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that the law reveals the deep and abiding concern by this Committee to ameliorate the impact on service employees of a vicious "labor broker” system where contractors were compelled to compete annually for Federal service work, with the winner's laurels going to the contractor who submitted his bid based upon lower wage costs than his competitors. Wage costs ordinarily include such items, as wage rates, classifications, fringe benefits, working conditions, overtime, et cetera.

Service employees were primarily the poor and unwanted of this earth—the disadvantaged, the minorities working in manual unskilled and semi-skilled occupations, at abominal wages without any fringe benefits, without any seniority rights or job security, without any voice whatsoever in their destiny, pressed down by this vicious system of low wage competition. The employers were nothing more nor less than "labor brokers."

In saying that I am not condemning the employers, but the system. Little capital was required by the enterprise. Equipment, supplies, offices, etc., were furnished by the Federal Government.

Mr. THOMPSON. The contractor, with all of these goods and services, materials and so on supplied by the Government, is in a somewhat analogous position to a surgeon. When he walks into a hospital, he has all of the equipment waiting for him; he does not even have to bring any tools and that is really nice, and he looks and determines in most cases what the patient's income is and that is the price of the appendectomy. He scrubs-up after it is over and walks out leaving a sponge or two in the patient, forgetting a stitch here and there. Very analogous situation.

Mr. CONNERTON. Basically all the employer has to do by way of investment is advance the wages for a period of one month.

Now, the successful contractor in reality was little different from the "labor contractor” in agricultural work who bid against other labor contractors with an owner on a price for picking a farm crop, with the low bidder furnishing the migratory labor crew.

In every other category of Federal contracts fair labor standards applied. Federal wage board employees often employed side by side performing the same work task with Service Act employees, at the same base, enjoyed the protection of prevailing wage laws and much higher labor standards, including wages, job protection, pensions, vacations, sick leave, etc.

To the everlasting credit of the Congress and particularly to this Committee and Congressman O'Hara, a law designed to ameliorate the impact of this vicious “labor broker” system on these workers, was enacted. The law required application of the Federal Wage and Hour Law to all Federal service workers. This immediately boosted the wages of many hundreds of thousands of employees. The law also applied the time honored and tested prevailing wage principle which is firmly embedded in Federal public policy, including such laws ás the Davis-Bacon Act, the prevailing wage laws for Federal Wage Board employees that originated in 1963 and similar legislation for classified employees.

Congress directed the Secretary of Labor to predetermine the rates of wages and the fringe benefits found to be prevailing in the locality, or similar work for the various classifications of workers to be employed, with such predeterminations to be included in the bidding specifications.

* Administration was entrusted to the United States Department of Labor because it was the agency with over three decades of expertise in interpreting and enforcing prevailing wage statutes. The term "locality” was deliberately left undefined, to give the Secretary of Labor maximum latitude in determining the prevailing wage.

The Secretary was required to examine all the facts and circumstances in varied situations, and to determine the prevailing rate in the light of the statute's objects and purposes. Clearly, the Service Contracts Act was a remedial statute designed by Congress to be interpreted liberally by the Secretary for the benefit of the worker, in implementing the statutory objectives, which were to see to it that contracts were not brokered each year to unscrupulous contractors who were willing to exploit labor the most, and to provide a system under which employers who pursued enlightened wage policies would not find themselves competitively disadvantaged from obtaining Government service contracts.

It is fair to say that Congress took the first major step toward decasualizing this casual industry and recognized the responsibility of the Federal Government to provide some measure of protection to these marginal workers who labor for the Federal Government, in a real sense, just as surely as if they were employed directly on its payroll--as in Laredo, as surely as they did before the work was let out on a service contract. Let me make clear that while we cannot explore with this Committee the wisdom of a Federal procurement policy which calls for annual competitive bidding with labor constituting the only real cost item, to those concerned with costs this system admittedly entails higher costs for the Federal Government than if service contracts were awarded for periods in excess of one year.

Nor can we totally ignore the utter waste and other economic deficiencies which are involved in the continuation of this system with its unbelievable annual turnover ratio of contractors to the point where the Air Force contends it has an annual 95% turnover ratio on contracts annually.

Much less can we ignore a system where a man can spend his entire working life holding down the same job at the same installation, but working for different contractors, and at the twilight of his working career have accumulated no more vested rights or benefits from his employment than he possessed on the first day he went to work.

Unless some provision is made for change, he will never receive pension coverage, job security, or health benefit protection. What incalculable loss to human dignity must occur where millions of employees are trapped in this intolerable casual industry, constantly shifting employers, constantly in danger of losing their employment with absolutely no rights in the premises? ,We recognize this Committee is not the proper forum for such inquiries, but surely it could serve as the proper source of inquiry by other committees. The main thrust of our testimony today is that the Department of Labor is failing to carry out its statutory mandate and is complying with neither the spirit nor the intent of the O'Hara Act.

Early in the administration of the Act, the question arose concerning whether, under circumstances where a collective bargaining agreement was found prevailing, wage determinations could include prospective wage increases contained therein. When this issue was presented to the then Secretary of Labor, the Act was interpreted to permit consideration on such data where the collective agreement was found prevailing. The underlying policy considerations were patently obvious. In most cases wage increases could never be predetermined unless previously extracted from the contractor who had been compelled to bid on the job on the basis of the then current wage rates. To predetermine prevailing prospective wage increases would place all contractors on an equally competitive level. It would preserve local area standards. And to hold otherwise would ordinarily result in a perpetual wage freeze.

In September 1969, the Comptroller General, never particularly noted for his expertise or insight into the aspirations on the working class, at the request of the Air Force "ruled” that prospective wage increases could not be included in such determinations.

Again I want to make clear that if included in such determinations they would only be effective as of the date the prospective wage increase became effective and not in advance.

To the surprise and dismay of virtually everyone, except the contracting agencies, which viewed the decision as a windfall, “for cost savings”—perhaps to help pay for cost overruns on the C5A or for the F-111, or a few more bombs on the “Ho Chi Minh Trail”, or to bail out certain defense contractors——the Department of Labor reversed its previous decision and acquiesced in this interpretation.

Nor should it come as any great secret that certain officials in this Labor Department are not sympathetic with prevailing wage statutes. Sometimes it seems as though those charged with the responsibility of administering these statutes have been expending the major portion of their energies developing schemes for dismantling them, or calling for their outright repeal.

I only wish to mention recently in connection with that, Mr. Chairman, in an address that one Mr. Fletcher—who was charged with responsibility for administering this statute-gave to the Associated Building Contractors, he claimed credit for dismantling the DavisBacon Act.

Lest it be argued that the Department of Labor was bound by the ruling of the Comptroller General, this Congress entrusted the responsibility of interpreting the Act to the Secretary of Labor—not the Comptroller General—and in times past the Secretary of Labor has adamantly refused to accept unsympathetic rulings from the Comptroller General which would have interfered with the proper administration of prevailing wage statutes.

By adopting this clever, artificial interpretation, the Department of Labor on thousands of federal installations has imposed a wage freeze-in perpetuity, apparently as their contribution in the fight against "inflation”—and all at the expense of the marginal workers who need a workable prevailing wage system the most. It is a bitter commentary on our times that a prevailing wage statute has been converted by unsympathetic administration into a wage freeze statute. This refusal to 'predetermine prospective wage increases has been relied upon by the National Labor Relations Board in the Emerald Maintenance case as an excuse to carve out an exception for federal service contractors from the successor doctrine which requires a successor employer to adhere to the terms of a contract negotiated by a trade union with the predecessor employer. Now service employees are not only denied the protection of the Service Contracts Act, but also the National Labor Realtions Act, and service employers are completely free to ignore the terms of valid agreements previously negotiated by trade unions with predecessor employers to protect and preserve the benefits covering service workers employed at federal installations.

Mr. Jacobs has proven that at the Laredo Air Force Base the wage rates have been frozen since 1968. Laredo is not an isolated example, but simply representative of a general condition. For example, at Fort Bliss, in Texas, the Laborers' Union which represented the Service Employees had entered into a multi-year contract with Manpower, Inc., which subsequently defaulted. Webster, the successor contractor, abided by the union agreement. In 1969, the Labor Department invoked the wage freeze at Fort Bliss when it refused to predetermine the modest prospective wage increases called for by the prevailing collective agreement with the service. The freeze was also instituted at Lackland Air Force Base where the union represented the service employees. There, the Department refused to include the prospective wage increase for 1970, and indeed, originally determined a lower rate than it determined the proceding year, only after much bickering returned the rate to the level of the previous year.

At the Charleston Naval Station, Charleston, South Carolina, the union organized the employees of Quality Maintenance Company, by NLRB election, and negotiated a contract which included modest wage increases for the next year. The Labor Department refused to include in the 1970 predeterminations the modest wage increase negotiated by the union, with the result that the wage freeze was imposed at the Charleston Naval Station.

The Laborers' Union organized employees of Tri-Cities at the Norfolk Naval Base. The company had a contract from January 1970 to January 1971, with a predetermination of $1.85 plus .06 per hour fringe benefits. The union negotiated a contract which called for a wage increase to $1.881/2 plus .061/2 an hour fringe benefits and a modest future increase. The Department of Labor refused to recognize even the actual increases and in its determination of January 1, 1971, called for the January 1, 1970 rates of $1.85 plus .06 cents.

At Beltsville, Maryland, the Frugal Company was organized by the Laborers' Union back in 1970, and a contract was negotiated calling for a wage increase to be effective September 1, 1970. The Labor Department refused to predetermine the increase, but set the rate at $1.94 an hour. Since the Company was compelled to pay the $2.22 per hour, it lost the contract to another company which bid on the basis of the predetermination.

At Washington Naval Shipyard, the employees of the same company were organized and the negotiated contract called for a rate of $2.20 per hour. The predetermination refused to recognize the prospective wage increase, and the rate predetermined was $1.94 per hour. Because the same contractor had lost his other contract in Beltsville by adhering to the union contract, the union was required to renegotiate its contract and reduce the wage rates to $1.94 per hour.

In the Norfolk Naval Supply Center, the union organized the employees of Scotty's Supply Company. A prospective wage rate was negotiated for the second year. The predetermination of the Department of Labor failed to include the predetermined wage increase, with the result that the union was required to renegotiate its contract in order that its employer could compete for the work.

We possess many additional wage freeze cases which can be submitted to the Committee. Also, at each of the installations referred to previously, we could submit a bill of particulars similar to the testimony of Mr. Jacobs concerning the Laredo Air Force Base. We are prepared to do both if the Committee requests.

We hope our testimony has documented to the satisfaction of the Committee how during a time of rising inflation a wage freeze has been clamped on federal service contract workers by the Department of Labor, through the device of simply refusing to recognize modest prospective wage increases negotiated for such workers, and how this action in turn has resulted in the NLRB's refusal to require successor employer to adhere to the terms of agreements validly negotiated by a trade union for the employees of such employers. Thus, these employees have been effectively deprived of the protection of the Service Contracts Act and the National Labor Relations Act. The service contract employees cannot be asked to endure this intolerable situation indefinitely. If this matter cannot be corrected and these service employees enabled to live in the same dignity as federal workers, we are prepared to support any proposal which would call for ending once and for all the contracting out of federal service work.

I thank you, Mr. Chairman and members of the committee.

Mr. O'HARA. Thank you, Mr. Connerton for a very eloquent statement. The chairman of the subcommittee, Mr. Thompson, asked me to convey his apologies to you. He received an urgent call to attend a hearing of the Rules Committee so he had to get over there.

Mrs. Hicks, would you like to direct some questions to Mr. Connerton ?

Mrs. Hicks. I don't really want to address any questions to the witnesses but I want to commend them for the presentation because of the specifics that were presented to the committee this morning. The chairman in his opening statement asked if the Department of Labor is properly administering this act. Certainly, from the testimony that you have given to us here today it seems to be answered by a resounding “no” for this is certainly an intolerable situation that is existing. I will certainly await the testimony from contractors who are going to come before us and we will have questions for them such as why is there such a turnover of the contracts and also when we see the Secretary of Labor I know this committee will have many questions for him.

I thank you, Mr. Chairman, and the witnesses for coming here this morning. It has been very enlightening to me.

Mr. O'Hara. Thank you, Mrs. Hicks. I know you will find the other days of this hearing very interesting too, because they are going to not only confirm what Mr. Connerton and Mr. Jacobs have told us but

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