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in the performance of such contract, and a sum equal to the amount of any deductions, rebates, refunds, or underpayment of wages due to any employee engaged in the performance of such contract; and, in addition, the agency of the United States entering into such contract shall have the right to cancel same and to make open-market purchases or enter into other contracts for the completion of the original contract, charging any additional cost to the original contractor. Any sums of money due to the United States of America by reason of any violation of any of the representations and stipulations of said contract set forth in section 1 hereof may be withheld from any amounts due on any such contracts or may be recovered in suits brought in the name of the United States of America by the Attorney General thereof. All sums withheld or recovered as deductions, rebates, refunds, or underpayments of wages shall be held in a special deposit account and shall be paid, on order of the Secretary of Labor, directly to the employees who have been paid less than minimum rates of pay as set forth in such contracts and on whose account such sums were withheld or recovered: Provided, That no claims by employees for such payments shall be entertained unless made within one year from the date of actual notice to the contractor of the withholding or recovery of such sums by the United States of America.

SEC. 3. The Comptroller General is authorized and directed to distribute a list to all agencies of the United States containing the names of persons or firms found by the Secretary of Labor to have breached any of the agreements or representations required by this Act. Unless the Secretary of Labor otherwise recommends no contracts shall be awarded to such persons or firms or to any firm, corporation, partnership, or association in which such persons or firms have a controlling interest until three years have elapsed from the date the Secretary of Labor determines such breach to have occurred.

SEC. 4. The Secretary of Labor is hereby authorized and directed to administer the provisions of this Act and to utilize such Federal officers and employees and, with the consent of the State, such State and local officers and employees as he may find necessary to assist in the administration of this Act and to prescribe rules and regulations with respect thereto. The Secretary shall appoint, without regard to the provisions of the civil-service laws but subject to the Classification Act of 1923, an administrative officer, and such attorneys and experts, and shall appoint such other employees with regard to existing laws applicable to the employment and compensation of officers and employees of the United States, as he may from time to time find necessary for the administration of this Act. The Secretary of Labor or his authorized representatives shall have power to make investigations and findings as herein provided, and prosecute any inquiry necessary to his functions in any part of the United States. The Secretary of Labor shall have authority from time to time to make, amend, and rescind such rules and regulations as may be necessary to carry out the provisions of this Act.

SEC. 5. Upon his own motion or on application of any person affected by any ruling of any agency of the United States in relation to any proposal or contract involving any of the provisions of this Act, and on complaint of a breach or violation of any representation or stipulation as herein provided, the Secretary of Labor, or an impartial representative designated by him, shall have the power to hold hearings and to issue orders requiring the attendance and testimony of witnesses and the production of evidence under oath. Witnesses shall be paid the same fees and mileage that are paid witnesses in the courts of the United States. In case of contumacy, failure, or refusal of any person to obey such an order, any District Court of the United States or of any Territory or possession, or the Supreme Court of the District of Columbia, within the jurisdiction of which the inquiry is carried on, or within the jurisdiction of which said person who is guilty of contumacy, failure, or refusal is found, or resides or transacts business, upon the application by the Secretary of Labor or representative designated by him, shall have jurisdiction to issue to such person an order requiring such person to appear before him or representative designated by him, to produce evidence if, as, and when so ordered, and to give testimony relating to the matter under investigation or in question; and any failure to obey such order of the court may be punished by said court as a contempt thereof; and shall make findings of fact after notice and hearing, which findings shall be conclusive upon all agencies of the United States, and if supported by the preponderance of the evidence, shall be conclusive in any court of the United States; and the Secretary of Labor or authorized representative shall have the power, and is hereby authorized to make such decisions, based upon findings of fact, as are deemed to be necessary to enforce the provisions of this Act.

SEC. 6. Upon a written finding by the head of the contracting agency or department that the inclusion in the proposal or contract of the representations or

stipulations set forth in section 1 will seriously impair the conduct of Government business, the Secretary of Labor shall make exceptions in specific cases or otherwise when justice or public interest will be served thereby. Upon the joint recommendation of the contracting agency and the contractor, the Secretary of Labor may modify the terms of an existing contract respecting minimum rates of pay and maximum hours of labor as he may find necessary and proper in the public interest or to prevent injustice and undue hardship. The Secretary of Labor may provide reasonable limitations and may make rules and regulations allowing reasonable variations, tolerances, and exemptions to and from any or all provisions of this Act respecting minimum rates of pay and maximum hours of labor or the extent of the application of this Act to contractors, as herein before described. Whenever the Secretary of Labor shall permit an increase in the maximum hours of labor stipulated in the contract, he shall set a rate of pay for any overtime, which rate shall be not less than one and one-half times the basic hourly rate received by any employee affected.

SEC. 7. Whenever used in this Act, the word "person" includes one or more individuals, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers.

SEC. 8. The provisions of this Act shall not be construed to modify or amend title III of the Act entitled "An Act making appropriations for the Treasury and Post Office Departments for the fiscal year ending June 30, 1934, and for other purposes", approved May 3, 1933 (commonly known as the Buy American Act), nor shall the provisions of this Act be construed to modify or amend the Act entitled "An Act relating to the rate of wages for laborers and mechanics employed on public buildings of the United States and the District of Columbia by contractors and subcontractors, and for other purposes", approved March 3, 1931 (commonly known as the Bacon- Davis Act), as amended from time to time, nor the labor provisions of title II of the National Industrial Recovery Act, approved June 16, 1933, as extended, or of section 7 of the Emergency Relief Appropriation Act, approved April 8, 1935; nor shall the provisions of this Act be constructed to modify or amend the Act entitled "An Act to provide for the diversification of employment of Federal prisoners, for their training and schooling in trades and occupations, and for other purposes", approved May 27, 1930, as amended and supplemented by the Act approved June 23, 1934.

SEC. 9. This Act shall not apply to purchases of such materials, supplies, articles, or equipment as may usually be bought in the open market; nor shall this Act apply to perishables, including dairy, livestock, and nursery products, or to agricultural or farm products processed for first sale by the original producers; nor to any contracts made by the Secretary of Agriculture for the purchase of agricultural commodities or the products thereof. Nothing in this Act shall be construed to apply to carriage of freight or personnel by vessel, airplane, bus, truck, express, or railway line where published tariff rates are in effect or to common carriers subject to the Communications Act of 1934.

SEPARABILITY CLAUSE

SEC. 10. If any provision of this Act, or the application thereof to any persons or circumstances, is held invalid, the remainder of the Act, and the application of such provisions to other persons or circumstances, shall not be affected thereby. SEC. 11. This Act shall apply to all contracts entered into pursuant to invitations for bids issued on or after ninety days from the effective date of this Act: Provided, however, That the provisions requiring the inclusion of representations with respect to minimum wages shall apply only to purchases or contracts relating to such industries as have been the subject matter of a determination by the Secretary of Labor.

Approved, June 30, 1936.

(The report on the bill S. 3055 is as follows:)

[S. Rept. No. 1193, 74th Cong., 1st sess.]

The Committee on Education and Labor, to whom was referred S. 3055, to provide conditions for the purchase of supplies and the making of contracts, loans, or grants by the United States, and for other purposes, having considered the same, report thereon with the recommendation that it do pass as amended.

The object of the bill is to prescribe labor conditions to be incorporated in all contracts for constrution, articles, materials, supplies, equipment, or services, including contracts for loans or grants made by the United States.

The purpose of the bill is to establish and maintain reasonable wages on purchases, loans, or grants where Federal funds are involved, directly or indirectly, thereby sustaining the purchasing power of employees.

The bill is applicable only to those individuals or concerns who receive the benefit of contracts, loans, or grants made directly or indirectly by the Federal Government. The requirements as to wage, hour, and other conditions apply only to those employees whose labor is involved in the performance of the principal contract and such subcontracts thereunder.

It will end the present paradoxical and unfair situation in which the Government, on the one hand, urges employers to maintain and uphold fair wage standards and, on the other hand, gives vast orders for supplies and construction to the lowest bidder, often a contractor or manufacturer who does not sympathize with and fights hardest against labor and social welfare policies.

The provisions of the bill may be summarized briefly as follows:

Section 1 provides that a principal contractor to an agency of the United States must adhere to certain minimum wage and maximum hour requirements from the effective date of this bill as to those employees who may be engaged on the contract, and further provides that said principal contractor shall not employ child or convict labor, after the effective date of the bill, on the contract.

Section 1-A provides for the same conditions to be adhered to by every subcontractor or supplier to the principal contractor.

Section 2 requires an industrial borrower (or grantee) to adhere to the same conditions as required of the principal contractor in section 1. Also, if the borrower (or grantee) contracts with others in the expenditure of Federal funds, that he will obtain from those with whom he contracts a similar representation. Section 2-A requires that States and political subdivisions thereof receiving Federal loans or grants shall write into their contracts an agreement that the principal contractors will comply with wages and hour and child and convict labor standards. Also, that if the borrower (or grantee) directly carries out projects or operations financed wholly or in part with Federal funds, the standards prescribed will be maintained with respect to its employees engaged on the project.

Section 2-B provides that the principal contractor or the borrower or grantee under sections 2 and 2-A shall obtain a representation from the subcontractor and supplier that the standards prescribed will be maintained.

Section 3 provides:

1. (a) A penalty of a sum equal to twice the difference between the amount required to be paid and that actually paid the employee. A like penalty for overtime labor in excess of the prescribed maximum hours.

(b) A penalty in the sum of $10 a day with respect to every person under 16 years of age employed.

2. A penalty of five times the amount of refund (kickback).

3. For cancelation of contracts for breach of a covenant of this act, and purchases may be made against the account of the breaching contractor.

4. That the principal contractor shall, if directed by the contracting officer, cancel any subcontract for a breach by the subcontractor. Failure on the part of the principal contractor to do so subjects his contract to cancelation.

5. That pay roll and pertinent records must be furnished when demanded. Section 4 provides for the recovery of any sums of money due to the United States by virtue of section 3 by a suit brought in the name of the United States if said funds have not been withheld. The amounts so withheld or recovered shall be applied to the payment of deficiency in wages to employees who had been paid less than the minimum rates of pay and on account of whose services such sums were withheld or recovered.

Section 5 provides for certain necessary powers in connection with administration of the act.

Section 6 authorizes exceptions to be made from the operation of the act. Section 7 allows rejection of a bid or proposal upon determination that the bidder has in the past breached a covenant of the act.

Section 8 sets a standard of pay and hours of labor for the guidance of the President.

Section 9 provides:

(a) That the act shall take effect 30 days after its approval.

(b) Makes the act applicable to existing contracts where contractors have agreed to be bound by such legislation as this.

(c, d, e) Outlines procedure under certain conditions in cases where proposals were invited prior to enactment of the act.

Section 10 provides that the terms of the act shall apply to Government agencies bidding in competition with private enterprise for contracts described in the act. Section 11 allows the President to issue necessary rules and regulations to carry out the act and delegate any of this functions.

Section 12 preserves the principles of the Buy-American and Bacon-Davis Acts, and the wage and hour provisions of title II "Public Works and Public Roads" of the National Industrial Recovery Act, approved June 16, 1933, as extended.

Section 13. Separability clause, providing that if any provision of the act is declared invalid, the others will remain in force.

The bill has been prepared upon the theory that Congress has power to prescribe conditions in public contracts, loans, or grants, and adopt such policies as conditions in them and to direct or authorize the President with respect to their effectuation. Decisions of the Supreme Court bear out this policy. The committee believes that in the absence of action by Congress, the Executive has power to require any condition in contracts, loans, or grants necessary to protect the United States but that his authority stops there and that matters of general policy not strictly necessary to secure to the United States the performance of a contract can only be laid down by Congress.

Coincident with this theory, the committee has deemed it desirable to include in sections 1, 1–A, 2, 2–A, and 2-B provisions requiring contractors, subcontractors and suppliers of articles, materials, supplies, equipment, or services upon Government contracts or contracts involving the expenditure of Federal funds in whole or in part, to furnish representations or agreements that employees engaged in the performance of the contracts or in the production or furnishing of materials or services in connection therewith, have been and will be paid not less than the minimum rates of pay and employed not to exceed the maximum hours as specified in those approved National Recovery Administration codes of fair competition in effect on May 26, 1935, which are applicable to their respective trades or industries. In deciding to incorporate these particular provisions, the committee was guided by the following facts:

1. Many trades and industries, despite the Supreme Court decision in the Schechter case which set aside National Recovery Administration codes, have to a considerable extent continued to adhere voluntarily to the wage and hour provisions of such codes. The committee believes that this tendency should be encouraged and rewarded.

2. The wage and hour provisions contained in the recent National Recovery Administration codes provide an equitable yardstick for determining the proper minima, as to wages, and the proper maxima, as to hours, that should be required by the Government in connection with contracts involving the use of Federal funds. The establishment of these code wage and hour provisions was the result of exhaustive study of nearly 2 years 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 exhaustive hearings, participated in by a majority representation of the trade or industry involved, and in every case the trade or industry itself assented to the said provisions. The reference to code wage and hour provisions in the bill does not represent, directly or indirectly, an attempt to revive National Recovery Administration codes of fair competition. It was deemed advisable, however, to use the code wage and hour provisions for the reasons above stated.

Both the Seventy-third and the Seventy-fourth Congresses have repeatedly committed themselves to the principle that American labor is entitled to a reasonable living wage, and that it should not be compelled to work more than a reasonable number of hours per day, week, or month. The Seventy-third Congress, in section 1 of title 1 of the National Industrial Recovery Act, stated in part: "It is hereby declared to be the policy of Congress * * to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate industry

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This declaration of policy was reaffirmed by the Seventy-fourth Congress in Public Resolution No. 26 (S. J. Res. 113), approved on June 14, 1935.

Existing statutes require that Government contracts be let to the lowest responsible bidder on open competitive bidding. The operation of this statute was qualified as to wages and hours under the provisions of Executive Order No. 6646 of March 14, 1934. Subsequent to the issuance of this Executive order, borrowers, grantees, contractors, and subcontractors, on Government contracts were required to comply with the codes of fair competition to which they were subject and in the absence of such codes, with the President's Reemployment Agreement.

This procedure was found in actual experience to be practical and workable and not productive of undue hardship upon industry. However, following the Supreme Court decision in the Schechter case, the operation of Executive Order No. 6646 was necessarily suspended.

Since the suspension of Executive Order No. 6646, the above statute has been construed as requiring an acceptance of the low bid without any limitations as to wage and hours except those contained in other Federal statutes such as the Adamson Act and Bacon-Davis Act.

Such construction commits the Government to the unconscionable practice of allowing private industry to dictate wages and hours of labor-no matter how oppressive for undertakings financed with Federal funds. The insistence of such standards on projects financed wholly or in part with Federal funds should, in due course, encourage private industry voluntarily to adopt like standards in private undertakings, thereby increasing purchasing power and improving the general conditions of our citizens.

The committee believes that the enactment of this bill will aid materially in securing industrial recovery and the permanent adoption of the standards of wages and hours and conditions of labor set forth in the bill.

The bill also provides for the regulation of Government departments of contracts wherein the Government is in open competition with private industry.

Senator WALSH. Mr. Walling, will you come forward, please? Your full name is L. Metcalf Walling, and you are Administrator, Division of Public Contracts, Department of Labor?

Mr. WALLING. That is right, sir.

Senator WALSH. Will you point out to the committee just what new provisions are contained in the bill S. 1032 that were not in the provisions of the bill of last year?

Mr. WALLING. Mr. Chairman, I wonder if I might preface my remarks by a brief general statement, giving the background and then discuss the amendments?

Senator WALSH. Very well.

STATEMENT OF L. METCALFE WALLING, ADMINISTRATOR, DIVISION OF PUBLIC CONTRACTS, DEPARTMENT OF LABOR

Mr. WALLING. I appreciate very much this opportunity to appear before the committee and comment on the pending amendments, and I should like to make a very brief general statement about the operation of the act to date, because I think that will highlight the amendments, and tie the consideration of them in with the present situation.

As of May 1 of this year, there have been awarded, subject to the provisions of the so-called Walsh-Healey Public Contracts Act, a total of 13,754 contracts, each one of them in excess of $10,000, valued at $935,028,035, just short of a billion. That is in a period of about 2 years and a half.

There have been issued and made effective 27 minimum wage determinations for various industries, employing about 1,300,000 workers. The act has had a very important effect not only in effectuating fair labor standards, and promoting equal competitive conditions among bidders on Government manufacturing contracts, but it has. also had a very important effect on the maintenance of existing good standards which would otherwise have been subject to deterioration through the sharp competition brought about on competing for a single Government order.

The provisions of the act now require the payment of prevailing minimum wages, as determined by the Department of Labor, that no employee engaged in the performance of a Government contract

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