IBEW members

In Andover, Mass., IBEW members at the defense contractor Raytheon yell at workers crossing the picket line during a strike over job security and benefits.

Making the Feds Model Employers

Obama must put a stop to worker abuse by private contractors.

BY David Moberg

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Unions are pressuring Obama to take early executive action in order to raise the standards and protect the rights of all workers under government contracts.

A little over a year ago, roughly 500 workers assembled and sewed backpacks, safety vests and other gear for the military at the Michael Bianco Inc. factory in New Bedford, Mass. According to U.S. Attorney Michael Sullivan, they worked under “deplorable” conditions in a “typical sweatshop,” except that it was operated entirely with federal contract dollars.

Workers nominally made $7.20 an hour, but they typically earned less after Bianco imposed fines–such as $20 for spending more than two minutes in the restroom (where the company limited the toilet paper), $20 for leaving their work for break before the bell rang, and $20 for talking to other workers.

Most workers had no health insurance and were systematically cheated out of time-and-a-half pay for their extensive overtime. Many had to rely on food stamps and other public assistance programs to survive. The Occupational Safety and Health Administration charged the factory with violating safety standards, such as operating with locked fire exits. Workers also accused the owners of inadequately heating workrooms in the winter and not ventilating them in the summer.

Bianco owner Francesco Insolia was sentenced to prison–for hiring roughly 300 undocumented workers–but the company’s new owner raised wages only modestly and made “cosmetic changes,” according to Steve Wishart of UNITE HERE, which is organizing the workers.

In 2002, the federal government directly employed less than 1.8 million civil servants and at the same time indirectly paid for more than 8 million workers through contracts and grants, according to New York University professor Paul Light.

Tom Woodruff, director of the strategic organizing center of the Change to Win labor federation, says that 1 million of those contract workers earn less than $8.20 an hour, and most of those low-wage workers receive no benefits.

Under contract

Many in the labor movement hope President-elect Obama will take executive action early in his tenure to raise the standards and protect the rights of all workers under government contracts. They argue it’s a matter of common decency and smart economic strategy.

Under Bush, contracting out has skyrocketed–growing by 86 percent from 2000 to 2005, according to a study prepared in 2006 by the minority staff of the House Committee on Government Reform for Rep. Henry Waxman (D-Calif.).

Federal laws–such as the 1931 Davis-Bacon Act (covering construction), the 1936 Walsh-Healey Act and the 1965 Service Contract Act–were designed to make sure that such federal contractors paid at least the prevailing wage. But these laws provide wage standards for only a third of federal contract workers. According to a 2000 Economic Policy Institute study, for many occupations covered by the laws, the prevailing wage standard pays below poverty income. And standards are routinely violated and rarely enforced.

In 2007, the Labor Department investigated 659 contractors, and discovered that 80 percent of them violated the Service Contract Act compliance standards. A Wall Street Journal investigation last March found that 40 percent of service contractors did not provide employees the health insurance or cash equivalent the law requires.

Toward the end of Clinton’s presidency, lawmakers and the administration offered proposals to raise standards, including a federal “living wage” for all government contract workers, modeled on the legislation passed by about 140 cities and other local government jurisdictions across the county. In its final month, the Clinton administration amended federal acquisition regulations that required contractors to have a “satisfactory record of integrity and business ethics.” The new rule specified that they must be in “satisfactory compliance with the law, including tax, labor and employment, environmental, antitrust, and consumer protection laws.” It also prohibited contractors from using public funds to promote or deter unionization.

But business groups filed suit, and the Bush administration quickly killed the new requirements.

The high road

While Bush blocked progress at the federal level, at the state and local level, labor and community groups around the country pushed through living wage ordinances, conditions on employment when public money subsidized projects, and sweat-free procurer laws. In many cases, governments set conditions that favored unionization–from prohibiting use of public funds for anti-union activity to favoring contractors who were more likely to guarantee labor peace.

But courts have frequently ruled that federal labor law pre-empts state and local action on many labor regulations. As a result, courts have restricted the scope of non-federal efforts to raise labor standards by encouraging collective bargaining.

At the federal level, President Bush headed in the opposite direction. For example, labor unions in recent years have promoted passage of the Employee Free Choice Act (EFCA), which would penalize employers for unfair labor practices when workers try to organize; recognize workers’ choice of a union when a majority sign membership authorization cards; and provide arbitration of contracts when employers balk at bargaining.

But early in the fall, Bush was preparing to issue an executive order barring any federal contractor from agreeing to union recognition with a majority card check.

Now Change to Win and other union leaders are talking with the Obama transition team about what the new administration could do. Obama has said he supports EFCA, and last summer he wrote a letter supporting organizing efforts by workers at Puerto Rican military supply contractors. So far, union leaders say the transition team seems open to action, but the unions are only asking for relatively limited, if important, changes.

Joseph Geevarghese, Change to Win deputy director of strategic organizing, says the federation is not seeking a broad mandate, covering all contract workers, but “trying to be more surgical in focusing on contracts.”

That could mean targeting new standards to the 25,000 to 30,000 employees of military needle trades suppliers, who are required to be located on U.S. territory. Or it could include other work groups–such as private security guards, hotel workers for private concessionaires in national parks, cafeteria workers or janitors.

“The fundamental challenge at the end of the day is whether President Obama could issue an executive order that says he believes in following the high road, not the low road, for federal contracts,” Geevarghese says. While raising wage and benefit standards might not help unions organize, such action would reduce the downward competitive pressure on unionized employers.

“The economy has been going backwards for workers for 30 years,” says Woodruff. “A big part of getting the economy going is wage growth. … The government’s ability to influence the private sector is huge if it chooses to be a model employer.” In total, companies with private contracts employ a total of 30 million workers.

Woodruff argues that forcing the government contracting divisions to pursue a high road could spill over to the rest of the economy as well.

“The purpose would be to do as much as possible to pay decent wages and benefits, and not interfere with workers’ right to organize,” he says, “They can use the huge footprint of the federal government to get us out of our economic mess in the short term, but it’s also important in the long term.”

UNITE HERE’s Wishart says any new standards should provide for a living wage–not just a prevailing wage. And he wants employer neutrality during organizing, so as to “to make the right to organize a reality”

Laphonza Butler, director of SEIU’s property services division, would like for there to be “some transparency to the system. Right now, there’s no way to tell how many workers there are or where they work.”

Although SEIU has not decided what mandate it would seek for federal security guard contracts, Butler says the union advocates “first, economic security and, second, to provide adequate training. And if that means they have to be in a union, that’s our third priority. Our federal government should be a provider of good jobs.”

The public agrees. In a September survey for Change to Win by Peter D. Hart Research Associates, 86 percent of voters said “companies that consistently violate labor laws should be prevented from receiving federal contracts.” And 71 percent say contracts should be given only to companies that offer good jobs and treat workers fairly. Two-thirds of surveyed voters believed that the president should act change policy to mandate good jobs.

Making the federal government a model employer – directly and indirectly through its contracts–would be a winner morally, economically and politically. To become that model employer, Obama could buttress his stimulus plan and send a message to workers and private businesses with a simple executive decision.


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David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy. He can be reached at davidmoberg@inthesetimes.com.

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