Horovitz, president of the National Association of Plumbing-HeatingCooling Contractors.

(The prepared statements referred to follow :)

PREPARED STATEMENT OF STANLEY M. ROSENBLUM, ATTORNEY AT LAW, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WarehouseMEN AND HELPERS OF AMERICA

Mr. Chairman and members of the Committee, my name is Stanley M. Rosenblum. I am an attorney at law from St. Louis, Missouri.

Upon behalf of General President Hoffa and the General Executive Board, representing 1,725,000 members of the International Brotherhood of Teamsters I wish to express appreciation for the courtesy extended me in this invitation to discuss S. 2609.

In recent months there has been a flurry of litigation calling for judicial interpretation of Section 302 of Landrum-Griffin. It has centered about the inadequacies of the law in defining specifically whether or not retired employees, trust employees, union officers, and union agents may receive the benefits therein enumerated and whether or not the benefits there specified are to be interpreted so restrictively that recreation in any form (for any purpose) as a benefit must be outlawed under the language of the Act. The decisions have not been uniform. One case has recently been resolved on appeal. The others are in the process of being appealed.

We support S. 2609 because it resolves any doubts as to the meaning of Section 302 and removes any possible ambiguities or latitude in interpretation. Once before in 1959 a similar situation existed with respect to doubts concerning the legality of apprenticeships and training programs and vacation, holiday, severance or similar benefits. In order to remove these doubts, Section 302(c) (6) was adopted. As counsel in two of these cases and having encountered the variances in construction and the effects caused in terms of human hardship, we support this amendment as a salutary answer to the spectre of continued litigation.

Recent developments in the St. Louis area demonstrate the pressing need for a clarification of the intent and purpose of Section 302(c). Several years ago a contributing employer filed a suit in the District Court challenging certain activities of the trustees of a 302(c) Trust. In reaching its ultimate decision (Kroger v. Blassie, 225 F. Supp. 300) the district judge employed what he thought was a literal and strict interpretation of the statute, and held that it precluded any trust benefits to employees after their retirement. This caused the immediate concern of Local 688, International Brotherhood of Teamsters; it was in the process of negotiating collective bargaining contracts which established a trust fund for the specific purpose of providing medical benefits to employees after retirement. The trustees of the new fund (called the "Teamsters Medicare Trust for Retired Employees") refused to dispense any benefits, fearing that they would be subject to criminal penalties under 302 if the Kroger v. Blassie decision were upheld. Therefore, Local 688 immediately filed a declaratory judgment action against the trustees; the district court followed the precedent established in Kroger v. Blassie and declared the trust unlawful. Both Kroger v. Blassie and the Local 688 case (Local No. 688 v. Townsend, et al.) were ultimately reviewed by the Eighth Circuit at 345 F. 2d 58 and 345 F. 2d 77, respectively. The appellate court declared that 302(c) should not be interpreted as prohibiting trust benefits to retired persons, so long as they were once active employees for whom contributions had been made to the trust fund.

While these decisions apparently settled the matter in regard to the St. Louis trusts involved, the entire controversy still had some unfortunate consequences. For more than a year, the Medicare Trust and at least one other in the St. Louis area were inactive while the case was on appeal, and all trust benefits were suspended for retired persons. Meanwhile, the district court in Oregon was confronted with the same problem in Jensen v. Garvison, et al., Civil No. 64-219, and following the lead of Kroger v. Blassie, (before the appeal was decided) it held a medical trust fund for retired members of the Painters' Union to be unlawful. Thus, at least four different trust funds lived under a cloud for the past year, the trustees being unable to act under the threat of illegality.

A repetition of this unfortunate episode can be prevented by an immediate clarification of Section 302(c). The proposed amendment, in regard to retired employees, does nothing more than express, in black and white, the original intent of Congress in passing this Section. The sole purpose of this section, as explained by Senators Taft and Ball (who sponsored the Senate amendment which became

Section 302) was to make certain that welfare funds established by employer contributions were used solely for the benefit of the employees for whom the contributions were made (See 93 Cong. Record 4746, 4752, 4753). In other words, welfare fund contributions are really nothing more than another form of wages; 302(c) merely seeks "to make sure that employees whose labor builds this fund and who are really entitled to benefits under it shall receive the benefits" (93 Cong. Record 4753). The retired employee is obviously one who has worked and labored to build the welfare fund; if he was an employee for whom contributions were made to the fund, he is entitled to participate in its benefits, regardless of the fact of his retirement. Congress never intended otherwise.

Trust benefits for retired personnel have become more and more common in recent years. Bulletin No. 1330 of the U.S. Department of Labor entitled "Digest of One Hundred Selected Health and Insurance Plans Under Collective Bargaining, Winter 1961-62", discloses that about two-thirds of the typical funds analyzed afforded coverage to retired workers. (These were essentially large welfare funds, in some instances including hundreds of thousand of beneficiaries). This is only as it should be. The law should encourage welfare funds to provide benefits at the time of greatest need (i.e., after retirement), and the proposed amendment to 302(c) will expressly manifest such an intent.

Similarly, the merit of S. 2609 is that it clarifies section 302 insofar as it pertains to the eligibility of employees of the trust as beneficiaries and to the eligibility of officer and non-officer employees of the union as beneficiaries. As noted by the Court in Blassie, the present statute does not, in so many words, recite that these classes may be beneficiaries; neither does it expressly disqualify them. This should be reason enough for amendatory language clearly resolving the question. The reasons given by the Court for permitting them to be beneficiaries are sound and cogent, but for reasons which appeared just as sound and cogent to it, a district court judge in the Southern District of New York ruled otherwise in United States Trucking Corp. v. Strong, 33L. W.2507. If reasonable men (similarly motivated to interpret in accordance with Congress' intent a certain statute stated in their native tongue) can reach such diametrically opposite results on the same language, one can hardly quarrel with a re-statement of the statute which will lead all to the same result. The best reason for adopting the interpretation offered here is the frank recognition that both union and trust employees are entitled to health and welfare benefits just the same as any other employees, and as long as they are treated no more favorably than other employees, it makes good business to include them at advantageous rates in some larger group; as long as their employers are required to pay on the same basis as other employers, there is no more danger of abuse with them than without them.

We think it advisable, also, to make clear (as does S. 2609) that a permissible trust purpose may be the establishment of health camps and health-oriented and medically-oriented recreational facilities. As the law now reads, "medical care" is listed as a legitimate trust purpose, but this has raised the question whether or not preventive medical care is to be permitted and whether or not recreation having a direct relationship to medical care must be barred. In the Blassie case, counsel for the Kroger Company argued that no recreation of any kind can be a labor-management trust activity; the trial judge's opinion indicated his approval of this position, although he framed his decree less broadly to bar only activity purely recreational and not health-oriented. This view confines medical and health benefits only to the cure and treatment of disease in the hospital or the doctor's office through medication or surgery; it runs counter to the premise of modern medicine that certain recreational activities do and can produce definite and scientifically supported health and medical benefits; and where recreation or "fun" can be employed to achieve such benefits and encourage a wider participation, it is preventive of disease and bodily malfunction and should be employed as one aspect of medical care. It was because of this Dark Ages concept of the interpretation of the words "medical care" in Section 302 that an amicus brief was filed in the appeal of the Blassie case. It was there pointed out that the legislative history of Section 302 justified the establishment of health camps; one plan approved in the debates contained such a projection. The point was made that President Kennedy's Council on Physical Fitness and on Youth Fitness has published three authoritative documents whose theme is that zestful, organized and informed physical recreation and exercise is the master conditioner for the healthy and the major therapy for the ill.

There was pointed out the strong authoritative support for the concept that regular exercise and physical recreation help prevent degenerative disease and slow down physical deterioration that accompanies aging and add to life expect

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ancy. In Physical Fitness Elements in Recreation, the President's Council tells us, p. iii:

Recreation can make a conspicuous contribution to physical fitness by providing outlets for participation in interesting, vigorous physical activities. Participation in physical forms of recreation is particularly significant now because our present way of life with all its conveniences, comforts, and gadgets makes fewer and fewer physical demands upon the individual. The need for exercise, therefore, must be met through regular, planned participation in sustained, vigorous activity."

And in his foreword to this same work, President Kennedy wrote:

"A sound mind in a sound body' is one of the oldest slogans of the Western World. I believe we should continue to place weight on intellectual achievement and excellence, but I also believe that by drawing on our total recreational resources, all Americans can help to increase our physical fitness as individuals and as a nation."

Based upon the concern of the amicus as to the record in the Blassie case which was wholly recreational and the trial court's sweeping condemnation of recreation as a proper trust purpose in its opinion, the Court of Appeals for the Eighth Circuit made it clear that recreation per se was not to be outlawed; the Court made the point very carefully that it may well be that circumstances are present where a particular facility with recreational attributes, nevertheless, has, in the light of developing medical knowledge and advice, a direct relationship to medical care and would be permissible under the statute.

If a court has already held, in effect, what S. 2609 seeks to accomplish, then one can properly ask: why the need for additional legislation? First, we can report that no party in either the Blassie or Townsend cases has sought Supreme Court review so that the rule of these cases is binding only on courts and litigants in Missouri, Arkansas, Iowa, Nebraska, Minnesota, North Dakota and South Dakota. Contrary decisions on one or more issues in these cases have been rendered by trial courts in the States of Oregon and New York; we are advised these cases are now on appeal. There is no certainty that their results will be consistent with Blassie and Townsend, or that they will ever get to the Supreme Court. We could have the situation where Section 302 could be given one interpretation in the Eighth Circuit and another in the Ninth Circuit, and still another in the Second Circuit. Eventually, such a conflict would be resolved by the Supreme Court, but this often takes years-it depends, among other things, on the financial ability of the parties to pursue such action. In the interim, the rights and benefits of hundreds of thousands of workers could be adversely affected and great hardship caused. It would do little good for a trust beneficiary whose benefits were suspended in 1964 in New York to be told by the Supreme Court in 1967 that the New York Court was wrong and should have followed the decisional lead of the Eighth Circuit. If the decisions in Blassie and Townsend resolve ambiguities in wording of Section 302 and truly express Congressional intent and policy, then those ambiguities and policies should be legislatively resolved and enunciated now. Litigation is expensive, time-consuming, and sometimes leaves harsh results and scars; a few lines added to the present law can prevent the need for resort to the sometimes uncertain vagaries of legislative history and preserve for trust beneficiaries thousands of dollars which might otherwise be spent in litigation-to say nothing of the intrusive effect of such litigation on labor-management relations. Secondly, the results reached in the Blassie and Townsend cases are common-sense, humane, up-to-date and enlightened approaches to the abuses sought to be treated in Section 302. Given the premise that employer's contributions to these trust funds are really nothing more than earnings of the workers, Section 302 should be unqualifiedly stated so that its benefits (broadly put) will pass to those whose labors made them possible.

PREPARED STATEMENT OF ROBERT L. HOROVITZ, PRESIDENT, NATIONAL ASSOCIATION OF PLUMBING-HEATING-COOLING CONTRACTORS

Mr. Chairman and members of the Committee, my name is Robert L. Horovitz of Cleveland, Ohio. I am a contractor actively engaged in the plumbing, heating, piping and air conditioning business in the City of Cleveland. I am also currently President of the National Association of Plumbing-Heating-Cooling Contractors, which has executive offices in Washington, D.C.

The National Association is a federation of state associations in our industry throughout the United States. These affiliates, in turn, are composed primarily of affiliated local associations. We have approximately 8,400 members, who em

ploy well over 100,000 mechanics and related employees. A very substantial portion of our members are signatory to labor agreements involving industry advancement funds.

Our Association appreciates the opportunity to express the views of our members on H.R. 1153. There follows our analysis of H. R. 1153 and its probable effect on industry advancement funds as they are now constituted.

I. THE UNION'S ENCROACHMENT UPON THE TRADITIONAL DUTIES AND
RESPONSIBILITIES OF MANAGEMENT

By its passage of H. R. 1153, the House of Representatives has given its sanction to legislation which represents an unprecedented and unwise invasion into those business functions which have been consistently recognized over the years as being within the prerogative of management. The Bill, if enacted, will permit the establishment of jointly administered trust funds for the purpose of product promotion and additionally the creation of joint boards or committees to be used to determine and resolve issues arising from disputes regarding the interpretation of collective bargaining agreements.

The industry advancement or promotion fund is legal under present law.1 There are many such funds in operation throughout the United States. The only limitation attendant upon the establishment or operation of such funds is that they may not be jointly administered by management and labor. It is this limitation that H.R. 1153 would remove if passed by Congress.

The amendment to Section 302 would permit labor organizations to jointly administer funds which have as their primary purpose the advancement of employer interests, being, in most instances, indirectly beneficial to organized labor.

As Representative Griffin stated in opposition to the Bill:

"The function of a Union under the Taft-Hartley Law is to represent employees with respect to wages, hours, and working conditions. Those are the purposes for which the Union represents the employees.

"This amendment to Section 302 does not go directly to the matter of wages, hours and working conditions, but to the matters of advertising, research, promotion of industry or the products of industry. These are peculiarly and exclusively management functions" (111 Cong. Rec. 19140 (daily ed. Aug. 10, 1965)).

It can be readily observed that H.R. 1153 will be utilized by the Union to bring itself to management's table and to participate in the determination of policies which touch upon functions which have little, if any, relationship to labor's legitimate interests. These are the responsibilities which have been historically exercised by management and which have preserved the independence of our free enterprise system. "Expenditures by industry promotion plans are for the direct benefit of the employer, and the interest of a labor organization in the employer's public relations, advertising and research programs is at very best indirect and peripheral. It may be likened to the interest which a union has that an employer corporation shall reinvest its earnings in expansion in order to create more jobs rather than in distributing such earnings in dividends." Hearings Before The General Subcommittee on Labor, 89th Cong., 1st Sess. at 19 (1965).

The Bill, in effect, would provide the Union with one-half the members of the Board of Directors insofar as these particular functions are concerned. By the same token, it would be just as wrong fundamentally as if legislation were enacted which permitted management to participate in the determination of union policy. H.R. 1153 would endorse jointly administered funds for the purpose of product promotion in the construction industry. However, the Bill as it is drafted appears to overlap and could be interpreted as encroaching upon other exclusive manage. ment functions which have little, if any, relationship to product promotion. For example, it may be argued that an industry advancement fund which has as one of its purposes the training of sales personnel does result in the promotion of the employer's product since the more efficient the sales force the greater likelihood that sales will increase and hence his product is being promoted. Examples such as this could be numerous and thereby result in unreasonable invasion by labor unions into an area peculiarly suited for management's expertise.

Presently, there exist numerous industry advancement and promotion funds. These funds have been established, operated, and financed exclusively by manage. 1 The Bill fails to adequately distinguish between trust funds which have as their basic purpose the development and promotion of a specific product and trust funds established to promote the general welfare of the construction industry, the latter of which are commonly referred to as industry advancement funds.

ment. Some of them have been worked through collective bargaining agreements. Section 302 as it presently reads prevents the joint administration of such funds. If labor were permitted to jointly administer such funds it would undoubtedly carry with it a veto power which could be exercised whenever it disagreed with the employer as to the use of such funds. Union participation, therefore, means union veto. The union representative motivated by the irresistible pressure of his membership, could demand that such funds be used for items of exclusive union interest. This would result in the fund being partially directed by men whose first responsibility is to their member-employees, rather than to the difficult and intricate problems the employers must resolve in working out their mutual well-being with respect to the business and public aspects of their industry.

It is obvious then that the purposes for which these funds may be jointly administered do not fall within the conventional term of wages, hours, or other terms and conditions of employment. These items directly affect the employee and Section 302(c) permits the joint administration of any funds designed to directly benefit the rank and file. In this respect, the National Labor Relations Board in its Mill Floor Covering decision stated:

"An industry promotion fund seems to us to be outside of the employment relationship. It concerns itself rather with the relationship of employers to one another or, like advertising, with the relationship of an employer to the consuming public." (Hearings Before the General Subcommittee on Labor, 89th Cong., 1st Sess. at 25 (1965).)

The proposed amendment, limited as it is to a single industry, constitutes an unreasonable and unjustified infringement upon employer responsibility, and has no legitimate connection with the employment relationship.

Moreover, no valid or persuasive reason has been advanced for requiring the employer to abandon the exclusive management of such funds where, under his guidance, they have developed into an effective institution benefiting the employer and the public at large.

II. THE FICTION THAT JOINT ADMINISTERED PRODUCT PROMOTION FUNDS WILL BE A PERMISSIVE RATHER THAN A MANDATORY SUBJECT OF COLLECTIVE BARGAINING

The supporters of H. R. 1153 place considerable reliance on the amendment's proviso which excludes jointly administered promotion funds as a subject of mandatory collective bargaining,

They have suggested that the employer need have no concern about the implications of the Bill, inasmuch as the Bill will not make it mandatory for employers to bargain with respect to jointly administered funds. However, the inadequacies of this assurance were illustrated by Mr. John Uhl when he testified in opposition to the Bill. He stated:

"[That only in the most extreme cases is there any practical difference between mandatory and permissive collective bargaining, and that if a Union desires to exact a concession on a point which is the subject of permissive bargaining, it need merely agree to relax its demands with respect to a point which is the subject of mandatory bargaining and thus induce the employer to acquiesce in what it considers to be the lesser of two evils." (Hearings Before the General Subcommittee on Labor, 89th Cong., 1st Sess. at 20 (1965).)

The inadequacy of this alleged safeguard is further magnified when consideration is given to the fact that the bargaining strength of the Union is usually far greater than that of the employer. In support of this view, Representative Griffin remarked: "It is not going to be a very voluntary agreement in many areas . . It may sound good to say this is not a mandatory subject of collective bargaining, but the unions will have ways of making sure these things are negotiated into the contract. They will demand 25-cents-an-hour increase when really they would settle for 10 cents. That is the way they will get it in" (111 Cong. Rec. 19141 (1965)).

In light of these well-known facts of collective bargaining life, and the considerable power which may be wielded by some unions in the construction industry, it appears inevitable that a skilled labor negotiator would have little difficulty in making such funds a mandatory subject of collective bargaining. The permissive power to bargain over these funds will unquestionably be an invitation to the unions to exert their influence in the establishment of such funds, even within those employer groups where no such funds had previously existed. Therefore, the legislature would appear to have as high an obligation to properly appraise the practical aspects of a statute's enactment as well as the considerations of policy and theory which may have led to its introduction.