[materials, supplies [, articles, or equipment used in the performance of] required under the contract will be paid [, without subsequent deduction or rebate on any account] not less than the minimum wages as determined by the Secretary of Labor to be the prevailing minimum wages for persons employed on similar work or in the particular or similar industries or groups of industries currently operating in the locality in which the [materials,] supplies [articles, or equipment] are to be manufactured or furnished under said contract, including the reasonable costs, as determined in accordance with administrative regulations, to the employer for furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees; (c) that no person employed by the contractor or subcontractor in the [manufacture or furnishing of the materials, supplies, articles, or equipment used in the performance of the contract or subcontract for supplies shall be permitted to work in excess of eight hours in any one day or in excess of forty hours in any one week; (d) that no [male] person under sixteen years of age [and no female person under eighteen years of age] and no convict labor will be employed by the contractor or subcontractor in the [manufacture or production or furnishing of any of the materials, supplies, articles, or equipment included in such contract; and] performance of the contract or subcontract for supplies, and that no person under eighteen years of age will be employed in any occupation or industry which the Secretary of Labor has determined to be hazardous or injurious to the health of such persons; (e) that no part of [such] the contract or subcontract for supplies will be performed [nor will any of the materials, supplies, articles, or equipment to be manufactured or furnished under said contract be manufactured or fabricated] in any plants, factories, buildings, or surroundings, or under working conditions which are [un] insanitary or hazardous or dangerous to the health [and] or safety of the employees engaged in the performance [of said contract] thereof. Compliance with the safety, sanitary, and factory inspection laws of the State in which the work, or part thereof, is to be performed shall be prima [-] facie evidence of compliance with this subsection []; (f) that the contractor and subcontractor will comply with all the terms and conditions of this Act, including any and all rules and regulations in force and effect.

"SEC. 2. That any breach or violation of any of the representations and stipulations in any contract for the purposes set forth in section 1 hereof shall render the party responsible therefor liable to the United States of America for liquidated damages, in addition to damages for any other breach of such contract, the sum of $10 per day for each [male] person under sixteen years of age [or each female person under eighteen years of age] or each convict laborer [knowingly] employed 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 for the second breach or violation double such amount due any employee, and for the subsequent breach or violation treble such amount; and, in addition, the agency of the United States entering into such contract shall have the right to cancel the 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. 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 for underpayment [s] of wages, including such double or treble damages as may be found due, 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.

Any

"SEC. 7. The words defined in this section, unless otherwise indicated, shall have the following meaning when used in this Act, to wit: (a) [Whenever used in this Act, the word] Person shall include (s) one or more individuals, copartnerships, [partnerships, associations, corporations, trustees, legal representatives, (trustees,) trustees in bankruptcy, or receivers, (b) "Supplies" shall be deemed to include materials, articles, vessels, equipment (including floating equipment), and services of any form, except professional, which are required to be furnished under the contract or subcontract, (c) "Subcontractor" shall mean any person who manufactures or furnishes to or for the principal contractor, whether directly or through any middleman

or broker, all or any part of the supplies which are required to be manufactured or furnished by the principal contractor pursuant to the Government contract; Provided, however, That the provisions of this Act shall apply only to such subcontractors whose contracts exceed a total of $2,000."

Said bill further provides:

"Section 11 is hereby amended by the addition of the following: “And provided further, That this Act as amended shall apply to contracts entered into pursuant to invitations for bids issued on or after ninety days from the effective date hereof." It appears from the foregoing that the principal changes contemplated by S. 1032, supra, are:

(1) the extension of the scope of the Walsh-Healey Act to all contracts of $2,000 or more (in lieu of the present limitation of in excess of $10,000); and to contracts for services and vessels, including floating equipment.

(2) To require of both contractors and subcontractors payment of the prevailing minimum wages, etc., and compliance with the act, "Including any and all rules and regulations in force and effect"; to assess liquidated damages of $10 per day for each person under 16 years or each convict laborer employed in performance of the contract, regardless of whether such employees were knowingly employed; to assess double and treble penalties for second and third breaches of a contract in failing to pay wages due an employee thereunder.

(3) To permit the employment of female minors of 16 and to prohibit the employment of minors under 18 in hazardous occupations or industries.

Gen

There is set forth below a detailed analysis of certain of these proposed changes. The first-mentioned change proposes to make the act applicable to contracts of $2,000 or more instead of only to those in excess of $10,000. Apparently, this change has for its purpose the elimination of the opportunity now existing for competition in Government bidding by that class of manufacturers and dealers who prefer not to operate under the provisions of the Walsh-Healey Act. erally, changes placing additional restrictions upon Government contractors with respect to their relationship to their employees and their responsibility to the United States by reason thereof, necessarily result in increased charges against public funds for the performance of Government contracts, in restricted competition and in increased administrative work in connection with such contracts. The change proposed in this instance will have the inevitable effect of slowing up Government business and increasing the cost thereof, since it will materially reduce the number of employers who are willing to bid on Government contracts. Accordingly, from an accounting and fiscal viewpoint the change would not appear to be advisable.

The change proposed in section 7 of the act would extend the scope thereof by defining "Supplies" to include vessels, floating equipment, and services, except professional. At present construction work is covered by the Bacon-Davis Act of August 30, 1935, 49 Stat. 1011, but by a ruling of the Department of Labor thereunder (Treasury Procurement Circular Letter No. 126, dated October 7, 1935) there were included among the "Contracts outside the Act"-with respect to which it was held the requirement of wage predetermination had no application-those for construction or repair of ships or other movables where the place of performance of the contract cannot be ascertained in advance of the bidding. At the present time the Bacon-Davis Act is applicable to such contracts, provided the place of performance of the contract can be ascertained in advance of the bidding, such, for instance, as contracts let under circumstances where advertising is impracticable. It appears that the exception to applying the provisions of said act was made necessary because predetermination had not been made of the minimum wage rates throughout the country. Since under the Walsh-Healey Act the prevailing minimum wages are required to be determined for the locality in which the supplies are to be manufactured or furnished, it is not apparent how, insofar as maintenance of the prevailing minimum wages is concerned, the extension of the latter act to this field would accomplish any more than could be accomplished under the Bacon-Davis Act. On the other hand, it is apparent that insofar as the other provisions of the Walsh-Healey Act-such as are not contained in the Bacon-Davis Act-are concerned, there properly would be for consideration the advisability of the proposed change. A quite generally recognized need exists for statutory regulation, within reasonable bounds, of wages, hours of labor, sanitary and safe working conditions, control of child labor, etc., but it is believed that restrictions in the matter of contracting for the Government's authorized needs is neither an appropriate nor effective means to that end.

The changes to which reference is made in paragraph (2) above would, in effect, make the contractor a guarantor that subcontractors would comply with the various provisions of the act, including the rules and regulations "in force and

effect." Such changes would impose upon the contractor hazards of the most extraordinary character, with the probable result of restricting still further the number of responsible manufacturers and contractors who will respond to Government invitations for bids. In contracting for the performance of Government work and for the furnishing of supplies it long has been recognized that a primary factor of economy is the elimination of restrictions and uncertainties attaching to the fulfillment of Government contracts, which conditions justify prospective bidders in submitting "safe" bids. These changes are not recommended by this Office.

It is noted that under section 1 of the bill (line 6, p. 2) the act, if amended as proposed, would be made applicable to contracts "in an amount of $2,000 or more," whereas section 2 of the bill (lines 23 and 24, p. 5) in proposing to amend section 7, would make it applicable in the case of subcontractors only when the subcontracts "exceed a total of $2,000." If the bill is to be enacted it might be advisable from an administrative standpoint to have the exemption limitation the same in each of the two sections.

The change proposed in section 1 with respect to employment of minors would not appear to be open to objection. Sincerely yours,

Hon. DAVID I. WALSH,

(Signed) R. N. ELLIOTT, Acting Comptroller General of the United States.

DEPARTMENT OF LABOR,
DIVISION OF PUBLIC CONTRACTS,
Washington, February 17, 1939.

United States Senate, Washington, D. C.

MY DEAR SENATOR WALSH: The American Federation of Labor has conferred with me about the pending Walsh-Healey amendments and has indicated its opposition to the suggested revision of section 1 (b) which deals with minimum wages, particularly emphasizing the undesirability of the words "including the reasonable costs, as determined in accordance with administrative regulations, to the employer for furnishing such employee with board, lodging, or otherf acilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees."

I pointed out that the attempt was being made to reconcile the two standards of the Wage and Hour and Walsh-Healey Acts in order to permit the same type of deductions under one statute as the other. The Federation of Labor, however, feels that it is undesirable to do this, that the two acts are to be kept entirely separate, and that there will be no problems involved in inconsistent standards which might apply to the same employer who is subject to both statutes.

I pointed out that the administrative interpretation which has been made under the Fair Labor Standards Act apparently permits almost any kind of deduction which the employees want if there is no element of fraud, coercion, or profit to the employer involved. The federation contests the interpretation as a stretching of the language of the statute and does not feel that it would be a desirable provision in the Walsh-Healey Act. They are very anxious to have the provision which was in last year's amendments allowing deductions to be made only by collective bargaining agreement, and the Federation made the flat statement that it itself would have to oppose the bill unless this provision could be inserted.

The Congress for Industrial Organization seems to feel that a better provision would be to allow deductions if there were no element of fraud, coercion or profit on the part of the employer in accordance with administrative regulations. I confess that this seems to me a more adequate provision as it takes care of the situation where there is no union organization, as is of course the case in many factories where deductions are being made. I think we will have difficulty in construing "collective-bargaining agreements" to mean a series of individual authorizations by employees not affiliated with any union.

The federation would like section 1 (b) of the pending amendments to read as follows:

"That all persons employed by the contractor and subcontractor in the manufacture or furnishing of the supplies required under the contract will be paid without subsequent deduction or rebate on any account except by collectivebargaining agreement not less than the minimum wages determined by the Secretary of Labor to be the prevailing minimum wages for persons employed on similar work or in the particular or similar industry or groups of industries cur

rently operating in the locality in which the supplies are to be manufactured or furnished under said contract.'

In view of this protest which has been made by the American Federation of Labor, you may want to talk the matter over with me and I should be glad to confer with you at your convenience.

Very truly yours,

(Signed) L. METCALFE WALLING,

Administrator.

Hon. DAVID I. WALSH,

DEPARTMENT of Labor,
DIVISION OF PUBLIC CONTRACTS,
Washington, March 21, 1939.

United States Senate, Washington, D. C.

MY DEAR SENATOR WALSH: I am returning your correspondence with Senator Thomas including a statement by the Acting Comptroller General on S. 1032, the pending Walsh-Healey Amendments.

The Acting Comptroller General seems to feel that the increase in jurisdiction to contracts in excess of $2,000 would eliminate from competition on Government business manufacturers who would not be willing to adjust themselves to the labor standards required by the act and would increase the cost which the Government has to pay for its purchases. These two assertions seem to me unfounded in fact as none of the Government departments is having any difficulty in making any purchases which it wants because of the provisions of the Walsh-Healey Act and no case has been brought to my attention for many, many months where an exemption under the language of section 6 of the act giving the Secretary power to eliminate any or all of the Walsh-Healey provisions from contracts has been necessary to permit the Government to make contracts.

It probably is true that some undesirable sweatshop competitors of legitimate business have been eliminated from Government business, as we are frequently told by reputable manufacturers that they are now bidding on Government contracts although they had retired from the Government market prior to the WalshHealey Act because they did not want to subject themselves to unfair competition from companies who would stoop to any unfair labor devices to get Government business. This to my mind is a desirable and intended effect of the act and should be regarded as one of its achievements. An examination of the companies dealing with the Government departments, such as the Navy Department for instance, will disclose that it includes the "social register" of American industry.

The statement by the Acting Comptroller General that increased cost to the Government would result is distinctly not borne out by the facts and in fact the reverse is actually true. Let me cite a few instances of this:

Manufacturers of cotton garments in the Philadelphia area are known to have paid, prior to the minimum wage determination, a wage scale beginning at $5 a week (e. g. King Card Overall Co.) and these contractors got a substantial number of Government contracts after the wage determination was established which raised the wages to $14 and $15 a week, depending on the commodity. These manufacturers continue to get some contracts, but in spite of this wage increase shirts were bought by the Navy Department under Contract No. 62073 for 34 cents per shirt while in the years 1936 and 1937, before the wage determination was made, the Navy paid 44 cents and 43 cents, respectively, for the same shirt under the same specifications.

Contract No. W-669-QM-6561 for 456,000 pairs of drawers, cotton shorts, to be made under specification 6188-B, was awarded on March 26, 1937, for a total price of $128,409.60, or a unit price of $0.2816. The company which was awarded this contract has paid its employees on a wage scale that started below 3 cents an hour. Wages of 5 and 6 cents an hour and less were conspicuous. The minimum wage determination became effective as to contracts awarded on or after August 2, 1937. The minimum wage stipulations included in contract No. W-669-QM6753 for 668,700 shorts made under the same specifications as the shorts included in contract No. W-669-QM-6561. The gross price was $153,801 and the unit price $0.23-more than 5 cents cheaper per unit although the minimum wage had been increased from less than 3 cents an hour to 37.5 cents an hour.

It is known that in the hosiery mills manufacturing socks for the Government wages started at about $8 per week and that a substantial number of employees in the plant were paid at this rate prior to the minimum wage determination establishing a minimum of $14 per week. Despite this fact the Navy Department purchased under contract No. 57862 wool and cotton socks for 17 cents after the wage

determination was made, while in 1937 before the wage determination they paid 22 cents.

In the case of oiled cloth rain clothing where the wage determination had been set, under contract No. 57845 the Navy purchased short raincoats for $1.64 after the wage determination, while before the wage determination they paid in 1937, $1.89 for the same garment.

After the wage determination was set for the hat industry the Government paid 45 cents for hats and in 1937 they paid 50 cents.

After a wage determination had been made for trousers they paid $1.38 and in 1937 they paid $1.74 before the wage determination.

On contract No. 64319 for high leather shoes, after the wage determination was made the Navy paid $2.96, and for low leather shoes they paid $2.76, while in 1937 before the wage was set they paid $3.78 and $3.53, respectively, buying these shoes in 1937 under the same specifications as required for the shoes ordered under contract No. 64319.

It is significant in studying the cost of purchases to the Government, influenced by the increase in minimum wages, to note that in connection with bids received from steel companies on March 2, 1939, pursuant to Navy schedule 5681 which schedule called for bids for 14,000,000 pounds of steel at a price of approximately $700,000 the bid price from the Carnegie Illinois Steel Co. which pays 622 cents per hour was lower on the majority of items and never higher than that of the Bethlehem Steel Co. which pays only 562 cents, or a difference of 6 cents per hour. Many of the same companies which now bid for amounts in excess of $10,000 would be bidding on the smaller contracts and of course their operations would not be disturbed in any way. There are, however, companies which are able to evade the provisions of the act by bidding just under $10,000 and it is not uncommon for contracts to be reported, as one recently was for band instruments, for $9,994. May I also call to your attention the fact that in October of this year the Fair Labor Standards Act applying to all interstate companies will provide for a basic 42-hour week which will be only 2 hours more than the 40-hour standard of the Walsh-Healey Act, which means that companies generally will be operating under our wage, hour, and child-labor restrictions which were not binding on them unless they had Government contracts prior to the enactment of the Wage-Hour Act. It would appear, therefore, any reluctance to subject themselves to the labor provisions of the Walsh-Healey Act will be decreased rather than increased, and where it does not seem to be a serious factor today it would seem to be completely nonexistent in the future, as the labor provisions of the Fair Labor Standards Act gradually approach those of the Walsh-Healey Act.

The objection to the extension of the act to apply it to vessels, floating equipment and nonprofessional service contracts is met by two factors which the Acting Comptroller General apparently has not weighed. In the first instance, it has not been the administrative practice under the Bacon-Davis Act to apply it to ship construction contracts and it was because of this practice that the Department recommended extension of the Walsh-Healey Act to cover such contracts as a more practical means of approach than under the Bacon-Davis Act.

The original draft of the Walsh-Healey Act covered ship construction contracts which were later eliminated and up until the Naval Appropriation Act, effective July 1 of this year, this very important item of Government expenditure was totally outside the coverage of any act applying labor standards. At the present time all construction paid for out of the Naval Appropriation Act is subject, but no other construction is, and it would seem desirable to have uniformity in this regard. At this stage of the preparedness program, where delays because of labor difficulties are urgently to be avoided, it would seem highly desirable for the Government to be able to impose fair labor conditions in the prosecution of its rearmament program to prevent strikes and stoppage of work.

Insofar as the nonprofessional service contr acts areconcerned there has been considerable complaint that such service industries as laundries operating under sweatshop conditions were able to obtain Government contracts. Whether the use of the contract power of the Government as the Acting Comptroller denies is an appropriate means to bring about desired ends, such as the promotion of good labor standards, is of course for the committee and the Congress to decide but it would seem that this policy has now become somewhat settled with the BaconDavis Act and the Walsh-Healey Act covering substantially the contracting field of the Government.

The objection which the Acting Comptroller General raises to the inclusion of subcontracts I believe has been largely met by the suggested changes which were included in the Department's earlier comment sent to the committee. The element of uncertainty will be eliminated if the contractor is required to file certi