They are going to be reading a bill for amendments under the fiveminute rule and the Legislative Reorganization Act prohibits us from sitting during that period.

We can go for a few more minutes until the second bell.

I have to apologize to the other witnesses who were scheduled and say to them that we will invite them back or let them submit their

statements.

We have a few minutes to hear from Mr. Stanley Gruber, the General Counsel of the National Maritime Union of America, AFL-CIO, and Mr. Talmage Simpkins, their Washington Representative.

STATEMENT OF STANLEY GRUBER, GENERAL COUNSEL, NATIONAL MARITIME UNION OF AMERICA (AFL-CIO), ACCOMPANIED BY TALMAGE SIMPKINS, NMUA WASHINGTON REPRESENTATIVE Mr. GRUBER. Thank you, Mr. Chairman.

Mr. Chairman and members of the subcommittee, as already noted, my name is Stanley Gruber and I am Associate Counsel for National Maritime Union of America, AFL-CIO.

With me is Mr. Tal Simpkins, Washington Representative and Mr. Tom Martenos, Port Agent for the Port of Baltimore.

Because of time, I am going to depart from my prepared statement and try to hit on points which I think are most important.

Mr. THOMPSON. We will put your statement in full into the record at this point, Mr. Gruber.

(The statement referred to follows:)

STATEMENT ON BEHALF OF THE NATIONAL MARITIME UNION OF AMERICA,

AFL-CIO

Mr. Chairman and Members of the Sub-Committee, my name is Stanley Gruber. I am an Associate Counsel for the National Maritime Union of America, AFL-CIO. I am accompanied by Tal Simpkins, Washington Representative and Tom Martinez, Port Agent of Baltimore, of the National Maritime Union.

We appreciate the opportunity that you have extended to us so that we may relay to you the problems that we have been confronted with in our efforts to bring the benefits of the Service Contract Act to contract employees. It is our contention that the Department of Labor, Department of Defense, and the Comptroller General, with prodding from the Bureau of the Budget and the Administration are disregarding the rights of the Service Contract employees by imposing a wage freeze.

It is important to know what type of workers this wage freeze is being imposed upon. The majority of these employees are from various minority groups with very little, if any, technical skills. As a matter of fact not many of the workers could qualify to work for the Government if the work was performed directly by the Federal Government.

The National Maritime Union's Industrial, Technical and Professional Employees Division represents food and janitorial service employees employed by service contractors at approximately 25 military installations located throughout the continental United States and Hawaii and Puerto Rico. In addition, the Union is conducting active organizing campaigns at other service contract installations which should substantially increase the size of its food and janitorial service membership in the near future.

We have requested an opportunity to appear before this subcommittee since our experience in representing service contract employees has demonstrated that the manner in which the Service Contract Act is being administered by the Department of Labor has resulted in the denial of certain basic rights to which

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service contract employees are entitled under the National Labor Relations Act. More specifically, we submit that the actions of the Department of Labor have effectively deprived service contract employees of collective bargaining representation and has severely restricted the earning power of these workers. The two specific areas which we wish to present to this sub-committee deal with the manner in which the Department of Labor is presently rendering wage determinations and the problems which arise when successor employers are awarded service contracts and replace contractors who have entered into collective bargaining agreements setting forth wages, hours and working conditions for their employees.

The National Maritime Union's experience in this area has been primarily at U.S. Naval Installations. At these bases it is customary for the food or janitorial service contract in question to run from July 1 to June 30. In many instances the Navy will enter into one year service contracts with an option to renew for two additional years. If the option is not renewed or if the contract was merely for one year, the bidding competition normally takes place in May.

The bids are, of course, based on the wage determination which has been issued by the Department of Labor for the locality in question. Normally, the Department of Labor is requested to issue its determination in late March or early April in order to facilitate the bidding process. Accordingly, it has been NMU's experience that the Department of Labor will issue a wage determination in late March for a service contract which will commence on July 1. It was this typical time schedule that led NMU to negotiate contracts which contain annual wage and fringe benefit reopeners in the month of February with the increases to go in effect the following July.

A brief word of explanation on this point. Since the NMU would receive certification from the National Labor Relations Board or recognition on the basis of a showing of a majority interest, during the life of an existing service contract it would not normally be possible to negotiate an immediate increase in economic benefits since this would mean a substantial loss of income to a service contractor who had already bid the service contract on the basis of a prior wage determination issued by the Department of Labor. Accordingly, under the pattern of most NMU agreements, the wage and fringe benefits negotiated by NMU were scheduled to take effect on the following July 1, or any other date on which the subsequent service contract would commence. In order to allow the Department of Labor to have the benefit of this information at the time it issues its wage determination it thus becoame necessary for NMU to conduct its wage and fringe benefit reopeners during the months of January and February. Prior to September, 1969 this system functioned in an efficient and satisfactory manner. Thus, after the wage and fringe benefit increases had been negotiated by NMU and the service contractor in question, the information would be sent to the Department of Labor who would incorporate this information in its wage determination. Accordingly, the wage determination issued by the Department of Labor would indicate that the prevailing rate on which the competing companies would bid was the rate set forth in the NMU contract which was slated to go into effect on the first day of the new service contract. This procedure was in line with the regulations promulgated by the Secretary of Labor under the Service Contract Act and particularly Section 4.164 (b) of those regulations which state in part:

"In a locality where it is determined that the wage rate which prevails for a particular class of service employees is the rate specified in a collective bargaining agreement or agreements applicable in that locality, and such agreement or agreements specify increases in such rates to be effective on specific dates, the prior determinations would be modified to reflect such changes when they become effective, and the revised determinations would apply to contracts entered into after the modification."

However, in September, 1969 the Comptroller-General issued a ruling which stated that it was improper for the Department of Labor to issue a wage determination which dealt with future wage increases. In the opinion of the Comptroller-General, the Department of Labor could only consider wage rates in effect at the time it issued its determination. This ruling, which was completely impervious to the standard pattern of collective bargaining which by then had developed in the service contract field, has been followed by the Secretary of Labor with very unfortunate results.

Under its present policy the Department of Labor will not consider the wage and fringe benefit increases negotiated by NMU in February to take effect on July 1. The Department of Labor will only consider the rates in effect at the time it issues its determination in late March or early April. Accordingly, if the Department of Labor relies on the Union collective bargaining agreement as the basis for making its wage determination the result is an effective freeze on wage and fringe benefits. Since the Department of Labor will only consider the rates actually being paid at the time it makes its determination, in this case in March or April, it must perforce use the rates negotiated by the Union which took effect on the preceding July 1. Accordingly, the wage and fringe benefit rates issued by the Department of Labor in March which will govern a service contract commencing on July 1 will be the same rates in effect on the preceding July 1. In short, there will be no increase for the employees and, if this result is followed to its logical conclusion, there can never be a wage or fringe benefit increase for employees.

At those installations where the Department of Labor does not rely on the Union collective bargaining agreement and instead uses statistics obtained by the Bureau of Labor Statistics the usual result is that the wage determination contains lower rates than those negotiated by the Union. Thus, in either event, the employees in question have lost the benefit of Union representation since the rates negotiated by their bargaining representatives are not considered by the Department of Labor.

The result not only adversely affects the employees, it also works to the detriment of the incumbent contractor, since in many instances, it puts him at a competitive disadvantage when the contract is put out for bids. Since the incumbent company is contractually obligated to pay certain wage and fringe benefit rates effective the following July 1 it must by necessity bid the service contract at those rates. However, its competitors who are not so contractually bound are free to bid the contract at the lower rates contained in the wage determination and will most certainly be successful in taking the service contract away from the incumbent.

We have not played favorites with any of the contractors nor is it our intent to do so in the future.

We have, however, attempted to notify all prospective bidders that we have an existing collective bargaining contract in effect so that they can calculate their bids accordingly when the bid for a particular installation hits the street. We say attempted because just this week the Navy's Regional Office in Philadelphia refused to supply us with the list of prospective contractors that they solicited to bid on a contract in Connecticut.

The current contractor has an option on this particular contract for another year and it will be renewed unless the Navy Department is successful in soliciting a lower bid. The chances are almost a hundred to one that they will find a lower price, particularly if they will not let us notify the prospective bidders of our existing contract.

Until recently, it has been thought that the National Labor Relations Board's decision in Burns International Detective Agency would preclude this type of result. In that case the Board had held that a successor employer was, in most instances, obligated to comply with the collective bargaining agreement negotiated by the predecessor employer. However, in its recent decision in Emerald Maintenance Co. the Board clearly held that companies operating under service contracts with the U.S. Government were not subject to the obligations set forth in the Burns decision. Thus, the Board created an exception for successor employers operating under the Service Contract Act. Their only obligation is to recognize and bargain with the incumbent Union. However, under the Emerald Maintenance decision, they are not obligated to comply with the terms of the existing collective bargaining agreement. Since it is quite common for a new employer to take over a service contract each year it now becomes necessary, under the present state of the law, for the incumbent union to sit down and negotiate a new agreement with each succeeding employer on a year to year basis. Since the incumbent employer will normally be at a competitive disadvantage when the service contract is once again put out for bids it is a sure bet that the Union will be dealing with a new employer each year.

In many instances where an employer chooses not to deal in good faith it is most likely that the entire service contract year will be allowed to elapse without the Union being able to successfully negotiate an agreement. National Maritime

Union is presently confronted with this situation with a company known as Federal Food Service, Inc., which holds food service contracts at U.S. Naval installations in Norfolk, Virginia and Brunswick, Georgia among other locations. NMU had entered into collective bargaining agreements with Federal Food Service's predecessors at those locations. However, since taking over at those bases on July 1, 1970 Federal Food Service has refused to comply with the terms of these agreements and, indeed, has refused to even recognize NMU as the collective bargaining representative for the employees at those installations. While litigation is in process with Federal Food Service it is quite likely that this litigaton will not be resolved until the company's service contracts have expired.

This result is a necessary consequence of requiring a union to begin bargaining anew each year with a new employer. First the union has to get over the recognition hurdle and only then is it able to negotiate a contract. Things being what they are it takes longer than one year to successfully prosecute a refusal to bargain charge before the National Labor Relations Board. Moreover, an employer can, if it equips itself cleverly at the bargaining table, spend almost one year at negotiations without reaching a final agreement and still not be guilty of an unlawful refusal to bargain. The Union's only alternative to action before the National Labor Relations Board, or perhaps the Federal Courts, is, of course, a strike which would result in an unhappy disruption of food and janitorial service at military installations. No one wants this result but we are sure you can see that the employees might feel that they had no alternative.

In short, a situation now prevails where the chosen collective bargaining representative of service contract employees cannot effectively negotiate wage and fringe benefit increases and, in addition, is confronted with the prospect of annually negotiating collective bargaining agreements with new contractors. The employees in question may well wonder whether they have been administratively exempted from the protections afforded them by the National Labor Relations Act. Certainly, it cannot be said that this was Congress' intention. However, we submit that it is possible to work out a satisfactory accommodation between the requirements of the Service Contract Act and the National Labor Relations Act which will benefit employee, employer and the public interest. In the first instance it should be made clear that the Department of Labor may take future wage and fringe benefit increases into account when issuing its wage determinations. We agree that there should be some limitation on how far into the future the Department of Labor can go. However, it would not be unreasonable to allow the Department of Labor to consider increases which will go into effect not more than six months from the date the wage determination is issued. Thus, in NMU's case the Department of Labor would be able to issue its determinations in March containing the increases to take effect in July. Moreover, we favor legislation which would require a successor employer functioning under the Service Contract Act to comply with the terms of an existing collective bargaining agreement negotiated by its predecessor provided that proper notice of the existence of this contract had been given the successor and that the contract had been negotiated at arm's length.

Such a program cannot be harmful to employers in the service contract industry since it will place them on an equal competitive basis and remove the incumbent contractor from the cross fire he now faces when he must choose between the competing requirements of the National Labor Relations Act and the Service Contract Act as it is being presently administered by the Department of Labor. It is certainly not unfair to ask a successor employer to take over a collective bargaining agreement when it had notice of the existence and the terms of said agreement before it bid on the service contract. As the Supreme Court of the United States indicated in its decision in John Wiley & Sons v. Livingston an employer is much better able to adjust to a succession than the employees. It is certainly unfair to require employees and their representatives to go through the annual tortures of negotiating a collective bargaining agreement since the interests of these employees remain the same regardless of who is the employer. It should be added that it is quite clear that most of the individuals employed by service contractors are drawn from the low income and poorly educated brackets. Indeed, these people might well have had difficulty in finding employment had it not been for the program opened by the Service Contract Act. To now deprive them of their rights under the National Labor Relations Act would certainly fly in the face of the result which must have been contemplated by Congress when it passed the Service Contract Act.

Moreover, the government and the public interest will almost certainly benefit from the resulting stability in labor relations at military installations. Lest there be any fear that wage and fringe benefit rates will go through the ceiling we should point out that it has been our experience that there have not been exorbitant increases negotiated by labor and management since of course there is always the fear that if the cost becomes too high the government or the military installation in question will choose not to contract the work out and will take the job over itself. Thus, we urge that in those locations where legitimate collective bargaining agreements have been negotiated for service contract employees at military installations the Department of Labor should limit itself to considering the rates set forth in such collective bargaining agreements.

Mr. GRUBER. I would like to touch on the point raised by Mr. Dellenback at the conclusion of Mr. Franklin's testimony.

We have found ourselves time and again confronted with a situation where we have entered into a collective bargaining agreement with a service contractor covering the employees at a particular military installation.

These contracts called for wage increases to take effect at a future date as is normal in collective bargaining agreements.

It is normally our practice to renegotiate the contract in February for wage increases to take effect the following July since July is normally the date when the new service contract begins.

However, what happens as a practical matter under the present state of the law is that invariably the incumbent contractor, because he is not in a competitive position to bid, loses the contract and we are faced with a new entity, a new contractor, a successor contractor with which to deal.

Now, up until recently the National Labor Relations Board had led us to believe that the successor contractor was required to comply with the terms of the collective bargaining agreement they negotiated by the predecessor in its Burns International Detective Agency decision.

Unfortunately, it has come down with a subsequent ruling with the Emerald Maintenance Case, which has held that a successor contractor in this field is not required to comply with terms of the collective bargaining agreement negotiated by predecessors.

This means that each year as a practical matter the incumbent union is required to sit down and negotiate with a new employer.

I am sure you are aware of the fact that an employer can resort to many devices which can make it look like he is bargaining in good faith but in reality can keep you tied up at the bargaining table for at least a year or if you have to go into the National Labor Relations Board, you can also be there for a year.

So, as a practical matter, it may well be that we are in litigation with a new successor contractor each year because each year we have to sit down at the bargaining table anew.

This is not what I think Congress had in mind and it certainly is not what the Supreme Court had in mind in the John Wiley versus Livingston Case where the Supreme Court noted that it is the employees who suffer the most when you have this successor type of situation.

The employer is much better able to bear the brunt of the succession than the employees in this type of situation. They are at this installation year in and year out. Why should they be penalized because the successor employer does not honor the contract which has been negotiated by their union?