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
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January 21, 1971

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Brief Collection, LDF Court Filings. 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, 1971. 8be69dcc-c69a-ee11-be37-000d3a574715. LDF Archives, Thurgood Marshall Institute. https://ldfrecollection.org/archives/archives-search/archives-item/26d11878-07b4-41b8-bc8b-b68b44527dca/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. Accessed July 09, 2025.
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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