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This refusal to predetermine prospective wage increases h. relied upon by the National Labor Relations Board in the I Maintenance case as an excuse to carve out an exception for service contractors from the successor doctrine which require cessor employer to adhere to the terms of a contract negotia trade union with the predecessor employer. Now service emplo not only denied the protection of the Service Contracts Act, the National Labor Realtions Act, and service employers a pletely free to ignore the terms of valid agreements previously ated by trade unions with predecessor employers to protect a serve the benefits covering service workers employed at installations.
Mr. Jacobs has proven that at the Laredo Air Force Base t rates have been frozen since 1968. Laredo is not an isolated e but simply representative of a general condition. For exa Fort Bliss, in Texas, the Laborers' Union which represented t ice Employees had entered into a multi-year contract with Ma Inc., which subsequently defaulted. Webster, the successor co abided by the union agreement. In 1969, the Labor Depart voked the wage freeze at Fort Bliss when it refused to pred the modest prospective wage increases called for by the p collective agreement with the service. The freeze was also in at Lackland Air Force Base where the union represented th employees. There, the Department refused to include the pr wage increase for 1970, and indeed, originally determined a le than it determined the proceding year, only after much bick turned the rate to the level of the previous year.
At the Charleston Naval Station, Charleston, South Care union organized the employees of Quality Maintenance Com NLRB election, and negotiated a contract which included moc increases for the next year. The Labor Department refused t in the 1970 predeterminations the modest wage increase nego the union, with the result that the wage freeze was impos Charleston Naval Station.
The Laborers' Union organized employees of Tri-Citie Norfolk Naval Base. The company had a contract from Janu to January 1971, with a predetermination of $1.85 plus .06 fringe benefits. The union negotiated a contract which cal wage increase to $1.8812 plus .0612 an hour fringe benefi modest future increase. The Department of Labor refused to even the actual increases and in its deter i
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they are going to bring out even some other aspects of this that I think need a public airing very badly.
Mr. Connerton, let me tell you what disturbs me the most. It is bad enough now that a differential between the labor rates paid wage board employees and service contract employees has been permitted to develop-it is bad enough for a Federal agency to sit there in cold calculation and say, “Now, let us see, shall we contract out this service or shall we do it with Federal wage board employees? Let us contract it out. We can pay those people $0.25 or $0.55 an hour less if we contract it out and we might save a couple of bucks. It is bad enough that the law permits them to be in that situation where they can make that kind of determination based on the wages paid the employees. But it is much worse-from your testimony, it does not appear that the Air Force even strives for a neutral appearance in these matters. I would gather that they actively intervene in wage determination questions to try to keep the wages down or to drive them down. Is that right?
Mr. CONNERTON. That is right, Mr. Chairman. They not only intervened before the Department of Labor and with the Comptroller General but you will notice that the decision upon which the Department of Labor applied was in response to requests from the Secretary of the Air Force. They also filed an extensive brief before the National Labor Relations Board asking the Labor Board to set aside a ruling by the Trial Examiner that a successor employer was bound by a contract negotiated by his predecessor on the grounds that such a ruling by the Labor Board attaching the protection to service employees the same as it did to other employees under the statute was contrary to public policy. The Air Force is not a neutral. Mr. Jacobs indicated how in Texas, again and again they have intervened on the side of the employers.
It seems to me that the Air Force feels that by this system they can substantially save money and the money only comes from one place, it comes out of the hide of the working employee.
In the one instance you mentioned, Mr. Chairman, the difference in wage rates, that is only half of the story because as you know the federal employees have many prevailing fringe benefits such as pension, welfare, large annual leave and so forth. These are all cost items. So, you at least have to increase the figures that Mr. Jacobs gave you by 50 percent.
He calculated conservatively in Laredo it cost those former Federal employees who were discharged, to make way for the service contract employees, over a period of 15 years, at least $20,000 each. These are the poor people who need it the most. We are not talking about the situation where a man is making $8,000, $9,000, $10,000 a year. We are talking about people who are living on the margin, who could very easily be on relief but who care to spend their lives working for their daily bread and it is taken out of them.
Mr. O'HARA. Mr. Connerton, I don't think I can add to that statement. That expresses my uneasiness very well.
The subcommittee will now stand in recess until Thursday morning at 10 a.m., when we will resume hearings on the Service Contract Act. Thank you very much, gentlemen.
(Whereupon, at 12 noon, the subcommittee adjourned, to reconvene on Thursday, April 1, 1971, at 10 a.m.)
TO AMEND THE SERVICE CONTRACT ACT OF 1965
THURSDAY, APRIL 1, 1971
HOUSE OF REPRESENTATIVES,
Staff members present: Hugh G. Duffy, counsel, Jeunesse M. Beaumont, clerk, and Michael J. Bernstein, minority counsel for labor.
Mr. THOMPSON. The subcommittee will be in order to continue public hearings relating to the Service Contract Act of 1965.
Our first witness this morning is Mr. Happy Franklin, president, ABC Food Service, Inc., of El Paso, Tex., who is accompanied by Mrs. Frances Franklin.
Mr. Franklin, good morning.
STATEMENT OF HAPPY FRANKLIN, PRESIDENT, ABC FOOD SERV
ICE, INC., EL PASO, TEX., ACCOMPANIED BY MRS. FRANCES FRANKLIN, ALSO OF ABC FOOD SERVICE, INC. Mr. FRANKLIN. Mr. Chairman and members of the subcommittee, my name is Happy I. Franklin. I am President of ABC Food Service, Inc., of El Paso, Tex., and a member of the Government Services Contractors Association, the Texas Restaurant and National Restaurant Associations.
On my right is Mrs. Frances Franklin, a Vice President of ABC Food Service.
I would like to add that Mrs. Franklin is very active in our business and with your permission may assist me in answering any questions you may have.
Mr. THOMPSON. She will be most welcome.
ABC Food Service, its wholly-owned subsidiary, Military Base Management and their franchises are engaged in the operation of food service and mess attendant contracts for the Department of Defense at various locations throughout the country.
These companies employ approximately 2,000 persons. We employ both union and non-union employees. Present unions with whom we have collective bargaining agreements are the National Maritime Union and National Service Workers Union.
ABC Food Service has been continuously engaged in service-type government contracting since 1952 and operated two of the first food service contracts awarded by the U.S. Air Force.
We, therefore, feel we are fully knowledgeable of the problems encountered with the implementation of laws applicable to the serrice industry, the most recent being the Service Contract Act of 1965 about which we address ourselves today, pursuant to an invitation of your Subcommittee transmitted to us on March 22, 1971 by Mr. Duffy.
While we are members of the above-referenced associations, we do not speak for these associations at this hearing.
Our company was most gratified by the enactment of the Service Contract Act in that we felt it would assist in competitive bidding and at the same time give a better standard of living, better working conditions, and a higher morale to the service workers who are long overdue for adequate compensation for their efforts, as well as a better end product to the Department of Defense.
We have comments to make on several aspects of the Service Contract Act, examples of problems encountered by our company, and some suggestions of our own for further amendment of the Act.
I would like to treat these separately as topics which follow. We appreciate, Mr. Chairman, the opportunity you have given us to talk to your Subcommittee today.
During the first years of military contract food service, the best protection for the workers was that of responsible contractors who attempted to pay a living wage. Due to highly competitive bidding, fly-by-night contractors, and a policy of low-bidder procurement, each year the service workers received less and less.
Every effort was exhausted by this contractor to get the Labor Department to include service contracts under the existing Minimum Wage protection.
At such time as the majority of the service workers became clearly covered by the Minimum Wage provisions of the Fair Labor Standards Act, some contractors soon discovered that they could pay less than the applicable minimum wage and if caught the worst that appeared to result was payment of a “portion" of those wages they had not paid their employees, which resulted in profit made by these contractors at the expense of their employees.
Failure by the Labor Department, for whatever reasons, to enforce the applicable laws and insert penalties placed a responsible contractor in an almost disadvantaged competitive position since lowbid procurement still prevailed and workers remained unprotected by reason of such non-enforcement.
While we are sure the Service Contract Act of 1965 was meant to correct the before-mentioned problems, we respectfully submit that we and other responsible contractors now find ourselves in an even worse situation in that more areas of wages and benefits are covered and enforcement is not being accomplished by the Department of Labor.
As an example, we have attached to this statement a copy of the United States of America Department of Labor Hearing No. SCA50 in the matter of Dynamic Enterprises, Inc., dated 24 September 1970. (The document referred to appears at the end of the witness' prepared remarks.)