CHAPTER 14
LABOR

1. Introduction. This chapter deals with statutes and Government policies concerning labor which affect the award and administration of Government contracts. The chapter is divided into three parts. The first is concerned with enforcement of the labor standards prescribed by law and Executive Order for Government contracts. The second treats the role of the Government in work stoppages affecting Government contracts. The third covers various other Government labor policies.

I. Labor Standards in Government Contracts and Their Enforcement

2. General. The various labor standards prescribed for Government contracts are not designed to aid contract administration but rather they are intended to achieve certain sociological ends prescribed by Congress or the President, and the Government contract is a vehicle to achieve those ends. The various labor standards are summarized in figure 1 and their application to various types of contracts is set forth in figure 3, infra.

3. The Fair Labor Standards Act. This Act requires employers to pay certain minimum hourly wages,2 to adhere to certain maximum hour standards, and to refrain from employing child labor under oppressive conditions. Employees protected by the Act are those engaged in interstate or foreign commerce, those engaged in the production of goods for such commerce, and those engaged in any closely related process or occupation essential to such production. The Act provides that employees injured by violation of the minimum wage or maximum hours provisions of the Act may

1 Act of 25 June 1938, 52 Stat. 1060-1069, as amended; 29 U.S.C. §§ 201-219 (1958). See also the Portal-to-Portal Act of 1947, 61 Stat. 84-89, 29 U.S.C. §§ 251-262 (1958), which limits the liability of employers under certain circumstances. Regulations pertinent to the Fair Labor Standards Act are found in ASPR Section XII, Part 7. Unless the contrary is indicated, all citations to ASPR in this chapter are to the 1 July 1960 edition. If a citation is followed by a date subsequent to 1 July 1960, the citation is to an ASPR revision of the indicated date.

One dollar per hour. 29 U.S.C. § 206a (1958).

E.g., building maintenance employees in an establishment where goods are produced for interstate commerce. Borden Co. v. Borella, 325 U.S. 679 (1945).

recover from their employer in a civil suit the amount of their unpaid minimum wages or their unpaid overtime compensation plus an additional equal amount as liquidated damages. No provision or clause is required to be included in Government contracts, and the Department of the Army is not charged with enforcement of the Act. But since payments made pursuant to the Act are regarded as reimbursable costs under cost-reimbursement contracts, the Department of the Army has an interest in litigation arising out of employees' claims and has the right to approve the contractor's employment of private counsel to defend such suits as a condition. precedent to reimbursement for judgments or litigation expenses." Army Procuring Activities may also reimburse these contractors for claims which are compromised within the limits expressed in Army Procurement Procedure."

4. The Walsh-Healey Public Contracts Act. This statute applies to contracts entered into by the Government for the manufacture or furnishing of materials, supplies, articles and equipment in any amount exceeding $10,000. Every such contract is required by the Act to incorporate certain representations and stipulations to the effect that:8

(1) The contractor is a manufacturer or regular dealer in the supplies, etc., contracted for;

(2) The wages to be paid by the contractor shall not be less than the prevailing wage as determined by the Secretary pursuant to the Act;

(3) No person employed by the contractor in connection with the contract will be permitted to work more than eight hours per day or forty hours per week, unless overtime wages are paid;

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(4) No male person under 16 years, no female under 18 years,1o and no convict labor will be employed in connection with the contract; and

(5) Certain health and safety standards will be maintained. Expressly exempt " from the provisions of the Walsh-Healey Act

are:

(1) Purchases of such materials, supplies, etc., as may usually be bought in the open market;

29 U.S.C. 216 (b) (1958).

ASPR 12-702.

• APP 12-751 (1 Nov 1957); 23 Comp. Gen. 439 (1943).

Act of 30 June 1936, 49 Stat. 2036-2039, as amended; 41 U.S.C. §§ 35-45 (1958). 41 U.S.C. § 35 (1958).

• Wage-determining authority of the Secretary of Labor received approval in Perkins V. Lukens Steel Co., 310 U.S. 113 (1940).

10 The Secretary of Labor has granted an exemption from the Act to females between 16 and 18 years of age subject to certain conditions, See 7 F.R. 9399, 11 November 1942, amending Exemption Order 21 April 1942, 7 F.R. 3003. But see United States v. Smoler Bros., 187 F.2d 29 (7th Cir, 1951).

11 41 U.S.C. § 43 (1958).

(2) Purchases of perishables including dairy, livestock, and nursery products;

(3) Purchases of agricultural or farm products processed for first sale by the original producers;

(4) Contracts made by the Secretary of Agriculture for the purchase of agricultural commodities or the products thereof;

(5) Contracts for the carriage of freight or personnel when published tariff rates are in effect; and

(6) Contracts for services by carriers subject to the Federal Communications Act of 1934.

Upon a written finding by the head of a contracting agency that the inclusion of the representations and stipulations mentioned above will seriously impair the conduct of Government business, the Secretary of Labor is permitted to make exceptions in specific cases or otherwise when justice or the public interest will be served.12 The Secretary has made several exceptions inter alia,13 including:

(1) Contracts for public utility services and newspaper deliveries,

(2) The "manufacturer or regular dealer" requirement as to certain coal purchases, and

(3) Contracts for materials, supplies, etc., no part of which will be manufactured or furnished within the geographic limits of the continental United States, Alaska, Hawaii, Puerto Rico, the Virgin Islands, or the District of Columbia. The Secretary of Labor is also authorized to administer the provisions of the Act and to issue interpretations and regulations in implementation thereof. Such interpretations and regulations are compiled in "Walsh-Healey Public Contracts Act, Rulings and Interpretations," as amended by circular letters from the Secretary. Moreover, the President is authorized,15 whenever in his judgment such course is in the public interest, to suspend any and all of the representations or stipulations discussed above. Any breach or violation of any of the representations or stipulations in any contract incorporating the provisions of the Act 16 shall make the party responsible therefor liable to the United States for liquidated dam

12 41 U.S.C. § 40 (1958).

18 41 U.S.C. App. § 50–201.603 (Supp. I, 1959). See also Note 10, supra.

14 41 U.S.C. §§ 38, 39 (1958).

15 41 U.S.C. § 40 (1958).

16 See United States v. Smoler Bros., Inc., 187 F.2d 29 (7th Cir. 1951). A required clause was not included in the contract. Although holding that the act makes insertion of the representations and stipulations in covered contracts mandatory, the Court decided that the remedies prescribed by 41 U.S.C. § 36 (1958) against the contractor are available only for breach of any of the representations and stipulations actually included in the contract. Hence, recovery against the contractor was not allowed.

ages, in addition to damages for any other breach of the contract, in the sum of ten dollars per day for each underage person and each convict laborer knowingly employed in the performance of the contract and a sum equal to any deductions, rebates, refunds or underpayment of wages due any employee engaged in the performance of the contract. In addition, the United States may terminate the contract and "repurchase" the materials or supplies contracted for, charging any excess costs to the contractor. Sums recovered or withheld by the United States for deductions, refunds, rebates, or underpayments of wages are placed in a special deposit account and paid, on the order of the Secretary of Labor, directly to the employees who have been paid less than minimum wages as stipulated in the contract and on whose account such sums were withheld or recovered." Suits may be brought under the Walsh-Healey Act only by the United States; employees are not given any right of action.18 Violators of the Walsh-Healey Act contract provisions are not only subject to assessment of money damages, but are also subject to being debarred from the subsequent award of Government contracts for a period of three years from the date the Secretary of Labor determines the breach to have occurred.19 The Department of the Army is responsible for reporting violations by contractors of the representations and stipulations of the Act to the Department of Labor.20 It is also responsible for ascertaining that contractors are "manufacturers" or "regular dealers" within the meaning of the Act when it is applicable." A contract clause incorporating the provisions, representations and stipulations of the Act is set forth in the Armed Services Procurement Regulation."

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5. The Convict Labor Law. This statute 23 provides:

Whoever, being an officer, employee, or agent of the United States or any department or agency thereof, contracts with any person or corporation, or permits any warden, agent, or official of any penal or correctional institution, to hire out the labor of any prisoners confined for violation of any laws of the United States, shall be fined not more than $1,000 or imprisoned not more than three years or both. Executive Order 325-A, 18 May 1905, implements and extends the policy set forth in the Convict Labor Law by requiring that a contract article reflecting the purpose of the Law be included in all

17 41 U.S.C. § 36 (1958).

18 United States v. Lovknit Mfg. Co., 189 F.2d 454 (5th Cir. 1951), cert. denied 342 U.S. 896 (1951), reargument denied 342 U.S. 915 (1952).

10 41 U.S.C. § 37 (1958).

20 ASPR 12-603 (v).

21 APP 12-603a (1 Nov 1957).

23 ASPR 12-604.

Act of 23 February 1887, 24 Stat. 411, as revised by Act of 25 June 1948, 62 Stat. 703; 18 U.S.C. § 436 (1958).

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contracts involving the employment of labor. Pursuant to this Executive Order, the Armed Services Procurement Regulation requires the use of the following contract clause:25

In connection with the performance of work under this contract, the contractor agrees not to employ any person undergoing sentence or imprisonment at hard labor.

The prohibition contained in the Executive Order and the Convict Labor Law does not apply to contracts subject to similar provisions of the Walsh-Healey Public Contracts Act, discussed supra;20 nor does it apply to purchases from Federal Prison Industries, Inc."7 Federal purchases from State prisons of finished supplies not requiring special fabrication are not prohibited,28

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6. The Copeland "Anti-Kickback Act". This statute 29 provides: Whoever, by force, intimidation, or threat of procuring dismissal from employment, or by any other manner whatsoever induces any person employed in the construction, prosecution, completion or repair of any public building, public work, or building or work financed in whole or in part by loans or grants from the United States, to give up any part of the compensation to which he is entitled under his contract of employment, shall be fined not more than $5,000, or imprisoned not more than five years, or both.

The language of the Act indicates that it applies to anyone who prevents an employee on a Government construction contract from receiving his full wages. Thus, the Act has been held by the Supreme Court to include a company foreman with power to hire and fire. But the Court has interpreted the Act to exclude officers of a labor union in a closed shop who required employees to pay $5.00 per week to keep their jobs, claiming the same as “initiation fees" of the local. The Secretary of Labor is required to make regulations for contractors and subcontractors working on a public building or work, including the provision that each contractor or subcontractor will furnish a weekly statement with respect to the

24 The Executive Order provides in part:

It is hereby ordered, that all contracts which shall hereafter be entered into by officers or agents of the United States involving the employment of labor in the United States composing the Union, or the Territories of the United States contiguous thereto, shall, unless otherwise provided by law, contain a stĺpulation forbidding, in the performance of such contracts, the employment of persons undergoing sentences of imprisonment at hard labor which have been imposed by courts of the several States, territories or municipalities having criminal jurisdiction,

25 ASPR 12-203.

ASPR 12-202 (1).

ASPR 12-202 (11).

In this connection, the Comptroller

28 ASPR 12-202 (11); 28 Comp. Gen. 409 (1949). General has held that a contract, involving the employment of convict labor, with a state prison for the repair of heavy equipment is prohibited by the Executive Order. 32 Comp. Gen. 32 (1952).

29 Act of 13 June 1934, 48 Stat. 948, as revised hy Act of 25 June 1948, 62 Stat. 740; 18 U.S.C. § 874 (1958) (formerly 40 U.S.C. § 276b).

30 United States v. Laudani, 320 U.S. 543 (1944).

United States v. Carbone et al., 327 U.S. 633 (1946). No records were kept of which employees made payments to the officers and how much was paid, but receipts were given for each payment.