OPENING STATEMENT OF THE HON. PETE HOEKSTRA, CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE, US HOUSE OF REPRESENTATIVES *

OPENING STATEMENT OF THE HON. ROBERT SCOTT, MINORITY SUBCOMMITTEE MEMBER, OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE *

STATEMENT OF THE HONORABLE JOHN DUNLOP, LAMONT UNIVERSITY PROFESSOR, EMERITUS, AT HARVARD UNIVERSITY AND FORMER US SECRETARY OF LABOR *

STATEMENT OF THE HONORABLE RAY MARSHALL, AUDRE AND BERNARD RAPOPORT CENTENNIAL CHAIR, ECONOMICS AND PUBLIC AFFAIRS, UNIVERSITY OF TEXAS AT AUSTIN AND FORMER US SECRETARY OF LABOR *

STATEMENT OF JAY MAZUR, PRESIDENT, UNION OF NEEDLETRADES, INDUSTRIAL AND TEXTILE WORKERS (UNITE) – AN AFFILIATE OF THE AFL-CIO *

TESTIMONY OF JAMES W. WIMBERLY, JR., ESQUIRE, WIMBERLY, LAWSON, STECKEL, NELSON & SCHNEIDER *

STATEMENT OF ROBERT T. THOMPSON, SR., ESQUIRE, THOMPSON AND HUTSON *

STATEMENT OF JOEL E. COHEN, ESQ., MCDERMOTT, WILL & EMERY *

Appendix A – Written Statement of the Hon. Pete Hoekstra *

Appendix B – Written Statement of the Hon. John T. Dunlop *

Appendix C – Written Statement of the Hon. Ray Marshall *

Appendix D – Written Statement of Jay Mazur *

Appendix E – Written Statement of James W. Wimberly, Jr. *

Appendix F – Written Statement of Robert T. Thompson, Sr. *

Appendix G – Written Statement of Joel E. Cohen, Esq. *

Thursday, August 6, 1998

U.S. House of Representatives

Committee on Education and the Workforce

Subcommittee on Oversight and Investigations

The American Worker at a Crossroads Project

Washington, D.C.

The subcommittee met, pursuant to notice, at 10:05 a.m., in Room 2175, Rayburn House Office Building, Hon. Pete Hoekstra [chairman of the subcommittee] presiding.

Present: Representatives Hoekstra, Norwood, Hilleary, Ballenger, Mink,

Scott, Kind, Miller, Payne, and Owens.

 

Staff present: Jan Faiks, Worker Project Director

Stephen Settle, Worker Project Counsel/Investigator

William Matchneer, Worker Project Chief Counsel

Kimberly Reed, Worker Project Counsel

Paul Boertlein, Worker Project Communications Director

Arturo Silva, Worker Project Media Assistant

Brian Kennedy, Labor Counsel and Coordinator

Maria Cuprill, Legislative Associate

Pat Crawford, Legislative Associate

Brian Compagnone, Minority Staff Assistant

John Flannery, Minority Project Director

Cassandra Lentchner, Minority Special Counsel.

 

 

Chairman Hoekstra. [presiding] Good morning. The subcommittee will come to order.

The subcommittee today is meeting to hear testimony for the American Worker at a Crossroads Project. Under Rule 12(b) of the committee rules, any oral open statement at the beginning of the hearing is limited to the chairman, and this morning, the ranking minority member, who is Mr. Scott. Good morning, and congratulations on your promotion today. We’re glad to have you here.

Mr. Scott. It’s temporary.

[Laughter.]

Chairman Hoekstra. Still, we are glad to have you here. This really does allow us to focus on hearing from the witnesses and helps members to keep to their schedules. If any other members have statements, they will be included in the hearing record.

Witnesses should also be advised that any additional information or testimony that you would like to have entered into the hearing record, you will have up to 10 days to insert those materials.

We have, I believe, reached a unanimous consent agreement, pursuant to clause 2(j)(2)(c) of House Rule 11, that counsel will be permitted to question the panel of witnesses for 40 minutes prior to questioning by the members. The time will be equally divided between the majority and minority counsels, and that counsel will be permitted to further question the panel of witnesses after questioning by the members for up to an additional half hour – with that time to be equally divided between the majority and minority counsels. Without objection, I would move that unanimous consent. Without objection, so moved. Thank you.

Let me then move to my opening statement. The title of this morning’s hearing is "The Rational for and Effect of the Garment Industry Proviso under Section 8(e) of the National Labor Relations Act." It might better be entitled, "What is the Garment Industry Proviso? Where did it come from and is it valuable to the American worker today?"

We will talk about liquidated damages, hot cargo, and secondary boycotts. For some, these may be new terms. I know that over the last couple of months as we have taken a look at these issues, this subcommittee is entering into a new technical area of legal terms and definitions of which I am not necessarily familiar. So, I am learning about this in a much greater detail. We’ll attempt to define these terms as well as a number of other garment industry-specific concepts. We’ll look at the modern history of the garment industry in an attempt to try to understand the root causes of sweatshops.

Not many Americans know much about the Garment Industry Proviso, much less the history behind it. I believe that this is the first time in almost 40 years that a subcommittee in Congress is actually gathered to assess the strengths and weaknesses of this unique exemption to the National Labor Relations Act. For the first time since its enactment in 1959, Congress will review the way this exemption has been used and will also begin the process of measuring whether the Garment Industry Proviso has satisfied the intended purpose of the Congress when it granted that proviso in 1959.

We’ll enlist the help of the president of the garment industry union, UNITE, as well as others who we believe to be experts in the field.

I need to say this up front. As a result of my visits to New York, Mrs. Mink’s visits to New York’s Chinatown, it has become crystal clear to us that workers are being exploited in the garment industry here in the United States. It is obvious that the US Department of Labor is having difficulty in preventing this exploitation, despite the laws passed by Congress. The tools provided in this Nation need to prevent this tragedy, need to be reviewed to make sure that we simply stop this from happening.

Many of the workers I talked to in New York City told me they were union members. They told me that the union was incapable of preventing these conditions. We had some of that testimony here. That is why Mr. Mazur is here today to talk on this subject. To provide a full hearing we are going through a process of learning. This is a very emotional issue. It is a very complicated issue. It’s been around for a long time, and we want to work in a constructive way to address these kind of issues.

We believe that the problem of sweatshops is growing rather than getting better. Chinatown in New York is only one example, and that there are probably worse examples.

In summary, the only way I can describe what I’ve seen and been told is that this is an example of a meltdown of the rule of law in America. American labor law and labor law enforcement, and the other protections that work so well in the rest of the country don’t appear to be working in this situation. We’ve looked at many aspects of this meltdown and will continue this analysis.

The exploitation of the workers in the garment sweatshops is not new. In fact, in 1959, in the name of ridding this Nation of sweatshops, Congress took a very unique step toward that end. The very unique action by Congress is what we are here to analyze today, and that is the Garment Industry Proviso. That is our objective. That is what we want to take a look at. That is the part of the puzzle that we want to better understand today and to put with the other pieces of the puzzle that we have been looking at.

I will now yield to our ranking minority member, Mr. Scott, for his opening statement.

Mr. Scott. Thank you, Mr. Chairman, and first, I’d like to apologize for the ranking member’s absence. She had a conflict that she could not resolve, and she’s expected here sometime during the hearing. So she wanted to express her apologies.

I’m delighted to participate in this hearing where we can hear from experts about the history and the effect of the Garment Industry Proviso. And perhaps, we can even strengthen the law in creating a joint liability so that those corporations that actually benefit from labor law violations can be held accountable. There is legislation pending, and perhaps we can hold hearings on that.

I look forward to the testimony, particularly testimony from former Secretaries of Labor, Mr. Marshall and Mr. Dunlop, and delighted that they were able to join us today, as well as the other witnesses. Thank you.

Chairman Hoekstra. Thank you, Mr. Scott. I, too, am excited about the panel we have today. We have a very distinguished panel who are very knowledgeable on this issue, and this should be a excellent forum and opportunity to us to learn .

Let me introduce the panel to you. One problem I have with people who have such a distinguished career is I don’t know exactly where to begin with the titles in front of their names. But we have, beginning with the Honorable Professor, John T. Dunlop. At least those are the two titles that I have in front of me – one on your card and one here in my notes. I first met Mr. Dunlop when he was working on the Dunlop Commission. We have spent some time together working on that.

Mr. Dunlop is our first witness. He is a former Secretary of Labor under President Ford. Currently, he is Lamont University Professor, Emeritus, at Harvard University. Professor Dunlop’s resume reflects many years of academic, labor relations, and public service experience. His accomplishments are numerous. Clearly, we are honored to have him on our panel today. Incidentally, he was the Chairman of the Commission on the Future of Worker-Management Relations, or the "Dunlop Commission." Thank you for coming back and being with us this morning.

We also have the Honorable Professor, Ray Marshall. That must be the profession you move into once you’re done being Labor Secretary; you move over and be a professor. Professor Marshall, thank you for being here. Mr. Marshall is also a former Secretary of Labor serving under President Carter from 1977 to 1981. He currently holds the Audre and Bernard Rapoport Centennial Chair in Economics and Public Affairs at the University of Texas at Austin. Professor Marshall has also served on a number of commissions concerning labor and economic policy, including the Dunlop Commission.

His accomplishments and contributions in the public service arena are also numerous and impressive, but let me say we’re are truly honored to have you here today. I think with the two of you testifying today, we’ve now had three former Secretaries of Labor testify to this committee in the last year and a half. We feel very good about the both of you taking the time to be here.

We have Mr. Jay Mazur, who is the President of the Union of Needletrades, Industrial and Textile Employees, commonly known as UNITE. He has been associated with UNITE and its predecessor union, the ILGWU, since he was 18 years old and has many years of labor experience. We’re hoping to learn considerably from you with that experience. Thank you for joining us this morning.

We have Mr. James W. Wimberly, Jr. who is the principle of the labor law firm of Wimberly, Lawson, Steckel, Nelson & Schneider in Atlanta, Georgia. He is a former general attorney in the Office of the Solicitor at the Department of Labor, and a former professor of labor law at the Woodrow Wilson School of Law and a member of the Labor Law sections of the American, Georgia, and Atlanta Bar Associations. He has written and spoken extensively on the issues of labor law. Thank you for being here.

We also have Mr. Robert T. Thompson, Sr. who is the managing partner of Thompson and Hutson in Greenville, South Carolina. He practices in Georgia, South Carolina, and the District of Columbia. He is a member of the American Bar Association and its employment law association, as well as the Federal Bar Association, and the Georgia Bar Association. Knowing Mr. Thompson, personally, I can speak from experience that he has extensive experience and expertise in labor law and has spoken widely on that topic and educated even more on that topic, as well.

Thank you for being here.

And, finally, we have Mr. Joel E. Cohen, who is a partner in the litigation department at McDermott, Will & Emery in New York. Mr. Cohen heads the firm’s labor and employment law practice group. He began his career with the National Labor Relations Board. Mr. Cohen has written and also spoken nationally about labor law.

Gentlemen, thank you very much for being here and participating with us this morning. The process for the Oversight and Investigations Subcommittee is that before we receive testimony, we ask each witness to take an oath. You should be aware that it is illegal to make a false statement to Congress while under oath. In light of this, will you please rise and raise your right hand?

[Witnesses sworn.]

Thank you. Let the record reflect that each of the witnesses has answered in the affirmative.

We are done with the preliminaries. So, good morning, Mrs. Mink.

Mrs. Mink. Good morning.

Chairman Hoekstra. Welcome.

Mrs. Mink. I’m sorry for being late.

Chairman Hoekstra. Not a problem. Thank you for being here. Do you want to say anything before we begin?

Mrs. Mink. Thank you, but Mr. Scott took care of that for me.

Chairman Hoekstra. Okay. Well, you weren’t here to hear it.

Mr. Scott. I reported it.

Chairman Hoekstra. You reported? Okay, great.

[Laughter.]

Mr. Scott. I reported.

Mrs. Mink. It has been reported.

Chairman Hoekstra. Good. Thank you.

Honorable Professor, Mr. Dunlop. Good morning.

Mr. Dunlop. Thank you, Mr. Chairman, and for those generous introductions earlier. I will try to summarize the brief statement I presented to you, some extemporaneously and reading some parts.

Aside from my Government service to which you referred, I think it might be important to point out that I served for a half a dozen years as an arbitrator under the St. Louis agreement involving the ILG at the time and the greater St. Louis employers.

Mr. Scott. Mr. Dunlop, could you pull your mike a little closer, please?

Mr. Dunlop. Thank you. I served as an arbitrator in the St. Louis market in the late 1950s and 1960s. I’ve just completed and pressed a major book of six years of research with some colleagues on the interconnections between retail apparel and textile industries, which should be published by Oxford University Press soon. And perhaps I might also mention that I’m a founding director of TC-Squared, a non-profit group that works with industry and the union, and retailers, manufacturers in the textile and apparel branch of the industry. We have headquarters in Carey, North Carolina.

The question to which this brief testimony of mine responds is, What is the case today and for the future for the continuation of the 1959 proviso in section 8(e) of the National Labor Relations Act as amended? I suppose we all know what that says.

The structure of my brief comments is very simple. I have four points to make that explain, in my mind, why the arrangements in collective bargaining developed a practice which the proviso was designed simply to continue. Then I would like to make four points about why the conditions that produced that then are more strenuous and more severe today, indeed in the last 5 or 10 years than they were at an earlier time.

The first explanation fact is because of the distinctive structure of markets. I speak as an Economist in retailing, jobbers, manufacturers, and contractors. The latter two are the direct employers, and this market structure places extraordinary downward pressure on the compensation of workers; by the way much more so than in women’s and children’s wear then is true in men’s and boy’s clothing. Establishments are small, capital costs are low, with second-hand sewing machines and easy entry. Contractors can readily move from one locale to another. The cost of materials constitute, according to the census, roughly half the value of shipments, and materials and payrolls together constitute about 71 percent of the value of shipments. The margins are thin, and these establishments have little capacity to influence textile prices, trying to shove costs into that area.

The General Accounting Office made a study in November of 1994, of this range of problems, and there is a paragraph I find which might button down the point I’ve just made. The study reports that, "The garment industry, one of the largest manufacturing industries, is dominated by less than 1,000 manufacturers who parcel production to about 20,000 contractors and subcontractors, all of whom enter and exit the industry easily. Analysts have long-identified the labor-intensive U.S. garment industry as one characterized by extreme price competition, low wages, an immigrant workforce, and a vulnerability to sweatshop working conditions." That is the GAOs report.

Now in that market setting, the strategy of labor unions and managements of those manufacturing plants has always been, for over 100 years, that collective bargaining would seek to place on the manufacturer a responsibility, rather than the contractor, for conformance to standards and wages and other conditions of employment.

It might be helpful to your committee to know since you mentioned earlier you interest in history that I recently had occasion to go back to the 1901 report of the Congress – a Commission on Industrial Relations. This report had 19 volumes. In volume 15 you will find a long report about sweatshops and those conditions. What that report contains is a collective bargaining agreement dated 1901, New York, with the United Garment Workers, before the ILG even existed. That places very clearly on the manufacturer the responsibility to control the contractor. He guaranteed that the contractors would comply with the terms and conditions in the inside shop.

Just to make a personal comment, I have great confidence in 100 years of collective bargaining by private parties faced with this kind of market structure. What they developed was the responsibility to be placed upon the manufacturer for controlling the conditions of work in the contract shop. So that market structure is my first point.

The second fundamental feature here is that in the contract shops demand is highly variable within a season and over years, in an industry with rapid-style changes, with a growing number of seasons, and with increasing product proliferation. Our Sloan study reported that in recent years, products have proliferated in almost every apparel category.

In this challenging state of demand for any shop, there is enormous uncertainty and instability for employment in a particular place of employment. Individual contractors are entirely unable to provide a basis for specifying future terms and conditions of employment or ensuring their enforcement, and manufacturers are required, as they have been in historic collective bargaining, to provide surety for any employment agreement.

The third fundamental feature is, of course, that collective bargaining agreements are much broader than wage and hour statutes, and there are in agreements a whole host, today, of benefits, vacations, holiday pay, bereavement pay, health and welfare, pensions, disability benefits, and the like. Therefore, it is the collective bargaining agreements that one must look to to provide orderly procedures for not only those enforcements, but also for the normal procedures for redress of grievances and adjudication over piece rates and over vacations and other issues that I used to handle in the St. Louis market.

The Fair Labor Standards Act only deals, as you know, with wages, overtime issues, and child labor, and all these other features of collective bargaining require enforcement beyond the questions of the wage and hour act.

The final point I want to make in this is that the proviso, as I have read the congressional record, and some of it I remember from 1949 since I worked in the Government at that time, was to simply allow collective bargaining to carry forward as it had in the past and not introduce some new change. It was to authorize the continuation of what was then many years, and now is a century, of collective bargaining practice in handling these sorts of problems in this kind of peculiar market structure.

Now I turn to what has made this problem worse in the last 5 or 10 years. The first, of course, of these four points is the enormous rise in imports over this recent period. I give you the numbers: Today, well over half, particularly if you include 807, the Caribbean-Mexican information, well over half of our apparel is imported; a little less than half is produced domestically. That obviously puts very significant downward pressure on domestic prices and in that respect, as compared to 1959 where imports were negligible as compared to the pressure at that time.

Secondly, and this is the subject of my book with my colleagues, in the last decade there has been an enormous change in the way retailers operate. From a time when buyers simply ordered six months ahead of time, the introduction today of bar codes, Electronic Data Interchange, and automated distribution centers, the result is that retailers no longer virtually carrying inventory. They are able to operate on a Saturday night with point-of-sale information. They can order from their suppliers on a Sunday night. They expect it to be on their floor on the Thursday morning following. As I’ve seen in a number of big retail establishments, and as a result, the whole risk of inventory carrying has been transferred back from retailers to apparel manufacturers in the real world, and that makes this sort of problem much worse than it was at a time when they all of this buying.

With many more products, with many more seasons, what happens is the risk of holding any particular style that may not sell is that at the end of that short season you will have to discount it and sell it. So there’s a real risk of holding inventory, and it is that risk which has helped to put this downward pressure, and that has been growing in this lean decade as lean retailing has become the order of the day.

The first big development, of course, was imports. The second is lean retailing practices, and the third is the vastly increased growth of immigration, and particularly of unskilled immigrants. There is a general agreement among economists that such immigration has been a factor in explaining the current downward pressure on wages, generally and particularly in an industry like apparel.

And, finally, the decline of collective bargaining in the apparel industry, which is always a stabilizer in the enforcement of these conditions, has declined from what it was. These four items have made a situation worse as a result of those developments.

My conclusion and judgment is that the practices of collective bargaining, as developed over this century in the apparel sector and the 1950 proviso, are even more essential today than they have been historically. I can see no valid reason for their elimination. Indeed, they need to be strengthened along with the enforcement procedures of the wage and hour statute.

Finally, Mr. Chairman, I sent this same draft to two of my colleagues and former Secretaries: Mr. Usery, who followed me under President Ford, and to Bob Reich, the most recent Secretary. They have both advised me and I will read Mr. Usery’s letter to me for the record. Mr. Usery says, "I have reviewed your testimony to be presented on Thursday, August 6 before the Oversight and Investigations Subcommittee of the US House of Representative’s Education and Workforce Committee. I concur with its contents and fully support your statement." Mr. Reich has told me the same. Thank you.

Chairman Hoekstra. Thank you very much. Secretary Marshall.

Mr. Marshall. Thank you, Mr. Chairman, members of the committee. I fully endorse Professor Dunlop’s statement, but would like to put the Garment Industry Proviso in a somewhat broader context.

I think the most important purpose of the proviso is to prevent sweatshops, and mainly because, of course, sweatshops are considered to be detrimental to the workers, but detrimental to the public interest as well. They make it very hard to enforce basic labor laws, as you observed in your visits to New York. They suppress wages and working conditions and make it hard for workers to support themselves and their families. They also damage fair competition. All democratic societies, therefore, have developed standards to prevent sweatshops.

There are equity and efficiency reasons for these standards. The equity reason is to prevent the worst consequences of competitive markets from damaging the most vulnerable people in our society. There are efficiency reasons for the standards because, not only to preserve human resources, which we all agree, though we don’t always seem to act like it, are our most important resource. And if we make it possible for workers to support themselves and their families, we help preserve that resource and develop it.

We also promote efficiency by forcing competition into high value-added, instead of suppressing wages and working conditions, and there can be little doubt that a high value-added type competition is better for everybody. It’s better for workers. It’s better for the society. It’s better for the sustainability of companies in the long run.

In order to be effective, however, labor standards have to meet the conditions of good rules, and good rules have three main requirements. They have to be transparent, which means people can figure out what they are. They need to be fair, and I believe that fair ordinarily means that they’re negotiated and that the value of negotiated rules is that the people who live with the rules are the ones who make the rules, and therefore, you’re much more likely to get effective rule-making.

The great strength of the Garment Industry Proviso, as Professor Dunlop has emphasized, is to give the private parties involved the power to deal with the problem. My view is that you need Government involvement as well as the private involvement. This is a very complex issue. No one process will deal with it. It is in the public interest to encourage the parties to be able to deal with it themselves.

To be enforceable, the evidence presented by Professor Dunlop supports the position that the rules have to coincide with the production processes and with markets. Otherwise, competition provides strong incentives for companies to attempt to acquire an unfair competitive advantage by shifting production to the establishments not covered by the rules. There is what can be considered to be a Gresham’s law of rules, and that is bad rules drive out good rules, and therefore if you don’t make the rules enforceable, you’re likely to get bad rules. In this particular case, of course, if you look at the history of the industry, there has been a constant tendency for people to try to avoid the rules. Good public policy would require that we extend the rules to people who have the ability to deal with the problem, as Professor Dunlop mentions.

Good rules also must be enforceable. This is the reason the garment industry devised procedures at the beginning of this century for unions to use picketing and other lawful means to sanction employers for violating their union contracts, and that provision was continued in the Garment Industry Proviso.

Liquidated damages are an effective way to enforce these contracts. I also believe that in a globalized market it’s important to extend the rules to the global marketplace. Labor standards, therefore, should be a component of the rules governing international transactions. I’m president of the International Labor Rights Fund, and one of our basic objectives has been to get trade labor standards in all of our trade agreements and to try to cause them to be enforceable.

For the reasons indicated, sweatshops, once again, blight the American industrial landscape. There are several reasons for this: the growing role of retailers who are outside the scope of the Garment Industry proviso; the weakening of garment industry; the rising tide of imports from low-wage countries where labor rights are routinely abused; and the growing availability of vulnerable immigrant workers. I agree completely with Professor Dunlop that these conditions make the Garment Industry Proviso needed now, more than ever, and therefore should be strengthened and expanded, not weakened or eliminated.

Thank you.

Chairman Hoekstra. Thank you very much. Mr. Mazur.

Mr. Mazur. Thank you, Mr. Chairman. Mr. Chairman, members of the committee, ladies and gentlemen, my name is Jay Mazur, and I am the president of UNITE, the Union of Needletrades, Industrial and Textile Employees.

Chairman Hoekstra. Would you move the mike up a little closer?

Mr. Mazur. Sure.

Chairman Hoekstra. Thanks.

Mr. Mazur. UNITE is a union of more than 250,000 people. Our membership includes women and men of all ages and ethnic groups – White, African-American, Hispanic, Asian – in big cities, small towns, and rural areas. We work in the apparel industry, in textile, and in light manufacturing.

I’d like to begin, Mr. Chairman, by expressing my appreciation to the committee for holding these hearings and for allowing me a chance to voice our union’s concerns about the continuing problems of sweatshops in America.

Since 1911, when 146 workers died in the Triangle Shirtwaist Factory fire, our union, working with concerned citizens and public officials, has led the struggle to strengthen laws and empower workers to protect their safety, security, and their rights. Those who work in the garment industry in 1998 are operating in a dramatically changing arena and a changing world, but workers still need the same protections and more in today’s global and competitive workplace.

In 1911 and in 1959, when the Garment Industry Proviso was enacted, the garment industry was characterized by manufacturers’ control over the wages and working conditions of workers in the contracting shops that sew their products. Today, manufacturer responsibility is required more than ever and should be expanded.

Today, retailers have even more power than manufacturers and are themselves large manufacturers when they produce private label apparel. Six retail chains account for over half of all the apparel sold in this country. Yes, gentleman, and ladies, six retail chains account for half of all the apparel sold in this country.

Compare these giants to the more than 22,000 sewing contractors that Professor Dunlop alluded to earlier. These small businesses compete with each other and with contractors where workers make pennies an hour and workers’ rights are routinely violated.

State legislatures and the courts understand the need to hold manufacturers responsible for the conditions in their contracting shops. Just last week, New York Governor Pataki signed a piece of bipartisan legislation that would hold manufacturers jointly liable for violations of labor law committed by their contractors. Also last week, a U.S. district court ruled a garment manufacturer is liable for the overtime pay for workers in contracting shops. Congress understood that the manufacturer had effective control of the conditions of work and must be held responsible, and today the courts and, if I may add, a Republican Governor of New York agree.

Our union, UNITE, has taken unique approaches in an effort to protect, to defend, and to work on behalf of our members. One solution is our agreements, which require manufacturers to put their work in union shops and to pay for the benefits of workers in contracting shops. Last year alone, $48 million was collected from union manufacturers to pay for the health benefits, for the pension benefits, of about 40,000 union workers in contracting shops which produce their work.

Without the proviso, these workers and their families would lose their benefits, their health care, their pensions, prescription drug plans, paid vacations, as well as holidays and other benefits, and certainly the protection of the collective bargaining process. And that’s one of the essential differences between union and non-union workplaces. In a union workplace, the contract covering the workers can require the manufacturer to provide decent wages, decent benefits, and decent health care, that are simply unheard of in non-union shops.

To protect decent, good-paying American jobs, we need to keep liquidated damages as an essential enforcement tool. These damages serve to discourage moving work from union factories to non-union shops with no benefits and sub-standard conditions. We have recently established a garment workers’ assistance fund through our union health center so that all damages will go towards benefits and social services for workers who are harmed by sweatshops at home and abroad.

Mr. Chairman, UNITE has fought vigorously against sweatshops in America throughout its history. Yes, there are problems, many of them unique to the garment industry, as they have been described earlier, and we have been aggressive in providing solutions to these problems. We want the apparel industry to remain in this country, as an industry which provides decent jobs for hundreds of thousands of American workers, and we need your help. The large manufacturers and retailers must be held responsible for the working conditions in which their garments are produced. That’s why we need to pass the Stop Sweatshops Act.

I think the issue of manufacturer and retailer responsibility is best illustrated by this pair of pants. Let me show them to you. They are sold exclusively by Wal-Mart. And let me tell you, Wal-Mart sells 16 percent of all apparel sold in the United States. Yes, it’s hard to believe. One major retailer sells 16 percent, $26 billion of apparel sales. These slacks sell for $14.96 at your neighborhood Wal-Mart.

After the manufacturer pays for the materials, and pays for transportation, pays for overhead and profits, the sewing contractor receives $2.00 and the contractor has to cover labor costs, rent, electricity, supervision, machine tools, taxes, and profits. At most, the contractor can pay the worker $1.35 for each pair of pants that the sewing machine operator produces. An engineer determined that an efficient worker could make 3.3 pairs of pants per hour for a wage of $4.45. Obviously, this is below the Federal minimum and with no benefits or paid time off at all.

Mr. Chairman, you simply cannot survive on $4.45 per hour, much less raise children and support a family. We, collectively, must make the giant retailers like Wal-Mart responsible for the working conditions under which their products are produced. It is time for the responsibility to rest with the power to end sweatshops. It’s time to help us pass the Stop Sweatshops Act and finally hold those who have created this problem accountable. And tonight, we are leading the fight against sweatshops and taking the responsibility for our members and their families. Now it’s time, yes, time, for others in the industry to join us.

I thank you.

Chairman Hoekstra. Thank you very much. Mr. Wimberly.

Mr. Wimberly. Ladies and gentlemen, Mr. Chairman, members of the committee, I’m Jim Wimberly. I have spent approximately the last 30 years in the practice of labor and employment law representing management, and a portion of my practice has been in the apparel industry.

We are here to talk about secondary boycotts, hot cargo provisions, and the special circumstances in the legislation in the apparel industry. The people that we are concerned about or should be concerned about here today are not only the innocent victims that work in sweatshops, but also innocent victim third parties that may have been harmed by secondary boycotts, by hot cargo provisions. And we’re also very concerned about the public. The public has an interest in what we have to say here.

Secondary boycotts and hot cargo provisions that are legitimized in the apparel industry, in the early part of this country were deemed to be monopolies – unlawful restraints of trade in violation of the anti-trust laws. Now legislation was passed in the 1930s that removed the application of the anti-trust laws to labor union activities while they’re acting in their own self-interest, and this is why it is a popular concept that labor unions are not subject to the anti-trust laws. But when a labor union combines with a non-labor group, such as an employer in a collective bargaining agreement, the anti-trust laws are implicated and apply unless certain labor law considerations come into play that legitimize that restraint of trade, created when the employer and the union enter into some agreement.

Now when the amendments were passed in 1959 that closed some loopholes in the secondary boycott laws that were hurting the public, two unions were excluded. Now I won’t re-visit the legislative history of the two industries that were excluded, but both of those two were obviously construction and apparel. So in the garment industry, it is lawful for a company and a union to agree that only union contractors will be used, of that particular union that is contracting with that particular company.

Now this applies regardless of whether the company or jobber or manufacturer has any employees represented by that union. It applies regardless of whether a skillful union contractor is available to perform that work, regardless of whether there are non-union contractors available that are more efficient and more highly-skilled to do that work, and regardless of whether the non-union contractor pays better wages or better benefits. That non-union contractor is simply excluded because it’s non-union from this subcontracting arrangement.

Also, a contractor represented by another union is typically excluded, so the proviso in the way it operates only protects the union that is contracting with that main company, whether it’s a manufacturer or a jobber. It doesn’t protect others. This type of arrangement would be illegal in any other industry.

Now admittedly, there’s also an exception in the construction industry, but I want to talk briefly about the construction industry to say how limited the exception is in construction. It’s limited to work at the site of construction, where you have numerous contractors working side-by-side. And even in construction, the United States Supreme Court ruled in 1975 in the Connell decision that top-down organizing was prohibited by labor law and by anti-trust law. This refers to a contract with an entity that really doesn’t have employees represented by the union, and which any contractor used has to be union. In other words, it forces those contractors to be union if they’re going to get a part of this contract, so to speak.

The Supreme Court in the Connell decision discussed these agreements requiring only union contractors and this is the Supreme Court speaking. It said that they were a direct restraint on competition. They were in direct conflict with the anti-trust laws because they indiscriminately excluded union contractors simply because they were non-union, without regard to the respective pay or working conditions of the various contractors.

Now these provisions are enforceable. These garment industry provisions in these contracts are enforceable by liquidated damages that require a percentage of the contractor’s price to be paid to the union. It’s a tax on the company for using someone who’s not approved by the union or a union contractor.

Now I haven’t talked about section 302 in my statement. I do want to mention it verbally, that the Federal labor laws in section 302 place severe restrictions on companies paying monies over to a union due to the origin of the labor laws in this country. Frankly, a history of bribery and I’m not suggesting any person here is involved in that kind of arrangement. Very strict restrictions were placed on monies paid over from companies to unions, but, nevertheless, these types of taxes in the apparel industry have become quite common.

Now I submit it’s questionable whether this arrangement has helped the domestic apparel industry at all or the elimination of sweatshops. I don’t think the apparel industry, while it is somewhat unique, is that unique from a number of other industries. Also, I really question the encouragement, and in some cases forced encouragement, of unionization. I submit that the policy of our Federal labor laws is and should be one of neutrality towards unionization, neither promoting or discouraging, but protecting the rights of employees to organize of their own free choice.

The questions are, ladies and gentlemen, do we have a lower percentage of sweatshops in this country because of this Garment Industry Proviso? Are there more effective ways of dealing with sweatshops? Are we using the laws we currently have? There is a hot goods provision, ladies and gentlemen, in the law, not to be confused with hot cargo.

Mr. Chairman, I hate to hit you with another term like that, but essentially hot goods says that if a person – even a retailer – comes into possession of goods that were produced in violation of the laws, they can be held and seized by the Government is hot goods.

I submit, ladies and gentlemen, in conclusion, that the Garment Industry Proviso has not accomplished what it was supposed to accomplish. Modification of the proviso, expansion of it to allow more domestic competition, whether a contractor is union or non-union, might actually bring more work back to this country and allow more competitive conditions to lead to lower prices for the consumer.

I’ll be pleased to answer questions. Thank you very much.

Chairman Hoekstra. Thank you. Mr. Thompson.

Mr. Thompson. Mr. Chairman, members of the committee, it’s a pleasure for me to have the opportunity to…

Chairman Hoekstra. Grab that microphone.

Mr. Thompson. …to appear before you today. I commend you on the examination of this subject of this proviso, the Garment Industry Proviso to section 8(e) of the Landrum-Griffin Act, or the National Labor Relations Act.

I’ve been in the labor field representing management since 1952. I’ve represented employers in the garment industry, apparel industry, textiles, construction, and most other industries that I can think of. I’ve observed a lot of legislative activity in the labor field, as well as the day-to-day practice of law in the outlying areas away from the beltway.

I have served on numerous committees of the American Bar Association. I was Chairman of the board of directors of the U.S. Chamber of Commerce at one time, and Chairman of their Labor Committee for about 20 years.

When the Landrum-Griffin Act was passed in 1959, I had been practicing law for about seven years, and I can’t say I was intimately involved in it as I was in later legislative efforts here, but I was very much interested in it and followed it very closely. It’s interesting how this proviso has been elevated to the level which it has reached and the congressional testimony brought out, and so forth, that supported it. My recollection is that this proviso was put into the Landrum-Griffin Act in a conference committee between the House and the Senate over a rather short period of time, like almost overnight. It was announced the next day to the great astonishment of a lot of us who were following this whole issue.

At that time there was something said about sweatshops and racketeering and a few other things. The system of bargaining, as Professor Dunlop has mentioned, was brought out. But, frankly, we had the impression that this was just a part of a political deal that was cut to enable them to pass this bill, and that that was a price that the supporters of the bill generally had to pay in order to get it passed. Now perhaps that’s too crass to say in this day and age, but I think it should be said because this thing should be put in some perspective.

I’m concerned that we may be distracted here over this sweatshop issue, as opposed to the proviso itself. The proviso itself supposedly was designed to preserve the collective bargaining system in the garment trades and principally in New York and in St. Louis, as the professor has said.

There was reference to sweatshops. I believe that there are just as many sweatshops today as there were in 1959, perhaps more. I do believe that there are as many sweatshops in the union area of the industry as there are in the non-union area, perhaps more. If this proviso was designed to eliminate or diminish sweatshops, it seems to me it has totally failed.

Conditions in the garment industry are no better today than they were in 1959. I would give more credit to the laws which you have passed and which haven’t been properly enforced than I would to the activities of the unions or any other interested parties in this field. And I don’t mean to knock the unions. They have their place, and I think they know that and they do what they can and what they do.

But, if you’re going to re-examine this proviso, you have to measure it against what basis it was sold. The basis it was sold on officially, it failed, and it failed miserably. And to talk about expanding it or changing it to make it stronger seems to me to be rather ridiculous. Let me go one step further to this practice of liquidated damages. That’s a practice that is peculiar to the garment industry, the apparel industry. It’s a practice which, when you examine it carefully, is really startling.

Unions are working out agreements with employers who violate their collective bargaining agreements and who wish to either go overseas or go out of business. They then pay a certain amount of money to the union and then they can walk away. The workers don’t get that money. As far as I can tell, very little, if any of it, is used for the benefit of the workers. It just simply goes into the treasury of the union. This is wrong. And I feel it should be stated here because it is made possible by this proviso.

One of two things must be done to answer this problem. One would be to abolish the proviso and thereby make any semblance of legality of this liquidated damages practice illegal, or else it simply should be made illegal on its own. If not, then certainly the law should require that whatever money is collected by any union from employers under collective bargaining agreements because of damage to the employees should go to the benefit of those employees. The benefit should either be in the way of severance pay, re-training, or whatever method you’d like to use it for to do something to benefit those workers who are the recipients of the damage that’s being done.

This committee should zero-in on this particular part of this problem. I don’t think that what you do here with 8(e) is going to have a whole lot to do with sweatshops. I do think you can do a lot of good if you will attack this liquidated damages provision.

Thank you.

Chairman Hoekstra. Thank you. Mr. Cohen.

Mr. Cohen. Mr. Chairman, members of the committee, my name is Joel Cohen. I’m a partner in the law firm of McDermott, Will & Emery where I practice labor and employment law exclusively. I have represented clients in the apparel industry for the 15 years that I’ve been in private practice.

Prior to entering private practice, I was an attorney with the National Labor Relations Board for six years, and during that time I handled many cases involving the apparel industry and the peculiar labor laws that apply only to that industry. I am currently a member of the National Advisory Panel to the NLRB, and I’m a contributing author to the Matthew Bender treatise, "NLRA Law and Practice."

I come here today to tell you of my experience of what is commonly known as the Garment Industry Proviso to Section 8(e) of the National Labor Relations Act. To tell you why I think the proviso does not do what it's congressional sponsors envisioned and to suggest changes in the law that will make it more relevant to the current marketplace and thus more realistic.

Mr. Chairman, in the 1950s Congress amended the National Labor Relations Act to outlaw secondary boycotts and hot cargo agreements. Very briefly, a hot cargo agreement, which is basically an agreement between a company and a union to engage in a secondary boycott, was specifically prohibited by section 8(e) of the National Labor Relations Act. An agreement between a company and a union that the company will not do business with another company with whom the union has a dispute is against the law. Thus, an agreement between a union and a company that the company will only subcontract to firms that have union contracts is a violation of section 8(e).

In prohibiting hot cargo agreements in the late 1950’s, Congress created two exceptions. One is extremely limited and involves the construction industry. The second is what is commonly known as the Garment Industry Proviso to section 8(e) of the NLRA. The Garment Industry Proviso states that for purposes of the hot cargo prohibition and the secondary boycott prohibition, all firms that are part of the, "integrated process of production," of garments, shall be considered single employers and thus legitimately and lawfully the subject of the secondary boycotts and hot cargo agreements.

The rationale for the Garment Industry Proviso, as can be discerned from the legislative history, is as follows. In the garment industry, the real economic powers are the manufacturers, also known in the industry as jobbers. Examples nowadays would be Liz Claiborne, Donna Karan, etc. These companies generally do not manufacture their own garments. They typically subcontract to small contractors who do the actual garment production. Many of these contractors are "sweatshops" who do not pay their workers in accordance with the law. These sweatshops when discovered by the authorities, simply close up and reopen elsewhere under a new name.

In adopting the Garment Industry Proviso, Congress accepted the argument that the only way to eradicate sweatshops was to allow the garment unions – then the ILGWU and the Amalgamated Clothing Workers, now merged as UNITE – to organize these shops and sign them to union contracts. The only way to accomplish that was to allow the unions to enter into agreements with manufacturers or jobbers that would require that they only subcontract production to unionized contractors. Thus, according to the rationale, only union contractors would be able to get work, thereby encouraging contractors to become unionized, and starving those who didn’t.

Under the Garment Industry Proviso, agreements between UNITE and a jobber that the jobber will only subcontract to unionized contractors are lawful, whereas in any other industry such an agreement would be unlawful. In the garment industry, these agreements are known as "jobbers agreements."

I am not here to argue whether the underlying assumptions that led to the passage of the Garment Industry Proviso were or were not correct at the time. I’m here to tell you that the practical use of the Garment Industry Proviso in the 1990s has absolutely no connection to the rationale for its creation. It does not keep jobbers from using domestic non-union contractors and has not and does not keep jobbers from using contractors overseas. In other words, importing garments instead of having unionized domestic contractors produce the garments. Instead, the Garment Industry Proviso in the 1990s does basically one thing – it provides millions of dollars a year in revenue to UNITE, the garment workers’ union.

Here is what has developed in the last 40 years. The ILGWU, now UNITE, signs jobbers to jobbers agreements that obligate these jobbers to give all production to unionized domestic shops – the purpose of the Garment Industry Proviso. Those jobbers agreements have something else that was never considered by Congress: an institutionalized system whereby the ILGWU, now UNITE, gets paid liquidated damages when a jobber violates the agreement. The contracts actually have a formula for payments to the union when jobbers violate the agreement by importing, and here is what actually happens.

The ILGWU, now UNITE, rarely, if ever, forces jobbers to abide by the contractual commitment to give garment production to American unionized shops. Instead what it does is allow the jobber to do whatever it wants, and it then collects liquidated damages for the contractual violation. In other words, rather than promoting the use of unionized law-abiding domestic contractors, the Garment Industry Proviso simply provides a major source of income to the union.

As American garment workers lose their jobs to imports, the union collects money for itself. According to published reports in the last 10 years, ILGWU, now UNITE, has collected approximately $100 million in liquidated damages from jobbers who import work or give it to non-union, "sweatshops" in the United States.

The union will tell you that liquidated damages discourage jobbers from violating the jobbers agreement. That is simply not true. The fact is that all liquidated damage settlements are negotiated by the jobber and the union at a rate substantially lower than the contractual formula. And while it surely increases the cost of importing to jobbers with these agreements, it is still substantially cheaper to import goods, even with the liquidated damage payment, then it is to produce goods in domestic union shops. For the past decade, a startling amount of ILGWU, now UNITE, contractors have closed their doors because the work that was contractually promised to them went overseas, while the union collected money damages. If you did a survey of jobbers with UNITE jobbers agreements, you would find that in the last decade, all continued to import at ever-increasing levels and to pay liquidated damages to the union, while domestic union production shrinks to almost minuscule levels.

To make the point even clearer, in the last few years the ILGWU, now UNITE, has agreed to put caps on liquidated damages in their jobbers agreement. These caps are so low that no one with any integrity can seriously argue that they discourage importing. Reduced to their essence, these caps, some of which I have myself negotiated on behalf of jobbers, are simply a payment to the union in return for which the jobber can import to its heart’s delight.

The point is that liquidated damages do not stop importing and do not stop sweatshops at all. And even if they did, I know of no other union in the United States that has a system whereby the union gets damages because its members lose work and ultimately jobs.

The persons who are really hurt by importing are the workers, many of whom no longer have jobs, and the pensioners, whose union pension is tiny, in large measure because the union pension plan is in poor financial condition as unionized contributing employers continue to go out of business at an alarming rate. The workers and the retirees get nothing, and the union gets $10 million a year. Imagine how the union pension plan would have improved if $100 million of payments were made to the plan instead of to the union.

In sum, the Garment Industry Proviso does not in any way prevent the exporting of American jobs or prevent sweatshops in this country. To the contrary, the liquidated damage system spawned by the proviso has at the very least put the ILGWU, now UNITE, in the conflicted position of financially benefiting from the export of the jobs of the workers it represents.

I believe it’s time to be honest and realistic about the apparel industry in this country. The truth is that most apparel production is leaving the country and will continue to leave the country. It’s simply a matter of economics. With the exception of goods that must be produced quickly and goods that require special skill to make, jobbers will import apparel production simply because it is much cheaper, and profit margins dictate decisions. Law-breaking sweatshops exist in this country because the only way most domestic apparel contractors can even hope to compete with importers is by cheating. Eventually, even those law-breaking sweatshops fail because economics dictate it.

Anyone who thinks the Garment Industry Proviso has any effect on what is going on is kidding themselves. Anyone who thinks new legislation that would make manufactures and retailers legally responsible if they sell goods coming from domestic sweatshops will do anything but accelerate the use of imported garments instead of domestically-produced ones is also kidding themselves.

Instead of passing or retaining cosmetic laws that do nothing, it’s time to confront reality. If we really care about apparel workers, if we really care about those who work in sweatshops, we should be spending money re-training workers to work in growth industries in this country. Health care is but one example.

In the meantime, it is the Government’s responsibility to enforce our labor laws, not the responsibility of jobbers and retailers. And I would suggest that if retailers should be held responsible for sweatshops, so should UNITE, when the sweatshops are under contract with it and UNITE fails to police its own contracts.

The proviso has no relevance to the apparel industry of the nineties, and should no longer exist, but even if it continues to exist, the law must be clarified to end the concept of a union getting money when its members lose jobs. The Garment Industry Proviso was never meant to be a $10 million a year source of revenue to the garment employees union. If Congress wants to incentivize the garment industry union, make its future, like the workers it represents, dependent on the retention of jobs in this country, not on the receipt of money when those jobs are lost.

I believe it is time to deal realistically with the effects of globalization on the apparel industry in this country, and stop making believe that the emperor’s new clothes will continue to be made in the United States. Thank you.

Chairman Hoekstra. Thank you very much. That was very informative.

The majority counsel is recognized for 20 minutes.

Mr. Matchneer. These questions are going to be directed primarily to Mr. Mazur and Mr. Cohen.

Mr. Mazur, Mr. Cohen spent some time discussing jobbers agreements. Do you agree, more or less, with his working definition of what a jobbers agreement is?

Mr. Mazur. I think it’s kind of narrow. He left out the major ingredients in what a jobber is. I didn’t hear him mention the retailer. I didn’t hear Mr. Cohen speak about the changing nature of the industry, the new compulsion. I didn’t hear Mr. Cohen speak about the fact that there are still 650 or 660,000 apparel jobs in this country, so I don’t accept his very narrow definition of a jobber.

I think Professor Dunlop’s definition and explanation was a clearer picture of what it looks like in America today. If we look back to 1959, for instance, we would see the number of manufactures that existed, for instance, even under a union agreement. To a large extent, many of them have been replaced by retailers, driving many manufactures out of business. And I think one has to really take a look at the present structure of the industry, how it has involved, to understand that the word jobber no longer applies in the traditional sense as he’s described it, or as we have understood it.

And I think what we have to really do is pay very close attention to what Professor Dunlop described, and that is that the nature of the industry is still the same. The contractor does not have a separate life of its own. It’s dependent. It’s tethered. As I indicated with this pair of pants, the contractor does not provide the style, does not provide the material, does not provide anything except the assemblage, and throughout history that has not changed. Whether it was in 1900 or in 1998, the relationship between the manufacturer, as we use that word in its broader sense and I include retailers in that explanation is really the employer, and the law recognizes it. The reality recognizes it, and I think that’s where we have to begin to understand the relationship. If you understand the relationship, then you’ll understand the complication that exists and the uniqueness of the industry.

There is no other industry like it in America today. One, it’s the most competitive industry in America. Some have described it as a last vestige of free, democratic capitalism. But the competition between 22,000 contractors, 6 major retailers producing more than 50 percent, 1 manufacturer doing $26 billion, I think that’s really the explanation of what a jobber is. A jobber could be a major retailer. A jobber could be a small person, a manufacturer, but we use the word jobber and manufacturer in the old sense. That no longer exists in the same sense that Mr. Cohen wanted to describe it.

Mr. Matchneer. Well, perhaps you misunderstood my question. I mean the jobbers agreement, the contractual agreement that Mr. Cohen referred to. There is a type of agreement that is common in your industry, known as a jobbers agreement. Is that correct?

Mr. Mazur. Yes. It is a collective bargaining agreement.

Mr. Matchneer. Right.

Mr. Mazur. Actually, it is the agreement. That’s correct.

Mr. Matchneer. Okay. And in your years with the garment unions, about how many of these would you say you’ve negotiated?

Mr. Mazur. Hundreds.

Mr. Matchneer. Okay. Now do all of these jobbers agreements require that production be done in union shops? Is that a common element?

Mr. Mazur. That is one of the provisions in the agreement. It also makes provisions for imports.

Mr. Matchneer. Do they also require the jobber to guarantee the wages and benefits of the union members?

Mr. Mazur. It does. In some limited degree, it does; yes. The answer is it does.

Mr. Matchneer. And do these contracts create, in effect, a co-employment relationship between the jobber and the contractor’s employees?

Mr. Mazur. It recognizes the proviso, which says the contractor is an extension of the jobber.

Mr. Matchneer. Okay. Do you consider it to be a co-employment relationship?

Mr. Mazur. You can express it that way. I’m just not sure.

Mr. Matchneer. And the contracts also provide for money damages which are known as liquidated damages. Is that correct?

Mr. Mazur. That’s correct.

Mr. Matchneer. And those are due in the event of a breach of the contract?

Mr. Mazur. That's right, and you might know that that has been in existence in our agreement since 1923. You might also want to know that that’s not uncommon in this industry, and it exists in some other industries. I’m sure it exists in commercial agreements where violations of those agreements say that you pay liquidated damages. It was and continues to be an important enforcement tool in the relationship in this industry.

I think if you disregard the nature of this industry and I don’t call it special. I call it unique. I think it’s incorrect to compare even this industry to the construction industry, because the construction industry doesn’t build a building in 17 different parts, in different parts of the world or in different parts of the country, and they haven’t exported buildings or imported buildings from other countries.

So even that belies the question. The question is understanding the special nature of this industry in that that relationship between the jobber and the contractor is unique. The nature of the competition is unique, and the new elements that have brought this industry to its present state, I think, are also quite remarkable and very unique for this industry.

Mr. Matchneer. But the contracts do contain a provisions whereby the jobber agrees to pay liquidated damages. Is that correct?

Mr. Mazur. Yes. They contain a provision that provides for liquidated damages in the even that you violate the agreement. That’s correct.

Mr. Matchneer. Right. Now your union was formed by a merger in 1995. Is that correct?

Mr. Mazur. That’s correct, between the former Amalgamated Clothing and Textile Workers Union and the International Ladies Garment Workers’ Union.

Mr. Matchneer. Prior to the merger, was the practice of the ILGWU the same with regard to liquidated damage provisions in its contracts? The same as the current UNITE practice, or close to it?

Mr. Mazur. Yes; basically, it is correct. Let me see if I can clarify something for you, Mr. Counsel. There are different agreements. While I’m the President of UNITE, and I was the President of the International Ladies Garment Workers’ Union, there isn’t one master agreement. There are thousands of agreements out there. There are agreements with associations. There are agreements with individual employers Those agreements can vary. There’s a kind of pattern about bargaining, but there isn’t one agreement.

So the Amalgamated agreements are separate, the International Ladies Garment formal agreements are separate, and while you merged the unions structurally, you did not abrogate the previous agreements, nor unify those agreements, nor change those agreements. Those agreements have a separateness of their own and continue to exist, and negotiations are held separately.

And I would suggest to you, even on the ILG side when we negotiate agreements, you’re negotiating even in a market area, say in the Northeast, you could be negotiating 32 to 35 separate agreements. And so, and in some cases the conditions may vary based on the circumstances, based on the product. Not all apparel is the same. Not all clothing is the same, so I think you’ve got to recognize the kind of fit that exists.

Mr. Matchneer. Of course the provisions are tailored to the individual contract, but just the concept of having liquidated damage provisions…

Mr. Mazur. That concept exists.

Mr. Matchneer. …is a common concept.

Mr. Mazur. That’s correct.

Mr. Matchneer. Okay. And that was common in the ILGWU contracts that pre-existed the formation of UNITE. Is that correct?

Mr. Mazur. That is correct.

Mr. Matchneer. Now with the Amalgamated Clothing Workers, was their practice the same, or was it different?

Mr. Mazur. They had damages as well.

Mr. Matchneer. Was it a liquidated amount of stated money damage that was due in the event of a breach?

Mr. Mazur. Well, here again, Mr. Matchneer, let me see if I can say this. When you want to compare, you’ve got to compare apples to apples and I think it’s a mistake. I wouldn’t compare your suit with a dress, and I wouldn’t compare your shirt with a blouse, and I wouldn’t compare your pants with a skirt.

The clothing industry is very, very substantially different. If I can be helpful, and that is, one, it’s more capitalized, and, two, there are very, very few contractors. Let me put it this way: 95 percent of all women’s apparel, is made by contractors outside the manufacturer, and I would suggest to you that the opposite is true in men’s clothing, so you have two separate industries. I might suggest the difference between an airplane and a car, but I’m not sure. I don’t know much about assembling either of those, but the point is that the difference is quite vast.

In the men’s clothing industry, you have a greater degree of capitalization, and you don’t have the access and egress the way you do. You don’t have firms coming in and going out. You have a more stable environment. You have a different kind of industry with a different kind of workforce, with different kinds of skills, with less immigrant population, a larger male population, and I can go on and on and on. So, in that sense the application of damages was different.

Too, I think, and Professor Dunlop alluded to it, and that is the whole question of imports. The penetration in imports and the level of competition in terms of driving wages down, does not exist in men’s apparel or men’s clothing. In fact, we even use different names. We talk about men’s apparel, men’s clothing, and women’s apparel, and in that sense, in the apparel industry I would say it’s closer to a 60 percent import penetration, maybe even higher. On the men’s side, I don't think it’s even 20, and so you have those factors which change the nature of the relationship and the need.

You’ve got to remember something. If we get back to what liquidated damages do and what they’re for, liquidated damages are an essential enforcement tool to protect American jobs. I think that is fundamental to this discussion and if you understand that that’s what it is for and that's what it’s done. And not only that, but it’s helped for us, for those workers that we protect. It’s helped even the playing field, level the playing field. It narrows the gap between wages in Mexico. The wages in Bangladesh are 12 or 15 cents an hour. The average wage of a worker in Indonesia today is $11.00 a month.

Mr. Matchneer. Mr. Mazur, our time is somewhat limited.

Mr. Mazur. Well, but I think this is fundamental to this discussion, if I could just…

Mr. Matchneer. The question that I was asking you to respond to is, are the practices somewhat different?

Mr. Mazur. That’s correct.

Mr. Matchneer. Okay. Now, Mr. Cohen?

Mr. Thompson. Are you going to give the rest of us a chance to comment on any of this stuff? You know, time is getting by here.

Mr. Matchneer. Mr. Cohen…

Mr. Thompson. Every industry I’ve ever represented has taken the position very honestly and sincerely that they were different, that everything was peculiar to them, and I think that’s what we just heard as far as the apparel and garment…

Mr. Mazur. Every industry is different, I would agree. Every industry is different, but not every industry has the same needs. As individuals, too, I think we recognize that.

Mr. Matchneer. Just briefly, Mr. Cohen, because our time is being absorbed rapidly.

Mr. Cohen. Let me respond very briefly to some of the comments Mr. Mazur made. First of all, the Garment Industry Proviso, the last I read it, applies to the garment industry – men and women. There’s no distinction in the garment industry. Historically, the Amalgamated Clothing Workers never collected liquidated damages. To my knowledge, the ILGWU is the only union in the United States that has this kind of a system institutionalized, and actually already assumes in the negotiating of the contracts there’s going to be violations of the contracts, and money is going to be paid to the union.

Secondly, let’s make this simple, if we can. Really, all a jobbers agreement does is it makes believes that two employers are considered one-in-the-same. So really, all that a jobbers agreement is a restriction on subcontracting. It’s basically saying you can’t subcontract the jobs of these workers, these American workers, anywhere else to a non-union shop, to imports, or whatever.

Think if General Motors had a contract with the UAW that said if you subcontract the jobs of GM workers to non-union sources, you’ll pay money to the UAW. Most people would be outraged. If you take any other industry where you had such a concept, people would be outraged.

For some reason, in the apparel industry, this has been done for many, many years. It is the only industry where it has been done, and people, for whatever reason until this hearing, have not focused on this. It really doesn’t make any sense.

Mr. Mazur. That’s not true.

Mr. Cohen. Lastly…

Mr. Matchneer. Will the gentleman yield?

Mr. Mazur. That’s not true. That’s not true.

Mr. Cohen. If I could just make one other comment. I don’t understand what the capitalization of employers in the men’s apparel industry has to do with the concept of liquidated damages. In terms of liquidated damages being essential, you have to understand how liquidated damages work. It is still substantially cheaper to import, even with the payment of liquidated damages, then it is to give the work to domestic unionized shops.

Anyone saying that by paying an extra amount of money to the union, that’s going to discourage people from importing, is not really being realistic about it. If you spoke to manufacturers and asked them whether the jobbers agreement or the payment of liquidated damages has had any impact whatsoever on their decisions when to import or not to import, I think they would tell you that it’s a non-factor. All it really is is a private tariff that is being paid to the union. It has absolutely no impact whatsoever on decisions of whether to import or not import.

Mr. Mazur. That’s not true, and Mr. Cohen knows it’s not true because he’s been involved in a series of negotiations, one in the case of Leslie Fay and one in the case of Liz Claiborne, both of which he negotiated, which provided the preservation of jobs. Money has never been the issue. We would give up the money for the jobs, and Mr. Cohen knows that. The fact of the matter is, without the proviso, without the liquidated damages, this industry would be worse off. We are confronted by…

Mr. Matchneer. Mr. Mazur, again, I have limited time, and I have a particular question.

Mr. Mazur. But I wanted to respond to Mr. Cohen.

Mr. Matchneer. But I have a question that goes to exactly just that. You have announced in your testimony today a garment workers’ assistance fund?

Mr. Mazur. That’s correct.

Mr. Matchneer. In your written testimony, it was described as a Dislocated Workers’ Fund?

Mr. Mazur. That’s right.

Mr. Matchneer. Is that one-in-the-same?

Mr. Mazur. Well, yes. It’s one in the same. That is correct.

Mr. Matchneer. Okay. When was this fund established?

Mr. Mazur. June 1st.

Mr. Matchneer. Why now? Over the years of this practice, why is it now that you’re establishing these funds?

Mr. Mazur. To avoid the kind of confusion, the kind of distortion that has been presented by Mr. Cohen and others that this was a tax, that it was intended to enforce the agreement. We believe very strongly that it hasn’t been a major factor in enforcing the agreement, in preserving American jobs.

As a result of the proviso and our ability to protect workers, 40,000 workers now get benefits. As I indicated in my testimony, $48 million was collected. This is not true in a non-union shop. The fact of the matter is that 135,000 retirees benefit from this, 40,000 workers and their families: health benefits, pension benefits, the whole range of things.

We wanted to avoid the kind of confusion and move away from the discussion that people have about this has been to collect money. We want to show very clearly that this money is being used in another way, for the benefit of the members.

And let me make this point, sir. The money that was collected in liquidated damages was and will continue to be used on behalf of the members. Those monies were used to protect and defend the members. In the last 27 years I went back for your benefit, we received $168 million in liquidated damages, and we collected over $850 million in dues, half of which went to the international. During that same period, we spent $170 million on organizing and defense of the workers, which is a very important. In this industry, organizing is very, very imperative. We spent millions of dollars on behalf of retirees. We spent $42 million on the union label. I won’t sing the song for you, but $42 million to promote union jobs in America. We thought that that has had an impact. We’ve spent millions of dollars on justice centers, and we’ve collected over $1 million for non-union workers. We’ve collected over $1 million in the last two years for union workers. All of these monies were used on behalf of the workers.

By setting up this new fund, it takes out of the arena this business that it’s a tax or that it’s a tariff or that the union is using it for some illicit reason. The purpose from the very inception was to use it to protect union jobs. We believe very strongly that it has done that.

Mr. Thompson. Mr. Chairman, I take it from what Mr. Mazur has said that he would have no objection to what I’ve suggested, which is the law be changed so to require the union to spend this money for the direct benefit of the workers who are directly affected by the violation of the contract or whatever produces the liquidated damages.

Mr. Mazur. But it has been used for the direct benefit of the workers.

Mr. Thompson. But the question is whether that should be put into the law, and I believe it should.

Mr. Matchneer. And that is the question, precisely, that I did have.

Mr. Mazur. Sure.

Mr. Matchneer. Now, that you've taken the step, Mr. Mazur, recognize that in order to avoid the confusion and the criticism and all this sort of thing…

Mr. Mazur. Or the misuse of the context of liquidated damages.

Mr. Matchneer. Just while we’re here today.

Mr. Mazur. Sure.

Mr. Matchneer. Would you object to Congress requiring that money damages collected for violations of jobbers agreements be dedicated to funds of this sort?

Mr. Mazur. I’d have to look at the law. I’d have to look at what the law says.

Mr. Matchneer. A general concept.

Mr. Mazur. I'm not…

Mr. Matchneer. Would you object to the general idea?

Mr. Mazur. My feeling is I’d like to look at it. I believe, for instance, that when we talk about the general concept, whether it’s in the way Government spends money or the way unions spend money, we believe that the money that we have spent on behalf of retirees, on behalf of members throughout the history of liquidated damages was spent on behalf of the members. We will continue to do it in a more defined and more realistic in a more defined, in a way which people can understand a little better.

Mr. Cohen. Mr. Matchneer, can I respond briefly to something?

Mr. Matchneer. Sure, absolutely.

Mr. Cohen. In no way, first of all, is any criticism I have of the system directed at Mr. Mazur, personally, or at the integrity of the union. That’s not the issue. But Congress, when it passed Section 302 of the Labor Management Relations Act, recognized that there was a danger when employers made contributions to unions and passed 302 which prohibits in many circumstances as a prophylactic measure to make sure that there isn’t any form of bribery or any conflict of interest on behalf of the union. Congress intended that when employers make contributions to unions for the benefit of employees, for example, for welfare benefit, health benefits, pension benefits, it should be done under specific provisions of 302 that set up a joint labor management trust fund that administers it. That has reporting responsibilities, et cetera, et cetera.

Now, there have been cases where when employers subcontract, a remedy for that to disincentivize employers from subcontracting union jobs, is to put the money into a union pension plan. That was actually accepted by the Supreme Court in a case called Walsh v. Schlecht. It’s a 1977 case of the Supreme Court. It’s 429 U.S. 401 and I would suggest that if in fact we are going to consider having concepts of opinions of damages when jobs are lost, that they should be directed to 302 funds where is a reporting mechanism. Where there is joint employer and union representation to make sure that we’re never in a situation where Mr. Mazur or any other union official has to come and defend the integrity of what the union is doing. I don’t know why that couldn’t be accepted by the union.

Chairman Hoekstra. The gentleman’s time…

Mr. Mazur. It’s been in existence since 1929, I might suggest…

Chairman Hoekstra. The gentleman’s time has expired.

Mr. Mazur. Thank you, Mr. Chairman.

Chairman Hoekstra. And, before I get into trouble with my ranking member today, we’re going to go to 20 minutes of questioning by minority counsel.

Mr. Flannery. Thank you, Mr. Chairman. Mr. Cohen, you said that UNITE rarely, if ever, forces jobbers to abide by the contractual commitment to give garment production to American unionized shops. Instead, what it does is allow the jobber to do whatever it wants, so it then collects liquidated damages for the contractual violations. In other words, rather than promoting the use of unionized, law-abiding, domestic contractors, the Government industry provides us a major source of income to the union. I’d like to ask you, Mr. Mazur, you referenced the Leslie Fay situation in your testimony earlier and what you said you gave up money for the jobs. Can you tell us exactly what happened in that case and who was involved?

Mr. Mazur. That was a classic example and a very good example in which Leslie Fay at termination of his agreement advised the union that it was moving over a 1,000 of its jobs to overseas. They did that on the day the negotiations started. In fact, we found out about it through a press release before we sat down to negotiate, and then they handed it to the committee. These were American jobs in Pennsylvania. They were good paying jobs. As a result of that, we engaged in a labor dispute which lasted six weeks. At the end of six weeks we settled that, and as a result of that settlement there was an understanding that the company would reserve for a minimum of one year and possibly more its jobs in Pennsylvania. And as a result of that, and for the very reason that liquidated damages had been an enforcement tool, and at the suggestion of the company and its attorneys, we capped liquidated damages in exchange for those jobs. As recently as 1997, a subsequent agreement did very much the same thing, in that as a result of capping them, which means reducing liquidated damages so that it does work_for capping it, the company agreed to provide a significant amount of work, and if they failed to do that, then they don’t meet the cap.

So, the question is, it is an enforcement mechanism. It is not a question of money. It is a question of preserving American jobs, and that is a classic example of what can work and should work.

Mr. Flannery. Now, is there any reason why Mr. Cohen should have known about the Leslie Fay case when he gave his testimony?

Mr. Mazur. He negotiated it.

Mr. Flannery. He negotiated it.

Mr. Cohen. Can I respond?

Mr. Flannery. If they choose to ask you.

[Laughter.]

Mr. Cohen. I take it that's a no.

Mr. Flannery. But I appreciate the request.

Mr. Cohen. I’d love to respond to Leslie Fay.

Mr. Flannery. Well, let me ask you a question then.

Mr. Cohen. Sure.

Mr. Flannery. You said today that you appear on your own behalf. That is not representing anyone. Is that correct?

Mr. Cohen. That is true.

Mr. Flannery. Yes, but in February or January of this year when you met with Congressman Hoekstra, it isn’t a fact that at that time you were representing Mademoiselle?

Mr. Cohen. No.

Mr. Flannery. It is not the case.

Mr. Cohen. No, I represent Mademoiselle, but the purpose in meeting with Representative Hoekstra was not in representing Mademoiselle. I believe that if the garment industry proviso were to be eliminated, companies like Mademoiselle would eventually be hurt.

Mr. Flannery. Well, let me understand this…

Mr. Cohen. Could I respond to the Leslie Fay issue before we move on to something else?

Mr. Flannery. No, I’m sorry, sir, but it’s my questioning.

Mr. Cohen. I see, okay.

Mr. Flannery. When you said that you met with Mr. Hoekstra, you were not representing Mademoiselle. It isn’t it a fact that you billed Mademoiselle for that meeting with Mr. Hoekstra on February the 12th, 1998, notwithstanding your testimony just now?

Mr. Cohen. Yes. Yes, and your point?

[Laughter.]

Mr. Flannery. So, you were representing Mademoiselle on that day, but you’re not representing them this day? Is that correct, so I understand your testimony?

Mr. Cohen. Yes, that is correct. And would you like me to explain?

Mr. Flannery. Oh, he just billed them. All right, excuse me, you weren’t representing them, you just billed them. Is that correct? You were there in your own capacity, and they were underwriting your appearance. Is that correct?

Mr. Cohen. Well, I’d be glad to explain it if you would give me the opportunity.

Mr. Flannery. Well, I just want to ask you to confirm a couple of things for the record. Did you submit in the Mademoiselle case in the bankruptcy court in the southern district of New York a bill for your time; that is a bill reflecting the fact that you rendered legal services on that date, February 12th, 1998, and you said it was a trip to Washington to meet with Representative Hoekstra. Did you submit that billing record to the bankruptcy court in the southern district of New York?

Mr. Cohen. I absolutely did.

Mr. Flannery. Okay. And I presume that you appreciated that you were vouching for the validity of this when you were asking the court to pay you from the debtor in bankruptcy in funds for those services that you rendered. Is that correct?

Mr. Cohen. That is absolutely true.

Mr. Flannery. But today you are not representing Mademoiselle. Is that correct?

Mr. Cohen. I am not representing Mademoiselle.

Mr. Flannery. And you’re not going to bill them?

Mr. Cohen. I am not going to bill them.

Mr. Flannery. Okay, thank you.

Mr. Cohen. Now, can I respond to Leslie Fay?

Mr. Flannery. No, I have other questions, but I want to use my time as efficiently as I can.

Mr. Cohen. Oh, I see. I understand.

Mr. Thompson. Just remember that.

Mr. Flannery. I have a good memory.

Mr. Thompson. Counsel, could I say for the record while you’re conferring with the…I’m here. Nobody’s paying me either. So, I think that ought to be in the record. I’m not here representing anyone but myself.

Mr. Flannery. Okay, well, I didn’t ask you. Thank you.

[Laughter.]

Does anybody else want to make a representation at this time?

[Laughter.]

Mr. Cohen, I think I’m going to frustrate you if I don’t allow you to say something about Leslie Fay.

Mr. Cohen. You’re very kind.

Mr. Flannery. What would you like to say about Leslie Fay?

Mr. Cohen. I appreciate it. Let me tell you what happened with Leslie Fay, because I think Leslie Fay is actually instructive of what the problem is. Leslie Fay was in bankruptcy. Leslie Fay was and I don’t remember the exact numbers, but Leslie Fay was losing significant amount of money on every dress manufactured in Pennsylvania, because he was competing against imports. There were 300 good distribution jobs that were dependent on the continuation of this company, and the only way that this company was going to come out of bankruptcy was eliminating jobs that it could not make a profit on because he was being killed by imports. Leslie Fay lives in the real world. What we said at negotiations with UNITE was, "Look, let’s stop making believe that these jobs can continue."

Leslie Fay, at one time, had thousands of production jobs, and they were down to something like a 1,000. We said let’s put the money that the company has left and I think we initially proposed a couple of million dollars to be placed towards the retraining of the employees in other industries. The union would not go along with that. We also didn’t want to pay liquidated damages, and what was eventually negotiated…

Mr. Flannery. Did you propose…

Mr. Cohen. Please, just let me finish.

Mr. Flannery. Let me just ask the question. Well, please, it’s also my time, and let me ask you a question in connection with the point you just made. Did you at any time during those negotiations offer liquidated damages and settlement of the Leslie Fay dispute?

Mr. Cohen. Because the union said…

Mr. Flannery. Did you or didn’t you?

Mr. Cohen. The union said it was not…

Mr. Flannery. Please, sir, listen to me.

Mr. Cohen. I’m answering your question, if you would allow me to.

Mr. Flannery. No, please, sir, answer the question. Did you or did you not offer liquidated damages in the course of that settlement, yes or no?

Mr. Cohen. Because that is what the union insisted on in order to end the strike.

Mr. Mazur. Absolutely not.

Mr. Cohen. You know, I’d be glad to let Mr. Mazur respond, but I haven’t finished telling you what happened to Leslie Fay. What happened in Leslie Fay was there was an agreement that while an independent study was done to verify that, in fact, these jobs could not be done in the United States at a profit. And that independent study was done by former Secretary of Labor Usery at a great expense.

Money that could have been spent retraining employees for other jobs in growth industries was instead spent on a study that showed what everybody knew it was going to show, that these jobs could not be done in the United States and make a profit for the company.

Instead, we went through that procedure. All of those employees were eventually laid off.

What came out of it was a cap on liquidated damages whereby the company now imports all of its production, and money is paid to the union, and there are no more domestic production jobs in Pennsylvania.

That, to me, is exactly what the problem is.

Mr. Mazur. But that is not true. It’s patently not true. I’m sorry to interrupt, Congressman. First of all, let me give a number of factors here. First of all, the company refused to cooperate in Usery’s suggestion that we bring in engineers and look at the jobs to make them more efficient. The company was determined to go overseas and in bad faith did so. Those jobs to a very large extent, and to this very day, have replaced those workers with jobs, union jobs in New York, and they’re not totally overseas. We did preserve hundreds if not thousands of jobs.

Two and very quickly, because I don’t want to use your time and that is simply that the firm went bankrupt because they cooked the books. They were involved in a major scandal. The Principle of the company was taking $5 million a year in salary, and Mr. Cohen distorts the picture. The bottom line was that Mr. Cohen and the company suggested reducing liquidated damages in exchange for guaranteeing American jobs, and he did the same thing only recently in the Liz Claiborne situation where jobs were guaranteed in exchanged for liquidated damages as well.

Mr. Cohen. I do not represent Liz Claiborne. Mr. Mazur is wrong. He’s confusing me with someone else.

Mr. Flannery. During those negotiations?

Mr. Cohen. No, I didn’t represent Liz Claiborne.

Mr. Flannery. Okay. Secretary Marshall, with regard to the purpose of liquidated damages, do you think they serve a purpose? They’re necessary? Are there alternative or better ways than liquidated damages?

Mr. Marshall. Let me go back to my statement, which was that if a rule is going to be a good rule, it has to be enforceable. One way to enforce a rule is to have liquidated damages, and there are damages paid for liquidations of contracts in a variety of circumstances.

Mr. Flannery. Now, Mr. Wimberly, you called liquidated damages taxes, but these are not imposed by the State, obviously, and they are probably more properly characterized as penalties. Does it matter to you that the parties actually agreed to this? That is, no one imposed it upon them? Two parties agreed to it, a company and a union, in a typical jobbers agreement.

Mr. Wimberly. Well, yes, we can all understand taxes, and I agreed with the testimony here that it’s unusual to have liquidated damages in labor contracts, and they’re frowned upon and often not enforced even when voluntarily entered into by the parties. So, although I do appreciate Mr. Marshall’s testimony that liquidated damages encourage union’s employers to reach agreements, we do have laws and policy considerations that even affect what employers and unions voluntarily agree to.

Mr. Flannery. Secretary Dunlop, I thought I saw you shake your head a moment ago. I don’t know if it was about this point. Do you think that these liquidated damages provisions in these jobbers agreements are as rare as suggested by the last witness?

Mr. Dunlop. One of the things to shake my head about is that I think the correct answer is that every collective bargaining agreement that I’ve been associated with as an umpire, as an arbitrator, there are arbitrators, often, is to determine whether there is a violation of the contract.

In the men’s clothing industry, you do not have, as we’ve heard, liquidated damages. But arbitrators in those agreements found violations and did impose various kinds of penalties in monetary form, and that’s exactly what arbitrators do, and it is in the arbitrator’s power normally to shape the penalty or shape what should follow having discovered that there is a violation. Somebody didn’t get his vacation, what do you do? Somebody paid below the rate, how much do you pay back as a result of that violation? Finding violations and providing remedies happens under most every collective bargaining agreement I know of.

Mr. Thompson. If I could point out just quickly, under normal circumstances where you have an arbitration and somebody didn’t get their vacation, the money that’s collected goes to the person who didn’t get his vacation. It doesn’t go into the coffers of the union to use for whatever purpose they see fit. That is where we ought to focus on this whole issue.

Mr. Flannery. Secretary Marshall, when the jobs go overseas and there’s no identifiable worker here, is there alternative for liquidated damages that’s now constituted to get it to some specific worker who’s been damaged but can’t be identified?

Mr. Marshall. Well, if you can’t identify him, it seems to me, the only other way to do it is to set up a fund to be used for all workers in the category, like all union members which is what this new fund, as I understand it, that the union now has set up. There are other ways that you could deter violation of a contract, of course, and deal with the damages, but I’m not sure it’s useful to go into all of them, but you could have bonding, for example, as a way to deal with the problems of non-payment of wages. We have mechanics liens, which are ways to deal with those issues. There are a variety of ways to do it, but it seems to me that the liquidated damages are a perfectly good way to do it.

Mr. Flannery. Would one of the problems with bonding be that you actually had to invest a certain amount of money?

Mr. Marshall. That’s right. The other problem with it is that everybody would have to be bonded, not just those who are going to pay the liquidated damages.

Mr. Flannery. Mr. Cohen, in his testimony said, "I am here to tell you that the practical use of the garment industry proviso in the nineties has virtually no connection to the rational for its creation." Would you agree with that, Mr. Marshall?

Mr. Marshall. No, I think that if the rational was to encourage collective bargaining in the industry and to protect workers from the worst consequences of highly competitive markets, which is what it was – we went through a period when markets were less competitive before globalization and deregulation of markets. But we’re now in a period where we have both the globalization of markets which has had a profound impact on all industries, but especially on industries like the garment industry which is subject to much higher levels of import penetration than many other industries. But globalization affects all industries.

The labor markets are a lot more competitive now than they were in the 1950s, sixties and seventies, and, therefore, it seems to me the essence of the problem is what kind of competition do we want to encourage? There are only two options. You can either try to compete with cost-cutting, which means mainly wages, or you can try to compete by encouraging people to improve productivity and quality. Cost-cutting is a loser, and you wouldn’t want to win it, because there will always be countries with lower wages, and the only way you can improve your condition with cost-cutting is to work harder which essentially is what American workers have been doing. If you go to the other option which is to try to improve productivity and quality, then what you’re really doing is substituting ideas, skills, and knowledge for resources and hard work, and that, it seems to me, is the way that a high wage country like the United States preserves relatively high wages. And this is simply not sufficient for that purpose, but it is one of the things that can be done for that purpose.

Mr. Flannery. Do you agree with Mr. Cohen’s statement, "Law-breaking sweatshops exist in this country because the only way most domestic apparel contractors can even hope to compete with importers is by cheating?"

Mr. Marshall. No, I don’t agree with that. The problem is that if you didn’t have this proviso you would create a great incentive to cheat and to escape, because that’s what I meant by the law of labor standards is that the bad standards would drive out the good ones, because even an employer who wanted to have high standards would have great difficulty doing it because of the competitive advantage that you would give the violator.

Mr. Flannery. Secretary Dunlop, there was testimony earlier denigrating the difference between the garment industry and other industries saying that they could be treated in some way all the same. Do you agree or disagree with that proposition?

Mr. Dunlop. Let me put it this way. I agree that every industry has its own distinctive characteristics and if you’re going to be a part of the dispute settlement in it, you better know that.

On the other hand, there are few industries in the country in which this kind of market structure is as competitive and as regressive in its effects upon wage structures as is the women’s and children’s branches. Let me give you another one that’s in my experience, which is the migratory labor contractor situation which I have handle problems in both Ohio and Michigan for 15 or 16 years. There, you have processors who are large. You have farmers who are independent. You have labor contractors who historically import labor, and then you have migratory people with the usual problems, like many of the immigrants, of language and discrimination of one kind or another. That is a market structure, which is highly depressant on wages.

There a few of these in our economy, but the women and children’s branches of the apparel industry have been regarded since the turn of the century as an extreme case of this and collective bargaining developed it that way.

In the agricultural area where I’ve introduced and mediated agreements, it is the same way. The role of the processors is essential in order to take care of wage structures that are viable in migratory labor. Happily or unhappily, as you all know, the agricultural labor field is totally excluded from the National Labor Relations Act.

Mr. Flannery. I yield back such time as I may have. Thank you, Mr. Chairman.

Chairman Hoekstra. I’m not sure I thank the gentleman for yielding back or not.

[Laughter.]

I’m not sure I’m ready to get into this.

I was just going to say that my colleague from Georgia has indicated an interest in going.

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

Chairman Hoekstra. I’m not going to give you my five minutes.

Mr. Norwood. Thank you very much.

Chairman Hoekstra. I will give you your five minutes. Last time I did this, you took my five minutes and your own.

[Laughter.]

 

I recognize the gentleman from Georgia for his minutes.

 

 

Mr. Norwood. Mr. Mazur, I am not a lawyer. I tend to like to have friendly conversations so we can learn something here, but, unfortunately, I only have five minutes, so I’ll have to take my cue from minority counsel and ask you to answer a couple of questions, please, with yes or no.

As you may know, I had the privilege of chairing a couple of hearings looking into the Department of Labor’s trendsetters list just last month, and I thought about you at the time and wish you had been here because I wanted to ask you what I consider to be a very serious and important question. Did you or anyone at UNITE contact in any form anyone at the White House or the Department of Labor to ask that Guess Jeans Company be suspended from or taken off the Trendsetter list?

Mr. Mazur. I don’t have any recollection of that.

Mr. Norwood. So, you are not aware that anybody in your union…

Mr. Mazur. Well, I can’t speak for anybody in my union. I know that Guess was considered a firm that had been violating the law and had just charged…

Mr. Norwood. Would you be good enough to check on that for us and report back to us if anyone in the union contacted the Labor Department or the White House regarding this? And I thank you very much if you would do that.

Mr. Norwood. Let me ask a couple of questions in general. I know we don’t have good records in this country, apparently, about sweatshops, but one of the things I’m interested in, Jim. I won’t call you Jim, although, if you like, I could.

Mr. Mazur. Jay.

Mr. Norwood. Do we have more or less sweatshops in this country today than we did 10 years ago?

Mr. Mazur. I don’t know the answer to that.

Mr. Norwood. Do any of you know the answer to that, Mr. Wimberly?

Mr. Wimberly. I am a little more optimistic than most. Though, about the ability of domestic apparel shops to survive in some form, fully complying with the law and think some will survive. I don’t know about the percentages and so forth. I can say, I have been in many contract shops all across the southeast and midwest and have not observed these terrible working conditions that I’ve heard reported in some of the metropolitan areas such as New York City.

Mr. Norwood. Can any of you answer the question? Do we have more or less sweatshops today?

Mr. Thompson. Mr. Norwood, based on some publications that I’ve seen recently, there seems to me to be an indication that at least in the urban areas such as New York, there is an increase in sweatshops. I attribute that, at least to some extent, to a lack of enforcement of the law that are on the books dealing with labor standards; with safety requirements, and the type of things that sweatshops usually go the other way on.

Mr. Norwood. Our feeling as a committee is that there may be more, but I’m trying to find out.

Mr. Mazur. Well, there are more.

Mr. Norwood. Mr. Dunlop, you wanted to comment on that.

Mr. Mazur. I can be helpful.

Mr. Norwood. Professor Dunlop wants to answer.

Mr. Dunlop. I think you’re right that no one can produce evidence of a valid statistical nature that I’m aware of. I have been studying that issue. I think the answer is that there is some view that evidence that in the last 5, 7, 10 years, that they have probably increased. I have tried to set forth in my testimony four reasons for the reasons that they have increased.

Mr. Norwood. Are you continuing to study that now?

Mr. Dunlop. Yes.

Mr. Norwood. Well, I think that's a very, very important question.

Mr. Mazur. Can I answer?

Mr. Norwood. No, sir, I’m sorry. The next part of my question isn’t about sweatshops, but it is about imported goods, losing jobs going south. Could we agree that there is more importation of garment goods today than there was 10 years ago?

Mr. Dunlop. We have very good data about that.

Mr. Norwood. All right. Now, I’m asking this question because I’ve got a dog in this bite. We have a lot of cut and sew in the 10th district of Georgia that has left the area and I don’t like that one bit. I want those people to stay in Georgia, and I want them to make wages, Mr. Mazur. I know we all do. My bottom line to this is then, if that is true, why do we consider believing that liquidated damages has done the job that it was intended to do which was to stop imports and stop sweatshops?

Mr. Mazur. Well, first of all…

Mr. Norwood. And, Mr. Thompson, I can understand you pretty good, because you’re from South Carolina. Why don’t you respond to that, if you would please.

Mr. Thompson. As I said in my statement, I believe there are more sweatshops. I believe there are as many sweatshops among the unionized segment of this industry as there are in the non-union segment of this industry. Therefore, if you’re to measure the success of the garment industry proviso, you have to say that it has failed miserably. It has failed miserably because it was touted at the time as being designed to eliminate, prevent, or diminish sweatshops.

Liquidated damages have absolutely not done the job.

Mr. Norwood. Mr. Wimberly?

Mr. Wimberly. Representative Norwood, I would like to add something that hasn’t been brought out that I’m not sure I’m entirely accurate in stating. I can tell you this used to be the common situation, but, traditionally, liquidated damages were assessed in a much higher fashion, a much greater percentage if a company was using a domestic, non-union contractor. Whereas, if a company was importing, the liquidated damages were much lower, so you might even want to get into the discussion about the use of liquidated damages that actually encourages imports as to non-union, domestic contractors.

Mr. Owens. Would the gentleman from Georgia yield for one second?

Mr. Norwood. He’s just told me, Mr. Owens that my time is up.

Mr. Owens. Just the word NAFTA. I want to say NAFTA, NAFTA, NAFTA.

Mr. Norwood. When you get your five minutes, maybe you could ask the question then.

Chairman Hoekstra. The gentleman’s time has expired. Major, did you want to say something?

Mr. Owens. In the discussion of increased imports and jobs fleeing despite the fact that you have a liquidated damages clause, NAFTA is the answer, NAFTA.

[Laughter.]

Mr. Norwood. All right. Can I respond to that, Mr. Chairman?

Chairman Hoekstra. NAFTA is the answer. Thank you. I just wanted to make one comment. I met Mr. Cohen while discussing this issue and I have also met Mr. Thompson on a number of occasions. I have never met Mr. Wimberly until this morning. Mr. Mazur, I believe this is the first time we’ve met, although, I think in the last few months I’ve had at least three or four meetings with UNITE and as recently as last week.

Mr. Mazur. And we appreciate that.

Chairman Hoekstra. Yes, I know, you’ve said that. Mr. Marshall, I don’t think we’ve met, and, Mr. Dunlop, you and I have crossed paths a few times over the last few years. So, as can be seen, there is an interest.

Mr. Scott is recognized.

Mr. Scott. Thank you, Mr. Chairman. Mr. Cohen, you’ve referred to the competition that domestic production has problems with competition, competing with work that’s done overseas. Also, you mentioned that even the domestic shops where there’s a vicious competition where you have to cut so close to the bone when they end up going under, they just close up and reopen. The suggestion is that some of us have is that the manufacturer, or in this case, the example up there is Wal-Mart, should be held accountable for the wages and health care and what not. Is it your view that the manufacturer should or should not be held accountable?

Mr. Cohen. My view is it shouldn’t and let me explain.

Mr. Scott. They should not?

Mr. Cohen. No, sir, they should not. I’ll tell you why. I am being practical, now and I think it’s not a question of philosophy. If you make retailers legally responsible for the Fair Labor Standards Act for contractors that make goods that are made in their store, you’re simply going to encourage them to import. As a result, you’re going to raise the stakes as a practical matter that when they sell domestically-produced goods, they are going to assume such great legal responsibility in terms of policing that in the real world what many of them are going to say is "You know something, this just isn’t worth it. Let's import if from the Far East."

So, I think if the purpose of this is to protect what is left of this industry in the United States, I think, actually, that would be counterproductive.

Mr. Scott. Mr. Marshall, do you think the retailers in the structure and that the manufacturers are someone between that and the people doing the work.

Mr. Marshall. Yes, my general belief is that we ought to pay more attention to what people do than what they call themselves. If they’re jobbers, you’ll apply rules that apply to jobbers. If they’re manufacturers, you ought to apply that rule. I would like to respond to the previous comment that we ought to apply it to international producers as well as domestic producers. That’s the reason I believe that we need to have trade link labor standards.

Mr. Scott. If the retailer in this case is not held responsible, is there any practical way of enforcing fair labor standards, health care, enforcing payroll with regard to a business if they don’t make the last couple of weeks for the payroll? Is there any effective way of enforcing those laws?

Mr. Marshall. I think what you do if you don’t hold the people who have the power, who internalize the problem, responsible for it, then they will shift responsibility for the enforcement to somebody else, and if that’s not in the national interest. You have it happening a lot where the people try to avoid responsibility for labor law particularly by shifting the work to somebody else through subcontracting.

Mr. Scott. And you actually have an incentive in that case?

Mr. Marshall. Sure you do.

Mr. Scott. Not to pay minimum wage and, in fact, might not even be able to compete on bids unless you fail to pay minimum wage.

Mr. Marshall. That’s right. That’s what I meant by the law of labor standards.

Mr. Scott. Mr. Thompson, you’ve indicated that things aren’t better as a result of the proviso. Isn’t it true that the proviso didn’t change anything? It just continued to practice what was in existence?

Mr. Thompson. That was one of the announced purposes of it which a great number of people subscribe to, but it also was touted as serving other purposes. One would be to eliminate or reduce the number of sweatshops.

Mr. Scott. Well, as you answer it, let me ask the question, how will removing the proviso make it less likely that there would sweatshops?

Mr. Thompson. If you remove this proviso that would bring the unions and the employers in this industry directly under the other provisions on secondary boycotts and other things in the labor laws directly under those provisions where they are now exempt. It would also put these practices of such things as liquidated damages under question as to whether they come under anti-trust laws.

Mr. Scott. How would eliminating liquidated damages make it less likely that there would be sweatshops or the jobs that move overseas?

Mr. Thompson. If you put this industry under the same scrutiny that other industries are under which seems only fair to me like labor laws, anti-trust laws, wage standard laws like minimum wage, and enforce those laws, you eliminate sweatshops. Obviously, this proviso is not eliminating sweatshops.

Mr. Scott. I think I just heard from Secretary Marshall that if you don’t have responsible party responsible, that you’re shooting at a moving target.

Mr. Thompson. I am suggesting the responsible party in this instance is the United States Government, which is responsible for enforcing these laws that would apply to this industry and to this union.

Another announced purpose of this proviso, which has been referred to here this morning, was to promote collective bargaining in this industry. I don’t think it’s even done that. If you look at the number of workers in the industry who have come under collective bargaining agreements, it seems to me in the figures I’ve seen it’s diminished. So, every purpose this proviso ever had as far as I can tell has failed, and it ought to be eliminated.

Mr. Scott. Thank you, my time has expired.

Chairman Hoekstra. Thank you. Mr. Mazur, UNITE negotiates jobbers agreements that place caps on liquidated damages, is that correct?

Mr. Mazur. Say that again. I’m sorry, I didn’t hear the question.

Chairman Hoekstra. UNITE in the agreements it negotiates with jobbers, you negotiate agreements that in certain cases place caps on liquidated damages. Is that correct or not?

Mr. Mazur. The answer is where we can preserve jobs or prepare to substitute jobs. The question has never been money; the question is preserving American jobs, and the answer is where we can do that, we do that.

Chairman Hoekstra. Okay.

Mr. Mazur. Giving you two illustrations I could probably cite…

Chairman Hoekstra. Which were the two illustrations?

Mr. Mazur. One is the Leslie Fay situation where we capped the liquidated damages as a result of the preservation of jobs. We recently got into Liz Claiborne, and there were other situations. I’m not familiar with all the agreements that they placed, because many of the agreements are negotiated outside the pale of the international. The fact is that in my own experience there have been any number of them, and the fact is again that our position simply remains that we want to preserve jobs, and anytime we can preserve jobs, we’re prepared to cap liquidated damages.

Chairman Hoekstra. Thank you. Mr. Dunlop, I’m reading the points that you made in your statement, and I’m looking at the last three or four: the rise of imports, new practices of green retailing, the increase in immigration – I’m not sure that applies – and then the decline in the share of domestic apparel governed by collective bargaining agreements. Those are at least four of the circumstances that strive for these kinds of provisions to be in law as it applies to the apparel industry.

Mr. Dunlop. Mr. Chairman, I offered those four not with respect to the proviso but with respect for reasons to suggest that the last decade or so those factors have been more significant than earlier in putting depressing effects upon wage structures and benefits in the women’s and children’s branch of this industry.

Chairman Hoekstra. When I read the history and background information, what comes to mind is that this leads me to believe that it applies to other industries as well.

Mr. Dunlop. I have said earlier this morning, Mr. Chairman, that I think this is a somewhat distinctive industry in its market structure. I did, a moment ago, give an illustration of agricultural areas where there are similarities, but I think you would be hard pressed to find an industry that is saying even the men’s branch of this industry have much larger firms. You have much larger capitalization. This kind of a problem is no where as intense in the same technology, in the same distribution system. So, that shows you, in my mind, how peculiar it is.

Chairman Hoekstra. I believe we have one vote. Mr. Norwood is going to vote, and we will just keep going with the hearing. All right, will that work? You don’t want to do that? Do you want to suspend pretty soon? You don’t want to miss anything. All right, then I’ll finish my time, and then we'll go one more question and then we’ll go break, vote, and come back.

Do you believe, Mr. Dunlop, that this industry is so unique that the remedy you propose as it says, "They need to be strengthened along with the enforcement procedures of the wage and hour structure?" Do you not see the globalization or the increase in competitiveness, and these types of issues driving the need for these kinds of provisions in other industries?

Mr. Dunlop. No, I do not. The question of what ought to be done opens up a subject that I would not want this morning of what should be done. What enforcement? One of things that occurs immediately is that the Labor Department has very rarely resorted to the so-called hot goods provisions of section 15 of the Fair Labor Standards Act, and a much more focused and much more pursuit of that area I think is one way in which you could get more enforcement where the Congress has specifically authorized going after the shipment of goods produced under these conditions. And in a recent case, as I understand it in New York, the Department of Labor last December did convince a Federal judge to sanction manufacturers – fashion headquarters – because of the conduct carried on by the wages and hours that its subcontractors followed. So, that legal device which has been in the statute since 1938 leaves a much more focused attempt to apply, and that’s only one. I have several other suggestions myself about this matter, but that is a big subject.

Chairman Hoekstra. All right, thank you. Ms. Mink.

Mrs. Mink. Thank you very much. The testimony this morning has been very engaging and very illuminating. I think, however, the specific reason that we’re here discussing this matter and in the two previous hearings that we’ve held, have to do with the victims of the industry, the lowest person working in these sweatshops; those are my concerns. And it seems to me that we can spend all day talking about the way that it currently operates and whether liquidated damages are good or bad and how they have been used to advance the purposes of that legislation and the failures of the Department of Labor in enforcing the laws and regulations that currently exist that if they had been more aggressive might have brought greater protection to the workers.

My concern and my frame of reference is the worker, and I think that the discussion with reference to how we got to incorporating the proviso and using liquidated damages and other areas as methods of enforcement all come down really to the necessary conclusion that we have not done enough and that the Government should do more, not less. And what purpose would be served by eliminating an enforcement tool that we already have, like liquidated damages? What purpose would be served by eliminating the hot goods provisions or any of the other enforcement tools?

It seems to me that the purpose of this hearing ought to be to find ways in which we can improve the lives of the individuals and to what extent we can enact laws to achieve that result. What comes to me as a great challenge and we’ve focused on the union situation in New York is when we went to a hearing on the West Coast, I was quite interested to find that most of the contractors and those in the actual preparation of the garments on the West Coast are not union and yet sweatshops are rampant. We had the extreme situation of the El Monte case where the courts had to intervene because of the extraordinary, savage ways in which people were treated there.

This is not a question of the difference between union and non-union operations; it is the difference of enforcement and that the Government needs to do more. We have all said that the situation is deplorable. I’ve heard the chairman of the subcommittee make those statements, and we join him in that. The inquiry, therefore, is what is the future? What more can we do? Not to say that the tools that the industry or the union or the people have been provided with are adequate or ineffective. It is the question of what more can we do? And I believe that the New York legislature has recognized that responsibility in enacting a law, which the governor has now signed. It goes to the very heart of this issue which is what more can be done and in New York they have said that the issue of joint liability is the key to greater enforcement of the standards that do exist –minimum wage, overtime, health benefits, and all of those things which are implicit in the protections of all workers throughout America.

So, my question to the two secretaries here, who are very distinguished indeed and whose presence is very valuable, is what about the New York law? Is that something that’s going to move us forward; the idea of joint liability and greater opportunity to enforce such things as hot goods which in criminal law, we would say if you benefited from the illegal production of goods or its acquisition or sale, you have no business to its ownership, and that's what hot goods is all about, and yet we have not been enforcing it.

So, Secretary Dunlop or Secretary Marshall, I would in my remaining minutes…

Mr. Marshall. Well, let me…

Mrs. Mink. I would like to have your response.

Mr. Marshall. Let me say, I haven’t studied the New York law, but my reaction to your comment is that you need to have joint responsibility. You will never solve the labor law enforcement problem with enforcement. You’ll never have enough inspectors to prevent occupational safety and health problems in the workplace, and that’s not even the best way to do it. You need to encourage the people in the workplace and give them the power, knowledge, and motive to protect their own interests, and then you supplement that with Government regulations – the inspectors. And, therefore, that’s the reason in my comments I made the statement that there’s no one way that you’re going to resolve this problem, but I believe we ought to encourage and permit workers to organize and bargain collectively to take responsibility for trying to resolve their problems, but that’s not enough. The comment was made that none of this has prevented sweatshops. I don’t know anybody who thought that it would by itself. That is mind-boggling to assume, but I think that it has helped, and I think we need to pay a lot more attention to enforcement processes and to induce as much self-regulation as you can backed up by enforcement.

Mrs. Mink. Secretary Dunlop, I think you have about a minute.

Mr. Dunlop. I have not read the New York statute either, but on the description you’ve made, the idea of making the contractor responsible for his subcontractor, I suggested earlier was an idea introduced in collective bargaining as long ago as 1901 in New York City, and I think that principle is essential to anybody’s attempt to regulate wages, hours, and working conditions in this kind of structure of markets.

Mrs. Mink. Thank you.

Chairman Hoekstra. Thank you. The gentlelady’s time has expired. We will recess and hopefully be back in less than 10 minutes. Thank you.

[Recess.]

Chairman Hoekstra. The subcommittee will come to order. Mr. Norwood is recognized for five minutes.

Mr. Norwood. Thank you very much, Mr. Chairman. Mr. Mazur, I apologize to you for only having five minutes, otherwise, we could have a decent discussion, but because of that, I really have to ask you to limit your answers, because I have about six questions.

The first one…

Mr. Mazur. I’ll do the best I can.

Mr. Norwood. I understand. There’s a lot to say but, nevertheless, I only have five minutes and I’ve got to get some answers here.

One that I think is pretty important is about the Dislocated Workers’ Fund that was just recently established. My understanding is and, again, I’m not a lawyer, but my understanding is that it is a law that must be jointly administered by the unions and employers under 302.

Mr. Mazur. That’s not true.

Mr. Norwood. That is not a law? That is not true?

Mr. Mazur. It’s not true in this case.

Mr. Norwood. It’s not true in your case.

Mr. Mazur. In this case, I said. I’m not sure if there are other situations that are similar, but I have not studied that, quite frankly. Our lawyers tell us…

Mr. Norwood. So you don’t jointly administer your Dislocated Workers’ Fund?

Mr. Mazur. It’s a Garment Workers’ Assistance Fund. There are some funds that we have in the union that are jointly administered, and there are some funds that are unilateral.

Mr. Norwood. Isn’t the Dislocated Workers’ Fund, this new thing that’s just…

Mr. Mazur. Let me just help you in this regard, Congressman. It’s called the Garment Workers’ Assistance Fund.

Mr. Norwood. And that’s the one you just set up in June.

Mr. Mazur. Yes, I sort of described it in terms of what it was going to do.

Mr. Norwood. And you just set it up in June?

Mr. Mazur. June 1, yes.

Mr. Norwood. That’s the one.

Mr. Mazur. That’s correct, June 1.

Mr. Norwood. And that one is not administered by the employers and the union.

Mr. Mazur. Not at all.

Mr. Norwood. Okay.

Mr. Mazur. It will be…let me say this…can I?

Mr. Norwood. I need to go ahead. I only have five minutes.

Mr. Mazur. But I must correct.

Mr. Norwood. And I’m going to control my time. I only have five minutes.

Mr. Mazur. But it’s for the record.

Mr. Norwood. I’m going to control it just like the lawyer taught me how over there.

Mr. Mazur. But it’s important that you have…

Mr. Norwood. As liquidated damages that you receive, are they intermingled with dues money?

Mr. Mazur. Say that again.

Mr. Norwood. Liquidated damages. $10 million a year. You said $168 million over the years. Is that intermingled with dues money?

Mr. Mazur. No.

Mr. Norwood. It is kept in a separate…

Mr. Mazur. No, it’s put into our general funds.

Mr. Norwood. So, is dues money put into general funds?

Mr. Mazur. That’s correct.

Mr. Norwood. So, they are intermingled.

Mr. Mazur. Well, in that sense they are, I guess.

Mr. Norwood. Well, that’s exactly what I meant.

The money is used to help members of the union. The men and women who lose their jobs, or is the money used to help members of the union who have not lost their jobs?

Mr. Mazur. I think it’s to help all of our members, those who have jobs, to preserve their jobs, to preserve their conditions as an enforcement mechanism, and it’s also used for those who lose their jobs as we all attempt to organize new firms where they may be working, and so it’s used in as broad a sense as we can, and that’s why we use it in that sense rather than give it to the members.

Mr. Norwood. Do you use it for people who lose their jobs in job training? Do you try to help them get relocated?

Mr. Mazur. Sure, within the industry, within the industry. In New York, for instance, we’ve established an organization which is jointly administered by the union, by the industry, by the City of New York in which we train operators. It’s called Garment Industry Development Corporation, and it was initiated by the union, and that’s an example, and part of it comes from the Government; part of it comes from the union; part of it comes from the industry, and part of it comes from the city.

Mr. Norwood. Do the people who lose their jobs – and I know there are many, some of them are in my district – do they file for employment compensation or seek Federal job training? Do you encourage them with that and help them with that?

Mr. Mazur. Sure, I’m sure we do that. That’s handled by various affiliates around the country, and I’m sure they do that in Georgia, and I’m sure they do that around the country as well.

Mr. Norwood. Why, then, should the taxpayers foot those bills, and, at the same time, you’re collecting money on their behalf to do the same jobs?

Mr. Mazur. We’re not doing the same jobs at all.

Mr. Norwood. You’re trying to help them get retrained or you only try to help them?

Mr. Mazur. That’s part of a total program that we conduct. The major part of those monies, as I said, went and since 1970, in those years, we collected about $165 million in liquidated damages and spent over $170 million.

Mr. Norwood. Do any of the members get back into the garment industry or do they have to retool and retrain for another type of industry?

Mr. Mazur. Some of them leave the industry and are retrained, that’s correct.

Mr. Norwood. Now, in your negotiations…

Mr. Mazur. We do not do very much with training for other industries.

Mr. Norwood. In your negotiations to come to this oftentimes a cap is part of a negotiation. At that point, once the cap is reached, isn’t the jobber free to give up production to any shop it chooses?

Mr. Mazur. No.

Mr. Norwood. Once they’ve reached the cap, then they can’t go deal with anybody they want to?

Mr. Mazur. No, because I think within the cap we try to define the level and at what point they’re doing it, and I think the fundamental aspect of it, as we’ve described on a number of occasions, is that we’re trying to preserve the jobs that we have. We live in an industry, which is highly competitive, as has been described…

Mr. Norwood. So, after the cap has been reached, then you still can, at that point in time, have some control over those people getting back to work.

Mr. Mazur. There is a constant effort in dealing with the firms by the affiliates who tend to negotiate these agreements to preserve the jobs we have and expand new jobs as the company grows. Some companies grow in leaps in bounds; some companies reorganize that do $10 million and are now doing $1 billion, and so we continue to talk to them about how we share the market.

Mr. Norwood. Well, that’s, of course, exactly what we want to do.

Mr. Mazur. Can I…

Mr. Norwood. Mr. Thompson, in my last seconds here, my father used to tell me a lot when I was growing up that nothing good happened after midnight, and I think he wasted that on me and probably should have been talking to the United States Senate. I’ve had a real problem with Senator Jacob Javits doing his best work after midnight. I’ve been pretty involved in that in the health care field where he, in the middle of the night, without any discussion, added health care to the IRISA laws. Generally, that kind of thing is done, because if you do it in conference, then there’s not enough time for Congress to review a 200-page bill. And all of sudden you vote out of conference, and you’ve got a law where somebody sort of slipped something in. Now, is that sort of what happened, in your opinion, in the middle of the night, someone slipped in liquidated damages in order to avoid the discussion?

Mr. Thompson. Well, Congressman, that’s, I'd say, part of it. Senator Javits was a great American and a great Republican Senator, but he was representing his constituents…

Mr. Norwood. I understand he was a great American and I’m just saying when you work after midnight, sometimes problems occur.

Mr. Thompson. His purpose here was to design this collective bargaining system that we still have, and he got that in the act in the middle of the night through some negotiations with some of the other Senators on the Conference Committee, including Senator Kennedy. I’d like if you will give me a second to read something from…

Chairman Hoekstra. You’ll get a chance to read that. I think you’ve answered Mr. Norwood’s question. We’re going to go to Mr. Owens for five minutes.

Mr. Mazur. Can I correct something, Mr. Chairman?

Chairman Hoekstra. I’m sure Mr. Owens is going to give you a chance in his five minutes, maybe not. It’s up to Mr. Owens. Mr. Owens, you’re recognized for five minutes.

Mr. Owens. I would just first like to note, Mr. Chairman, that I would like to join the General from Georgia, Mr. Norwood, in crusading against slipping things in conference reports after midnight. As majority party, you can do a lot to stop that, and a lot of that’s happening lately.

Mr. Norwood. Well, we’ve only been the majority a short time. I’m learning from the past 40 years.

Mr. Owens. You and I will work together. The thing that I approached this hearing with was great anticipation that I’d hear an explanation of why liquidated damages have been given such an aura of criminality; the propaganda which led up to today. Liquidated damages, you know, they made it appear like it’s some kind of mafia operation, and they put emphasis on liquidated, and you think somebody’s being rubbed out.

It’s very interesting how in just few minutes of testimony I heard both Secretary Dunlop and Marshall describing something that is rather routine. I heard something about liquidated damages being penalties and all contracts must have some way of being enforced, so all contracts have some kind of provision for penalizing people who don’t live up to the contract, so this is nothing new. It’s nothing unique. It seems that just because unions are doing it, just as unions began to get involved in politics and suddenly you couldn’t spend the dues for political statements unless you had all the members voting for it, and on and on it goes. Unions are being held to a higher standard or a ridiculous standard, and this is one of those cases.

I heard someone I think, Mr. Mazur, it was you who said liquidated damages help to keep jobs in America.

Mr. Mazur. That’s correct.

Mr. Owens. If that’s true, then we need to have more unions with liquidated damages in their contracts, more types of work, because we are in a battle to save the American way of life. The economic standards are eroding our consumer base by steadily taking the jobs away from the people who spend the money to keep the economy going. I think it’s very proper that liquidated damages were used for your union label campaign, and you need to go back to that, because in the end – and other industries need to do it too – in the end, it’s going to be the American consumers who are going to have to save us from this constant flight to the cheapest labor markets in the world where they take more and more jobs away, and they’re going to destroy the engine of our economy. That’s the consumers. We're not going to have anybody who's making any money to buy the products.

So, my question is, Mr. Mazur, liquidated damages have helped to keep jobs in America. The rate of erosion has been slowed down. You have NAFTA and the World Trade Organization, all that’s come along since. So, if you didn’t have something, you would probably be wiped out completely by now, but should we have more and how can we help other unions and other groups to get the liquidated damages or something similar to that into their clauses so that we don't lose jobs at such a rapid rate?

Mr. Mazur. I think it's important to note, Congressman, that liquidated damages is only one of a number of vehicles that preserve and defend union jobs, and to suggest one that eradicates sweatshops without understanding the presentation made by the two secretaries belies what is really happening. You mentioned NAFTA, there are a number of other areas, I think, that has to be to fight sweatshops; to preserve American jobs. Obviously, we have to have a trade policy that makes sense. You know that our union and millions of dollars from liquidated damages were spent on trying to promote the idea that we want our share our markets with the rest of the world. We’ve never been against imports, never. We said, "Let’s share out markets with the rest of the world on a more equitable basis." How can we compete with workers in Indonesia that are now making $11 a month or in a Mexico on our border where you just walk across the border in the Micuraduras and NAFTA where they're making one-tenth, one-fifteenth of what American workers make? All they’'ve got to do is walk across the border. And we’ve passed those bills three times in both houses of Congress. Republicans and Democrats supported us on those bills, and twice President Reagan vetoed them, once by President Bush. So, then, I think also the question of greater degree of enforcement to responsibility. I think to suggest, as was suggested here, that retailers are not responsible when they act as manufacturers. If it looks like a rose and it smells like a rose, it’s a rose. When you paint it green it doesn’t become a shamrock.

Mr. Owens. Would you let Secretary Marshall clarify his statement on, "All contracts must have remedies for violations?" Give us some other examples of this liquidated damages is just one of…

Mr. Marshall. There are all kinds of ways that you could enforce, of course, by trying to get injunctions in some cases or going to court to enforce a contract or you have an arbitration clause if you’ve got a union agreement, and an arbitrator ordinarily has the power to impose a penalty for violation of the contract. What makes liquidated damages necessary is that it’s hard to identify the specific individual who lost as a result of the process. So, it’s a group decision there.

Mr. Owens. There’s nothing criminal or improper about liquidated damages?

Mr. Marshall. I don’t think so, no.

Mr. Owens. The accountability for liquidated damages? You keep a set of books, and nobody makes a commission, Mr. Mazur? Nobody makes a commission on liquidated damages. Do you keep a set of books of where the money goes? There’s nothing there that’s different from any other set of rules that apply to your accounting?

Mr. Mazur. It’s used for the purpose for which it was intended and that is to defend and preserve the jobs of our members, and we believe very strongly that we’ve done that. If I could take one second in connection with Congressman Norwood. That new fund that’s being established is being established for the Union Health Center which is a separate institution within the union, and that will be administered by the board of the health center which includes non-union officials but not employers. I can give you more information about that as we move forward, but I just wanted to clarify that when you say it’s being run by the union. It will be separated to a large extent from the everyday operation of the union and will not be part of the general funds, and I think there is a separateness that we’re identifying for all the reasons I indicated.

Chairman Hoekstra. Okay. Thank you.

Mr. Norwood. Did the gentleman say will be or is?

Mr. Mazur. Is, I think. Well, it’s now in process. It’s June 1, yes, as of June 1, those monies will be moved there. It is and will continue to be.

Chairman Hoekstra. Mr. Thompson, you wanted to read something.

Mr. Thompson. Yes, Mr. Chairman, there was discussion earlier, Mr. Norwood…

Chairman Hoekstra. Can you pull the mike a little closer, please.

Mr. Thompson. Mr. Norwood asked a question of whether there has been an increase in sweatshops? I went back and looked at the congressional record, the legislative history of Landrum-Griffin, and I found this statement by Senator Javits which in further reflection I found a little bit more on the sweatshop question.

This is Javits speaking, "Mr. President," and he’s speaking in terms of preserving this collective bargaining system, "It is readily felt that the elimination of sweatshops in these two industries is heavily attributable to this method of proceeding to unionization through the fact that there is integrated production process."

And then he put an editorial from the New York Times into the record, which talked about sweatshops and how they had been eliminated. And you asked the question had there been an increase? I understand there’s an exhibit over at the Smithsonian Institute here in town on sweatshops which will be there through October, and one of the points that they make in that exhibit, I understand, is that sweatshops in 1959 virtually were non-existent, and now we have them running rampant. If this proviso was designed to reduce sweatshops, it certainly has not served that purpose. It certainly has worked in the opposite direction.

Could I just add one other point to what Congressman Owens had to say? In my opinion, if you repeal the garment industry proviso, you would make these liquidated damage provisions and practices illegal in and of itself. No other industry I know and no other union I know has that practice in place. So, when you say we were criminalizing it, it would maybe not be criminal, but it would certainly be illegal if you were to eliminate this proviso.

Mr. Owens. What about other remedies?

Mr. Thompson. Beg your pardon?

Mr. Owens. What about remedies in case of violations?

Chairman Hoekstra. The Chair will reclaim his time. The Chair reclaims his time. Thank you.

The extraordinary power with the liquidated damages, and, Mr. Cohen, you talked earlier about this earlier and I don’t think you had a chance to answer. About the Leslie Fay case even though you have negotiated for liquidated damages, you’re doing so because that’s the law, not because you necessarily agree with it, is that correct?

Mr. Cohen. I think the law is unclear and with litigation going on…

Chairman Hoekstra. Can you move the mike a little bit closer?

Mr. Cohen. I’m sorry. I think that it’s unclear under the law whether it’s lawful. There’s litigation that’s ongoing that may clarify it, but the union has certainly taken the position, as you’ve heard today, that it’s lawful. When you are faced with a strike in which the survival of the company is at stake and the union makes as a quid pro quo for settlement of the strike, you have to agree to continue the concept of paying liquidated damages for importing. Then most companies are not in a position to take a strike over that issue. If the garment industry proviso were to be repealed, then companies would not be put in that position, because a union striking for such a clause would be unlawful under 8(e).

If I could just very briefly respond to something that Congressman Owens said, the problem with liquidated damages is not necessarily the concept itself. It’s the concept of who it’s paid to, because there’s a potential conflict of interest. Now, I know Mr. Mazur is a man of integrity, and Mr. Mazur fights very hard for his members, but what if theoretically Mr. Mazur is replaced by somebody who isn’t as honorable as he is and you’re in a position where employees’ rights are being violated and as a settlement for the violation of employees’ rights, money is going to the union. There are no legal restrictions on how the union can use that money? That creates a very dangerous potential conflict of interest. Normally in liquidated damages, the party that receives liquidated damages – I’m not talking about in the labor context – but, say, a typical commercial contract, it’s going to be the party that was hurt. Here, the part that is hurt is not the union. It’s the employees. The money goes to the union. Theoretically, taken to its logical extension, when an employee is fired in violation of the contract, no one would suggest that it would make any sense that the union take the money as a result of the employer’s violation of the contract for firing the employee, but the employee doesn’t get the back pay. The union gets the back pay. That’s a dangerous concept.

Now, in terms of Secretary Marshall’s statement that, yes, it’s very, very difficult when you can’t identify which employees have been hurt. There are ways of rectifying that without paying the money to the union, and that’s why I’m suggesting if you’re going to have such a system, let the money be paid to 302 funds that are subject to Government regulation where you can be sure that the money is being spent in the proper way for the benefit of employees as opposed to leaving it to the discretion of union officials, not because Mr. Mazur is not…

Mr. Owens. Everybody agrees with good bookkeeping and good accountability is what you’re arguing for.

Mr. Cohen. And what law would prevent, as it exists now, if the union wanted to spend liquidated damages on increasing people’s salaries? The answer is there is no law.

Chairman Hoekstra. Thank you. Mr. Kind.

Mr. Kind. Thank you, Mr. Chairman for yielding. I want to thank the witnesses for coming in today. It’s been a very interesting hearing with extremely contrasting views to say the least.

But I am interested in the present and the future. I don’t want to let our distinguished former secretaries off the hook testifying before the subcommittee without asking them that given their knowledge of the industry and their involvement on these issues, what type of recommendations would you make this Congress as far as the type of initiatives or actions that we can take to help and the proliferation of sweatshops in the garment industry, specifically, and just more generally in the country?

Mr. Dunlop. Well, I did not come today to really answer that question. I’ve written a bit about it. It seems to me that a total view of that involves a very large number of elements, which need to be worked out and synthesized in which also you need to gather a wide element of consensus for that.

First of all, there has been this element of voluntary kinds of arrangements among retailers and manufacturers of the union. I should tell you for history purposes that the consumers reestablished in 1899 was designed in part to set and approve and provide a label for work that was performed under non-sweatshop conditions you might say. So, there are voluntary elements, bully-pulpit business. As a rule, I think, to make it effective, it needs very much to be linked with more effective enforcement by itself. I’m happy to have secretaries and with my friends push it, but it needs to be linked much more directly.

I’ve indicated to you earlier this morning that I thought that this hot goods provision needed to be focused more and applied. I won’t take the time, I have a view of my own. I do think that what I would like to see is a Treasury Department requirement that a bar code be attached to every label of a garment showing the hour and place and location at which it was manufactured. Under our modern bar code arrangements, that would immensely enhance the enforcement instead of going into one of these lofts and trying to figure out where the time cards are and who speaks English and all the rest of the problems you would have. I would file that particular bar code with the local office, and they could sample a reasonable share of it. That kind of added element to the enforcement should be an element in this, in my judgment.

My colleague mentioned as well as Major about the New York statute. I have not seen that. It interests me because it comports with what I regard as not some artificial attempt to deal with the problem but dealing what history as indicated, mainly that if you want to control the contractors situation, you’ve got to control the manufacturer. Although I haven’t see it, is what the New York applies. The answer to your question is there needs to be a multiple of these approaches to the problem. I do not think there is any single silver bullet, and the problems are made worse by the sorts of factors I mentioned to you earlier.

Mr. Kind. Thank you, Secretary Dunlop. Secretary Marshall?

Mr. Marshall. Yes, and as usual I endorse all of that, and what I would say is that there are other things that we need to try to induce as much self-regulation as we can. The Dunlop Commission made some recommendations which I still strongly support about how we could strengthen the right of workers to organize and bargain collectively to give them their own enforcement power. We found that were about 25 million workers out there who would like to be union members who are unable to be union members. That’s one possibility.

The other possibility is joint labor management committees in the workplace to oversee the enforcement of Federal labor legislation. Other countries have such mechanisms. I think a lot is to be said for giving great attention to that in the United States, because I go back to my earlier comment and that is that in having been responsible for the enforcement of these laws, there’s no way without a constant presence in an area where you’ve got great temptation for violation that inspectors are going to be able to deal with the problem. When the inspector has gone, they go back to doing what they’ve always done and that means without a presence in the workplace. This is a very different situation. But that’s pretty much what had to be done with mine safety and health is you had to have a lot more inspectors because of the nature of the problem.

I think we need to give some imagination to how they improve the enforcement of labor laws and not to assume that the kind of talk-down approach to regulations will work either; that’s kind of a tailoristic approach to regulations. There’s only one way to deal with a problem in the workplace and that the Government knows what that is, and we’re going to write a regulation to do that. You’re not going to do that, and that doesn’t mean that you don'’ have the enforcement. What I would do is what I tried to do which was to use our inspectors to go after the worst cases and to make examples, so that you would induce regulation that way. If people think they’re never going to get inspected, or if they believe there will be no penalties as under our National Labor Relations Act, the penalties are so minimal that people make the decision that it's cheaper to disobey the law than to obey it.

So, that’s a dangerous situation. It’s not good regulation, and that’s the reason I believe that the law ought to be transparent, fair, and enforceable, and I think they can be. But we need to use some of this modern technology to help enforce the law.

Mr. Kind. Obviously, we’ve touched upon a very big topic here, Mr. Chairman, and with your permission, Secretaries, I’d like to follow up with some further contact with you from our office and explore these possibilities. Thank you, Mr. Chairman.

Chairman Hoekstra. Thank you. I know Mr. Norwood has some more questions.

Mr. Norwood. Mr. Chairman, I’m ready to wind down, though, I’d love the rest of the day to have this discussion. But I have a couple of observations that may or may not be helpful. I’ve noticed behind our witnesses the legal counsels have been pretty busy, and I think it would be a lot easier if you would either swear them in or let them come up and sit up here at the diocese to ask their questions rather than passing the legal pad back and forth. It would make it easier on you guys, and I really don’t mind your questions at all.

Mr. Chairman, I find that we have more agreement here than disagreement as is often the case. We all agree very strongly that we would like to have the garment industry stay in America. I mean, there is no question that I believe everyone here and everyone out there would agree with that. We would like to see that they are paid fair and reasonable wages. But as is often the case, sometimes we disagree on how do we achieve that particular end. And, with that, Mr. Wimberly, I’m going to walk through a couple of things here and see if you can help me just a little bit.

I think it’s accurate to say that following the enactment of the Taft-Hartley and the Landrum-Griffin Acts that the policy of Congress was to take a neutral role in the promotion of unionization. Isn’t that right?

Mr. Wimberly. That’s correct. At the time of the 1935 Act, the policy was to promote unionism, and Taft-Hartley meant to make it neutral with the Federal Government neither favoring nor disfavoring but simply protecting employees’ rights to organize if they choose.

Mr. Norwood. We don’t do that real well in terms of staying neutral, but the law was designed to protect the right of the employees to bargain collectively. While also, I think I’m right in saying that it protects the right of non-union employees to resist unionization if that’s what they choose. Did I say that correctly? Have I got that right?

Mr. Wimberly. Absolutely, they have an equal right to resist unionization if they choose. One of the ways I think, as you know, that Congress struck this important balance was through legislation that banned the use of secondary boycotts. To make Congress’ policy of neutrality seems to me to be seriously violated by what you call top-down organizing techniques.

The violation is sort of this. Under these tactics, the unions thrust itself on employees regardless of whether they want to be in the union or not. In some cases, the workers may not even know that their employer is going to make them join a union. Now, I’m the first to tell you, but this does not seem to be a practice that would be consistent with Congress’ stated objective of neutrality. In contrast, this seems to actually be a one-sided policy for Congress to have implementation through an exemption for only one union. This is an industry that I am greatly interested in but, still, you have to be fair in Congress. Did I perceive this correctly?

Mr. Norwood. You did.

Mr. Wimberly. As a matter of fact, it’s unlawful for an employer to approach a group of non-union employees and direct them or strongly urge them to sign up with the union.

Now, the employer can introduce them to union officials and let the union talk to them, but when the employer asks the employees to sign up with a union, that's considered coercion.

Mr. Norwood. Mr. Chairman, in conclusion, I just want to say that this reminds me a little bit of our Teamsters hearing that we had the other day. It’s not so much that the idea may be wrong. It is a process of not letting the sunshine in. It is perceptions out there of things that may be wrong. For example, three or four bureaucrats meeting on the sixth floor of the Labor Department in a dark room deciding who wins and who loses. Now, maybe they ought to have a Teamsters list for example, but it ought to be an open process. What I hear all six of you saying a little about the assistance fund for the garment workers, and I commend you, Mr. Mazur, the fact that just recently you separated this fund. It would have been better, perhaps, had it been done 20 years or 10 years ago, because what happens is without that fund and maybe even without enforcing 302, the sun can’t shine in.

I don’t think anybody is necessarily saying you shouldn’t have this tool, but it also shouldn’t be allowed to have these people question how that tool is being used. What I would encourage you to do is let’s administer this jointly between the employers and the unions and open this thing up for the world to see. We all want to keep your folks here at work and making a good living. At the same time, we have an obligation to be fair about everything too. At least Congress does, and, Lord knows, we don’t do that, I reckon, too well, but some of use try. With that, Mr. Chairman, believe it or not, I’ll yield back the balance of my time, and thank you for this hearing.

Chairman Hoekstra. Thank you. Any questions on the minority side? Mr. Thomas? Ms. Mink? Oh, Mr. Scott?

Mr. Scott. Thank you, Mr. Chairman. First, Mr. Mazur, a lot has been said about money going into the general fund of your treasury. Is it true that all the money that goes into the general fund of the treasury of your union is benefiting the workers? I mean, what’s the mission of the union anyway?

Mr. Mazur. The mission of the union has worked from its very founding and that is to represent workers and wages, hours, and working conditions. It’s to protect their jobs. Both of our unions had a deeper sense about where we were. We called it social unionism. We went beyond the workplace, beyond the shop floor, beyond the shop.

Mr. Scott. So, that any money that goes into the general fund of the union would generally go to help workers.

Mr. Mazur. Yes, all of the money. Yes, the money that went into the fund went on behalf of the workers.

Mr. Scott. Not on behalf of the worker, the general fund just paid to the union itself, not to any special fund. I mean, if your union receives money, that money has to be put to use to help workers.

Mr. Mazur. That’s correct.

Mr. Scott. Now, you’ve eliminated a lot of the rhetorical issue by having a separate fund for the liquidated damages that you can show where each and every one of those dollars goes. But if it is not in the general fund as it had in the past, that money was being put to the use to help workers.

Mr. Mazur. That’s correct. We believed that then, and I believe it now.

Mr. Scott. But we don’t have the issue now, because you have a separate fund.

Mr. Mazur. That’s correct. Because we wanted more clarity and more identification with it to avoid these kinds of discussions.

Mr. Scott. Secretary Dunlop, you’ve indicated that enforcement of the hot goods legislation would be helpful. What sanctions can be assessed against a repealer or manufacturer caught with hot goods?

Mr. Dunlop. Well, I’m not a lawyer, but the injunction against the manufacturer for conduct carried on by a contractor or, indeed, even a retailer for conduct that has been carried on by a supplier…

Mr. Scott. But without going into detail, there’s enough sanction there to give the retailer and manufacturer enough of a disincentive to deal with people who are producing the hot goods?

Mr. Dunlop. Your use of the word enough is the word that bothers me. My own view is that has not been systematically focused and used. Recently, there have been some cases, and I think the Secretary needs to pursue that.

Mr. Mazur. Where it’s been used let me say, where it’s been used, it’s been very effective.

Mr. Scott. Okay. Mr. Mazur, if you didn’t have this proviso and you were trying to represent your employee and you’re dealing with these groups that are going in and out of business, without this proviso how could you effectively represent the interests of workers?

Mr. Mazur. The simple answer is we couldn’t. It would create official sweatshops and 40,000 workers presently and their families would be without health care, without any benefits, without pension, and without the right to be represented in an industry which has been characterized very aptly this morning by the interrelationship, the symbiotic relationship, between the jobber and the contractor. It would be destructive.

Mr. Scott. And if a business went out of business without paying the last couple of weeks of payroll, letting the health care benefits expire, underpaying minimum wage, what recourse will you have against that manufacturer?

Mr. Mazur. None whatsoever, and in the non-union shops those workers are left high and dry for the most part.

Mr. Scott. And where is the recourse now that you have with the proviso?

Mr. Mazur. Well, under the agreement, the manufacturers sending work to those firms is responsible for the last two weeks of wages of those workers who are not paid or any number of manufacturers. There are many contractors that work for a number of manufacturers, and in those cases, those manufacturers, collectively, are responsible for the payroll. As I indicated earlier, we have collected close to $1 million over the last two years for workers in Chinatown alone, and we were aggressively proceeding in that.

Mr. Scott. Now, you’ve got a chart up here that shows how you can calculate that a reasonable proficient employee can’t possibly be making the minimum wage. Without the proviso, what do you do about it?

Mr. Mazur. Nothing. Without the proviso, those workers have no rights. That’s part of the problem. That’s why there’s a proliferation of sweatshops.

Mr. Scott. If the Federal Government were to try to enforce the minimum wage against the people underpaying the minimum wage and the group just went out of business, what good would enforcement do at that point?

Mr. Mazur. Nothing, absolutely nothing.

Mr. Scott. Mr. Cohen, did you want to comment on that?

Mr. Cohen. In terms of money being used by the union, by definition, it’s going to the benefit of employees. Section 302 of the Labor Management Relations Act was passed by Congress because there were abuses by unions when they received monies from employers, and the purpose of the statute, not only as reflected in the legislative history but in the court decisions is that the statute is prophylactic. There is always a potential for abuse.

It is very dangerous to simply assume that all monies that a union receives will be, by definition, be used for the benefit of its membership, because people disagree about what is going to benefit the membership and what is not. That is why Congress passed 302 to basically outlaw payments by employers to unions except in certain select circumstances. So, what I am suggesting is, if, in fact, these monies are going to be used for the benefit of members. There is already a legislative scheme that has been enacted into law to protect against potential abuses if the money is left completely in the hands of the union, completely discretionary with the union. I would suggest even assuming everything that everyone is saying on that side of the table is true, there is no reason why money should go into the union’s general operating funds or that a unilateral fund be established by the unions. As opposed to a 302 fund where there is no potential for abuse where there is Government regulation of those monies.

Secondly, I believe that it is a myth and I think Mr. Wimberly discussed it in some detail that the only contractors who violate the law are non-union contractors. Also it’s equally a myth that all non-union contractors violate the law. Studies have been done showing that there really isn’t a correlation between the two.

The garment as the proviso may help the union. It doesn’t necessarily help the employees, because there have been many, many cases where unionized contractors violate the Fair Labor Standards Act. There have been many situations where unionized contractors violate the law, and there have been lots of situations where non-union contractors who the union tries to keep out of the market are actually law-abiding companies.

Mr. Scott. And what is the recourse if you don’t have the proviso?

Mr. Cohen. The proviso is irrelevant to the recourse. That is my point.

We must come up with mechanisms for enforcement. The assumption that a union will police the industry has been proven to be false. I am suggesting that there shouldn’t be enforcement but the concept that we have to empower the union, UNITE, formally the IGW and Amalgamated to police the industry and that's going to work has been proven to be false.

Mr. Scott. But without the ability to go against a responsibility party who’s going to be here tomorrow afternoon, they would have no one to talk to.

Mr. Cohen. But that has nothing to do with the garment industry proviso.

Mr. Scott. What does it have to do with the garment industry proviso, Mr. Mazur?

Mr. Mazur. Everything. You know, it would take me a long time to respond to Mr. Cohen. First of all, all our records are open and all the monies that we collect are reported, but the idea that the proviso does not protect those workers, it protects them in every way possible. It protects them in terms of holding – it’s a joint responsibility. I bet that’s the way I can answer it. The courts have recognized it. It’s been recognized by New York State. It’s recognized by the State of New Jersey. The fact of the matter is that we, as indicated earlier, the jobber is headed to the manufacturer. It gives us the opportunity to go in, for instance, and get sometimes it goes beyond two weeks, so we believe that the manufacturer has been remiss and hasn’t paid enough attention. We go to the manufacturer and ask the manufacturer to pay more than two weeks. It has everything to do with the proviso.

Mr. Scott. Mr. Chairman, I think my time is expired. I think the point that we’re making is that the proviso gives the union the opportunity to have somebody to talk to that’s going to be there tomorrow afternoon with some funds.

Mr. Mazur. And workers know where to go.

Mr. Scott. Thank you.

Chairman Hoekstra. Thanks. I understand and I was ready to adjourn. I’m not sure I can adjourn on Mr. Mazur last statement. And then Patsy will probably want to go too.

Let me make a couple of comments. I don’t necessarily see the connection with the proviso. I don’t see a telling case having been made. I think, Mr. Cohen said it well that we’ve given extraordinary power and responsibility to the union to police this.

The last 40 years of history have shown that that has worked. It is a very unique circumstance. My experience in another program, which we are working on – and I don’t know anything about UNITE’s finances – but in the hearings that we have had, I’m glad your spending is open and transparent and everybody can see where it goes. Because you must be doing something beyond what labor laws are requiring because if you plan on going to an LM2 and that is the document that opens up, that’s totally inadequate.

The statement there is that all union dollars are spent for the benefit of its members. We’ve had telling testimony here on another union where that is patently false. Where, at least in that union, the members took their money, and they used it for personal gain. If we would have closure and, they could have been sitting here in front of us saying the same things that you are saying.

I am still very troubled by the problem. I am troubled that in 40 years we have not made progress. We have actually regressed in this area. I am also troubled that we’ve such a diversity of opinion in how to now move forward.

I wish we had a consensus on that. Although it is pretty obvious that we don’t and that is an issue that we will work on and hopefully we can work on a bipartisan way. I have trouble believing that the proviso is as colorful as it says. I don’t see that. I think there are some real potential conflicts of interests between the union and its members and its workers that concern me deeply.

But this is an issue and a problem that we are going to continue working on and that we’re going to sort through. I yield to Ms. Mink.

Ms. Mink. Thank you, Mr. Chairman. I just wanted to end, at least on our side, on an attempt to clarify this notion of a dark room and secret negotiations which led to the incorporation of this language. I think that in following the chairman’s notion that we ought to really approach this whole matter on a bipartisan basis, I wanted to read the congressional record of August 31, 1959 in the Senate.

There was a preliminary intervention by Senator Javits about this very matter. This can be found on page 17381, and the most interesting part, Mr. Chairman, is Mr. Goldwater says, "Mr. President, I want to comment on what my friend from New York has been discussing. We conferees are in a very peculiar position of every one of us agreeing that we do not intend to upset the status quo of the garment or apparel industries. I am one who is probably closest to this situation than anyone except my friend from New York, Mr. Javits. I’ve been engaged in the retail end of this business all my life. I’ve watched what has happened in the garment section of New York and the garment section of Philadelphia, St. Louis, and on the West Coast, and I’ve seen sweatshops disappear. I’ve seen order come out of chaos. I’ve seen unions create profits for businesses which were unable to produce profits, and, Mr. President, none of us want to disturb for one second the status that the garment trade now occupies under the present law. I know full well the very complicated manner in which the complicated industry works, and I can assure my friend from New York that the efforts of Senator Javits and Senator Keating and Senator Scott have been most appreciated by those of us in the conference as we try to develop language to take care of this situation, and I thank my friend for his continued interest in this matter."

So, on that note, Mr. Chairman, if Senator Goldwater and Senator Kennedy can concur on this important issue, I’m sure we can find some common ground. Thank you.

Chairman Hoekstra. And they concurred that they had solved the problem in 1959 and that you and I have seen in New York at which we can agree on that we have problem in 1998.

I’d like to thank the panel for being here. This was a tremendous panel.

Mr. Mazur. Thanks for the opportunity.

Chairman Hoekstra. Very informative, and you were very knowledgeable. I hope we’ve learned a lot from what you’ve told us today.

We do have a responsibility for creating a fair and equitable work environment. Thanks again for being here. If no further business, the hearing is adjourned.

[Whereupon, at 1:24 p.m., the subcommittee adjourned subject to the call of the Chair.]