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made it in a different form. But even though it was not a formal recommendation, the Department of Labor obviously thought it was a particularly good nail on which to hang the policies they are now following.

Mr. DONAHUE. I would note that that was not true in the year's 1967 and 1968, when the Department resisted the General Accounting Office opinions on this same point.

Mr. THOMPSON. I think there was less interest then in freezing wages by administrative means.

Mr. O'HARA. Mr. Chairman, I can't resist the note that in those days it was Mr. Donahue who was responsible for the administration of the act and inasmuch as he had a pretty good knowledge of the legislative history and legislative intent itself and having been so deeply involved in it, he did not need anyone to tell him what the legislative intent was.

Mr. THOMPSON. Did you ever have any doubt what the legislative intent was?

Mr. DONAHUE. No, sir; it was very clear to me. The whole business of playing with the word "prevailing” and whether it means today or tomorrow prevailing is a perversion of the very clear intent of the statute which was, as Mr. O'Hara said, to make it clear that people who work under service contracts should be paid the same thing as people in private industry are paid.

Mr. THOMPSON. Did you have any difficulty reconciling the administration of this act with the manner in which you knew the DavisBaron and Walsh-Healy Acts were being administered? Mr. DoVALUE. None whatscever Mr. Thompson.

The procedures just went forward, the determinations were made as the General Accounting Office people have testified, there were questions raised by them in 1968 and 1969 as to the applicability of prospective prevailing wages, but the record is clear that the Department resisted that attitude on the part of the GAO as this Department of Labor, the current officials in the Department have resisted the General Accounting Office in other areas.

But there was an all too ready acquiescence in the GAO position on prospect of prevailing wages.

Mr. THOMPSON. Yes; they thought they really had it tied down then.

I doubt that the ink was dry before it was implemented. Thank you very much, Gentlemen. Our next witness is Mr. James C. Gahey, president of the United Plant Guard Workers of America, accompanied by Gordon A. Gregory, general counsel.


Mr. McGAHEY. Mr. Chairman, members of the committee, I am James C. McGahev, president of the International Union, United Plant Guard Workers of America. I have with me Mr. Gordon A. Gregory who is general counsel for the international union.

I heard you state, Mr. Chairman, awhile ago if we could summarize some of this instead of going through the complete submission because there are exhibits attached—there are also exhibits attached here in the testimony that I originally gave back in 1964.

Mr. THOMPSON. Your statements and attachments will be made a part of the record in full now and you may proceed as you wish.

Mr. McGAHEY. I believe you have also been supplied with additional statements that I added in regard to the Emerald case.

Mr. THOMPSON. Yes, we have that.
(The documents referred to follow :)


UNITED PLANT GUARD WORKERS OF AMERICA (UPGWA) Mr. Chairman and members of the committee: I am James C. McGahey, President of the International Union, United Plant Guard Workers of America

(UPGWA). On behalf of the Union, and its members, I wish to express our appreciation to the Committee for inviting my appearance here today and accepting our written statement of views concerning the administration and enforcement of the Service Contract Act of 1965. As I hope to develop fully in my remarks, our Union has a vital interest in the Act and its proper implementation.

The UPGWA was founded as an independent union in 1948 after Section 9(b) (3) of the Taft-Hartley Act was enacted to provide that "guard employees" cannot be included in a bargaining unit with non-guards or be affiliated, directly or indirectly, with a labor organization which admits non-guard employees to membership. Thus, our Union is composed exclusively of “. . . Plant Guards, including fire protection and other employees performing protection and security activities for private and governmental employers. ..."

We have members and bargaining units throughout the United States, Canada and Puerto Rico. Many of our members are directly employed as industrial plant guards at such companies as General Motors, Ford, Chrysler, U. S. Steel, International Harvester, Boeing and Martin-Marietta to name only a few.

Some of our members are employed directly by government agencies, such as Federal Reserve Banks.

In addition, a substantial part of our membership is employed by guard agencies such as Pinkerton, Burns Detective and The Wackenhut Corporation, to illustrate only a few agencies which operate nation-wide. Such agencies, and those of a more parochial nature are involved with U. S. government security contracts on either a direct basis as the prime contractor, or indirectly as a subcontractor. It is with respect to these contracts that I appear today and attempt to define and explain the areas where our Union has experienced problems under the Service Contract Act.

On January 27, 1964, I had the privilege to appear before a similar House Sub-Committee and offer a rationale, including- case histories, in support of enactment of the Service Contract Act. At that time I stated in part :

"... The adoption of a standard for establishing minimum prevailing rates for service employees will place them on a par with their fellow workers engaged at the same project and installation, The wage should not be frozen, as it is now, at the minimum set by the Wage and Hour law because of the fixed fee bidding policy for government contracts. The service employees should no longer be relegated to second class citizenship. They should no longer be the forgotten men of labor. They should no longer be left in this vicious circle of uncertainty and insecurity where they stand just one step ahead of the welfare rolls.

“They are the helpless victims of the policy of our government to award contracts to the lowest bidder on the one hand and the policy of that same government which, up to now at least. denies them protection against substandard wages and other standard economic benefits."

A copy of my prior statement has been submitted to the Committee as Exhibit

Unfortunately, my prophecy that a service contract art would cure the economic ills and injustices suffered hy service employees under government contracts has not proven true. This is due in large measure to interpretation and enforcement of the Act. The point is, I believe, adequately demonstrated by actual experiences of our Union.

FORT RUCKER, ALA. In December 1966, our Union was certified by NLRB to represent guards employed by Metropolitan Security Service at Fort Rucker, Alabama. Before negotiations for a first bargaining agreement could be completed, the Army let bids for the security work. On the basis of these bids, Metropolitan lost the guard contract to Harrison Security Service of Jackson, Mississippi. On October 1, 1964, we entered into a three year bargaining agreement with Harrison and a revised wage determination was requested. The revised wage determination was not received until January 24, 1969. A copy, including the initial determination dated March 29, 1967, has been submitted as Exhibit “B-1.'

During the term of our agreement with Harrison, the Army again let bids for security work. Thus, on July 1, 1969, Industrial Maintenance Services, Inc. of Dothan, Alabama assumed the guard work from Harrison, hired the guard force, but refused and failed to honor the bargaining agreement. Our Union was forced to file unfair labor practice charges with the NLRB. During the pendency of these charges, someone unknown to our representatives applied for and received a wage determination dated December 18, 1969. A copy of that Determination is submitted as Exhibit "B-2." You will note that it is identical to the earlier Determination.

After considerable negotiation, we entered into a bargaining agreement with Industrial effective September 30, 1970. On October 9, 1970, the parties suhmitted a joint request to the Department of Labor for a revised wage determination. A copy of that request is submitted as Exhibit “B-3.".

On October 22, 1970, a revised wage determination was issued, although this fact was not made known to the parties until some time later as I shall explain. A copy of that determination is submitted as Exhibit "B-4."

Upon receiving complaints from guards that the revised wage determination had not been placed in effect, our representative contacted Mr. J. P. Hollomon, President of Industrial Maintenance. Mr. Hollomon advised that he could not pay the new wages until so instructed by Mrs. Wendis Morrow, the Contractor Officer at Fort Rucker. He did undertake, however, to contact Mrs. Morrow and advised our representative by letter dated November 9, 1970. that Mrs. Morrow could not find the revised wage determination. A copy of that letter is submitted as Exhibit “B-5."

After waiting several more days without a reply, our representative telephoned Mrs. Morrow and was advised that a decision had been made, but refused to disclose it except to the contractor.

On December 2, 1970, Mr. Hollomon advised our representative by letter that the current determination (October 22) would not be placed in effect, despite the parties' bargaining agreement and joint promise to be bound by the new determination. A copy of the letter is submitted as Exhibit "B-6.".

At the present time, the wage determination issued December 18, 1969 (Eshibit B-2) is controlling for guards at Fort Rucker. To date, the Department of the Army and/or Department of Labor have refused and failed to implement the wage determination issued on October 22, 1970 (Exhibit B-4). Thus, guards receive a top rate of only $2.25 per hour albeit the Union and Industrial agreed to a maximum rate of $2.55 effective October 1, 1970.

('ertain conclusions can be drawn from our experience at Fort Rucker:

(1) It is profitable for a contractor to refuse to honor an existing labor agrep. ment, to request or cause to be requested a wage determination based upon the prior prevailing wage irrespective of its genesis, and when the unrealistic wage determination is received, insist that the labor agreement, if any, is controlled by the unilateral, arbitrary and capricious determination.

(2) The experience at Fort Rucker demonstrates a frustration of legislative intent that employees of Federal contractors receive wages and other benefits equivalent to those received by other persons doing the same work in the locality.

(3) The Department of Labor policy that only wages actually being paid may be taken into account in making wage determinations is unfair, unrealistic and contrary to the spirit and intent of the Act. Such a policy does not consider increases in the cost of living, the economic area in which the data is collected (Fort Rucker is per se the locality), or, most importantly, wages and other benefits derived from the federally encouraged process of free collective bargaining.

(4) Under the Department of Labor theory (apparently shared by the Department of the Army), wage increases would never occur under government con

tracts where the "prevailing wage" is not changed for the surveyed locality by mutual agreement of at least a substantial number of employees. But even in the case of Fort Rucker, the sole guard employer and Union agreed upon a reasonable wage rate for the sole locality involved (the Fort), and yet the U.S. Government vetoed the proposal administratively and thereby kept wages and fringe benefits in a depressed category.


Our Union was certified by NLRB to represent guards employed by Burns International Detective Agency at Fremont, California. Burns had a subcontract for guard services with the Federal Aviation Corporation, the prime contractor with the U.S. Government.

On June 9, 1966, the Department of Labor issued a wage determination but neglected to include applicable fringe benefits. Burns entered into its contract with Federal Aviation on July 1, 1966.

During the course of collective bargaining, Burns contended that it was not required to pay fringe benefits since none were established in the wage determination and/or subcontract.

On August 1, 1966, I brought this matter to the attention of the Department of Labor. A copy of my letter is submitted as Exhibit “C-1.”

On August 26, 1966, the Department issued a revised determination which included fringe benefits. A copy of that determination is submitted as Exhibit *C-2."

l'nfortunately, Burns refused to honor the revised determination and on September 19, 1966, our Regional Director contacted the Department of Labor for assistance. A copy of his letter is submitted as Exhibit “C-3."

By letter of reply dated October 12, 1966, a copy of which is not available, the Department of Labor advised that the revised determination of August 26, 1966 was not applicable to Burns since its service contract was entered into prior to that date. Accordingly, Burns was not obligated to pay fringe benefits even though the initial wage determination was issued approximately three weeks before the service contract became effective. A chronology of events in this matter i. set forth in a report of our California Director dated October 17, 1966, a copy of which is submitted as Exhibit “C_4."

The conclusion to be drawn from this experience is that guard employees were unjustly deprived of fringe benefits for the duration of a service contract because the Department of Labor was negligent in promulgating the initial wage determination.

Since the Secretary of Labor has not only the authority, but the responsibility to enforce the Act and make reasonable rules and regulations, it is inconceivable to me that the Department cannot correct its own errors rather than place the consequences of them on innocent employees.

While I have cited only two specific cases to illustrate my point that administration and enforcement of the Service Contract Act has been less than satisfactory, numerous other complaints have been brought to my attention. Such complaints may be summarized as follows:

(1) It appears that government contracts for the use of service employees do not always contain provisions specifying the “minimum monetary wages" and "fringe benefits" to be paid as required by Section 2 (a) of the Act.

(2) Wage determinations have been made without a fringe determination, the contract awarded, and the fringe determination made subsequent to the contract award, but held inapplicable to it.

(3) In some areas, such as the Kennedy Space Center, no wage and fringe determinations have ever been made for certain service employees.

(4) As a result of delay in issuing determinations and/or issuing incomplete determinations, many contractors have been exempted from the Act's coverage for the term of the contract.

(5) Wage and fringe benefit surveys are often incomplete and unrealistic. In determining the "prevailing rates for ... employees in the locality ...” the Department of Labor does not appear to give appropriate consideration to negotiated wage settlements or to periodic increases in the cost of living index.

(6) Frequently service employees are not advised of the "compensation required" as provided for in Section 2(a) (4) of the Act. In this regard, a specific case involving the A. 0. Smith Corporation, Waco Ordnance Division, Bellmead, Texas and Industrial Security Services Corporation was brought to the attention of the Department of Labor on October 17, 1966. To my knowledge, no remedial action was taken against the contractors pursuant to Sections 3 and 5 of the Act.

(7) By interpretation, the Department of Labor has restricted the scope and coverage of the Act. As a consequence, a "grey area" has developed which deprives certain employees of the Act's benefits although employed at a Company performing substantial amounts of government work.

Needless to say, any legislation irrespective of its purpose or how carefully written, can be emasculated by ineffective administration and enforcement. I respectfully submit that your investigation will demonstrate conclusively that the Service Contract Act has fallen into the latter category.

I urge the Committee to take such action as is necessary and appropriate to cause administration and enforcement of the Act in accordance with Congressional intent. At a minimum, the Secretary of Labor should be directed to provide timely periodic and realistic wage and fringe determinations ; to make determinations where none exist; to apply revised determinations during the course of the contract; to advise contractors, employees and government agencies of their rights and obligations under the Act; and to interpret, apply and enforce the Aet liberally.

Thank you for your interest and courtesy, and for the privilege of appearing before you.



I wish to add to my remarks to include the Emerald Maintenance case decided by NLRB on March 5, 1971. To say that our Union, and others, greeted the Emerald decision with dismay and disgust at its plain "buck-passing" is to put it mildly. The NLRB admonished that "the agencies primarily charged with administration of the Federal Service Contracts Act have declined to take steps to achieve that result," (i.e. failure to include negotiated wage settlements in wage determinations); and “the problems raised require comprehensive treatment by the agencies which administer the Service Contracts Act." The royal “buck-passing" is, of course, in the last quoted phrase and, obviously, give this Committee added incentive for action.

I am proud to state that our Union participated in establishing the Burns Detective landmark decision regarding successor employers.

Before that long legal struggle we were the plaintiff in the Wackenhut case decided by the 9th Circuit.

Thus, we have both a pragmatic and idealistic interest in the federal doctrine of successor employers and their relationship to the Service Contracts Act. One should not be used against the other; federal agencies must coordinate philosophies and application of law; and, most importantly, federal law, if it is uniform, as it must be, should never be used to defeat the goals and purposes of the people it allegedly serves. Government, including the U.S. Air Force, should observe, and hopefully exceed, the rules of law imposed upon private employers.

In Emerald Maintenance, the NLRB, on the strength of an officious intermeddler brief by the U.S. Air Force, overruled its Trial Examiner and decided that a different standard applied to companies dealing directly with an agency of the U.S. Government, as opposed to those dealing through a subcontractor or a general employer in the private sector.

The Emerald Maintenance case raises the spectre of government imposing, and supposedly enforcing, a certain law, but refusing or failing to be bound by it. Morever, it demonstrates a failure of communication and uniformity of decision between government agencies,

As I have already noted, the participation of the U.S. Air Force in the case was gratuitous but apparently formed the basis of NLRB's decision, notwithstanding the legal principle, that decision is limited by facts on the record. Indeed, a medal should be struck for Trial Examiner Ricci and his decision in which he cut through the nonsense and said:

"The net effect of all this is an end insistence that among civilian employees working for a Government contractor there may be no union activity, no union representation, and no collective bargaining."

Indeed, on February 26, 1971, approximately one week before NLRB's decision in Emerald Maintenance, the Comptroller General opined to a contractor

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