standards upon which the Government will do business with private firms and corporations.

Substantially the same amendments were favorably reported by this committee last year in connection with S. 3390 and were unanimously adopted by the Senate. Likewise, the same amendments were favorably reported by the House Judiciary Committee last year in connection with H. R. 9745.

These amendments represent one of the primary aspirations of organized labor. At the Congress of Industrial Organizations convention in November 1938 at Pittsburgh, resolutions were adopted calling for the enactment of legislation of this type.

This bill rests upon the unanswerable premise that corporations which secure profitable Government contracts should comply with the laws of the United States. The amount of Government business is tremendous and increases each year. In the approximately 3 years of the operation of the Public Contracts Act there have been over 14,000 contracts covering practically every type of industrial product manufactured in this country, amounting to a total sum of one billion dollars. The firms which secured these contracts are receiving public funds and the Federal Government therefore has the right to impose upon these firms the obligation contained in this bill. We would like to briefly comment upon each of the important amendments made by this bill.

1. The amount of any contract covered by the law is lowered from $10,000 to $2,000. This amendment arises out of the fact that it has been the practice of certain of the departments of the Government to split up contracts so that instead of there being one single contract for $10,000, there would be two or more for lesser sums which became exempt under the present provisions of the law. This caused considerable amount of dissatisfaction among the workers in the field who believed quite naturally that such a glaring loophole in the law should no longer remain open.

2. Under the amendments contracts for vessels will be covered, thus extending the law to include one of the major items of Government purchases, which has been omitted without any justification from the coverage of the present law. During the last 2 years the amount of naval construction in private shipyards has reached the sum of over $300,000,000 and the armament program will call for increasingly larger amounts of public funds to be paid over to private contractors for naval construction.

3. The amendments permit deductions to be made from the minimum wage required to be paid, on account of the reasonable value for board, lodging and other facilities furnished by the employer. This amendment represents, we understand, the administrative practice of Public Contracts Divisions and is necessary in order to take care of wages paid by the employer in the form of facilities at no profit to himself.

4. The provisions of the law dealing with subcontractors as defined by section 7, are clarified.

5. The amendments modify the present provisions by making the age limit the same for both boys and girls and allowing the Secretary of Labor to prohibit the employment of minors between 18 and 16 years in hazardous industries. This conforms with the policy of the Fair Labor Standards Act. It is another instance of making the Federal laws protecting labor uniform.

6. The bill further amends the Walsh-Healey Act under the proviso proposed by Senators Walsh and Hill to add to the list now established under section 3 of the act, the names of the firms that have been found in a final adjudication by a court to have interfered with, restrained, or coerced their employees in their rights to collective bargaining. In so doing, the bill does not create any new or novel situation. It merely extends the protection of the Walsh-Healey Act to the labor standard of the right of collective bargaining. The act now protects hours of work, minimum wages, it prohibits the use of child labor and the use of convict labor, and it protects the worker against unsafe working conditions. Certainly a right as fundamental and as important as the right of collective 'bargaining should likewise receive the protection of the Federal Government in the expenditure of tremendous sums to private contractors.

In short, there is no situation where a policy favored by the United States is ignored in its contracts. As soon as protection against industrial hazards, guarantee of wage payments, maximum hours and prevailing wages, provision against insolvent subcontractors were recognized as desirable, they were established as conditions in Government contracts. Indeed this feature of the amendments to the Walsh-Healey Act is only necessary because the Comptroller General has ruled that in the absence of statutory authority, the Government contracting agencies may not reject bids of firms that have violated the labor laws of the

Federal Government. The Comptroller General has recognized other labor standards as proper conditions to be fulfilled in Government contracts in the absence of statutory authority. We think this ruling of the Comptroller General is erroneous, but there is no present alternative except to press for this type of legislation.

The fact of the matter is, and it has been demonstrated before this committee on previous hearings on similar legislation, that firms who have received profitable Government contracts, obtaining substantial profits thereby, are among the most notorious of those who deny to their employees their rights to collective bargaining. These firms and their Girdlers, Graces, and Weirs are in effect being subsidized by the United States Government in their use of industrial spies, industrial munitions, and daily interference with the free choice of representatives by their employees. These firms can offer lower bids precisely because through the use of their illegal methods, they avoid the increased wages and other costs of production which the benefits of collective bargaining agreements bring to workers. Firms that are able to pay the lowest wages because they do not practice collective bargaining are able from time to time to secure Government contracts as the lowest bidders. The net result is that the United States is supporting the vicious practices which the public morals have long condemned. For example, the Newport News Shipbuilding & Dry Dock Co. has Government contracts amounting to over $70,000,000. When its employees attempted to organize, this company fired about 30 of them and used every effort to break the strike and starve the men into submission. It succeeded in preventing the union from hiring any halls, shut off credit of the strikers from the local grocery stores and finance companies. It used the police department to harass the pickets and arrest them. It blacklisted strikers and terrorized the rest of the men in accepting the company union.

The proposal to protect the rights of organized labor in its present form eliminates any possible objection. A firm is not placed on the list until a court has finally determined that it has denied the rights of its workers. It thus has full opportunity to raise all defenses before this penalty is invoked against it.

If any situation should present a case of public necessity, then under the terms of section 3, the Secretary of Labor has the discretion to remove any firm from the list and allow it to bid for Government contracts. We do not see anything unusual in the practice of the Government to refuse to do business with firms that have failed to comply with its laws. Certainly in private business, it is frequently the case for a firm to discontinue dealings with a firm that has breached business ethics. So the United States Government has the power to refuse to deal with a firm that has breached the laws of this country.

Objections have been made to these amendments by the Army and Navy Departments which claim that they would cause delays in the armament construction program of the United States. We cannot take these objections seriously. They are the same objections which were made when the Walsh-Healey Act was originally passed.

Each time these objections arose they have shown themselves without merit. On the contrary, our experience shows that firms that engage in collective bargaining are free from any serious interruption to their production. In the steel industry which supplies the major portion of the articles called for by the armaments program, specific experience demonstrates this point. Seventy-five percent of the steel industry is now organized and engages in collective bargaining with the Steel Workers Organizing Committee, affiliated with the Congress of Industrial Organizations. The officials of the United States Steel Corporation, themselves have expressed the view that the signing of these agreements avoided serious and costly delays due to industrial disputes. In contrast, there is the experience of the Bethlehem Steel Corporation, Republic Steel Corporation, and other so-called "little steel" producers who in the summer of 1937 underwent a prolonged stoppage of production, which demoralized their plants for many months thereafter. The fact of the matter is that with very few exceptions, the firms that engage in collective bargaining, are able to supply the United States with all of the iron and steel products that it needs.

Finally we wish to point out that the principle of this particular provision has been universally accepted. In 1932 a subcommittee of the House was appointed to investigate Government competition with private industry, pursuant to House Resolution 235 of the Seventy-second Congress, second session. The members of this committee were Joseph B. Shannon of Missouri, chairman; Edward E. Cox, Georgia; Samuel B. Pettingill, Indiana; William H. Stafford, Wisconsin; and Robert F. Rich, Pennsylvania. In its special report, being House Report No. 1985 of that session of Congress, this committee laid down the follow

ing fundamental principle as a means of equalizing Government competition with private enterprise:

"4 (c). Organization. No contract shall be let to any organization, plant or establishment, in which it is made a condition of employment that the workers engaged therein shall not belong to, or remain or become a member of, a labor organization, or in which workers shall be denied the right to bargain collectively, should they choose to do so, through representatives selected by them."

Several attempts have been made to pass legislation of this type to protect the rights of organized labor in government contracts. This bill now states the minimum terms upon which these guarantees can be made effective. There is no conceivable reason, short of arbitrary selfishness and disregard of the welfare of the millions of workers in this country, which stands in the way of passage of this legislation at this session of Congress.

Mr. PRESSMAN. I would like to indicate briefly that we are in favor of and are supporting S. 1032 and in addition the proposed amendment that was suggested by Senator Walsh and Senator Hill at the hearing last week. S. 1032 is substantially the same as the bill that was enacted unanimously by the Senate last year and also approved by the House Judiciary Committee, and before action could be taken on it in the House, Congress adjourned.

That is in brief the essence of our statement. If there are any questions, I shall be pleased to answer them.

Senator TAFT. What are you interested in particularly? The extension to subcontractors or the reduction in the amount?

Mr. PRESSMAN. The reduction in the amount is, of course, particularly important in the textile industry where the orders can very easily be divided so that what should be a $10,000 order or a $15,000 order becomes merely a $1,500 or $3,000 order in lots, and to reduce this to $2,000, means that it would bring in a number of others who should be in under the provisions of the act.

And also in that connection, the suggestion made, I believe, by Mr. Walling at the hearing last week that the requirement for subcontractors even be modified to the extent that the contractor need only obtain a certificate from a subcontractor that the subcontractor will comply. That may well be a fair solution with regard to the contractor and subcontractor problem.

With regard to the deduction that S. 1032 provides for, that is simply consistent with the present administrative practice, and as we understand it, the provision as voiced in S. 1032 simply is making certain and definite what the administrative practice now is.

Senator TAFT. Are there any other gentlemen that want to be heard this morning?

Senator TAFT. The committee will be adjourned until tomorrow morning at 10 o'clock.

(Whereupon, at 10:50 a. m., a recess was taken until 10 a. m. Friday, May 19, 1939.)

PURCHASE OF SUPPLIES AND THE MAKING OF CONTRACTS BY THE UNITED STATES

FRIDAY, MAY 19, 1939

UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE

ON EDUCATION AND LABOR,

Washington, D. C.

The subcommittee met pursuant to call at 10 a. m., in room 357, Senate Office Building, Senator David I. Walsh (chairman) presiding. Present: Senators Walsh (chairman), Hill, and La Follette. Senator WALSH. The committee will come to order.

The first witness is Judge Padway. We will be pleased to have your views, Judge Padway, in respect to the pending amendments.

STATEMENT OF JOSEPH A. PADWAY, COUNSEL, AMERICAN

FEDERATION OF LABOR

Mr. PADWAY. My name is Joseph A. Padway, and I am appearing this morning with Mr. William Hushing, legislative representative of the American Federation of Labor, Mr. Calvin, secretary of the metal trades council of the American Federation of Labor, and Mr. David Kaplan, research director of the International Association of Machinists, all on behalf of the American Federation of Labor and its affiliates in connection with this bill, S. 1032, and the various amendments to the bill.

I am directed to say to the committee that the American Federation of Labor is in accord with the principles of this bill, and requests respectfully that it be passed by Congress at this session.

We desire, however, to emphasize one or two points which we are greatly interested in. The points that we wish to emphasize in the bill this morning are these-it is unnecessary to go into a long discussion or dilate at any length on the necessity of the reduction of the amount now provided in the law from $10,000 to $2,000. We think many arguments have been made or will be made, and the points in favor of them are well known to the committee. Instead of giving you my own views on that, I should like to read a letter which was addressed to Mr. Hushing, and received by him only this morning, which bears out the points we make as to the necessity for the reduction from $10,000 to $2,000.

This happens to be a letter to the United Hatters, Cap and Millinery Workers International Union, located in New York. It is dated May 18, 1939; it is addressed to Mr. W. C. Hushing, American Federation of Labor, Washington, D. C.:

DEAR MR. HUSHING: I have read in today's Daily News Record that you will appear before the Senate Committee on Education and Labor in the matter of the Walsh amendments to the Public Contracts Act.

75

In this connection it may be of interest to you to learn of the experiences we have made with the exemption from the act of contracts under $10,000.

On July 28, 1937, a minimum wage of 67.5 cents per hour under the Public Contracts Act was fixed for the men's hat and cap industry. From this moment on the Army and the Navy established the practice of giving out orders which permit the lowest bids to fall short of $10,000 by a few dollars. The Navy even repeatedly circumvented the law by dividing larger orders between two bidders so that the single contracts were slightly under $10,000.

The enclosed list of contracts of $9,000 to $10,000 will inform you on the extent this practice has assumed.

It appears to me that these experiences make it imperative to lower the exempted amount from $10,000 to $2,000.

Very truly yours,

ALFRED BRAUNTHAL, Research Director.

The public contracts of $9,000 to $10,000 awarded to hat and cap manufacturers are given; it gives the dates, and they are from August 20, 1937, to April 12, 1939. He lists 14 contracts. They were given by the Navy and the Army and are variously set forth here. They are for 4,000 khaki cotton service caps, 30,000 mechanics' caps, 4,500 field hats, 150,000 white service hats and caps, et cetera, and the firms who were given the contracts were the Royal Specialty Manufacturing Co., the Bob Evans Hat Co., the Philadelphia Uniform Co., G. W. Alexander Co., and others that are named.

The amounts are significant. In the first instance, the Navy contract of August 20, 1937, $9,900. The next contract is $9,937.50; the next one is $9,475.40. Here is one that is quite unique; it is $9,999.99. One is for $9,315; another $9,750; $9,900, and so on down the list, Mr. Chairman, and members of the committee. Not a single one is below $9,000, and all as you can see, approximate the amount of $10,000, but do not go into the figure of $10,000.

I ask the privilege of filing this with the committee and will ask the clerk to kindly return it to Mr. Hushing when it has been incorporated in the record.

Senator WALSH. That may be done.

(The document is as follows:)

Public contracts of $9,000 to $10,000 awarded to hat and cap manufacturers