Mr. MICHENER. But you want to be able to use the labor there and prevent the use of the same labor in a State institution; am I right?

Mr. REED. No, sir; not at all. At the present time we have an art which arranges for the transfer of material produced in Government institutions to other agencies of the Government that may need it. That is section 7 of the Penitentiary Act, and it is very short, sir, and reads as follows:

The several Federal departments, independent establishments, and all other Government institutions of the I'mted St tes sall purchase at not to exceed current market prices such products of the industries herein authorized to be carried on as meet their requirements and as may be available and are authorized by the appropriations from which such purchases are made.

The entire problem of convict labor, as the committee knows better than I do, has been an extremely difficult problem to handle in its relations both in competition with free labor and to our people who are incarcerated in the Federal institutions. Congress has some time ago developed this plan of meeting it, and of course there are only limited quantities and limited types of things produced in these Federal institutions. Shoes, I believe, are produced at Leavenworth and some other supplies at Atlanta and different places, and the Federal departments are required to purchase those things from the Federal institutions.

One of two suggestions is made that this should be included in the bill:

Nothing in this act shall apply to commodities manufactured in or services rendered by Federal penal and correctional institutions for the Federal Government or any department or agency thereof.

Or in the alternative the following might be used:

Nothing in this act shall apply to commodities or services referred to in the act of May 27, 1930, or in the act of June 23, 1934— with the statutory citations.

The policy of whether you wish to permit the use of convict-made goods, of course, is a matter that the committee is advised on. The point that we desire to make here is in regard to the present language which permits the penitentiaries and correctional institutions to sell the products of their labor to the Federal Government agencies only and to ask that that should be continued by this explicit language.

The third suggestion that I have to make is in regard to language which appears on page 2, lines 1 to 24; page 3, lines 17 through the page and on down to line 7 of page 4; and page 5, lines 7 to 14, inclusive; page 7, lines 5 to 18; and possibly at another place in the act. The whole comment, however, is directed at a single problem.

This language sets up the codes which were in effect on May 26, 1935, as the requirement for the operation of industry from the time that this act goes into effect, which, by the language of the present draft, is 30 days after the date of the signature or approval by the President.

Under the codes, there were, of course, a body of codes in existence on May 26 that were already having very considerable difficulty in administration. I presume representatives of N. R. A. would be here, who can give you more of the detail of such difficulties as they may have than can I, and I am not speaking for the N. R. A. in what I am saying

Under those codes there were variations, not only geographic in character but also for different strata of labor, so that the unskilled labor was paid a certain wage, which varied in different parts of the country, and so that more or less skilled labor was paid different rates of wages beyond that of the unskilled labor, which of course the committee is familiar with.

Since the codes have not been in effect-and I speak only from newspaper accounts—there have been variations from code wages and hours made by manufacturers in all parts of the country. I think it only fair to say that the great body of manufacturers has tried in every way to live up as near as possible to the requirements of the codes.

On account of the fact that since May, and necessarily from the time of the passage of this act for another 30 days, there may be variations from the normal by these manufacturers, it has seemed to me that the test of compliance with codes was impractical for the country as a whole, and that the base of bidders would be so narrow that you would have difficulty in getting proper competition for governmental contracts.

Under those circumstances you have a choice of three methods, as I see it, of approaching the problem: Either by accepting the bill as drawn by the Senate Committee and as passed by the Senate, or making the test of compliance with the requirements of the bill relate only to labor to be performed in the future, that is, from the time that the contract is entered into; or, third, that language could be used flexible enough so that there was not a fixed requirement that the contractor should have lived up to the code as it was written on May 26. You know, of course, that there were variations in the code from one time to another, and it is difficult for manufacturers to adjust themselves promptly to the code requirements, and they would have only 30 days to do it.

I think it is a question of choice with the committee which one of those methods they should adopt.

Mr. Chairman, I think that that covers all that I care to say in regard to the bill as it is now drawn.

Mr. MICHENER. May I ask a question?
The CHAIRMAN. Certainly.

Mr. MICHENER. I notice, Mr. Solicitor General, on page 15, after fixing the hours, and so forth, there is a provision at the end of the section, line 20:

Provided further, That the President shall set a rate for any overtime in excess of the maximum hours designated in the specification or invitation to bid.

In other words, a man who bids according to that does not know what he is going to be required to do, does he? If you give the President discretion to change the hours or to change the wage or change the overtime rate, it seems to me that is rather unusual. It is a power that has never been given, or attached to a contract that I know of before where it was guaranteed by a bond.

Senator Walsh. The reason for that provision is that, after a contract is made, in the event that it may be desirable to work overtime, the President fixes the amount, and a provision is made later in the bill for the contractor to be paid for that extra expense.

The CHAIRMAN. Any further questions? Thank you, Mr. Reed. Mr. REED. Thank you, Mr. Chairman.

The CHAIRMAN. Dr. Lubin is here, who represents the Department of Labor. You were not here when we discussed our limitation of time?

Dr. Lubin. No, sir; I was not.

The CHAIRMAN. There is a limitation. I do not think it is necessary to suggest it to you, but you were not here. The Committee will be glad to hear you in regard to this bill.



Dr. LUBIN. Mr. Chairman, with your permission, I have a prepared statement that I would like to read.

The bill which is now before your committee is so vital to the preservation of the advance in wages and purchasing power accomplished under the National Industrial Recovery Act that I strongly urge its favorable consideration. Unless this bill is enacted into law at this session, the Government, since it is compelled by law to deal with the lowest responsible bidder, will be placed in the position of having to purchase its supplies from contractors who have abandoned the wage and hour standards of the codes in order to undercut their competitors.

This bill seeks to maintain the standards of wages and hours of labor which had been threatened by the abandonment of the N. R. A. by the device of securing from every contractor with the Government an agreement to comply with wage and hour standards contained in the invitation for bids and to refrain from employing child labor or convict labor in connection with the contract work,

The bill also proposes to utilize the credit machinery of the Government, to secure similar agreements from borrowers and grantees of Federal funds. Moreover, these contractors, suppliers, borrowers, and grantees, in turn, are required to obtain similar representations from the employers with whom they deal with respect to these labor conditions.

This bill does not represent a novel contribution to Federal law. For the past 4 years each contract made by the Federal Government or District of Columbia for the construction of public buildings has contained, pursuant to the Davis-Bacon Act, a stipulation requiring the contractor to pay the prevailing local rate of wages to laborers and mechanics. This statute applied, however, merely to construction contracts in excess of $5,000. After the enactment of the National Industrial Recovery Act, however, and the subequent promulgation of codes of fair competition, the principle of this legislation was given a much broader scope under the provisions of Executive Order No. 6646 of March 14, 1934.

Under the terms of this order, borrowers, grantees, contractors, and subcontractors on Government contracts were required to submit certificates to the effect that they were complying and would continue to comply with the codes of fair competition to which they were subject or, in the absence of such codes, with the President's Reemployment Agreement. The experience of the National Recovery Administration in enforcing the provisions of this order has proved that the device is administratively workable and imposes no undue burden upon industry. This condition of affairs prevailed on Government contract work until the necessary suspension of Executive Order No. 6646 following the Supreme Court decision in the Schechter case.

Since the revocation of the order, the Comptroller General has ruled that the Government is absolutely compelled to accept the lowest bid without any limitations as to wages and hours except with respect to those in such narrow fields of industry as falls within the operation of the Adamson Act, the 8-hour law and the Davis-Bacon Act. As a result, a premium will be placed upon wage cutting in private industry unless Congress enacts this bill at this session, and the Government will continue to be placed in the paradoxical position of urging the maintenance of wage and hour standards on the one hand and yet encouraging the contractor or manufacturer whose standards are the most unjust to his employees by giving vast orders for supplies and contracts to the lowest bidder regardless of the labor conditions under his control.

Gentlemen, I might cite to you the complaints that have come to the Department of Labor, one in particular, of two large orders being placed immediately after the Supreme Court declared the N. R. A. unconstitutional. In one instance the firm receiving the order was a nonunion firm, which immediately after the Supreme Court decision had lowered its wages and increased its hours, and in the other case a union firm breaking its contract with the union, shutting down its plant, going to a State something like a thousand miles away, opening up a new plant under much lower conditions than normal standards, and getting a contract with the Federal Government, because under the law it was the lowest bidder and therefore could get the order.

As I have stated, the conditions which this bill imposes should cause no hardship to industry. Immediately after the Schechter case, various national trade associations issued statements to the effect that their membership would continue to live up to the wage, hour, and child-labor standards of the codes. It is believed that these statements are representative of the enlightened point of view which prevails among most employers. It would be very unjust for the Government to encourage the minority competitors, however, who do not share this feeling by keeping in effect a statute which has the tendency of making Government business and Government credit available to the antisocial employer.

You will also recall that last spring, when the question of extending the National Industrial Recovery Act was presented to Congress, employer after employer who appeared to attack the N. R. A. before the committees of Congress having this legislation in charge, almost invariably prefaced their remarks with the statement that they personally were not opposed to the wage, hour, and child-labor provisions of N. R. A. but, on the contrary, believed that they had accomplished a great deal of good. It is only these concededly admirable features of N. R. A. which this bill seeks to preserve. Unfortunately, there has been considerable loose talk by opponents of this bill to the effect that it proposes to do something which the Supreme Court has already held unconstitutional. This is not the case. This bill does

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not invoke the sanctions of the Federal law to impose upon any employer standards which he himself has not agreed to maintain. That the codes of fair competition would have been valid if they rested upon the same was conceded by the Supreme Court. The Chief Justice, in his opinion, expressly said:

The further point is urged that the national crisis demanded a broad and intensive cooperative effort by those engaged in trade and industry, and that this necessary cooperation was sought to be fostered by permitting them to initiate the adoption of codes. But the statutory plan is not simply one for voluntary effort.

The codes of fair competition, which the statute attempts to authorize, are codes of laws. If valid, they place all persons within their reach under the obligation of positive law, binding equally those who assent and those who do not assent.

All this bill provides is that those who assent voluntarily shall be compelled to maintain the terms of their contract which fix conditions of labor to be used in these specific plans.

It is obvious that under this bill employers who do not assent to have the Federal Government impose any restrictions upon wages and hours may continue to be free from such restraint. It is only when they apply to the Government for a contract, a loan, or grant that they must agree to abide by Federal labor standards.

Equally unsound is the objection that the broad principle of the Schechter case against delegation of power to the Executive applies to this bill. Even if this bill were mandatory upon industry, its wage and hour provisions would not involve an unlawful delegation of legislative power. Unlike the National Industrial Recovery Act itself, the standards of executive action in fixing wages and hours are precisely defined in this bill.

The former witness, incidentally, mentioned that aspect of the case. The law specifically provides that those wages and hours which were in effect under the codes on a given date shall be the wages and hours which shall be applicable to any specific industry.

Standards similar to these have been upheld by the courts in passing upon the constitutionality of the New York minimum wage laws, nor can there be any valid objection to using the wage and hour provisions contained in the recent codes as equitable yardsticks to be considered in determining the proper wage minimum and proper hour minima. The establishment of these code, wage, and hour provisions represented the fruits of nearly 2 years of exhaustive study by the National Recovery Administration in collaboration with representatives of industry and labor. In each instance code wage and hour provisions were determined only after notice and hearing, participated in by a majority representation of the trade or industry involved. While it is true that some of these code provisions were criticized as inequitable in some industries, this bill confers sufficient authority upon the President or the agency to which the administration of this bill is confided to make the necessary adjustments.

Mr. MICHENER. Right there–I did not understand that was true. Then, as a matter of fact, the President is given authority to write the code here, following out just what you said. Speaking of what is found in the bill, the President has the authority to make such adjustments as he sees fit, therefore, to write a code.

Senator Walsh. May I answer that?
Mr. MICHENER. I prefer his answer first, Senator.

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