PAGENO="0001" ~~RO (~(96«=~ VA CONTRACTS WITH COMMUNITY NURSING HOMES COMMITTEE ON VETERANS' AFFAIRS HOUSE OF REPRESENTATIVES NINETIETH CONGRESS SECOND SESSION ON EFFECT OF P.L. 89-286 ON VA CONTRACTS WITH COMMUNITY NURSING HOMES FOR CARE OF VETERANS, AS AUTHORIZED BY P.LL 88-450 e (~ mittee on Veterans' Affairs Printed for ~ brinnrrrr~, r~'- -~ .,. oo59 ~«= U.S. GOVERNMENT PRINTING OFFICE WASrnNGTON: 1968 JUNE 19, 1968 JUL 261968 V~LJ A 7] 73/3 PAGENO="0002" I WM. JENNINGS BRYAN DORN, South Carolina. JAMES A. HALEY, Florida WALTER S. BARING, Nevada ROBERT A. EVERETT, Tennessee THADDEUS J. DULSKI, New York HORACE R. KORNEGAY, North Carolina RAY ROBERTS, Texas GEORGE E. BROWN, JR., California. DAVID B. SATTERFIELD III, Virginia HENRY HELS'TOSKI, New Jersey JOSEPH Y. RESNICK, New York JAMES M. HANLEY, New York ROMAN C. PUCINSKI, Illinois WALTER S. BARING ROBERT A. EVERETT THADDEUS J~ DULSKI - RAY ROBERTS GEORGE E. BROWN, JR. WM. JENNINGS BRYAN DORN DAVID E. SAJTTERFIELD III ROMAN C. PUCINSKI B. ROSS ADAIR, Indiana WILLIAM H. AYRES, Ohio PAUL A. FINO, New York JOHN P. SAYLOR, Pennsylvania CHARLES M. TEAGUE, California SEYMOUR HALPERN, New York JOHN J. DUNCAN, Tennessee THEODORE R. KUPFERMAN, New York JOHN PAUL HAMMERSCHMIDT, Arkansas WILLIAM LLOYD SCOTT, Virginia MARGARET M. HECKLER, Massachusetts COMMITTEE ON VETERANS' AF1~AIRS OLIN E. TEAGUE, Texas, C1~a~rman Oniv~a E. MEADOWS, Staff Director SUBCOMMITTEES (Chairman and Ranking Minority Member ex officio Members of all Subcommittees) COMPENSATION AND PENSION WM.. JENNINGS BRYAN DORN, South Carolina, cihairman J~RLJi~b lvi. ±IAINLJiJX WILLiIAM LiL&JXJ) ~SUOTT ROMAN C. PUCINSKI HOSPITALS JAMES A. HALEY, Florida, Chairman JOHN J. DUNCAN WILLIAM H. AYRES PAUL A. FINO JOHN P. SAYLOR CHARLES M. TEAGUE SEYMOUR HALPERN THEODORE R. KUPPERMAN JOHN PAUL HAMMERSCHMIDT (II) PAGENO="0003" WALTER S. BARING, Nevada, Chairman RAY ROBERTS WILLIAM H. AYRES DAVID E. SATTERFIELD III PAUL A. FINO HENRY HELSTOSKI SEYMOUR HALPERN JOSEPH Y. RESNICK JOHN J. DUNCAN MARGARET M. HECKLER INSURANCE ROBERT A. EVERETT, Tennessee, Chairman HORACE R. KORNEGAY JOHN P. SAYLOR GEORGE E. BROWN, Ja. JOHN PAUL HAMMERSCHMI]YT HENRY HELSTOSKI MARGARET M. HECKLER CONTENTS American Legion: Page Golembieski, E. H., director, National Rehabilitation Commission 3812-3814 Mattingly, Charles L., assistant director, National Legislative Commission 3812 American Nursing Home Association: Ercolano, Alfred S., executive director 3838-3843 Exhibits, correspondence and memorandums 3818-3839 Pickens, John K., general counsel 3818, 3829, 3833, 3839, 3842 QQ1Q QQ'~ `)OAA OQ~') PAGENO="0004" VI Scerra, Joseph A. (See Veterans of Foreign Wars.) Service Contract Act of 1965, Public Law 89-286, Legislative History: House of Representatives, H.R. 10238: Page Floor debate, September 20, 1965 3764-3768 Hearing, Committee on Education and Labor 3775-3794 Report No. 948 3734-3738 Public Law 89-286, text 3796-3798 Senate, ILR. 10238: rloor debate, October 1, 1965 3794-3795 Hearing, Committee on Labor and Public Welfare 3739-3763 Re ort No 7~8 ow~wjox1 ii. v~.; iJej5ilty 2cffm1nrs~ra~cyrj 3so8-3s Veterans of Foreign Wars: Scerra, Joseph A., commander in chief 3804 Stover, Francis W., director, National Legislative Service 3814-3816 Walker, Ed. (See American Nursing Home Association.) Wirtz, Hon. W. Willard. (See Labor, Department of.) I PAGENO="0005" President of the United S~ates (See Johnson, Hon. Lyndon B., President of the United States.) Public Law 89-286. (See Service Contract Act of 1965.) Roberts, Hon. Ray - 3809, 3811, 3843, 3849-3853 Robertson, Ben P. (See Labor, Department of: Wage and Hour and Public Contra1cts Divisions.) Satterfield, Hon. David E., III VA CONTRACTS WITH COMMUNITY NURSING HOMES . . WEDNESDAY, J~UNE 19, 1968 HousE OF REPRESENTATIVES, arisen with regarci to i'u~iic ~aw ~-4EtU ana YUDI1C lAW ~ By enactment of Public Law 88-450, which originated in this subcommittee, Congress created the veterans community nursing home program, which is used for veteran patients who have achieved maxi- mum hospital benefits but who are in need of further medical atten- tion. Six months' care is provided ; however, there is a basis for ex- tension. These homes are available in practically every community in America. The Veterans' Administration has contracts or agreements with 2,325 community nursing homes having approximately 170,000 beds in 48 States and Puerto Rico ; $25 million has been spent on this program so far. There are about 3,000 veteran patients under the pro- gram at the present time. The objective of the program was to take veterans out of expensive hospital beds and place them in nursing homes near their homes. The program has been an outstanding success. In most instances a typical nursing home will have only two or three patients under the VA program. Earlier this year in a routine examination an agent of the Wage and Hour Public Contracts Division of the Department of Labor raised the question and his Department subsequently ruled that com- munity nursing homes having contracts with the Veterans' Adminis- ~ ~ ~ ~ . PAGENO="0006" ~~1~A1A:~(-bM'rP A orr~ wrr~ ~A1~Ir1u-TT1~jTrp~%r rn~mici Public Law 89-286, the Service Contract Act of 1965, was enacted for the principal purpose of requiring that the minimium wage be paid to service employees hired by agencies having contracts to pro- vide service to the Federal Government. The act defines "service em- ploye)e" as guards, watchmen, and any person engaged in a recognized trade or craft, or other skill, mechanical craft, or an unskilled, semi- skilled, manual labor occupation ; or any other employee, including foreman or supervisor, in a position having a trade, craft, or labor experience, as a paramount requirement. The legislative history of the act indicates that it was not the intention of Congress to cover medical services. House Report No. 948 contains the following statement: "Thus, for example, contracts made by the District of Columbia gov- ernment with local hospitals for the care of indigent patients would not be covered since `service employees' as defined in the bill would be performing only incidental functions." In addition to this indica- tion that medical services be exempt, section 4B of the bill provides authority for the Secretary of Labor to provide exemption "as he may find necessary and proper in the public interest or to avoid serious impairment of the conduct of the Government's business." The Secre- ~ anih ~ ~ ±i~y~±a ti~iz~ at~i~c~ the Secretary for his authority for the action he had taken and re- quested a reply at the earliest possible time. Eleven days later, on June 3, he received a brief acknowledgment, and on June 7 Chairman Teague directed another letter to the Secretary of Labor asking for a reply to the letter by the Administrator of Veterans Aft~airs, and asked for a prompt response. To date no response has been received. On June 11 Chairman Teague sent a telegram pointing out to the Secretary of Labor that he had not received a reply to his letters, that he was convinced the interpretation was wrong, and that failure to act would result in serious impairment to the Veterans' Administra- tion nursing home program. This telegram requested a prompt re- sponse. On June 11 Chairman Teague directed a letter to the Presi- dent of the United States calling his attention to the conifict between PAGENO="0007" VA CONTRACTS WITH COMMUNITY NURSING HOMES 3733 On June 13, 1968, I sent a telegram to Secretary Wirtz on this same subject. The Wage and Hour Division has not applied this same ruling in thents witil tne \~ eterans' &ci:ministFaiion; ~ut ciespite this, `tne ~ecre- tary of Labor has specific authority under the act to grant an exemp- tion where necessary to prevent serious impairment of the conduct of the Government's business. Without objection I will insert at this point in the record the legis- lative history of Public Law 89-286 together with correspondence on this same subject and other material pertinent to this hearing. (The material referred to follows:) PAGENO="0008" 89TH CONGRESS ~ HOUSE OF REPRESENTATIVES 18t Se88ion f as amended do pass. The amendment is as follows: Page 7, beginning in line 19, strike out "transportation, handling, or delivery of the mails, or" EXPLANATION OF COMMITTEE AMENDMENT The committee amendment has the purpose of including under the provisions of the bill contracts with the Post Office Department for the transportation, handling, or delivery of the mails. EXPLANATION OF BILL This bill is proposed to provide much needed labor tection for employees of contractors and subcontrr services to or performing maintenance service for The service contract is now the only remaiiiing cat contracts to which no labor standards protections r tion contracts, including many which s partial Fecli ~ to which the Federal ~ut is not a ~ with minimum labor under the I lAt,Pd ~ ~ - p - REPORT No. 948 SERVICE CONTRACT ACT OF 1965 SEPTEMBER 1, 1965.-Committed to the Committee of the Whole Ilouse on the State of the Union and ordered to be printed Mr. POWELL, from the Committee on Education and Labor, submitted the following PAGENO="0009" (Joncern over protection br wage standards ot empioyees ot em- ployers having service contracts with the Federal Government has been expressed by Members of Congress for a number of years. During the 88th Congress this committee conducted hearings on a number of bills having the same general purpose as the bill herein reported. The record included pleas for this type of legislation from labor organizations and from service contractors. Testimony was heard from Federal agencies. Reports were received from th~ Bureau of the Budget, General Services Administration, and the Board of Commissioners, District of Columbia. A bill was reported (H. Rept. 1495, 88th Cong.). On January 12, 1965, H.R. 2453, a bill quite similar to the bill reported in the 88th Congress, was introduced. The bill, H.R. 10238 by Mr. O'Hara of Michigan, together with H.R. 10239 by Mr. Pelly, is a bill sponsored by the administration. On August 5 the committee conducted a hearing. Mr. Charles Donahue, Solicitor of Labor, represented the administration. He told the committee (p. 7 hearings): The Budget Bureau advised us that there was no objection ?~ opposition to this proposal and that it was consistent with Ser~ice emp1oyees~ in many inst~ances are no~ ~ov~red by the Fair Labor Standards Act or State minimum. wage laws. The counterpart of these employees in Federal service, blue-collar workers, are by a Presidential directive assured of at least the Fair Labor Standards Act minimum. Bureau of Labor Statistics surveys of a ~ erage earnings in service occupations in selected areas in 1961 and 1962 show, however, that an extremely depressd wage level may prevail in private service employment. In contract cleaning services, fOr example, in some areas less than $1.05 an hour was paid. Elevator operators earned low rates, varying from $0.79 to $1.17 an hour. Service contract employees are often not members of unions. They are one of the most disadvantaged groups of our workers and little nope exists for an improvement of their position without some positive action to raise their wa ~e levels. The *~ ~ ~l Gov has added respoi because Gi lowest respons. factor in most ser bid for a contract the lowest wage. w~ PAGENO="0010" to a service contractor with low wage standards, the Government is in effect subsidizing subminimum wages. PROVISIONS OF BILL The bill is applicable to advertised or negotiated contracts, in excess of $2,500, the principal purpose of which is for the furnishing of services through the use of service employees, as defined in the bill. Thus, for example, contracts made by the District of Columbia ~ ~ t/~t~Ith5 1~2 ~ ~ . ~ ` . . i . ~ ~ . The bill also recognizes the growing importance of fringe benefits as an element of wages in today's society. It therefore requires inclusion in the contract of an agreement to provide service employees benefits determined by the Secretary to be prevailing for such em- ployees in the locality. This obligation may be discharged by furnish- ing any equivalent combinations of benefits or cash payments in accordance with regulations of the Secretary. The bill also prohibits the payment on any Government service contract of wages less than the minimum wages required under the Fair Labor Standards Act. In addition to the wage and fringe benefits requirements of the bill, additional stipulations require that service or maintenance work shall not be performed under unsafe or unsanitary working conditions where those working conditions are under the control of the contractor 0!~ subcontractor. Contractors or subcontractors are also required to notify employees of the benefits due them under the act. In the event of ~rio1ation, the bill authorizes the withholding from the contractor of accrued payments necessary to pay covered workers the difference between the wages and. benefits required by the con- tract and those actually paid . The Government may also bring court action against the contractor, subcQntractor, Qr surety to recover the The Secretary's authority to prescribe regulations includes authority to permit reasonable tolerances, vai.iations, and exemptions from pro- visions of tite act where they are deemed necessary and proper in the public interest or to avoid serious impairment of Governlnent business. The committee, however, does not expect the Secretary of Labor to be bound by past practices worked out for determinations under the PAGENO="0011" ~1) ti provision speciiyiiig tiiit~ uiimrnuui vv~~~v' v'-' ~-"i service employees performing the contract as established by the Secretary in accordance with prevailing rates for such employees in the locality. (2) A provision specifying the fringe benefits to be furnished such employees as determined by the Secretary as prevailing for such employees in the locality. (~\ A J~V~ThjT1Q1C~fl f.1-i~i±. nt~ nc~.vt c~f siwh ~ontra~t will l)e nerformed Act of 1938. Section 3 provides that a violation of section 2 by failure to pay the prevailing wage or fringe benefit or the Federal minimum wage under the Fair Labor Standards Act shall render the contractor liable for a sum equal to the amount of any such underpayment and provides that the contracting agency may withhold payment to the contractor in the amount necessary to pay such employees the amounts due them. In addition, the United States is authorized to cancel contracts performed in violation of the provisions of the act. Section 4 establishes the authority to the Secretary of Labor to enforce the act, including the promulgation of such rules and regu- lations, orders, et cetera, which may be necessary to do so. Section 5 provides that the Comptroller General shall distribute to all Federal agencies a list of those contractors found to have violated the act and prohibits the awarding of further contracts to violators for a period of 3 years after such publication unless the Secretary of Labor otherwise recommends. if the accrued payments withheld under the contract are insufficient to reimburse employees with respect to whom there has been a failure to pay the compensation required under this act, the United HEARING BEFORE ¶I~HE SUBCOMMITTEE ON LABOR OF TUE COMMITTEE ON PAGENO="0012" uoIumDla, ruerto ifico, the Virgin Islands, Outer Continental Shelf lands, Samoa, Guam, and Wake Island. Section 9 provides an effective date 90 days from the date of enactment. 3740 ULAWOENE FELL, Rhode Island EDWARD M. KENNEDY, Massachusetts GAYLORD NELSON, Wisconsin PAGENO="0013" U.S. GOVERN~fENT PRINTING OFFICE WASHINGTON: 1965 (3739) CONTENTS Pag* 2 H.R. 10238, text of STATEMENT Donahue, Charles, Solicitor, Department of Labor 10 ADDITIONAL INFORMATION 97 1Wtit fVI~Tn (~`i7t'iiQVqflflA PAGENO="0014" PAGENO="0015" SERVICE CONTRACT ACT OF 1965 THURSDAY, SBPT~MBER 23, 1965 tLS. SENATE, SUBCOMMITTEE ON LABOR OF THE COMMITTEE ON LABOR AND PUBLIC WELFARE, Washington, D.C. professional stall memDer. -. . . ~_ Senator MCNAMARA. The informal hearing will be in order. Mr. Donahue, will you move up to the table here, please. We are glad to have you here this morning. Naturally, since we are considering the House bill 10238, we would like to have a state- ment from you answering some of the obvious questions, such as the justification for this legislation that the administration seems to be supporting, the number of people involved and the needs you find existing in the area. I expect it would be helpful for you to explain to us why they should not come under some of the existing programs that deal with matters of a similar nature, such as Davis-Bacon, or Walsh-Healey. I wifi insert a copy of the bill in the record. (H.R. 10238 foilows.) 1 (3743) PAGENO="0016" 3744 SEPTZMBnR 21 (legislative day, SErTE~&BER 20), 196~ Read twice and referred to the Committee on Labor and Public Welfare AN ACT To provide labor standards for certain, persons employed by Federal contractors to furnish services to Federal agencies, and for other purposes. Be it enacted by the Senate and House of Bepresenkt-. lives of the United States of America in Congress assembtecl, That this. Act may be cited as the "Service Contract Ac~ 4 of 1965". i-'~r'~ j~j"~ `S" wisa~u ~s w iurmsu services in. uae 1 2 3 2 PAGENO="0017" ~_, I ~ZIJ Unitea st~t~ through the use of service employees, as definc4 herein, shall contain the following: (1) A provision specifying the minhniim monetary ~wages to be paid the irarious classes of servioe* em- ployees in the performance of the contract or any sub-S contract thereunder, as determined by the Secretary, or his ~tuthorized representative, in accordance with pre-~ ~vai1ing rates for such employees in the locality, which in no case shall be lower than the minimum specified. in. ~iihs~~finn (h~ _ Ills authorizea representative to te prevaiiing ior suen. employees in the locality~ Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, va- cation and holiday pay, costs of apprenticeship or other similar programs and other bona fide ~fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractorS The obli- :1 2 4 a 7 8 9 iT 18 19 20 21 22 2. 24~ 25 PAGENO="0018" P3746 1. gation under this subparagraph may be discharged by 2 furnishing any equivalent combinations of fringe benefits 3 or by making eanivalent or differential Davments in cash `p uw cun~rui Ot sapervision 01 tne contractor or any SIiD- 9 contractor, which are unsanitary or hazardous or dau-~ 10 gerous to the health or safety of service employees 11 engaged to furnish the services. 12 (4) A provision that on the date a service em~ 13 ploye~ commences work on a contract to which this 14 Act applies, the contractor or subcontractor will deliver 15 to the employee `a notice of the compensation required. 16 under paragraphs (1) and (2) of this subsection, on 17 a form prepared by the Federal agency, or will post a. 18 notice of the required compensation in a prominent 24 any of his employees engaged in performing work on such 25 contracts less' than the minimum wage specified under sec-~ 4 PAGENO="0019" ~EC. ~. ~a) Afl~ violation ot any ot tne contract sup.uia tions required by section 2 (a.) (1) or (2) or of section 2 (b) of this Act shall render the party responsible therefor liable for a sum equal to the amount of any deductions, re- bates, refunds, or underpayment of compensation due to fund. On order of the Secretary, any compensation which the head of the Federal agency or the Secretary has found to be due pursuant to this Act shall be paid directly to the~ underpaid employees from any accrued payments withheld. under this AOt. (b) In accordance with regulations prescribed pursuant to section 4 of this Act, the Federal agency bead or the Sec~ retary is hereby authorized to carry out the provisions of this section. (c) In addition, when a violation is found of any con~- tract stipulation, the contract is subject upon written notice~ 6 7 8 9 15 16 17 18 19 20 21 22 23 2 25 1 stantial interest until three years hayc `elapsed from, the 2 date of publication of the: list contahuing. the name of such PAGENO="0020" 10 hereunder. 11 (b) The Secretary may provide such reasonable limi- 12 tations and may make such rules and regulations allowing 13 reasonable variations, tolerances, and exemptions to and 14 from any or all provisions of this Act as he may find neces- 15 sary and proper in the public interest or to avoid serious 16 impairment of the conduct of Government business. 17 SEc. 5. (a) The Comptroller General is directed to 18 distribute a list to all agencies of the Government giving 24 or association in which such persons or firms have a sub- 6 3Tho `1 including painting afld. deoorating ~of public buildings*or 2 pUblic works; PAGENO="0021" regiLw~r or uu~w nou.uy ~tvt~ `.~L puy vi ~u.u a~i not include any fringe benefit payments computed hereunder Which are excluded from the regular rate under the Fair Labor $tandards Act by provisions* of section 7(d) thereof. SEc. 7.. This Act shall not apply to- (1) any contract of the United States or District of Columbia for construction, alteration and/or repair, 3751 or skilled inannal labor occupations; and -any other ~mployoe including a foreman or supervisor in a position having trade, craft, or :l~boring experience as the. paramount requirement; and. shall incliideill such persons regardless of any contrac~ tual relationship that may be alleged to exi~t. between a con~ the District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined, in the Outer (Don- tinental Shelf Ivands Act, American Samoa, Guam, Wake Island,: but shall `not include' any- other territory under the jurisdiction of' the United States or any United States base or - possession witl3in:a `foreign country. Si~. 9. This Act - shall annlv to all contracts ~11tATAa 20 21 23 24 2. 7 -1 2 3 4 5 11 12 13 14 15 16 17 PAGENO="0022" -- V.L&~~ JJF~~1UJVL~JL~ ~.FL 25 or other skilled meoh&mcal craft, or m unskilled, semiskiPed, 8 - - - - .- ---- --- - ~--- - ~ `,~ ~~%J .1:' `-`~ -`~-`~ V(~l)W~#~J V'J ULL~ subcommittee that I possibly can. This is a bill which is supported by the administration. It has the purpose of filling a gap in labor standards upon Federal Govern-. ment contracts. We have the Waish-Healey Act which covers supply contracts ; we have the Davis-Bacon Act which covers construction contracts, as the Senator well knows. But we have not any standards at all which could be applied to assure that the Government is paying fair wages, prevailing wages, on service contracts of the Government. That is a particularly unfortunate thing for those workers, mainly unskilled workers, for example, who provided janitorial and mainte- nance service under contracts between contractors and the Govern- ment, where the main factor of competition between the various contractors is the wage rates paid to the workers. The result is that sometimes pitifully low wages are paid. A survey made concerning the wage rates in these service classifications show 89 cents an hour was paid to elevator operators in Atlanta ; 79 cents in Memphis. Senator PROUTY. When were those wages paid? Mr. DONAHUE. This was made by the Bureau of Labor Statistics in 1963. Senator PROUTY. You don't have any idea what they ~re ~iirrent1v. Mr. Ji0NAHUE. We lind the lower wage rates primarily in the South Senator. Senator PROUTY. Thank you. Mr. DONAHUE. I think that it is just a matter of simple justice that this legislation should receive favorable consideration. It is a measure which the chairman has introduced in his bill in the Sen ath 1 I. PAGENO="0023" I I 3753 Now, I would be very glad to answer any questions which members of the committee or their staffs may have concerning it. At the threshold I have been told that there is some curiosity as to why we did not simply take the Davis-Bacon Act and extend it so that it would cover service contracts as well as construction contracts. I think perhaps that there are several answers to that question, the first of which is that at the time this bill was first being considered, that approach was thought of. In fact, there were in the House of Representatives at least several bills which took that approach to covering service contracts under the Davis-Bacon Act. We did not take it at that time and thereafter did not take it, because, as the Senators will recall, about 1962 when this measure was first introduced, the Davis-Bacon Act was under very thorough in.. vestieation in the House of Representatives and there seemed little intende~ exception was misconstruect ~y some as meaning i~na~ we Wtwt' applying the Davis-Bacon Act. I believe the complaint was that we were excluding maintenance and repair work from the Davis-Bacon Act and putting it under another statute. We were not doing that and we changed the lan- guage here to insure that that would not be misunderstood in any way. I just cite that to show that there is a certain amount of real sensi- tivity as to any amendment which affects the scope and purpose of the Davis-Bacon Act confined as it now is to the construction industry. Another answer to that question is, that in principle, without . mentioning . it, we have followed the Davis-Bacon Act. I address myself to the provisions on page 2 of the bill as it was reported in the House of Representatives, paragraph No. 2, which provides for the determination of prevailing wage rates by the Secretary of Labor on the basis of those prevailing for service employees in the locality. Now the word "locality" is comparable to the words in the Davis- Bacon Act; city, town, village, or any other political division of the State in which the contract work is to be performed. We have found in the administration of the Davis-Bacon Act that we cannot give a technical construction to those specific words in the act. For that reason, we have substituted the word "locality" for ~).t,uii J)Ld~.L~.LLb (J~U &hu j J(~J~LiL~4 LI VL ~)J.)LJ 11 PAGENO="0024" 3754 We would rr~vide in this. hill fôv c~. flA~4h1A ~1~~411~j ~ ith~ i~h~ assume there were not. Senator MCNAMAEA. Were these people in any manner temporary employees or were they what you would consider permanent em~ pioyees? Mr. DONAHUE. Well, from the categories of workers, in At1anta~ for example, wage rates for laundry and deaning seiirices; and in Balti-. more, they give wage rates for elevator operators; I assume that that is as permanent as any other similar type of employment is. At those wage rates I would regard any employment as probably temporary in character, because each person is trying to move on as fast as he can to something that pays him a little more. Senator MCNAMARA. Senator Prouty, you apparently bad some questions. Senator PROUTY. Senator Javits is here. ~ ~ .. Senator MCNAMARA. Senator Javits? Senator JAVITS. I just walked in, but what I have in mind may be troubling Senator Prouty, too. We are troubled, and I ~ am briefed by the minority labor counsel, by two questions : One, why do you need a bill at all; why do you not just have a very brief amendment to the Davis-.Bacon Act? And two, what is the legal and conceptual~ difference between the catechism proposed by this bill, to wit : "pre- J..LVW ~ U ~ L,uIS urn, thiu ii ~U, Wna~ is it Mr. DONAHUE. That is a good uestion, Senator, and 1 think I can explain it best this way. . In the first place, the word "locality" is not a new word, it is used in the Walsh-]E[ealey Act and it has been accorded a very wide degree of flexibility by use of the statute in court decisions in a number of cases. Now, the second answer is the Davis-Bacon provision: "City, town, village or other political subdivision of the State in which the contract work is to be performed," is 1an~uage which cannot be liter- ally applied. If it is, it is much too rigid to suit the needs of that statute and I think* that that was recognized at the time the statute was first enacted by some of the colloquies which occurred, particu- larly in the House of Representatives1 as I remember it. - 12 PAGENO="0025" [ ~3755 We cannot confine ourselves under that statute to one State, for example, we~ even have to ~ reach Qut beyond a State line in many areas o~ the West to find a prevailing wage i~ate. ~ We cannot coufii~e ourselves to the District of Columbia, for example, in establishi~ig wage rates for this metropolitan area. And we do not do so ; we reach out beyond the District of Columbia. So, it is in deference to that need for flexible applications under the Davis-Bacon Act that we have used what we believe to be a more realistic word when we use the word "locality." A question might come up~ how would we construe that word? We would construe it, I would believe, in terms of metropolitan areas in the first instance; I believe it would be most convenient administratively, for example, to take what they call. the standard metropolitan . statistical area comparable numbers 01 people in trie same types oi joDs to wmcn uie contracts on the base relate. . Senator JAVIT5. In other words, really, you are telling us that because of the nature of this business, you need a standard which is more administrable? Mr. DONAHUE. That is correct. As a matter of fact, we ran into fairly sharp criticism in investigation a couple of years ago in the House of Representatives because we did not literally . apply . the Davis-Bacon Act. . . . One example was Quantico, Va., the Marine base there. We determined it was the equivalent of a city by itself and that there was enough construction there so that the Quantico rate was the pre-. vailing rate. We were criticized because Quantico was not a State or a political sub4ivision, for example, but I think it was a realistic result we reached. Senator JAVITS. You do not intend to come in. for changes in, the Davis-Bacon Act itself, do you? Mr. DONAIIUE. Not at this time, Senator, and we did not consider it advisable to attempt to open up that statute in this way at this time. As I said to the committee before you came here, the building trades are very sensitive to any amendments which may affect that. ~uflt,* w ~ I U i.w~b~ u~IL ~ ,jj ui~ç~ ~&i ~ y ,~ t~IL Healey Act? . . ia PAGENO="0026" 3756 ~ `-,~ -&`~,`, A)~~ JU)VLL~.L Vi~W)1L Ull U,iIJ I1U~UIU1IW1Ut3 UUSIS~ 1. WOUIU believe. Senator JAVITS. Why use the word of art, "locality," which has been construed by the courts? Mr. DONAHUE. We have not been confined in establishing wage rates by the courts. We have not been restricted under the Walsh- Healey Act. There is authority to have multiple rates for different parts of the country under that statute. We have that type of discretion. If the committee should think that we should not use that discretion on a nationwide basis, and may I say it is only because and in those cases where there is nationwide competition that the courts have sustained a nationwide wage rate under the word "locality." It is doubtful in my mind that they would be able to do that under this word "locality" in this statute where I think it may be found that no such nationwide competition will probably occur. Senator JAvITs. Mr. Chairman, I ask unanimous consent that the rccord may be corrected by Mr.. Donahue in view of the specificity which he used in defining how he would administer this law if on review he should decide something else needs to be said or added. Senator MCNAMARA. Without objection. Mr flfli'JAT-TTTi~ Thc~T~1r -~c.i~ 4 ~ ~ ~ , ~ do not know how the statute would be administered in the Department of Labor if passed. My own personal view of it would be that a very appropriate place for its administration would be with the Wage and Hour Act in the Wage and Hour and Public Contracts Divisions, and if so, I imagine that a fair amount of the inspection and enforce- ment could be reasonably absorbed by that operating. arm of the Department of Labor. Senator MCNAMARA. Well then, your guess is that it would require approximately 10? Mr. DONAHUE. That is the estimate which has been made; yes. Senator MCNAMAJtA. You mentioned the Budget Bureau. Do we understand that the Budget Bureau has approved this legislation? Mr. DONAHUE. They have said there is no objection to it and that it is consistent with the objectives of the administration. Senator MCNAMARA. Very well. Any other questions? 14 PAGENO="0027" Senator JAVITS. Senator Prouty has some. Senator MCNAMARA. Senator Prouty? Senator PROUTY. Mr. Donahue, first, I wish you would submit for the record a memorandum indicating the differences and similarities between this proposed legislation and the Waish-Healey and Davis.. Bacon Acts. I think that would be helpful. Mr. DONAHUE. I will be delighted to do that. Senator JAVITS. Would the Senator yield? One other point. ~ Are we to assume that these statutes, including this one, will now cover everybody, or do you still have any interstices? Mr. DONAHUE. There is one group that would not be covered and in my opinion they need coverage very much, and that is part of the L'~iLu, v'j~ ~ .~ L,; iv .if lcx~, ~ vA~~ ~ ~ Prouty has asked, any thoughts you may have for those employees who work in the PX's. If we are going to do the job, let's do it. Mr. DONAHUE. The principal fact of the matter is it could be done by administrative action. Senator JAVIT5. Tell us that anyway. Let us have that informa.. tion. Mr. DONAHUE. Surely. (The memorandum and additional information referred to follow:) MEMOUANDTJM ON PEINCIPAL DIFFERENCES BETWEEN THE SERVICE CONTRACT Ac~ PROPOSAL, S. 2369, AND THE DAVIS-BACON Acr (40 U.S.C. 276a-276a--7) AND WALSH-HEALEY PUBLIC CONTRACTS ACT (41 U.S.C. 35-45) . PURPOSE These acts have the common purpose of requiring minimum wage standards for employees on Government contracts, as determined by the Secretary of Labor. The Davis-Bacon Act and the Service Contract Act proposal include express requirements for, the payment of certain fringe benefits. The Waish-Healey Public Contracts Act and the Servica Contract Act further include health and safety requirements. COVERAGE The Davis-Bacon Act covers contracts of the United States exceeding $2,000 ~ an WI4W?r e1i~i~oç ~c~p~cJ~ Dainting and decorating of The Service Contract Act proposal covers contracts, the principal purpose of which is to furnish services through the use of service employees, as defined in the 15 95-824 0-68-3 PAGENO="0028" work performed under the Service Contract Act proposal. 1~NFORCEMENT The two acts and the proposal all provide for contract cancellation and with- holding of payments due contractors if the labor standards provisions are violated. Similarly, they provide for debarment of violating contractors from Federal contract award. Under Davis-Bacon Act, the debarment period is~ 3 years. Similar language under the Davis-Bacon Act is construed as barring the debarred contractors from participating as subcontractors as well. Under Walsh-Healey and the Service Contract Act proposal the debarment period is 3 years but the Secretary of Labor has the discretion to recommend against debarment. The Service Contract Act proposal incorporates by reference the provisions of the Walsh-HealeY Public Contracts Act requiring the Secretary of Labor to hold administrative hearings subject to section 5 of the Administrative Procedure Act to determine violations. Comparable procedures under the Davis-Bacon Act are less formal, although with respect to violations the contractor is afforded an opportunity to be heard both before the executive branch and the Comptroller General. NONAPPROPRIATED FUND ACTIVITY EMPLOYEES OF DEPARTMENT OF DEFENSE There is attached a Department of Defense directive requiring that certain of No. 1416.6 ASD(M) DEPARTMENT OF DEFENSE DIRECTIVE Subject: Minimum wages for nonappropriated fund employees. Reference: (a) Fair Labor Standards Act, as amended (29 U.S.C. 201 et seq.). I. PURPOSE This directive establishes a Department of Defense minimum wage policy for employees of nonappropriated fund activities. II. APPLICABiLITY `This directive is applicable to all components of the Department of Defense (military departments, defense agencies, and the Office of the Secretary of De- fense), hereinafter referred to as "DOD components.' 16 PAGENO="0029" Deputy ~ecre~ary 01 ue;ense. Senator MCNAMAtRA. We have an amendment that is being passed `out here, suggested by a member of the full committee in the House. I understand that you have seen a copy of this amendment. Did you `get one now? Mr. DONAHUE. I do not happen to have it now. Senator MCNAMARA. Bob is going to read it, as he has been there and can pronounce the names. Mr. PERRIN. I don't remember, but on page 8, line 10, after the word "Island," insert the following: "Eniwetok Atoll, Kwajalein Atoll, Johnston Island * * Mr. DONAHUE. I can pronounce the last one. Senator MCNAMARA. I understand these are included in the bill amending the Fair Labor Standards Act this year. Mr. DONAHUE. This coverage was in the bill as reported by the House of Representatives this year and the bill as recommended by the request 01 IJongressman u'nara, we got iii W1i~ wii~u ~-~ivi1gLv~w~ (17) 3~61 Senator PROUTY. Let me ask you this then : Would you have any objection if this finding of the wage rates were restricted to an indi~ vidual State? I mean, for example, prevailing wages in New York City are not comparable with some rural community in some small State. But perhaps the average wage throughout the State might be somewhat comparable. Mr. DONAHUE. That would be one basis for doing it, but I believe that the wage rates do not respect State lines. For example, I believe the State line between Indiana and Illinois out in Gary runs through a powerhouse. It divides it in half. I just give that as an extreme example. I believe it would be realistic for us to take, if we were considering the Chicago area, the wage rates paid in Gary, for example, on one side of that State line and the wage rates paid on the other side of fh~if ~ liflA, PAGENO="0030" under contract with the Federal ~iovernmeiLit. We ~would not~regard those added payments as part of the regular rate of pay when made ~r ~ ~ ~ ~ ~ ~ L'Ji xii'%y `3 VV ii 1111W ui&iii~1i. * ~ I tj~iiiiit you said that you could not determine the prevailing wage scales in the District of Columbia. Why can you not do that in any metropolitan area-determine the prevailing wage scale? Mr. DONAHUE. I tried to say that we could not realistically confine ourselves to the exact boundaries of the District of Columbia. Senator PROUTY. Let us take any metropolitan area, New York City, for example. Mr. DONAHUE. Well, in New York City we have authority under the statute to seek out any city, town, village, or other political subdivisions of the State which is broad enough to let us go out beyond New York City as far as we wish, or as far as we need to, in order to ascertain sufficient wage rates to determine what is prevailing. 18 3762 SENATOR MCNAMARA. I think the common use of the word "scale" ~ ~ ~ ~ ~?~-~/ ~J~.&&Ld&L1e ~ t~' p1u'~iul~ j~i~i~ tonal service, including cleaning offices and similar services. Now, what position is the building owner in under the provisions of this bill? Mr. DONAHUE. I believe he would not b~ covered under the pro- visions of this bill, because it applies to contracts which are primarily service contracts, and I would assume that such a leasing arrangement providing janitorial services is not primarily a service contract, Senator; that it would be in effect a lease of space in a building. Senator PROUTY. That is all I have, Mr. Chairman. Senator MCNAMARA. Thank you very much. If there are no other questions, we appreciate your taking the time to appear here and give us this clarification. Mr. DON~IUE. It is my own pleasure to have a chance to be of any PAGENO="0031" 3763 Nonunion contractors, almost invariably from another State, paying sub~ minimal wages, underbid area contractors who pay the going rate in the area, with the consequent displacement of workers, the destruction of decent work and. salary standards, and the lowering of the quality of the cleaning work performed. The Service Contract Act would require that contractors doing this work pay the prevailing rate for similar work in the locality and provide similar fringe benefits. The bill has the endorsement of every Government agency and de- partment. We are hopeful that the Senate Subcommittee on Labor will also give it unani- mous support. If you would like any further information on this please do not hesitate to call upon us. Sincerely, DAVID SULLIVAN, General President.. (Whereupon, at 10:50 a.m., the subcommittee went into executive~ session.) I 21 PAGENO="0032" I 3764 VA CONTRACTS WITH COMMUNITY NURSING HOMES DEBATE IN HOUSE OF REPRESENTATIVES ON H.R. 1O2~8, EXCERPT FROM CONGRESSIONAL REco1w~ SEpT. 20, 1965 ~ervice uontract Act 01 ~ "SEC. 2. ( a) Every contract (and any bid specification therefor) entered into by the United States or the District of Columbia in excess of $2,500, except as provided in section 7 of this Act, whether negotiated or advertised, the principal purpose of which is to furnish services in the United States through the use of service employees, as defined herein, shall contain the following: " (1) A provision specifying the minimum monetary wages to be paid the van- ous classes of service employees in the performance of the contract or any sub- contract thereunder, as determined by the Secretary, or his authorized repre- sentative, in accordance with prevailing rates for such employees in the locality, which in no case shall be lower than the minimum specified in subsection (b). " (2) A provision specifying the fringe benefits to be furnished the various classes of service employees, engaged in the performance of the contract or any subcontract thereunder, as determined by the Secretary or his authorized repre- sentative to be prevailing for such employees in the locality. Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compen- sation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. The obligation under this subparagraph may be discharged by furnishing any equivalent combinations of fringe benefits or by making equiva- lent or differential payments in cash under rules and regulations established by the Secretary. " (~ A rn'nvi~irn-~ th~~t uc~ i~o~'~ ~-~P 4-1-.~ ~ ~ ~ ~ ~ service employees as defined herein and no subcontractor thereunder shall pay any of his employees engaged in performing work on such contracts less than the minimum wage specified under section 6(a) (1) of the Fair Labor Standards Act of 1938, as amended (52 Stat. 1060 ; 29 U.S.C. 201, et seq.). " (2) The provisions of sections 3, 4, and 5 of this Act shall be applicable to violations of this subsection. . "SEC. 3. (a) Any violatiion of any of the contract stipulations required by sec- tion 2(a) (1) or (2) or of section 2(b) of this Act shall render the party respon- sible therefor liable for a sum equal to the amount of any deductions, rebates, refunds, or underpayment of compensation due to any employee engaged in the performance of such contract. So much of the accrued payment due on the con- tract or any other contract between the same contractor and the Federal Govern- ment may be withheld as is necessary to nay such emnlove~ Sii~'h withhAlll ~11tn~ PAGENO="0033" VA CONThACTS Wfl~H COMMUNITY NURSING HOMES 3765 PAGENO="0034" I 3766 VA CONTRACTS WITH COMMUNITY NURSING HOMES persons regardless of any contractual relationship that may be alleged to exist between a contra4~tor or subcontractor and such persons. " (c) The term `compensation' means any of the payments or fringe benefits (1Ac1n1'ihL~t1 4Y~ ~M-i~m 0 ,~P 44.4~ A g~1~ The SPEAKER. Without objection, a second will be considered as ordered. There was no objection. The SPEAKER. The gentleman from Michigan is recognized for 20 minutes. Mr. O'HABA of Michigan. Mr. Speaker, I yield myself such time as I may con- sume. Mr. Speaker, the purpose of this bill is to extend the longstanding policy of the Congress that the Federal Government shall not be a party to the depressing of labor standards in any area of the Nation. We accomplish this by providing much-needed labor standards protection for employees of contractors and subcontractors furnishing services to or perform- ing maintenance service for Federal agencies. I suppose every Member who brings a bill to the House likes to claim it is bipartisan ; sometimes the term may be stretched rather thin. In this part1cul~r instance, I believe this bill meets every test of bipartisanship that may be ap- plied. It is jointly sponsored by myself and the gentleman from Washington [Mr. PellyJ. Each of us has a history of introducing predecessor bills In prior Congresses. There was no opposition to this bill in committee ; in fact it was enthusiasti- cally supported by both sides. Furthermore this bill is part of the legislative program of this administration. It accepts the great principle adopted by an earlier Congress, under Republican leadership, when the Davis-Bacon Act was written into law. The committee report contains a full and complete explanation of the bill, as well as the committee amendment. It might be helpful, however, to develop the rationale for the amendment. piuviueu piuwciiuu w ~ue empiuyees ul service cuii~iac~ors invoiveu a contract for the hauling of mail between Detroit and Port Huron, Mich. Truckdrivers, having been organized, were threatening to strike. A strike was averted when a wage increase to $1 per hour was agreed to. This wage rate was considerably below the prevailing wage within the area. The committee could see no sound reason for not protecting local prevailing wages when a contract involved the transportation, handling, or delivery of the malls. Mr. Speaker, just because the committee report and my remarks both have contained references to the Davis-Bacon and Walsh-Healey Acts it Is not ex- pected that the Secretary of Labor will be bound by past practice worked out for determinations under them. We would expect that he consult with ap- propriate Government agencies, including the chief procurement agencies and the Civil Service Commission with respect to the procedures. We make this clear in the report, but it should be further emphasized here. PAGENO="0035" VA CON'TRACTS WITH CO~UNITY NURSING HOMES 3767 The bill is applicable to advertised or negotiated contracts in excess of $2,500, the principal purpose of which is for the furnishing of services through the use of service employees, as defined in the bill. Thus, for example, contracts made by the District of Columbia government with local hospitals for the care of indigent patients would i~ot be covered, since "service employees" as defined in the bill would be performing only incidental functions. Similarly, contracts entered into by the atomic Energy Commission for the management and opera- tion of Government-owned plants would not be service contracts within the meaning of the bill. Provisions regatdlng wages and working conditions must be included in these contracts and bid specifications. Service employees must be paid no less than the rate determined by the Secretary of Labor to be prevailing in the locality. The bill also recognizes the growing importance of fringe benefits as an eIe- ment of wages in today's society. It therefore rec~ulres inclusion In the contract of an agreement to provide service employees benefits determined by the Secre- tary to be prevailing for such employees in the locality. This obligation may be discharged by furnishing any equivalent combinations of benefits or cash pay- ments in aócordance with regulations of the Secretary. ~ ~jj~1~ ~ tractor, or surety to recover the remaining amount of the underpayment. The contract may be terminated because of violations and the contractor held liable for any resulting cost to the Government. The bill also provides a procedure for blacklisting, for a period up to 3 years, those who violate the act, with authority in the Secretary to recommend removal from the blacklist upon assurance of compliance. The Secretary is given the same authority to make rules, regulations, issue orders, hold hearings, and take other appropriate action to enforce the act as under sections 4 and 5 of the Walsh-Healey Act. The Secretary's authority to prescribe regulations includes authority to permit reasonable tolerances, variations, and exemptions from pro- visions of the act where they are deemed necessary and proper in the public interest or to avoid serious impairment of Government business. The SPEAKaR. The gentleman from New York is recognized for 20 minutes. Mr. REID of New York. Mr. Speaker, I yield myself such time as I may con- sume. The purpose of this bill is clear. The service contract is now the only remain- ing category of Federal contracts to which no labor standards protections apply. Construction contracts, including many which are partially financed with Federal funds but to which the Federal Government is not a party, require compliance with minimum labor standards under the Davis-Bacon Act and related statutes. Supply contracts of the Federal Government also provide labor standards pro- tection pursuant to the Walsh-Healey Act. The bill H.R. 10238 was reported unanimously by the committee. Mr. Speaker, I now yield such time as he may consume to the distinguished gentleman from Washington [Mr. Pelly], who was an author of inItial legislation ~ . PAGENO="0036" 3768 VA CONTRACTS WITH COMMUNITY Nt Mr. n to extend t objection to the request - ~ of the gentleman f s and pass the bill] R 1O23~ s having voted in favor thereof) the d. ~e table. I PAGENO="0037" SERVICE CONTRACT ACT OF 1965 SEPTEMBER 30, 1965.-Ordered to be printed `ublic Welfare, to which was referred labor standards for certain persons 1 contractors to furnish services t~ Federal r purposes, having considered the same, reports an amendment and recommends that the bill 14, ~i iwetok Ai EXPLANATION OF AMENDMENT The amendment enlarges the definition of States" to extend coverage of the bill to the Eniweto Atolls and Johnston Island. PURPOSE OF THE BILL The purpose of this bill is to provide labor standards for the pro- tection of employees of contractors and subconrtactors furnishing services to or nerformin~ maintenance service for Federal agencies. 3771 The committee strongly urges that appropriate directive issue by the Department of Defense or any other appropriate Federal agenc to give to such service employees the coverage provided by this bil. BACKGROUND OF THE BILL PAGENO="0038" holding of payments due th~ contractor under the coi~tract ~ and payments to the employees of amounts due them; suit by the United States against the contractor or surety to recover the amount of underpayment; cancellation of the contract for any violation with the contractor liable for any resulting cost to the United States; authority for the Secretary to list and withhold awarding further contracts to contractors violating this bill for up to 3 years; and authority to issue regulation under sections 4 and 5 of the Walsh-Healey Public Con- tracts Act to enforce this bill. The authority to list contractors violating this act specified in the bill and to recommend no further contracts of the United States be awarded such violators is subject to the provision of sections 4 and 5 of the Walsh-Healey Public Con- tracts Act. Contractors would therefore be entitled to the notice, hearing, and other procedures provided for in said act. - appropria~ea iunus are not coverect by tins bill. Mr. Donahue, in a memorandum submitted to the committee, said: The authority of that Department would undoubtedly also support directives requiring a minimum wage for all non- appropriated fund activity employees. Similarly, it would appear to be within existing authority to require prevailing wage rates to be paid these employees as is required for blue- collar workers of the Federal Government. The principal types of employees who would be affected are believed to be those employees for PX's, ship's stores, officers clubs, and in recreational activities for the benefit of the Armed Forces. 3772 awarded to the lowest respor are the predominant factor mos (~fl tnc~lzino' ~ ~ lr~iir h~1 ~ SECTION-BY-SECTION Ai~~ Section 1. The act is cited as the "Service Contract Act of PAGENO="0039" Service employees in man~ in'~tances are not covered by the Fair Labor Standards Act or State minimum wage laws. The counterpart of these employees in Federal service, blue~ collar workers, are by a Presidential directive assured of at least the Fair Labor Standards Act minimum. Bureau of Labor Statistics surveys of average earnings in service occupations in selected areas in 1961 and 1962 show, however, that an extremely depressed wage level may prevail in private service employment. In coutract cleaning services, 3773 (b) The Secretary may provide such reasonable limitations and may make such rules and regulations allowing reasonable variations, tolerances, and exemp tions to and from any or all provisions of this act as he may find necessary and proper in the public interest or to avoid serious impairment of the conduct of Government business. Section 5. (a) The Comptroller General is directed to distribute a list to all agencies of the Government giving the names of persons or firms that the Federal agencies or the Secretary have found to have violated this act. Unless the Secretary otherwise recommends, no contract of the United States shall be awarded to the persons or firms appearing on this list or to any firm, corporation, partnership, or association in which such persons or firms have a substantial interest until 3 years have elapsed from the date of publication of the list containing the name of such persons or firms. (b) If the accrued payments withheld under the terms of the con- ~L1U~) Uii~ L ~ ~ ~ lC~~T~1i~Q U7if.}%~Vflp(~f Section 6. In determining any overtime pay to which such service employees are entitled under any Federal law, the regular or basic hourly rate of pay of such an employee shall not include any fringe benefit payments computed hereunder which are excluded from the regular rate under the Fair Labor Standards Act by provisions of section 7(d) thereof. Section 7. This Act shall not apply to- (1) Contracts covered by Davis-Bacon Act. PAGENO="0040" ageii'cyi~iay I y ~ritten~notice, whereupon the United States may enter into other contracts or arrangements for completion of the original contract, charging any additional cost to the original contractor. Section 4. (a). Sections 4 and 5 of the Walsh-Healey Public Con-~ tracts Act, as amended, shall govern the Secretary's authority to enforce this act. 3774 (d) "United States" means any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, the Outer £1 (11 I~ 1 1 - - PAGENO="0041" SERVICE CONTRACT ACT OF 1965 HEARING BEFORE THE SPECIAL SUBCOMMITTEE O~ LABOR OP~HE i -~-rv~ -r ~ H.R. 10238 A BILL TO PROVIDE LABOR STANDARDS FOR CERTAIN PERSONS EMPLOYED BY FEDERAL CONTRACTORS TO FURNISH SERVICES TO FEDERAL AGENCIES, AND FOR OTHER PURPOSES HEARINGS HELD IN WASHINGTON, D.C., AUGUST 5, 1965 Printed for the use of the Committee on. Education and Labor ADAM C.. PowBa.L, Chairman WASHINGTON: 1005 (3775) PAGENO="0042" CARL D. PERKINS, Kentucky EDITH GREEN, Oregon JAMES ROOSEVELT, California PRANK THOMPSON, Ja., New Jerssy ~LMER J. HOLLAND, Pennsylvania -JOHN B. DENT, Pennsylvania ROMAN C. PUCINSKI, Illinois ~OMLNICK V. DANIELS, New Jersey jOHN BRADEMAS, Indiana JAMES 0. O'HARA, Michigan RALPH J. SCOTT, North Carolina HUGH L. CAREY, New York AUGUSTUS F. HAWKINS, California `CARLTON R. SICKLES, Maryland SAM GIBBONS, Florida WILLIAM D. FORD, Michigan WILLIAM D. HATHAWAY, Maine. PATSY T. MINK, Hawaii JAMES H. SCHEUER, New York LLOYD MEEDS, Washington WILLIAM H. AYRES, Ohio ROBERT P. GRIFFIN, Michigan ALBERT H. QUIE, Minnesota CHARLES ~L 000DELL, New York JOHN M. ASHBROOK, Ohio DAVE MARTIN, Nebraska ALPHONZO BELL, California OGDEN R. REID, New York GLENN ANDREWS, Alabama EDWARD J. GURNEY, Florida 3776 ADAM `C. POWELL, New York, Chair-man Lourss MAXIENNE DARGANS, Chief Clerk RUSSELL C. DERRIcKS0N, Staff Director C. SUMNER SToNE, Special Assistant to the Chairman Dr. GRACE IJEwELL, Education Chief ~25h~ n54~1Sffu - . . - - - JAMES H. SCHEUER, New York - II ROBERT MOC0RD, Director PAGENO="0043" iexi~ ot u.n. &atement of- Donahue, Charles, Solicitor of Labor, accompanied by Carol Cox and Seth Zinman, members of the staff of the Office of the Solicitor, Department of Labor Karth, Hon. Joseph E., a Representative in Congress from the State of Minnesota in 3777 3 13 PAGENO="0044" PAGENO="0045" Si~cIAL SUBCOMMITTEE ON LIABOR OF THE COMMI1~EE ON EDUCATION AND LABOR, Washington, D.C. The special subcommittee met at 10 :15 a.m., pursuant to call, in room 2251' of the Rayburn House Office Building, Hon. James G. O'Hara presiding. Present: Representatives O'Hara and Sickles. Present also: Robert McCord, professional staff member. Mr. O'H~nA. The Special Subcommittee on Labor of the Com- mittee on Education and Labor will come to order. The purpose of the hearing today is to gain information with resp~ct to the bill, H.R. 10238, desigiiated as a bill to provide labor standards for certain persons employed by Federal contractors to furnish services to Pederal agencies, and for other purposes. (The bill, H.R. 10238, is as follows:) (fl.R. 102S8, 89th Cong., 1st sess.i A BILL To provide labor standards for certain persons einployod by Federal contractors to furnish services to Federal agencies, and *~or other purposes Be it enacted by t~e Senate and Hou8e of Representatives of t1i~e UniteZ State8 of 4merioa in Congress a8sembled, That this Act may be . cited as the "Service ~- ~---~---.--~--- 44___~-_-.~~ . , . (2) A provision. specifying the fringe benefits to be furnished the various classes of service employees, engaged in the performance of the contract or any subcontract thereunder, as determined by tl~e Secretary or his author- ized representative to be prev~i1ing for such employees in the locality. Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation. for injuries . or illness resulting from occupational activity. or insurance to provide any of the foregoing, unem- ~1oyment `benefits, life insurance, disability and sickness insurance, acci- dent insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other `bona tide fringe henefits not otherwise required by Federal, State, or local law to be provided by the contractor or s~bcon- tractor. The obligation under this subparagraph may be discharged by fur- nishing any equivalent combinations of fringe benefits or by making equiva- lent or differential payments in .ca$h under rules and regulations established by the Secretary. 1 (3779) PAGENO="0046" ernment the First, may I introduce those who are with me? To my right is Miss Carol Cox, of the staff of the Office of the Solicitor of the Depart- ment of Labor, and similarly of the same staff, on my left, Mr. Seth Zinman, who may, from time to time, with your permission, fill in any blank spots that I happen to have in my mind at the moment. r~.. ~ ~ 1 PAGENO="0047" e you wit ~j_,ne lull eue~~ ui: uie~e pri~r~tiii~ wii'~u ~i~j ~ ~ ~ ~- ----~ In the shorter run, it is essential `that the Federal Government at least seek to remedy the plight of the exploited workers who perform work financed with Federal funds. Although Federal policies should be directed toward linproving wage stand- ards, the sad fact is, that insofar as Federal service contract employees are concerned, our contracts tend to depress wages even further. As you know, contracting agencies must, In the absence of statutory authority, award con- tracts ~to the lowest `bidder who can satisfactorily `complete the work. Since labor costs are the predominant factor in most service eontraets, the odds on making a successful `low bid for a contract are heavily stacked in favor of the contractor paying the lowest wage. Oontraetors who wish to maintain an enlightened wage policy may find it difficult-if not impossible-to compete for Government service contracts with those who pay wages to their employees at or below the subsistence level. There is the possibility also that under the pressure of `bid competition an ordinarily fair contractor may reduce the wages of employees in order to improve the chances that his bid will be accepted. This action, of course, would further depress wage rates. When, as `at present, a low bid award policy on service contracts is coupled with a `policy of no labor standards protection, the trend may PAGENO="0048" orteii tney are notmemners or unions ana nave little prospect or bettering their coitdijtonthrough.eollective ~arga1ning. Comprehensive wage rate information which may be Identified with Govern- ment service contracts is not available. Through Bureau of Labor Statistics surveys of average earnings in selected areas, we do gain some insight Into the extremely depressed ie~el of wages paid by some service contractors. In contract cleaning services in 1961, less than $1.05 an hour was paid to production workers In many areas. In Atlanta, 74 percent of all production workers received less than this amount; in Dallas, the proportion was 65 percent; and in Baltimore, 45 percent. In Atlanta in 1963, average earnings of employees in laundry and cleaning services were $0.94 an hour; in Memphis $0.83 an hour; in Baltimore $1.17 an hour. Elevator operators in 1962 averaged $0.89 an hour in Atlanta; $0.79 in Memphis: $0.94 in Miami: and $1.17 in Baltimore. e and sai PAGENO="0049" ~bjectives of the~adi~iinistration. With that introduction, Mr. Chairman, I think that I probably should outline briefly some of the changes from prior proposals, and the reasons for them. Before doing so, I thii~k that I should make a brief statement of what this bill is about. This is a bill to provide prevailing wage coy- erage for service contracts in excess of $2,500. This fills a gap in the wage standards structure governing Federal ~ Government procure- ment. We have the Walsh-Healey Act covering Federal supply con- tracts, and we have the Davis-Bacon Act covering Federal construction contracts, but we have not had, over all of the years, any similar and much needed protection for contracts covering service contract em- ployees. The most typical of which may be, for example, a serviëe contract by the General Services Administration, covering janitorial and maintenance activities, which when performed by the Federal Gov- ernment is subject to what they call wage board procedure, and pre- vailing rates are established for that work. But when it is contracted out to some private organization on a bid basis, then there is no similar ~wage protection provided, although the major part of the costs are wage costs. Iw~_ ~ ifrn~th~1cv~+p~ ~411 flm o'~.i~ ~ith vided that the wage determination would be made by the agency head, with the concept that the agency head would use exactly the same procedures that the agency now uses for so-called wage board employ- ees, who are direct blue-collar employees of the Federal Government. It was thought at that time that this approach might be a more accept- able one to the procurement agencies. Accordingly, we took that approach. However, we discovered, in the course of getting their advice on this measure, that they would prefer to have this function centered in the Department of Labor. We were being very modest about it. at that time. We allowed the procurement agencies to tell us that they desired to have the Department of Labor, the experts in this field ad- minister the bill. Once they did so we s~id that we willingly accepted that duty and that obligation. So we have changed the bill as a re- 1~ ~ ~ ~ ~ 1-~ ~ h.~ ~-b~ ~ I PAGENO="0050" 3786 stead of by the procurement agencies ; a change which all of the pro~ curement agencies have approved. The third change which we made here is in regard to what we call fringe benefits. Prior proposals had provided that the fringe benefits to which an ~mployee would be entitled be determined by considering the cost to the Government of furnishirto' similar benefits to its own employees. Under H.R. 6088 in 1964, ~ determinations would have been made by the contracting agency. This was questioned by many agencies as, in their Opinion, an in- appropriate standard, and besides, they desired to have here again the determination of it placed in the hands of the Department of Labor. Again we modestly accepted their suggestions and changed the bill to provide for those fringe benefits, which prevail generally in the local- ViL~io PJL2L, ~J~L~32L 1V &CFtt~L~X ~~~mii~1 £~~JlIFI~i~O I ~ U~L1 I ~IiU~ ~ j~~; ~ hourly wage rate, any of the fringe benefit payments of the types specified in the Fair Labor Standards Act as being omitted from the regular rate of pay for overtime purposes under the Fair Labor Standards Act. This is for the purpose of underlining and emphasizing the need for consistency in administration and in presentation of overtime under all of these statutes in a standard way, so that it would be easier for employers to understand, and easier for agencies to know about ; and easier for the Department of Labor to administer. The actual enforcement of the statutes under the proposed bill would give the Secretary of Labor a more prominent and direct role than under the prior bill. Under this bill the Secretary would be proceed- ing in enforcement in precisely the same way he now proceeds under the Walsh-Healey Public Contracts Act, with investigation and en- forcement through an enforcement arm. Undoubtedly, the enforcement arm would be the Wage and Hour and Public Contracts Divisions, using their some 900 investigators, which are already on their staff, for purposes of enforcing this bill in exactly the same way that they operate today, in investi- gating for the enforcement of the Waish-Healey Public Oontracts Act. A fti~r ~m invc~qt.~ n'~t~m ~ ~i-~il iyl,mc. ~ PAGENO="0051" ~;o~;;:i: ~c ~ £s;;c torecovGramounts of money which cannot be recovered through the withholding process. Third, there is final authority given to the Secretary of Labor to debar from contracts of the United States any violating contractor for a period, I believe, of 3 years, but which may be reduced in time in accordance with the equities of the case. Those very briefly, are the major enforcement provisions inthe bill. Perhaps it might be helpful for the purposes of the record to em- phasize those who are not covered by the bill. Generally speaking, this bill applies to what are ordinarily known as service or blue-collar `employees, to janitorial services, to various kinds of maintenance services under Government service contracts. Perhaps I should add that guards are also covered under this proposal. Specifically exempt, I wish to underline, ~ are any ` contracts for the construction, alteration and repair, including painting and decorating of public works of the United States. This insures that those who may be subject to the Davis-Bacon Act will not be subject to this particular statute. Second, the same end is accomplished, so far as the Walsh-Healey Act is concerned. Any workers or any cOn- ~ .i: (ThI~ UIIi\X~ `~tniuI-tL~.;uS wi-' I~LlL'ui~4~ôL ~Tig ~ iaLlAuulih ~ :ing the mails and the operation of:p~stai c~ntract~statãonsare exempt. Other than that, the classes of employees which I have referred to ivould be given the much needed protections of this bill, which the Secretary of Labor heartily and very enthusiastically endorse~. He asked me to compliment the chairman for his very constructive en- deavors in bringing this bill before the Congress. ~ Mr. O'HARA. I certainly thank you for your testimony and for your kind words. As you mentioned, I am indeed very pleased to have the Department appear on this bill and present such forceful and knowledgeable te,stimony. As you mentioned, this is a matter~ On which your office started working with me some 5 or6 years ago. Mr. DONAHUL That is correct Mr. Chairman. Mr. O'HA1~. We are happy that we are making some progress. I wish to bring up a couple of points. I notice in. your stat~ment sub- mitted for the record, you make the point that although this bill is in its concept and in its application very similar to the Davis-Bacon 9 PAGENO="0052" 3788 Act, the procedures you evolve for working out your determinations under th~ act will not necessarily be those used in the Davis-Bacon ActS The reason is because there are some differences in the types of industries covered ; is that correct? . Mr. DONAHUE. That is correct ; we would not consider either the Davis-Bacon Act or the Waish-Heaiey Act as binding upon us in mak- ing prevailing wage determinations under this proposal. As the chairman knows, there is a vast difference between the procedures un- der the Walsh-Healey Act, as contrasted with the Davis-Bacon Act. Neither may be appropriate under this particular statute. I would propose, as well, that we take a good hard look at the Wage Board procedures which are followed by the various Government agencies and come up with a proposal which is geared to the needs of service employees and to the realities of the service industries. us~ ~bi ~~flTroriaiservll~es I%t tue piace at wniëfl the contract is per: formed. This act does not intend to apply to services incidental to a contract for another purpose. , Mr. DONAHUE. I think that. is technically correct under this bill. It was a matter of some concern to me in the course of getting agency clearance on this proposal that that was true. I had in mind, for example, that the Government has any number of large operating contracts under which private companies operate Government-owned plants. ~ . ~ . ~ ~ ~ The prime example is the Atomic Energy Commission, which ha~ very large installations operated by very large private companies. Under these, a great deal of maintenance and other ~ related services are performed. : . . It has been our position under the Waish-Healey Public Contracts Act that these companies, for example, are acting as agè~ts of the United States `and therefore the contracts that they may enter into for the performance of services of the nature covered by this bill, or com- parable to those provided for by this bill, which are in the supply contract area, for example, would be covered. It is because of the agency principle. I do think that while technically this bill does not cover those types 10 PAGENO="0053" who a~re~direct1y ffivo1~ed in the production of those trucks. It wouldn't apply to the fellow who is sweeping up around the . area in which the production takes place. It wouldn't apply to the fellow who is the timekeeper on the job. It wouldn't apply to the guards standing at the gate of the plant. It `seems to me that it ought to be broadened so that it does apply to them. Perhaps it would apply in a Government-owned plant. I believe, that . is. the position you are taking, where the plant itself was operated under contract. But in a privately owned facility, such as the Dodge plant in my district producing trucks for the Army, it wouldn't * apply to those categories of employees. I had not thought of taking up that question at this time. It will have to wait its turn. Mr. DONAHUE. I think the Department would be sympathetic to any constructive proposal to try to sensibly broaden the reach of the Walsh-Healey Act. Mr. O'HARA. I have a question which bothers me a little bit, and perhaps you and I can discuss it. I am rather naive now, but I was even more naive when I first came to Congress and realized that the prevailii~g wage laws with respect to Government contracts didn't apply to service contracts. It was first brought to my attention wher wage. . ~Lt Was tnen that 1 nrst reaiizea, arter eri~ckCing wrui yO&tr Department, that these service-type contracts were not covered by the minimum wage' protection. S Then of course I learned of the ramifications of that fact, in other areas. Most of these areas were much more important in terms of numbers involved and so forth than the carriage of mail. . But., nevertheless, it bothers me to find that we aren't trying to cover contracts for the carriage of mail. I wonder why we aren't doing so. Mr. DONAHUE. To give you the most candid answer in the world, we are not doing it because we wanted to insure `that we could present to the Congress a bill which was not opposed by all of the procure- ment agencies of the Government. Recognizing at the same time it is the prerogative and, indeed, the duty of this committee to give care- ful consideration to the proposal we have made and to exercise its will on the bill and use its best judgment in gearing its coverage to the consensus of the committee. - 1_i 95-824 0-68-5 PAGENO="0054" tic;;~f; 1,section7;thatisflavis-Bacon: No.2 isth~Wa1sh-Hea1ey Act. No. 3 is contracts for the carriage of freight and personnel by vessel or airplane, or bus, truck, express, railway line, or oil or gas pipeline where published tariff rates are in effect. I can seeS the rationale for that. We don't have the same competi- tive situation which we face in service contract areas generally. As you pointed out in your statement, the difficulty in this service contract area, where so much of the input on the job is direct labor costs and where you have a situation in which the low bidder who gets the contract is the fellow who is paying the h~west wages and has a great competitive advantage. It wouldn't be the case here. Mr. DONAHUE. I think that that is true, sir. Mr. O'HAi~. Likewise, No. 4, I would assume a similar rationale. :~:~ . ~ ~ ~ ~ ~_ , ~. ~ Mr. DONAHUE. That is correct. Mr. O'HAn~. The various procurement agencies felt, I gather, that their administrative burdens would be eased if we chose $2,500. Mr. DONAHUE. I would prefer to have Mr. Zinman answer that question, if he would. Mr. ZINMAN. Well, there are procedures available under the pro- curement statutes which permit both civilian and defense agencies to negotiate contracts which are less than $2,500. Such contracts need not be submitted for formal advertising. It was felt by the agen~ cies that in view of the expedited procedures for these lesser contracts, they didn't want to add complications. Mr. O'HARA. I think that is a very good reason. Finally, I would like to compliment our witness and his colleagues on the work they have done. I wouldn't have believed, and didn't believe, as a matter of fact, in January when this Congress convened, it would have been possible to come up with a bill that was not ob- jectionable to any of the Government's procurement agencies or to the Bureau of the Budget. Mr. DONAHUE. I would have shared that view. I think that they have done an excellent job. Mr7 (VTTtp~ T 1i~n1z- it, ic~ m~v~ tb~m i41~~ni~ Tt. is mirn~iilniis. 12 PAGENO="0055" it not, we snail now near our coiieague irom ivilnuesoLa, ivir. lIäf UI. STATEMENT OP HON. JOSEPH R LU~.TK, A REPRESENTATIVE IN CONGRESS PROM THE STATE OP MINNESOTA Mr. .KARTH.. Mr. Chairman, I would like to add my thanks to the appreciation you have already expressed to Mr. Donahue and his a~socia,t~s for thei.r fine. work in bringing the executive departments ihese islands are inhabited by some of the lowest paid individuals in our country. Just think about this personally for a moment : how would any one of us cope with the problem of raising a family on 75 cents per hour-$30 per week-about $130 per month. It is my firm belief that we cannot in good conscience tolerate the continuation of these dismal conditions that are so prevalent under Government services contracts. As one part of the study I mentioned a moment ago, I examined the situation at one large Air Force base. As early as 1962 the Depart- ment of Labor began court action against a contractor at this base in an attempt. to require compliance with the minimum wage provi- sions of the Fair Labor Standards Act. Mr. Donahue has already de- scribed the basis for their court action: attempting to consider mili- tary installations ~s instruments of interstate commerce. But this issue. remains unresolved. Similar actions have been taken against two subsequent contractors at the same base; again, the issue is still up in the air-with no prospect of an early decision. In fact, a good guess is that final determination by the courts may well be 2 years off. 13 Alth~ugh I ha~e related a sequence of events that demonstrates confusion, despair, and hardship at one base, the pattern is nationwide. This we cannot accept ; rather, we in the Congress must accept the responsibility to destroy the inequities so widespread in Government services contracts by enactment of this legislation at the earliest pos- ;sible date. Mr. O'HARA. Thank you, Mr. Karth, for a very fine statement. The Special Subcommittee on Labor of the House Committee on Education and Labor will now stand adjourned until the call of the Chair. I 1~ PAGENO="0056" on strike intui atfempt to~force the contractor to bargaift with them. The day after the strike began, the coi~itractor notified the Air Force that he was unable to carry out the terms of his contract. The Air Force then declared him in default and canceled the contract. As a temporary measure, airmen were flown in from other bases to take over the jobs. From the point of view of the Air Force, they were manning essential functions. From the viewpoint of the em- ployees, their attempt to resist the lowering of wages-wages that al- ready were very low-resulted in the loss of their jobs. After a period of confusion, the Air Force allocated some temporary civil service positions to the base, but only about 60 percent of the former em- ployees were hired. This came about because fewer civil service posi- tions were authorized than had been used under contract, and because it was necessary to use the Veterans' Preference Act in hiring. For the latter reason, 44 veterans who had not formerly worked at the There is no assurance that these temporary civil service appoint- ments will be made permanent; forthat matter, there is no hiforma- 14 3794 VA CONTRACTS WITH COMMUNITY NURSING HOMES DEBATE IN SENATE ON H.R. 10238, EXCERPT FROM CONGRESSIONAL RECORD, OCT. 1, 1965 SERVICE CONTRACT ACT OF 1965 The Senate proceeded to consider the bill (E[.R. 10238) to provide labor standards for certain persons employed by Federal contractors to furnish serv- ices to Federal agencies, and for other purposes which had been reported from the Committee on Labor and Public Welfare, with an amendment, on page 8, line 14, after the word "Island", to insert "Eniwetok Atoll, Kwajalein Atoll, Johnston Island,". The amendment was agreed to. The amendment was ordered to be engrossed and the bill to be read a third time. The bill was read the third time, and passed. "The bill is applicable to advertised or negotiated contracts in excess of $2,500, the principal purpose of which is to furnish services through the use of service employees. Service employees are defined in the bill as guards, watchmen, and any person in a recognized trade or craft, or other skilled mechanical craft, or ir~ iiy~1zi11c.~1 mF-~11~t1 ~ ~b-~11~1 ~ ~ T'.~r.~-Ql ~ PAGENO="0057" .~ - VA CONTRACTS WITH COMMUNITY NURSING HOMES 3795 prevailing wage rates to be paid these employees as is required for blue-collar workers of the Federal Government. " `The principal types of employees who would be affected are believed to be those employees for PX's, ship's stores, officers clubs, and in recreational activ- ities for the benefit of the Armed Forces.' "The committee strongly urges that appropriate directive issue by the De- partment of Defense or any other appropriate Federal agency to give to such service employees the coverage provided by this bill. "BACKGROUND OF THE BILL "A number of bills having the same general purpose of this bill have been introduced in the past. Hearings were held by the House Select Subcommittee on Labor in the 88th Congress. The record included pleas for this type legislation from labor organizations and from service contractors. Testimony was heard from Federal agencies and reports were received from the Bureau of the Budget, General Services Administration, etc. A bill was reported (H. Rept. No. 1495, QQ~4~ C1,mc~ \ "The need for this legislation is well stated in the report issued by the House Education and Labor Committee on September 1, 1965 (H. Rept. No. 948) , as follows: " `Many of the employees performing work on Federal service contracts are poorly paid. The work is generally manual work and in addition to craftwork, may be semiskilled or unskilled. Types of service contracts which the bill covers are varied and include laundry and drycleaning, custodial and janitorial, guard service, packing and crating, food service, and miscellaneous housekeeping services. " `Service employees in many instances are not covered by the Fair Labor Standards Act or State minimum wage laws. The counterpart of these employees in Federal service, blue-collar workers, are by a Presidential directive assured of at least the Fair Labor Standards Act minimum. Bureau of Labor Statistics surveys of average earnings in service occupations in selected areas in 1961 and 1962 show, however, that an extremely depressed wage level may prevail in private service employment. In contract cleaning services, for example, in some areas less than $1.05 an hour was paid. Elevator operators earned low rates, varying from $0.79 to $1.17 an hour. Service contract employees are often not members of unions. They are one of the most disadvantaged groups of our work- ers and little hope exists for an improvement of their position without some positive action to raise their wage levels. "`The Federal Government has added responsibility in this area because of fh~ i~'~i veniiirem~nt thnt ~nntra'ts he awarded to the lowest resnonsible bidder. PAGENO="0058" I _______________ I I 3796 Be £t enacted by the Senate and Houie of Repre8entath~e8 of the Uiiited Sta.te8 of Arneriea in Congre8s a88ern.bled, That this Act may Service Con.. I)e cited as the "service Contract Act of 1965". ~ raot Act of SEC. 2. (a) Every contract (and any bid specification tlierefor) 1965. entered into by the United States or the bistrict of Columbia in excess Required oon~ of $2 500, except. as provided in section 7 of this Act, whether ne~o- `~ tiateJ or advertised, the principal purpose of which is to furnish services in the United States through the use of service employees, a.~ defined herein, shall contain the following: ( 1) A provision specifying the mimmum monetary wages to M1nimtu~ wages. be paid the various classes of service employees in the perform- ance of the contract or any subcontract thereunder, as determined by the Secretary, or his authorized representative, in accordance with prevailing rates for such employees in the locality, which in no case shall be lower than the m mimurn specified in subsec- tion (b). (2) A provision specifyiiig the fringe benefits to be furnished Fringe benefits. the various classes of service employees, engaged iii tile perform- aitce of the contract or any sul)contract thereunder, as determined by the Secretary or his authorized representative to be prevailing for such employees in the locality. Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, ormsurance to 1)1oyide any of tile foregoing, tuieinp1ov.~ ~ conditions, provided by or tinder the (ontrol or supervision of tile contractor oF any subcontractor. lVlli(11 fl I~C ililsanitary ol~ hazard- ous or dangerous to the health or safety of service employee~~ engaged to furnish the services. ( 4) A. provision that on the date a service employee (oIllIfle1lce~ Notioe of oom- work on a contract. to which this ACt applies, the COiltiuCtOl' or sub- pensation to contractor will deliver to the employee a notice of the compensa- employees. t.ion required under paragraphs ( 1) and (2) of this subsection, oi~ a form prepared by the Federal agency, or will post a notice of the required compensation in a pro~nmeI~t place at the worksite. (b) (1) No contractor who enters into any contract with the Federal Wage Government the principal purpose of which is to furnish services speoif~1oations. through the use of service employees as defined herein and 110 sub- contractor thereunder shall nay any of his enrnlovees enffal!'ed in PAGENO="0059" 3797 Pub. Law 89-286 - 2 - October 22, 1965 79 STAT. 1035 Violations, SEC. 3. (a) Any violation of any of~ the contract stipulations penalties. required by section 2(a) (1) or (2) or of section 2(b) of this Act shall render the party responsible therefor liable for a sum equal to the amount of any deductions, rebates, refunds, or underpayment of corn- pensation due to any employee engaged in the performance of such contract. So much of the accrued payment due on the contract or any other contract between the same contractor and the Federal Government may be withheld as is necessary to pay such employees. Such withheld sums shall be held in a deposit fund. On order of the Secretary, any compensation which the head of the Federal agency or the Secretary has found to be due pursuant to this Act shall be paid directly to the underpaid employees from any accrued payments withheld under this Act. (b) In accordance with regulations prescribed pursuant to section ~ T~g1QvG1 Qt~y%1%~7 l~AOII f~P +h~ ~t~r~t.~rv ic~ h~ri~hv (b) The Secretary may provide such reasonable limitations and may make such rules and regulations allowing reasontble variations, tolerances, and exemptions to and from any or all provisions of this Act as he may find necessary and proper in the public interest or to avoid serious impairment of the conduct of Government business. List of SEC. 5. (a) The Comptroller General is directed to distribute a violators. list to all agencies of the Government giving the names of persons or firms that the Federal agencies or the Secretary have found to have violated this Act. Unless the Secretary otherwise recommends, no contract of the LTnited States shall be awarded to the persons or firms appearing on this list or to any firm, corporation, partnership, or asso- ciation in which such persons or firms have a substantial interest until three years have elapsed from the date of publication of the list con- taming the name of such persons or firms. Legal action. (b) If the accrued payments withheld under the terms of the con- tract are insufficient to reimburse all service employees with respect to whom there has been a failure to pay the compensation reqmred pursuant to this Act, the United States may bring action against the contractor, subcontractor, or any sureties in any court of competent jurisdiction to recover the remaining amount of underpayments. Any sums thus recovered by the United States shall be held in the deposit fund and shall be paid, on order of the Secretary, directly to the underpaid employee or employees. Any sum not paid to an employee because of inability to do so within three years shall be covered into ih~ Trc~nsiirv nf th~ TTnif~cl States as miscellaneous receiuts. PAGENO="0060" 3798 t~'p~ho1~, te'i~~F~pii, or tab[e compalues, s~?6~et i~oTh~ ~m?I~i~ nications Act of 1984; ( 5) ally contract for imbue utility sei'vk~es, including electru: light and power, water, steam, and gas; (6) any employment (olltract providing for (lirect services to a F&leral agency by an individual or individuals ; an(l (7) any contract with the Post Office Department., the principal purpose of which is the operation of P~~t.al eontra(,t stations. SEC. 8. For the i)~~r~oses of this Act~- ( a) "Secretary" means Secretary ~f Labor. (b) The term "service employee" meaiis gus rds, watchmen, and any person engaged in a recognized trade or craft, or other skilled mechanical craft, ~r in unskilled, semiskilled, or skilled manual labor occupations ; and any other eiup1oye~ including a foreman or super- visor in a position having trade., eiaft~ or laboring experience as the paramount requirement. ; and shall iiitItide all meli persons regard- less of any coiit.ractua.l re1ati~nship that nifty be alleged to exist. between a contractor or subcontractor and such persons. (c) The term "compensation" means any of th~ paymeilts or fringe benefits described in section 2 of this Act.. (d) The term "United States" when used iu a geographical sense shall include any State of the t~nited States, the l)istrict of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, Wake Island, Eniwetok Atoll. Kwajalein Atoll, Johnston 48 Stat. 1064. 47 Usc 609 and note. Definitions. 67 Stat. 462. 43 USC 1331 LEGISLATIVE HISTORY: HOUSE REPORT No. 948 (Comm. on Education & Labor). SENATE REPORt No. 798 (Comm. on Labor & Public Welfare). CONGRESSIONAL RECORD, Vol. 111 (1965): Sept. 20: Considered and passed House. Oct. 1: Considered and passed Senate, amended. Oct. 6~ House concurred in Senate amenbnent. PAGENO="0061" VA CONTRACTS WITH COMMUNITY NURSING HOMEB 3799 U.S. DEPAETMENT OF LABOR, WAGE AND Houn AND PUBLIC CONTRACTS DIvISIoNS, Washin~gtoit, D.C., June 22, 1966. GILLARDO HOSPITAL, Puerto Rico: This is in reply to your letter of May 18, 1966, addressed to Secretary of Labor Wirtz, in which you ask whether Federal wage rates must be paid to employees of your hospital in the event that you sign with the Social Security Administra- tion for the rendering of medical services under the Medicare program. It is assumed that your question concerns the McNamara-O'Hara Service Con- tract Act. That act applies generally to contracts entered into by the United States or the District of Columbia the principal purpose of which is the furnish- ing of services through the use of service employees. However, the legislative his- M' the. ~it jn(lipnjps thAt contracts with hosDitals for the care of patients x1UU bn Uir .n~i n~iiii~ r&iivr~, COMMITTEE ON VETERANS' AFFAIRS, Washington, D.C., May 22, 1968. Hon. W. WILLARD WIRTS, Elecretary of Labor, Department of Labor, Washington, D.C. DEAR MR. SECRETARY : I am familiar with the recent ruling of the Wage and Hour and Public Contracts Division to the effect that contracts between the Veterans Administration and community nursing homes, pursuant to Public Law 88-450 are subject to the provisions of Public Law 89-286. I am thoroughly familiar with the legislative history of the bill which became Public Law 88-450 and have read the House and Senate reports on H.R. 10238 as well as the debate which took place on this bill in the House on September 20 and in the Senate on October 1, 1965. It will be appreciated if you will advise me in detail as to the language in the reports of the two laws, the legislative reports, and/or the Congressional debate which gives the authority to make the ruling which has been made. I shall appreciate receiving a detailed reply from you at the earliest possible time. Sincerely, OLIN E. TEAGUE, Chairman. VETERANS' ADMINISTRATION, OPFICE OF THE ADMINISTRATOR OF VETERANS AFFAIRS, Washington, D.C., June 3, 1968. -.-~- ~L OZ~Li7~ICCQf~I ~ItflU1~ ~ p ~ ~ ~ ~ ~ ~ ~ ~ ~ .~ ~ . through minimum wage legislation but I must point out that under this decision the Veterans Administration will be unable to provide the community nursing home care inaugurated by the Congress with the enactment of Public Law 88-450 to a large segment of our veteran population. Termination of our contracts will require transfer of large numbers of sick veterans away from the beneficial corn- PAGENO="0062" 1hfö1i~f6ni~f15f~fàtjons and Opinions in a memorandum to your Regional Attorney in Dallas concluded after a review of our contracts that "the services are mainly custodial and little in the nature of medical services is envisioned". I cannot agree with the con- structions or the categorical classification of the type of care given in our com- munity nursing home program. The approaches and the conclusions reached seem to have stemmed from exam- ation of only selected language from our contracts in the light of an earlier ruling by the Administrator of June 22, 196G, addressed to the Gillardo' Hospital in Puerto Rico. That interpretive decision is to the effect that Federal contracts' with hospitals for the care of patients are not within the scope of the Service Con- tract Act. The ruling reads as follows: "It is assumed that your question concerns the McNamara-O'Hara Service Contract Act. That act applies generally to contracts entered into by the United States or the District of Columbia the principal purpose of which is the furnish- ing of services through the use of service employees. However, the legislative history of the act indicates that contracts with hospitals for the care of patients are not within the scope of this law. The services of service employees under such contracts are considered only incidental to the purpose of such contracts to pro- vide patient care under the continuing supervision of professional medical per- sonnel. Since the principal purpose is to provide medically-supervised care, such contracts are not within the purview of the act. Thus, the act would be inapplica- ble to an agreement with the Social Security Administration for Medicare services." The last sentence suggests that the Service Contract Act is inapplicable to all Medicare services. As you may know, these include substantial periods of nursing ~ --~~`- ~ ~`_,~__.~t (-~ ~~Aia~ (~pV ~Lj1Uit~iuuai £ueuiciii care 11) uiat pro- vided in VA hospitals. This program has never contemplated mere custodial or domiciliary care, which is elsewhere provided in our system for a different class of patient. From its inception we established rigid standards for our program both as to the physical facilities and the professional services to be provided under our con- tracts. Skilled nursing homes must be licensed by the State in which located, must be accredited by the Joint Commission on Accreditation of Hospitals or ap- proved by the VA through inspection, and must comply with local Government regulations. Our contracts specifically include the following requirements which reflect a maximum of professional supervision at both physician and registered nurse levels: (a) The skilled nursing home. must have a physician to advise the facility on general matters of care and administration. A physician must provide general supervision of the clinical work and a registered professional nurse must be on duty 40 hours or more per week. (b) Medical records in a skilled nursing home must be maintained for each patient and include: (1) physician's orders; (2) physician's admitting evalu- ation (including diagnosis); (3) VA Form 10-1204, Referral for Community Nursing Home Care; (4) physician's progress notes (notes of all professional PAGENO="0063" W. J. DRIVER, Administrator. U.S. DEPARTMENT OF LABOR, OFFICE OF THE SECRETARY, Washington, June 3, 1968W iactS. Currently we have agreements for the furnishing of slUlleci nursing home care with 2,325 community nursing homes having approximately 170,000 beds in 48 States and Puerto Rico. These nursing homes have been paid over $25 million for the care of veteran-patients. Numerous inquiries have al- ready been received from VA field stations concerning the applicability of the Service Contract Act to VA agreements. Application of the provisions of the Act will have an adverse impact in many other States, with the cumulative result of an effective curtailment of our program. I ask your early and favorable consideration of this matter. Sincerely, I I Hon. OLIN E. TEAGUE, Chairman, Committee on Veterans' Affairs, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: Thank you for your letter of May 22, 1968, concerning the application of the McNamara-O'Hara Service Contract Act to contracts be- tween the Veterans Administration and community nursing honies. I am asking for a report on this matter and will send a reply to you as soon as possible. Sincerely, WILLIARD WIRTZ, secretary of Labor. our letter of March 25, 1968, to Mr. John K. Pickens, General Counsel or the American Nursing Home Association. In that letter we held that contracts for the care of veterans entered into between the Veterans Administration and nursing homes are subject to the McNamara-O'Hara Service Contract Act. We carefully considered the very informative descriptions of the various types of nursing homes submitted by Mr. Pickens. Since coverage under the VA CONTRACTS WITH COMMUNITY NURSING HOMES 3803 1968, at which time I received a brief acknowledgement. To date I have not had a reply, although I have written him the second letter. This matter has also been brought to the attention of members of your staff through Congressman Pickle, and I understand your staff members have contacted the Labor Depart- ment. Briefly, the problem is this. Purporting to act under the Service Contract Act of 1965 (P.L. 89-286) the Wage Hour Division has vn1A'~ ~ -- PAGENO="0064" ~LJ~~J VV ~ V ~ a~ ~~Vt 1 - 4.123 of the enclosed bulletin, the Secretary of Labor may by auiiii~~ action establish reasonable limitations on the application of the act's provisions or grant reasonable variations, tolerances, or exemption therefrom which he finds to be "necessary and proper in the public interest or to avoid serious im- pairment of the conduct of Government business." Petitions for exemption under section 4(b) of the Service Contract Act should be submitted through the headquarters office of the contracting agency. Sincerely yours, BEN P. RoBERTsoN, Deputy Administrator. I have your acknowledgement of my letter and in view of the fact that the ruling of the Department of Labor is already having an adverse effect on the community nursing home program, may I urge you again to give me a reply on this matter at the earliest possible time. I have been furnished with a copy of the letter to you from the Administrator of Veterans Affairs on this same general subject, and would appreciate being furnished with a copy of your reply to Administrator Driver. I look forward to hearing from you at the earliest possible date. Sincerely yours, OLIN B. TEAGUE, ChaitVman. COMMITTEE ON VETERANS' AFFAIRS, Washington, D.C., June 11, 1968. Hon. LYNDON B. JOHNSON, President of the United states, Washington, D.C. DEAR MR. PRESIDENT: I am greatly concerned about a recent ruling by the Administrator of the Wage and Hour and Public Contracts Division, Department of Labor, which is in the process of wrecking the Veterans Administration hometown nursing care program. I brought this matter to the attention of the Secretary of Labor on May 22, 1968, and heard nothing from him until June 3, [Pe~egram] VETERANS OF FOREIGN WARS OF THE UNITED SPATES, June 13, 1698. Hon. W. WILLARD WmTz, Hecretary of Labor, TVashington, D.C.: The Veterans of Foreign Wars was the chief proponent of the Veterans Nursing Care Act of 1964, which authorizes the Veterans Administration to take care of veterans in community nursing homes. It is shocking to learn that nursing homes ~-hic~ veterans program because of an interpretation by the PAGENO="0065" Washington, D.C.: In the 88th Congress I had the honor to serve as chairman of the subcommittee which led to the enactment of Public Law 88-450, the so-called nursing home care law, and have been constantly concerned with the implementation and utilization of this law from its effective date to the present. The community nursing home program has been particularly vital to the Veterans' Administration medical program, and I want to join with other Members of Congress in pro- testing the unwarranted ruling of the wage and hour and public contraots division of your department in applying Puhlie Law 89-286 to the community nursing home contracts administered by the Veterans' Administration. This VA CO]~TRACTS WITH COMMUNITY NURSING HOME1S 3805 The fact that the contract itself provides for reacimlssion to a hospital when more than minimal medical care is required makes it clear that the Veterans Administration is not here contracting primarily for professional medical serv- ices of the type found exempt under the Service Contract Act. The Veterans Administration appears to be contracting primarily for convalescent care serv- ices which are furnished through the use of service employees. While there may be a dearee of similarity between professional medical care furnished in hos- Should the Veterans Administration decide to pursue this request, mere would be a public hearing on the request with full opportunity for all inter- ested parties to appear. A decision then would be made based on the record of the hearing. Sincerely, W. WILLARD Wnmz, ~eoretary of Labor. Mr. EVERETT. We have a very distinguished colleague with us, Con- gressman Pickle from Austin, T~x. Congressman Pickle, will you go right ahead? STATEMENT OP HON. L J. PICKLE, A REPRESENTATIVtE IN CONGRESS PROM THE STATE OP TEXAS Mr. PICKLE. Thank you, Mr. Chairman. I want to express my ap- preciation to you and to the members of the committee for the privi- lege of being here with you this morning, and I would like permission to revise and extend my remarks. Mr. EVERETT. Without objection it is so ordered. PAGENO="0066" otner special services." Also, patients receiving care under this agree- ment who begin to require more than occasional visits by physicians or more than minimal laboratory, X-ray and other special services will be promptly re- admitted to an appropriate Veterans' Administration facility." type of C t is differentiated from the exclusion mentioned - ~. 948 accom~ ~ H.R. 10238 pertaining to cc for the care of :s. The principal pu nistration contrac - - r the ren of service em~ and put them in nursing homes n~ar their own hom~s. These ntfrsing homes are largely an accommodation to the Veterans' Administration. There are very few veterans in these nursing homes ; not more than 3 or 5 percent of the patients in a nursing home are veterans. And now they say le1gaiistically that, because the act thd not clearly say it was hospital care, it is therefore custodial care and all these employees would be subject to the maximum wage rate. That was not the intent of the Congress and certainly it is not the purpose of the Veterans' Administration, because I think this would wreck the program of the Veterans' Administration in nursing homes. I submit commonsense would not have permitted the Department of Labor to hold that these provisions would be extended to nursing homes, particularly since the nursing homes are willing to amend the wording of their contract so the wording would more specifically de- scribe the services they are rendering. I would hope the letter of Mr. Driver, the very able Administrator of the Veterans' Administration, to Secretary Wirtz would have been sufficient in itself for Secretary Wirtz to grant this exemption, particularly since the nursing homes were willing to renegotiate their contracts and comply with the legal requirements. Their intent is wholesome and they have bent over back- ing15~ u~ia~i i~, ()Iie iiui~~iiig nOffibs, ~5ernaps tne ~Oflcitor or the Depart- ment of Labor, and the Veterans' Administration, and any others wishing to be heard. I would hope, however, that we would have the hearings today or tomorrow, because many of these people will be in Washington. I urge that the hearings not be held 30 or 60 days from now, because if this happens I prophesy the nursing homes will get out of this program as rapidly as they can, because they would be ruined otherwise. The nursing homes have extended a helping hand to the Veterans' Administration, but if you were in this business and, because of a tight ruling by the Department of Labor, since you had two vet- erans in your nursing home, 50 of your employees would be covered 0 ~ ~ h~ .1 -~-~-~ -~ 1 ~-1 ~ f~11+ PAGENO="0067" VA OONTRAOTS WITH COMMUNITY NURSING HOMEtS 3807 Mr. PICKLE. It will cost a lot more money. Mr. EVERETT. And we will have to build a lot more VA hospitals, wilLwcyiiot ~ construction work or other typ~s ~f moi~ d~manding employment. Would you say so, Mr. Pickle? Mr. PICKLE. That is correct. They would lose their jobs and the veterans would not have the treatment they are entitled to near their own homes, and in addition it will cost the Government more money. I introduced two companion bills to bills Congressman Teague has already introduced, simply exempting the nursing homes from the provisions of the Service Contract Act. I have visited with the presi- dent of the Nursing Home Association and the legal counsel in Texas who works in this field, and I have been convinced of their sincerity and willingness to cooperate, but they cannot be silent when their pro- gram is threatened and the program of the Veterans' Administration. Mr. DUNCAN. The act itself says the Secretary of Labor may make such rules and regulations and grant exemptions from any and all provisions of the act as he may find necessary and proper in the public interest, or to avoid serious impairment of the conduct of the Govern- ment's business, so he clearly has authority to do it. Mr. PICKLE. This is one aspect of the ruling which I understand will be coming out today which I deplore. The Secretary is given the authority to make this exemption and I had felt he would do so, but hearings we Woulci i~now wiier~'we are, utiu au ~i1~st~rIi?ir~riig r~iTi1~2~ operating under a cloud. Mr. PIcKLi~. Not only are they working under a cloud but, as you said, Mr. Chairman, the Veterans' Administration has contracts with 2,325 nursing homes having approximately 170,000 beds, and if they are covered under the Service Contract Act I say the nursing homes will get out of this business as quickly as they can. The Department of Labor can stand on a pinnacle and say the law says this, but there is good and sufficient reason to say they could rule differently, and the veterans are the ones who will be hurt. Mr. EVERETT. Mr. Satterfield. PAGENO="0068" iNUI1~i.LN~j JJYiJi~ `Mr. SATTERFIELD. I want to join the other members of the committee in complimenting Mr. Pickle for a fine statement. Mr. EVERETT. Mr. Meadows, do you have any questions? STAFi~ DIRECTOR. No. Mr. Ev~m~rr. Mr. Patterson? COUNSEL. No. Mr. EVERETT. Thank you, Mr. Pickle. We will see what we can do. Mr. PICKLE. Thank you, Mr. Chairman. Mr. EVERETT. Mr. Stratton, we will be glad to hear from you at this time and you may identify those with you. STATEMENT OP A. W. STRATTON, DEPUTY ADMINISTRATOR, VET~ ERANS' ADMINISTRATION; ACCOMPANIED BY DR. PAUL A. L. HABcER, DIRECTOR, EXTENDED CARE SERVIQE, DEPARTMENT OP MEDICINE AND SURGERY, AND ROBERT B. WHITE, DEPUTY ASSISTANT GENERAL COUNSEL, VETERANS' ADMINISTRATION Mr. STRATTON. I have with me Dr. Paul Haber, who is the Director o,f~~i~} iiu~ikig iloihfbeus ~or our vetefansin community ~nüFsihg~homes When you consider that 4,000 are in VA hospitals and about 1,500 in State nursing homes, you can see this constitutes a large portion of the entire program. We do have 3,000 veterans in 900 different homes, although we have contracts with 2,325 community nursing homes, as you said, Mr. Chairman, and since April 1965 when we im- plemented the law passed in 1964 we have provided this tyj~e of care for 2~,000 veterans, or 2.3 million days at a cost of $25 million. Now, I don't appear here today as a representative of the Veterans' Administration to debate with my colleagues the recent ruling, but I lose `the continuity if I don't speak briefly to this Service Contract Act of 1965. As we understand it, it provides minimum wages for service employees in establishments under Government contract, and hos- pitals have been exempt from this requirement. `Mr. EVERErP. You mean ordinary hospitals? Mr. `STRATTON. Yes, sir. We went from 1965 to 1968 with, I am sure, the nursing homes that we contracted with completely confident they were not under this act. Then in March 1968 one of the officials in Oklahoma from the Department of Labor's Wage and Hour Division made the ruling that they were not exempt. Mr. EVERETT. When was that? PAGENO="0069" VA CONTRACTS WITh COM~ that the vete s `Lre the ones t on, do you have reason to believe you are ins in these nursing homes than that pro- PAGENO="0070" 3810 VA CONTRACTS WITH COMMUNITY NURSING HOMES . Mr. STRATTON. No. My figures are that 85 percent of the patients in nursing homes today are receiving some sort of Federal help and they are in beds next to each other. STAFF DIRECTOR. The response we received from the Department of Labor this morning indicates they made their ruling based on the wording of the contract, and that is that the contract says they shall receive minimal treatment, and that is less than others get. Can you explain the type of medical services you buy with your fee? Mr. STRATTON. Yes. I will ask Dr. Haber to speak more precisely to this, but this was the thrust of our request to the Department of Labor for a ruling. `Dr. HABER. Mr. Chairman and Mr. Counsel, much has been made of the fact there were only intermittent medical needs required by these patients expressed in our contract, but we feel, we hope with justification, that there is a great deal of material we insist on relating to the quality of care under medical supervision which would seem to put this out of the range of the Service Contract Act in that it does not relate to ~iis~çdia1 ~ Fç~r rni~ thino' wj~ r~üiiir~ c~f rnir~ii~ nurse supervise the nursing staff of the patients. We require that medications and narcotics shall be properly stored and controlled, an.d locked and registered. We require that, although the nursing home may not in every instance supply X-ray and diagnostic services, that those services be available and that the nursing home have access to them in the community. All of this seems to refute the idea that we are interested in cus- todial-type services. Custodial-type services would not have these various elements under medical supervision. What we are trying to express is the fact that although this re- quires medical supervision it is probably less than is required in some hospitals. However, I submit the requirements we make here would suffice for many chronic-disease hospitals, and they would be the same as in many tuberculosis hospitals in which a physician did not see the patient every day nor did the hospitals have immediate access to some of the refinements of diagnostic equipment that we require. So this seems to refute the idea we are contracting for purely cus- todial care. STAFF DIRECTOR. Do you have any idea that you are contracting for lesser care than medicare patients require? fir TTA1~ri~ N~ Td~~ PAGENO="0071" Dr. HABER. He would go' into wh'~t we call a board-and-care home, where medical supervision is minimal. Such care is provided by many denominational homes and by VA domiciliary facilities. STAFF DIRECTOR. How many domiciliary patients do you have? Dr. HABER. 13,000. STAFF DIRECTOR. What is the cost of care for those patients? Dr. HABER. About $6 a day. STAFF DIRECTOR. How does this compare to the cost in a nursing home? Dr. HABER. A little less than half. STAFF DIRECTOR. Then you pay $5 or $6 a day for 13,000 veterans receiving custodial care and double that for higher quality medical care in nursing homes? Dr. HABER. That is right. STAFF DIRECTOR. And in the custodial homes or domiciliaries is it not true the patient has to be able to dress himself, go to meals, and ~vir. Ø~fNuA~t~L~ 0. Mr. EVERETT. Mr. Satterfield? Mr. SATTERFIELD. No. Mr. EVERETT. Mr. Roberts? Mr. ROBERTS. No. Mr. EVERETT. Mr. Patterson? COUNSEL. Mr. Stratton, I believe you stated that the first notice you had of this decision on the part of the Department of Labor cam.e when you were advised of some activity in the State of Oklahoma? Mr. STRATTON. Yes. COUNSEL. Did the Department of Labor, any time prior to the present discussion, advise you that they had found officially that the Service Contract Act applied to this kind of contract? Mr. STRATTON. Not within my knowledge. COUNSEL. Thank you. Mr. EVERETT. Mr. Stratton, will you ask the Department of Labor to have a hearing on this right away and see if we can't resolve this situation? As you know, we vote on the tax bill tomorrow and money is pretty tight, and I think the sooner we get rid of this thing the better. As the committe~ I merican Legion has si PAGENO="0072" i~:;~.&~i U iie iiieu W1I]11 111t5 lJepU4LIllelLl 01 iiauor. Mr. EVERETT. Without objection, it will certainly be filed with the Department of Labor. Mr. MATTn~GLY. Mr. (ihairman, I cEo not wish to testify at this point. Mr. E. H. Golembieski, director of our national rehabilitation corn- mission, has prepared a statement I would like to submit for the rec- ord. I would like to add that the American Legion is very seriously con- cerned with this situation on the basis of the information filtering back to our office and being evaluated. We feel the rulipg of the Depart- ment of Labor would completely destroy the VA nursing home pro- gram, and we hope something can be worked out to settle this problem. Mr. EVERErr. Has your national convention gone on record as ap- proving the nursing home program? Mr. MArrINGLY. Yes. Mr. EVERETT. Without objection, the statement of Mr. E. H. Golem- bieski, director, national rehabilitation commission, the American Legic~n, will be filed and made a part of the record. STATEMENT 0]? E. H.. GOL~MBIESKI, DIRECTOR, NATIONAL REHABILITATION COMMISSION, THE AMERICAN LEGION Mr. G0LEMBIESKI. Mr. Chairman and members of the subcommittee, the American Legion appreciates the privilege of presenting its com- ments and recommendations on those bills which would exempt nurs- In discussing the purpose and application of the act, (Jongress specifi- cally exempted certain contracts. Among these were contracts by the 3814 VA CONTRACTS WITH COMMUNITY NURSING HOMES alertness and competence. There is no basis for the supposition that nursing home patients are inherently apathetic or lacking in motivation. The traditional custodial facility, lacking a realistic philosophy of therapy, and lacking even a semblance of program, contributed to the pessimistic attitude toward institutions as well as the conviction of hopelessness relative to the recuperative powers of older persons. The Nursing Home Care Unit of the VA, existing by design, can have no such conviction. It is not a custodial care program. PAGENO="0073" outsicte tne purview or tne service uontract Act or w~io. We urge your intervention to the end that the ruling of the Administrator of the Wage and Hour and Public Contractors Division is rescinded. Unless this Is done, the net result of- his ruling will be the disintegration of the Veterans Ad- ministration home-town nursing bed care program, increased cost of VA hospital patient care, and a decrease in VA hospital patient turn-over due to the main- tenance of chronic care patients in beds that would otherwise be used for acute and intensive care. Although the language of the VA contract may well lead to the con- clusion that the care contracted for with community nursing homes is custodial, with incidental medical services, a review of the regulations, manual provisions, and VA nursing bed care philosophy, will negate it. In describing the mission of the nursing home care program, the Veterans' Administration enunciated the following philosophy: Well-equipped facilities that are properly and adequately staffed with qualified personnel are an important part of the provisions for meeting the total needs of these patients. However, nursing home care involves more than keeping patients clean and comfortable. It is expected that patients in these units will extend over a continuum of levels of ambulation, type, and degree of disability, mental VA CONTRACTS WITH COMMUNITY NURSING HOMES 3815 Thank you, Mr. Stover. We are always glad to have you appear before our committee. Without objection, your letter of June 18, 1968, addressed to the chairman of the full committee, will be made a part of your remarks and a part of the record at this point. (The letter follows:) VETERANS OF FOR~GN WARS OF THE UNITED STATES, Washington, D.C., June 18, 1968. Hon. OLIN E. TEAGUE, Chairman, house Committee on Veterans' Affairs, Washington, D.C. DEAR CONGRESSMAN TEAGUE : This is in reference to the application of Public Law 89-286 to community nursing homes with respect to contracts between the Veterans Administration and such homes which provide nursing care for veterans. It has come as a considerable shock to the Veterans of Foreign Wars to learn located in 48 states and Puerto Rico. Probably there are no more than two or three veterans in one of these homes at a given time. The key to the veteran being in one of these homes is that be is in or near his hometown and, conse- quently, has the advantage of being near his family and friends. A~s you know, there is a maximum of 3000 veterans who can be cared for in these community nursing homes under the present regulations carrying out Public Law 88-450. Now we find that the Service Contract Act of 1965 (Public Law 89-286) has been interpreted as being applicable to these nursing homes which have contracts with the Veterans Administration to provide nursing care and service to veterans. 4-1-.~ UT.~ .~1 tT~. ~ ~-.f ~-1-~. fl M' T~h~m~ ~ fh~t PAGENO="0074" homes and see the pro~rarn in oper~t~on at ti~ie present time?~ Mr. STOVER. I have seen a couple of them and have been very im- pressed with the type of service they are providing. The service is far above the level of custodial care which one would find in a VA domi- was authorized. Mr. Evi~m~rr. Any questions? 3816 VA CONTRACTS WITH COMMUNITY NURSING HOMES veterans in local communities. It is understood the Veterans Administrator has requested such an exemption. ~---`-,~~*y ~ ` ~ ~ ~ ~ t4;~;rn ~ .1.1 ~ ui~&~~teL ui.i~ iiu'~ii~y `Ji. the Service Contract Act. In summary, the Veterans of Foreign Wars is deeply appreciative that your Committee is looking into this matter, which could cause the nursing care pro- gram to be seriously impaired or even wrecked. By bringing the facts out in the open and developing the history and intent of the Veterans Nursing Care Act of 1e64, it would seem a certainty that the evidence will be so overwhelming as to lead to but one conclusion, namely, that this retroactive ruling concerning the Veterans Administration contracts is in error and should be reversed. In any event, this ruling is serving to so seriously curtail the community nursing home care for veterans that it may well serve to wreck the program In large areas of the Nation. With kind personal regards, I am Sincerely, FRANCIs W. SPOVER, Director, National Legislative 1~ervice. Mr. EVERETT. Our next witness will be Mr. William Gardiner from the Disabled American Veterans. STATEMENT OF WILLIAM B. GARDINER, ASSISTANT NATIONAL DIRECTOR FOR RESEARCH., DISABLED AIVIERICAN VETERANS Mr. GARDINER. Thank you, Mr. Chairman and members of the committee. ~. - and women who have become disabled as the result of the perform- ~ii'ioc~ tf flf~tivE~ wfl.vtim~ mf1it,~rv cu~vv~~~ f1,c~ 1) A V Iv~r it~ ~ PAGENO="0075" VA CONP]~RACTS wrTH COMMUNITY NURSING HOME~S 3817 We believe this ruling to be erroneous, as the legislative history of the act indicates that medical services are to be exempt and such an exemption has in fact been granted insofar as medicare patients in these same nursing homes are concerned. -. In a June 22, 1966, decision regarding agreements with the Social and there was no expression as to its definition until the enactment o Public Law 88-450 on August 19, 1964. It was then defined by subsection 28, of section 101, title 38, United States Code, as follows: The term "nursing home care" means the accommodation of convaiscents or other persons who are not actuely ill or not in need of hospital care, but who re- quire skilled nursing care or related medical services, if such nursing and medi- cal services are prescribed by, or are performed under the general direction of, persons duly licensed to provide such care. The term includes intensive care where the nursing service is under the supervision of a registered professional nurse. In light of the legal definition quoted above, it is difficult for us to understand how the Department of Labor can seriously contend that veteran-patients are receiving domiciliary care rather than medical service. The Department of Labor's retroactive application of the mini- mum-wage requirements is in the process of wrecking the Veterans' Administration hometown nursing care program. Nursing homes are withdrawing in increasing numbers from the VA program and com- munity nursing home care may soon be unavailable to a large segment of our veteran population. In view of the critical need for the protection of these essential r~d~iii~1 ~or~grari,rna tha~cr~~'~ ~ ~Tt~'iiQ~ A ff~rQ te~ f~1rc~ Mr. EVERETT. You have heard the other witnesses testify. Do you agree with their observations on the nursing home program? Mr. GARDINER. Absolutely. Mr. EVERETT. Any questions? Thank you, Mr. Gardiner. We are always happy to hear from you. Mr. GARIMNER. Thank you. Mr. EVERETT. We will now hear from Mr. Pickens of the American Nursing Home Association. We are happy to have you, Mr. Pickens. PAGENO="0076" WALKER, PRESIDENT; AND ALFRED SERCOLANO, EXECUTIVE DIRECTOR, AMERIC:AN NURSING HOME ASSOCIATION Mr. PICKENS. Thank you, Mr. Chairman. I have with me Mr. Ed Walker, the president of the American Nursing Home Association, who will bear the most of the burden of the testimony. Mr. EVERETT. Where are you from, Mr. Walker? Mr. WALKER. Miami, Okla. Mr. PICKENS. And Mr. Alfred Ercolano, executive director of the association. Before Mr. Walker testifies, I wish to say that I agree with these other gentlemen that this is an urgent problem. The American Nurs- ing Home Association has contacted every State association in an at- tempt not to have them cancel their contracts ; those that have can- celed, of course, canceled before we were able to get to them, and we have asked them to hold off canceling for the next 30 days to see if we cannot get this situation resolved. Mr. Evr~iu~rr. You have statements to file for the record? Mr. PICKENS. I have correspondence. Mr. Ev~m~rr. You want to file that for the record? ~ ~ ~ ~ v eu, i uu. ~ i~i~y ~ ~. i~uui~, ivii~&~. ~ re v ~. pauen~ plus invoice for Medical & Hospital services and their dispute. 4. Letter from Mr. Cobb (Yukon, Okla.) covering investigation made by Dept. of Labor (Wage & Labor Div. of Okla.) re VA and the Act. 5. Congressman Steed's letter to Mr. Pickens about the letter he received from Ben Robertson (NLRB). 6. Mr. Driver's letter (Veterans Administration) to Mr. Pickens acknowlecig- ing receipt of April 26 letter. 7. Mr. Lundquist's letter acknowledging receipt of Congressman Steed's let- ter of April 25. 8. Letter to Mr. Lundquist from Congressman Steed (April 25). 9. Letter to Mr. Pickens from Mr. Lundquist (March 25). 10. Letter to Mr. Driver (Veterans Administration) from Mr. Pickens (Feb. 6). 11. Letter to Mr. Lundquist from Mr. Pickens (January 29, 1968). MISCELL&NEOTJS MATERIAL Memorandum. Question and answer. Testimony submitted August 25, 1967. Woon~'s SENIoR CITIZEN HOME, GRthrie, Okk&, June 12, 1968. Mr. ALFRED S. ERCOLANO, 1101 ~eventeent1i, street, Washington, D.C. ~ cs.-.-.. ~ PAGENO="0077" zie nrs~ ciiec~eu my racinty wnicn was J anuary iv, .w~. tie tnen stateu tnat I owed for 104 weeks and after allowing for 2 weeks vacations I would owe for 100 weeks at $330.00 a week which would make a grand total of $33,300.00. He arrived at this figure by figuring I had at least one VA patient for every day of the year. It seemed to me his biggest concern was whether I would pay it or not. Enclosed is a complete list of all the VA patients I have cared for up to April 16, 1968 when a tornado struck my facility. Yours truly, CHABLtE WOODY, AdnUniistrator. WooDY's SENIoR CITIZEN HOME, Guthrie, Okia., June 11, 1968. The following list of veterans includes all veterans beginning with the first one admitted on January 20, 1966 to the dismissal of all veterans on April 16, 1968 when a tornado struck this facility. 1966 Name Veteran's identi- Date admitted fication No. Date dismissed Total days care Davis, Charles A C-283 39 26 Jan. 19, 1966 Fitzpatrick, Ralph J C-1874 83 36 Feb. 25, 1966 Wiggins, JamesR C-2179 1561 Dec. 2,1966 Jul. 19, 1966 Mar. 8, 1966 Dec. 11,1966 180 11 10 1~6~ `)~ Baldwin, Elmer Z C-385 72 64 Jan. 10, 1968 Brown, Wallace C-1667778 Feb. 9,1968 Hathway, Claude W C-1421 00 25 Feb. 16, 1968 White, Clarence A C-1918 50 98 Mar. 22, 1968 Apr. 16, 1968 Feb. 22,1968 Feb. 19, 1968 Apr. 16, 1968 98 13 3 26 Total 140 PAGENO="0078" 3820 VA CONTRACTS WITH COMMUNITY NURSING HOMES ~Gr~EEMENT TOFURNISH NURSING HOME CARE ~ - ~:!:9 PAT2~NTS o~: THE VETERANS ADMINISTRATION ~ . ~ -~- -. c PARTI.APPLICATION I ~ ~ ~ I 2. AD D~E~S tCft~'. ~ SMt~ ~dZh~ COd.) I 2. TEtEPHONE NO. ~. -- - ~ ~ -~. ..~ ~. ~-~- 1: .. ; 1:. ... . ~. ,~ ,..~.,.. . ~. .-~ ~. ...- .,-.... . . N. HA SNURSINOM ONE NEON CNR1IPIED . ~- COMMISSION ON ACCOEQITATION OF HOSPITALS? FOR PARTICIPATION UNDER TIlLE 4. IS LURSING HOME LICENSED ON APPROVED BY STATE IN (7I'Y,"iR~~ ~t~) ~ XVIO, SOCIAL NECURITV~ACT?N~~* V . flVES fl NO. flYNN * El NO ~ ElVES ONO LICONO~D DOD CAPACITY 8.NUMNOROF0005 dCCUPIEO ON FILING DATE N. OWNERSHIP * ~ : ~PROPRIETARY . ~oRGANizA'rION ~O. TYPE OF PATIENTS ACCEPTED (Ch.Dk .11 ~ppIiNDbI. DD~.~O(i.D) j ~ H ~- . TRATION .~ . 00000NVONV 16 OTOER (SpDNJty) £8 . D. NURSING ......*-- 21.22 2 26 2930 32 - - 3738 ~!_ ~f_ 46 ;s_ - , 6162 AR66 ~ LICENSED VOCATIONAL/PRACTI COLOURS ES NURSING ASS~STANTU/MUES . DIETITIAN AMEUICAN DIETETIC ASSN. (10*1. II S*C$N11D~ I @~1y) ~-~--~ . . . CDIETARY . STAFF . DOIRECT CARE * .:.SIAFr.. (Exclusive of Notoing) * VOLUNTEERS (ZCoIodICg olD17C.R) . . E. HOUS~- : KEEPING STAFF JASITORS/MAINTENANCE STAFF LAUNDRY - OTHFR(Dp.Ol(y) 7172 ~ 1EF*CILITYBUIL 7 B. DO ~ES o~ EXPANSION OR MAJOR REMODELING C. NUMBEROF DEOSAF. ?AUTIES . - BUILDING CONStRUCTION (Type, e.g., veneer, masonr,', concreto, etc.) FE~S~E., O* ~ S T LROOF ~ ~ E U E DM0 ~ ~. I.ETO ONE HOUR FIRE R~ES;STANTT . SPRINKLER SYSTEM T#$R000MOOT * NURSING HERR? . . . . . THE FACILITY? ~ . S P_!~Es ONO . 0 ~ O~~HAN M. ANNISTANCE IN H~EEDING N. OTHER (Sp.oIly) is 19.20 33 ALL OTHER KIT COENI'IELP 3536 PHYSICUL/CORRECTIVE THERAPIST . 39 43 RECSEUTI OSUL/UCTIVITIES DI RRSYSR . 45 47 ?i57 5960 6364 67 6970 BCEH?~~:~ND. 1600559 i~D~'~ ~ 7~ PAGENO="0079" 2. Nursing home care will be furnished to veterar~s for whom such care is epecUically authorized by the Veterans Administration. It is mderstoød that the type of patient to be cared for under this agreement will normally not require more than occasional visits by physicians or more than minimal laboratory, X-ray and other special oervites. The care provided wilt include room, meals, nursing care and any other services or supplies normally provid~d other patiente in the nursing home without extra charge. In addition, the per diem rate established in this agreement will include the cost of medical care, emergency dental care, drugs, labora- tory, X-ray and other necessary services, unless specifically excepted in paragraph 9 of this Agreement. It is further agreed that patients receiving care under this agreement who begin to reqoire more than occasional err4Y of one `unsieco ocaces on cruSt. in tnêse `chses ole nurSIng nomd wfu sorwafu'an amtencurrbi any .ucn'pru~w erty and funds in its possession to the appropriate Veterans Administration office and will hold them (except articles of clothing nefesSary for proper burial) under safeguard until instructions are received from the Vat- erans Administration concerning disposition. 5. It is agreed that the Veterans Administration will have the right to Inspection of the nursing horns and alt appurtenances by an authorized representative(s) designated by the Veterans Administration, to determine w1~sther acceptable standards ard maintained and that adequate care is being rendered. Minimum standards for nursing home care are listed in Appendix "A" hereof, and become a part of this agreement. 6. . It~is impossible in deteimine the exact or estimated amount which will be expended under this agreement. It is understood that no obligation will be incurred by the `VeteraneAdministration under this agrsument~mtil authorizations are issued for nursing home care of specific veterans. `i')ie ~tsans Adnlnistration a~ries to make payment on a timely basis for services rendered in accordance with such authorizations upon rec'eipt'ot billings submitted by the nursing home at the completion of each month's service., The per diem rate will b. paid for either the first or inst day of nursing hams care, but not both. If a veteran is admitted to and die. charged from the nursing home on the same calendar day, payment wifl be made for one day. 7 Itis agreed that the Veterans Administration. may readily b~ve access to. all nisdical ~scàrds concsynthg the veteran's care in the nursing borne. 8. It is understood that the veteran may beprovided nursing home care at the expense of the Veterans Ad" ministration for a period not in excess of that stated in the nursing care and trea~.ist plan received from the Veterans Administration, unless an extension of the authonisatioa. is provided in writing by thi appaopriat. V-eterans AdmiMstratton station. , VA CONTRACTS WITH COMMUNITY NURSING HO]\L APPRNDIXA . LllNIllUM STAN~)AIU~S TOll Nt7I~SING ROME CARE FOR VETERANS ADMINISTRATION PATIENTS 1. A nursing home is defined as a facility og unit operated for the acco~s,rnodation of convalescents or other persona who are not ocutely ill and not in need of hospital care but who require skilled nursing care and re- lated medical services, if such nursing care and medical services are pr~scribed by, or are performed under the general direction of, persons duly licensed to provide such care. PAGENO="0080" Da~eSig~ie~. 3824 VA CONTRACTS WITH COMMUNITY NURSING HOMES I re~~i %~u'bUiTIiJ1~G pa~1'~LLu tiLL ~)V - of a letter Division, Veterans ~ PAGENO="0081" VA CONTRACTS WITH COMMUNITY NURSiNG . IIOM~S 382~ Under the terms of your agi~eement, you should bill us on your letterhead at the completion of each months service. i would suggest that you bill us on October 31 for the month of October and the first few days of September. After that, you should bill us on the last day of each month. ~. P1east~ enclose with your bill a concise renort on the veteran's general comli- , . ~ ~ . ~ V~~V~NS ADMN~ST~ATO>4 . ... .. :~.L ~ ~ ~ ~ ~ ~ id C~. ~ w: ~ D t ~ ~`i~2. C.~ ~PC~~S ~~Fr1ca .~ ~ * * ~ ~ ~ ~ ~ -~-~~---: V ~T~D&~S ~ ~ ~ ~ c~rr . ~ ~ . ` ~ . . ..., . ~ ~ ~ ~ ~-:-~-DATE O~ ISSUE (M~:h, ~ ~ ~ ~ ~ ~ ~ ~ So~t~'~r ~8 ~965 2. V~TC~A~~ ~Th~T ~4AM~ MIQOL~ w4mAL~Afl SAME . l~:Lmdth Fl. 1~TWOOD r- ~ ~ * ~ ~ * ~ ~ ~ . -*1 * ~ 3. ADDR~SS * ~ ~ . ~o~* ~ * ` . . . ~ . . ~ ~. ~1 ~a~ito* 1~e Hotel, ~L3.fv..~c ~ Y.xzco~-pora ed ~ B.lo~i : 400 ~ ~h~-th Bez~h ~ ~ ~ ~ `* V~TaRAN'S CtA~1 NO. * ~ ~`j S Lou~to, \3. ~ ~ C 495 530 ~ ~ ~ ~ . . ~s. AUT$O~IZATtON VAU~ ~ ~ ~OM~ ~ ~~ITO ~ ~ T~ *~L Lf* Sept~nbcr 28,l96~ ~io~ositioz~~t .: . * ~ ~ ~ . : ~ : ~ than ~- -~ ~I. r~ ~ ~ ~ .~ ~- ~- ~- ` 7n~-~ ~ AU ~6 ~oTl~t~ ~ ~ ~ ~ ~ ~ ~ v ~n so ~ H~è Ca~~in Oo~.u~tty Nui~n~ ~oi~o. .. ~ ~ ~ p~, ~c~.pm ~ ~~°:°~ V. é%Ui$iQ~UT *.; ~ .;w~ 60;O(J) I *~: , , : . ~_ ~Wi ~ PAGENO="0082" OCTOBER 5, 1965. Mrs. Mm'rLE R. SMALLWOO~, Guif view Haven, Inc., Ba/y E~t. L0u18, Mi88. DEAR Mns. SMALLWOOD: Attached is Our authorization to cover nursing home care for Mr. Malmoth H. Atwood. This authorization is effective September 28 and continues for a period of 6 months. PAGENO="0083" VA ~ON~ThACTS WITH dOM~iJNITY' NU~ING ~I ES 3827 W. J. DRIVEE, Adminis& HOuSE OF REPRESENT Washingto~'u, D.C., 4~ i~ii~ai ~ £.c.&u;~ ~-~~-"-`~ ~ ~ , ~.- ~- ~ .~-- .~ ~ ~ ~ ~ ~ ~ ~ .,.~, ~ ~ ~ ~ ,~ ~ reAdmittéd to an appropriate Veterans Administration facility" The fact that the contract itself provides for readmission to a hospital when more than minimal medical care is required makes it clear that the Veterans Administration is not here contracting primarily for professional medical serv- ices of the type found exempt under the Service Contract Act. Instead it appears to be contracting primarily for convalescent care services which are furnished through the use of service employees. While there may be a degree of similarity between professional medical care furnished in hospitals and the extended care and skjl~ed nursing home services about which Mr. Pickens wrote, it seems clear that on the basis of the contract the services called for here are within the scope of the act. On re-examination, we find that we must affirm the conclusion stated in our letter of March 25, to Mr. Pickens. However, as stated in section 4 (b) of the Servtce Oontract Act and section 4.123 of the enclosed bufletin, the Secretary of Labor may by administrative action establish reasonable limitations on the application of the act's provisions or grant reasonable variations, tolerances, or exemption therefrom which he finds to be "necessary. and proper in the public interest or to avoid serious im- pairme~at of the copduct of Government business." Petitions for exemption under section 4(b) of the Service Contract Act should be submitted through the head- quarters office of the contracting agency. Sincerely yours, BEN P. ROBEETSON, Deput~ij Adnrinistrator. we are, or cc ui-be, IIIWL with nursing homes for care of veterans. I will appreciate it if you will keep me informed about any new developments. Sincerely, Mr. CLARENCE T. LuNOQuIsT, Admi~iistratec, Wage and Hoxr and Public Co~rtract~ Divisions, Department of Labor, Washington, D.C. ~ DEAR Mn. LUNDQUI5T The General Counsel of the American N Association, Mr. John K; Pickefl5, has forwarded me a copy oi to him dated March 25, 1968, in which you purport to rule that Contract Act of 1965 covers contracts between the Veterans AdminisU nursing homes for the care of veterans in nursing homes up to six months.; PAGENO="0084" 3828 VA CQNTRACTS WITH COMMUNITY NURSING HOMES Mr. Pickens' letter sought a ruling only on the care rendered in extended care facilities and skilled nursing homes as those terms are deflnM in Titles XVIII and XIX respectively of the Social Security Act. ~ . YOu have already exempted hospitals. It is my understandir~g that the pro- fessional medical and nursing care rendered in extended care facilities and skilled nursing homes is very similar to that rendered in hospitals. The statement inyour letter quoted below is contrary to the facts : "On the basis of all the facts available to us, it seems clear that contracts for convalescent care cannot be deemed contracts for hospital care, i.e. for pro- fessional medical services. They do not provide for the type of dli~gnostic or corrective care normally associated with hospital services and require only occa- sional visits by physicians and only the incidental use of other professional medical personnel, in contrast with the type of services normally provided In hospitals." Mr. Pickens supplied you with much information in his letter of Eanuary 29, 1968, all of which you have disregarded. I have a great deal of contact with the Fair Labor Standards Act. I am well aware of its provisions and the public policy behind it. I am also familiar with the legislative history of the Service Contract Act. The nursing home program of the Veterans Administration is an excellent one. It should not be ruined by the hasty judgment of one of your advisors Hon. ToM STEED, House of Representatives-, Washington, D.C. DEAR CONGRESSMAN STEED : Phi~ ~y ,~ j~ ~cknowledge receipt of your letter of April 25, 1968, in which you requested that we re-examine the position set forth in our letter of March 25, 1968 to Mr. John K. Pickens, General Counsel of the American Nursing Home Association, In that letter we stated that contracts for the care of ~ veterans entered Into between the Veterans Administration and nursing homes are subject to the MeNainara-O'Hara Service C~nt~act Act. This matter is heing givep eoiisider~tion and a reply will be.sent to yqu as soon as possible. ~ Sincerely yours, CLARENCE T. LUNDQUIST, AdministratOr. U.S. DEPARTMENT OF LABOR, WAGE AND Houn AND PUBLIC CONTRACTS DIVI$IONS, OFFICE OF THE ADMINISTRATOR, Washington, D.C., March ~5, 1968. Mr. JOHN K. PICKENS, General Counsel, American Nursing Ho'me Assooiatiou, Washington, D.C. DEAR MR. PIOKENS: This is in further reference to your letter of January 29, 1968, concerning the applicability of the McNamara.~O'Hara Service Contract Act. to contracts entered into by members of your association with the Veterens PAGENO="0085" i.e. for professional medical services. They do not provide for the type of diag~ nostic or corrective care normally associated with hospital service~ and require only occasional visits by physicians and only the incidental use of other profes~ sional medical personnel, in contrast with the type of services normally provided in hospitals. This being the case, it would appear that the principal purpose of these veteran care contracts is the furnishing of services through the use of service employees, rather than the furnishing of services by professional medical personnel. As such, these contracts would be within the purview of the Service Contract Act. Sincerely yours, CLARENCE T. LUNDQTJISP, Administrator. AMERICAN NURsING hOME ASSoCIATIoN, Washingtoi'~, D.C., Febri~airy 6, 1968. Mr. WILLIAM 3~. DRIVER, Administrator of Veterans' Affairs, Veterans Administration, Washington, D.C. DEAR MR. DRIVER : Enclosed herewith is a copy of a letter which I have written to Mr. Clarence Lundquist, Administrator of the Wage and Hour Division of the Department of Labor, asking for a ruling that Extended Care Facilities under Public Law 89-97 and Skilled Nursing Homes under Public Law 90-248 having contracts with the Veterans Administration are exempt from the provisions of the Service Contract Act of 1965. It is conceded that such act does not apply for example, to the District of nome, proviueu jor (`duer ievens ui care unu~f l~i~iiieu uumaiig nuiiie~, in inter- mediate care facilities" whose definition has been left to the states, which have not as yet acted, I asked for a ruling covering solely ECF's and Skilled Nursing Homes. If ECF's and Skilled Y-~~ Contract Act, the recenti 1967) amendmen' and time and orn be subject to a r in any one day In some paid for aides However, as wage rates nb only employee~ administrator to maximum I of oui estion that if they are ~ther they will be able ion program because of ~n and its members has ye had with the Veterans s bavei ~iervices Cont Vet~ PAGENO="0086" PAGENO="0087" (10) meets other necessary conditions relating to health, safety or physi- cal facilities. The Secretary issued J~urther regulations regarding such facilities on ~June 1, 1966 which covered the following : (1) Compliance with state and local (9) Laboratories laws . (10) Radiology (2) Qoverning body (11) Medical library (3) Physical environment (12) Compleflientary department (4) Medical Staff (13) Out-patient In Public Law 90-248 Congress has established minimum standards for skilled nursing homes. Section 1902(a)26(A) provides for a regular program of medical review which would do the following: (1) Make a medical evaluation of each patient's need fo~ skiiZed nursing home care; (2) Prepare a written plan for care for each, patient; and (3) A plan or rehabilitation ror eac1i~ patient. Section 1902(a)26(B) requires the state to have one or more medical review teams make periodic inspections in all skilled nursing homes within the State. These medical review teams are to be composed of physicians and other appro- priate health and social service personnel. Section 1902(a) (28) (13) requires the skilled nursing home participating in a State's Title XIX program to: ( 1) Have and maintain an organized nursing service; (2) To have a proj'essional Registered Nurse employed full time as the director of the nursing service ; and (3) To have sufficient nursing and auu,iliary personneZ at all times to provide adequate and properly supervised nursing services for the skilled nursing home's Title XIX patients at all times. Section 1902 (a) (28) (D) requires the skilled nursing home to: (1) Have satisfactory policies and procedures relating to the maintenance of medical records on each patient of the nursing home; (2) Have satisfactory policies and procedures relating to the dispensing and administering or drugs and biologicals; (3) Have satisfactory policies and procedures assuring that each patient is under the care or a physician; and I,t\ t1~~ fff~-~r r11M~ niil nm himc~q nssiimin~ ths.t adeauate VA CONTRACTS WITH COMMUNITY NUR&ING HOME~S 3833 ary hospitals) have a jurisdictional amount of $250,000 whereas all nursing homes a jurisdictional amount of only $100,000. The requireme~its of Public Law 8~-97 and Public Law 90-238 compose total regulations of nursing home staffing and require minimum medical (physicians) and nursing personnel. Public Law 90-248 also requires licensure of all ~urslng home administrators. PAGENO="0088" So that it would seem that until the State agencies further define the staffing and types and levels of care to be provided under Title XIX (which most states are already in the process of doing) lit will be impossible to determine how Inter- mediate Care Facilities should be treated. However, it is abundantly clear from the above that the staffing, medical and nursing, and the care given In extended care facilities (under Title XIX) and skilled nursing homes (under Title XIX) Is very similar `and in mOst instances substantially the same as that reindered in hospitals. IV. NURSING HOMES SULrECT TO NATIONAL LABOR RELATIONS ACT AND PAIR LABOR STANDARDS ACT Although non-profit hospitals (95% of all'hospitals are non-profit) are exempt from the provisions of the National Labor flelations Act, as amended, nursing homes, whether profit or non-profit `are not exempt. In fact, on November 16, 1967 in the University Nursing HO~iie Case, 168 NLRB No. 53, the National Labor Re- lations Board asserted jurisdiction over all nursing homes having annual gross receipts of $100,000 or more. This would take in all nursing homes with 20 beds or more. Proprietary hospitals ~ have a jurisdictional amount of It is clear that nursing homes were intended by Congress not to be covered by the provisions of the Service Contract Act of 1965. It is conceded that hospital care supplied to government agencies was to be excluded. Extended Care Facilities and skilled nursing homes offer substantially similar care by almost identical staffing patterns, namely, physicians, registered profes- sional nurses, licensed practical nurses aide and orderlies as do hospitals. The care contracted for by the Veterans Administration is short term chronic or convalescing care-not of a custodial type-similar to that rendered by hospitals. Nursing homes are subject to the Fair Labor Standard Act. They are also sub- ject to the jurisdiction of the National Labor Relations Board (NLRB). Ninety- five percent of the hospitals are not subject to the NLRB. The other 5% (proprle- PAGENO="0089" I V) C,, 0 C) C) >. C, (1) -J 0 = 0 and (3) Suffering from a disease which Is included in one of the six specific groups named in Section 612(g) (2). Of these, 559 have completed one year on post-hospital care status and thus become eligible for further care as reasonably necessary, for such disease or dis- order. Of the remaining 966, there are 683 still undergoing active treatment on a post-hospital care status. House Report No. 680, 88th Congress, 1st sessIon, includes a table showing an analysis of aid and attendance pension cases on the rolls June 10, 1963 by major diagnosis. This table appears below. Using a most liberal Interpretation, ap~~ VA CONTRAOTS WITH COMMUNI~ NURSING HOMES 3835 00000C)0 00000 C) CO CO~cC) 00 C~)C)C~ - ~0ac~)) C) a (I, cc *0 ~0 `C) PAGENO="0090" -J -J w 0 L~J 0. cC = C,) C,, 0 -J 0 Ui = 0 Ci) C,) 0 C/) 3- cC 0 Ui I- C~J -J 3- Ci, 0~ C~ 03 ~C) C~4C~4 ~ ~ - - ~ C'4 0r-~ ~ 00C'J c~0 ~ CC)0 0 0 ~0 0 ~ C~40 0 ~-~0 0 0 0 00 0 ~ C~J ~4 ~ ~ Cl) 0 0 (3 O~ ~fl 0 C~)C43~ cC) ~ :~~o :.~ ~ I ~ E~° 0= ~ - ~ ,o~: 2 ~ _oQ~ t~;~ PAGENO="0091" J2~ ~ .2 ~ ~ ~ -~ ~ _:~ _~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~2 ~ ~c~b ~ ~ ~ U) r~ ~ ~ ~ ~ 0 ~ ~ r~. ~ Co -~o cb ~ ~ PAGENO="0092" ~383S VA CONTRACTS WIT~I CON PAGENO="0093" ~ress the pas PAGENO="0094" 3840 VA CONPRACTS WITH COMMUNITY NURSING HOMES These patients require essentially the same care as a medicare patient. . Mr. EVERETT. Do medicare patients come under this ruling ? Mr. WALKER. No, we understand they do not. This is such a minute part of the total patient load that, while it is everything to the veteran, actually the average nur~iñg home in the country-for example, my 6O~bed nursing care unit in Miami has the largest caseload of veterans if~~Lf ~W'p 3~d ~ 3~&Tz~g~vL2rn~: ~ ei,~3&;jur~~.~1.iRf ~ patients pay $16 a day The effect on the patient for this program to be hampered in any way would be very serious. The effect on the nursing home financially ~ would be very little, if anything. We went along with the program and offered our suggestions. The efThct on the cost of the total medicare and medicaid program-and, for the record, I am a member of the new advisory council that will advise Secretary Cohen on the medi- caid program. If this ruling is allowed to stand and the program oontinues, then it will mean a multimillion-dollar increase in cost to carry the program. Mr. EVERETr. In other words, you will either have to kick Mr. Johnson out or- . Mr. WALKER. Or Mr. Johnson will have to go back to the VA Hospital, where it will cost $35 to $40 a day. Mr. EVERETT. Do you have any trouble getting employees at the wages you pay now? Mr. WALKER. No, sir. We have always paid a little above the mini- mum. However, I will be frank to say that most of the States in this country are in serious trouble financially, just as the Federal Govern- ment is. For ext~mple, the nursing homes of Oklahoma have absorbed ~ million a year minimum waø~e i1mrens~c~. ein(~ 1~c~f what the nursing home is facing in this situation. Mr. EVERETT. How far back does that go? Mr. ERCOLANO. That goes back to 1966 at the time the Service Con- tract Act was initiated. This is a letter from one of our members in Guthrie, Okla. It says: Mr. Abbott of the Department of Labor visited my facility on January 10, 1968. He checked my records and found that I was in compliance with the minimum wage law. He then asked if I had a contract with the Veterans' Administration PAGENO="0095" 9. IA~JUJ~J1I `i-I. VY AJ~JU1L~)L U]L'..)~) .L~ ~ ~ ~ , ~ ..~. ~ ~ ~ ~ ~ ~ .~ cause they are complying with the minimum wage requirements-what we are talking about is this punitive retroactive application? Mr. WALKER. We are talking about two things. At this point the minimum wage iS $1.15. A year ago it was $1. In February it was $1.15. Next February it will be $1.30. The next February it will be $1.45, until it reaches a maximum of $1.60 under the law. STAFF DIREcToR. In other words, Congress has put the nursing homes under an escalating minimum wage program so we are not talking about your business being under a minimum wage, but we are talking about the retroactive application of the law? Mr. ERCOLANO. And also if there is room for an exemption in the nursing home field under the Service Contract Act. STAFF DIREcToR. Mr. Walker, have you tallied what you would owe? Mr. WALKER. It would run about $100,000. STAFF DIRECTOR. In your three homes? Mr. WALKER. Yes. STAFF DIRECTOR. And you have never had over 10 veteran patients? Mr. WALKER. I have never had over 12 veterans in the three homes in the whole program. We have not canceled the contracts, inciden- mènt,Tiis 1'eèbiu~ art? ltepI ine ~cun& v~d~ ~ ~ ~ and everything is not only there but is utilized as needed. STAFF DIRECTOR. And there is no special arrangement that results in medicare patients having a different relationship with the doctor? Mr. WALKER. Not one bit. 95-824-68--9 VA CONTRACTS WITH COMMUNITY NURSING HOMES 3843 uents or jU~u veueran p~ui~iiu~ Mr. ERCOLANO. Just veteran patients. As far as I know they have never contended that either medicare or title 19 of the Federal Public Assistance patients came under the Services Contract Act. They never contended that. Mr. EVERETT. They are liable, to do it, aren't they? Mr. FJRCOLANO. I hate to say "Yes" but I guess it certainly is possible. PAGENO="0096" like sic1~ care to me. Mr. WALKER. They are iii. It is like any other piece of equipment. Mr. Johnson came back and he got along fine for a while but suddenly he developed congestion in his lungs caused by poor circulation, a bad heart condition, and he suddenly degenerated. Many times you have your cerebral vascular accidents suddenly. We are dealing with 65- or 70- or even 90-year-old pieces of equipment called the human vy ~ nave~ fiot na(i any ~g~Iierai ifftice lior iiave~ We oeeii UOLIIICU, ilOf have I been notified, as an individual. STAFF DIRECTOR. Are you saying that the notice you have is in the nature of conversation with the enforcement officer? Mr. WALKER. The notice we have had has been through the nursing homes that have been served notice. Mr. ERCOLANO. By a field agent. Mr. WALKER. We have originated an inquiry ourselves, and it has been made part of the record. To answer the question precisely, to my knowledge, and I think I would know, we have not had an official notice to all the nursing homes of this country putting us on notice to this effect. Mr. PI0KEN5. Mr. Meadows, the first rumblings we had were last October and November from Oklahoma and Texas and then some from Colorado and other States. This was the reason that on January 29 we had accumulated so many of these that I wrote this letter that was just put in the record, on January 29, to. the Administrator, requesting a ruling on extended-care faoilities and skilled nursing homes. 3844 VA CONTRACTS WITH COMMUNITY . NURSING HOMES Had a cold and flu. Medications given : Lincocin (antibiotic) * 2cc's IM BID until temperature subsides ; reticulogen, 1/2 cc daily for 2 weeks, then two times per week ; allergic to penicillin. Current medication : Librium, 5 mg, capsule 1 QID ; Serutan, 1 gram with juice TID ; Merazine, 50 mg, tablets 1 daily ; Entozyme, tablets 1. p.c. QID; Maalox, 2 grams for gastric distress ; Nembutal, 11/2 grams h.s. for rest; Reticulogen 2 times per week ; laxative as needed. General comments by Mrs. Blandin : RN on duty 7-3, and on call at all times~ LPN's or RN's are on duty from 3-il and from 11-3. Re special care of patients. Some hospital procedures are undertaken, such as oxygen given to Mr. Carroll and the reinsertion of the foley catheter. Consultants are called in when necessary, again as in the case of Mr. Carroll when an eye specialist was called in. All patients are admitted only on orders of a physician and are under the continuing supervision of a ph3~sican at all times. Mr. EVERETT. Have you anything else to say? Mr. WALKER. I want to simply say this, sir. T ~ ~-hc~ r~t ~ tim primmitf.c~A WA ~i11 flflT~1'AAi~tA fii~ PAGENO="0097" Age: 74. Admitted: 7.7.67 from VA Hospital Diagnosis: generalized arteriosclerosis, arthritis, emphysema. Admitted with influenza. Heart enlarged-limited expansion and excursion of lungs. Ambulatory with help on admittance. Forgetful and confused mental condition. Went to clinic 10.20.67 with gastric distress. Had gallbladder series at hospital. Medication given for gastric distress: Acidulin, tablet 1; pathibamate tablets 1 AC and TID; Compazine; Donnazyme, 1 before breakfast daily. Mr. EVERETT. We appreciate your testimony. Thank you. Now we will hear from the Department of Labor, Mr. Ben Robert- son and Mr. Friedman. PARTMENT OP LABOR; ACCOMPANIED BY EDWARD D. PRIED~ WAGE AND HOUR AND PUBLIC CONTRACTS DIVISION, U.S~ DE~ PARTMENT OP LABOR, ACCOMPANIED BY EDWARD D. PEiED.~ MAN, DEPUTY SOLICITOR, U.S. DEPARTMENT OP LABOR, AND ROBERT GUTTMAN, DEPUTY ASSOCIATE SOLICITOR, U.S. DEP~RT~ MENT OP LABOR Mr. EVERETT. Mr. Robertson, will you be the speaker for your group? Mr. ROBERTSON. Yes, sir. Mr. EVERETT. Have you a prepared statement? Mr. ROBERTSON. No, sir. I would like to make some remarks, how- 13~ver_ ~ ~ To relate the history a little more precisely than it has been pre- sented, the Administrator of the Veterans' Administration, several veterans' organizations, and a number of Congressmen and Senators have requested review and reconsideration ofthe opinion of Mr. Clar- ence T. Lundquist, Administrator of the Wage and Hour and Public Contracts Division in a letter dated March 25; 1968, to Mr. John K. Pickens, general counsel of the American Nursing Home Asso- ciation, stating the position of the Department of Labor that the McNamara-O'Hara Service Contract Act is applicable to Veterans' Administration contracts with nursing homes for the care of con- valescent veterans. The Service Contract Act applies to contracts the principal pur- pose of which is to furnish services to the Federal Government through the use of service employees. In determinino' en1~sticrnR if PAGENO="0098" A1~--~ ~ A ~~-~----~ ~J- ~ 3846 VA CONTRACTS WITH COMMuNITY NURSING HOMES A similar understanding of contracts principally for "services" as embracing contracts other than those for construction or supplies is reflected in the statement of President ,Johnson upon signing the act. In determining whether or not anyof the contract services will be that contracts for nur~ing home dare, the ~rincipal purpose of whi~h is to furnish services through the use of nurses' aides, orderlies, food service and custodial employees, clearly fall within the type of con- tracts covered under theService Contract Act. In the letters received by the Department of Labor, it is correctly stated that the Department does not assert coverage with respect to contracts for hospital * care. This position is based upon a specific statement on page 3 of House Report 948 accompanying H.R. 10238 pertaining to contracts with local hospitals for the care of indigent patients. Mr. EVERETT. Why don't they change the name from "nursing homes" to "hospitals"? Mr. ROBERTSON. This is the next point I would like to cover, Mr. Chairman. Mr. SATTERFIELD. Is this your statement or are you reading from somebody else's prepared statement? Mr. ROBERTSON. No, sir; this is my statement. I prepared it. Mr. SATTERFIELD. I understand you did not have a prepared state- ment. That is why I asked the question. Mr. ROBERTSON. It was not prepared in form to submit to the corn- Ho~ T~- ~ pii~~ `~r~il ~+~d House debate: "The bill is applicable to advertised ~r negotiated contracts." Mr. O'Hara, who presented the legislation: The bill is applicable to advertised or negotiated contracts in excess of $2,500, the principal purpose of which is for the furnishing of services through the use of service employees, as defined in the bill. Thus, for example, contracts mndt~ by the District of Columbia government with local hospitals for the care PAGENO="0099" VA CONTRACTS WITH COMMUNITY NURSING HOMEtS 3847 It seems there must be some significance to the use of this term "would not be covered, since `service employees' as defined in the bill would be performing only incidental functions." It seems to me that when you deal with the legislative history of the act that the act is totally silent on this subject of medical care with one exception, and that one exception tends to exempt medical patients. Am I in error? Mr. ROBERTSON. Only that the statement is limited to hospitals. STAFF DIRECToR. What do you think the meaning of the word "in- digent" is here? Mr. ROBERTSON. I assume these are people who are public charges. ~ DicYrf~P~ TTu~n viii vp~iscin thfl± rnirSifl~r homes are not in the same sense as Blue Cross or Blue Shield which would bear the expenses if one of their covered policyholders were institutionalized. STAFF DIRECTOR. How about the medicaid program? Mr. ROBERTSON. The medicaid program would fall in the same cate- gory and the same problem as to whether or not there is a contract with HEW and the institution where the person is housed. We are in the process of exploring this with them, but we have reached no ~onc1usion. STAFF DIRECTOR. Go ahead. I wanted to interrupt on this point of the legislative history. Mr. ROBERTSON. In the licensing requirements of the various States and in the Fair Labor Standards Act Amendments of 1966 a clear distinction is made between hospitals and nursing homes. The VA itself recognizes this distinction. Appendix A, "Minimum Standards for Nursing Home Care for Veterans' Administration Patients," which is incorporated in the Veterans' Administration standard contract for this type of service, contains the following: A nursing home is defined as a facility or unit operated for accommodation of convalescents or other persons who are not acutely ill and not in need of hos- pital care but who require skilled nursing care and related medical services, if such nursing care and medical services are prescribed by, or are performed under Administration facility. PAGENO="0100" 3848 VA CONTRACTS WITH COMMUNITY NURSING HOMES that the Veterans' Administration is not here oontraoting primarily for professional medical services of the type found exempt under the Service Contract Act. The Veterans' Administration appears to be contracting primarily for convalescent care services which are fur- nished through the use of service employees. ~ While there may be a degree of similarity between prbfessiOnal medical care furnished in hospitals and the extended care and skilled nursing home services, it seems clear that on th~ ha~is of the contract the services called for here are within the scope of the act. `~ In the communications received by the Department, it has been requested that if the opinion of March 25, 1968 cannot be reversed that action be taken under section 4(b) of the ~rvice Contract Act to exempt contracts of this type. . ~ We are unable to find on the basis of material submitted that there is sufficient justification before us at present for the granting~ of the exemption ~ requested. If further data are made available the Depart- ment will be pleased to give the matter of ~ exemption fu~ther con- sideration. However, there would be a public hearing on the request for exemption with full opportunity for all intei~ested parties to appear. . A dethsion then would be made based on the record of the hearin~r. heard. Mr. EVERETT. I am talking about the nursing home people. That is the group I want to hear first. All of these people who appear from the service organizations main- tam offices here ; but these other people have come from Oklahoma and all these other places. It just means another trip back down here for them. You follow what I am talking about? Mr. ROBERTSON. Yes, sir. Mr. DUNCAN. I cannot find anywhere in the act that it says there must be a public hearing. I cannot see why you cannot accept the testimony here as part of the record. It is very clear that the Secretary can make this decision. To me this would be a waste of time and everything else to even try to hold a hearing because the Secretary certainly does not have to hold one. PAGENO="0101" VA CONTRACTS WITH COMMUNITY NURSING HOMES 3849 Mr. ROBERTSON. No ; but apparently he has made a deoision in this ~L Uh11~1t ~IiiyviLe %`Y1i~.) Ji~2~ ,J~3t,L? 1iw~w wu~y vv~iuiu ~a~y ,y `ii~t oi'~ iiiiyciii - ing the conduct of Government business. I think you are duty bound to give some cooperation in this matter. Mr. EVERETT. You do have the right to exempt these people if you so desire, do you not? Mr. ROBERTSON. The Secretary of Labor has that right. Mr. EVERETT. Suppose we change the names of these nursing homes to "hospitals." Would they be covered then? i~k r. ROBERTSON. Sir, 1 think they would have to do more than cha~ige the names to qualify as hospitals under the laws of the various States. :1~;I r. EVERETT. Such as what? :~i: r. ROBERTSON. Provide resident physicians, operating rooms, van- ous~technical requirements of the various States. ~[r. ROBERTS. If these people do not comply, it is the fault of the coir~mittee, Congress, or the Veterans' Administration. Certainly they are not at fault. They were not attempting to make more money bec~tuse they can fill the same bed with patients from the medicaid program. I~; is obvious that the assumption of custodial care has to be in er$r because, if he is a custodial patient, he would be in a VA cus- . ~ ~LwBJ~J:c1iftTh~'. iiiere ~ U1~:~ euiiuffluthg Ui~ciep~uioy iii ~ Mr. ROBERTS. Yes ; that we can worry about later. How are we going back to correct this letter of March 25 or this ruling as it affects these people who are trying to perform a service and trying to save the Government some money? How are we going to get them out of this mess? You all are technicians in this field. How are we going to get them out of it? If it takes an act, the V~terans' Affairs Committee passes many of the bills through this Congress, most of them by 400 votes. We should not try to spank somebody. I think it would be wrong on our part and I think it would be bad business on everybody's part. How are we going to remedy this? lVrv Rc~nn~prr~i T +i'i~i~lr t1i~.v ~~iri ~f c~iit ~ tlmv trill ii~ W(~ l1~lVA PAGENO="0102" Mr. ROBERTSON. I I loo we would all be better ~. It is just a matter of ~ 3J~~~~L1 ~ ROBERTSON. I would assume we didn't have the question brought to attention until we receive Mr. Pickens' letter representing the ass( ation in January Mr. SATTERFIELD. I notice you say you have not ruled on medicare, either. Mr. ROBERTSON. That is correct. Mr. SATTERFIELD. Do you have any idea how lon you get to that? Mr. ROBERTSON. We are hoping to obtain enough information from HEW to permit a decision. Mr. SATTERFIELD. I would certainly think we should have retroactive liability when they are in a position of possibly getting socked with this thing. I have had serious misgivings about continuing with this program. Mr. ROBERTSON. If I may clarify this in relation to Mr. Roberts' remarks. What I suggest might be accomplished through a meeting by representatives of the association, the VA, and the LabOr Department. This would relate to this retroactivity question and not the solution of whether or not the exemption will be granted. This would be con- tinLrent on the record of the hearing~s. PAGENO="0103" Mr. Sai~ED. Very briefly, Mr. Chairman. I am more interested in lilofie ~iui~ ~1ne~r1rr1guñcu51~,1±*rI1 - ~ ~ ~ ~ ~ can all live with will come out of it. Mr. EVERETT. Talking about getting something unsatisfactory, have you ever gotten anything satisfactory out of them? Mr. STEED. In other areas and in years gone by I have been able to work with them where it has turned out quite satisfactorily. I hope perhaps we can do so this time. Mr. ROBERTS. I just believe these guys can work it out if they want to without our having to get as rough as we might. Mr. EVERETT. Mr. Meadows? STAFF DIRECTOR. I have no questions. Mr. EVERETT. Thank you, Mr. Steed. You always make a wonderful contribution and we appreciate your coming by and letting us have the benefit of your views. Mr. STEED. I really believe this is a serious matter. I think you are to be highly commended for trying to get this worked out Mr. EVERETT. Don't you think this act was passed 2 or 3 years ago when they just called it to their attention and don't you think it is highly irregular to assess them with all these back payments? Mr STFED I think in a situation like this that inste'id of fo the hairsplitting letter of the law it is much ~ r to use we __________ VA CONTRACTS WITH COMMUNITY NURSING HOMES 3853 them under medicare and minimum wage, people keeping medicare patients will jump on Members of Congress and we will b~ Hght on your backs. What are you going to do abOut that? Don't you, think you should make. some kind of decision ? * ~ ~ ~ ~ . ~. Mr~ ROB~RTS~N. We will make a `decisioii oh the rn~aieate problem as soon as we can. I would rather not prejudge the d:ecision. ~ Mr. Evi~nrn~r. I don't waPt you to. Th~ Medicare Act has been in effect for some time now. These people out here are barely making ends meet with these nursing homes. I certainly think we owe it to them to let, them kijow where their ~ Mr. EVERETT. Would you be available to work with our staff here later on, and with Mr. Stratton of VA, Mr. Walker and Mr. Pickens of the Nursing }Iome Association, to see wh~ther we can resolve this while these gentlemen are in town? Could you meet with them in the morning at 10 o'clock? _&A-~. ~ ~ PAGENO="0104" kWJ~~Lj~ LR~ ~ve have tO I1~LV~ e2u)e1I~1ve iiearings anu an extensive recorct to prove that is disruptive so the Secretary can act, but it seems to me that it almost speaks for itself and stands on its own bottom. In this connection, Mr. Teague will not be here but he asked me to be sure certain letters were made part of the record, and Mr. Chair- man, the correspondence I refer to was, I believe, inserted in the rec- ord with other material relative to the legislative history of Public Law 89-286. Mr. EVERETT. Yes. STAFF DIRECTOR. One brief comment. We have been trying for some these ietters in the recorci and express his disappointment about that sort of handling of his correspondence. (Letters and other information referred to appear on pages 3799 throuh 3805.) Mr. EVERETT. Mr. Robertson, do you realize that you are fixing to have all of these veterans out of these nursing homes? Word will get around to all these nursing homes about this medicare. If you put COUNSEL. The Service Contract Act was signed ~nd made public law on OctOber 22, 1965, with the provision that it would be effective 90 days thereafter as far as contracts are concerned. As of this date have you told the various community nursing homes around the country, as a general proposition, by notice~from your office, that they are covered? Mr. ROBERTSON. Not directly.We wrote Mr. Pickens, general counsel for the association. COUNSEL. You have not taken any action on your own responsibility to indicate to. the individual nursing homes that they are covered? Mr. ROBERTSON. No, sir. COUNSEL. And .jf a community nursing home were not a member of the American Nursing Home Associ~tion it would. have no officiali notic~?. . . Mr. ROBERTSON. That is correct. . . . OOUNSEL. With regard to the application of this act? Mr. ROBERTSON.. That is right..~ .. COUNSEL. Do you plan to continue to proceed this way? Mr. ROBERTSON. I would believe that w~ hflvA rn~ ~ ~ PAGENO="0105" 1 PAGENO="0106" q PAGENO="0107" PAGENO="0108" PAGENO="0109" PAGENO="0110" PAGENO="0111" PAGENO="0112" PAGENO="0113" PAGENO="0114" PAGENO="0115" PAGENO="0116" PAGENO="0117" PAGENO="0118" PAGENO="0119" PAGENO="0120" PAGENO="0121" PAGENO="0122" PAGENO="0123" PAGENO="0124" PAGENO="0125" PAGENO="0126" PAGENO="0127" PAGENO="0128" PAGENO="0129" PAGENO="0130" PAGENO="0131" PAGENO="0132"