SERVICE CONTRACT ACT OF 1965 THURSDAY, AUGUST 5, 1965 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON LABOR OF THE The special subcommittee met at 10:15 a.m., pursuant to call, in room 2257 of the Rayburn House Office Building, Hon. James G. O'Hara presiding. Present: Representatives O'Hara and Sickles. Present also: Robert McCord, professional staff member. Mr. O'HARA. The Special Subcommittee on Labor of the Committee on Education and Labor will come to order. The purpose of the hearing today is to gain information with respect to the bill, H.R. 10238, designated as a bill to provide labor standards for certain persons employed by Federal contractors to furnish services to Federal agencies, and for other purposes. (The bill, H.R. 10238, is as follows:) [H.R. 10238, 89th Cong., 1st sess.]. A BILL To provide labor standards for certain persons employed by Federal contractors to furnish services to Federal agencies, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Service Contract Act of 1965". SEC. 2. (a) Every contract (and any bid specification therefor) entered into by the United States or the District of Columbia in excess of $2,500, except as provided in section 7 of this Act, whether negotiated or advertised, the principal purpose of which is to furnish services in the United States through the use of service employees, as defined herein, shall contain the following: (1) A provision specifying the minimum monetary wages to be paid the various classes of service employees in the performance of the contract or any subcontract thereunder, as determined by the Secretary, or his authorized representative, in accordance with prevailing rates for such employees in the locality, which in no case shall be lower than the minimum specified in subsection (b). (2) A provision specifying the fringe benefits to be furnished the various classes of service employees, engaged in the performance of the contract or any subcontract thereunder, as determined by the Secretary or his authorized representative to be prevailing for such employees in the locality. Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. The obligation under this subparagraph may be discharged by furnishing any equivalent combinations of fringe benefits or by making equivalent or differential payments in cash under rules and regulations established by the Secretary. 1 (3) A provision that no part of the services covered by this Act will be performed in buildings or surroundings or under working conditions, provided by or under the control or supervision of the contractor or any subcontractor, which are unsanitary or hazardous or dangerous to the health or safety of service employees engaged to furnish the services. (4) A provision that on the date a service employee commences work on a contract to which this Act applies, the contractor or subcontractor will deliver to the employee a notice of the compensation required under paragraphs (1) and (2) of this subsection, on a form prepared by the Federal agency, or will post a notice of the required compensation in a prominent place at the worksite. (b) (1) No contractor who enters into any contract with the Federal Government the principal purpose of which is to furnish services through the use of service employees as defined herein and no subcontractor thereunder shall pay any of his employees engaged in performing work on such contracts less. than the minimum wage specified under section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended (52 Stat. 1060; 29 U.S.C. 201, et seq.). (2) The provisions of sections 3, 4, and 5 of this Act shall be applicable to violations of this subsection. SEC. 3. (a) Any violation of any of the contract stipulations required by section 2(a) (1) or (2) or of section 2(b) of this Act shall render the party responsible therefor liable for a sum equal to the amount of any deductions, rebates, refunds, or underpayment of compensation due to any employee engaged in the performance of such contract. So much of the accrued payment due on the contract or any other contract between the same contractor and the Federal Government may be withheld as is necessary to pay such employees. Such withheld sums shall be held in a deposit fund. On order of the Secretary, any compensation which the head of the Federal agency or the Secretary has found to be due pursuant to this Act shall be paid directly to the underpaid employees: from any accrued payments withheld under this Act. (b) In accordance with regulations prescribed pursuant to section 4 of this Act, the Federal agency head or the Secretary is hereby authorized to carry out the provisions of this section. (c) In addition, when a violation is found of any contract stipulation, the contract is subject upon written notice to cancellation by the contracting agency. Whereupon, the United States may enter into other contracts or arrangements for the completion of the original contract, charging any additional cost to the original contractor. SEC. 4. (a) Sections 4 and 5 of the Act of June 30, 1936 (49 Stat. 2036), as: amended, shall govern the Secretary's authority to enforce this Act, make rules, regulations, issue orders, hold hearings, and make decisions based upon findings of fact, and take other appropriate action hereunder. (b) The Secretary may provide such reasonable limitations and may make such rules and regulations allowing reasonable variations, tolerances, and exemp tions to and from any or all provisions of this Act as he may find necessary and proper in the public interest or to avoid serious impairment of the conduct of Government business. SEC. 5. (a) The Comptroller General is directed to distribute a list to all agencies of the Government giving the names of persons or firms that the Federal agencies or the Secretary have found to have violated this Act. Unless the Secretary otherwise recommends, no contract of the United States shall be awarded to the persons or firms appearing on this list or to any firm, corporation, partnership, or association in which such persons or firms have a substantial interest until 3 years have elapsed from the date of publication of the list containing the name of such persons or firms. (b) If the accrued payments withheld under the terms of the contract are insufficient to reimburse all service employees with respect to whom there has been a failure to pay the compensation required pursuant to this Act, the United States may bring action against the contractor, subcontractor, or any sureties in any court of competent jurisdiction to recover the remaining amount of underpayments. Any sums thus recovered by the United States shall be held in the deposit fund and shall be paid, on order of the Secretary, directly to the underpaid employee or employees. Any sum not paid to an employee because of inability to do so within three years shall be covered into the Treasury of the United States as miscellaneous receipts. SEC. 6. In determining any overtime pay to which such service employees are entitled under any Federal law, the regular or basic hourly rate of pay of such an employee shall not include any fringe benefit payments computed hereunder which are excluded from the regular rate under the Fair Labor Standards Act by provisions of section 7 (d) thereof. SEC. 7. This Act shall not apply to (1) any contract of the United States or District of Columbia for construction, alteration and/or repair, including painting and decorating of public buildings or public works; (2) any work required to be done in accordance with the provisions of the Walsh-Healey Public Contracts Act (49 Stat. 2036); (3) any contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line or oil or gas pipeline where published tariff rates are in effect; (4) any contract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communications Act of 1934; (5) any contract for public utility services, including electric light and power, water, steam, and gas; (6) any employment contract providing for direct services to a Federal agency by an individual or individuals; and (7) any contract with the Post Office Department, the principal purpose of which is transportation, handling, or delivery of the mails, or the operation of postal contract stations. SEC. 8. For the purposes of this Act (a) "Secretary" means Secretary of Labor. (b) The term "service employee" means guards, watchmen, and any person engaged in a recognized trade or craft, or other skilled mechanical craft, or in unskilled, semiskilled, or skilled manual labor occupations; and any other employee including a foreman or supervisor in a position having trade, craft, or laboring experience as the paramount requirement; and shall include all such persons regardless of any contractual relationship that may be alleged to exist between a contractor or subcontractor and such persons. (c) The term "compensation" means any of the payments or fringe benefits described in section 2 of this Act. (d) The term "United States" when used in a geographical sense shall include any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, Wake Island, but shall not include any other territory under the jurisdiction of the United States or any United States base or possession within a foreign country. SEC. 9. This Act shall apply to all contracts entered into pursuant to negotiations concluded or invitations for bids issued on or after ninety days from the date of enactment of this Act. Mr. O'HARA. Also before the subcommittee are a number of other proposals, some of them identical to H.R. 10238, such as H.R. 10239, introduced by Mr. Pelly, of Washington, and others similar to H.R. 10238 but not identical. The committee last year reported out a similar measure and the Congress did not act upon it. It was still before the Rules Committee when the 88th Congress adjourned. We have asked Mr. Charles Donahue, the Solictor of the Department of Labor, to come before us today, to explain to us what this bill does, and what the differences are between this bill and the bill on which the committee held hearings and reported favorably last year. Mr. Donahue, we are happy to have you with us. STATEMENT OF CHARLES DONAHUE, SOLICITOR OF LABOR; ACCOMPANIED BY CAROL COX AND SETH ZINMAN, MEMBERS OF THE STAFF OF THE OFFICE OF THE SOLICITOR, DEPARTMENT OF LABOR Mr. DONAHUE. Thank you, Mr. Chairman. I am certainly going to try my best to carry out the purposes for which I am here. First, may I introduce those who are with me? To my right is Miss Carol Cox, of the staff of the Office of the Solicitor of the Department of Labor, and similarly of the same staff, on my left, Mr. Seth Zinman, who may, from time to time, with your permission, fill in any blank spots that I happen to have in my mind at the moment. Mr. O'HARA. Do they have permission to correct any mistakes you might make? Mr. DONAHUE. Indeed they have. Mr. O'HARA. Just so they don't start correcting us. Mr. DONAHUE. Mr. Chairman, I have a prepared statement here, which I would like, if I may, to submit for the purposes of the record. Mr. O'HARA. Without objection, the statement referred to by Mr. Donahue will be inserted at this point in the record. (The statement is as follows:) STATEMENT OF CHARLES DONAHUE, SOLICITOR OF LABOR Mr. Chairman, I am particularly pleased that you have given me this opportunity to speak in favor of legislation providing labor standards protection for employees engaged in work on Government service contracts. The Department of Labor has long been engaged in the enforcement of labor standards legislation. We know from experience the value of such protection and the problems which result from the lack of it. Living with these problems as we do from day to day, we have become increasingly concerned with the serious defect in Federal procurement policy which the legislation you are considering today is designed to correct. As you know, the Davis-Bacon Act provides labor standards protection for employees of Federal construction contractors. The Walsh-Healey Act provides comparable protection for employees working on Government supply contracts. Today the service employee is the last major category of Federal contract employees without the benefit of such standards. The standards set forth in H.R. 10238 would apply to guards, watchmen, and employees in jobs of the type for which wage rates are set by individual agency wage boards when the workers are employed directly by the Government. These employees are, as you know, employees in trades, crafts, or manual labor occupations, including supervisors, often referred to as "blue collar" workers. Included in coverage under the bill would be janitorial, custodial, maintenance, laundry, drycleaning, hauling, pest extermination, clothing and equipment repair, and cleaning service employees. The employees who would be covered by the proposed legislation are among the most poorly paid and economically deprived in our society. Many are not covered by the Federal Fair Labor Standards Act or State minimum wage laws. Often they are not members of unions and have little prospect of bettering their condition through collective bargaining. Comprehensive wage rate information which may be identified with Government service contracts is not available. Through Bureau of Labor Statistics surveys of average earnings in selected areas, we do gain some insight into the extremely depressed level of wages paid by some service contractors. In contract cleaning services in 1961, less than $1.05 an hour was paid to production workers in many areas. In Atlanta, 74 percent of all production workers received less than this amount; in Dallas, the proportion was 65 percent; and in Baltimore, 45 percent. In Atlanta in 1963, average earnings of employees in laundry and cleaning services were $0.94 an hour; in Memphis $0.83 an hour; in Baltimore $1.17 an hour. Elevator operators in 1962 averaged $0.89 an hour in Atlanta; $0.79 in Memphis; $0.94 in Miami; and $1.17 in Baltimore. While I do not wish to imply that low-wage rates are universal in the service industry, the fact that they exist at all is indefensible, particularly where Government contracts are involved. In recent years there has been much justifiable pride taken in our growing national economy and in the higher living standards which it makes possible for all Americans. This expansion has been aided by an increased understanding of the economic forces which affect us. But, through |