These were valid arguments in 1931 when the law was passed. Now, in 1962 with the protection of the Fair Labor Standards Act, Taft-Hartley Act, LandrumGriffin Act, and the acknowledged power of the construction unions, it is no longer necessary to protect workers by Government fiat and particularly now that one of every three workers is represented by a union.

The Bureau of Labor Statistics reports that for the year ending April 1961, straight time construction wage scales rose 4.3 percent. When, according to these BLS reports, $123 represents the gross average weekly earnings of construction employees (union and nonunion) for October 1961, the argument for protection against sweatshop and "substandard" wages disintegrates.

It should be noted that the administration in 1930 attempted to meet the problem administratively. The Comptroller General held the proposal improper because it would involve unauthorized use of appropriations chargeable for the procurement involved and would not only clash with the intent of Revised Statutes section 3709 (general advertising statute), but would inevitably increase the cost of construction to the United States in a way which bore no relationship to actual accomplishment of the work authorized by the appropriations to be done" (10 Comp. Gen. 301 (1931)). [Emphasis supplied.]

Within a month after the Comptroller General's decision, companion bills were introduced by Senator James J. Davis of Pennsylvania and Representative Robert Bacon of New York. The bill had been drafted for the administration by an interdepartmental committee from Labor, War, and Treasury. Both bills were reported out and passed by both Houses in precisely the form in which they had been introduced. Secretary of Labor Doak's testimony made it clear that the Secretary of Labor should settle disputes over prevailing rates. It was decided that the Secretary would determine the rate of wages because the Department of Labor had a conciliation service.

The main theme running through the committee reports and the debates in both Houses was the desire to provide minimum wages in order to prevent discrimination of Federal construction against local labor in the emergency situation caused by the depression. It is worthy of note that the congressional debates reveal that those statements made in support of the bill assured repeatedly that it was intended as emergency legislation. (See 74 Congressional Record 65136520.) The "emergency" has sustained itself for over 30 years.

Accordingly, the legislative history of the 1931 act reveals that administration was interested in an emergency "prevailing" rate law which was applicable to Government building contracts to be let in the course of an extensive public building program and which was intended to enable the Government to maintain existing rates as minimum wages on Government jobs when need be. This was a compromise in that the union demand to maintain union rates as the minimum wages on Government work was rejected on the one hand, and the contractor's demand for predetermination of definite fixed rates which could not be changed during the life of a contract was rejected on the other.

The Labor Department ignores this part of the legislative history showing that the prevailing rate is not synonymous with union rate.1

No enforcement provisions were enacted in the original law, apparently upon the general assumption that pressure by labor and contracting agencies to keep rates at existing levels would assure compliance. When the Davis-Bacon Act became law in 1931 and when it was amended in 1935, the growing intensity of the depression rendered the freedom left to unions to enforce or negotiate higher rates for Government work a fairly speculative advantage at the time. With the passing of the emergency of the depression and with the growth of unionization, that advantage has become a very real one in the hand of the craft unions under the aegis of administration of the "prevailing rate" by the Labor Department.

The 1935 amendments to the Davis-Bacon Act

By Executive Order 5778, January 19, 1932, President Hoover anticipated a number of amendments to the law made in 1935. He required all Federal contracts for the construction of Government buildings to include stipulations reciting that the parties "expressly understood and agreed" that the contractor would:

Pay the required wages at least once a week, unconditionally and in full. Pay the required wages to everyone performing the work of a laborer or mechanic, regardless of any private contractual arrangement otherwise.

1 See Chamber testimony, Mar 8, 1962, quoting Solicitor of Labor Donahue insisting that the union rate be defended.

Keep payrolls open for inspection by the contracting officers.

Post the required rates at the site.

Acquiesce in termination of the contract for failure to pay required rates and accept liability for excess costs of completion by the Government. Were it not for a Presidential veto, the Davis-Bacon Act would have been further amended in 1932. It was at this time-and for the first time-testimony was given urging judicial review of prevailing wage determinations by the Secretary of Labor as a safeguard in the public interest (House hearings, AprilMay 1932).

In effect, the 1935 amendments to the Davis-Bacon Act comprised a new law. The changes made are summarized below:

Predetermination of prevailing rates which remain fixed for the life of the contract.

The Secretary of Labor to make such predeterminations by decisions final and conclusive on all parties.

Both specifications and contracts based upon them to contain the prevailing rates as predetermined by the Secretary (formerly only contracts). Rates to be based on rates for "corresponding classes of laborers and mechanics on projects of a character similar to the contract work" (formerly on rates for "work of a similar nature"). Other changes made were:

The scope of the act was broadened to cover contracts for not less than $2,000 (formerly $5,000), contracts for "painting and decorating" (formerly only "construction, alteration and/or repair"), and contracts for "public works" (formerly "public building" only). Covered employment was extended to that performed "directly upon the site of the work" (formerly "on the public buildings").

Provisions in aid of enforcement (formerly none) requiring stipulations in covered contracts for

Withholding from accrued payments to the contractor by the contracting officer of any difference between wages due under the contract and wages paid.

Termination of the contract by the Government upon a finding by the contracting officer that less than prevailing rates are being paid. Acceptance by the contractor of liability for excess costs occasioned by completion of the work by the Government after termination. Sanctions to effectuate payment to employees (formerly none) authorized— Payment directly to employees by the Comptroller General of withheld amounts.

Blacklisting of employers by the Comptroller for 3 years upon his finding that the contractors had "disregarded their obligations to employees and subcontractors."

Suit against the contractor and his sureties under the payment bond statute (Miller Act) by laborers and mechanics not fully paid through withholding.

The 1940 amendment to the Davis-Bacon Act

The second and only amendment to the Davis-Bacon Act itself since 1935 was enacted in 1940. It enlarged the scope of section 1 of the act to cover Federal contracts for construction in the territories of Hawaii and Alaska, effective prospectively from June 30, 1940.

Expansion of Davis-Bacon concept

The principle of predetermination by the Secretary of Labor has since been extended by statute to contracts related to construction of federally assisted non-Federal public works such as:

(1) Insured mortgages (FHA) for large-scale multifamily rental housing projects constructed by private persons (enacted in 1939, National Housing Act).

(2) Development of public airports by local "sponsors" (enacted in 1946, Federal Airport Act).

(3) Hospital construction under State plans (enacted in 1946, Hospital Survey & Construction Act).

(4) Development of slum clearance and community development projects by local public bodies (enacted in 1949, Housing Act of 1949 as amended in 1954).

(5) Development of low-rent public housing initiated by local publichousing agencies (enacted in 1949, U.S. Housing Act of 1937).

(6) Construction of school facilities by local educational agencies in federally affected areas (enacted in 1950, School Survey and Construction Act of 1950).

(7) Loans and grants for public housing and community facilities in connection with national defense (enacted in 1951, Defense Housing and Community Facilities and Services Act of 1951).

(8) Insured mortgages (FHA) in connection with contracts covering construction of multifamily rental housing for 12 or more families construction by private persons for the purpose of planned slum clearance (enacted in 1954, National Housing Act).

(9) Construction of buildings with private funds pursuant to lease purchase agreements entered into by GSA or Post Office Department (enacted in 1954, Lease Purchase Act of 1954).

(10) Initial construction of State highway projects in the Interstate System (enacted in 1956, Federal Highway Act of 1956).

(11) Area redevelopment (enacted in 1961, Area Redevelopment Act). (12) Water pollution (enacted in 1961, Water Pollution Act).

Without exception every time a Federal law is proposed involving construction, there is a determined effort to expand the Davis-Bacon concept (e.g. Public Works program costing $2 billion proposed by President Kennedy).

The continuing Davis-Bacon controversy

Although the Davis-Bacon Act was extended to the Interstate Highway System in 1956, the legislative debate to exclude it is still pertinent to this investigation. The minority report on that highway legislation (H.R. Rep. No. 2022 on H.R. 10660, pp. 25-32), is illuminating for legislative history purposes:

"Prevailing Wages Already Being Paid"

"The proponents of the Davis-Bacon provision claim that all they want is the prevailing wage to be paid to workers on highways throughout the Nation. We submit that prevailing wages are being paid on highway construction today, by economic necessity, by collective bargaining agreements, or by State prevailing wage laws or regulations. Today, in addition to the Fair Labor Standards Act, which certainly applies to interstate construction programs, there are prevailing wage laws or regulations in 30 States. There are collective bargaining agreements with highway construction unions in 25 States, some of which are also covered by prevailing wage laws. Altogether the States are doing a fine job in protecting the labor standards of our citizens on highway construction work. There is no need for 'Federal protection.' Members of Congress may well be alarmed at this attempt to put Federal wage fixing on the highway program as a violation of States' rights and the spirit underlying our Constitution."

"What Labor Really Wants"

"What did come out of these hearings? Was this a question of paying highway construction workers the prevailing wage rate? No. We challenge and call to the attention of Members of Congress the question now posed: Is the highway bill to be used as a vehicle for promoting union welfare and an AFL-CIO organizational drive on the open shop and unorganized areas of the country, particularly the South and West?"

"No Right of Appeal, No Court Review"

"Most dangerous of all, there is no appeal from the ruling of the Secretary of Labor which violates the most basic of American principles, the constitutional separation and balance of powers. This is bureaucracy in its most dangerous form and is antithetical to all that Americans hold dear concerning freedom and the role of Government. Congress saw fit to amend the Walsh-Healey Act (a law similar to the Davis-Bacon Act) providing for judicial review of actions of the Secretary of Labor, but his decisions under the Davis-Bacon Act go unrestrained and unchecked, regardless of how capricious or arbitary they may be. It cannot be said that the Labor Department hearings are equivalent to judicial review, for the Secretary of Labor in such hearings is at the same time the prosecutor, the judge, and jury. This again proves that the subject matter of 88711-62-16

Davis-Bacon or Federal wage fixing should be handled by the House Labor Committee which might well investigate the lack of jurisdictional review and the maladministration of this labor law by the Labor Department."

Determination of “prevailing rates” by the Secretary of Labor under Davis-Bacon in the past has been arbitrary and unfair

(All citations are to 102 Congressional Record 7100 et seq.)

Barden. "The Federal 'prevailing rate: is always the highest rate'," (P. 7111.) Smith of Virginia.—“Wage determinations by the Secretary of Labor have not been honestly administered, citing cases of hospital at Winchester, Va., etc. The Labor Department says to contracting agencies who complain, "This is our business assigned to us by the Congress. You people keep your nose out of it.' How can you trust such administrators?” (P. 7114.)

Dondero.-"The Secretary may take rates from as much as 200 miles away, citing Maryland and Virginia cases. In one instance the rates were 77 percent higher than the actual prevailing rates." (P. 7186.)

Byrd.-"Cites Winchester hospital case and other abuses." (P. 9156.) Holland. "There is no question about what the Secretary has done heretofore. *** We must not fool ourselves by thinking that decisions of the Secretary of Labor are in accord with the actual conditions prevailing * * *." Describes cases on Federal construction in Florida. In one instance the Miami rate from 100 miles away was taken-a "rate completely out of harmony with the rates prevailing in many small towns closer to the spot than the city of Miami." (P. 9710.)

Knowland.-"A frequent source of complaint in the past has been that wage determinations by the Federal Government tend to follow the wage structures in the metropolitan areas and to extend these * ** into nonurban and rural areas." (P. 9167.)

Also, Dondero (P. 7186).

Wofford. "The Secretary has been remarkably unsuccessful in learning the actual prevailing scales of wages paid in the communities of the Nation." (P. 9158.) Cites Federal projects in South Carolina on which the prevailing rates set vary from 5 to 37 percent over the actual prevailing rates. (P. 9159.) Case. "Contractors cannot know what rates the Secretary will ultimately fix. They may be changed 3 months after the contract starts." (P. 9166.) Davis-Bacon prevailing rates will unnecessarily increase the cost of the highway program, thereby reducing the miles of highway built or enlarging the burden on the taxpayer

Barden. "Davis-Bacon rates are always ceiling rates, not minimum rates as under the FLSA. Federal rate determinations will lead to waste and confusion. Davis-Bacon is 'probably the worst administered piece of law on the statute books.' There is no reason for the trouble and confusion over prevailing rates if it is properly done." (P. 7111.)

Alger. "Some higher costs will not go into the pay envelopes. At present there are 20,000 rate determinations a year; the road bill will add another 10,000. Each road contract will have around 230 job classifications and there will be people to administer, inspect, and enforce. (P. 7140.) The increase in cost is estimated at $2-4 billion. The AFL demands recognition and protection of 250 job classifications. These will give rise to jurisdictional disputes over job assignments and complicate rate fixing. There will be bureaucratic redtape, waste, and delay that does no one any good. All will reduce the mileage built." (P. 7145.) If Davis-Bacon is added to the highway bill, then judicial review must be provided Alger (PP. 7139, 7140).-"The 'most dangerous of all' is that there is no appeal." (P. 7145.) "The Walsh-Healey Act provides a precedent for judicial review." (Pp. 7145, 7189-7190.)

Byrd (P. 9156).

Wofford.-"No one should have the power Davis-Bacon would give over the highway program, from which there is no appeal." (P. 9158.)

Fulbright. "We only want to provide for an appeal. The Secretary of Labor is not alway impartial." (P. 9162.)

Goldwater. "There is too much delegation of power without judicial review." (P. 9165.)

Knowland. "Wage determination decisions under the Davis-Bacon Act are not subject to any review, as has been ably pointed out by the distinguished Senator from Arkansas (Mr. Fulbright); thus, there is no check upon the authority of the administrative agency making the determinations."

It is anomalous that 6 years have elapsed since the passage of the Highway Act, and yet the administration of the Davis-Bacon Act continues in defiance of due process without judicial restraint.

3. ADMINISTRATION OF THE DAVIS-BACON ACT

How a wage determination is made by the Labor Department

Pursuant to regulations issued by the Labor Department, the Solicitor of Labor obtains and compiles wage information by voluntary submission of wage rate data by contractors, contractor associations, labor unions, public officials and other interested parties regarding wage rates paid to laborers and mechanics on various types of construction in the area such as buildings, bridges, dams, highways, tunnels, rivers, powerlines, railways, airports, apartment houses, wharves, levees, canals, dredging, land clearing and excavating.

The information submitted must reflect not only the specified wage rate paid to a particular craft in an area, but also that type of construction on which the rates are paid.

The following types of information are used in making the wage rate determination:

(1) Statements showing wage rates paid on projects.

(2) Signed collective bargaining agreements.

(3) Wages rates determined for public construction by State and local officials pursuant to prevailing wage legislation.

(4) Information furnished by State agencies (under the Federal-Aid Highway Act of 1956); pursuant to section 115 of the law, the Labor Department must consult with the highway department of the State in which a project in the Interstate System is to be performed.

(5) Any other information pertinent to the determination of prevailing wage rates.

(6) The Solicitor of Labor is authorized to supplement such information obtained on a voluntary basis by such means and from whatever sources he deems necessary.

It should be noted that the regulations further provide that if the Solicitor deems the data on hand to be insufficient to make a determination, he may conduct a field survey. This is seldom done except where strong protests are received by the Labor Department. The Davis-Bacon prevailing law utilizes the services of management and labor to perform its functions, thus adding immeasurably to the cost of doing business with the Federal Government. [Emphasis supplied.]

Formal hearings on wage determinations and other interpretations of the law are also permitted if the Solicitor "deems it necessary." These are seldom held. Often a discussion of prevailing rate determinations between the Solicitor and the Secretary of Labor have been held to be a "hearing." Thus, the Labor Department is prosecutor, judge, and jury with no right of appeal to a higher body. The 30-percent rule

The Labor Department regulations then proceed to interpret what "prevailing"

means:

It is the rate of wages paid in the area in which the work is to be performed, to the majority of those employed in that classification in construction in the area similar to the proposed undertaking. In the event that there is not a majority paid at the same rate, then the rate paid to the greater number: provided that such greater number constitutes 30 percent of those employed; or, in the event that less than 30 percent of those so employed receive the same rate, them the average rate.

This 30-percent approach is very effective in reaching a "union" rate and defining it as prevailing. Most non-union contractors do not have a uniform rate, but, negotiated contracts do reflect such a uniform rate.

This is the way the 30-percent rule works. If you have 3 jobs in the community, for example, there are 20 carpenters receiving $2.50 an hour, on the second job 20 carpenters receive $2.75 an hour, and on the third job, a Federal job, 25 carpenters receive $3. In this case, the Labor Department will always