requirements. For instance, Interim Order 7-2(1) requires, with respect to subcontracting, that the contractor "will use his best efforts" to assure subcontractor compliance with equal employment opportunity obligations. But another contract requirement, P.R. 1273, relying on the authority of Executive Order 11246, requires the contractor to take action against materials suppliers and subcontractors who do not comply with equal employment opportunity obligations and threatens the contractor with sanctions if the materials suppliers and subcontractors do not comply. This can result in the ridiculous situation in which a small bridge contractor is held responsible for the personnel policies of a major steel company.

We believe it is appropriate for the Subcommittee on Separation of Powers to consider the propriety of applying Executive Order 11246 and the Revised Philadelphia Plan in an area covered by a specific Act of Congress.

We are concerned that the Revised Philadelphia Plan and other compliance programs of the Federal government will destroy the cooperative efforts of our industry.

We believe the "ranges of minority manpower utilization" upon which the Revised Philadelphia Plan is based amount to racial quotas. We are opposed to quotas because we do not believe they will achieve the desired results.

We also object to the provisions of the Revised Philadelphia Plan which would require a contractor to breach agreements with labor unions. Contractors should not be held responsible for actions of the unions.

We agree with the provision in the Revised Philadelphia Plan which exempts those classifications of labor covered by approved multi employer training programs. Twelve of our training programs have been approved by the Office of Federal Contract Compliance and would, presumably, be accepted in lieu of quotas imposed on individual contractors.

It is our considered opinion that all Federal-aid highway construction contracts should be exempted from the Revised Philadelphia Plan.

We feel that other legal questions raised by the Revised Philadelphia Plan are adequately covered in the Comptroller General's letter to the Secretary of Labor on August 5, 1969.

We have grave concern over the announced intention of the Department of Labor to apply the Revised Philadelphia Plan to Federal and Federal-aid construction contracts in metropolitan areas throughout the nation.

This action would, in our opinion, have an adverse effect on the momentum generated by many dedicated people in the highway construction industry. We appreciate this opportunity to transmit the view of the American Road Builders' Association to your Subcommittee.

Senator SAM J. ERVIN, Jr.,

U.S. DEPARTMENT OF LABOR,

OFFICE OF THE SECRETARY, Washington, D.C., December 2, 1969.

Chairman, Subcommittee on Separation of Powers,
U.S. Senate,

Washington, D.C.

DEAR SENATOR ERVIN: I would like to thank you once again for the opportunity to appear before your Subcommittee and help to clarify the Department of Labor's position relating to the Revised Philadelphia Plan.

I am submitting to you at this time a memorandum prepared by the Solicitor of Labor clarifying certain points which were raised at the Hearings on October 29, 1969, including the answers to certain questions which you asked Assistant Secretary Fletcher in your letter of October 30, 1969. Although many of these points were explained in the Solicitor's Memorandum of July 15, 1969 and in the Opinion of the Attorney General dated September 22, 1969, we should like to review them briefly once again.

I am also enclosing a "case study" prepared by Assistant Secretary Fletcher's office which we feel helps to explain how the Philadelphia Plan operates on a step-by-step basis.

I hope that these submissions will be helpful to you in your review of the Revised Philadelphia Plan. It is my hope also that the questions which have arisen relative to the Philadelphia Plan can be quickly resolved.

If I can be of further assistance, please do not hesitate to call upon me. Sincerely,

Enclosures.

GEORGE P. SHULTZ,

Secretary of Labor.

MEMORANDUM ON THE REVISED PHILADELPHIA PLAN

This memorandum prepared by the Solicitor of Labor is submitted to the Subcommittee on Separation of Powers of the United States Senate for the purpose of clarifying certain questions relative to the Revised Philadelphia Plan. 1. What is the authority for the issuance of the Philadelphia Plan?

The Revised Philadelphia Plan was issued in implementation of the provisions of Executive Order 11246. This Executive Order requires both Government contractors and subcontractors and contractors and subcontractors on Federally assisted construction contracts to agree not to discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin and to take "affirmative action" to insure that applicants are employed and that employees are treated during employment without regard to race, color, etc.

The authority of the President to issue Executive Orders requiring Government contractors to promote equal employment opportunity has been exercised for over 28 years. The validity of such Executive Orders has been affirmed by opinions of the Attorney General (42 Op. Atty. Gen. No. 21 (1961)); the Comptroller General (40 Comp. Gen. 592 (1961)); (42 Comp. Gen. 692 (1963)); as well as the courts (Farmer v. Philadelphia Elec. Co. 329 F.2d 3 (C.A. 3-1964); Farkas v. Texas Instrument Co., Inc., 375 F.2d 629 (C.A. 5-1967); U.S. v. Local 189, U.P.P. and Crown Zellerbach Corp., 282 F. Supp. 39 (E.D. La., 1968),— F.2d-(C.A. 5-1969), Weiner v. Cuyahoga Comm. Coll. Dist., 238 N. E. 2d 839 (Ohio Com. Pl.-1968), 19 Ohio St. 2d-(Ohio S. Ct.-1969).

It has been recognized also that specific social objectives, such as requiring equality of employment opportunity, may be made requisites of doing business with the Government. Not only may social objectives be set forth in Federal procurement regulations as authorized by explicit legislation (see Perkins v. Lukens Steel, 310 U.S. 113 (1939)) but the Executive may also impose such requirements with regard to direct Federal contracts (Farkas v. Texas Instrument Co., Inc. 375 F.2d at 632 n.1 construing the Federal Property and Administrative Services Act of 1949, §§ 2, 205 (a), 40 U.S.C.A. §§ 471, 486 (a)) and Federally assisted contracts (King v. Smith, 392 U.S. 309, 333 n. 34 (1968)). With respect to Executive Order 10925, the predecessor of the current Order, the Fifth Circuit made clear that the President has statutory authority from the broad authority conferred on him by Congress to "prescribe such policies and directions . [as he shall deem necessary to] an economical and efficient system for... the procurement and supply of property and services." (Farkas v. Texas Instr. Co., Inc., 375 F.2d 629 (C.A. 5–1967), at 632, footnote 1).

It has been held that Government assistance which subsidizes private discrimination is unconstitutional and even an act of Congress directing such assistance is unconstitutional. (U.S. v. Frazer, 397 F. Supp. 319, 323 (Md. Ala. N.D.-1968)); Ethridge v. Rhodes, 268 F. Supp. 83 (S.D. Ohio-1967); see also Hurd v. Hodge, 334 U.S. 24 (1948); Simkins v. Wilmington Parking Auth., 365 U.S. 715 (1961); Bolling v. Sharpe, 347 U.S. 497 (1954); Todd v. J.A.C., 223 F. Supp. 12 (N.D. Ill.-1963).

Thus, the Executive is not only authorized but has an obligation to require that no action be taken by the Federal Government which violates the constitution by subsidizing employers who permit discriminatory employment practices and who do not take affirmative action to insure equal employment opportunity.

The passage of the Civil Rights Act of 1964 did not affect the President's authority nor relieve him of his responsibility to require fair employment practices by Government contractors. The objective of both the Executive Order and the 1964 Civil Rights Act is equality of employment opportunity for all Americans, and the procedures of one law complement the procedures of the other. The holding in the steel seizure case (Youngstown Sheet and Tube v. Sawyer, 343 U.S. 579 (1952)) is clearly distinguishable from the issue of the President's authority to promulgate and implement Executive Order 11246. That case dealt with the Presidential exercise of a power which had been explicitly denied to him by the Legislative Branch. In 1947 Congress rejected legislation conferring the seizure power generally in the context of national emergency strikes. Nevertheless, President Truman issued his directive seizing the steel mills and ignored the provisions of the Taft-Hartley Act which Congress had passed over his veto. Such facts are a far cry from a legislative history which results in a Civil Rights Act giving specific approval to the pre-existing Executive Order 10925 and which

makes clear that Congress did not intend in any way to limit the authority already exercised by the President. Notably, the specific terms of the Tower Amendment provided that Title VII "shall constitute the exclusive means whereby any department, agency or instrumentality in the Executive Branch of the Government . . . may grant or seek relief from, or pursue any remedy with respect to ..." employment practices proscribed by Title VII and this approach to equal employment opportunity enforcement was rejected by the Congress. In addition, the statutory language of Title VII (particularly, Sections 708, 709 (d), 716(c), and 1103) specifically refers to Executive Order 10925 (the predecessor to Executive Order 11246) and plainly contemplates the continued operation of the Executive Order Program to insure equal employment opportunity in Government contracting. Rather than oust altogether Executive action in this field, Title VII was to bring new vitality to the goals of the contract compliance program.

2. Does the Revised Philadelphia Plan require "discrimination in reverse"? The Revised Philadelphia Plan requires that an individual contractor submit an affirmative action program in which he shall commit himself to attempting to reach specific goals of minority manpower utilization. However, in no case would the Revised Plan require a contractor to discriminate against a better qualified white craftsman in favor of a less qualified black. Not only would such action by a contractor violate Executive Order 11246 and Section 703 (a) of the 1964 Civil Rights Act but also the explicit provisions of the Philadelphia Plan. Section 6.b. (2) of the Plan states clearly that "the purpose of the contractor's commitment to specific goals is to meet the contractor's action obligations and is not intended and shall not be used to discriminate against any qualified applicant or employee."

It is, of course, true that the Revised Philadelphia Plan requires contractors to take action based on race. However, this does not mean that some restructuring of an employer's hiring practices along the lines of the Philadelphia Plan are prohibited by the prohibitions against discrimination set forth in the Executive Order and Title VII. The referral practices of some unions have been found to have contributed to the exclusion of minorities from the trades designated in the Plan. For years the contractors have relied solely upon these unions in the hiring of their workforce. What the Philadelphia Plan requires, therefore, is that contractors broaden their base of job recruitment to encourage the employment of members of minority groups. In so doing it is our view that the contractor's goals may be met without unlawful discrimination.

Merely neutralizing an employer's racially one sided practices cannot be compatible with the concept of equality. Affirmative action embraces the additional obligation to remedy the isolation of minority groups from the opportunities and the rights enjoyed by the majority of the population. In accomplishing this task the courts under Title VII and other laws have repeatedly ordered remedies which take race into consideration. In Heat and Frost Insulators v. Vogler (407 F.2d 1047 (C.A. 5–1969)), a case involving union discrimination flowing from nepotism with an all white membership, the Fifth Circuit affirmed a lower court order requiring, inter alia, the union to refer for work Negroes and whites alternately. (It is important to note that the reference in the Order of September 23, 1969 implementing the Revised Philadelphia Plan to this judicially recognized standard is intended only as a reasonable guideline for contractors in general to meet their goals.) Race has been viewed by the courts as a valid consideration in fashioning relief to overcome the present effects of past discrimination in other employment cases, as well as school, housing, and voting cases. The point is best made by the Supreme Court in a recent decision striking down a North Carolina county's petition for reinstatement of a literacy test which had been suspended under the terms of the 1965 Voting Rights Act.

The court, after discussing the efforts of county authorities to equalize and integrate its school system, said:

"Although we accept these claims as true, they fall wide of the mark. Affording today's youth equal educational opportunity will doubtless prepare them to meet, on equal terms, whatever standards of literacy are required when they reach voting age. It does nothing for their parents however. From this record, we cannot escape the sad truth that throughout the years, Gaston County systematically deprived its black citizens of the educational opportunities it granted to its white citizens. 'Impartial' administration of the literacy test today would serve only to perpetuate these inequities in a different form." (Gaston County, N.C. v. U.S., 37 LW 44 8, 89 Sup. Ct. 1720 (1969)).

3. What is the difference between the goals required by the Revised Philadelphia Plan and quotas?

The Revised Philadelphia Plan requires contractors to commit themselves to specific goals of minority manpower utilization chosen by the contractor from ranges established by OFCC for the six designated trades which are based on a realistic evaluation of labor force factors in the Philadelphia area. Such a standard, however, is not a "quota." The goals of the Plan differ in many respects. A quota, as defined by Webster's Unabridged Dictionary, is "a fixed number or percentage of minority group members" to be admitted into some activity or institution. The Philadelphia range of numerical standards is flexible and is not applied in a rigid mechanistic manner.

More importantly, there is no absolute requirement that the goals be met but rather that the contractor make every good faith effort to meet his goals. A stronger argument might be made that the Philadelphia Plan requires "unlawful quotas" if a failure to meet the numerical standards would, in itself, constitute noncompliance with the Executive Order. But, rather than being an absolute requirement, the goals provided for in the Plan are used as a starting point in determining whether there has been good faith compliance with the contractor's affirmative action obligations.

4. What are the consequences if a contractor fails to meet his goal and cannot show that he has made a good faith effort to do so?

Should a contractor fail to meet his commitment to the specific goals under the Philadelphia Plan and be unable to show that he has made good faith efforts to do so he shall be subject to the sanctions provided in Executive Order 11246 which include suspension, cancellation, termination, or debarment. The contractor shall, of course, have every opportunity to demonstrate his efforts to achieve his goals under the Plan during both the investigation and formal hearing stages. OFCC or the contracting agency will first determine whether a contractor has met his goal. If he has not, the contractor will be given every opportunity during this investigation stage to show that he has made every good faith effort to meet his goal. Where deficiencies are found to exist, reasonable efforts I will be made to secure compliance through conference, conciliation, and persuasion (41 CFR 60-1 (A)). Thereafter OFCC or the agency may undertake to initiate the hearing procedure which is prerequisite to the imposition of sanctions under the Executive Order. During the hearing OFCC or the agency has the burden of proving that the contractor did not meet his goal and that he did not exert every good faith effort to do so. All due process is guaranteed for such hearings including the right to counsel, a fair opportunity to present evidence and to cross-examine, and such proceedings are conducted by impartial hearing officers. (41 CFR 60-1.26 (b)). After recommendations by the hearing officer a decision, reviewable in court, is rendered by the agency head or the Director of OFCC (41 CFR 60-1.26(b) (2) (v)).

5. If a contractor can demonstrate to OFCC that he cannot reach his affirmative action goal because of union referral practices, is he absolved of his responsibilities under the Revised Philadelphia Plan?

A contractor will be given an opportunity to demonstrate that he has made good faith efforts to meet his goal of minority manpower utilization in the event he fails to meet such goal. However, a contractor may not be relieved of his obligations under the Revised Philadelphia Plan on the basis that he has an exclusive hiring arrangement with a union and that such union does not refer minority group persons for employment. A contractor may not continue to rely on established hiring practices which are reasonably expected to result in continued exclusion of minorities. The Philadelphia Plan places the burden of broadening his recruitment base squarely upon the contractor. Whether he shall do so within or without the existing union referral system is for him to determine but he shall not be relieved of his responsibilities under the Executive Order merely because he has delegated to another entity the power to act on his behalf. (Ethridge v. Rhodes, 268 F. Supp. 83 (S.D. Ohio E.D., 1967); U.S. v. Local 189, supra, State v. Baugh Const. Co., 61 L.C. ¶ 9346; Central Contractors Ass'n v. Local 46, I.B.E.W. 61 L.C. ¶ 9347.)

If it is determined that a union may be engaging in patterns of discrimination in its referral practices it is within the administrative discretion of the Department of Justice whether or not to bring a pattern or practice suit under Section 707 of the 1964 Civil Rights Act. Yet, it remains the duty of OFCC to see to it

that contractors doing business with the Government fulfill their obligations under the Revised Philadelphia Plan and Executive Order 11246.

6. Must the decision of the Comptroller General relating to the Revised Philadelphia Plan (Comp. Gen. Dec., No. B-163026, August 5, 1969) be obeyed by the Department of Labor whether or not that Department agrees with its legal reasoning?

In essence the Comptroller looks to Section 304 of the Budget and Accounting Act of 1921-which provides in relevant part, "Balances certified by the General Accounting Office, upon the settlement of public accounts, shall be final and conclusive upon the Executive Branch of the Government"-as vesting in him the exclusive authority to construe any and all laws having any bearing whatever upon expenditures. The Comptroller's interpretation, according to his testimony, must be adhered to by Executive agencies regardless of the Attorney General's views, and his power of disallowance may be invoked to compel their adherence. We can not agree with the Comptroller's interpretation. We submit that the Comptroller reads the Act too broadly, even in a situation in which the Attorney General has not spoken, but particularly in this case in which his interpretation fails to take into account the Attorney General's stautory duty to advise the heads of Executive agencies upon questions of law arising in the administration of their departments. 80 Stat. 613 (1966), 28 U.S.C. § 512 (Supp. III, 1965–67). The language of Section 304 of the Budget and Accounting Act of 1921 was derived from the original Dockery Act which provided, "The balances which may from time to time be certified by the Auditors to the Division of Bookkeeping and Warrants, or to the Postmaster-General, upon the settlements of public accounts, shall be final and conclusive upon the Executive Branch of the Government . . 28 Stat. 207 (1894). During the quarter century between enactment of the Dockery Act and the 1921 Act creating GAO, Attorney General Moody had occasion to rule on the former Act's effect on his own authority to render binding legal opinions:

"I am unable . . . to agree to the proposition that the Act of 1894 establishes a rule which is universal and without exception under all circumstances. While I do not challenge the authority of the Comptroller under that law to determine conclusively the question of the legality of a payment out of the public Treasury, I am nevertheless of the opinion that Congress intended to confine the power of the Comptroller within a relatively narrow range, and did not mean thereby to curtail the occasions for the rendering of opinions by the Attorney-General or to diminish their scope and weight. I do not believe that Congress by that enactment intended to shorten the reach of Sections 354 and 356, Revised Statutes [now codified at 28 U.S.C. §§ 511, 512] as construed to give to opinions of the Attorney-General controlling authority (5 Opin., 97; 6 Opin., 334; 7 Opin., 699; 9 Opin., 37; 20 Opin., 648), or to repeal pro tanto those laws.

"If a question is presented to the Attorney-General in accordance with lawthat is, if it is submitted by the President or the head of a Department—if it is a question of law and actually arises in the administration of a Department, and the Attorney-General is of opinion that the nature of the question is general and important in other directions than disbursement, and therefore conceives that it is proper for him to deliver his opinion. I think it is final and authoritative under the law, and should be so treated by the accounting officers, even if the question involves a payment to be made. [25 Op. Att'y Gen. 301, 303-04 (1940).]"

Mr. Moody's opinion was consistently followed by himself and his successors in the years antedating the 1921 Act. See, e.g., 26 Op. Att'y Gen. 81 (1906); 26 Op. Att'y Gen. 609 (1908); 27 Op. Att'y Gen. 542 (1909)..

The Budget and Accounting Act did not effect any fundamental change in the Dockery Act, so far as the powers of the Government's chief accounting officer were concerned. The enactment of the 1921 Act was for the purpose of transferring the powers of the Comptroller of the Treasury to the General Accounting Office. That the statute did not confer on the Comptroller General any authority in excess of that formerly exercised by the Comptroller of the Treasury under the earlier Act is made clear by Globe Indemnity Co. v. United States, 291 U.S. 476, 479-80 (1934). Consequently Congress' re-enactment of the Dockery Act without change, in light of the Attorney General's long continued construction of that statute, appears to have been an adoption by the legislature of the Attorney General's construction. United States v. Hermanos Y Compania, 209 U.S. 337, 339 (1908).

The Comptroller's view of Section 304 of the Budget and Accounting Act would nullify the Attorney General's statutory duty to advise the heads of Executive agencies upon any question of law involving the expenditure of pub