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you have properly interpreted the situation and I probably would tend to disagree a little bit with my chairman on that point.

Mr. SILBERMAN. I think you are right, Congressman Ashbrook.

In fact, as the chairman noted at the very beginning, the fact that we recognize enclave rates is primarily a benefit to the unions because normally they wish those rates to obtain in areas where the enclave rates are higher than the surrounding areas which is true at most out

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Now, if the General Accounting Office legal position is correct, we felt we ought to comply with it and we did. The implication of the chairman's question is also correct. Then the answer is we should stop setting enclave rates and instead to broaden those rates to include a general area so that we do not run into the problem of the nonescalating rate freezing, as you suggest, the existing rate, and maybe we ought to reexamine that in light of the position that you suggest, Mr. Chairman. Maybe the enclave rate will work a disadvantage and we ought to discontinue it at least until the Comptroller General changes his legal position.

Mr. O'HARA. Well, I think that depends on the situation, whether it is an advantage or a disadvantage, and I would encourage you to decide each case on the basis of the congressional intent and sometimes I think it would be appropriate to use an enclave or a facility and other times it would not and I think, as I stated at the outset of this questioning, that I think that you are correct in using facility or enclave rates in some circumstances but not in others, and I think you do have to use discretion, as you set forth in your testimony, in determining that. But I also think you have to be careful when you do use an enclave or facility rate to make certain that that doesn't result in freezing wage rates at that facility that you have got, so I want you to go on a case-by-case basis, but I happen to think that you have to be very careful about it.

Mr. SILBERMAN. Mr. Chairman, let me observe at that point and let me emphasize again that our limitation to prevent the problem that you suggest, the freezing problem, is the law. As Congressman Ashbrook said, when you pass a Service Contract Act, you predicated it on Davis-Bacon. In that act they never set escalating wage clauses in there and the Comptroller General took strong exception to our putting these escalating or subsequent to be affected rates in our predeterminations as illegal, and we took the position after carefully examining his opinion that he was correct and, therefore, we discontinued it.

Now, you would have to change the law, then, in order to get around that escalating problem, or else eliminate the enclave.

Mr. O'HARA. I would also note that one particular problem that comes into effect here is in the different administration of the different laws. This act was considered several times in several Congresses. Clearly also there is a thread running through that we expect that service contract employees will receive the same or approximately the same amounts as employees under Federal wage board prevailing rate determinations on that particular base.

So that there won't be a situation on a given base where the wage board employees are receiving more or less for doing the identical work that a service contract en ployee is performing. The committee - noted with some alarm that the approximate equality that existed back in the mid-1960s has now at least in the case of Laredo Air Force Base, Texas, and perhaps others, deteriorated to the point where there

are now very substantial differences between the blue collar wage : board rates and the service contract prevailing rates, even though -both of them are supposed to be set on a prevailing wage rate.

So with blue collar wage board rates being much higher's Mr. MORAN. Mr. Chairman, this has been a subject of a great deal

of concern to me over a period of time, and I have met with people

who determine civil service blue collar rates. I can tell you there is - nothing I would prefer or the Department would prefer but to have these two statutes identical in their wage determination areas.

I will point out this, under the Civil Service Commission procedures, when they make a wage board rate for janitors, for example, they only survey janitors employed in industrial plants. They do not survey what school janitors are getting, what city hall janitors are getting. These are traditionally lower rates than industrial janitors are getting. We take the Service Contract Act to mean we should get prevailing rates for all janitors and so we survey school janitors, city hall janitors and warehouse janitors as well as industrial and that is why they come out differently.

Mr. O'Hara. I think, Mr. Moran, we may have discovered the problem. What they do under the blue collar wage board determinations depends on who they are surveying for. In other words, the Department of the Navy, naval shipyards, consider the equivalent. Let's take a janitor at a naval shipyard. They will look in that case to janitors in industrial plants in the area.

On the other hand, if they are doing a survey for Veterans Administration of looking for rates applicable to janitors at VA hospitals, they will look to what janitors at other similar institutions are receiving. They won't look to industrial rates in that case.

By the same token, if they are looking for rates to be established for, let's say, elevator operators in a Federal courthouse, then they would look at office buildings in that town and I think that system makes a lot of sense in determining prevailing rates because they are looking to comparable employments.

They recognize janitors in hospitals get different sums than janitors in office buildings who get different amounts than janitors in industrial plants. So they recognize that distinction, and I had always thought that you did. Do you recognize a distinction between janitors?

Mr. MORAN. No, we recognize a janitor as a janitor.

Mr. O'HARA. I think that is what we would like you to examine and we would like to discuss with you at a future date in terms of correctness of breaking those down. Let me get into one other case before we close up today.

Mr. Ashbrook and I have both expressed our concern about the failure to use the contract debarment remedy in more cases than we perceive it is being used. And in your statement, Mr. Secretary, you indicate the circumstances in which you use it and the circumstances in which you don't.

You state here: “Relief from the debarment provisions of the Service Contract Act has proven to be an effective trade-off in recovering back wages and gaining assurance of future compliance which is, after all, one of the main objectives of the act.

"In addition, there should be some administrative remedy in the law to enable the Secretary to mitigate economic sanctions imposed by debarment in extenuating circumstances.

“There are instances when debarment does not serve the best interest of the affected employees or of the Government."

Now, I am going to ask you, well, you will recall that Mr. Ashbrook and I said we were concerned because if debarment is not used, there were great incentives to the contractor to try to reduce his performance costs by not paying his workers what the prevailing rate might require. But let me get to the procedures that are used in cases of violation and find out procedurally how you make these determinations.

As I understand it, and correct me if I am wrong, the Department of Labor goes out and conducts investigations to determine whether or not violations of the act are occurring. And if the Department in the course of these investigations determines that violations of the act have occurred, an attempt is made to settle the case perhaps, perhaps not, dependent on the circumstaces, I suppose, and then in the event that the Department decides to proceed, charges are brought and the case is decided under the provisions of the Administrative Procedures Act. Is that correct?

Mr. SILBERMAN. Well, that is correct, all but one point that you mentioned earlier. I would not like to leave the impression, which is apparently your impression, Mr. Chairman, that the debarment remedy is not used. In fact, it is used, there are some 21 contractors on the debarment list now.

Mr. O'HARA. That is right. I would gather, I suspect all of them are people who failed to make restitution of back wages that were found due.

Mr. SILBERMAN. I couldn't tell you because back to a period of time before we came into office, the policy that we followed on this question has been not indistinguishable in the two different administrations. So I can't tell you the characteristics of those contractors who have been debarred.

Mr. O'HARA. In any event, the procedure you followed is the one you set forth in your testimony and that you reviewed here with us. Then a hearing examiner hears the evidence under the procedures of the Administrative Procedures Act. He makes the determination. He has a written opinion. The opinion is reviewed, then, by the Secretary and under the provisions of the Administrative Procedures Act the decision of the hearing examiner, and the Secretary in making that determination is assisted by a review that the director of the work place standards division has made of the case. Is that correct?

Mr. SILBERMAN. I would like to defer to the Solicitor on the procedural questions, Mr. Chairman.

Is that correct, Mr. Solicitor? Mr. Nash. If exceptions are taken to the hearing examiner's decision, then it is reviewed by the Administrator; that is correct.

Mr. O'Hara. It is reviewed by the Administrator?
Mr. Nash. That is right.

Mr. O'Hara. But is he in a position to make any sort of final decision or is his role

Mr. Nash. The Administrator makes the final decision on whether or not there have been violations and makes a recommendation to the Secretary of Labor on the appropriateness of the debarment remedy.

Mr. O'HARA. All right.

Let me ask you, under the provisions of the Administrative Procedures Act, on what evidence may the Administrator take into account when he makes his decision?

Mr. Nash. His decision?
Mr. O'HARA. Yes.

Mr. Nash. He takes into account the evidence on the record in making his determination as to whether or not there have been violations under the Act.

Mr. O'HARA. Is he permitted to take into account any matters not appearing on the face of the record ?

Mr. NASH. Certainly not on that decision; no, sir.

Mr. O'HARA. As you know, in one particular case, it has been suggested by the press that the Administrator of the Work Place Standards Division had an input into one of his decisions that did not appear on the face of the record. If that had been the case, I would ask the Solicitor that would not have been appropriate, is that right? I mean without assuming the fact. It has been alleged and we don't know if that is true or not true.

Mr. SILBERMAN. The easiest thing is to ask the Administrator whether in fact that allegation which appeared in the press and I thought also appeared in the statement that you may have issued a couple of days ago, was, in fact, true or not true. Without getting into the merits of the case, I would like to pass that to Mr. Moran because you are referring to the Dynamic Enterprise decision.

Mr. MORAN. The report you have in the press is completely untrue. There were no influences on my decision other than what appeared in the record.

Mr. O'HARA. Then is it correct to assume then that you did not discuss the case with any representatives of Dynamic Enterprises ?

Mr. MORAN. You are correct.

Mr. O'HARA. I think it was suggested that representatives of Dynamic Enterprises had met with your staff. May I ask if that is correct and, if so, if your staff then discussed it with you?

Mr. MORAN. They met. There was a meeting with the Deputy Administrator of the Wage and Hour Division and representatives of both parties and the Solicitor's Office. The Government was represented and the respondent was represented. It was a meeting of which I received no report until such time as the columnist who wrote this up questioned me about it and then I went back and looked into it.

Mr. O'HARA. In other words, the people who were present at the meeting did not play any role in making the decision that was your responsibility to make and they didn't then, in turn, talk to you or anything of that nature? Mr. MORAN. No.

Mr. O'HARA. To the best of your knowledge, then, you not only did not discuss the matter with representatives of Dynamic Enterprises but you did not discuss it with any persons within the Department who had, in turn, been a part of the discussions with Dynamic Enterprises, is that right?

Mr. MORAN. Not to my knowledge, although I am not a hundred percent sure who was present at that meeting. I believe there were five or six people present, including, as I said, the counsel for the Solicitor, Mr. Yahner, who wrote the brief recommending that Dynamics Enterprises be debarred. Counsel for both sides was present, as I have indicated. Mr. O'HARA. All right. Thank you, Mr. Moran, for clearing that up. Let me with respect to the debarment procedures call your attention to a couple of the problems that have troubled this committee.

The first of them was brought out by Mr. Ashbrook. That is, that if debarment procedure is not used except in cases where the contractor has refused to make restitution, then there is an incentive for a contractor to try to cut corners on his labor costs because he knows if he determines that he can cut corners he is going to bid lower in the hope that he can cut corners, he is going to get the contract, and if he succeeds in cutting corners, he makes out on the contract. If he loses, the worst that happens is restitution and, as you know, in the particular case we have been using as an example, and I don't want to get into that any further, and I am sure it is the case with respect to other violators, the Department usually ends up setting out for a lower amount than they suspect the amount of unpaid wages might have been. Well, in that particular case, they settled out for 50 when they had gone in charging a hundred or something close to a hundred, but elements of proof are very difficult to come by. This is after the fact.

Employees may have left that employment and gone elsewhere and would be difficult to locate. Records are incomplete. It is always hard to establish the exact amount of unpaid back wages, isn't it? Mr. SILBERMAN. That is true in all wage and hour cases.

Mr. O'HARA. That is right. So he knows he is not going to be stuck for more than the amount of the unpaid back wages.

Mr. SILBERMAN. That is not so, Mr. Chairman, because in my experience, and I was previously the Solicitor, I know there are a number of cases where employees will consider normal wage and hour cases where you will find that the allegations of violations amounts up to more than possibly have been not paid and often the employer who violates the law ends up paying more, No.1; and No. 2–

Mr. O'HARA. Well, somebody, Mr. Solicitor, if-
Mr. SILBERMAN. I was the Solicitor.

Mr. O'Hara. When you were the Solicitor, did you bring cases in which you claimed back wages in excess of the actual amount due?

Mr. SILBERMAN. The question is what is the amount due and that is an element of proof and there are allegations brought by employees in many cases which once put to proof sometimes dissipate.

Now, when an employer settles out of court to avoid the legal expenses, he ends up in some cases paying more than he might have paid.

Secondly, he is stuck with the cost of legal expenses and as a lawyer yourself, Congressman, you know they are in many cases not inconsiderable.

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