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Mr. O'HARA. They are deductible as ordinary business expense.

Mr. SILBERMAN. So are wages, for that matter, so that doesn't cut either way.

Of course I would regard them as ordinary business expenses as a lawyer, myself. But, thirdly, he pays a publicity price which is often not inconsiderable.

And, fourth, he gets himself on record with the Department of Labor with having previously violated the law, which means he is subject to closer scrutiny in the future.

All of these factors, it seems to me, would lead an ordinary prudent businessman, assuming there is such hypothetically, to try to avoid getting himself caught in this legal procedure.

Mr. O'HARA, All right. Let me suggest to you, though, the committee would like to have from you, if you could go back to your records, I am sure you can, and determine how many people have been debarred after having agreed to annually make restituiton of some sum as back wages because I suspect those are the only cases in which debarment is used, and, if they are indeed, as Mr. Ashbrook and I have discussed, the committee is very concerned about that interpretation.

(The list supplied by the Department of Labor follows:)

CASES ARISING UNDER THE SERVICE CONTRACT ACT WHERE THE RESPONDENTS WERE PLACED ON THE INELIGIBLE LIST EVEN THOUGH THE AMOUNTS FOUND DUE IN UNDERPAYMENT OF WAGES WERE RECOVERED

1. No. SCA-38, Bay Area Cleaners, recovered $2,248.43. 2. No. SCA–70, Gertrude Mansfield d/b/a Mansfield Motel, recovered $2,541.40. 3. No. SCA-75, Harland H. Selmer, recovered $15,914.06.

4. In the following case the Department recovered all but about $1,000 of the $40,562.74 found due in No. SCA-80, Western Janitorial Services.

5. No. SCA-85, Raymond Robinson d/b/a Robinson Security Service, recovered $5,611.43.

THE FOLLOWING ARE EXAMPLES OF CASES ARISING UNDER THE WALSH-HEALEY

PUBLIC CONTRACTS ACT WHERE THE INELIGIBLE LIST SECTION WAS IMPOSED ALTHOUGH THE AMOUNTS OF BACK WAGES FOUND DUE WERE RECOVERED 1. No. PC-952, Forte's Fuel Service, Inc., recovered $2,776.59. 2. No. PC-1132, SanColMar Industries, recovered $4,094.15.

3. No. PC-1116, U & W Manufacturing Company, Inc., and Thomas Manufacturing Company, Inc. Respondent U & W Manufacturing Company was relieved from the ineligible list on payment of the full amount ($11,112.98) found due in the case but respondent Thomas Manufacturing Company, Inc., was not so relieved.

4. No. PC-635, Eugene C. McPherson, individually and d/b/a, McPherson Coal Company, et al. The above individual was placed on the ineligible list even though he paid the full amount of liquidated damages found due ($6,305.22) in the administrator's decision but was relieved about a year after he was placed on the list. This case also involves safety and health violations.

Mr. SILBERMAN. Mr. Chairman, I would like to say now, as I said both to you and to Mr. Ashbrook earlier, that I am not unsympathetic to more flexible remedial devices that could be utilized here. I am just opposed to making debarment automatic no matter what degree the violation.

Mr. O'HARA. We are not saying it should be automatic but we are saying it should be more frequent than it is.

Mr. SILBERMAN. As I read your bill, it would make it automatic. If a violation is found the contractor would be debarred.

62-474-71----13

Mr. O'HARA. That statute was introduced in desperation because of our dismay over the interpretation that was being given. We feel that the proper interpretation was being given, we should not have introduced the statute. We felt if that Secretary could not be relied upon to exercise sound discretion in these matters, then that discretion should be removed.

If he could be relied upon to exercise sound judgment and discretion, then there is no need for the new bills.

Mr. SILBERMAN. Of course, I want to emphasize here and this is not by any means a defense or necessarily a defense, but the position that the Secretary Hodgson and Secretary Shultz have taken on this has been exactly the position that Secretary Wirtz and Secretary Goldberg took and it carries back for some 8 or 10 years probably through Secretary Mitchell's time.

And you may be right, there ought to be more use of debarment in certain selected cases, but I would have to go back and review those cases, as of course you would, too, Mr. Chairman, to make that determination.

Mr. O'Hara. Let me simply say that I have been a Member of Congress during the time that all of the aforementioned were Secretaries of Labor and I never considered them to be perfect during the time they were Secretaries nor has hindsight made them appear any better as I look back on it. I think some were good, some were better and some were very good indeed.

They were all good Secretaries but they were not, any of them, always right.

Mr. SILBERMAN. So stipulated.

Mr. O'HARA. Yes. That is right. Now the statute that we have that we are discussing here, today, the Service Contract Act, provides in section 5A, and I am sure you're familiar with it, the section we are talking about, “The Comptroller General is directed to distribute a Jist to all agencies of the Government giving the names of persons or firms that Federal agencies or Secretaries have found to have violated the act."

“Unless the Secretary otherwise recommends, no contract of the United States shall be awarded to the persons or firms appearing on this list until 3 years have elapsed from the date of publication."

All right. I would suggest to you that this language which is taken directly from the language of another act, Walsh-Healey to be particular, envisions the fact that they go on the list unless the Secretary makes a finding that they should not, so that one would think, well, the normal procedure would be that they go on the list and then the secretary may make a finding that they not be debarred. Isn't that the way you read it, the controller general is directed to distribute a list?

Unless the secretary recommends no contract shall be awarded to persons appearing on the list. So the list is a ministerial function. You compile the list and unless the secretary determines no person on the list shall receive a federal contract for 3 years.

But in fact we foundMr. SILBERMAN. I don't believe that is the way we read it. I don't understand what the purpose would be to put them on the list unless you wanted to debar them.

Mr. O'HARA. The point of the matter is that a third class of cases

has started to appear. First the cases where they go, on the list and they are debarred. Second, cases where the secretary recommends otherwise. Third, cases where the secretary has made no recommendation. Here we are in the particular case of Dynamics Enterprises and I just use that illustratively, I am not trying to suggest to the Secretary now, although I have on the record suggested to the Secretary how to decide that case. The decision of the hearing examiner the finding of guilt under 13 separate violations was made I believe in Sep. tember of last year.

It is now April. It is now in excess of 9 months later.

During all of that time after, what in effect was an admission of violations by the contractor, because after four days of hearings the contractor entered into an agreement and stipulation admitting violations in these 13 instances and agreeing to make restitution.

Nine months after admission of 13 violations, the debarment procedure has not taken effect, not because the Secretary decided there were good reasons to relieve the contractor but because the Secretary has not taken any action and in those months, the admitted violator has been bidding on new contracts obtaining some new contracts, and even if some day in the by and by the Secretary decides that the contractor should not be relieved of the debarment procedure, he will have in the meantime acquired a number of contracts which he will then be permitted to continue to perform to receive payments, he enters into open competitive bidding on an equal footing with every other contractor in that field, and nothing happens. "

Don't you agree with me that there is a problem here in terms of the application of the law when periods of that length elapse between the finding of violations and the making of an ultimate decision?

Mr. SILBERMAN. Because the examples that you use was the Dynamic Enterprise case, it becomes necessary for me to state for the record that we can have no comment concerning that case.

As your counsel has been advised, our Solicitor has advised us that any comments we would make concerning that case and indeed any comments that you might make concerning that case raise serious questions of due process pursuant to the case of Pillsbury Company v. FTC,534 F. 2d 1952, 1966.

Since we are the adjudicatory body in this area, just as FTC, was in that case, our Solicitor advises us it would be inappropriate for us to enter any discussions with any member of Congress concerning the merits of that case and I am afraid the way you phrase that queg. tion would lead us in a discussion of the merits or what conll subsequently be considered a discussion of the merits and so you will forgive us, Mr. Chairman, for not discussing that question. "I know you are as concerned as we are about preserving due process.

Mr. O'Hara, Vr. Secretary, I might sav that there is some disagreement about the application of the Pillsbury decision but I won't go into that. There is no sense in getting into any hassle over that. I will withdraw that question and raise the question in this context.

GAO testified that a name of a contractor under the debarment procedures does not go on the list until the Secretary has made a final decision as to whether or not the contractor should be relieved of disbarment, so that you have a situation where the penalty is not being applied until the Secretary makes a decision... a

Are there not cases where that works to the advantage of the contractor because long periods of time might elapse between the finding of the violations and the decision of the Secretary during which time the Secretary has made no decision?

The second sentence of the thing says "unless the Secretary otherwise recommends," so we agree that when the Secretary otherwise recommends, debarment should not take effect, but we did not write it to say "unless and until the Secretary finds that debarment should be used."

We did not write it that way. We said “unless the Secretary recommends to the contrary debarment shall be used," and here the circumstances I am setting up in a hypothetical involve a failure of the Secretary to make a recommendation one way or the other. Don't you believe that that raises soime questions about whether or not that ought to operate as a stay of the debarment proceedings?

Mr. SILBERMAN. I think I get your point, Mr. Chairman, but the difficulty with reading it the way you would suggest would mean that, of course, in every case there has to be some period of time while a Secretary examines it. What you are suggesting is that if it was interpreted the way you are suggesting as I understand it, if there was the smallest violation and there was a period of 2 weeks before the Secretary could review it, let's take the extreme case, that contractor would have been debarred, and the list would have gone out.

I think, regardless of the way Congress phrased that, it was pretty clear that the final decision as to whether or not there was going to be debarment imposed was within the Secretary of Labor's discretion, an adjudicatory discretion.

Mr. O'HARA. I disagree with that. Let's take a 2-week delay between finding and recommendation of the Secretary. I don't see anything wrong with debaring that contractor from receiving Federal contracts during that 2-week period that the Secretary is using to decide whether or not he is going to recommend relief from the debarment provisions. I again call your attention to the fact that the statute reads section 5, that the Secretary shall, that debarment shall be the remedy unless the Secretary recommends to the contrary.

And I think it would be much more in keeping with the intent of the Congress if that were the way the regulation were written and the act was administered.

Mr. SILBERMAN. Of course, the interesting thing there, Mr. Chairman, as you well recognize, the interpretation an agency gives to an act of Congress when it is first passed is entitled to great weight and my recollection is that this statute was passed in 1965 and at that time the Secretary of Labor, Willard Wirtz, gave it the interpretation that we are following now and we took it to be fairly accurate indication of what Congress intended.

Mr. O'HARA. I might say that I wish you would give that same effect to the prospective wage increase decisions.

Mr. SILBERMAN. We did until the Comptroller General took the vigorous position that that was illegal.

Mr. O'HARA. Mr. Silberman, I think we are engaged in something of a juggling act. I would suggest as a lawyer that you fellows take the position you want to take and then you look around for prior decisions or GAO decisions that will help you support that position,

The same way that you would if you had a client, and you had a particular objective in mind. When you have a client walking into your office, Mr. Silberman, back when you were in private practice of law just as I did when I was in private practice of law, you find out what his problem is, you find out what legal position would do him the most good, you look at the law to see if you can justify such a position and if you find something there that would help you justify it, you use it but in the end you are just simply using that to buttress the result that you want to reach.

You are not acting in the capacity of a judge. I think you are acting in capacity of someone who has definite ideas.

Mr. SILBERMAN. Mr. Chairman, my response to that is, and I say it most respectfully, that is not the way that I have or the rest of us in the Department have tried to interpret the law and implement the laws of Congress. I personally view as desirable including the excalating wage or the deferred wage in the predetermination under Service Contract and were it not for Comptroller General's opinion which raised the legal issue to me as Solicitor of Labor, we would have continued with that approach.

I grant you there is some flexibility within administrative agencies and Government departments as to how they interpret the law. One of the interesting things that we found when we first came into office was our view that flexibility might have been a bit less than previous administrations and we take a very serious view of the law and the law is in all cases that which Congress sets forth and as interpreted by various bodies and tribunals.

We did not make the decision then on service contract escalating deferred wage increases based on anything other than the fact that the legal question was posed.

We did try to look at what the impact would be but had it not been for the Comptroller General's opinion and his decisive opinion, we would not have reexamined that practice.

We would have continued it. I must say, Mr. Chairman, that I have been advised that the Comptroller General works for you.

Mr. O'HARA. Well, Mr. Secretary, I think that is right. He does work for the Congress but I think you have exaggerated the scope of his warrant. I don't think Congress ever exclusively authorized the Comptroller General to interpret the intent of Congress.

We don't even like the courts doing it, but I would conclude, Nr. Secretary, that in this observation in all cases it seems to me whether you use prospective wage increases or whether you don't, whether you classify drivers who are employed under contracts providing for the haulage of mail with other drivers of dry freight or similar distances or whether you classify them with other mail drivers and with drivers of parcel services, whether or not you put an offender on the debarment list while you are making up your mind as to whether he ought to be relieved of that, the circumstances under which you relieve persons of the debarment penalty, it seems to me that all of those interpretations have to be made with one overriding consideration, which is what was the intention of the Congress when it. enacted this statute.

What were they trying to accomplish and does our particular decision forward that intention or does it hinder it?

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