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This principle had first been established in 1931 in the enactment of the Davis-Bacon Act-an Act which prescribed that in construction contracts with the United States, the contractor had to undertake to pay his employees no less than the minimum wage, and no less than the wage generally prevailing in the area for similar work. Current comments in high places to the contrary notwithstanding, the Davis-Bacon Act never prescribed union wages, nor has it ever prescribed that the wages on government construction contracts had to be at the highest level available. It merely said-and it says to this day-that the wages of persons employed on public construction should not be less than the prevailing wage.

A few short years later, in 1936, the precise same principle was applied to the wages of employees engaged in fulfilling government procurement contracts. To the wage guarantee was added, in the Walsh-Healey Act, the proposition that safe and healthful working conditions must always be guaranteed such employees.

In 1965, after a long and indefensible delay, the same principle was applied to employees of persons performing service contracts for the United States. These service employees-janitors, guards, laundry workers, food service workers, contract mail haul drivers, and the like-people in a myriad of trades, had one common characteristic. They tended to be among the lowest paid people in the economy, and they tended not to be organized by trade unions.

And because they were not organized, and because they were poorly paid under even the best of circumstances, there was a tendency by government agencies to enter into contracts with the employers of this particular kind of labor to perform by contract services that might otherwise have to be performed by civil service wage board employees.

To quote from the 1965 Report of the Committee on Education and Labor, which accompanied the Service Contract Act to the House floor:

"The Federal Government has added responsibility in this area because of the legal requirement that contracts be awarded to the lowest responsible bidder. Since labor costs are the predominant factor in most service contracts, the odds on making a successful low bid for a contract are heavily stacked in favor of the contractor paying the lowest wage. Contractors who wish to maintain an enlightened wage policy may find it almost impossible to compete for Government service contracts with those who pay wages to their employees at or below the subsistence level. When a Government contract is awarded to a service contractor with low wage standards, the Government is in effect subsidizing subminimum wages."

It was to avoid this temptation, it was to remove the incentive for the exploitation of labor in this area that the Service Contract Act was passed.

Speaking as one of the authors of the Act, I can say with what I believe is some authority that it was never the intention of the Congress to have the McNamara-O'Hara Service Contract Act serve to depress wages in the service contract field, or to freeze those wages. Least of all was it the intention to freeze such wages in a period of unbridled inflation.

Let me make one further point, Mr. Chairman, in order to clarify the intention which underlay the enactment of Public Law 89_286. The Act contains, as do the Davis-Bacon and Walsh-Healey Acts, a provision prescribing the blacklisting of employers who violate the Act. It is not enough for those employers, the Act says, to pay what they should have been paying to begin with. Restoration, the Act suggests, is not in and of itself a penalty. The penalty for violation is suspension from the right to bid on government contracts.

The Act also contains, as do its predecessors, a provision allowing the Secretary of Labor to relieve employers from that penalty. That authority was intended to be used in situations where the violation was a minor one, or an inadvertent, one, or one on which disbarment from bidding on government contracts would have been wholly disproportionate to the offense.

We did not intend in 1965 that relief from the penalties of the Act should be given automatically, or lightly. We intended then, and we intend now that the full vigor of the law should be felt by those who repeatedly and callously violate it. The rights of government contractors are important and deserve full procedural safeguards. The rights of the workers performing these contract services are no less important, and deserve no less vigorous protection.

Mr. THOMPSON. Our first witnesses this morning are representatives of the Laborers International Union of North America, Mr. Robert J. Connerton; general counsel, and John T. Curran. Mr. Connerton will introduce those who are with him.



Mr. CONNERTON. Mr. Chairman, members of the committee, my name is Robert Connerton. I am general counsel of the Laborers' International Union of North America, AFL-CIO, the union with approximately 600,000 members, employed both by private contractors and by Federal, State and local governments.

I am accompanied here today by Jack Curran, legislative director of the Laborers' International Union of North America, and David Jacobs, business manager of Public Service, Production and Maintenance Employees Local 1057, to present the views of Laborers International Union on the unfair and unjust administration of the O'Hara-McNamara Public Service Contracts Act of 1965 by the U.S. Department of Labor.

Mr. Jacobs has served as business manager since 1967 of Local 1057, which has represented the workers employed by service contractors at Laredo Air Force Base. It was certified by the NLRB in 1965 by a vote of 156–0. For 6 years prior thereto Mr. Jacobs was employed by various service contractors at Laredo Air Force Base.

We would respect fully request permission from the chairman for Mr. Jacobs to testify first regarding numerous specific incidents of statutory violation and maladministration and enforcement of the act at the Laredo Air Force Base. He will testify particularly to the freeze in wages which has prevailed at Laredo Air Force Base since 1969, when the Secretary of Labor first refused to recognize reasonable prospective wage increases contained in the union agreement which had been recognized as prevailing by the Secretary of Labor-even after they were paid, with the result that wages have remained fixed for a period of three years and the successful bidder has refused to recognize either the union or the union's contract. Thereafter, with the committee's approval I would testify regarding conditions nationally on the effect of the Secretary's decision. Mr. THOMPSON. You may proceed in any way you wish.

You are very welcome, Mr. Jacobs, and we look forward to hearing from you. Mr. Connerton, you wish to complete your statement later?

Mr. CONNERTON. With the permission of the Chair, I would like to testify after Mr. Jacobs.

Mr. THOMPSON. Go ahead, Mr. Jacobs.

Mr. JACOBS. Mr. Chairman and members of the subcommittee, on behalf of the service contract employees of Laredo Air Force Base, I wish to express our appreciation for the opportunity afforded us to bring our grievances before this subcommittee. The call for these hearings has brought new hope for fairness and justice to 250 service contract employees at Laredo Air Force Base.

My name is David L. Jacobs, and I am and have been since April 1, 1967 business manager of Laborers Local 1057 in Laredo, Tex., representing the vast majority of the service contract workers at Laredo Air Force Base. Prior to becoming business manager of Local

bring our or brought new hope ir Force Base. have been since A

1057, I was myself a contractor employee at Laredo Air Force Base. Thus the testimony I am about to give results from intimate personal knowledge of the conditions affecting service contractor employees in my community. In order for me to present a comprehensive analysis of the effects of the Service Contract Act of 1965, I feel that I must deal with the following elements:

(1) The background and history of service contract work from its inception at Laredo Air Force Base; (2) the salutary effect of the O'Hara-McNamara Service Contracts Act of 1965; and (3) the betrayal of those effects by the Labor Department's decision in 1970 to eliminate deferred wage increases from the wage predeterminations.

After a temporary shutdown at the end of World War II, the Air Base in Laredo was activated around 1952. At that time, most of the personnel other than military personnel were blue-collar Federal employees. From the beginning, however, a small number of employees performing the food service and refueling operations were working for service contractors.

This situation continued through 1960, but suddenly in 1961 there was a sudden shift which resulted in a large number of civil service jobs in support and housekeeping functions being contracted out. Why suddenly were Federal employees terminated or abolished? We can never be sure, but we sincerely believe that it was a reasoned and deliberate plot to reduce the cost of Government operation at the expense of working people.

Someone in the hierarchy of the Department of Defense devised a devilish scheme which they thought would provide considerable savings to the Government. No consideration appears to have been given to the fact that this scheme would initiate and perpetuate exploitation of the worker on a scale not seen in the country since the beginning of the industrial revolution. Under this new plan, services previously performed by civil service employees would be contracted out. The savings in labor costs would be fantastic. Wages, in most cases, could be cut in half, since there would be no labor standards applicable to these jobs. Indeed, the contractors employees would not even be covered by minimum wage and hour protection under the Fair Labor Standards Act. Federal agencies making use of this scheme could abdicate all responsibility to their former employees and should villainy be discovered, they could insist that the service contractor was the only villain in the piece, since they, of course, had no control of the operations of an employer from the private sector.

Unlike contracting out in the private sector, the Government system was designed to exploit the worker. The public service contractor receives free of charge all of the equipment, facilities, and supplies he needs to fulfill his contract. He, thus, is purely and simply a labor broker, with no investment in his job and virtually no concern over the long-term effects of his operation. In a situation like this, the contractor who pays the least and gouges the most is in virtually all cases the lowest and successful bidder. The worker, whose livelihood is at stake, receives no consideration.

At Laredo Air Force Base, this wretched system was put into practice in April of 1961 and I was one of the first employees to go to work. At that time, a million dollar multi-department service contract was awarded to a single contractor to perform a variety of services. One hundred-fifty civil service employees were terminated and what followed was simply astounding in modern America. The Air Force did not require that the service contractor hire the workers whose jobs had been eliminated, nor did it make any attempt to require the service contractor to pay wage rates equivalent to those of the terminated federal employees. As a result, only a handful of the former Government employees who had lost their jobs accepted employment at the depressed peonage wages offered by the contractor who cut the previous rates by at least one-third. One of these employees, Mr. Guadalupe Castillo, a trash truck driver, took a cut in wages from $2.12 to $1.15 an hour. Mr. Clemente Bermea, a member of Castillo's crew, took a cut from $1.59 to $1.15 an hour. I am well acquainted with these two employees who are still employed at Laredo Air Force Base and are members of Local 1057. Only their wages were cut, of course, as both continued to perform the same kind and volume of work they had previously been required to do as federal employees. Other wage classifications established by this same contractor were kitchen helpers at 55¢ an hour, janitors at 65¢, laborers at 70¢, and cooks at $1.15 an hour.

Whereas the Federal employees that had formerly performed this work enjoyed substantial fringe benefits such as pensions, health and welfare, paid holidays, sick leave, et cetera, fringe benefits were unknown to the service contractor who would not even admit of such a socialist concept as regular hours. Employees who were worked 10 to 12 hours a day, in many cases, received credit for only 6 or 8 hours. Supervisors employed by this contractor were placed on a very unusual incentive system in which their wages depended in part on the number of hours they could gouge from their employees.

Degradation of the contractor employees did not stop, however, with such things as cheating on hours worked. Like the early British industrialist, who was known to file the teeth of his child labor, so they could not eat so much, the system established by the Air Force was open to any expression in ingenuity on the part of the contractor or his henchman. There were recorded all kinds of corruption, kickbacks, personal favors, gifts of liquor and other things of value required by supervisors as a condition of continued employment with the service contractor.

In spite of his imaginative operation, the initial contractor was unable to keep himself from being underbid, after 1 year's operation; 1962 then saw a new successful bidder, Aerospace Services, out of California. This contractor brought no relief from the abuses of his predecessor. On the contrary, the wages of many employees were further cut and a few new jokers were slipped into the deck. Perhaps the most outstanding contribution of this employer to labor relations at Laredo Air Force Base was a daily shape-up for mechanics in which they were required to report to work each day, but only those for whom work was immediately available were allowed to remain on the job. I have been told by at least one mechanic, Mr. Felipe

Jasso, that he can remember occasions when he received a check for his work which grossed $15.00 or $20.00 a week. Other gimmicks were introduced and, as a final blow, before the curtain fell on this contractor, the paycheck covering the 2-week period including Christmas and New Years bounced. Needless to say, these checks remain uncollected today and Air Force has made no attempt to proceed against this contractor for the wages not paid to his employees. At this time there were no payment bonds required by the Air Force to protect wages earned by these service contractor employees.

In 1963, the original contractor, Pickett, Inc., of Springhill, La., returned to Laredo. It can be said in his favor that he didn't reduce the pay rates further, since they had already hit the absolute minimum that would sustain life. However, the innovative ideas introduced by his predecessor so impressed him that he must have felt expressly bound to add the finishing touches to this work of art.

In 1964, the Laredo contract was taken over by J. H. S. Packaging Co. of Pittsburgh, Pa., who was pretty much of a standout in the history of Laredo Air Force Base. This employer raised no wages, but he at least stabilized the workday and workweek and no new abuses were introduced.

The low bidder for 1965, Defense Contractors, Inc., of Fort Walton, Fla., decided, upon mature consideration, that he had been perhaps a little too competitive. With true American knowhow, however, he discovered a way to convert a loser into a winner. Although it was not required by base regulations, except in a very few jobs, this employer decided that all of his employees should be required to wear uniforms which they could buy, of course, only from him, and which they could only maintain at their own expense. Any employee who objected to this exaction was simply invited to seek employment elsewhere. At this point, the employees sought union representation.

Service contractor employees at Laredo Air Force Base went in a body to the Laborers' International Union and asked to be represented. Regular and legal contract was made with Defense Contractors, Inc., who initially refused under any circumstances to consider dealing with the union, and the employees were forced to strike simply in order to get the employer to agree to an NLRB election. Agree he did, however, and the union won the election 156 to 0. As might be expected attempts to bargain with this employer after the election proved fruitless and in another 17 days another strike followed. The National Labor Relations Board determined that the strikers should be protected in their right to return to work and that the employer was required to bargain with the union. The employer then abandoned his contract at Laredo Air Force Base and was defaulted without prejudice.

At this point, the Air Force which had previously used military personnel in an attempt to break the strike decided to do the contractors job itself with employees who would be put on temporary civil

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