United States v. Bethlehem Steel Corporation Brief of the NAACP Legal Defense and Educational Fund as Amicus Curiae in Exception to "Recommended Findings and Proposed Decision" of Panel

    UNITED STATES OF AMERICA 
DEPARTMENT OF LABOR 

OFFICE OF FEDERAL CONTRACT COMPLIANCE 
OFCC DOCKET NO. 102-68 
EXECUTIVE ORDER 11246

In the Matter of 
BETHLEHEM STEEL CORPORATION, 

Respondent.

BRIEF OF THE NAACP LEGAL DEFENSE AND 
EDUCATIONAL FUND, INC., AS AMICUS CURIAE 
IN EXCEPTION TO "RECOMMENDED FINDINGS AND PROPOSED DECISION" OF PANEL

JACK GREENBERG 
JAMES M. NABRIT, III NORMAN C. AMAKER 
WILLIAM L. ROBINSON

PAUL J. SPIEGELMAN
1301 Delaware Avenue, S.W. 
Washington, D.C. 20024

10 Columbus Circle Suite 2030
New York, N. Y. 10019

GERALD A. SMITH
Suite 1500 American Building Baltimore & South Streets 
Baltimore, Maryland 21201

Attorneys for NAACP Legal Defense 
Educational Fund, Inc. as Amicus CuriaeOf Counsel



INDEX

Page

AMICUS BRIEF IN EXCEPTION TO "RECOMMENDED
FINDINGS AND PROPOSED DECISION" OF PANEL---------------  1

FACTS OF DISCRIMINATION-----------------------------------  10
A. Evidence of Blatant Discrimination---------------  10
B. Present Effects of Past Discrimination-----------  11

ARGUMENT
I. THE HEARING AFFORDED BETHLEHEM ONLY 

CONCERNS THE ISSUE OF WHETHER OR NOT 
BETHLEHEM WAS IN COMPLIANCE WITH ITS
CONTRACTUAL OBLIGATIONS--------------------------  15

II. UNDER ANY THEORY OF THE CASE, BETHLEHEM'S 
DISCRIMINATORY PRACTICES, COUPLED WITH ITS 
ADAMANT REFUSAL TO CONCILIATE REQUIRE THE 
DEBARMENT REMEDY---------------------------------  21
A. The Constitution Requires that Bethlehem

Be Debarred-------------------------------  21
B. Proper Interpretation of Executive Order

11246 Requires That Bethlehem be
Debarred----------------------------------  2 3

C. Even Assuming That It Was Appropriate for 
Panel to Conduct a Trial-type Hearing on 
All Issues, the Record Requires That
Bethlehem Be Debarred------------------------  2 7
1. A Proper Interpretation of the BusinessNecessity Defense Requires Debarment-----  27
2. Even Under Panel's Interpretation of 

Business Necessity the Evidence Failed
to Establish This Defense----------------  35

D. Even if the Business Necessity Test Is
Established, Bethlehem's Failure or 
Refusal to Comply with OFCC Guidelines 
Violated Its Affirmative Action Obliga­
tions----------------------------------------  28

i



Page
III. THE REMEDY RECOMMENDED BY BETHLEHEM AND 

BY THE PANEL VIOLATES EXECUTIVE ORDER
11246---------------   41

IV. THE POSITIONS TAKEN BY THE DEPARTMENT OF JUSTICE, THE SOLICITOR OF LABOR, AND THE 
OFCC ARE BINDING ON THE SECRETARY OF LABOR
AND REQUIRE THAT BETHLEHEM BE DEBARRED------  44

CONCLUSION-----------------------------------------------  46

l i



UNITED STATES OF AMERICA
DEPARTMENT OF LABOR 

OFFICE OF FEDERAL CONTRACT COMPLIANCE 
OFCC DOCKET NO. 102-68 
EXECUTIVE ORDER 11246

In the Matter of 
BETHLEHEM STEEL CORPORATION

Respondent.

AMICUS BRIEF IN EXCEPTION TO "RECOMMENDED 
FINDINGS AND PROPOSED DECISION" OF PANEL

This is an amicus brief in exception to the "Recommended 
Findings and Proposed Decision of Panel" in debarment proceed­
ings initiated on May 23, 1968 by the Labor Department's Office 
of Federal Contract Compliance (OFCC) against Bethlehem Steel 
Corporation for its adamant refusal to comply with the equal 
employment opoortunity practices required of all contractors



who do business with the federal government. It is submitted 
in accordance with your invitation to do so contained in your 
letter of December 18e 1970.

We vigorously except to the proposed decision of the 
Panel's two-to-one majority, which, after agreeing with the 
overwhelming evidence of blatant and consistent racial dis­
crimination on the part of Bethlehem continuing over a period 
of many years, then goes on to do mental handsprings in order 
to arrive at its recommendation that you place the full weight 
of your authority as Secretary of Labor in support of 
Behtlehem's discriminatory policies. We submit that the panel's 
recommendations in this regard are in direct conflict with 
the applicable legal decisions governing the matters at issue,
the findings made by the dissenting member of the panel, the

1_/position on these issues taken by the Attorney General, and the 
manifest weight of the evidence presented to the panel. We 
further except to the Panel's unsupportable assertion that - 
Bethlehem —  a company whose discriminatory policies have 
already been publicly exposed in litigation in the United

2_/States District Court for the Western District of New York;

1 / See United States v. Bethlehem Steel c o m (Lackawanna 
Plant) 312 F.Supp. 977 (W.D. N.Y. 1970) Appeal noticed.
No. 35183 (2nd Cir. June 12, 1970).
2 / Ibid

2



whose very practices in this case are being attacked by the 
Attorney General as violative of Title VII of the Civil Riqhts

3_/Act of 1964; who has conceded in these proceedings that it did, 
as matter of company housing policy, discriminate against 
blacks on the basis of race; and whose contentions, dilatory 
and unproductive conduct in these proceedings are evidence of 
its intention to continue discriminating until forced to stop, 
rather than the willingness to take the "affirmative action" 
to prevent discrimination required by law —  "is not . . .  a 
company which is presently engaged in patterns of blatant dis­
crimination or which attempts to justify such patterns." Panel 
Report p. 13 H32. We further except to any implication either 
in the appointment of a panel of professional arbitrators for 
these proceedings by the Secretary of Labor under the previous 
administration or in the mediation efforts conducted under the 
supervision of this panel, that the Secretary of Labor wishes 
to undermine the authority conferred on him by Executive Order 
11246 and delegated by him to the Director of the Office of 
Federal Contract Compliance to enforce equal employment 
opportunity in government contracts; the notion that law en­
forcement officials of the United States Government should be 
forced to mediate with recalcitrant violators seem to us 
absurd and unconstitutional.

3 / The District Court in the Lackawanna case agreed that 
Bethlehem was discriminating by use of its unit seniority system. 
The relief granted by the court was more limited than requested 
by the Attorney General and he is therefore now appealing.

3



whose very practices in this case are being attacked by the 
Attorney General as violative of Title VII of the Civil Riqhts

3_yAct of 1964; who has conceded in these proceedings that it did, 
as matter of company housing policy, discriminate against 
blacks on the basis of race; and whose contentions, dilatory 
and unproductive conduct in these proceedings are evidence of 
its intention to continue discriminating until forced to stop, 
rather than the willingness to take the "affirmative action" 
to prevent discrimination required by law —  "is not . . .  a 
company which is presently engaged in patterns of blatant dis­
crimination or which attempts to justify such patterns." Panel 
Report p. 13 H32. We further except to any implication either 
in the appointment of a panel of professional arbitrators for 
these proceedings by the Secretary of Labor under the previous 
administration or in the mediation efforts conducted under the 
supervision of this panel, that the Secretary of Labor wishes 
to undermine the authority conferred on him by Executive Order 
11246 and delegated by him to the Director of the Office of 
Federal Contract Compliance to enforce equal employment 
opportunity in government contracts; the notion that law en­
forcement officials of the United States Government should be 
forced to mediate with recalcitrant violators seem to us 
absurd and unconstitutional.

3 / The District Court in the Lackawanna case agreed that 
Bethlehem was discriminating by use of its unit seniority system. 
The relief granted by the court was more limited than requested 
by the Attorney General and he is therefore now appealing.

3



Mr. Secretary, as amicus curiae, we wish to advise you 
of our conviction that your action on this case has the most 
far-reaching implications for the whole future and credibility 
of federal contract compliance efforts. A decision to adopt 
the unsupportable recommendations of the panel would be in­
defensible on the facts of this case and a clear signal to 
every federal contractor that, as far as the Secretary of Labor 
is concerned, such contractors can engage in discriminatory 
practices so long as they defend their illegal practices with 
sufficient vigor (through no legal justification). Moreover, 
failure to accept both the authoritative weight of the position 
taken by the Office of Federal Contract Compliance and to re­
affirm the authority of the Director of OFCC in compliance 
matters would destroy his credibility and thereby hamstring 
OFCC efforts to enforce the law.

For the reasons set forth more fully below, we respectfully 
urge you to reject the recommendations of the panel majority, 
and adopt those of the OFCC, the agency with the responsibility 
for and expertise in enforcement of equal opportunity com­
pliance by federal contractors.

History of Proceedings
At the outset it should be understood that the fact 

formal proceedings were necessary at all in this case results

4



Mr. Secretary, as amicus curiae. we wish to advise you 
of our conviction that your action on this case has the most 
far-reaching implications for the whole future and credibility 
of federal contract compliance efforts. A decision to adopt 
the unsupportable recommendations of the panel would be in­
defensible on the facts of this case and a clear signal to 
every federal contractor that, as far as the Secretary of Labor 
is concerned, such contractors can engage in discriminatory 
practices so long as they defend their illegal practices with 
sufficient vigor (through no legal justification). Moreover, 
failure to accept both the authoritative weight of the position 
taken by the Office of Federal Contract Compliance and to re­
affirm the authority of the Director of OFCC in compliance 
matters would destroy his credibility and thereby hamstring 
OFCC efforts to enforce the law.

For the reasons set forth more fully below, we respectfully 
urge you to reject the recommendations of the panel majority, 
and adopt those of the OFCC, the agency with the responsibility 
for and expertise in enforcement of equal opportunity com­
pliance by federal contractors.

History of Proceedings
At the outset it should be understood that the fact 

formal proceedings were necessary at all in this case results

4



from the refusal by Bethlehem to agree to follow those practices 
which OFCC has deemed minimal acceptable standards of equal 
employment opportunity. Having become informed of Bethlehem's 
discriminatory practices, on May 29, 1967, the OFCC notified 
Bethlehem that it was in violation of its contractual agree­
ment under the equal opportunity clause of its contracts with

±Jthe government. This was the first step in the tortuous pro­
cess of attempting to get Bethlehem to live up to its agree­
ments with the government; nearly four years have passed since 
this initial step and Bethlehem has still refused to meet its 
obligations under the equal opportunity clause of its govern­
ment contracts.

After a full investigation of Bethlehem's operations at 
its Sparrows Point facilities, OFCC uncovered the following 
discriminatory practices on the part of Bethlehem:

4 / This clause, required by Executive Order 11246 to be included in all government contracts, provides as follows:
"The contractor will not discriminate against any 
employee or applicant for employment because of 
race, color, religion, sex, or national origin."

Executive Order 11246 also requires inclusion of an affirmative action clause:
"The contractor will take affirmative action to ensure that 
applicants are employed, and that employees are treated during employment, without regard to their race, color, 
religion, sex, or national origin. Such action shall 
include, but not be limited to the following: employ­
ment, upgrading, demotion, or transfer; recruitment or 
recruitment advertising; layoff or termination; rates 
of pay or other forms of compensation; and selection 
for training, including apprenticeship."

5



(1) excluding Negroes from administrative 
and executive positions and super­
visory positions above the first line;

(2) discriminating in the selection of 
first-line supervisors and limiting Negro supervisors to racially segre­
gated units, and failing to take affirm­
ative action to cure the effects of dis­
criminatory practices in selection and 
assignment of supervisors;

(3) assigning Negroes on a racially dis­criminatory basis to those departments, 
units and jobs in which the working con­
ditions are the least desirable, the pay
is lowest, and the opportunity for advance­
ment is smallest, and continuing to limit 
the transfer opportunities of Negro em­
ployees from these segregated departments 
and units, failing to take affirmative 
action to cure the effects of discrimina­
tory assignment practices;

(4) requiring Negro workers to meet higher 
standards for placement in certain depart­
ments, units and jobs than incumbent white 
employees were required to meet;

(5) failing to take necessary affirmative 
action to cure the effects of previous 
discriminatory practices in the operation 
of training programs; and

(6) failing to take necessary affirmative 
action to cure the effects of previous discriminatory hiring practices in regard 
to clerical, professional, technical and 
other white collar employees.^'

5 / Letter of 5/16/68 from Edward C* Sylvester, Jr., Director 
of OFCG,to Stewart S. Cort, President of Bethlehem Steel Corp.
In addition, Bethlehem was later charged with discrimination in 
housing. In negotiations with OFCC, Bethlehem conceded that its company housing was segregated on the basis of race and agreed 
to OFCC requirements that affirmative steps to desegregate 
be taken.

6



OFCC attempted to assist Bethlehem and gain voluntary 
compliance in conciliation meetings with the Company repre­
sentatives on February 12-14, 1968, March 7, 1968, April 24-25, 
1968, and May 7, 1968, but Bethlehem refused to satisfy the 
OFCC that it would comply with its equal employment opportunity 
obligation with respect to any of these six issues. Accordingly, 
on May 16, 1968, the Director of OFCC informed Bethlehem of 
his intention to terminate all existing government contracts 
with Bethlehem and to recommend that the Department of Justice 
take appropriate action to enforce the company's contractual 
obligations. As was its right under the applicable regulations, 
Bethlehem requested a hearing on the charges. The Acting 
Director of OFCC then, on August 2, 1968, served Bethlehem 
with a formal "Notice of Hearing" which (1) set forth the 
specific charges against Bethlehem; (2) announced that a panel 
consisting of Messrs. Hanley (chairman). Bailer and Seitz, 
had been appointed by the Secretary of Labor to hear and 
determine the charges against Bethlehem and to recommend to 
the Director what action he should take with respect to con­
tracts with Bethlehem; and (3) include as an attachment "Rules

6_/ These were essentially the same as those described
in footnote 5 and accompanying text.

7



of Procedure" for the proceeding. In accordance with these 
procedures, Bethlehem filed an answer on August 26, 1968 
denying all charges of discrimination and setting forth twenty- 
five "affirmative defenses" to the charges. Then, reacting with 
Pavlovian predictibility, at the sound of the bell opening the 
litigation, counsel for Bethlehem spewed forth a barrage of 
verbiage in the form of motions and memoranda whose purpose 
and effect were described by the government in its motion to 
cite Bethlehem for contempt as "dilatory tactics" and "con­
tinuing efforts to obstruct the orderly and timely presentation" 
of the case to the panel. These efforts were successful in 
delaying the start of hearings on the merits from the scheduled 
date of September 9, 1968 to October 21, 1968. After three 
days of hearings in October 1968, the panel adjourned for four 
months; resumed hearings again in February 1968 for five days; 
scheduled additional hearings for April 1968, but then postponed 
these hearings until November 1969 when they were finally con­
cluded so that the panel chairman could "mediate" the dispute.
The panel gave the parties until February 16, 1970 to file pro­
posed findings of fact and conclusions of law and not until 
December 18, 1979, over three and one-half years after the 
original action taken on these matters by OFCC and almost two 
and one-half years after the panel was appointed, were the panel's 
"Recommended Findings" forwarded to the Secreatry of Labor.
In its findings, the Panel unanimously concluded that Bethlehem

8



was guilty of racial discrimination and that the unit seniority 
system to which Bethlehem and the United Steel Workers had 
agreed and which was currently in force at the Sparrows Point 
plant perpetuated the effects of this past discrimination. 
Despite the fact that there was overwhelming evidence in the 
record of segregation and discrimination against blacks on the 
part of Bethlehem (including a stipulation by Bethlehem whose 
necessary implication was that Bethlehem had maintained 
segregated company-owned housing), the panel's two-to-one 
majority viewed Bethlehem as "not a company which is presently 
engaged in patterns of blatant discrimination" —  apparently 
agreeing with Bethlehem that lily white means angel pure.

In any case, based on the general assertions of em­
ployee-witnesses for Bethlehem and the United Steel Workers 
Union (which had been allowed to intervene in the proceeding) 
that the remedies requested by the government —  abolition 
of unit seniority in favor of prospective plant-wide seniority 
and rate retention for victims of prior discrimination if they 
chose to transfer —  would adversely affect (white) employee 
morale and undermine the equal-pay-for-equal-work "cornerstone 
of labor-management bargaining in the steel industry, the two- 
to-one majority found that application of these remedies was in 
its view "unworkable" in the circumstances of this case. This 
latter conclusion was reached by disregarding the OFCC position 
which the panel recognized had "a substantial basis in judicial

9



precedent and reason" and which "plainly [fell] within the 
scope of . . . its authority," the cogent views of the dissenting
panel member; and the testimony of Dr. Richard Rowan, a 
nationally recognized expert in minority employment in the 
steel industry, that the plan was in fact workable.

FACTS OF DISCRIMINATION
A . Evidence of Blatant Discrimination

The panel unanimously found that Bethlehem followed 
“a predetermined hiring and assignment practice of placing 
Negroes, because of race, into inferior jobs and units and of 
excluding them from jobs, units, and employment opportunities 
which were reserved for white employees only." (Panel Report 
p. 42 1155) . This conclusion was based on overwhelming 
statistical and testimonial proof, uncontradicted by Bethlehem;
thus there can be no arguing with the Panel's finding in this

7 / .regard. The proof supporting its conclusion consists of
statistical evidence which established that 'a total of 6,436
Negro blue collar workers out of 7,864 Negro workers, or 81%
were assigned to all-Negro or predominantly Negro departments
and units; and of 12,602 white employees, 8,385 or 66% were

7 /  This evidence is summarized in the Panel's Report at 
pp. 40 to 43 and more fully in the Government's Proposed: 
Findings of Fact and Conclusions of Law at pp. 40 to 82.

10



assigned to all-white or predominantly white departments and 
units where only 831 or 10% of the Negroes were assigned."
(Panel Report.p. 40-41 H51). The average job class for black 
employees was 5.47 while the average job class of whites was 
9.62; the pay of the average black employee ranged from 13% 
to 20% less chan the average white, depending on length of 
service. (See Gov't. Proposed Findings at pp„ 47-54).

This statistical evidence was buttressed by testimonial 
evidence of the shocking practices followed as a matter of 
course by Bethlehem. Testimony in the record established 
that, in addition to hiring and assinging on the basis of race, 
Bethlehem segregated its company-owned housing, segregated its 
locker rooms, lied to black employees seeking information on 
transfer and employed personnel supervisors who referred to 
blacks as "Niggers". All of this testimony was uncontradicted 
by Bethlehem which never at any time sought to give any 
explanation for its blatantly discriminatory conduct of business.

B . Present Effects of Past Discrimination
The panel has unanimously found that the effect of the 

pattern of exploitation, humiliation, and degradation of 
Bethlehem's black workers has been the segregation of black 
workers into the hottest, dirtiest,lowest paying, and generally 
least desirable jobs at Bethlehem's plants (Panel Report 
p. 42 H55). It also recognized that the unit seniority system

11



currently in use by Bethlehem is the principal mechanism by 
which the prior discriminatory segregation of blacks into 
the worst, lowest paying jobs is perpetuated (Panel Report 
at p. 42 559-61). Under the unit seniority system,promotion, 
demotion, and lay-off are decided primarily upon the basis 
of length of service in a particular job category rather than 
length of service in the plant. On its face, such a system 
does not appear discriminatory on the basis of race, but 
when it is realized that the job categories were, in effect, 
divided up into black jobs and white jobs, it becomes clear 
that, as the Panel unanimously found, the unit seniority 
system operates to maintain segregated, discriminatory job 
assignments because a black entering the plant could advance 
only up a black ladder of progression and a white could only 
advance up a white ladder. So long as original job assign­
ments remain discriminatory, the unit seniority serves to lock 
blacks into inferior job opportunities by placing them on 
ladders of progression which never seem to rise out of the 
coke ovens. Because of its so-called "Affirmative Action" 
program and the Conciliation Agreement entered into by 
Bethlehem, the Company's position was that by no longer dis­
criminating in original assignment, it was no longer dis­
criminating at all. Even the panel recognized this argument 
for the nonsense it is. All of the people who were dis-

12



criminated against in past assignments and have advanced up 
black ladders of progression are locked into these positions 
by the operation of the unit seniority system.

In order to illustrate the operation of this system, 
let us take the example of a black who entered Bethlehem's 
Sparrow's Point plant ten years ago and was, solely because 
of his race assigned to a menial, low-paying job near the coke 
ovens and who, by dint of ten years of conscientious work has 
managed to advance to a less menial, higher paying job near 
the coke ovens. He must, if he wishes to get off his dead-end 
job, give up the benefits which he has accrued over ten years 
of continuous service and begin at the very bottom of a pro­
gression ladder which admittedly leads eventually to a higher 
horizon, or at least out of the coke ovens. In other works, 
in order to gain entry to a jcb with full employment opportunity 
one which he has been denied for the past ten years solely 
because of his race —  he must now give up the raises in pay, 
the promotion and demotion rights, and the job security which 
he has earned because of ten years continuous service and 
begin again as if this were the first day he had ever walked

8Vinto the plant. It is authoritatively settled by case law

8 / At least with respect to pay, pormotion, and bumpoff; 
his bump-back rights make his position slightly better than 
a brand-new employee.

13



and accepted by the panel that to place such barriers in the 
way of the victim of past discrimination constitutes dis­
crimination which violates both Title VII of the Civil Rights 
Act of 1964 and the equal employment opportunity clause entered
into by Bethlehem (as well as all other contractors with the

_9/
government) pursuant to Executive Order 11246. In short  ̂^  

perpetuating past discrimination is present discrimination.
In order to remedy this discriminatory evil, the OFCC 

took the position, both in attempting to gain voluntary com­
pliance from Bethlehem and before the panel, that the equal 
opportunity and affirmative action clauses of Bethlehem's 
contract with the government required the Company to remove 
the discriminatory barriers by allowing the victims of past 
discrimination:

(1) to compete for future job openings on 
the basis of their length of service 
in the plant;

(2) to transfer to future job openings at 
the bottom of the formerly white seniority ladders without having to 
give up the pay raises they have earned 
for the years they have been employed.

9 / bocal 189. United Papermakers and Paper Workers v. 
United States, 416 F.2d 980 (5th Cir. 1969) cert denied.
397 U.S. 919 (1970). (The Crown Zellerbach case
10/ Ibid. See generally authorities cited at note 23, infra

14



In setting out these guideline requirements, OFCC has left 
unimpaired the right of Bethlehem to set reasonable non- 
discriminatory job qualifications on the basis of which the
Company can^deny promotion to anyone who lacks the ability to 
to the job.

ARGUMENT 
I .

THE HEARING AFFORDED BETHLEHEM ONLY CONCERNS THE ISSUE OF WHETHER OR NOT 
BETHLEHEM WAS IN COMPLIANCE WITH ITS CONTRACTUAL OBLIGATIONS_____________

In the appointment of a panel of arbitrators to hear 
OFCC1s case against Bethlehem and in the panel's attempt to 
mediate between the position of the parties, serious in­
cursions were made on the authority of the Director of OFCC, 
debilitating the effectiveness of the enforcement efforts 
under Executive Order 11246. Implicit in these two actions 
is the unacceptable notion that it is proper procedure for a 
federal official charged with responsibility to enforce federal 
law (in this case E.O. 11246) to yield the authority and 
responsibility conferred on him to a panel of arbitrators or 
mediators merely because a flagrant violator is recalcitrant.

11/ This is, we contend, all that the business necessi 
defense requires or the case law allows. See Section liety

15



The Notice of Hearing issued by the.Acting Director of OFCC
dealt in part with the dangers of such a precedent by requiring
that the recommendations of the panel be made "to the

12/
Director." Apparently because no regulations precisely de­
fining the authority of the Director of OFCC had then been 
issued and because the Director had personally participated 
in the attempts to gain compliance, former Secretary of Labor 
Wirtz decided that the Secretary, personally, should be the 
decision-making authority in the Bethlehem case.

It is important that the implications of this history 
be understood by the present Secretary in reviewing this case: 
the Secretary sits in this case as a super-Director of OFCC —  
the federal official primarily responsible for equal employment 
opportunity compliance efforts for the entire United States 
Government. As such, he has all the responsibility and duties
which he has now delegated to the Director of OFCC under §60-1.2

13/of the OFCC Rules and Regulations.

12/ The "Rules of Procedure" attached to the notice required the Panel to certify its recommended findings and proposed 
decision to the Secretary of Labor (§14); allowed any party to file a brief with the Secretary (§15); and called for a 
final decision by "The Secretary or his designated repre- sentative." We contend that this designated representative should have been the Director of OFCC.
13/ 41 C.F.R. §60-1.2 (1970); at the time these proceedingswere begun, the Secretary had already delegated this authority 
to the Director. Order of Secretary, 31 Fed. Reg. 692 (May 10, 1966).

16



Proper recognition of this role is of great significance
in the resolution of this and other cases arising under
Executive Order 11246. First a proper understanding of his
role includes the precepts that the Secretary's discretion is
narrowly limited by the requirements of Executive Order 11246
and that in reviewing the recommendations of the Panel he sits
not as mediator between two conflicting sides, but as the final
authority within the executive branch on what constitutes 14/
compliance.

A necessary corollary of this reasoning is that much
of what the Panel had done is irrelevant to the decision to
be made by the Secretary because the Panel's recommendations
with respect to the remedy to be applied to correct undeniably
discriminatory practices was based on its erroneous mediating
approach. As stated above, this approach accepts the un-

15/
workable (and probably unconstitutional) practice of requiring 
the compromise of equal employment standards mandated by 
Executive Order, Congressional Act, and constitutional principles 
of equal protection of laws.

14/ J. Jones, Federal Contract Compliance in Phase II -- 
The Dawning of the Age of Enforcement of Equal Employment Obligation, 4 Geo. L. Rev. 756 ("mediation and conciliation 
were not intended to be part of the [hearing examiner's] 
mandate")
15/ See Section II A infra.

17



The proper approach for the Secretary to take in this
case, and which should have been taken by the Panel, is to
review the facts presented to the Panel fco determine whether
the OFCC's determination of noncompliance is supported by
substantial evidence. Once it is determined, that there is
substantial evidence to support OFCC's determination, it is
our position that the hearing requirements of applicable

16/regulations are satisfied. The only remaining limitations 
on the Director's (or in this case the Secretary's) power 
to impose the authorized sanctions of termination, con- 
cellation, and debarment are those which customarily govern 
discretionary administrative action -- that the action taken 
be reasonable, that is, not arbitrary or capricious. Indeed, 
the Panel recognized that its authority was limited in the way 
we have suggested when it stated that "it serves no useful 
purpose in this report to distinguish and compare cases . 
[because] the principles embodied in the OFCC's . . . [proposed

16/ See Crown Zellerbach Corp. v. United States, 281 F.Supp. 
337 (D.D.C. 1968) ("Evidentiary hearing required by Executive
Order 11246); A. Blumrosen, The Newport News Agreement —  One 
Brief Shining Moment in the Enforcement of Equal Employment 
Opportunity, 1968 111. L. F. 169, 198 ("the hearing" require­
ment contemplated under [Executive Order 11246] . . .  need
not be a trial-type adversary proceeding. The order may 
mean no more than a requirement that contractors be afforded 
a full opportunity to present evidence and argument")
J. Jones, supra n. 14, at 765 ("proof of failure to comply with contractual obligations . . .  is the predominant issue 
in contract compliance.")

18



remedy] have a substantial basis in judicial procedent and 
reason, and plainly fall within the scope of authority and 
responsibility which we conferred upon the OFCC." (Panel 
Report, p. 38 H47). In essence, our position is that these 
findings by the Panel concerning the OFCC position are more 
than is necessary to uphold the OFCC position.

Summarizing our argument with respect to the nature 
of the hearing, we contend that the scheme of enforcement 
established by Executive Order 11246 requires the Secretary 
to review the Panel's report subject to the following 
limitations:

(1) His role (and the proper role of the panel 
is to determine whether there is substantial 
evidence to support the charge of non- 
compliance and whether the remedy proposed 
by OFCC is arbitrary or capricious.

(2) If there is such substantial evidence and 
the remedy is not arbitrary or capricious, 
the Secretary must give conclusive weight 
to the judgment of the OFCC —  the agency with the responsibility for the expertise 
in equal employment opportunity enforcement.

We submit that the scope of review of the OFCC 
action suggested above is the only one which is consonant 
with the scheme of enforcement set up by Executive Order 
11246 and now implemented by the Rules and Regulations

19



17/
of the Office of Federal Contract Compliance. Had this 
approach been followed by the Panel, the hearings in this case 
could have been kept to a manageable length. To usurp the 
authority conferred on the Director by §60-1.24 (c) (3) of the 
regulations and leave to the Panel the issue of appropriate 
remedy not only undermines the credibility of the Director of 
OFCC in his efforts to gain voluntary compliance, but also 
invites the dilatory, unproductive kind of proceedings which 
were followed in this case. Indeed, quite apart from equal 
employment policy considerations, it makes little practical 
sense to engage in trial type proceedings when deciding the 
subtle questions of remedy. As the Panel noted, the adversary

17/ see generally 41 CFR §60-1 et seq. And in particular 
§60-1.24 (c) (3) which provides that:

"If the final decision rendered in accordance 
with [the hearing requirement]. . .  of §60-1.26 
is that a violation of the equal opportunity
clause has taken place, the Director may cause 
the cancellation, termination or suspension of any contract. . . cause a contractor to be de­
barred from further contracts or may impose such 
other sanctions as are authorized."

Although it is understaood that the effective date of these 
regulations is after the initiation of hearings in this case, 
we believe that even if these regulations are not binding 
on the Secretary in this case, they do shed light on the 
question of his proper role and thereby make easier to interpret the then applicable regulations (temporarily con­
tinued from the President's Committee on Equal Employment 
Opportunity, 30 Fed. Reg. 13441 (Oct. 22, 1965))which merely 
provide that "Hearings shall be informally conducted."
41 CFR §60-1.27 (Revised as of January 1, 1968).

20



nature of such hearings tends to harden positions and prevent 
OFCC from gaining a satisfactory resolution from the offending 
party.

II.
UNDER ANY THEORY OF THE CASE, BEHTLEHEM'S 
DISCRIMINATORY PRACTICES, COUPLED WITH 
ITS ADAMANT REFUSAL TO CONCILIATE REQUIRE 
THE DEBARMENT REMEDY.____________________

A . The Constitution Requires that Bethlehem Be Debarred
Our threshhold position is that the Fifth Amendment

to the United States Constitution requires that Behtlehem
be debarred from all government contracts. This position
is set forth in the "Legal Memorandum, Authority under
Executive Order 11246" a memorandum dated July 15, 1969,
from the Solicitor of Labor to the Comptroller General,and
we contend that these arguments, made by the Solicitor in
support of the Philadelphia Plan, are applicable here and
binding on the Secretary of Labor. In essence, the argument
is based on the recognition that a federal official, bound
by his oath of office to faithfully execute his duties and
support and defend the Constitution, cannot spend federal
monies in a manner that denies equal protection of the laws
to minority groups. It is well settled that Fourteenth
Amendment equal protection requirements (which are applicable
to the States) are included within the Fifth Amendment's due

21



process guarantee (to which every federal official must 
18/

conform). It is equally well settled that under the Equal 
Protection Clause, a government can neither discriminate 
directly, nor contract with a private party to perform 19/
services for the government when that party is discriminating.

Applying these principles to the present case, it is 
clear that the Fifth Amendment's equal protection guarantees 
require that the Secretary not spend any federal monies with 
Bethlehem. The OFCC, the Panel, and the manifest weight of 
the evidence all agree that Bethlehem is currently discriminat­
ing against blacks by use of a seniority system which perpetuates 
the effects of earlier discriminatory hiring, job assignment, 
and transfer practices. Since the fact of discrimination is 
established, the Secretary would violate the Fifth Amendment 
by authorizing the use of federal monies in such a dis­
criminatory manner. He must therefore debar.

18/ Bolling v. Sharpe, 347 U.S. 497 (1954); Washington v.Legrant, decided with Shapiro v. Thompson, 394 U.S. 168 (1969); 
Green v. Kennedy, 309 F .Supp . 1127 (D.D.C. 1970).
19/ Reitman v. Multke, 389 U.S. 369 (1967); Burton v. 
Wilmington Parking Authority, 365 U.S. 715 (1960); Simkins v. 
Moses H. Cone Memorial Hospital, 323 F.2d 959 (4th Cir. 1963), 
cert denied, 376 U.S. 938 (1964); Todd v. Joint Apprenticeship 
Committe, 223 F.Supp. 12, 22 (N.D. 111. 1963), vacated as moot
without commenting on merits, 332 F.2d 243 (7th Cir. 1963), 
cert denied, 380 U.S. 917 (1964); Note, State Action: 
Significant Involvement in Ostencibly Private Discrimination,
65 Mich. 17. Rev. 777 ^1967) .

22



B . Proper Interpretation of Executive Order 11246 Requires 
That Bethlehem be Debarred

As the discussion of scope of review (Section I above)
establishes, quite apart from constitutional requirements, a
proper interpretation of the purpose and intent of Executive
Order 11246 leads to the conclusion that the only issue which
should be before a hearing Panel convened pursuant to the
order is whether or not the contractor is in compliance with
its contractual equal employment opportunity obligations; once
a violation is established, the Director of OFCC (in this
case the Secretary of Labor) is authorized to employ the
debarment remedy, in his discretion. This discretion is of
course limited by the purposes of the order, but the authority
to debar or to debar unless conditions which assure compliance

20/
are met is clearly vested in the Director of OFCC; it is his 
judgment, subject to judicial review, for arbitrariness or 
capriciousness, which determines whether a violator has cured 
his breach of contract by offering to follow a plan which will 
satisfy his obligations and cure the breach.

Under this theory of the case, it is clear that the 
record requires that Bethlehem be debarred. The OFCC, the 
Panel, and the manifest weight of the evidence all agree that

2 0/ 41 C.F.R. §60-1.24 (c) (3) (1970). For discussion of
relevance of present regulations to this case, see note 17, supra.

23



Bethlehem has been guilty of blatant racial discrimination
and that the present seniority system perpetuates the effects
of this discrimination. Thus, it cannot be denied that
Bethlehem is in violation of its contractual obligations.
This is all that is necessary under E.O. 11246 to authorize

21/the Director of OFCC to debar Bethlehem. Inasmuch as the 
Director has already recommended that Bethlehem be debarred, 
the Secretary must follow this recommendation, in the absence 
of a finding that the use of this remedy by the Director is 
arbitrary or capricious. Considering that the Panel has found 
that the Director's position that in order to cure its breach, 
Bethlehem must allow victims of discrimination to compete for 
job openings on the basis of plan seniority and to retain 
present wage rates should they transfer has "a substantial 
basis in judicial precedent and reason, and plainly [falls] 
within the scope of the authority and responsibility conferred 
upon OFCC," a finding of arbitrariness or capriciousness is 
surely precluded.

It should be noted that under this theory of the case, 
all of the evidence presented by Bethlehem as to the hardships 
caused by the guidelines which OFCC demanded that Bethlehem 
follow in curing its breach are irrelevant. Since the only

21/ See Hadnott v. Laird, 63 CCH Employment Practices [̂9528 
(D.D.C. 1970) appeal noticed No. 24, 956 (1970) (suit to enjoin 
Secretary of Defense from contracting with discriminatory 
employers dismissed on other grounds; pending appeal may 
establish that cause of action against Secretary exists).

24



issue before the Panel was (or should have been) whether
Bethlehem was guilty of a breach, that is noncompliance, the
only evidence which wogld have been admissible was evidence
that Bethlehem was not discriminating. It is perfectly clear,

22/
as the Panel found, that Bethlehem offered no such evidence.
Moreover, an analysis of the posture of the case before the
Panel makes it clear that Bethlehem could not present any
evidence of compliance. Throughout the proceedings Bethlehem
took the position that its seniority system was non-discrimina-
tory; this untenable and uncooperative position by Bethlehem
was rejected unanimously by the Panel because it is now settled
law that perpetuating the present effects of past discrimination

23/constitutes present discrimination. The record thus

22/ Panel Report p. 41 [̂53
23/ Local 189, United Papermakers and Paperworkeis v. U.S.416 F.2d 980 (5th Cir. 1969) cert denied, 397 U.S. 9l9 (1970); Quarles v.
Phin jp Morris. Inc.. 279 F.Supp. 505 (E.D. Va. 1968); Griggs v .
Duke Power Co., 420 F.2d 122 5 (4th Cir.) cert granted on otheF 
issues, June 29, 1970; Irvin v. Molhawk Rubber Co., 308 F.Supp.
152 (D. Akr. 1970); United States v. Bethlehem Steel Corp., 312 
F.Supp. 977 (W.D.N.Y.), appeal noticed, No. 35183 (2nd Cir.June 12, 1970). See generally Gould, Employment Security.
Seniority and Race: The Role of Title VII of the Civil Rights 
Act of 1964, 13 Haward L.J. 1 (1967); Gould, Seniority and the 
Black Worker; Reflections on Quaries and its Implications, 47 
Texas L. Rev. 1039 (1969); Cooper & Sobel, Seniority and 
Testing under Employment Laws; A General Approach To Objective 
Criteria of Hiring and Promotion 82 Harv. L. Rev. 1598(1969);
Note, Title VII, Seniority Discrimination and the Incumbent 
Negro, 80 Harv. L. Rev. 1260 (1967).

25



establishes that, even limited solely to the question of 
seniority, Bethlehem was guilty of a present breach of its 
equal employment opportunity obligations. Even if the 
inadequate plan proposed by the Company could be deemed to 
be a compliance posture if implemented, the fact of the 
matter is that Bethlehem to this day has not altered its 
clearly discriminatory system, even in the token way suggested 
by the Panel majority. Thus, throughout the four years since 
Bethlehem was notified of the discriminatory nature of its 
seniority system, the Company has done nothing to cure this 
breach of its obligations. Surely, this record of recalcitrance 
requires that Bethlehem be debarred.

26



C . Even Assuming That It Was Appropriate for Panel to 
Conduct a Trial-type Hearing on All Issues, the 
Record Requires That Bethlehem Be Debarred.
As stated above, the Panel found that Bethlehem was guilty 

of discrimination in the past, that the current seniority system 
perpetuated the effects of this prior discrimination, and that 
OFCC's recommended remedies--plant seniority and rate retention 
for the affected class— were supported by the applicable cases 
and within the scope of OFCC's authority. These findings clearly 
require a recommendation that Bethlehem should be debarred.
The Panel sought to avoid the only result supported by the record 
and applicable case law by means of the "business necessity" 
defense. In doing so, the Panel not only misconstrued the 
nature of the business necessity test, but reached its conclusion 
on the basis of evidence which was neither probative nor sub­
stantial, even under its erroneous view of the law.

1. A Proper Interpretation of the Business Necessity Defense Requires Debarment.
The leading case on the business necessity test as it

applies to seniority systems is Local 189, United Papermakers
24/

and Paperworkers v. United States. In that case, Judge Wisdom, 
the judicial author of the business necessity defense, held 
that a unit seniority system which perpetuated the effects of 
prior discrimination was a discriminatory practice which 
violates both the equal opportunity clause required by E.O.

24/ Supra, note 23.

27



11246 and Title VII of the Civil Rights Act of 1964. In 
doing so, he directly rejected the arguments of the union 
and the employer that the substitution of plant-wide seniority 
for unit seniority would have "disastrous" consequences on the 
operation of the paper mill, stating that such a defense could 
be established only by a showing that "the job seniority 
standard . . .  is so necessary to . . . [the employer's] opera­
tions as to justify locking Negroes . . . into permanent

25/
inferiority in their terms and conditions of employment." 
Inasmuch as "Congress did not intend to freeze an entire

26/
generation of Negro employees into discriminatory patterns," 
a showing of such necessity can only be made by the most com­
pelling evidence: mere expense or inconvenience will not 
satisfy the requirement; a company relying on such a defense
will have to establish that unit seniority is "essential to

27/the safe and efficient operation" of the plant.
Although the opinion does not spell out definitively 

exactly what evidence will suffice to establish this defense, 
it is clear that a mere showing that the present system 
furthers safety and efficiency is not enough to justify con­
tinuing the discrimination worked by it. In Local 189, 
employees of the Company and the Union testified that aboli­
tion of the unit seniority system would create unrest by

25/ 416 F.2d at 989.
26/ Quarles v. Philip Morris, Inc., 279 F. Supp. 505, 516 

(E.D. Va. 1968).
27/ Local 189, supra, at 989 (emphasis added).

28



allowing employees to "jump" over others and might allow 
unqualified employees to gain jobs which they could not 
perform- The Court found that such evidence was insufficient 
to establish the defense because "job seniority does not pro- 28./
vide the only safe or efficient system for governing promotions." 
The Court upheld the right of the Company to pass upon the 
ability of any worker to do a job and the right of a company 
to require that an employee have the necessary experience at 
lower jobs on a progression ladder before he could be promoted 
to a higher job for which the lower job experience was neces­
sary. Since such interests could be protected by a "residence" 
requirement of prior service in the lower ranking job before 
promotion, the seniority system was not essential to the safe 
and efficient operation of the plant and therefore could not 
be a justification for continuing discrimination. Similarly, 
in Quarles v. Philip Morris, Inc., the Court recognized that

Operation of the company's business on 
departmental lines with restrictive depart­
mental transfers serves many legitimate management functions. It promotes efficiency, 
encourages junior employees to remain with 
the company because of the prospects of advance­
ment, and limits the amount of retraining that 
would be necessary without departmental or­
ganization. 29/

Nonetheless, it did not find these reasons sufficient to lock 
the employees of Philip Morris into inferior positions based 
on prior discrimination.

28/ 416 F.2d at 990 (emphasis in original). 
29/ 279 F. Supp. 505, 513 (E.D. Va. 1968).

29



Applying the principles of Local 189 and Quarles to the 
present case, it is clear that Bethlehem has filed to establish 
the defense. The only evidence which Bethlehem introduced on 
this point was the testimony of labor and management employees 
that abolition of the unit seniority system would allow un­
trained workers to obtain jobs which they were not trained to 
perform and would be injurious to worker morale because it would 
frustrate the settled expectations of the beneficiaries of 
discrimination in the discriminatory seniority system and that 
rate retention would undermine the equal-pay-for-equal-job 
"hallmark" of labor-management negotiations in the steel industry. 
Such evidence is plainly insufficient to establish the business 
necessity defense as defined in the applicable cases. The 
assertion that plant-wide seniority would require Bethlehem 
to promote unqualified workers is false; the government has 
always conceded the company's right to require that workers be 
qualified to do their jobs. To the extent that training and 
experience can be demonstrated to be necessary, the Company 
can require employees to obtain the necessary experience before 
promoting them; this was exactly what the court allowed in 
Local 189. The expectations of workers that they will continue 
to reap the benefits of past discrimination are entitled to 
the same weight in this case than they were given in Local 189 
and Quarles: none whatsoever. Companies and unions cannot be 
allowed to continue discriminatory practices merely because 
some of the workers who benefit from the discrimination will

30



become disruptive or disrupted when their ill-gotten gains
30/are circumscribed. The testimony that rate retention would 

undermine the equal-pay-for-equal-job principle is similarly 
insufficient and irrelevant to establish the defense of 
business necessity. This testimony did not and could not in 
any way indicate that rate retention would place workers in jobs 
they could not perform; to the contrary, the apparent fear of the 
labor-management witnesses was that rate retention might lock 
overqualified workers who transferred from higher ranking jobs 
in the formerly black seniority units into entry level jobs in 
formerly white units. Such evidence is clearly not the showing of 
"overriding business necessity" required to establish the defense.

In simple terms, the Panel completely misunderstood what 
the Court in Local 189 meant when it spoke of seniority being 
essential to safe and efficient operations. The Panel applied 
and made the test of business necessity one of business conven­
ience . Even if the "expert" testimony, which consisted of 
only conclusory assertions unsupported by the slightest bit of 
empirical data, is to be fully credited, all that it established 
was that it would be more convenient and less expensive for 
Bethlehem to continue discriminating; such evidence is irrele­
vant to the question of whether the seniority system was 
necessary, i.e., essential. In short, the Panel's belief that 
the "problems of morale, costs and administrative burdens"

30/ Cf. Cooper v. Aaron, 358 U.S. 1 (1958)(possible violence 
in desegregation not a permissible consideration for a 
Court). See Vogler v. McCarty, Inc., discussed infra in 
note 31.

31



are "of some weight . . .  on the issue of business necessity"31/
(Panel Report p. 47, f72) is contrary to the appliable law.

The Panel, perhaps realizing that its analysis contradicted 
the applicable and binding decisions of the courts, sought to 
avoid the ineluctable conclusion that Bethlehem's case was 
irrelevant to the question of business necessity, and distinguish

31/ Numerous decisions under Title VII have required the complete 
reorganization of company and union policies governing hiring, 
promotions, transfers and referrals. For example, in Vogler 
v. McCarty, Inc., the court declared unlawful the nepotistic 
and other exclusionary policies of Local 53 of the Asbestos workers as applied to blacks and Spanish surnamed persons and 
ordered the union to refer blacks and Spanish surnamed appli­
cants on a one—for—one basis with white applicants for referral. 
294 F. Supp. 368 (E.D. La. 1967) aff'd sub, nom., Asbestos 
Workers v. Vogler, 407 F.2d 1047 (5th Cir. 1969). In a sub­
sequent and more detailed order granting additional relief, the court continued the one-for-one referral and required:
1) that the maintenance of several detailed work referral 
registers according to rigorously prescribed conditions, a 
detailed program to attrack minority applicants and detailed 
frequent reports to the court (obviously severe administrative 
burdens); and 2) that at the end of thirty days all improvers 
or apprentices working under the jurisdiction of local 53 must 
be terminated and referred on a one-for-one basis (obviously 
resulting in a lowering of the morale of white improvers or apprentices who had previously been insulated from competition 
with black applicants) 62 L.C. 9411 (E.D. La. 1970). Accord: 
United States v. Sheet Metal Workers Local 10, 3 EPD 58068 
(D.C. N.J. 1970). See also. United States v. Sheet Metal Workers Local 36, 416 F.2d 123 (8th Cir. 1969)(union referral 
system); Quarles, supra and Local 189, supra (seniority 
system and promotions); United States v. Libbey Owens-Ford 
Co., 3 EPD 58052 (D.C. Ohio 1970)(transfer rights including
requirement of training and educational benefits).

Indeed, courts have consistently noted that the obliga­
tion of the courts under Title VII is to require companies 
and unions to take whatever steps are needed to correct 
their discriminatory practices. Bowe v. Colgate Palmolive 
Co., 416 F.2d 711 (7th Cir. 1969); Asbestos Workers Local 
53 v. Vogler, 407 F.2d 1047. Surely under E.O. 11246 the 
obligations of the Secretary of Labor which we contend are 
of a constitutional dimension cannot permit him to require 
less, simply because of costs, morale or administrative 
burden.

32



Local 189 and Quarles on the ground that their rules relating
to a paper mill and a tobacco plant, respectively, could not
be applied to steel plants. Instead, the Panel majority sought
to rely on Whitfield v. United Steelworkers, a 1959 case in
which Judge Wisdom, writing for the Fifth Circuit panel held
that the National Labor Relations Act did not require the
abolition of a unit seniority system. In the recent case of

32/
Taylor v. Armco Steel Corp., a case involving the identical
company and seniority practices approved in Whitfield, Judge
Wisdom made clear that Whitfield no longer had any vitality under
Title VII and that Local 189's rulings were as applicable to the
steel industry as any other industry.

Similarly, the Panel's reliance on the cases of United
33/

States v. H. K. Porter Co., and United States v. Bethlehem Steel
34/Corp., is misplaced. H.K. Porter is currently before Fifth

Circuit, whose chief judge has indicated to attorneys for the
35/parties that it will be reversed; even if this reversal is 

not considered, the case is clearly distinguishable from this 
one because its result was bottomed on a specific finding that 
the on-the-job training required by the seniority system was

32/ 429 F. 2d 498 (5 th Cir. 1970).
33/ 296 F. Supp. 40 (N.D. Ala. 1968), appeal noticed No. __

(5th Cir. 1968).
34/ 312 F. Supp. 977 (W.D. N.Y.), appeal noticed No. 35183 

(2nd Cir. June 12, 1970).
35/ The court has contacted the parties to request that the 

parties assist it in formulating a decree which will 
reverse the district court decision.

33



36/
necessary to the safety of the employees, whereas in this 
case no such finding is possible. The District Court in 
the case involving Bethlehem’s Lackawanna plant based its 
failure to grant relief in part on its finding that the remedy
requested by the Attorney General

benefits certain Negroes but not whites who 
are similarly situated. . . • The proof m  this
case indicates that Bethlehem Steel Company s discriminatory assignment policies related not 
alone to Negroes but also to ethnic minoritiesin general. . . . Simply because the Attorney
General has, for practical results, limited its 
case to Negroes, does not require the court to 
be so limited in providing relief. Indeed, to 
do so under these facts would be arbitrary, unfair and unwarranted under the evidence pre
sen ted

To the extent that this reason constituted the basis for the 
result there, that case is clearly distinguishable on that 
ground from this one in which the remedy applies to all workers 
who were the victims of discrimination. To the extent that
any other of the considerations mentioned by the Court in 
Bethlehem influenced its decision, that case is in direct 
conflict with the overwhelming weight of authority and is no
legal basis for the decision here.

36/ 296 F. 
37/ 312 F.

Supp. at 90; see Local 189, supra, 
Supp. at 994.

n . 23 at 993.

34



2. Even Under Panel's Interpretation of Business 
Necessity the Evidence Failed to Establish 
This Defense.
a. Evidence not Probative. Even assuming that the

Panel's erroneous interpretation of the business necessity
defense was valid -- and that a showing of enormous costs in
terms of morale, disruption, extra pay, and administrative
burdens could establish a business necessity defense —  the
evidence clearly fails to establish such a defense. The only
testimony on this point was that of Mr. Schubert, Bethlehem's
Assistant Manager of Industrial Relations, and Mr. Fischer,
the Union's Director of Contract Administration. Their self-
serving assertions, unsupported by a scintilla of empirical
data, can hardly be called "proof" that the burdens on
Bethlehem would be so great as to make application of OFCC's
suggested remedies "arbitrary and capricious" as the Panel
itself deemed necessary to establish the business necessity

38/
defense in this case. Surely the Company must come forward
with some concrete evidence of the amount that the remedies 
will cost and not merely wail and moan on the record to 
establish its case. This concrete evidence must consist of 
expert testimony based on statistical and other empirical

38/ See Panel Report p. 39 1[48(3): "In an executive order 
proceeding, this type defense would require a showing of such 
over-riding adverse effects on safety and efficiency as to 
render the OFCC's guidelines arbitrary and unreasonable as 
applied to the individual facts."

35



data which would establish that the proposed action would be 
arbitrary and capricious with the same quality of proof as 
would be required of a public utility attempting to prove 39/
that a rate set by a public service commission is confiscatory. 
Thus, as a matter of law, the unsupported, self-serving asser­
tions by employees of Bethlehem and the United Steelworkers 
are not probative and should not have been considered by the 
panel.

b. Evidence not Substantial. Even assuming that the 
Panel should have considered the dubious evidence supplied 
by Bethlehem, this evidence cannot be deemed substantial 
enough to establish a defense which allows public condonation 
of discriminatory practices. If there were any substance to 
the claims by Bethlehem, surely the Company could have offered 
testimony of industrial engineers and cost accountants in 
support of its blanket assertions.

Further, as the opinion of dissenting member Bailer 
points out, the analysis of Mr. Fischer, which is accepted 
uncritically by the Panel majority, miscalculates the cost of 
the remedy proposed by OFCC because they completely miscon­
strue the nature of this remedy. All that the abolition of 
unit seniority means is that in the future, employees will

39/ Including expert testimony from industrial engineers 
and cost accountants which would establish both the likelihood and 
the exact amount or at least the magnitude of the alleged 
increases in cost.

36



compete for vacancies on the basis of total service in the 
plant. To the extent that any job requires prior experience 
or training, and the majority appears to find that all jobs 
do require experience in jobs below them in the seniority 
ladder, the Company can, consistent with Local 189, require 
such experience and training. Thus, as the dissent points 
out, the possibility that abolition of unit seniority will 
result in "leapforgging" is a "house of straw" erected by the 
majority.

Similarly, the statements with respect to the effects 
of rate retention are unsupported nonsense. Nowhere in the 
testimony of Messrs. Schubert and Fischer, or in the analysis 
of the panel majority, is there a particle of evidence to 
support the assertion that rate retention will work havoc 
with the equal-pay-for-equal-job "hallmark" of the steel 
industry. Exactly how this temporary relief, granted for a 
limited period of time to a limited class of employees who 
are the proven victims of blatant racial discrimination, is 
going to "undermine the whole structure of wages in the steel 
industry" never appears. To the extent that such a structure 
would be undermined by the granting of fair treatment to the 
victims of discrimination, it is a structure which rests on 
a foundation of illegal racial discrimination —  a structure 
it was the very purpose of E.O. 11246 to tear down.

37



Given the dubious, self-serving nature of Bethlehem's 
proof and the Panel majority's misconceptions concerning the 
nature and effect of the proposed remedy, its conclusions with 
respect to the "business necessity" of Bethlehem's discrimina­
tory practices can hardly be said to be supported by substan­
tial evidence. To the contrary, the evidence offered by Dr. 
Rowan, the Government's disinterested expert, including the 
examples of the experience with returning veterans after 
World War II, established that any problems created by the 
remedies of rate retention and plant-wide seniority had been 
successfully handled by the steel industry before and, there 
was every reason to believe, could be successfully handled 
now. This expert testimony, which the panel arbitrarily dis-

■credited, makes the almost non-existent case of Bethlehem 
even weaker. In no way can it be said that Bethlehem has 
proved the defense of business necessity or that the Panel's 
finding that Bethlehem has proved the defense is supported 
by substantial evidence.

■r-V

D . Even if the Business Necessity Test Is Established,
Bethlehem's Failure or Refusal to Comply with OFCC 
Guidelines Violated Its Affirmative Action Obligations.
Even assuming that the Panel majority's finding that

the hardship to Bethlehem (consisting of damage to morale,
increased costs, and administrative burdens) was too great to

38



justify following the court-approved guideline remedies 
demanded by OFCC in order to bring Bethlehem into compliance 
with its equal employment opportunity obligations, these 
demands were clearly justified under the affirmative action 
clause of E.O. 11246. Under this clause, the contractor agrees 
that he will

take affirmative action to insure that 
applicants are employed, and that em­
ployees are treated during employment, 
without regard to their race, religion, 
sex, or national origin. Such action 
shall include, but not be limited to: 
employment upgrading, demotion or trans­
fer, . . . layoff or termination; rates
of pay or other forms of compensation; 
and selection for training, including 
apprenticeship.

Clearly under this clause OFCC can require Bethlehem 
to take affirmative action to upgrade and transfer the victims 
of discrimination, increase their rates of pay and other forms 
of compensation, and select them for training. Just as clearly 
any demotion, transfer, or layoff or termination of the bene­
ficiaries of past discrimination would be authorized by the 
clause.

We contend that the affirmative action clause requires 
these remedies not only to cure the present discrimination 
worked by the seniority system -- perpetuation of effects of 
prior discrimination —  but also as a form of reparations for 
Bethlehem's past discrimination. Thus, even if the Panel's

39



coupled with rate retention. Thus, it is our position that.
quite apart fro. considerations of rectifying present effects

necessity of rectifying past of past discrimination, the necessity
wrongs requires the OFCC1s requested remedies.
refused to honor its commitment under the affirmative action 

clause, it should be debarred.

III.

Z  STS SSS52
ORDER 11246------- ----- ------ -

We agree with the Panel's dissenting — er that "The

Company plan recommended by the majority
cient in achieving the objective of correcting the presen

• • 4-a ™  suffered by Negro employeeseffects of past discrimination suff
Point " (Panel Report p. 76 199). We also con at Sparrows Point. ^  r

• a n-t-n to cure Bethlehem’s past breaches tend the remedy is inadequate to c
and to meet its present "affirmative action" duties.

In essence, the Company's plan calls for a merger o 
seniority units, reducing the number of units from 217 to 155. 
This merger of units together with improved procedures for 
posting notice of job openings is supposed to increase the 
ability of Bethlehem's employees in general to transfer an

• aid the victims of past discrimination;tliojrGbY indirectly
. a for either plant seniority carryover the plan does not provide for eitner P

41



coupled with rate retention. Thus, it is our position that, 
quite apart from considerations of rectifying present effects 
of past discrimination, the necessity of rectifying past 
wrongs requires the OFCC1s requested remedies. Since Bethlehem 
refused to honor its commitment under the affirmative action 
clause, it should be debarred.

III.
THE REMEDY RECOMMENDED BY BETHLEHEM 
AND BY THE PANEL VIOLATES EXECUTIVE 
ORDER 11246________________________

We agree with the Panel's dissenting member that "The 
Company plan recommended by the majority is seriously defi­
cient in achieving the objective of correcting the present 
effects of past discrimination suffered by Negro employees 
at Sparrows Point." (Panel Report p. 76 H99). We also con­
tend the remedy is inadequate to cure Bethlehem's past breaches 
and to meet its present “affirmative action duties.

In essence, the Company's plan calls for a merger of 
seniority units, reducing the number of units from 217 to 155. 
This merger of units together with improved procedures for 
posting notice of job openings is supposed to increase the 
ability of Bethlehem's employees in general to transfer and 
thereby indirectly aid the victims of past discrimination; 
the plan does not provide for either plant seniority carryover

41



or rate retention. As the dissent points out:
The Company's calculations indicate 

that approximately 31% of the Negro ar 
gaining unit employees (as of May 1, I9 would, under this plan, become part of a merged unit in which the earnings opportun 
ities are higher than in their units [PX-V4 at 9]. Of course, this means 
that iver two-thirds of the Negro employees 
in the bargaining unit would not be f ably affected in this respect by virtue of the unit mergers. The Company states that 
4.615 Negroes, or 55.7%. would be in larger 
seniority units than before. [PX-V4 at i/j.
This means that 44.3% would not be included 
In such larger units and therefore would not 
have a broader base in terms of their exist ing status and rights relative to potential
demotion or layoff.

There remains, of course, the question 
as to whether Negro employees in some merge 
units might become more vulnerable to bump 
ing" from above when layoffs occur, s y by virtue of the fact that there would be 
more employees in higher level jobs in th 
merged units who could exercise displace­
ment rights in lower level jobs in such units A similar question concerns the effect 
of the reduction in the number of pools under the Company plan. Finally, approximately 40% 
of the Negro bargaining unit employees av been working in seniority units that would not be Sffected^y the unit merger Procedure Thus 
on its face, and quite apart from the lack of 
plant seniority carryover and rate retenti , 
the merger aspect of the Company P seriously deficient by virtue of the large nroDortion of discriminated Negro employees whose1" opportunities would not be improved thereby. Moreover, the merger proposal represents
little or no improvement in the abili y Negro employees to move from production gobs 
?o!he various types of skilled maintenance

42



jobs from which they have been largely 
excluded in the past.41/

Even the majority recognizes that a plan which leaves the 
discriminatory wage rate earned by 69% of the victims of 
prior discrimination unaffected, which leaves the discrimina­
tory lay-off status of 44.3% of the prior victims unaffected, 
and which may leave a detrimental effect on the layoff status 
on the other 55.7% does not constitute a satisfactory solution:

The OFCC appears to have merit in its 
argument that there will be Negroes not 
so situated as to take advantage of this 
plan . .„. by further study and possible
amendment of this plan the majority feels 
that the most efficacious program can be 
devised for remedying the effects of past 
discrimination. (Panel Report p. 73 f92)

Moreover, the inference that the Panel majority did 
not really consider the Company's plan to be full compliance 
is clear from their suggestion that the Secretary "should 
retain jurisdiction over the case for a period of 60 days 
during which there should be a thorough investigation of any 
gaps, flaws, or failures in the Company's plan and an explora­
tion of supplementary methods of relief which may be practical 
and feasible." (Panel Report p. 75 f97).

41/ For a fuller discussion of deficiencies of Company plan 
see letter of August 11, 1969 of William Fauver, Special Counsel
of OFCC, to Rev. Hanley, pp. 4-6.

43



Thus, the panel majority, apparently feeling con­
strained as mediators to propose some concrete solution, 
recommended adoption of a Company plan which they realized 
did not really constitute compliance. The Secretary should 
not be so confused. The OFCC is perfectly correct in its 
position that once it proved discrimination —  m  this case 
both past and present -  the onus was on Bethlehem to come 
forward with a plan for compliance. This the Company has 
clearly failed to do. Accordingly it should be debarred.

IV.
the positions taken by the department JUSTICE, THE SOLICITOR OF LABOR, AND “ c ARE binding on the secretary
I f j l l o i  A ®  REQUIBE THAT BETHLEHEM BE
d e b a r r e d ______.—  ------------ ---------

Our arguments that debarment is constitutionally 
required by the equal protection guarantees subsumed 
within the Fifth Amendment's due process requirements are 
specifically approved by the memorandum of duly IS, 1969 Plan 
from the Solicitor of Labor to the Comptroller General in 
which the solicitor, with the concurrence of the Department 
of Justice, upheld the constitutionality of the PhiladSiEiiia 
Plan— XThe Solicitor's advice with respect to constitutional 
duties of the secretary must surely be binding on the Secretary, 
especially when his position has the specific concurrence of

42/ Memo of Dep’t of Labor 
1969; 71 Lab. Rel. Rep. 366 Sec. of Labor Schultz Sept. 
(Daily ed. Dec. 18, 1969).

BNA Daily Labor Report 
(1969); Att'y Gen. Op., 22, 1969, 115 Cong. Rec.

, July 16, letter to 17,204-06

44



the Department of Justice. Thus, we believe that the 
Secretary is bound by the position that the debarment remedy
is constitutionally required.

Moreover, the position we take here with respect to
the requirements of Executive Order 11246 is not only that
of OFCC, but that of the Department of Justice with respect43/
to Bethlehem's Lackawanna plant. We believe that the Secretary 
is precluded from taking a position here which is in direct 
conflict not only with both the OFCC —  the agency with the 
responsibility and expertise in contract compliance — but 
also the Department of Justice —  the ultimate authority in 
the executive with respect to enforcement matters. For the 
Secretary to disregard the otherwise consistent position of 
all agencies of the Uhited States Government with respect to 
the very issues —  plant—wide seniority and rate retention 
_ crucial to this case would raise serious questions con­
cerning the Secretary's desire to enforce the law with 
respect to Bethlehem. This is especially true when the 
Secretary's Executive Assistant is, we understand, the same 
Richard Schubert who was Bethlehem's principal witness in 
this case.

43/ United States v. Bethlehem Steel Corp. (Lackawanna 
Plant) supra note 1.



CONCLUSION
For all of the reasons set forth above, we contend 

that the Secretary is required both by the Constitution and 
by E.O. 11246 to debar Bethlehem from all future government 
contracts and to terminate and cancel all its existing con­
tracts with the government. In view of the dilatory, 
unproductive, and uncooperative stance taken by Bethlehem 
and its counsel throughout the proceedings, we believe that 
strong measures must be taken to see that such conduct is not 
repeated by other contemptuous violaters. Thus, we request 
that Bethlehem be debarred for a period of time not less than 
the four years which it has already taken to get an adjudica­
tion of what everybody connected with the case has known all 

44/along —  that Bethlehem as a regular course of business is 
guilty of blatant discrimination; the debarment should not 
be lifted, in any case, until Bethlehem has completely elimi­
nated the present effects of past discrimination. For the 
reasons set out in Section II D above, reinstatement should 
also be conditioned on the paying of back wages for all victims 
of Bethlehem's discriminatory practices. The Secretary should 
also recommend to the Attorney General that pursuant to §209 
(a)(2) of E.O. 11246 all of Bethlehem's contractual duties 
should be enforced by lawsuit.

Finally, as amicus curiae, we wish to repeat our firm

44/ For example, in the Lackawanna case Bethlehem stipulated 
that it was discriminating.

46



conviction that the action of the Secretary in this case is 
vital to the whole future of federal contract compliance 
efforts. A decision by the Secretary to debar Bethlehem and 
to adopt a set of procedures for conducting hearings which 
will avoid the cumbersome, unproductive result here will be 
a needed affirmation of the Administration that it is going 
to enforce the law even-handedly and that it is committed to 
exercising its powers in a manner consistent with statutory 
and constitutional requirements. A decision to condone blatant 
discrimination and recalcitrance on the part of Bethlehem will 
be confirmation that "law and order" is a weapon to be used 
against the black community, but never for it.

Respectfully submitted,

JACK GREENBERG 
JAMES M. NABRIT, III 
NORMAN AMAKER 
WILLIAM L. ROBINSON 

10 Columbus Circle New York, New York 10019
GERALD A. SMITHSuite 1500 American Building 

Baltimore and South Streets 
Baltimore, Maryland 21202

Attorneys for NAACP Legal Defense 
and Educational Fund, Inc., as 
Amicus Curiae

PAUL J. SPIEGELMAN 
Of Counsel

47



CERTIFICATE OF SERVICE

I hereby certify that on
I served a copy of the foregoing Brief of the NAACP Legal 
Defense and Educational Fund, Inc. as Amicus Curiae in 
Exception to "Recommended Findings and Proposed Decision" 
of Panel on: Ralph L. McAfee, Esq., Thomas D. Barr, Esq., 
Robert S. Rifkind, Esq., John A. Lucido, Esq., Cravath,
Swaine & Moore, One Chase Manhattan Plaza, New York, New 
York 10005; Roland T. Wilder, Jr., Esq., Room 4122, Office 
of Solicitor, Department of Labor, 14th & Constitution Avenue, 
Washington, D.C. 20210 by depositing a copy of same in the 
United States mail, postage prepaid.

Attorney for Amicus Curiae