any place to move around in; he cannot fool around. He does not have to take the $10 liquidated damage into account in making his bid.
Now, the other contractor who may not be bound by an agreement or enforcement mechanism that he has to take into account now can take and can continue to take a business risk of saying, “Well, I will classify some fellows as laborers who are really iron workers and things of that sort, and if they catch up with me, I will give them the money.”
There is an awful lot of construction and a lot of people working. I am sure the investigating agents don't catch up with everybody. A good many slip through. But if they knew in the Work Hours Act this is not an unusual proposal, that there would be a $10 penalty per day for each day of violation, then you might be able to reduce your investigation forces because they figure it would not be worth it.
Entirely apart from the question whether the money and the contract and the bond is there, the man is in business; if he has any assets, they would be the subject of the suit and, of course, that money would go to the Government, not to the individual.
Mr. Gill. In other words, this liquidated damage, the penalty is to the contracting agency but not to the employees of the employer.
Jir. SHERYLAN. Yes.
Mr. SHERMAN. Yes; that is the way it is in the Work Hours Act which came through this committee. The same way with the Child Labor. You have a $10 penalty in Walsh-Healy.
Mr. HAGGERTY. That is the same in every State, Mr. Gill, $10 per person per day penalty for violation.
Mr. SHERMAN. I think the whole idea is, without frightening anybody, to create a deterrent so you don't have to expend vast amounts of money on investigators and keep somebody checking all the time.
Mr. ROOSEVELT. Is this a willful violation ?
You have disbarment now and that comes in only when you have a very aggravated violation. There is a terrific area where a man of that type of skill can look not too willful and still try to save himself a little profit money on the contract. We have not gotten very specific about it. We say the committee should look into it. Perhaps there are other devices to accomplish the same purpose. We think if you do look into it, you are going to find—I am talking about the facts now, not the way it is written down on regulations or piece of paper—there is quite an area of evasion here that really has not been caught up with.
Mr. Gill. I was merely concerned, Mr. Chairman, that we move into an area of this sort, that the liability is as defined, so that we don't get into this never-never land on bonding such as we have in another section of the law.
I think that is all I have at the moment. Thank you very much. Mr. ROOSEVELT. May the Chair say that, first, I want to thank you, Mr. Haggerty and Mr. Sherman. You are always a great help to the committee and a help to your president.
Could I ask you to do one other thing?
The poverty bill is not the subject of this hearing, but in the poverty bill we wrote certain sections into the act, as you know, dealing with the building trades. My recollection is we didn't write any Davis-Bacon provision into the act at all.
Mr. Haggerty. I think you did, Mr. Chairman.
Mr. SHERMAN. Mr. Mason, who is, unfortunately, out ill, has been checking with me on that, and I understand the committee has been doing quite a job protecting that situation.
Mr. ROOSEVELT. We did the best we could. I hope it is all right but I would like to have you have a good look at it.
Mr. HaGGERTY. We can check it.
Mr. ROOSEVELT. Again let me thank you very, very much for your help to the committee.
Until the committee has further requests for hearings on the subject, there are no more hearings planned for the present and the committee will adjourn, subject to the call of the Chair.
Mr. HAGGERTY. Thank you, Mr. Chairman, and members of the committee, for your courtesy.
(Mr. Haggerty submitted the following analysis.)
LEGAL ANALYSIS OF THE JUDICIAL REVIEW PROPOSAL CONTAINED IN H.R. 9590
(INTRODUCED JANUARY 8, 1964)
H.R. 9590, a bill introduced by Representative Goodell on January 8, 1964, proposes to amend the Davis-Bacon Act by providing judicial review of wage predeterminations issued by the Secretary of Labor and of enforcement proceedings under this act. This bill has been referred to the House Committee on Education and Labor which has obviously had no time to give it consideration.
It should be noted that the House Committee on Education and Labor reported the fringe benefits bill on May 9, 1963, and that at no time during 1963 did Congressman Goodell or any other Congressman introduce a judicial review bill for consideration by the committee. Actually, Congressman Goodell did introduce a bill on April 4, 1962, to provide for judicial review of Davis-Bacon Act administrative actions but his recent bill of January 8, 1964, contains so many changes in the 1962 bill that it is clear that the original bill is not considered an appropriate vehicle for consideration of the amendment.
The delay in formulating a legislative measure for committee consideration is an index to the difficulty and intricacies of the subject matter.
The analysis of H.R. 9590 which is set forth below demonstrates clearly that the decision by Congress on the matter of judicial review should be made only after hearings on a specific measure at which testimony can be secured from experts in the contracting agenices, the Comptroller General's Office, the Department of Labor and from industry and labor. The complexities of Governinent contract bidding and enforcement procedures are such that unwise decisions on the floor of the House can be avoided only by appropriate study of specific proposals, through the time-honored method of hearings before the appropriate House subcommittee and a report by the full committee.
H.R. 95.90, is a substantial revision of the proposals contained in H.R. 11115, introduced by Representative Goodell on April 4, 1962. Under the earlier bill, the review procedure would have been initiated by a charge that a contractor paid wages less than those stipulated in his contract and less than those found prevailing under the act. Thereafter, the Secretary of Labor was to investigate the ebarge, hold a hearing, issue findings, and determine wages owing by the contractor. Persons aggrieved by such a decision could have sought review from a U.S. ('ourt of appeals, which was specifically authorized to stay any action under sections 2 and 3 of the act, pending completion of judicial review. The proposal contained in H.R. 11115 was defective in several respects in terms of the orderly operation of the act and the relative position of fair and unfair contractors. H.R. 9590 appears to be an attempt to avoid the problems arising from the earlier judicial review proposal. For the reasons discussed below, however, the new bill is subject to the same criticism.
PROVISIONS OF THE BILL
H.R. 9390 provides two avenues for judicial review. Section 1 of the bill would add a new section 8 to the act permitting “Any persou (defined to include contractors, subcontractors, bidders, prospective bidders, labor organizations, employees, prospective employees, and public and private contracting agencies), azgriered by a wage determination” to initiate an action in a U.S. district court against the Secretary of Labor and the contracting agency to "enjoin the application of such wage determination to the invitation for bids for the advertised contract and to determine the prevailing wage lawfully applicable thereto.” Such action must be commenced within 15 days after the publication of the adTertised specifications which contain the challenged wage determination. The district court is empowered to issue a temporary restraining order relieving all bidders from stipulating that they will comply with the determination being challengedi, provided, that the court "may" require any bidder to whom the contrart is awarded to post an indemnity bond to guarantee the fulfillment of any wage obligation if the challenged determination is sustained. The court is then charged with the duty of deciding whether the challenged determination was in accordance with law, and, if not, to establish the prevailing wage. Thereafter, reriew is provided to the appropriate l'.5. court of appeals and the U.S. Supreme Conrt.
Section 2 of H.R. 9590 would amend section 7 to provide that whenever it is claimed that a contractor or subcontractor has failed to pay the prevailing wage
rate, the contracting agency is to investigate the claim and issue a written ruling on the claim. No penalties, including the with holding of funds from the contractor or subcontractor, can be imposed prior to such ruling. Any contractor or subcontractor aggrieved by such a ruling may bring a de novo action in the U.S. district court where the violation is alleged to have occurred. The district court, which may stay any penalty pending the completion of judicial review, is to determine whether the contractor or subcontractor has failed to comply with his obligations under the wage provisions of his contract. Similarly, employees aggrieved or adversely affected by the ruling of the contracting agency may seek review in a U.S. district court. While employees may maintain such actions on behalf of other employees similarly situated, only those employees who give their consent in writing may become a party plaintiff to any action brought under this section. It may be noted here that this limitation is entirely contrary to the recog. nized concept of a class action. In practice, this provision will operate in discriminatory fashion, since some employees will recover additional sums owing to them under the law, while others, entitled to exactly the same sums, will not receive them because of their failure to consent in writing to become a party. Following the decision of the district court, review is provided to the U.S. court of appeals and the Supreme Court. Although it appears that section 7 is intended to be limited to enforcement, there is no explicit statement in the bill that the validity of wage predeterminations cannot be challenged in the judicial proceedings related to the enforcement issue. The language of section 7(d) is of such ambiguous nature that it is possible that the validity of a wage predetermination could be challenged in a section 7 case. The answer to such question would not be known, under the present language of the bill, until a judicial test case had been completed.
EXISTING ENFORCEMENT PROCEDURES AND THE EFFECT OF THE BILL
To understand the detrimental effects upon the operation of existing law which would result from the enactment of H.R. 9590 it is necessary to review briefly the present enforcement machinery contained in sections 1 to 3 of the act. Section 2 presently provides that, upon a finding by the contracting officer involved that any laborer or mechanic is being paid a rate of wages less than that required to be paid by the contract. The Government may terminate the contractor's right to proceed with the work involved, to complete the work through other means and to recover from the contractor any existing costs occasioned by his violation. Section 3, read in conjunction with section 1, authorizes the Government to withhold from a contractor so much of any accrued payments as may be necessary to pay to his employees the difference between the rate of wages required by the contractor to be paid them and the rates actually received by them, and authorizes the Comptroller General of the United States to pay directly to the employees affected the wages so withheld. In addition, the Comptroller General is authorized to distribute to all Government departments a list of contractors whom he has found to be in violation, and such firms may receive no further contracts for a period of 3 years from the date of their appearance on the list.
The effectiveness of these enforcement procedures arises from the fact that, with the exception of the ineligible list, come into play while the work is still in progress. Under both of the Goodell bills. however, provision is made for the delay of these enforcement procedures until all administrative and judicial appeals have been exhausted. Under proposed section 7, the contractor can wait until a claim of violation is made, and then proceed to an investigation before the contracting agency. Thereafter, he may start all over again by bringing a de novo action in the l'.S. district court and again follow the appeal route up through the Supreme Court of the United States. ind, during all of this lengthy period, the withholding order of the Government may be stayed hy judicial order.
Under proposed section 7, it is specifically provided that no penalties, “including the withholding of funds from the contractor or subcontractor." can be im. posed prior to the ruling of the contracting agency. Further, on initiation of a de novo action in a U.S. district court, the court has authority to stay any penalty imposed “pending the completion of judicial review." Thus, a contractor receiving an adverse ruling could seek and in most situations obtain--a stay of the well-established and necessary withholding procedure. Since, as noted above, no presumption of validity can attach to the Secretary's determination based on prior administrative rules, practices, etc.—which would ordinarily serve as sup