Page images

Mr. O'HARA. I don't believe we do.

Mr. SILBERMAN. I think it would help you if that were made a part of the record. Mr. O'HARA. Without objection it will be made a part of the record. (The document referred to follows:)


Washington, D.C., September 19, 1969. The HONORABLE, The Secretary of Labor.

DEAR MR. SECRETARY: Enclosed for your information is a copy of our letter of today to the Secretary of the Air Force regarding the propriety of wage rate determinations issued by your Department under the Service Contract Act of 1965, Public Law 89-286, 41 U.S.C. 351-357, which in addition to establishing currently prevailing wage rates also purport to provide for escalation on definite future dates at specified rates.

As indicated in the enclosure it is our opinion such determinations are improper, and therefore that the practice should be discontinued promptly. In this connection, your attention is directed to our letter to the Solicitor of Labor of September 12, 1968, B-164348, copy enclosed, to which no reply was ever received. Sincerely yours,

ROBERT F. KELLER, (For the Comptroller General of the United States). COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., September 12, 1968. Hon. CHARLES DONAHUE, Solicitor, Department of Labor

DEAR MR. DONAHUE: By letter of July 12, 1968, we transmitted for any comments you might wish to submit a copy of a letter dated May 15, 1968, from the Assistant Postmaster General, Bureau of Transportation, requesting a decision from us as to the propriety of a wage determination, said to be typical of current practice, issued by the Administrator, Wage and Hour and Public Contracts Divisions, in the exercise of the rate determination function delegated to him pursuant to the Service Contract Act of 1965, Public Law 89–286, 41 U.S.C. 351-357 (supp. III). It was reported that the Administrator, in some instances, is making wage rate determinations that not only establish currently prevailing rates, but also provide for escalation on definite future dates at specified rates.

We have now received another letter dated September 4, 1968, from the Assistant Postmaster General, Bureau of Transportation, which advises as follows:

“We have been informally advised by the Department of Labor that it is withdrawing all wage determinations which included wage escalation provisions and that none would be included in future determinations."

This would appear to be as contemplated by 29 CFR 4.164 (b) of your regulations which provides as follows:

“Provision for consideration of currently prevailing wage rates and fringe benefits. (1) Determinations will be reviewed periodically and where prevailing wage rates or fringe benefits have changed, such changes will be reflected in new determinations. In a locality where it is determined that the wage rate which prevails for a particular class of service employees in 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.” (Emphasis supplied.)

In view thereof, we interpret the advice from the Post Office Department as being indicative of a determination by the Department of Labor to withdraw all current wage rate determinations issued to any Government agency under the Service Contract Act which included wage escalation provisions, and not to include such provisions in any future wage rate determination issued thereunder.

If this interpretation is correct, it would appear that no further consideration by this Office need be given to the propriety of including escalation provisions in wage rate determinations, in which event your reply to our letter of July 12 will be unnecessary. In the event, however, that such interpretation is incorrect, please advise us to that effect. Sincerely yours,


Acting Comptroller General of the United States. This entire matter was carefully reviewed with the GAO, the Postal Service, and with the Solicitor of Labor. As a result of this review, it was decided to revise our procedures for determining prevailing rates for mail-haul contracts. Basically, it was decided that a new and separate class of employment would be established for wage data and wage determination purposes.

This would include all mail-haul drivers (other than those specifically exempt, such as owner-operators) and other drivers engaged in performing work similar in duties and equipment to mail-haul contract work, including such drivers, for example, as those employed by the larger parcel delivery services.

In other words, the Department's position, Mr. Chairman, although giving deference to the General Accounting Office's position, is not exactly what the General Accounting Office wanted.

The wage rates and fringe benefits paid to such employees would be surveyed and new wage determinations applicable to mail-haul drivers would be issued by September 1, 1971, based upon the rates prevailing at the head out point for similar driving.

In addition, experience has indicated that the distinction between long and short haul based upon over and under 40-mile runs does not as accurately reflect the differences in driver operations as does a distinction based upon truck size. The latter distinction also tends to take into account the length of the truck run. That is to say, the larger the truck, the more likely it is to be on a longer run.

Therefore, our present survey of rates is based upon a distinction between operators of trucks of under and over 4 tons.

We are now in the process of completing the necessary wage surveys and expect to meet the September 1 deadline established. We believe that changes along the lines proposed can provide for more adequate and simplified treatment of mail-haul contracts consistent with the concept of "prevailing rates."

In closing, I am pleased to have had this opportunity to comment on H.R. 6244 and H. R. 6245 as well as to discuss the administration of the Service Contract Act with the members of this subcommittee.

Of course, I am pleased, Mr. Chairman, to answer any questions that you may have formulated along with members of your subcommittee.

Mr. O'Hara. Thank you, Mr. Silberman. I have quite a list of questions I would like to ask and therefore I would like to give other committee members a chance to question you before I start.

Mr. Badillo, do you have any questions at this time or would you like to withhold?

Mr. BADILLO. I will withhold.
Mr. O'HARA. Mr. Ashbrook.,

Mr. ASHBROOK. Yes, I have several questions, Mr. Chairman. I will say Mr. Silberman, I am most interested in your statement and it certainly relates to the oversight responsibilities of our committee but I would respectfully say that I don't think you have said much about the bills in question.

You mention them in the first page and then you never mention them again. The last paragraph you say you were pleased to comment on H.R. 6244, and H.R. 6245 and I don't see any statement that relates really to the two bills before us which refer to the practices of contractors putting them on a blacklist, removing the optional blacklisting provision of the Secretary of Labor, changing it to mandatory option of that particular phase of the law.

Our testimony in the last hearing dealt primarily with the abuses by contractors, service contractors, the plight of the employees that have been placed in the position of being employees of what looked like fly-by-night contractors and their inability to receive any assistance from the operation of the law and particularly the Department of Labor.

That specifically is my understanding of what is involved in H.R. 6244 and not particularly the matter of prospective wage increases although that is certainly part of our interest and mandate. As to the specific function of the Secretary of Labor you indicate that you are very strongly opposed to this proposal and I waited for your reasoning on that but I did not gather it in the statement.

Did I miss something? Are you against it but not giving any reasons why?

Mr. SILBERMAN. The first two pages of the statement indicate the reasons we are against it. I will elaborate. Let me explain why we discussed as I did the issues concerning the administration of the act.

The chairman of the subcommittee in a letter addressed to us asking us to testify, specifically asked us to direct our attention to the issues that I discussed concerning the administration of the act and that is why we discussed them.

As to why we are opposed to the elimination of the Secretary's discretionary power to relieve a contractor from the debarred list, I have said that such discretion is an important enforcement tool.

As I read the proposed bill, if it were to go into effect, any violation of the service contract, no matter how minor once found, would result automatically in debarment of a contractor for 3 years.

We think that is inappropriate. We think that would in fact be counterproductive for the efficient administration of this act because that is a massive penalty to hit a contractor with. And if you can make no judgment as to the size or scope or nature of the violation, then it is too great a penalty to apply.

Mr. ASHBROOK. I would tend to agree with the fact that certainly coming in with a sledge hammer where it is not necessarily needed, but by the same token there seems to be at least in the hearing developed thus far that there are many what you might call fly-by-night contractors who move in, get the lowest possible bid, don't exactly become model employers and then move out a year or so later and you have ernployers hanging from year to year and not having any continuity of service, very little continuity as far as the employer is concerned, and this is a specific area where we feel and I think the committee generally feels there should be some administrative remedy, and, if it knows that, possibly tightening up the law a little bit.

I was very much impressed in the last hearing about the plight of employees operating under the Service Contract Act and I know it was not the intention of the Congress they be left that way and I am sure the gentleman from Michigan feels the same way.

I would tend to agree that possibly, and I might disagree with my chairman a little bit, this bill goes a little too far, but it does seem to me that you leave an awful lot of people just hanging right now without an effective remedy.

What is the Department of Labor doing to help alleviate this problem? First of all, does it recognize this as a problem? I think the committee does. Possibly the Department of Labor does not view this as a problem in the way that we do.

Mr. SILBERMAN. Any time the Chairman of this committee and ranking Republican member regards an issue as a problem, it automatically is regarded by the Department of Labor as a problem. Now, I would not be opposed to some careful examination of the remedies in the statute.

I am simply opposing the bills set forth that are before us now because it seems to me unwise to set up a situation wherein, for the slightest violation of law once found, the imposition of this very great remedy of debarment for 3 years would be imposed.

Now, under the present administration of the act, contractors have, in fact, been debarred. There are some 21 on the debarment list, I am advised. What happens is that when a case is brought against the contractor (in accordance with the Administrative Procedure Act) the hearing examiner in the Department of Labor hears the case, makes a finding of violation or not as the case may be, and recommends or does not recommend that the contractor be relieved from debarment.

I understand that that recommendation goes up through the Administrator of the Workplace Standards Administration for his recommendation, and then to the Secretary of Labor, who makes the final decision as to whether or not there should be relief from debarment.

Now, I am not unsympathetic to the idea that maybe we ought to carefully explore the sufficiency and nature of that existing remedial structure.

I am simply saying that I do not believe the proposal before the Congress about which we were asked to testify, would be an effective aid to the enforcement of the act.

I am afraid of what will happen if whenever there is a violation there is an automatic 3-vear debarment. Many cases would be settled before they could get to the finding of a violation and a finding of violation, I think, has an important therapeutic impact.

Mr. ASHBROOK. I don't want to ask any more questions.

Mr. SILBERMAN. Let me say one other thing. We don't allow a contractor to escape debarment unless; one, he pays all of the back wages due, and two, indicates a plan whereby we can be reasonably assured that this event will not occur again, that is to say, we are assured that the employees will not be shortchanged.


Mr. Moran can go into more detail on that if that is an issue you would like to explore.

Mr. ASHBROOK, I don't want to take more than my allotted time. There are others who have questions. I will conclude by saying that I hope that the Department of Labor and particularly your office reviews the testimony we have at the last hearing.

I still get the feeling there are an awful lot of people just left hanging without much resources, or recourse, either administratively or at law, and I think that is an area where we are vitally interested.

I would ask no further questions at this time.

Mr. SILBERMAN. I wonder if I might ask the gentleman from Ohio what exactly do you mean by "employees left hanging”?

I did try to review the testimony as it was condensed for me but I am not sure I understand.

Mr. ASHBROOK. I think the thing that concerns us is the fact that so many prospective employers can come in, be little more than labor brokers, issue a bid based on what appears, trying to keep their labor costs at a very minimum, have little more than a year or so in operating their contract, and then they move out again and employees are in a position of starting out all over again with a new prospective employer when he comes in.

I think the bid process is great, but I think if you have employees year in and year out making gains and all of a sudden turning around and finding they have to make the fight for the same ground with another employer a year from now and the law and operation of the regulations by the Department of Labor seem to make that possible, I think you have what I call "people hanging.”

Mr. O'HARA. If the gentleman will yield for a moment, I would agree with that analysis and add just one further element to it. During that year you give this contractor who bid in with the idea of having the lowest possible labor cost every incentive to chisel unless you start using the debarment procedure. In the first place, he may never be caught, in which case the chiseling of his employees is very distinctly to his economic advantage.

Second, if he is ever caught, he figures that the worst that can possibly happen to him is that he is going to have to pay what he already agreed to pay. It did not cost him any more than it would cost him if he had been honest and above board from the beginning.

Mr. SILBERMAN. I must say Mr. Chairman, the point that you just raised is one that bothers me too and I think there may be middle ground of imposing some kind of penalty which is suitably stringent-but which does not go so far as debarment for 3 years.

Mr. ASHBROOK. I would agree. Possibly there ought to be a penalty of double or triple damages. I think the problem is there and maybe the gentleman from Michigan has a remedy that is a little too strong but I think what the Department of Labor is doing now is not strong enough.

Somewhere between the two I think we need to do something. I will ask no questions. I have already trespassed on the five minute rule.

Mr. O'HARA. And with a very good point. Mr. Reid.
Mr. Reid. I have two questions.

One, with regard to the present act that we are discussing which deals with the question of prevailing rates in the locality, might I

« PreviousContinue »