if you do not have the prospect of employment that is definite, concrete, established at the end of the line, people just will not be in for all of this very expensive training. And I might say that the individual really bears most of the cost of the training in terms of his opportunity cost.

Professor KURLAND. Your analogy fails it seems to me because while it is quite true you went through what is the equivalent of this good faith activity, the companies were not required or told that they have to have a percentage on their payroll of a given number. I do not want to suggest to you how you write your plans, but it seems quite clear to me that the conflict with Congress at the moment is essentially over the numbers, and that if they are required, if these numbers are requirements, then you are in the greatest difficulty. If they are not requirements, then I wonder why they are included at all.

Secretary SHULTZ. First on the analogy, I noticed, in trying to do this, an absolutely stunning shift of attitude in the business community toward this problem along about the time the Executive order to business began to get noticed, and after passage of the Civil Rights Act. People began to get interested in that. So that the fact that here is a company and somebody might be scrutinizing us and saying not only equal employment opportunity in the shop but how about the executive suite, just created a tremendous amount of interest and I think that is analogous in some ways.

I have tried to state that the Philadelphia Plan as we see it has a kind of threefold set of requirements that are interrelated, and we think that they do support each other, and I would not want to take one away for fear that others really would not work very well.

Professor KURLAND. But that is not making the first into a requirement. You said three full sets of requirements?

Secretary SHULTZ. If you simply said let us have affirmative action as recruiting, training, outreach and things like that but not employment, then I do not think we would get very much real recruiting, training, and so on. I think there has to be that employment possibility there.

Professor KURLAND. If they did all these things and turned down minority employees it would clearly be a violation of the statute as well as of the quota; would it not?

Secretary SHULTZ. And if that were the case, then I think we would be finding that there was not a good faith effort.

Professor KURLAND. Are you saying that if they did all these things and did not come up with the numbers

Secretary SHULTZ. No. You gave me the case of an employer that did all of this and then when the black man showed up at his door Professor KURLAND. Surely.

Secretary SHULTZ (continuing). He did not give him a job, he discriminated against him on the basis of color, would he be in compliance? No; he would not be.

Professor KURLAND. No; there would be a violation not only of your order but I suspect of title 7 and maybe some other provisions. Secretary SHULTZ. Yes.

Professor KURLAND. Thank you, Mr. Secretary.

Mr. EDMISTEN. I would ask a question of Mr. Silberman. I didn't find much law in the Labor Department's memorandum supporting

the plan. I take it you fully researched this in the legal department before you sent it over to the Justice Department?

Mr. SILBERMAN. That is correct.

Mr. EDMISTEN. And you have no doubt in your mind that the plan is in harmony with title VII of the Civil Rights Act?

Mr. SILBERMAN. I have no doubt that the plan is legally pursuant and authorized by the Executive order and not in conflict with title VII of the Civil Rights Act.

Mr. EDMISTEN. It does not bother you any here that section (j) of title VII

Mr. SILBERMAN. 703 (j) I think you are referring to.

Mr. EDMISTEN (continuing). Speaks of no preferential treatment? That did not give you any qualms?

Mr. SILBERMAN. I first read 703 (j) to note it starts out "Nothing in this title," so it occurred to me that Congress was clearly directing its attention to a prohibition toward the administration of title VII, and since they were at the same time debating the existence of the Executive order program, it seems to me as a strict constructionist that Congress clearly intended not to apply 703 (j) to an Executive order. But second, and I think the Secretary referred to this a moment ago in his testimony, I did not believe the plan granted a preference to anyone. Therefore I did not believe that it violated 703 (j), even if it was pursuant to the Civil Rights Act.

Mr. EDMISTEN. Thank you.

Senator ERVIN. Mr. Secretary, I want to thank you and the other gentlemen for appearing. The subcommittee will stand in recess until 2:30.

(Whereupon, at 1:25 p.m. the subcommittee recessed, to reconvene at 2:30 p.m. on the same day.)

AFTERNOON SESSION

Senator ERVIN. The subcommittee will come to order.

I am delighted to welcome you, Mr. Comptroller General, to the subcommittee, and appreciate very much your willingness to come here and give us the benefit of your views.

I wish you would identify the gentlemen with you for the record.

STATEMENT OF HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES, ACCOMPANIED BY ROBERT F. KELLER, ASSISTANT COMPTROLLER GENERAL, J. EDWARD WELCH, ACTING GENERAL COUNSEL, AND MELVIN E. MILLER, ASSISTANT GENERAL COUNSEL

Mr. STAATS. Thank you very much, Mr. Chairman.

To my immediate left is Mr. Robert Keller, Assistant Comptroller General, to my immediate right, Mr. Jed Welch, our Acting General Counsel, and Mr. Miller, one of our assistant General Counsels who has been working on this particular matter.

Senator ERVIN. You may proceed in your own way in giving your testimony.

Mr. STAATS. Mr. Chairman and members of the subcommittee:
We appreciate this opportunity to appear before your subcom-

37-693-70-10

mittee to discuss our position with respect to the revised Philadelphia Plan.

We are concerned about both the legality of the plan and the situations which appear to have arisen as a result of our endeavors to discharge our statutory duties and responsibilities in connection with the plan.

I believe the members of the subcommittee are by now aware of the basic facts, which are:

(1) that the Department of Labor has issued an order requiring that major construction contracts in the Philadelphia area, which are entered into or financed by the United States, must include commitments by the contractors to goals of employment of minority workers in specified skills trades;

(2) that by a decision dated August 5, 1969, we advised the Secretary of Labor that we considered the plan to be in contravention of the Civil Rights Act of 1964 and would be required to so hold in passing upon the legality of expenditures of appropriated funds under contracts made subject to the plan; and

(3) that the Attorney General on September 22, 1969, issued an opinion to the Secretary of Labor advising him of his conclusion that the plan is not in conflict with any provision of the Civil Rights Act; that it is authorized by Executive Order No. 11246; and that it may be enforced in awarding Government contracts.

We would like to offer for the record copies of our decision and of the Attorney General's opinion...

The revised Philadelphia Plan was issued on June 27, 1969, with the announcement that it was designed to meet GAO's objections to a lack of specificity in a prior plan. The new plan is frank and direct in stating its purpose.

It gives a rundown of the history of alleged discriminatory practices by the Philadelphia construction unions in admitting members; it states that the percentage of minority group membership in the unions and the construction trades is far below the ratio of minority group population to the total Philadelphia population, and it advises that the purpose of the plan is to achieve greater participation of minority group members in the construction trades.

The plan states that there shall be included in invitations for bids (IFB's) on both Federal and federally assisted construction contracts in the Philadelphia area, specific ranges of minory group employees in each of six skilled construction trades; that each bidder must designate in his bid the specific number of minority group employees, within such ranges, that he will employ on the job; and that failure of the contractor to make every good-faith effort to attain the minority group employment goals he has established in his bid may result in the imposition of sanctions, which might include termination of his contract.

The primary question considered in our decision of August 5 was whether the revised plan violated the equal employment opportunity provisions of the Civil Rights Act of 1964.

In the formulation of that decision, we regarded the Civil Rights Act of 1964 as being the law governing nondiscrimination in employment and equal employment opportunity obligations of employers. Therefore, we considered the 1964 act as overriding any administrative

rules, regulations, and orders which conflicted with the provisions of that act or went beyond such law and purported to establish, in effect, additional unlawful employment practices for employers who engaged in Federal or federally assisted construction.

"

We think the basic policy of the equal employment opportunity part of the act is set out in pertinent part in section 703 (a) as follows: It shall be an unlawful employment practice for any employer-(1) to fail or refuse to hire *** any individual *** because of such individual's race, color, religion, sex, or national origin.

The basic policy of the act as it relates to federally assisted con tracts, is stated in pertinent part in section 601, as follows:

No person *** shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal assistance.

Another pertinent provision of the act is set out in section 703 (j), which provides in part as follows:

Nothing contained in this title shall be interpreted to require any em, ployer *** to grant preferential treatment to any individual or to any group because *** of an imbalance which may exist with respect to the total number or percentage of persons of any race * ** or national origin employed by any employer (or) referred * * * for employment by any *** labor organization *** in comparison with the total number or percentage of persons of such race * * * or national origin in any community *** or in the available work force in any community * *

This part of the law is known as the prohibition against quotas; that is, the prohibition against requiring an employer to hire a specified proportion or percentage of his employees from certain racial or national origin groups.

It seems to have been generally accepted by Labor, Justice, and minority group spokesmen that quotas are illegal. But in defense of the Philadelphia Plan the Department of Labor argued that the goals for minority group employees which would be included in IFB's and in contracts under the plan could not violate the Civil Rights Act of 1964 because

1. A quota is a fixed number or percentage of minority group members, whereas ranges to be established under the plan are flexible in that the bidder may choose as his goal any number or percentage within the ranges set out in the IFB.

2. Failure to attain the goals does not constitute noncompliance, since such failure can be waived if the contractor can show that he made every good-faith effort to attain the goals.

3. The Philadelphia Plan was promulgated under Executive Order 11246, not under the Civil Rights Act of 1964, and affirmative action programs under the Executive order may properly require consideration of race or national origin if such consideration is necessary to correct the present results of past discrimination.

4. The plan provides that the contractor's commitment to specified goals of minority group employment shall not be used to discriminate against any qualified applicant or employee.

In considering these arguments in our decision of August 5 we said that in our opinion the distinction between quotas and goals was largely a matter of semantics. The plain facts are, however, that the plan sets a definite minimum percentage requirement for employment of minority workers; requires an employer to commit himself to em

ploy at least a corresponding minimum number of minority workers; and provides for sanctions for a failure to employ that number (unless the contractor can satisfy the agency personnel concerned that he has made every good-faith effort to attain such number).

It follows, therefore, that when such sanctions are applied they will be a direct result of the contractor's failure to meet his specified number of minority employees.

In our decision of August 5 we also said that the basic philosophy of the equal employment opportunities portion of the Civil Rights Act is that it shall be an unlawful employment practice to use race or national origin as a basis for hiring, or refusing to hire, a qualified applicant. And we said the plan would necessarily require contractors to consider race and national origin in hiring.

In reply to the Department's contention that the plan itself says a contractor's goals shall not be used to discriminate against any qualified applicant or employee, we expressed the opinion that the obligation to make every good-faith effort to attain his goals under the plan will place contractors in situations where they will undoubtedly grant preferential treatment to minority group employees. Later, I will address this point again.

It is our opinion that the legislative history of the Civil Rights Act shows beyond question that Congress in legislating against discrimination in employment recognized the discrimination that is inherent in a quota system, and regarded the term "discrimination" as including the use of race or national origin as a basis for hiring; the assignment of numerical ratios based on race or national origin; and the maintaining of any racial balance in employees.

In considering Labor's contention that it could properly consider race or national origin under affirmative action programs established under Executive orders, we pointed out that while the term "affirmative action" was included in Executive Order 10925, which was in effect at the time Congress was debating the bill which was subsequently enacted as the Civil Rights Act of 1964, no specific affirmative action requirements of the kind here involved had been imposed upon contractors under authority of that Executive order at that time. We therefore did not think it could be successfully contended that Congress, in recognizing the existence of the Executive order and in failing to specifically legislate against it, was approving or ratifying the type or methods of affirmative action which the present plan imposes upon

contractors.

While the Labor Department cited various court cases in support of its position that reverse discrimination may properly be used to correct the present results of past discrimination, our examination of those cases showed that the majority involved questions of education, housing, and voting.

We said we could see a material difference between the circumstances in those cases and the circumstances which gave rise to the Philadelphia Plan, since in those cases enforcement of the rights of the minority to vote, or to have unsegregated housing, or unsegregated school facilities, did not deprive members of the majority group of similar rights, whereas in the employment field, each mandatory and discriminatory hiring of a minority group worker would preclude the employment of a member of the majority group.