[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE BLACKLISTING EXECUTIVE
ORDER: REWRITING FEDERAL
LABOR POLICIES THROUGH
EXECUTIVE FIAT
=======================================================================
JOINT HEARING
before the
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
and the
SUBCOMMITTEE ON HEALTH, EMPLOYMENT,
LABOR, AND PENSIONS
of the
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, FEBRUARY 26, 2015
__________
Serial No. 114-3
__________
Printed for the use of the Committee on Education and the Workforce
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_________
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COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN KLINE, Minnesota, Chairman
Joe Wilson, South Carolina Robert C. ``Bobby'' Scott,
Virginia Foxx, North Carolina Virginia
Duncan Hunter, California Ranking Member
David P. Roe, Tennessee Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania Susan A. Davis, California
Tim Walberg, Michigan Raul M. Grijalva, Arizona
Matt Salmon, Arizona Joe Courtney, Connecticut
Brett Guthrie, Kentucky Marcia L. Fudge, Ohio
Todd Rokita, Indiana Jared Polis, Colorado
Lou Barletta, Pennsylvania Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada Northern Mariana Islands
Luke Messer, Indiana Frederica S. Wilson, Florida
Bradley Byrne, Alabama Suzanne Bonamici, Oregon
David Brat, Virginia Mark Pocan, Wisconsin
Buddy Carter, Georgia Mark Takano, California
Michael D. Bishop, Michigan Hakeem S. Jeffries, New York
Glenn Grothman, Wisconsin Katherine M. Clark, Massachusetts
Steve Russell, Oklahoma Alma S. Adams, North Carolina
Carlos Curbelo, Florida Mark DeSaulnier, California
Elise Stefanik, New York
Rick Allen, Georgia
Juliane Sullivan, Staff Director
Denise Forte, Minority Staff Director
------
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
TIM WALBERG, Michigan, Chairman
Duncan Hunter, California Frederica S. Wilson, Florida,
Glenn Thompson, Pennsylvania Ranking Member
Todd Rokita, Indiana Mark Pocan, Wisconsin
Dave Bratt, Virginia Katherine M. Clark, Massachusetts
Michael D. Bishop, Michigan Alma S. Adams, North Carolina
Steve Russell, Oklahoma Mark DeSaulnier, California
Elise Stefanik, New York Marcia L. Fudge, Ohio
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
DAVID P. ROE, Tennessee, Chairman
Joe Wilson, South Carolina Jared Polis, Colorado,
Virginia Foxx, North Carolina Ranking Member
Tim Walberg, Michigan Joe Courtney, Connecticut
Matt Salmon, Arizona Mark Pocan, Wisconsin
Brett Guthrie, Kentucky Ruben Hinojosa, Texas
Lou Barletta, Pennsylvania Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada Northern Mariana Islands
Luke Messer, Indiana Frederica S. Wilson, Florida
Bradley Byrne, Alabama Suzanne Bonamici, Oregon
Buddy Carter, Georgia Mark Takano, California
Glenn Grothman, Wisconsin Hakeem S. Jefferies, New York
Rick Allen, Georgia
C O N T E N T S
----------
Page
Hearing held on February 26, 2015................................ 1
Statement of Members:
Byrne, Hon. Bradley, a Representative in Congress from the
State of Alabama........................................... 7
Prepared statement of.................................... 8
Polis, Hon. Jared, Ranking Member, Subcommittee on Health,
Employment, Labor, and Pensions............................ 9
Prepared statement of.................................... 15
Walberg, Hon. Tim, Chairman, Subcommittee on Workforce
Protections................................................ 1
Prepared statement of.................................... 3
Wilson, Hon. Frederica, S., Ranking Member, Subcommittee on
Workforce Protections...................................... 3
Prepared statement of.................................... 5
Statement of Witnesses:
Goldsmith, Mr. Willis, Partner, Jones Day, U.S. Chamber of
Commerce, New York, NY, Inc................................ 23
Prepared statement of.................................... 26
Styles, Ms. Angela, Partner, Crowell and Moring, LLP,
Washington, DC............................................. 45
Prepared statement of.................................... 47
Walter, Ms. Karla, Associate Director, American Worker
Project, Center for American Progress, U.S. Department of
Education, Arlington, VA................................... 61
Prepared statement of.................................... 64
Soloway, Mr. Stan, President and CEO, Professional Services
Council, Washington, DC.................................... 73
Prepared statement of.................................... 75
Additional Submissions:
Foxx, Hon. Virginia, a Representative in Congress from the
State of North Carolina:
Report by the Interagency Suspension and Debarment
Committee.............................................. 96
Mr. Polis:
Letter dated February 23, 2015, Fair Pay and Safe
Workplaces Executive Order............................. 11
Chairman Walberg:
Letter dated November 6, 2014, Concerns with the Fair Pay
and Safe Workplaces Executive Order (E.O. 13673)....... 18
Letter dated February 25, 2015, 2014, from Associated
Builders and Contractors, Inc.......................... 21
Letter dated March 6, 2015 from, The Associated General
Contractors of America................................. 266
Mr. Goldsmith response to questions submitted for the
record................................................. 264
Ms. Walter:
Letter from Integrity National Corporation............... 270
Letter dated July 18, 2014, from Allen G. Sander, Chief,
Operating Officer, Olympus Building Services, Inc...... 271
Letter dated May 5, 2014, from Victor Moran, President,
CEO, Total Quality..................................... 272
Response to questions submitted for record............... 277
Ms. Wilson:
Fair Pay and Safe Workplaces............................. 136
Letter dated February 25, 2015, from The Leadership
Conference on Civil and Human Rights................... 143
Campaign for Quality Construction........................ 145
Center for American Progress Action Fund................. 153
Report dated September 2010, Government Accountability
Office, Federal Contracting............................ 174
Report dated December 11, 2013, United States Senate,
Acting Responsibly..................................... 196
For Florida companies that play by rules, success is
tough as nails......................................... 255
Questions submitted for the record....................... 274
THE BLACKLISTING EXECUTIVE ORDER:
REWRITING FEDERAL LABOR POLICIES
THROUGH EXECUTIVE FIAT
----------
Thursday, February 26, 2015
House of Representatives
Subcommittee on Workforce Protections
joint with
Subcommittee on Health, Employment, Labor, and Pensions
Committee on Education and the Workforce
Washington, D.C.
----------
The subcommittees met, pursuant to call, at 10:07 a.m., in
room 2175, Rayburn House Office Building, Hon. Tim Walberg
[Chairman of the Workforce Protections subcommittee] presiding.
Present from the Subcommittee on Workforce Protections:
Representatives Walberg, Thompson, Brat, Bishop, Russell,
Wilson, Pocan, and Clark.
Present from the Subcommittee on Health, Employment, Labor,
and Pensions: Foxx, Walberg, Byrne, Allen, Polis, Courtney,
Pocan, Wilson, Bonamici, Takano, and Scott.
Also present: Representatives Kline, Grijalva, and Ellison.
Staff present: Janelle Belland, Coalitions and Members
Services Coordinator; Ed Gilroy, Director of Workforce Policy;
Christie Herman, Professional Staff Member; Marvin Kaplan,
Workforce Policy Counsel; Nancy Locke, Chief Clerk; Zachary
McHenry, Legislative Assistant; Daniel Murner, Deputy Press
Secretary; Brian Newell, Communications Director; Krisann
Pearce, General Counsel; Molly McLaughlin Salmi, Deputy
Director of Workforce Policy; Alissa Strawcutter, Deputy Clerk;
Loren Sweatt, Senior Policy Advisor; Alexa Turner, Legislative
Assistant; Joseph Wheeler, Professional Staff Member; Tylease
Alli, Minority Clerk/Intern and Fellow Coordinator; Barbera
Austin, Minority Staff Assistant; Amy Cocuzza, Minority Labor
Detailee; Denise Forte, Minority Staff Director; Melissa
Greenberg, Minority Labor Policy Associate; Carolyn Hughes,
Minority Senior Labor Policy Advisor; Eunice Ikene, Minority
Labor Policy Associate; Brian Kennedy, Minority General
Counsel; Brian Levin, Minority Press Secretary; Richard Miller,
Minority Senior Labor Policy Advisor; Amy Peake, Minority Labor
Policy Advisor; Veronique Pluviose, Minority Civil Rights
Counsel; and Rayna Reid, Minority Labor Policy Counsel.
Chairman Walberg. The subcommittee will come to order.
Today, we will have opening statements from the chairmen and
the ranking members of the two subcommittees.
With that, I recognize myself for my opening statement.
Good morning, and I would like to welcome our guests and
thank our witnesses for joining us.
I would also like to welcome our colleagues from the
Health, Employment, Labor, and Pensions Subcommittee. Given the
breadth of the issues we will discuss this morning, we felt it
was appropriate to hold a joint hearing.
Federal contractors are essential to government operations.
Most employers provide quality, cost-effective services while
complying with labor and employment law.
Unfortunately, there are a few bad actors. We can all agree
bad actors who deny workers basic protections, including wage
and overtime protections, should not be awarded federal
contracts funded with taxpayer dollars.
For that reason, the federal government has had a system in
place for decades which, if used effectively, would deny
federal contracts to bad actors. In the event that a contractor
fails to maintain a satisfactory record of integrity and
business ethics, the contracting agency can suspend or debar
the contractor, disqualifying the employer from contracts
government-wide.
Rather than dealing with these contractors directly under
an existing system, on July 31, 2014 President Obama signed an
executive order adding a burdensome, redundant, and
unnecessarily punitive layer onto the federal procurement
system.
The executive order will require employers to report
instances in which they or their subcontractors have violated
or allegedly violated various federal labor laws and equivalent
state laws for a preceding three year period. Prior to awarding
a contract, these agencies' contracting officer and a newly
created labor compliance advisor will review this information
and decide whether the employer's actions demonstrate a lack of
integrity or business ethics.
While the new reporting requirements are significantly
burdensome, particularly for some small employers, the
subjectivity of the decision-making process and deprivation of
due process are deeply troubling.
The labor compliance advisor will advise the contracting
officer as to whether an employer's record amounts to a lack of
business integrity. However, this subjective determination will
include alleged violations, creating a new, dangerous precedent
that employers are guilty until proven innocent.
Ultimately, the employer could be blacklisted based on
alleged violations that are later found to have no merit,
putting some good employers on the brink of going out of
business and impacting their workforce.
We all share the same goal however, rather than implement
another layer of bureaucracy, the administration should work
with Congress and stakeholders to use the existing system to
crack down on bad actors and ensure the rights of America's
workers are protected.
With that, I now yield to my distinguished colleague from
Florida, Congresswoman Wilson, the ranking member on Workforce
Protections Subcommittee, for opening remarks.
And welcome.
[The statement of Chairman Walberg follows:]
Prepared Statement of Hon. Tim Walberg, Chairman, Subcommittee on
Workforce Protections
Federal contractors are essential to government operations. Most
employers provide quality, cost effective services while complying with
labor and employment law. Unfortunately, there are a few bad actors. We
can all agree bad actors who deny workers basic protections, including
wage and overtime protections, should not be awarded federal contracts
funded with taxpayer dollars.
For that very reason, the federal government has had a system in
place for decades which, if used effectively, would deny federal
contracts to bad actors. In the event that a contractor fails to
maintain a satisfactory record of integrity and business ethics, the
contracting agency can suspend or debar the contractor, disqualifying
the employer from contracts government wide.
Rather than dealing with these contractors directly under the
existing system, on July 31, 2014, President Obama signed an executive
order adding a burdensome, redundant, and unnecessarily punitive layer
onto the federal procurement system.
The executive order will require employers to report instances in
which they, or their subcontractors, have violated or allegedly
violated various federal labor laws and equivalent state laws during a
proceeding three year period. Prior to awarding a contract, each
agency's contracting officer and a newly created Labor Compliance
Advisor will review this information and decide whether the employer's
actions demonstrate a lack of integrity or business ethics.
While the new reporting requirements are significantly burdensome,
particularly for small employers, the subjectivity of the decision
making process and deprivation of due process are deeply troubling. The
Labor Compliance Advisor will advise the contracting officer as to
whether an employer's record amounts to a lack of business integrity.
However, this subjective determination will include alleged
violations, creating a new, dangerous precedent that employers are
guilty until proven innocent. Ultimately, the employer could be
blacklisted based on alleged violations that are later found to have no
merit, putting some good employers on the brink of going out of
business.
We all share the same goal, however, rather than implement another
layer of bureaucracy, the administration should work with Congress and
stakeholders to use the existing system to crack down on bad actors and
ensure the rights of America's workers are protected.
With that, I will now the ranking member of the subcommittee,
Representative Wilson, for her opening remarks.
______
Ms. Wilson of Florida. Thank you, Mr. Chair.
Mr. Chairman, today is our first Workforce Protection
Subcommittee hearing of the 114th Congress, and I can barely
talk. I look forward to working with you and our colleagues to
address the needs of America's working class, which is the
backbone of our country.
Today we are discussing the President's executive order on
fair pay and safe workplaces, aimed at improving the federal
contracting process by ensuring that government agencies have
access to data and can evaluate each bidder's compliance
history with 14 basic workplace laws. Simply put, this
executive order builds on the expectation that companies who
are seeking federal contracts must obey federal laws.
Annually, the U.S. government issues approximately $500
billion in contracts--that is with a ``b.'' According to two
recent reports, one-third of those companies who received the
largest sanctions for violations of federal wage and health and
safety laws went on to receive a government contract.
I am certain that we can all agree that taxpayer dollars
should not be used to award contracts to unscrupulous companies
that have a pervasive practice of engaging in wage theft,
cheating workers out of overtime, or putting workers' safety in
jeopardy.
In the audience today we have Ms. Karla Quezada, a food
court worker at the Reagan Building, which is owned by the U.S.
General Services Administration and home to several federal
agencies. Despite regularly working more than 40 hours a week,
Karla never received a dime in overtime pay.
And she reported to the Department of Labor that her
employer used a fraudulent scheme to cover up the wage theft.
Although she is still working there, her hours have been more
than halved.
Karla was named a ``champion of change'' by the President
for her advocacy to raise the minimum wage for government
contract workers to $10.10 per hour.
Karla, thank you so much for being here today and for your
courage.
[Applause.]
Ms. Wilson of Florida. Finally, Mr. Chairman, we have
received written testimony supporting this executive order from
the Campaign for Quality Construction, comprised of the FCA
International; the International Council of Employers of
Bricklayers and Allied Craftworkers; the Mechanical Contractors
Association of America; the National Electrical Contractors
Association; the Sheet Metal and Air Conditioning Contractors'
National Association; and the Association of Union
Constructors.
It is their view that this executive order will help ensure
that responsible contractors are not put at an unfair
disadvantage by those who cut corners and treat violations of
labor law as the cost of doing business.
I thank the witnesses for being here today and I look
forward to their testimony.
I now yield to the ranking member on the Health
Subcommittee, the gentleman from Colorado--
[The statement of Ms. Wilson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. I thank the gentlelady.
Ms. Wilson of Florida. Okay.
Chairman Walberg. At this time I will now yield to my
distinguished colleague from Alabama, Congressman Byrne, for
his opening remarks.
Mr. Byrne. Thank you, Mr. Chairman.
As a journeyman labor and employment attorney, I have grave
concerns over the executive order we are examining today. It
unfairly shifts the regulatory burden to employers while
removing the burden of proof from labor violation claims. It
reverses the historic Anglo-Saxon notion that you are innocent
until you are proven guilty--which results, by the way, in a
much less efficient system of government acquisition for the
taxpayers of the United States.
Furthermore, the executive order's ban on pre-dispute
arbitration is a direct violation of the Federal Arbitration
Act, which ensures the validity and enforcement of arbitration
agreements, a practice that the United States Supreme Court has
repeatedly reaffirmed. The President has exceeded his authority
to make such a change and is in direct violation of that law.
What is worse, through its new reporting requirements the
executive order shifts an incredible regulatory burden to
contractors themselves by requiring prime contractors, some of
whom have thousands of subcontractors, to collect information
on their subcontractors related to 14 different federal labor
and employment laws and over 500 different state laws.
This will have a major effect on these subcontractors, many
of them small businesses with limited resources to handle such
an undertaking. Many will be forced to divert resources to
handle this new administrative task that will not have to be
completed just once, but every six months.
These aggressive new regulations are going to unreasonably
block responsible parties from participating in federal
government contracts while seriously affecting the willingness
of new employers to even seek federal contracts in the first
place. The result of this new process will be a significantly
delayed contracting process that limits both healthy
competition and the efficient delivery of goods to the U.S.
government at a reasonable price to the taxpayers.
Instead of helping employers comply with complicated
regulatory requirements, the administration has added yet more
red tape to the federal procurement system that has the
potential of blacklisting responsible employers when there is
already a system in place for weeding out truly bad actors.
To make matters worse, contracts will be put in jeopardy by
alleged violations--not confirmed or convicted violations,
alleged violations. This could be particularly devastating for
employers that are the target of union corporate campaigns or
competitors who simply want a competitive edge against their
competition. This highly elevates the risk of frivolous
complaints and the loss of business.
This executive order represents an overstep of authority by
the President at the expense of employers and workers and the
taxpayers.
Rather than impose additional layers of bureaucracy, the
administration would be better served working with Congress and
stakeholders to ensure the rules and regulations implementing
our laws are modernized and streamlined. Then, the
administration can work with good employers to ensure
compliance rather than punishing them after the damage is done.
Prepared Statement of Byrne, Hon. Bradley, a Representative in Congress
from the State of Alabama
The vast majority of federal contractors are responsible employers
who obey the law and do right by their employees.
There will always be, as the Chairman noted, bad actors who deny
workers basic protections and we can all agree they should not receive
taxpayer dollars for work on federal contracts.
However, even the most responsible employer can occasionally run
afoul of labor and employment laws, or simply be accused of doing so.
The Executive Order we're examining today unfairly shifts the
regulatory burden to employers while removing the burden of proof from
labor violation claims, resulting in a much less efficient system of
government acquisition for both taxpayers and those seeking government
contracts.
Furthermore, the Executive Order's ban on pre-dispute arbitration
clauses is a direct violation of the Federal Arbitration Act, which
ensures the validity and enforcement of arbitration agreements - a
practice that the United States Supreme Court has repeatedly
reaffirmed.
The President has exceeded his authority to make such a change and
is in direct violation of the law.
What's worse - through its new reporting requirements, this
Executive Order shifts an incredible regulatory burden to contractors
themselves by requiring prime contractors, some of which have thousands
of subcontractors, to collect information on their subcontractors
related to 14 different federal labor and employment laws and over 500
different state laws.
For example, the Fair Labor Standards Act is the cornerstone of
worker wage and hour protection. However, the regulations implementing
that law are flawed and outdated.
Even the Department of Labor, which enforces the Fair Labor
Standards Act, has run afoul of the law's requirements from time to
time.
This will have a major effect on these sub-contractors, many of
them small businesses with limited resources to handle such an
undertaking.
Many will be forced to divert resources to handle this new
administrative task that will not have to be completed just once, but
every six months.
These aggressive new regulations are going to unreasonably block
responsible parties from participating in federal government contracts
while seriously affecting the willingness of new employers to even seek
federal contracts in the first place.
The result of this new process will be a significantly delayed
contracting process that limits both healthy competition and the
efficient delivery of goods to the U.S. government at a reasonable
price to taxpayers.
Instead of helping employers comply with complicated regulatory
requirements, the administration has added yet more red tape to the
federal procurement system that has the potential of blacklisting
responsible employers when there is already a system in place for
weeding out truly bad actors.
To make matters worse, contracts will be put in jeopardy by alleged
violations.
This could be particularly devastating for employers that are the
target of union corporate campaigns or competitors who simply want a
competitive edge against their competition.
This highly elevates the risk of frivolous complaints and the loss
of business.
This executive order represents an overstep of authority by the
President at the expense of employers and workers.
Rather than impose additional layers of bureaucracy the
administration would be better served working with Congress and
stakeholders to ensure the rules and regulations implementing our laws
are modernized and streamlined.
Then the administration can work with good employers to ensure
compliance rather than punishing them after the damage is done.
______
I thank you, Mr. Chairman, and I yield back.
Chairman Walberg. I thank the gentleman.
And I will take a point of personal privilege here to make
mention to the two subcommittees that Chairman Roe, who would
normally be sitting in the spot where Mr. Byrne is filling
today as vice chairman, has been home for an extended period of
time with his wife, who is going through some extremely
challenging health situations. And so we wish our colleague and
friend the best, and I would ask us all to keep Phil and Pam in
prayer at this time.
Having said that, now I yield to my distinguished colleague
from Colorado, Congressman Polis, the ranking member on the
Health, Employment, Labor, and Pensions Subcommittee, for his
opening remarks.
Mr. Polis. Thank you, Mr. Chairman.
This is a joint subcommittee hearing. I appreciate the
opportunity of the HELP Subcommittee to ask questions and
provide input on this important issue of how we can better
serve taxpayers and improve the efficiency of federal
contracting.
I was pleased to see in the Chairman's opening remarks he
stated that bad actors should not be awarded contracts and that
we should deny federal contracts to bad actors. That is really
what this rule and hearing are about here today, how we can
better reach that goal.
Frankly, if that were the case, we wouldn't need to be
here, we wouldn't need to be discussing the rule.
Unfortunately, there is a pervasive problem among federal
contractors. A recent GAO report showed--investigating--that
looked at 15 contractors, showed that the federal government
awarded these 15 contractors over $6 billion in government
contract obligations in one year alone. Clearly there is a
problem that requires additional steps to address with regard
to the following of our labor laws of our federal contractors.
The President is doing his job in this regard. He is
charged in U.S. Code--40 USC 121--with, ``The President may
prescribe policies and directives that the President considers
necessary to carry out this subtitle,'' referring to federal
contracts.
And he is simply taking a step that will, as the Campaign
for Quality Construction put it, which is a group of
contractors who strongly support this rule, believe that this
hearing should be entitled and that this rule will serve the
taxpayers well with improved federal contract economy,
efficiency, and performance with more discerning and uniform
federal prime contractor and subcontractor selection
procedures.
I hope that these rules are enough--the proposed rules are
enough to address this pervasive problem.
To put a human face on the problem, we have an individual
with us today who has been impacted directly by these issues.
Edilcia, a single mother of three, who worked at the food court
at Ronald Reagan Federal Building for three years.
[Speaking foreign language.]
I met her before this hearing and she is with us here
today.
Even though she worked 10 hours a day--
[Speaking foreign language.]
Ten hours a day, seven days a week, she never received a
dime of overtime pay.
How could that happen? She has filed for over $30,000 in
back wages and damages because what her employer did is they
forced her to clock in and out of two different businesses
within the Reagan Building, both owned by the same person.
Is this the kind of behavior of a federal contractor that
we want to reward with more contracts? Or, is this the type of
behavior that we want to make sure that contractors rectify and
what happened to Edilcia does not happen to other employees?
So even though Edilcia worked in some cases more than 70
hours a week, she didn't receive a dime of overtime. She
started to speak up, and when the government shut down in 2013
her employer fired her.
And companies like this need to be put on a remedial path
towards acting responsibly, which is what these rules are all
about. I have a letter expressing the support of 70
organizations dedicated to eradicating discrimination in the
workplace and promoting good jobs, and they agree that this
executive order is an important step towards this goal.
Mr. Chairman, I ask permission to submit the letter?
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Without any objection.
Mr. Polis. Thank you.
I also want to mention another example of a federal
contractor, Tyson Foods, that received half a billion dollars
in federal contracts in 2012 alone, but they had almost $7.2
million in penalties and assessments for workplace safety
violations and back pay for overtime or other violations.
Companies cannot just try to see these costs and fees as a
cost of doing business. They need to know that when they
violate our labor laws, which we take very seriously as a
country, that there are ramifications to their business and to
their future potential to be a contractor of the federal
government.
I find it interesting that this hearing is also being held
solely on speculation since we haven't even seen the
regulations and guidance from DOL or OMB. The contractors who
are concerned that their record of violations may be
problematic aren't even aware of the details of how this will
be implemented because it simply hasn't been presented yet.
But it is a really simple concept: If you are consistently
breaking the law with regard to your workers, taxpayers, or the
community, you should not receive millions of dollars of
taxpayer contracts. Companies that are cutting corners on
safety, not paying their workers on time, not paying overtime,
or in dozens of other areas, shouldn't be allowed to compete
against good actors who follow our law.
Everyone needs to start from a level playing field. It is
simply not fair if one company is paying people below the
minimum wage or withholding salaries from their workers. They
don't have an actual economic ability to bid at a lower cost,
but because they violate our labor laws they, in fact, might
take out the excess profits or bid at a lower cost.
Unfortunately, unscrupulous actors who pervasively ignore
the law are allowed to compete with those who follow our labor
laws. And right now there are some bad actors receiving
billions of dollars in federal contracts. I hope that this rule
will address that.
I look forward to the information that our expert witnesses
will be providing before us today, and I yield back the balance
of my time.
[The statement of Mr. Polis follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. I thank the gentleman.
Pursuant to committee rule 7(c), all subcommittee members
will be permitted to submit written statements to be included
in the permanent hearing record. And without objection, the
hearing record will remain open for 14 days to allow
statements, questions for the record, and other extraneous
materials referenced during the hearing to be submitted in the
official hearing record.
At this time, let me also enter, if there is no objection,
two letters--one coming from a group of employers who are
concerned with fair pay and safe workplaces and the executive
order--to be submitted to the record; as well as a letter from
the Associated Builders and Contractors on their concerns, as
well.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Hearing no objection, they will be
submitted for the record.
It is now my pleasure to introduce our distinguished panel
of witnesses.
First, Willis Goldsmith is a partner with Jones Day in New
York. Mr. Goldsmith represents management in labor and
employment law matters.
Welcome.
Angela Styles is a partner with Crowell & Moring LLP in
Washington, D.C. Ms. Styles was a former administrator for
federal procurement policy at the Office of Management and
Budget.
Welcome.
Karla Walter is the associate director of the American
Worker Project at the Center for American Progress in
Washington, D.C. Ms. Walter's work focuses primarily on
increasing workers' wages and benefits, promoting workplace
protections, and advancing workers' rights.
Welcome.
And finally, Stan Soloway is the president and CEO of the
Professional Services Council in Arlington, Virginia. The
Professional Services Council is the principal national trade
association representing the government professional and
technical services industry.
Welcome.
I will now ask our panel of witnesses to stand and raise
your right hand for being sworn in.
[Witnesses sworn.]
Let the record reflect the witnesses answered in the
affirmative.
You may be seated.
Before I recognize you to provide your testimony, let me
briefly remind you of the lighting system and encourage you to
keep attention to that, at least with one eye, as you give your
testimony. We don't want to become a hindrance to your
testimony, but we do have time issues and we will have plenty
of questions to ask you, as well.
The green light begins the process. You will have four
minutes with that light on.
Then the yellow light will come on for the final minute. We
would encourage you to wrap up as soon as possible within the
context of your sentence or short paragraph when the red light
comes on.
The same will be true for our members on the panel as we
ask our questions, and we will keep to that five minute
sequence also.
So with that, let me recognize Mr. Goldsmith for your five
minutes of testimony.
TESTIMONY OF MR. WILLIS GOLDSMITH, PARTNER, JONES DAY, NEW
YORK, NY, TESTIFYING ON BEHALF OF THE U.S. CHAMBER OF COMMERCE
Mr. Goldsmith. Thank you.
Chairman Walberg, Ranking Member Polis, Ranking Member
Wilson, and members of the subcommittees, thank you for
inviting me here to testify today. By way of background, I am a
partner with Jones Day, resident in our firm's New York City
office. I have practiced labor and employment law for over 40
years.
Since 1974 I have advised employers regarding compliance
with seven of the 14 federal statutes and regulations that are
encompassed by the executive order. I have tried cases and
argued appeals, including in six United States courts of
appeals and in the United States Supreme Court, arising under
various of those or related laws.
I am pleased to be here today on behalf of the United
States Chamber of Commerce. As you know, the Chamber is the
world's largest business federation, representing more than 3
million businesses of all sizes, industry sectors, and
geographic regions. The President's Fair Pay and Safe
Workplaces Executive Order will significantly and adversely
impact many of these entities.
First, let me provide a brief overview of the executive
order. The order requires contractors and subcontractors to
self-report supposed violations of federal and state labor
laws. Based on these reports, contracting officers must
determine whether an entity is, ``a responsible source that has
a satisfactory record of integrity and business ethics.''
In making that determination, the contracting officer
consults with the agency's labor compliance advisor, an
entirely new position created by the order. Contractors are
likewise required to make responsibility determinations for the
subcontractors.
The most fundamental problem with the executive order is
that it oversteps the President's authority. Congress has
already enacted detailed enforcement and penalty mechanisms for
federal labor laws. The order improperly alters those
regulatory schemes.
The order is also invalid because it encroaches on
employers' rights under the Federal Arbitration Act. For
contracts and subcontracts exceeding $1 million, the order
prohibits employers from enforcing advance agreements to
arbitrate certain claims. This prohibition impermissibly
conflicts with employers' rights under the Federal Arbitration
Act.
As if these problems weren't enough, the order is riddled
with uncertainties that make it entirely unworkable. It is
absolutely impossible to predict how it will work in the real
world, except to say that it is certain to create chaos among
contractors, subcontractors, and within agencies.
For example, the order requires entities to report any
administrative merits determination, arbitral award or
decision, or civil judgment. Leaving aside whatever those words
mean--and they are not defined--even when an agency finds a
violation through its administrative process, it is not at all
uncommon for that decision to be reversed by a court.
That process can take many years, often due to agency
inaction. It would be manifestly unfair to disqualify
businesses from federal contracts simply based on violations
that years later prove to be entirely baseless.
In addition, contractors are left simply to guess as to
whether they must report all violations regarding all of their
activities or whether they must report only violations
involving the performance of a federal contract. A reporting
requirement that extends to all activities of a large corporate
entity would flood agencies with information that may be
entirely irrelevant to the contract at issue.
The order is likewise silent on which state law violations
trigger the reporting requirement. The order applies to 14
federal labor laws, executive orders, and ``equivalent state
laws.''
Depending on how equivalence is defined, contracting
officers and labor compliance advisors may have to master
literally hundreds of state laws. That simply cannot be done,
period.
Finally, agencies must consider whether a violation is
sufficiently serious--I am quoting--``serious, repeated,
willful, or pervasive''--to warrant remedial action. Many of
the included federal labor laws are themselves exceedingly
complex.
Even the best-intentioned employers have run afoul of these
laws in isolated circumstances or in situations where the rules
are ill-defined. An employer that is ultimately found guilty of
violating these laws is not necessarily a bad or unethical
employer.
Finally, even courts struggle to interpret such terms as
``repeated, willful, and pervasive.'' There is certainly no
reason to believe that agencies are better equipped to do so.
These terms will inevitably be applied inconsistently, further
shrinking the pool of eligible contracts.
Moreover, as a practical matter the order is impossible to
implement. As to contracting officers, it requires contracting
officers to master a complex web of hundreds of interrelated
and constantly evolving state and federal laws. I have been
doing this for over 40 years and I know to a certainty I would
not be able to do this, nor would any lawyer I have ever known
be able to do so.
Then the order floods the contracting offices with
information regarding violations, most of which will bear
little relationship to an entity's integrity or business
ethics. The contracting officers then are supposed to sift
through this deluge of statutes and data, consult with a labor
compliance advisor, and make a responsibility determination.
Then they have to do this every 6 months. This is just not
achievable in the real world. There are comparable burdens
imposed on contractors and subcontractors and may drive
businesses from the contracting world--perhaps especially small
businesses, including those run my minority--
Chairman Walberg. Mr. Goldsmith, we have to ask you to wrap
up your time--
Mr. Goldsmith. Thank you.
Chairman Walberg.--and--
Mr. Goldsmith. The order is so deeply flawed in so many
ways that it is simply beyond redemption. There is no way it
could be modified or tweaked into something workable.
Thank you, Mr. Chairman.
[The testimony of Mr. Goldsmith follows:]
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Chairman Walberg. Thank you.
Ms. Styles, we recognize you for your five minutes.
TESTIMONY OF MS. ANGELA STYLES, PARTNER, CROWELL & MORING, LLP,
WASHINGTON, D.C.
Ms. Styles. Thank you.
Chairman Walberg, Congresswoman Wilson, Congressman Polis,
and members of both subcommittees. I appreciate the opportunity
to appear before you today to discuss the Fair Pay and Safe
Workplaces Executive Order. As a former administrator for
federal procurement policy at OMB, as a government contracts
practitioner, and as a taxpayer, I can tell you that I care a
great deal about the effective and efficient functioning of our
federal procurement system.
While I can't say that I was surprised that this executive
order was issued, the concept of imposing greater sanctions on
federal contractors for purportedly unacceptable labor
practices has been around for at least two decades. I was,
however, astonished when I started contemplating the practical
effects of how this administration planned to go about
subjectively sanctioning companies for actual and alleged labor
violations.
The potential negative impact of this executive order
cannot be overstated. The potential disruption and damage is
particularly troubling because adequate mechanisms exist in our
current procurement system to exclude companies with
unacceptable labor practices.
To put it simply, if a pipe breaks at your house you hire a
plumber to fix it; you don't go build a new house.
If this administration truly believes that companies with
unacceptable labor practices are not being properly excluded
from federal contracting, why aren't they using or bolstering
the current, well-established, objective, and fair processes to
do just that? Why instead are they building a new house; a new
house with vast, complex, and highly subjective processes for
sanctioning companies?
My written testimony goes into great detail about the
processes being created and the ridiculous administrative
burden it will place on our federal contracting officers and
the new contemplated labor compliance advisors. Our federal
contracting officers simply do not have the bandwidth to review
extensive volumes of labor information, consult with labor
compliance advisors, determine the appropriate remedial action,
and consult with prime contractors regarding the labor
practices of hundreds of thousands of subcontractors.
There are not enough hours in the day or enough employees
in the federal government to implement this executive order as
written. The federal government will be either unable to
purchase essential goods and services or forced to create a
system that unfairly targets contractors for special attention.
What I must highlight, however, is the devastating impact
of this executive order on small businesses. While it should be
relatively simple for a small business--and I think
inexpensive--for a small business to collect and report on
their own labor violations, it will be impossible and cost-
prohibitive for a small business to try to collect information
regarding their subcontractors and make responsibility
determinations regarding their subcontractors.
The reality is that today small businesses rely on other
businesses, including many, many large businesses, to perform
substantial portions of their federal contracts. So they
receive a federal contract and they award subcontracts to other
businesses, including large businesses. So these small
businesses that receive a prime contract will be faced with the
overwhelming task of trying to collect and understand labor
violations made by some of the largest businesses in the world
and make a responsibility determination based upon that
information.
So if, for example, a small business in Virginia wins a $5
million information technology contract at the Department of
Defense but needs to subcontract $500,000 of that work to a
multibillion dollar, multinational information technology
company to actually successfully complete the work, the small
business will be tasked with collecting and understanding all
federal labor laws, the labor laws of all 50 states, as well as
determining whether this large, multinational company has taken
sufficient remedial steps to improve their labor practices. So
even if the federal contracting officer and the labor
compliance advisor or the Department of Labor answers the phone
to help this small business make a decision, it is a monumental
task that the small business will not be capable of performing.
Ultimately, small businesses will be left in the difficult
decision of willfully failing to meet the terms and conditions
of their prime contract with the federal government--requiring
them to collect and assess this labor information--or they will
not be able to do business as a prime contractor with the
federal government.
As a bottom line, the articulated rationale for this E.O.
fails objective scrutiny. The suspension and debarment process
was created and operates with the purpose of fairly and
objectively excluding companies that are not responsible from
doing business with the federal government. Through the
suspension and debarment process, the federal government makes
a single, unified decision based upon all available evidence
and affords contractors an appropriate level of due process.
This concludes my prepared remarks, but I am happy to
answer any questions you may have. Thank you.
[The testimony of Ms. Styles follows:]
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Chairman Walberg. Ms. Styles, thank you.
Ms. Walter, it is now your time for five minutes of
testimony. Thank you.
TESTIMONY OF MS. KARLA WALTER, ASSOCIATE DIRECTOR, AMERICAN
WORKER PROJECT, CENTER FOR AMERICAN PROGRESS, WASHINGTON, D.C.
Ms. Walter. Thank you.
Thank you, Chairman Walberg, Ranking Members Wilson and
Polis, for this opportunity to present in support of the Fair
Pay and Safe Workplaces Executive Order. I would also like to
thank the workers who may be personally affected by the
executive order for being here today.
My name is Karla Walter. I am associate director of the
American Worker Project at the Center for American Progress
Action Fund.
In my testimony today I will make three main points. First,
far too often companies with long and egregious records of
violating workplace laws continue to receive federal contracts.
This not only harms workers, but also taxpayers and law-abiding
businesses.
Second, the contractor review process is supposed to
prevent this from happening by ensuring that only responsible
companies receive federal contracts, but the system is broken.
Third, President Obama's Fair Pay and Safe Workplaces Executive
Order strives to help fix this broken system and ensure that
law-breaking contractors come into compliance.
The federal government spends hundreds of billions of
dollars each year contracting out everything from janitorial
services to the design and manufacture of sophisticated weapon
systems. Indeed, one in five American workers are actually
employed by a company that contracts with the government.
The government is supposed to contract only with companies
that have a satisfactory record of performance, integrity, and
business ethics. But the contracting system does not
effectively review the responsibility records of companies
before awarding contracts, nor does it adequately impose
conditions that encourage them to reform their practices.
Instead, the federal government all too often awards
contracts to workplace violators with no strings attached. As a
result, contractors that violate workplace laws have little
incentive to improve their practices.
For example, a 2013 report by the Senate HELP Committee
found that government contractors are often among the worst
violators of workplace laws. Nearly 30 percent of top
violations were received by companies that continued to receive
government contracts.
Workers at these companies were shortchanged by $82
million, and at least 42 people died from workplace accidents
at these companies. The victims ranged from a 46-year-old
father of four who was killed while trying to clear a clothes
jam in an industrial dryer, to 13 workers killed at a sugar
refinery explosion sparked by combustible dust, to workers at
two separate companies killed in oil refinery explosions.
When governments continue to contract with these law-
breaking companies, it also frequently results in poor contract
performance, wasting taxpayer dollars, and delivering low-
quality services. Analysis from my organization shows that one
in four companies that committed the worst workplace violations
and later received federal contracts had significant
performance problems. These ranged from contractors submitting
fraudulent billing statements, to cost overruns and scheduling
delays during the development of major weapons systems, to
contractors falsifying firearm safety test results for
courthouse security guards, to an explosion in the Gulf of
Mexico that spilled millions of barrels of oil.
Finally, the current system puts law-abiding companies that
respect their workers at a competitive disadvantage against bad
actors that lower costs by paying below what they are legally
required and cutting corners in workplace safety.
The federal government could have prevented many of these
problems and promoted an efficient procurement process by
reviewing companies' records of workplace violations before
awarding a government contract. Unfortunately, the existing
tools to ensure that this actually happens are inadequate. The
database tracking contractor responsibility fails to include
many serious violations, enforcement agencies provide no
analyses of contractors' legal records, and contracting
officers receive little guidance from existing regulations on
how to evaluate records.
The executive order strives to ensure that contractors'
records of workplace violations will be taken into account in
determining whether or not they have a satisfactory record. It
aims to create a fair, efficient, and consistent process by
which the federal government can ensure all federal contractors
are responsible and that law-breakers come into compliance.
The order is informed by best practices from the state and
local governments and, in limited instances, federal agencies.
Even in the private sector, it is becoming increasingly common
for companies to factor in a bidder's record of safety in
contracting decisions.
President Obama's order strives to ensure that companies
that respect their workers are not put at a competitive
disadvantage compared to law-breaking companies. Indeed, that
is why six contractor associations are submitting for the
record today their joint statement in support of the order.
While opponents have argued that these sorts of policies
can bar or even blacklist companies with minor violations from
receiving any federal contracts, improved responsibility
guidance and a thorough investigation process promises to allow
the government to identify only persistent violators and
provide them an opportunity to clean up their acts. Moreover,
the administration has indicated that this new system will
simply require law-abiding companies to check a box to certify
legal compliance, a process similar to how firms currently
report on tax delinquency and contract fraud.
States and localities have found that adopting these laws
to raise workplace standards actually has increased competition
among contractors. For example, after Maryland implemented a
contractor living standard, the average number of bids for
contracts in the state increased by 27 percent.
Congress has the opportunity to support implementation of
the order and thereby strive to ensure that companies with
egregious records of violating workplace laws come into
compliance. This will make a difference for millions of working
Americans, ensuring that law-abiding companies can compete on
an even playing field, and prevent the waste of taxpayer
dollars.
Thank you.
[The testimony of Ms. Walter follows:]
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Chairman Walberg. Thank you.
And now we turn to Mr. Soloway for your five minutes of
testimony.
TESTIMONY OF MR. STAN SOLOWAY, PRESIDENT AND CEO, PROFESSIONAL
SERVICES COUNCIL, ARLINGTON, VA
Mr. Soloway. Thank you, Mr. Chairman, members of the
subcommittees. I appreciate the opportunity to be here.
In the interest of avoiding being overly redundant with my
colleagues on the panel, I would like to just make a couple of
core points to lead into the discussion and your questions as
we go forward.
First, let me also mention my own personal involvement with
this issue. The Fair Pay and Safe Workplaces Executive Order is
actually the stepchild of a Clinton-era executive order called
the Contractor Responsibility Rule, which was known in those
days as the ``blacklisting rule.'' I was the lead official at
the Clinton administration Department of Defense dealing with
the writing and development of that rule at the time.
And, as with this rule, that rule was poorly constructed,
it was poorly thought out, and it was rushed through the system
without any consideration of the unintended consequences it
could create despite the fact that it was based on a perfectly
reasonable and appropriate tenet. In fact, I would fully
associate myself with the comments of everybody on the
Committee who has spoken thus far, including Mr. Polis and
others, who have talked about the need to avoid giving
contracts to bad actors.
This executive order does not make policy in that regard.
It is well-established in federal law and federal procurement
practice that bad actors can be and should be denied federal
contracts.
The real issue at stake here with regard to that particular
point is the degree to which current information systems in the
government adequately interface with each other and provide
collective information to the parties that appropriately need
it to make reasoned, expert decisions--particularly suspension
and debarment officials and others. Instead of fixing the
information system, this order creates a broad, sweeping
regulatory regime that, as others have already said, raises
significant questions of executability and of due process.
Second, the executive order and many of the reports and
statistics already cited in this hearing, including the Senate
HELP report, ignore the fact that a substantial if not majority
of the cases involved and reported are tied directly to either
the government's failure to appropriately exercise its
responsibilities or the sheer complexity of implementing the
Service Contract Act, the Davis-Bacon Act, and other prevailing
wage laws.
This is not to suggest that we argue in favor of getting
rid of them, but it is to suggest if you look at the record and
you talk to officials in the Wage and Hour Division at DOL and
elsewhere, they will fully acknowledge that it is absolutely
routine for companies who are trying to do business under the
rules established by Davis-Bacon and Service Contract Act to
have violations, many of which are technical in nature, many of
which involve the complexity of trying to determine how to
match a job to a given wage and benefits rate as prescribed by
the Department of Labor.
And even in the reports that have come out of the Senate,
something like half of the cases of violations of these laws
resulted from the government's failure to include in the
contract the appropriate clauses to tell the contractor, ``You
are subject to these particular laws.'' So this is a really
complex implementation challenge on the--both government and
contractor side, which I think this proposed executive order
and many of the reports that deal with some of these issues
tend to overlook dramatically.
Third, this executive order kind of upends a very important
concept that Ms. Styles addressed a moment ago, or alluded to,
and that is this whole concept of present responsibility.
Every institution experiences wrongdoing. I think we all
agree with that. And often it is said that the best measure of
an institution is how it responds to that wrongdoing and
adjusts going forward.
This rule does not open up the door to that kind of a--it
completely changes that. Allegations, settlements without
finding of--on either party's side automatically considered
violations that are to be considered.
What would you do if you were a government contractor? You
wouldn't go to the trouble of trying to figure out all the
details of every case on every--of every bidder that is coming
in the door; you are going to just say, ``I can't deal with
this,'' and any allegation, any situation that raises any red
flags, you are simply going to walk away.
That is the way the system will work because it is the
safest way to protect yourself. That is fundamentally unfair.
Finally, just one comment with regard to some previous
testimony--the idea that this is simply a checking of the box,
like we do for tax responsibility. I would urge you to go back
to the record of discussion and debate over tax--over the
legislation that led to that simple box-checking, because the
same issues were at stake there that are at stake here.
Fully adjudicated tax violations we all agreed to--not
allegations, not tax liens that were not yet fully adjudicated.
There was a whole process of defining what I was--what I would
be certifying to if I checked that box.
That process has not been gone through with regard to this
executive order.
[The testimony of Mr. Soloway follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. I thank the gentleman.
I thank all of the panel for your testimony and look
forward now to questions that can bring further clarification
to this issue. Again, the whole effort of this panel is to find
a means by which we, indeed, can make sure that our contracting
system produces the right things for the employers, for the
government, and for the taxpayer, and that the systems in place
are usable and used effectively to make sure that that happens.
I now recognize myself for five minutes of questioning.
Mr. Soloway, it is evident that there are no contractors on
this panel. And again, that is not because we haven't had
contractors submit a lot of concern about this proposed
executive order, but it is a concern that they feel, right or
wrong, potential retaliation for being here. So you are the guy
in the hot seat to answer some of the questions, I trust.
Can you explain some of the frustrations your members have
with this executive order and how they feel about being targets
of excessive administrative action over the past year?
Mr. Soloway. That is a large question, but this is about
the fifth or sixth executive order in the labor realm that we
have seen over the last few years from this administration, not
just the last year. By and large, the earlier executive orders
were not nearly as controversial, though implementation and
execution was a challenge, but we all agreed with, again, the
intent there.
This is by far the most sweeping that we have seen, and it
raises a number of concerns, because the fundamental policy
question that drove this issue back in the 1990s in the Clinton
administration was whether you could actually deny a contract
to a company for something they did in work that was unrelated
to the work for the government. For example, the BP oil spill--
would that have been a reason to deny BP a government contract
since the oil spill was not a government contract?
That issue has been long since decided, and the answer is
yes you can, and we do it routinely today.
So from our perspective, from the company's perspective,
they know that they are responsible to adhere to federal law.
They have extensive compliance systems in place. But the
concern is that we are continually shifting responsibility for
massive compliance regimes on the companies rather than
focusing on the much smarter and more effective method of
saying--of, as I said, collecting information once and using it
multiple times.
Why would I do this every six months? Why does the
government not use the Office of Federal Contract Compliance,
DOL Wage and Hour Division, all the other elements of
government that have responsibility for labor law
implementation and have records of who has violated what when
and where?
Why are those information systems not centrally feeding
into an area where people can use it? Why do I, as a company,
need to go through that detail? And the regulatory compliance
burdens here are enormous.
Second, it is a certification. You are not just saying, ``I
think I am responsible''; you are saying as a company that,
``We have no violations that would be reportable.''
If I am wrong and I don't know about something that a field
office in Texas or elsewhere did, I am liable--I will leave it
to my legal colleagues, but I am liable under the False
Statements Act for some very, very severe penalties.
And third, there is already mammoth exercise of oversight
by the Department of Labor. The Department of Labor itself has
talked about adding I think it is over 1,000 investigators over
the last six years on Service Contract Act.
Companies are routinely dinged. And even when the fault is
with the government, the company often has to make the employee
whole.
So I think it really--the concern on our part is this just
really ignores the massive complexity of the system and is
just--it is a blunt instrument that is unnecessary.
Chairman Walberg. Okay.
Ms. Styles, the executive order unfairly slants the federal
contracting competition against contractors with minor
infractions that may have no bearing on the employer's
integrity or business ethics. Could you explain how requiring
contractors to disclose this information affects the
relationship between prime contractors and subcontractors?
Ms. Styles. Well, it completely changed the dynamic between
prime contractors and subcontractors. So right now under the
law, the dynamic is largely one of an arms-length transaction
for good reason. So you want your prime contractors going to
the marketplace and competing the subcontract work and having
an arms-length transaction between them.
This causes the prime contractor to become very involved in
the subcontractor's business, which is not the way that it
operates right now. The prime contractor is going to have to
ask for this list, they are going to have to understand it,
they are going to have to go back and consult with the
Department of Labor and the labor compliance advisors and
determine whether the remedial action is appropriate.
And what happens when it turns around and you are their
subcontractor? Because even the largest of companies are prime
contractors and subcontractors, and they team together, and
they are primes to each other and subcontractors to each other.
So you are sharing what is, you know, very sensitive
information and giving the prime contractor an extraordinary
ability to try to negotiate some deal related to labor issues.
Chairman Walberg. Is there a concern also about disclosing
trade secrets in this process?
Ms. Styles. Absolutely. So, you know, and then what happens
when it changes around and they are the prime and you are the
sub in another situation and you have just disclosed trade
secrets, or they are competing against you in another
procurement?
Chairman Walberg. I see my time is about expired so I will
not violate my own rules.
And so I will now recognize the distinguished lady from
Florida, Ranking Member Ms. Wilson.
Ms. Wilson of Florida. Thank you, Mr. Chairman. Some of the
people you see in the audience are from Good Jobs Nation.
And, Ms. Walter, these workers are actually wearing
stickers on their sweatshirts with the amount stolen from them
in wages--actual money from these workers. So as I listened,
one witness testified that there is no evidence of willful,
pervasive, or repeated violation of federal contractors that
would merit adopting this executive order.
Do you agree with this conclusion? Could you please give us
some specific examples of pervasive or repeated violations? I
would appreciate it.
Ms. Walter. Certainly. And I should say, I had said in my
opening remarks that the HELP Committee's report found that
there were $82 million in wage theft violations found at these
companies that they--that were severe violators of federal
contracts that continue--or severe violators of wage theft laws
that continued to receive federal contracts.
This included paying workers at chemical weapon storage
facilities for time spent--not paying workers at chemical
weapon storage facilities for time spent donning safety gear. I
mean, these were workers who were protecting us as Americans,
and they were owed in 18 instances $6 million in--or they were
owed--there were 18 instances of back pay, but yet they
continued to receive federal contracts. And this affected 1,300
workers.
There are issues of workers being--failing to pay more than
25,000 workers at call centers for overtime, and this was--this
involved Cingular Wireless, and yet AT&T continued to receive
$620 million in federal contracts.
And work--instances of mis-classing workers responsible for
helping recently released prisoners reenter society and find
work, owing these workers $1.7 million in back wages, and yet
the company continued to receive $28.8 million in federal
contracts.
Ms. Wilson of Florida. Thank you.
In Florida there is a construction company called Concrete
Plus. They went after contracts for 20 jobs with state or
federal funding--mainly projects to build or improve low-income
housing. It won just seven, well below the company's usual rate
of success.
Concrete Plus was constantly underbid by companies that
were cheating by misclassifying employees. Is misclassification
of employees a way for contractors to shift costs to workers or
leave them without basic protections, such as workers'
compensation, and thus underbid a job?
Ms. Walter?
Ms. Walter. Certainly it is.
From that story from McClatchy that uncovered the issue of
Concrete Plus and the American Recovery and Reinvestment Act
funds we found that they documented the real story of one
company trying to do well by their workers and being underbid
over and over again on these--the Recovery Act funds. And this
definitely transferred to companies throughout the Recovery Act
and throughout the contracting system in general.
And what we see is that at the state level there have been
lots of states who have undertaken this question of how do we
ensure that our contractors are responsible by and ensure that
it is efficient contracting process? And some of the states
have specifically looked at misclassification of independent
contractors as an issue.
Minnesota is one of the most recent examples that passed a
law that became effective in 2015 that takes a closer look at
the misclassification issue.
Ms. Wilson of Florida. Thank you.
This question is for Mr. Soloway and Ms. Styles: Five trade
associations for general contractors--especially trades
covering sheet metal, mechanical, electrical, finishing,
bricklayers--submitted a statement today applauding the
executive order as sound public administration propriety
policy.
Operating under the banner of Campaign for Quality
Construction, they said that the E.O. will promote high
workforce standards for the benefit of the public project
owner--that is the taxpayer. It will raise the bar in the
market for federal construction, and they contend it will
enhance due process rights for contractors in the procurement
process, compared to the status quo.
While these contracting groups have suggestions to make the
executive order workable through the rulemaking process, is
there something that these five trade associations, which
represent thousands of construction workers, failed to
appreciate regarding the implication of this executive order?
Why don't these companies see the E.O. as harmful to their
economic self-interest, as you seem to suggest it will be for
the companies you represent? Do these companies want to uphold
a higher standard than the companies you represent?
Chairman Walberg. The gentlelady's time is expired, but for
the record, let's get a brief answer.
Mr. Soloway. I will just be very brief and say no, I don't
think it suggests that they want to be held to a higher
standard. I don't know enough about the construction side of
the business and so forth to understand and--nor would I
comment on what other organizations are saying or doing.
I would be very careful, however, when we hear things like
``wage theft'' terms, because it does occur and it needs to be
punished and it needs to be dealt with. But it needs to be
determined to have been intentional and willful.
``Misclassification'' is also a very tricky term, and it
takes a--we don't have time today to go into how it actually
works when you are under the Service Contract Act and you are
classifying a position. Misclassification can be done by the
Department of Labor, it can be done by a contracting officer,
it can be done by a company, and it can be all across the
board.
So I would be just very careful at sort of accepting at
face value that all these things amount to unethical lowballing
of government contract prices in the workforce, because I don't
think that is the case.
Chairman Walberg. Thank you.
I now recognize my colleague from Alabama, Mr. Bradley
Byrne.
Mr. Byrne. Thank you.
Ms. Walter asserted that there was a problem with the
present process.
I would like to ask you, Mr. Goldsmith, given your 40 years
of experience, do you see any deficiency in the present process
to determine if we have got a bad actor in a government
contractor?
Mr. Goldsmith. I don't, Mr. Byrne. As has been pointed out
by other witnesses, the government has had in place for many,
many years systems to deal with bad actors and the like.
I would add that saying an entity is a bad actor is a
question of definition. It doesn't necessarily suggest that an
employer is a bad actor for having, for example, had a charge
filed with the NLRB or the EEOC or, for that matter, the
Department of Labor under the FLSA, and had decided, for
whatever reasons, to resolve that charge. And that doesn't make
that entity a bad actor or an entity that doesn't act with
integrity.
I think part of the problem with this entire executive
order is that words are used without really much care for what
they mean and how they have been interpreted even by the
courts. And to use, frankly, words like ``bad actor,''
``pervasive,'' ``longstanding,'' and other words, ``law-
breaking'' is just--simplifies something that is not at all
simple.
Mr. Byrne. I appreciate that.
Ms. Styles, given your substantial experience, do you find
the present process that we have insufficient in any way?
Ms. Styles. Not at all. It is a very robust process for
suspension and debarment.
Companies that have had integrity issues, that have had
labor issues, are considered by the suspension and debarment
officers at the various federal agencies. Some federal agencies
are better at it than others; I think there are some ways to
make some of them more robust in terms of how they consider
particular issues, be they labor issues or be they other
integrity issues.
But the system is there. The system is robust. It is fair,
it has an appropriate level of due process.
And many of the examples that I have heard here today, you
know, my question is why weren't they sent to the suspension
and debarment officer at the various agencies? I mean, if there
is a problem then it needs to go to them so they can fairly
consider whether that business should be doing business with
the federal government anymore.
Mr. Byrne. Mr. Soloway, same question to you, given your
substantial experience.
Mr. Soloway. I don't think it is a process issue, sir. I
think it is a question of the appropriate, efficient collection
of information and sharing of the appropriate information
across the system, because there are so many tentacles to the
compliance regime.
And I think to Ms. Styles' points, if you look even at the
Senate HELP Committee report, there were numerous cases in
there where the contracting officer didn't even look at the
excluded parties list, which is designed to list all of these
companies that are not appropriate recipients--didn't even look
to see if they were on there. So yes, they got a contract.
So I think it is not the process; I think it is the sharing
and gathering of information by the government internally, for
its own uses, not putting this burden on the private sector.
Mr. Byrne. Ms. Walter, I want to give you an opportunity to
respond to that. Tell me what, from your experience and your
expertise, leads you to the conclusion--which is contrary to
what these three people with substantial experience have--what,
in your experience, your background and expertise, leads you to
your conclusion where you disagree with them?
Ms. Walter. Certainly. I think the Harkin report is a great
example, and that is not the first report to find that--
Mr. Byrne. But that is a report. I am asking what is your
experience, based--they stated their experience. What is your
experience here before the Committee today that leads you to
that conclusion? Not a report--
Ms. Walter. Oh, well, I can tell you about my experience
talking with business owners who say that that is a problem. We
have heard from business owners who have, at the District of
Columbia level, have said, ``Before they passed the responsible
bidder provision I couldn't compete. It wasn't worth it. Now
that there is a responsible bidder provision in place, I can
compete. There is a fair playing field.''
Mr. Byrne. Do you have a list of those businesses you
talked to?
Ms. Walter. Certainly.
Mr. Byrne. Would you submit that to the Committee.
Ms. Walter. I can submit some letters and--some more
information. I am happy--
Mr. Byrne. Okay. Other than reading a report and talking to
some businesses, what experience do you have to lead you to
that conclusion?
Ms. Walter. Well, I am a researcher at the Center for
American Progress, so I can talk to you a little bit about the
research we have done about these problems translating to poor
quality for taxpayers, as well. You know, we found that one in
four companies with these sorts of violations also had
significant performance problems.
This included contractors KBR being assessed $1.1 million
in back wages for violations of the Davis-Bacon Act.
Contractors then--the company continued to receive significant
federal funds--$11.4 billion over five years.
In the end, there were performance problems: contractors
submitting fraudulent billing statements to the federal
government, failing to meet a performance level--
Mr. Byrne. My time is going to run out, so I am making
sure--you have talked to some businesses, got some research--
Ms. Walter. We certainly do. We certainly do.
Mr. Byrne.--and that is what you are bringing to bear to
make the conclusions you have made.
Thank you, Mr. Chairman. I yield back.
Chairman Walberg. Thank the gentleman.
Before I recognize the next colleague I want to welcome our
friend and colleague from Minnesota, Mr. Keith Ellison, to join
us at the dais here.
I know you have a strong interest in this issue. We are
glad to have you join us.
Without objection? Hearing none.
Welcome.
I now recognize the gentleman from Colorado, Mr. Polis.
Mr. Polis. Thank you, Mr. Chairman.
Ms. Styles, I--you have a rather ominous prediction that
you have given us of what will occur if the E.O. is
implemented. To be specific, you said if the E.O. is
implemented, ``purchases by the federal government will grind
to a halt.''
Does that mean that if the E.O. is implemented there will
not be any purchases by the federal government--there cannot be
any purchases by the federal government?
Ms. Styles. No. That is not at all what I mean. I just
think that the process that is put into place by the executive
order is so--such an overwhelming administrative burden in
terms of the number of steps they have to go through--
Mr. Polis. So what does ``grind to a halt'' mean if it
doesn't mean ``stop''? Because usually ``halt'' means ``stop,''
so if it is--if they are not going to stop federal purchases,
what do you define ``grind to a halt'' as?
Ms. Styles. They will be really slow. Only the most
important ones will be able to--
Mr. Polis. So grind to a slower pace perhaps, not grind to
a halt?
Ms. Styles. Significantly slower pace, yes.
Mr. Polis. Would you like to change your testimony, as
opposed to grind--or do you want to keep it as ``grind to a
halt''?
Ms. Styles. I will keep it as ``grind to a halt.''
Mr. Polis. So then how do you define ``halt''?
Ms. Styles. Some of the most important purchases that we
need to make aren't going to happen--
Mr. Polis. Okay, well--reclaiming my time--``halt'' means
``stop.'' So you are saying federal purchases will stop. I
again offer you an opportunity to modify your testimony if you
would like.
Ms. Styles. I am not going to modify my testimony--
Mr. Polis. So again, you are--now you are contradicting
yourself. You told us, this Committee, that federal purchases
would halt, which means stop, if this E.O. went through. I just
asked you, ``Would federal purchases stop if this E.O. went
through,'' and your answer is again--I will give you another
opportunity to answer that?
Ms. Styles. I think many will.
Mr. Polis. Some will, and others will go through under this
E.O.
Ms. Styles. I am sure some will go through, yes.
Mr. Polis. Okay. So again, your testimony to us is that if
the E.O. is implemented purchases by the federal government
will grind to a halt. You didn't provide any conditions to that
statement. So again, if you are saying federal purchases will
slow--but you did not agree to make that change--
Ms. Styles. I can say ``generally grind to a halt,'' if
that would be better.
Mr. Polis. Okay, will ``some''--how about ``some purchases
by the federal government--"
Ms. Styles. I will say ``generally grind to a halt.''
Mr. Polis. Okay. Again, if you are saying that some might
grind to a halt, perhaps the ones that would stop would be the
ones from pervasive violators of our labor law.
I would like to go to Ms. Walter on that.
Now, there have been several states, including New York,
Minnesota, and Massachusetts, that have required labor
compliance reviews, similar to those under this E.O. I would
like to ask you if federal purchases have generally halted in
New York?
Ms. Walter. No, they haven't.
Mr. Polis. Have federal purchases generally halted in
Minnesota?
Ms. Walter. No, they haven't.
Mr. Polis. Have federal purchases generally halted in
Massachusetts?
Ms. Walter. No.
Mr. Polis. Can you answer why they might not halt in those
states if we are given this testimony that somehow they are
going to halt in the country--generally halt?
Ms. Walter. I can't say why Ms. Styles is--Ms. Styles is
predicting that. What I can say is that they are using these
programs successfully. They have been able to efficiently use
systems such as prequalification to get contractors--take a
closer look at contractors and still uphold high standards.
Mr. Polis. Has there been any noticeable or observable
slow-down in the efficiency of contracting in New York,
Massachusetts, or Minnesota?
Ms. Walter. No. And I would say that other sorts of
contracting standards, such as the contracting living standard
that was implemented in Maryland, actually increased
competition.
Mr. Polis. Now, so getting back to kind of why we are here
today, do you think that under current rule there are adequate
mechanisms to exclude companies with unacceptable labor
practices?
Ms. Walter. No. The current regulations have a--well, and
let me be clear here: Responsibility review is not about
suspension and debarment.
This is about upholding higher standards, taking a closer
look at companies with problems, and when there is a problem,
resolving those problems so that that company can come back
into the fold and bid in a responsible manner that isn't going
to shortchange its workers and put them in harm's way.
Mr. Polis. And to be clear, in this proposed executive
order, is there any black list?
Ms. Walter. No. No. That is--
Mr. Polis. And the same label, as you know, was applied to
the 2008 legislation, which created a federal database that
includes certain federal contractors. It seems that it is
common every time there is more contractor accountability added
opponents seem to label it ``blacklisting.''
There is no, again, for the record, the expert testified
there is no blacklist in this, nor has there been a general
halt to contracting in the states that have moved forward in
this regard. I also am confident that there would not be any
form of general halt of contracting here at the federal level.
Really we are discussing the inadequacy of current
mechanisms of enforcement of labor practices among federal
contractors. There are gaps to be filled. The E.O. goes some of
the way towards doing that.
But certainly companies need to be held accountable if
workers aren't being paid, if they are engaged in
discriminatory behavior, and I think that this E.O. represents
the first step toward implementing the congressional intent
with regard to applying the law to federal contractors.
And I yield back the balance of my time.
Chairman Walberg. I thank the gentleman.
I now recognize the gentlelady from North Carolina, Dr.
Foxx.
Mrs. Foxx. Thank you, Mr. Chairman.
I want to just make a point for the record, there have been
some statements made about suspensions and disbarments, and it
is my understanding that during fiscal year 2012 and 2013, DOL
registered no suspensions or disbarments of federal
contractors, and I will give the source of this for the record,
if I might do that later on.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Without objection.
Mrs. Foxx. Thank you.
I wonder, Ms. Styles, if you could answer a question for
me? Can you describe the current process for contractor
responsibility determinations?
What types of violations or allegations are taken into
account when a contracting officer makes a responsibility
determination? Can a contractor contest an adverse
determination?
Ms. Styles. Absolutely.
So there is a part of the Federal Acquisition Regulation,
it is called Part 9, and a contracting officer, before they
actually execute a contract with a company, has to go through a
number of articulated steps to determine if the company is
responsible. It includes everything from financial
responsibility, to their past performance in particular jobs,
to their integrity as a business. Labor violations absolutely
can be taken into consideration, in terms of the integrity of a
business, so in many ways this is already existing, in terms of
the ability of a contracting officer to consider it.
If that decision is made--adverse to a contractor--by an
individual contracting officer, it actually can be appealed
through the protest process currently, but it is a pretty
arduous process for appeal.
Mrs. Foxx. Thank you very much. Mr. Goldsmith, federal
labor laws already contain remedies to address violations. How
does this executive order, which introduces new remedies,
effectively rewrite U.S. labor laws and run afoul of
congressional intent?
Mr. Goldsmith. Well, it does precisely that. It augments
existing remedies in a way that would not only put at risk
contractors who currently have contracts with the federal
government, but as a result of that, it really is
unconstitutional.
It is not the prerogative of the President to decide to
rewrite the laws to augment remedies. For example, under the
NLRA the law has been longstanding that a--the government
cannot--the executive branch cannot simply add to remedies, nor
can the states, for that matter. It is a case called Gould that
has been around for many years.
So this executive order does precisely that and it is
unlawful?
Mrs. Foxx. You know, this is a recurring pattern with this
administration, it seems to me. There are 57 oversight hearings
going on this week in the House of Representatives, and I just
wonder how many of those hearings are focusing on
unconstitutional actions taken by this administration.
It simply is mindboggling that every day we learn of more
and more of these unconstitutional actions being taken by an
administration doing its best to write laws or rewrite laws,
and we really need to start keeping long lists of these,
because I don't think the American people are aware of all of
the violations that have occurred.
Mr. Chairman, I am going to do something very unusual. I am
going to yield back the balance of my time.
Ms. Walter. Representative Foxx, could I make just one
point on that?
Chairman Walberg. No question was asked. Appreciate you can
maybe work that into an answer of the next question you get.
I now recognize Mr. Scott for his five minutes of
questioning.
Mr. Scott. Thank you, Mr. Chairman. And I would point out
the fact that a oversight hearing was held does not--is not
evidence that a--conclusive evidence that any violation has
occurred. There are oversight hearings all the time.
Ms. Walter, you wanted to respond?
Ms. Walter. Certainly. Thank you for giving me the time.
I just wanted to make clear that, first of all, the purpose
of a responsibility determination is not to penalize a federal
contractor but to promote an efficient procurement process. And
the Federal Property and Administrative Services Act authorizes
the President to create processes to ensure that contractors
are responsible.
And the courts have actually upheld this right several
times. They have upheld it under previous administrations, if
you--including E-Verify proposals, the right to post notices
for workers that--informing of their rights not to join unions;
and it has been upheld during this administration with the
Project Labor Agreements Executive Order.
Mr. Scott. Thank you.
Can you explain how this process is significantly different
than the present process?
Ms. Walter. Certainly. Right now there is a contractor
responsibility database. However, significant number of labor
law violations are not included in it, and there is no guidance
for contracting officers on how they should implement these--if
a contracting officer finds out about a legal violation there
is no guidance on how they should consider it or how much of a
warning sign this is.
What the order does is it allows, through a process that
will include advice from labor compliance advisors, from the
Department of Labor, it will provide contracting officers the
information they need to make an informed decision. It is not
requiring contracting officers to find a contractor not
responsible because of anything that they report, but the
reporting mechanism throws up a warning signal that contracting
officers should take a closer look.
Mr. Scott. Ms. Walters, can persons with unresolved issues
be punished?
Ms. Walter. Again, it is not a punishment process. This--
Mr. Scott. Well, can people with unresolved issues have
contracts withheld or not be awarded contracts because of
allegations that haven't been resolved?
Ms. Walter. So I am not a member of the administration, so
I can't tell you exactly what the administrative merits
determinations are going to include, but what I can say is
that, again, this is about throwing up a warning signal, taking
a closer look, figuring out what is going on in those instances
and whether or not that would jeopardize taxpayer dollars to
contract with that organization before they take remedial
action.
Mr. Soloway. Mr. Scott, can I offer a comment briefly on
that? I don't want to take your time.
The answer to your question is absolutely yes, and this is
one of the issues that has been missed in this discussion. Yes,
we do not have the regulations yet to know exactly how they
will be implemented, but the executive order sets the construct
for those regulations and it very clearly references situations
where there is no finding of intent or willful violation.
Allegations are included, and so forth, so the answer to your
question is yes.
Mr. Scott. Well, you kind of fuzzified that intent. You
could have a violation--
Mr. Soloway. Correct. Correct. And there are multiple
levels at which there are questions. One is on the allegations.
As you said a moment ago, the holding of a hearing is not
necessarily proof of wrongdoing. We apply that same standard to
the executive order.
Mr. Scott. Okay, well, let me follow through. If you have a
contractor who is systematically underpaying, not paying
overtime, and otherwise essentially cheating, what effect does
that have on the competition?
Mr. Soloway. Are you asking me, sir?
Mr. Scott. Yes.
Mr. Soloway. Absolutely, that contractor shouldn't be
considered if, in fact, that contractor has a repeated, willful
history. There are a whole slew of opportunities for the
government to deny that contractor the right to bid, and so I
think that we have to be very careful here that we don't mix
issues.
In the case here, we are not changing policy about whether
companies can or cannot get contracts because they are law-
violators. What we are doing is creating a broad new regulatory
regime, and even mixing issues.
When we talk about what is going on in Massachusetts or New
York or Minnesota, there are other standards that are far more
prominent in those responsibility determinations, like do they
pay a living wage? Well, the living wage debate is a very
different debate. Contractors pay what the government tells
them they have to pay job by job under the Service Contract Act
or Davis-Bacon Act----
Mr. Scott. Well, is it true that people with chronic
underpayments and chronic violations are getting contracts?
Mr. Soloway. There absolutely may be cases of that, and
that doesn't mean it is right. We are not defending that. There
is nothing--
Mr. Scott. So we should do everything we can to prohibit
people who are chronic violators of labor laws and fair wage
laws from getting contracts.
Mr. Soloway. And we have all the mechanisms to do it, as I
said before.
I believe that fundamentally it is - A.) you have to deal
with what is the violation, as you said. Has it been proven or
is it just an allegation? And then the second question is, why
are we not focusing on technology and information-sharing as
the answer, which is what the logical answer is, rather than
this massive burdensome regime that raises far more questions
than it answers?
Mr. Scott. Time is up.
Chairman Walberg. Thank the gentleman. Time is expired.
I now recognize Mr. Russell, the gentleman from Oklahoma.
Mr. Russell. Thank you, Mr. Chairman.
And, panelists, thank you for your testimony today, thank
you for your extensive work and experience and bringing light
to this issue.
Mr. Goldsmith, given the enormous burden of reporting and
compliance requirements that the executive order calls for,
what, in your opinion, is the net effect of now having timely
contracts and having the best companies provide government
needs?
Mr. Goldsmith. I think it is going to be a huge burden. I
think it is going to take some companies that would otherwise
be federal contractors out of that business. It is going to add
to a reporting burden that exists for not just major employers,
many of whom can deal with it on one level or another, but
especially for small businesses who have enormous difficulties
complying with the existing burdens.
So now when you talk about a subcontractor to a large
contractor, as Ms. Styles was talking about in her testimony,
it just adds more of a burden, more of a problem, more of a
cost, and it is going to drive-- especially small business, as
I said in my testimony, including especially perhaps those
owned and run by minorities and women-- out of the federal
contracting arena. It is a bad idea.
Mr. Russell. I appreciate that.
And, Ms. Styles, given that, if contracts fail to meet cost
and timeliness due to the burdens of the executive order, would
that be a halt in efficiency and a failure of the best laws to
contract?
Ms. Styles. Absolutely. You know, if you stop getting the
performance that you need, there are mechanisms in place to
take that contractor out of the whole procurement system.
Mr. Russell. In your view, if that is the case, what is the
motivation behind the executive order, if we already have laws,
as many of you have testified, to meet this? In your view, what
is the motivation behind the executive order if it is not to
fix something that is not broken?
Ms. Styles. I would only be speculating as to the
motivation, although I have to say, when I look at the
executive order and how it is implemented--so if you have a
problem and you want to fix it, like I said, you bring in the
plumber to fix the pipe.
If there is a problem here and there isn't enough
information going to the suspension and debarment officials,
there is a way within the current system to fix it. So I am
mystified why you would create a vast bureaucracy to fix
something that you already have a well-functioning system to
take care of.
Mr. Russell. And, Mr. Soloway, especially with your defense
background, given the vital role that contracts play in the
defense of our nation, and having been on the receiving end of
contracts, or the lack of timely delivery of them while
fighting in the field, what impact does the executive order
have on our constitutional requirement to provide for the
common defense?
Mr. Soloway. Sir, I am going to take a slightly different
view on that than Ms. Styles, not to disagree substantively at
all, because we share a view on this. And this goes back to Mr.
Polis' question about a grinding halt.
I think the biggest danger here is exactly the reverse, is
that we are going to have--you have multiple bidders for
contracts, as the President himself said, the vast majority of
whom are ethical performers, and a red flag, such as Ms. Walter
said, comes up on one company, an allegation, something
completely unproven, something completely undocumented but just
an allegation or several allegations, or one contract which
could have, you know 1,000 violations just because of one
mistake, and the contracting officer is going to say--excuse
me--contracting officer will say, ``I don't have time to deal
with this. I am going over here.''
That is as much as a danger to the system as the grinding
halt, and that is a rush to judgment because there is so much
of a pressure to get things done. I think the--what we are
missing in this discussion is that the context and the
framework set up by the executive order does not require that
it be proven to have been, at that moment, a bad actor. It
simply looks at, quote, as Ms. Walter put it, ``red flags.''
Well, there are a lot of red flags on this.
Mr. Russell. Well, do you believe, then, you know, given
the amount of contracts that our military relies upon for the
delivery of their systems, their weaponry, their, in many
cases, services--many things, what impact would this executive
order have on providing for our common defense?
Mr. Soloway. The biggest impact, according to the experts I
have talked to--and I would be glad to get the report for the
Committee for the record, because there has been some analysis
done on this--is one colleague of mine at a major firm who is--
not a defense firm--has analyzed this suggests that this
executive order in and of itself could raise the cost of
compliance by 20 percent.
In other words, there is now, at most estimates, compliance
with federal regulations, they are somewhere in the 20 to 25
percent of every dollar, and in their estimate this could raise
it to 30 cents on the dollar. So it could well be a cost impact
at a time we are trying to reduce expenses.
Now, that is not to say if it were to achieve its intended
outcome that that is not worthwhile. Our view is it won't
achieve the intended outcome, so why would we do this?
Mr. Russell. Well, I appreciate that, and hopefully we can
get this overturned with the powers of Congress.
And thank you, Mr. Chairman. I yield back my time.
Chairman Walberg. I thank the gentleman.
Now I recognize the gentlelady from Oregon, Ms. Bonamici.
Ms. Bonamici. Thank you very much, Mr. Chairman.
And thank you, to our panel of witnesses, for their
testimony. This has been a very thought-provoking discussion
about an important issue.
My constituents back home in Oregon would be very glad to
hear that we are having a hearing to address unfair labor
practices by federal contractors. The federal government pays
billions of dollars out in federal contracts, and it sounds
like we all agree that we should have good policies that hold
our contractors accountable for labor standards.
And as members of Congress we should be good stewards of
taxpayer dollars, and that means that we need to work together
to protect those dollars and protect American workers. And the
executive order seeks to do just that, and I look forward to
seeing the regulations, as we have all acknowledged do not
exist yet.
I want to ask you, Ms. Walter, I am concerned to learn that
with the current state of federal contracting, in addition to
potentially rewarding companies that have violated labor laws,
we might actually be costing the federal government even more.
And you talk about the link between labor law violations and
poor contract performance. So if violators are not good
business partners we shouldn't keep rewarding them with
taxpayer dollars.
So could you elaborate on the connection between labor
violations and poor contracting performance and talk about how
this executive order could save the government money in the
long run? And I do want to save time for one more question.
Ms. Walter. Certainly. Our report took a look at the
universe of contractors that have had the worst labor law
violations and said, so what happened to those federal
contracts? And what we found is that when contractors continued
to receive contracts after they had had these serious
violations, there was poor performance. One in four had
performance problems.
So, you know, this was a report that looked at a small
universe of companies, but if the number of companies is
anywhere near that, this should raise a red flag not just in
the terms of workers and in terms of law-abiding businesses,
but also in terms of taxpayers and taxpayer value.
Ms. Bonamici. Terrific. Thank you very much.
And I want to follow up on the conversation that Ranking
Member Scott was having with you and Mr. Soloway, because it
sounded like you acknowledge that there are some current
federal contractors, or have been federal contractors, with
labor law violations. But then I also hear people saying we
have a system that works and so we don't need this executive
order.
So do you want to explain, if there are federal contractors
with labor law violations, how that is consistent with
witnesses saying, ``We have a system; we don't need the
executive order?''
Mr. Soloway. Of course there are contractors with
violations. There are contractors with violations from five
years ago or 10 years ago. There are contractors with
violations driven by the fact that the government forgot to put
the contract clause in to tell them what--that they were
subject to the Service Contract Act or the Davis-Bacon Act.
When you say ``violation,'' this is one of the fundamental
problems with the executive order. We are taking the fact of a
violation and equating it to intent, whether it is nefarious or
administrative.
It is widely accepted in both government and industry--and
I am talking about the Department of Labor when I talk, the
Wage and Hour Division. We do training on the Service Contract
Act with the Department of Labor three times a year, and it is
widely accepted that there are administrative errors made all
the time on both sides. But every one of those errors equates
to a violation, so it would be listed as a violation.
So we are using terminology here a little too freely.
Ms. Bonamici. Understood. I want to ask one more question.
There is some testimony about how a number of states--New
York, Minnesota, Massachusetts--have required labor compliance
reviews, and there--in fact, it has increased competition in
some of those states.
Can you, Mr. Soloway, and then I want to ask Ms. Styles
also, how do those differ from the executive order?
Mr. Soloway. I am not familiar with each of the states, but
I can tell you that a number of states that have looked at this
kind of an approach don't have prevailing wage laws to begin
with. Some do, some don't.
Ms. Bonamici. Ms. Styles?
Ms. Styles. I think it is an issue of the number of laws
that they are reviewing and making certifications to. So you
take what we have in the federal government, which is almost
100,000 contract actions over $500,000 every year, then you
take what it looks like the executive order is saying with
regards to the number of labor violations, the potential
violations, and you multiply that by 50.
And so I think it may be that it is simply easier to
administer and they have created an easier-to-administer system
at the state level.
Ms. Bonamici. I just want to say, if there is a model for
labor compliance reviews that is working and that is increasing
competition, that has the potential to make sure that
contractors with labor law violations do not get federal
contracts, we should be doing that. It is important to preserve
taxpayer dollars and make sure that the contractors have a good
record on labor laws.
So I look forward to working on this Committee to make sure
that we implement the executive order.
And I have a few seconds left. Ms. Walter--
Ms. Walter. One quick point: Most of these state laws, they
are looking at federal law compliance and state law compliance.
So they are looking at a myriad of laws.
Ms. Bonamici. Terrific. Thank you.
Sounds like we have the same goal on mind. I think we can
get there.
Thank you, Mr. Chairman. I yield back.
Chairman Walberg. Thank the gentlelady.
Now I recognize the gentleman from Georgia, Mr. Allen.
Mr. Allen. Thank you, Mr. Chairman.
And I feel like I should be down giving testimony. I have
been in the contracting business for 37 years and I have to
say, we did one job for the federal government and promised our
people that we would never do that again. And the reason for it
is because of the compliance requirements that I felt like were
a total waste of taxpayer money.
Now, how we can continue to add compliance to contracts
when--and save taxpayers money, I don't know how that works,
but I can tell you, I am a witness to see, you know, some of
the things were just maddening, particularly when it comes to
the thing about even contractors in the private sector--which
we were in business 37 years and, you know, we paid overtime
because--not because the law required it, but because it was
the right thing to do, for crying out loud.
And I can't imagine a contractor out there who is not
paying lawfully overtime. I mean, it just--because there are so
many complying agencies that require that reporting, and the
opportunities for folks to go and get relief from that sort of
thing.
But anyway, since--Mr. Goldsmith, you know, the federal
agencies have been found to violate federal labor law, and can
you talk about how onerous and expensive compliance regulations
imposed by executive order would drive many employers away from
contracting and how this will hurt the taxpayer, as well as the
employees who work for them?
Mr. Goldsmith. Well, I don't think that there is any
question but that the executive order would add significant
compliance burdens on potential federal contractors, and as a
result, significant cost. And much as you did in your business,
I don't doubt that there would be any number of otherwise
highly qualified contractors that would choose to exit the
federal contracting business because it is just not worth it,
on top of every other federal and state and local obligation
that they have to meet.
And with respect to overtime, there has been a lot of talk
about overtime and the Fair Labor Standards Act. I would just
like the record to reflect that the Fair Labor Standards Act
has been around since the mid-1930s and it is the statute that
now is the subject of more litigation probably than any other
in the labor and employment field because people just don't
understand it.
So not paying overtime does not in any way suggest that
there is an intent not to pay overtime. It suggests that there
is a complexity in a workplace with respect to hours of work
and how those hours of work are calculated.
And I think part of the problem with this discussion this
morning is that there has been an extraordinary amount of kind
of loose talk, in my judgment--that is to say, talking about
reports and linkages and severity and willful-- without any
appreciation of the underlying facts, which actually count in
these assessments, as to how that might affect the performance
of a contractor.
And so far as I am concerned, there is absolutely no
linkage that I am aware of. I have never read a report or a
study that is at all credible that suggests that there is a
linkage of any sort between a contractor's failure to, in the
eyes of a Department of Labor investigator, to not pay overtime
properly and that contractor's performance.
It is easy to say; it is not so easy to prove. And I think
that is the problem.
We are talking about words, we are talking about
contractors, we are talking about facts, and you can't just
pull all of this out of context and assume that just because
you say it is so, it is so. I don't know what report Ms. Walter
was talking about that suggests that there is linkage. I would
like to know.
Thank you.
Mr. Allen. Thank you, Mr. Goldsmith.
Ms. Styles, your testimony outlines seven new steps that
must occur before a contracting officer can award a contract
under this new scheme. You also note the new burdensome
reporting requirements for both prime and subcontractors. Can
you estimate the cost on federal contractors to gather and
maintain this information?
Ms. Styles. I cannot estimate the cost, although it has got
to be substantial, particularly in the context of trying to
determine if your subcontractor is responsible. I mean, that
just is an extraordinary requirement to add to a prime
contractor to do that with all of their subcontracts over
$500,000.
Mr. Allen. How about the cost imposed on the government to
ensure contracting officers are reviewing all this information
and delays this will cause in the procurement system?
Ms. Styles. Well, I certainly can't estimate that. It seems
like an extraordinary thing to ask our already overburdened
contracting officers to go through all these steps, and to put
new labor compliance advisors in place to go through all these
steps as well.
Mr. Allen. Plus the fact they are arbitrary.
Ms. Styles. Yes. They are very subjective. I will say, they
are very subjective.
Mr. Allen. Yes.
Mr. Chairman, I yield back my time.
Chairman Walberg. I thank the gentleman.
Now I recognize the gentleman from Wisconsin, Mr. Pocan.
Mr. Pocan. Thank you very much, Mr. Chairman.
Mr. Allen, you have nine years on me in business. I am 28
years in May, so congratulations to you.
And, you know, I come here as a member of actually three
local chambers back home, and I got to tell you, I personally
see it very different from a business perspective. I see it
from the perspective of what we are actually finding in real
application in places like Maryland.
I am more likely to bid on something knowing that I am
doing a fair bid, that I am bidding at the same level playing
field--not someone who is cutting the corners, not someone who
is doing something else. And I do bids with local and state
government. Obviously I can't do federal ones because of my
job, but we do a lot of local and state.
So I kind of--when I listen to some of the words that have
been used about the process--that it is chaos, aggressive
regulations, vast bureaucracy, it is going to divert resources,
this is a robust process--and when I look at as I understand
the process, if I have no labor violations--and by the way, Mr.
Chairman, I would have loved to have on this panel--we are
lawyered up today, which is great, but I would have loved to
have seen some contractors here, perhaps, that--especially
contractors maybe that have a violation and not paying
overtime, because I would love them to discuss that and why
they think they should get another contract of our taxpayer
dollars while they are in violation of federal law. I--
Chairman Walberg. If the gentleman will yield, I would
answer that.
Mr. Pocan. Or in a future hearing would be fine, too--
Chairman Walberg. Well, we mentioned that we would love to
have them here, but they were afraid to be in front of the
panel.
Mr. Pocan. And, you know, that is a problem, Mr. Chairman,
isn't it, right? That alone speaks volumes, that the very
contractors who violate the law don't want to come before a
Committee to actually speak the truth.
Chairman Walberg. These were contractors in general who
feared retribution.
Mr. Pocan. Well, I am watching all the contractor
associations today that came out in support of this because
they have got members, hopefully like my business and the
people who I belong to at my local chambers who are law-abiding
businesses, who want to compete for contracts fairly but we
don't want to compete unfairly when it comes to that.
So my first question, Ms. Walter, what exactly is the
process for someone like me? If I have no labor violations and
I am competing in this, what does the chaos, aggressive
regulations, and diverting of resources I am going to be
involved with on a putting something in if I was a federal
contractor?
Ms. Walter. You will check a box.
Mr. Pocan. Let me just try that.
That was the compliance right there?
Ms. Walter. Yes.
Mr. Pocan. All right. I am going to do it for another
business.
Yes. I just did it for two businesses who follow the law,
right?
Okay, then if I do have something that I can't check the
box, does that mean I am automatically banned from being able
to be a federal contractor?
Ms. Walter. Certainly not. It means that the federal
government will take a closer look.
Mr. Pocan. And a closer look, so it is not automatic.
Instead, it is allowing them to enter a process, if I
understand, to perhaps improve the law.
And if they really are a business who just has something
that ran a little astray and they are trying to get back in
compliance, doesn't this set up a process for them?
Ms. Walter. There will be a process for that, and there
will be a process for contracting officers who are not expert
in every single law to look to experts to get some guidance.
Mr. Pocan. And let me just, if I can for a second--Mr.
Goldsmith talked about that you had the linkage on the last
question. Would you mind addressing that?
Yes, Ms. Walter.
Ms. Walter. Say it again?
Mr. Pocan. Mr. Goldsmith mentioned that you didn't refer to
the linkage. You had it but you didn't--
Ms. Walter. Oh, I am sorry. The report.
Mr. Pocan. Yes.
Ms. Walter. The report finds that one in four contractors
with these problems also have performance problems. We cannot
establish a causal relationship; that would be very difficult.
And we would love to see better data coming out from the
government so we could look at a larger universe, but that
simply--you know, Mr. Soloway has pointed out that there are
opportunities for better data. We fundamentally agree.
Mr. Pocan. Sure. Wasn't there also a New York study, the
Fiscal Policy Institute? Could you just talk about that for a
second?
Ms. Walter. Certainly. They found that contractors were--
with labor law violations were five times more likely to have
performance problems.
And 30 years ago the HUD inspector general actually came to
similar results looking at HUD projects, finding that there was
an increased performance problems in companies that had
workplace law violations. So we were not the first to find this
relationship.
Mr. Pocan. Well, and again, Mr. Chairman, that is part of
it. As a business owner I want to have a level playing field. I
want every business to have that level playing field.
But it becomes an unlevel playing field when someone who
can violate the law and, by violating the law, cut some
corners, get a better bid, and this is something that I see as
pro-small business. And I--certainly I disagree with the lawyer
for the Chamber, but as a small business owner, since I had
hair, you know, 23 years old starting up a business, that is
exactly what I want in place. And that is probably why these
contracting organizations want this in place.
And, Mr. Chairman, I hope that if we have another hearing
on this if there is a way to compel some of these contractors
who have violated the law, I--it would be great to have them in
front of us to explain why they think they should still be
eligible for federal contracts while they are in violation of
safety and labor practices.
I yield back.
Chairman Walberg. Would the gentleman yield?
Appreciate the time.
Let me just--Mr. Soloway, respond to that if you would,
please, because you are the only contractor, as it were, here
today.
Mr. Soloway. Mr. Pocan, we are the largest organization of
government contractors, professional services, technology
firms--large, small, medium-sized--and our members are
universally opposed to this not for the reasons you think. They
are opposed to it because of the regime it creates and the
unfairness it structures.
You are confusing violation with administrative errors,
complexity of implementation. So I--it is a much longer
conversation, but I think that there is a universal concern
amongst our membership.
Chairman Walberg. I thank the gentleman.
Now I recognize the gentlelady from Massachusetts, Ms.
Clark?
Ms. Clark. Thank you, Mr. Chairman.
And thank you, to all the panelists, for being here today.
My first question is for Ms. Walter. We know that two-
thirds of low-wage workers, who are the most vulnerable to poor
labor practices, are women. And we know that, according to some
estimates, firms that contract with the federal government hire
approximately 22 percent of the entire American workforce.
So if we are able, through this executive order, to raise
our labor standards, what do you think the effect would be on
working women in this country?
Ms. Walter. Well, I think that, you know, there are plenty
of working women here who can tell you their personal stories
of what the effect would be to know that they are going to take
home a higher paycheck because it is the wages they have
earned. Not because we are requiring contractors to raise
wages, but because they have worked hard and they are getting
the wages they have earned. They have the powerful stories
here, and I think that this is the reason why we are here.
Ms. Clark. And do you think this would have a net effect on
pay equity across the country for women?
Ms. Walter. I would certainly hope so.
Ms. Clark. Yes.
Mr. Goldsmith, I was caught by part of your written
testimony when you were talking about Section 6 of this
executive order that bans for, in certain circumstances,
compulsory arbitration, pre-dispute arbitration clauses, for
sexual assault and sexual harassment. You wrote in your
testimony that this encroaches on employers' rights.
I just want to be sure I understand your position and that
of the U.S. Chamber. Is it your position that the executive
order's prohibition on contracting with companies who require
compulsory pre-dispute arbitration of sexual assault and sexual
harassment claims should be overturned?
Mr. Goldsmith. It is my position that the courts have
uniformly permitted employers to require arbitration in
connection with all manner of employment disputes, whether it
is sex harassment, whether it is race discrimination, whether
it is age discrimination, whether it is disability
discrimination, whether it is anything else.
That regime has been in place for a long time. It has
existed certainly with the sanction of the support of the
Supreme Court in the Gilmer Case in 1991, and it continues to
exist today.
So to the extent that this executive order suggests that
with a contract of over $1 million you cannot have any kind of
arbitration process to resolve the employment disputes, it
simply flies in the face of volumes and volumes of cases in
all--basically all of the circuits. So it is wrong, and it
seeks to overturn that.
Ms. Clark. In basically all of the circuits. There is a 5th
Circuit case, right, that has--the Jones versus Halliburton--
that did not allow arbitration to cover sexual assault. Is that
right?
Mr. Goldsmith. I don't know that case. I believe I read it
when it came out. I would be happy to read it again and tell
you if I agree or not with your assessment of it.
Ms. Clark. So basically, your position is that pre-dispute
arbitration, no matter what the incident, whatever kind of
intentional tort may occur in the workplace, is a work-related
incident that should be covered under arbitration. Is that
right?
Mr. Goldsmith. Well, that begs the question of intentional
tort. It is absolutely common throughout businesses large and
small in the United States to have a regime in place where
there is an arbitration process to resolve all manner of
workplace disputes.
If there is an intentional tort--I am not sure exactly what
you mean by that, but if there is an intentional tort, you
know, the punitive plaintiff may have other opportunities and
there may be ways in which that punitive plaintiff can
circumvent the arbitration clause. But as a general
proposition, there is no question in my mind--none--that this
provision in the executive order that seeks to preclude
employers from having pre-dispute arbitration to resolve
employment disputes for those contracting in excess of $1
million flies in the face of the overwhelming majority of
courts'--district courts, courts of appeals, and the United
States Supreme Court--decisions.
Ms. Clark. Can you think of an example where a sexual
assault in the workplace would not be an intentional tort?
Mr. Goldsmith. I don't know what--this is why I say facts
matter. I don't know what you mean by ``sexual assault.'' You
know, there are plaintiff's lawyers who have all manner of
theories about what is and isn't sexual harassment, sex
discrimination, sexual assault.
If you give me the facts, I will be happy to take a--I will
be happy to give you my thoughts. But I don't know what you
mean by ``sexual assault.''
Ms. Clark. I see my time has expired.
Chairman Walberg. I thank the gentlelady.
Now I recognize the gentleman from California, Mr.
DeSaulnier.
Mr. DeSaulnier. Thank you--
Chairman Walberg. Did I get close to that?
Mr. DeSaulnier. I get asked that every time a chair--
Chairman Walberg. That was my first opportunity to say it.
Mr. DeSaulnier. Anything close, with a name like mine, I
will respond.
I want to associate my comments with both Mr. Allen and Mr.
Pocan, as somebody who spent somewhere around the same period
of time owning businesses and is still responsible for
businesses.
Mr. Soloway, you said in your testimony--I am reading from
it: Logically, it is unfair for contractors with repeated,
willful, and pervasive violations of labor laws to gain
competitive advantage over the vast majority of contractors who
are acting diligently and responsibly to comply with complex
web of labor requirements.
So in my previous elected office in California we did a lot
of work around the underground economy and found that the
contractors and the employers who violated labor laws were also
violating health and human service--health and safety laws. So
my question to you is--and we also found that some of the
things that you suggested and Mr. Goldsmith suggested from our
chamber was true, that for a small business, which I was one,
although never dealt very much with the government directly on
contracts, that they needed more help getting through it.
So two-part question: I am assuming that all of us want to
get rid of the bad actors, the ones that, in my perspective,
sometimes take a fairly sophisticated risk management approach
to whether they are going to get caught or not, and then also
sort of take the fines as a cost of doing business.
So knowing that your members, most of them, are doing the
right thing, what are you doing first to educate smaller
members so they don't get those administrative violations? And
secondly, what are you doing to make sure that most of your
members--I think you would have a political problem if you
weren't being aggressive to those people were repeatingly, as
you suggest, have an unfair competition?
Mr. Soloway. We spend a great deal of time internally on
this. As I said earlier, three times a year we conduct major
training on the Service Contract Act, which is the principal of
the prevailing wage laws, I mean, that affect our membership,
because we are on the services and technology side.
We do training in partnership with the Department of Labor
Wage and Hour Division on the Service Contract Act. We sell out
every single course, and it is an enormous mix of small,
medium, and large companies because everybody faces the same
complexity.
We have done numerous programs on government ethics
requirements, government compliance requirements. If I went
through for you the list of compliance requirements that a
government--a federal government contractor would have to face,
I could be fairly certain that there would be very few states
in the country that would match the list, although California
has some fairly--has recently put in place some new laws.
But the second thing I would say--and I just want to urge
the committee to keep this in mind: When we talk about the
biggest violators of these laws--and one example that was used
was KBR as a--one of the major violators, at $1 million in
either misclassified or wage theft or whatever term you want to
use, that is against the baseline of billions, literally, with
a ``b,'' in salaries they were paying over that period of time.
So I am not excusing the $1 million. I don't know if it was
intentional, if it was a technical error or an administrative
error, but does that make it a pervasive problem just because
the number sounds big? You could have a small business that has
10 people that it underpaid and it might be half their
workforce.
So you have to be really careful. These numbers are being
thrown around today that are--that really--the
interconnectivity is not at all clear.
But to answer your question, we spend an inordinate amount
of time as an organization, and I think it is fair to say Ms.
Styles and Mr. Goldsmith and their firms spend an inordinate
amount of time with their clients trying to coach them through
what is an incredible complex thicket.
Mr. DeSaulnier. Have you found clients that had a pattern
of avoiding labor laws that you no longer--you refuse to--
Mr. Soloway. The ones that I am aware of that have actually
had a pattern of willful abuse of labor--or other laws, by the
way--have been suspended or debarred, and many of them have
gone out of business. And some of them, of course, come back
because they have taken remedial action.
Mr. DeSaulnier. Have you ever found any of your clients--
Mr. Soloway. I am sorry?
Mr. DeSaulnier. Have you ever found any of your clients to
do that, and have you taken action to--
Mr. Soloway. I don't have a legal authority to take action.
I am not quite sure what I would--
Mr. DeSaulnier. Well, just, if you think there is a law
being violated do you have a legal obligation to tell the
authorities? Have you ever had occasion to do that?
Mr. Soloway. I wouldn't have that kind of knowledge,
personally.
Mr. DeSaulnier. Okay.
Mr. Goldsmith, similar, the Chamber we found in California
that a lot of it was actually education, so the Chamber and
NFIB actually spent money trying to help people. Have you done
the same thing?
Mr. Goldsmith. Absolutely. Our clients, especially our
larger clients--have large and highly skilled human resources
staffs who spend virtually all of their time in training their
direct reports, and their direct reports training--
Mr. DeSaulnier. Mr. Goldsmith, I am going to take that as a
yes. I appreciate it.
Ms. Walter, we have talked about overreach. Do you have any
opinions on under-reach by previous administrations when it
comes to enforcement of compliance laws?
Ms. Walter. Well, I think our--currently we are under-
reaching. We have responsibility compliance laws.
I think the other panelists have focused on, well, we have
suspension and debarment. Well, we also in our regulations have
responsibility provisions because we want to uphold high
standards, we want to protect taxpayer dollars.
Companies are already required to report into a database.
They are already required to update that information every six
months. They are already responsible for their subcontractors.
But the system is not working. It is not working because
they are not reporting what is important. And the system is not
working because contracting offices don't have analysis about
what is important, and they don't have guidance, and they don't
have the technical expertise they need that this new order will
help institute.
Mr. DeSaulnier. Thank you.
Chairman Walberg. Thank you. Time is expired.
I recognize the gentleman from New York, Mr. Jeffries.
Mr. Jeffries. Thank you, Mr. Chair.
And I want to thank the witnesses for their presence and
testimony here today.
Think I will begin, Mr. Goldsmith, by just picking up on
the previous line of questioning from my colleague,
Representative Clark. I think you indicated that you are
concerned with the inclusion of the pre-dispute arbitration
category as a criteria, correct?
Mr. Goldsmith. That is correct.
Mr. Jeffries. And you have indicated, I believe, that
courts have concluded in large parts of the country, although
there is some dispute as to the 5th Circuit's perspective on
this, that pre-arbitration clauses are permissible. True?
Mr. Goldsmith. Correct.
Mr. Jeffries. But I think that there is a distinction
between what is permissible and what there is a right to do.
And is it your position that employers and contractors have an
absolute right to mandate that their employees sign off on a
pre-dispute arbitration clause?
Mr. Goldsmith. I am not sure I understand the distinction
between an absolute right and a right, but it is certainly
well-established in the law that employers can insist upon, if
you will, a pre-dispute arbitration provision.
Mr. Jeffries. Right. The dispute is not between--
Mr. Goldsmith. It has been the law for a long time.
Mr. Jeffries. The dispute is not between an absolute right
and a right. The dispute is between the opportunity to do
something that is lawful and whether you have an absolute right
to.
You have an absolute right not to be discriminated against,
but you don't necessarily have an absolute right to secure
certain contracting opportunities from the federal government,
correct?
Mr. Goldsmith. And I think that is true. I agree with that.
Mr. Jeffries. So then it is not clear to me how you can
take issue in the context of a duly elected President's
administration, elected twice, coming to the public policy
conclusion that it is not necessarily appropriate in certain
instances to mandate that employers require pre-dispute
arbitration.
Let me turn to--
Mr. Goldsmith. May I respond to that?
Mr. Jeffries. Yes, certainly.
Mr. Goldsmith. I mean, the problem with that is that it is
not the President's call; it is Congress' call. And it is
especially the case when you are talking about well-established
legal precedent.
And I would also suggest that to the extent that a
provision like that exists in this executive order, which, as I
said, you know, can't be tweaked to be saved, that is going to
discourage employers--large employers--from the federal
contracting space, which can't be a good thing for the country
or the taxpayers.
Mr. Jeffries. Is there any evidence, Ms. Walter, to suggest
that the interest in federal contracting opportunities, which
can be pretty lucrative in this country--we are talking about
hundreds of billions of dollars, presumably, each and every
year, if not more--is there any evidence to suggest that the
interest or the lines will dry up because of this executive
order that has been put in place?
Ms. Walter. None that I have seen. I have addressed the
state examples of states instituting these sorts of provisions.
I am not familiar and I am not as familiar with the pre-
arbitration requirements being instituted at the state level,
but efforts at the state level to uphold higher responsibility
levels among contractors have been met with either what we have
seen as no change or actually increasing levels of competition.
Mr. Jeffries. And it seems to me that this executive order
is designed to promote at least three values that I think
should be important to the Congress and to the American
people--you know, protect employees from harmful conditions at
the workplace, protect taxpayers from the integrity of these
contracting opportunities to ensure that those that receive the
opportunity to contract with the federal government are
deserving within the framework of law and statute that already
exists, and then, of course, just to make sure that any
business benefitting from taxpayer dollars are, in fact, law-
abiding.
I mean, does this strike you as the intent and the goal of
the executive order, and are these worthy goals?
Ms. Walter. Certainly. And it is continuing further down
the path of what Congress did when it enacted the contractor
responsibility database, where it is trying to uphold higher
standards among contractors to protect taxpayers.
Mr. Jeffries. Are you aware of anything in law, statute,
common law, Supreme Court jurisprudence, the Constitution, that
provides an absolute right to contractors in America to federal
contracting opportunities? Is it a right or is it just an
opportunity within the parameters of what is established by the
Congress, the administration, or both?
Ms. Walter. What has been established by Congress is that
you have to be considered responsible in order to receive a
federal contract. There hasn't been good definitions about what
that means, in terms of business integrity, to date.
All this does is add to that definition so that contracting
officers can make an informed decision.
Mr. Jeffries. Thank you, Mr. Chair. I yield back.
Chairman Walberg. I thank the gentleman.
And now I recognize a member who is not a member of this
subcommittee but has a interest in it, and we are delighted to
have him here, the gentleman from Arizona, Mr. Grijalva.
Mr. Grijalva. Thank you very much, Mr. Chairman, and for
your courtesy in allowing me to participate in this meeting.
And thank you, to the witnesses.
We have talked a lot about the impact of the executive
order on the function of business and the function of federal
contractors. There is a concurent effect as well, and that is
the effect on workers that have been affected by wage theft and
have been affected by a process currently in the Department of
Labor where the authority doesn't exist for disbarment or for
the compliance issues that the executive order is bringing up.
Antonio Banejas, from my district, who is not here in D.C.,
came in 2010 and worked until May 2013 at the Reagan Building
at a fast-food establishment. He did everything--cooked,
cleaned, handled the register. And he was working over 60 hours
a week and not being paid overtime.
Antonio and others stood up to complain and to use their
collective voice to say, ``We need fair labor practices here
and we need to be paid for what we work.'' The consequence of
that is Antonio was then turned over to Immigration by the
business; he was detained for four days, released, and now two
years later that wage theft complaint is still waiting to be
resolved. The executive order means to expedite that.
And I should--my friend, Mr. Ellison, left, and through his
leadership, on four separate occasions Congress approved an
amendment either by voice or by roll call that essentially has
the outlines of the content of the executive order on wage
theft and what--and disbarring businesses who do that. Four
times, including--all appropriations bills, and including the
appropriations for the Department of Defense, where those are
the big contractors.
Department of Labor is a smaller player, other departments
smaller player. The Departments of Defense and Homeland
Security are the big contracting players, and I mention that
because if I may, Mr. Soloway, ask you a question--Raytheon-
Abouie, through their subcontractors you have a bad actor in
violation of current law, wage law, in violation of other
issues.
That big actor that gets hundreds and hundreds of millions
of dollars of contract work--essential work for the Department
of Defense--their responsibility without this executive order
to police, for lack of a better word, and assure that their
subs are treating their employees in a fair way, consistent
with the current law, how does that happen if there is no
accountability to the big contractor to essentially make sure
that none all the way down the hundreds of millions of workers
are not being shortchanged or abused in the workplace?
Mr. Soloway. They can have, under current law, tremendous
responsibility for that. I have to go back to the premise of
the statement, sir, because I think several of you--
Mr. Grijalva. Well, but--
Mr. Soloway. I am going to answer your question. I
understand. But--
Mr. Grijalva. Chairman was courteous enough to give me a
few minutes.
Mr. Soloway. I think the answer is that this rule, or this
proposed executive order and the proposed rule that will
implement it, doesn't change current policy.
But you made the comment that you--that the Department of
Labor doesn't currently have the authority. It has all the
authorities it needs. The length of time to adjudicate whatever
is happening at the Reagan Center, which has not yet been
adjudicated, which is indefensible, that length of time,
doesn't get changed and expedited by this executive order.
What this executive order does is open the door to
expedition by saying, ``Okay, well if you have been alleged or
you have had several violations you are bad.'' That is a whole
different standard.
Mr. Grijalva. Ms. Walter, to the point that the gentleman
is making, if there is such a mechanism--a functioning
mechanism to disbar and suspend contractors, why is this whole
executive order needed then?
Ms. Walter. Well, I mean, I think the executive order is
about present responsibility. So we are talking about is the
contractor responsible in the present tense?
And so if there are warning signals that they are--they may
not be responsible, it is something that the government should
take a closer look at.
Mr. Grijalva. Thank you. And I think you have made that
point over and over again. I think the executive order does
that--shed light, and in the present tense--and thank you for
that phrase--to begin to create some balance between the
interests of the workers and the interests of the contractor.
With that, Mr. Chairman, again, thank you for your
courtesy, and I yield back.
Chairman Walberg. I thank the gentleman.
And now I recognize the Ranking Member, Ms. Wilson from
Florida, for closing statements.
Ms. Wilson of Florida. Thank you, Mr. Chair.
I would like to thank all of our witnesses for testifying
and answering our questions today.
And I want to thank the workers for attending this hearing
and for your attention, and we appreciate all that you do and
appreciate that you are here with us.
President Obama's Fair Pay and Safe Workplaces Executive
Order has widespread support in the public and private sectors.
The executive order lays out ways that the Department of Labor
can provide compliance assistance or remedial measures to
contractors who are struggling to adhere to labor laws.
I personally believe that this is more than fair. Our
nation's children can fail, according to federal standards,
after a single assessment. They call it high stakes. Yet
government contractors are given chance after chance to receive
multimillion dollar contracts while continuing to blatantly
abuse labor laws.
Last year the Miami Herald and McClatchy newspapers
conducted a year-long investigation in Florida and 27 other
states and found that unethical contractors worked on taxpayer-
funded building projects even as they ignored labor laws and
avoided paying state and federal taxes. This is a no-brainer.
If you want to do business with the federal government, you
must obey federal laws. It is critical that we support law-
abiding companies, that we support our workforce, and that we
eliminate inefficiency and waste in government. This will lead
to a stronger, healthier, and more productive nation.
This executive order will improve the lives of millions of
workers, helping to ensure they have access to fair pay,
benefits, and safe working conditions. For those who suggest
that this process will be too burdensome, there is a simple
solution: Comply with the law. Comply with the law.
If you comply with the law you can check the box indicating
that there are no violations and that your company wants to
uphold high standards.
I would like to enter the following documents into the
record under unanimous consent: the President's Executive Order
on Fair Pay and Safe Workplaces; letters from 68 women's
organizations; the Leadership Conference on Civil and Human
Rights; and the Campaign for Quality Construction in support of
the Fair Pay and Safe Workplaces Executive Order; Center for
American Progress--``At Our Expense: Federal Contractors that
Harm Workers Also Shortchange Taxpayers;'' Government
Accountability Office--``Assessments and Citations of Federal
Labor Law Violations by Selected Federal Contractors;'' and
Senate HELP Committee report--``Acting Responsibly? Federal
Contractors Frequently Put Workers' Lives and Livelihoods at
Risk;'' McClatchy newspapers--``For Florida Companies That Play
By the Rules, Success is as Tough as Nails.''
[The information follows:]
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Ms. Wilson of Florida. Thank you, Mr. Speaker--Mr. Chair.
Chairman Walberg. I thank the gentlelady, and I would
appreciate not being given that title.
I too want to thank the members--witnesses who are here
today. I appreciate your time and attention from all sides of
the issue, to speak to us, to listen to our questions and
concerns, and to sit there and wish that we asked some other
questions, as well, to get the nub of it. We will have that
opportunity. We would appreciate your response.
The letter that I received from multiple business
organizations--H.R. Policy Association, U.S. Chamber of
Commerce, Professional Services Council, American Hotel and
Lodging Association, Trucking Association, contractors, et
cetera, et cetera--expressed the concerns of this entire
Committee, that definitely we want to make sure that bad actors
in the contracting field don't remain as bad actors in the
contracting field--that they are removed or they benefit from
the training and the resourcing that can be given using present
law that is in place, using the capabilities that ought to be
there with our agencies to instruct them in very difficult--
very difficult law that is in place to protect employees, the
workplace, as well as the employers.
We have heard testimony that there are associations and
client bases that are being trained, but that ought to come
from our government level, as well. And I think that is where
my concern comes with this executive order.
It is based upon the fact--and I think I would quote what
the President said in his executive order, that he said that
the vast majority of federal contractors play by the rules. But
he also said that they would not--they would likely not be
impacted by it. I disagree with that.
I agree with the fact that the vast majority of our
contractors do play by the rules. And even those that sometimes
find themselves in violation of rules simply because they
weren't told the rule or they weren't instructed in the rule,
yet want to play by the rules.
But these who are good actors and play by the rules will be
impacted by this executive order. There is no way that they
won't.
And so my concerns, as we take up this order, are several,
and I will just sift them down into just a few.
I am concerned about the lack of due process protections
under the executive order, that we will have a situation where
self-reporting requirement to go back, at great risk of not
knowing every single incidence that a subcontractor, for
instance, might have run amuck of some rule or some policy, in
many cases through no fault of their own, just not being aware
of it. All of a sudden we have due process concerns that
innocent--that our--these contractors are considered guilty
until proven innocent. I have got a concern about that.
I have a concern about burdensome reporting requirements
added on top. And if we are concerned about employees having
their jobs and having the security of their jobs, if we are
concerned about minority and women-owned businesses, for
example, of being able to continue to contract, and yet in
general, in most cases, being small entities without the
ability to have vast resources of legal backup and background
to ferret them through the process of the contracting with this
executive order and the great burden that that puts on,
specifically in the area of making a mistake through no fault
or no effort of their own, and now running amuck of this
executive order and the new provisions. I have a concern with
that.
But I think I also have a concern with the fact that this
is an administrative order that very likely has illegal
ramifications. And I stand here as--or sit here as a member of
Congress, very concerned that, Democrat or Republican, that we
continue to uphold the primacy of the People's House, the
People's Congress, the Article 1 of our Constitution, with
significant responsibilities for all of these laws that we
protect the people we represent and we don't give over that
authority to Article 3, the executive office, without the
authority being given by the Constitution to the President.
I know that can be battled in the court of law, and I am
afraid that if this executive order is implemented there will
be plenty of court battles, indicating that, in fact, this
administration overstepped their bounds of authority.
The unprecedented level of subjectivity introduced into the
responsibility determination process of this executive order
and the possible consideration of non-final adjudications
establishes the executive order as an anti-competitive
administration initiative that I believe will greatly impede
government contracting. And that is my concern, and that is why
I am glad we had this hearing today.
This isn't the end. And I can say for employer and employee
alike, we want to get down to the problem to make sure that we
use the present law effectively to protect all concerned, but
also make sure that we don't allow impediments to come in with
good intentions that will hurt all aforementioned.
So, having stated my piece right now and having heard the
questions and the responses and the testimonies, with no
further business to come before the subcommittee, it is
adjourned.
[Additional submissions by Mr. Walberg follow:]
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[Additional submission by Ms. Walter follows:]
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[Questions submitted for the record:]
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[Response to questions submitted for the record:]
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[Whereupon, at 12:15 p.m., the subcommittees were
adjourned.]