SERVICE CONTRACTS ACT OF 1963

WEDNESDAY, JANUARY 29, 1964

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON LABOR

OF THE COMMITTEE ON EDUCATION AND LABOR,

Washington, D.C. The subcommittee met at 10:10 a.m., pursuant to adjournment, in room 429, Cannon Building, Hon. James G. O'Hara presiding. Present: Representatives O'Hara, Sickles, and Thompson.

Staff members present: Robert E. McCord, staff director, Special Subcommittee on Labor; and Philip R. Rodgers, minority counsel for labor.

Mr. THOMPSON. The subcommittee will be in order.

Our purpose this morning is to consider two bills by our friend and colleague from Michigan, Mr. O'Hara, H.R. 1678 and H.R. 6088. We are very glad this morning to have as our first witness Mr. David Sullivan, president of the Building Service Employees International Union of the AFL-CIO.

Because of commitments which I have elsewhere, and because of a custom we have on the subcommittee, I am going to ask Mr. O'Hara, the author of the bill, to preside over the hearings, and I hope, Mr. Sullivan, that you won't be offended if I pull out. I hope to be able to get back in a bit, but Mr. O'Hara will conduct the hearing, and will take the chair at this point.

Mr. O'HARA (presiding). Mr. Sullivan, without any further ado, we would like to have you identify yourself, and your companions identify themselves for the record, and then proceed with your testimony in any manner that you wish. If you want to read it, or insert it in the record and summarize it, whatever may be your preference. STATEMENT OF DAVID SULLIVAN, PRESIDENT OF THE BUILDING SERVICE EMPLOYEES INTERNATIONAL UNION OF THE AFL-CIO; ACCOMPANIED BY THOMAS R. DONAHUE, ASSISTANT TO MR. SULLIVAN; AND AARON BENENSON, ESQ., COUNSEL, BUILDING SERVICE EMPLOYEES INTERNATIONAL UNION, AFL-CIO

Mr. SULLIVAN. First of all, my name is David Sullivan. I am the general president, Building Service Employees International Union, AFL-CIO. On my right is my assistant, Thomas Donahue. On my left is the international's counsel, Mr. Aaron Benenson.

First of all, good morning, gentlemen. We very much appreciate having this opportunity to appear on behalf of the bills labeled H.R. 1678 and H.R. 6088. We also appreciate very much the fact that this

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distinguished subcommittee is giving careful consideration to the proposals contained in these bills.

The local unions of the Building Service Employees International Union represent more than 300,000 workers engaged in the cleaning and maintenance of public and private buildings, institutions, hotels, sports arenas, and so forth. Consequently, we have long been concerned about the problems created by the absence of any wage standards for persons employed by companies providing services to the Federal Government.

There have been several bills introduced in the Congress since 1959 to provide some measure of protection for these workers. Your committee's hearings on the bills currently before you, therefore, represent a long-awaited development and one which will, I am sure, be the first step toward the early passage of this much-needed legislation.

As we see it, both of the bills before you deal with the same problem but offer different approaches to its solution. The problem, simply stated, is the destruction of wage standards and the exploitation of workers which result from the operation of the present system of contracting out without regard to wage and work standards of the cleaning and maintenance work in Federal buildings or installations. The operation of the system casts the Government in the role of a partner in this exploitation.

We have succeeded, through years of difficult collective bargaining, in building up decent wage rates and good working conditions, as well as a fair measure of health, welfare, and pension benefits, for our members. Indirectly even unorganized workers in this industry have benefited to some extent by this general raising of these standards.

We have won a fair measure of dignity and security for these workers, the majority of whom are members of minority groups too long overlooked in our Nation's economy.

But those standards have been threatened, eroded, and in some cases, entirely destroyed.

The annual bidding procedures and the rules under which the Government agencies involved award these service contracts to the lowbidding contractor, without regard to the wages or conditions under which he proposes to work his employees, are responsible for this breakdown of wages and conditions.

Current rules and procedures make it almost inevitable that these contracts will be given to that contractor who is best able to exploit his employees and who can find and employ the cheapest labor in the area-since labor cost is obviously the paramount cost item.

Nonunion contractors, almost invariably from another State, paying subminimal wages, underbid area union contractors who pay the going rate in the area, with the consequent displacement of the union workers, the destruction of decent work and salary standards, and the lowering of the quality of the cleaning work performed.

Before discussing this problem at some length, I want to discuss briefly the nature of the two solutions that have been proposed. The solution contained in H.R. 1678 follows the pattern set by the DavisBacon Act and the Walsh-Healey Act of 1931 and 1936, respectively. Under the Davis-Bacon Act, all contracts in excess of $2,000 for construction, alteration, and repair of public buildings must provide that minimum prevailing wages be paid as determined by the Secretary

of Labor; and, further, that payment must be made not less than once a week, and that moneys may be withheld from payments due to the contractor in order to pay the workers any differential between the prevailing wages and those actually paid.

Under the Walsh-Healey Act all contractors with contracts over $10,000 for the furnishing of materials, supplies, articles, and equipment to the Federal Government must agree to pay not less than the prevailing wage in the area; and also to pay time and one-half that rate for all hours worked in excess of 8 hours per day or 40 per week, whichever is the greater.

The proposed act, H.R. 1678, taking the $10,000 standard of the Walsh-Healey Act, provides that contracts in excess of $10,000 for the furnishing of services or maintenance work to a Federal agency are subject to the minimum standards provided in Walsh-Healey. Excepted from its requirements are certain types of contracts coming within the scope of either the Davis-Bacon Act or the Walsh-Healey Act, and contracts with certain common carriers, public utilities, or communications companies and employment contracts of Federal employees. Moreover, executive, professional, and administrative personnel are exempt from the proposed act.

Unlike the earlier laws which were enacted at a time when fringe benefits were less important than they are today, the proposed act recognizes the importance of fringe benefits in the current labor market and specifically provides, in addition to the maintenance of the prevailing rate, for the preservation of those additional employment benefits, which the Secretary of Labor has determined to be prevailing, such as paid vacations, holidays, sick leave, and the like. This section provides effective protection to wage standards because the failure of an employer to accord to his employees prevailing fringe benefits at the present time can effectively undercut overall wage standards in the market area.

This act, if passed, would round out protection for workers who are employed by cleaning and maintenance contractors doing business with the Federal Government and eliminate the possibility of Federal moneys being used to depress wage rates.

H.R. 6088 provides that whenever a Federal agency enters into a contract in excess of $2,000 for janitorial, custodial, or cleaning services or maintenance work the contractor shall be required to pay no less than the agency pays its own employees under the wage board procedures applicable to blue-collar workers. In addition, the contractor must provide fringe benefits equivalent to those provided to the same kind of employees by the Government when such employees are employed directly.

This bill also provides that, if the contracting officer, upon investigation, finds that the employees are being underpaid he may set aside money due to the contractor and hold up such payment until the situation has been remedied. The report of the findings of the contracting officer must be submitted to the head of the contracting agency. The latter will consider whatever arguments that the contractor or subcontractor presents in his own behalf; and the head of the agency shall make the decision which shall be conclusive upon all Federal agencies, and, if supported by substantial evidence, conclusive in any court of the United States.

The head of the contracting agency, if he discovers that any employee of the contractor has not been compensated in accordance with the contract, or that a breach or violation of the contract has occurred, may terminate the right of the contractor to proceed with the work, or part of the work. The employees of contractors that have been found guilty of such acts can be paid by the Comptroller General of the United States any compensation which the contracting agency has found to be due them.

The Comptroller General shall distribute to all contracting agencies a list of those contractors who have violated this act and they shall be prohibited from doing business with the Government for 3 years, unless otherwise recommended by the head of the contracting agency. The Secretary of Labor shall enforce the provisions of the act and may establish rules and exemptions from the act.

In brief, these are the essential features of these bills.

Either of them will go a long way toward remedying a situation that has grown up in the last few years in an important and expanding industry whose progress should be of deep concern to the Members of Congress.

I would like now to sketch briefly some of the background data necessary for a complete understanding of the situation as it obtains today. The industry that we are discussing, namely the cleansng and maintenance industry, is a growing industry in the United States. Despite the inroads of automation the industry is adding regularly to the number of jobs available to American wage earners.

The 1940 census indicated that at that time there were about 409,000 people in the United States who were in occupations listed as janitors, sextons, charwomen, and cleaners. By 1960 the number of people in these occupations had increased to 773,000 people an increase of almost 89 percent.

If we add to these 773.000 people the guards, watchmen, porters, and elevator operators who were counted in the 1960 census we have increased the number of people in this general area to 1,232,000. Some of these people would be excluded from the group by definition but excluding them would probably still leave roughly 1 million people employed in this industry in 1960. In other words, the industry at that time represented 1 out of every 70 people in the civilian labor force in the United States.

As the industry has grown, there has also been an expansion of the number of contracts who entered the field and an expansion of the receipts of the contracting companies. The 1948 census of selected service industries showed that there were only 1,373 disinfecting and exterminating service contractors in the United States at that time. Their total recipients were $43.4 million. By 1958, the number of contractors in the field has increased to 4,231 and the receipts had increased to $159.6 million.

Similarly, the number of window-cleaning contractors in the 10 years increased from 1,249 in 1948 to 4.476 in 1958, while the receipts of these window-cleaning contracts increased from $39 million in 1948 to $106.3 million in 1958.

The most spectacular growth has taken place in that kind of contractor classified by the census under the heading "Miscellaneous Services to Dwellings and Other Buildings." The number of such con