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The '0.s. Department of Health and Human Services has since revised its Medicare Provider Reimbursement Manual to preclude providers from using Medicare money to finance persuader costs

351/ whether incurred through their own efforts or through consultants. But there are few federal statutory prohibitions against such

352/ funding. The Comprehensive Employment and Training Acta specifically bars use of funds for "unionization, or antiunionization 353/

354/ activities." The Domestic Volunteer Service Act that the agency ACTION cannot expend funds "directly or indirectly

355/ to finance labor or antilabor organization or related activity."

356/ The Legal Services Corporation Act contajas a more detailed

357) prohibition on the use of corporation funds. Nevertheless, in response to recent organizational activity among legal services workers, legal services offices have hired management counsel and paid them with federal funds in aggressive attempts to prevent

359/ unionization. Direct subsidization occurs in other forms. Under the Inter

360/ governmental Personnel Act, which was enacted to improve state and local government administration, the federal government funds

361/ the management side of labor relations training. Pederal funds may also be involved when higher educational institutions conduct campaigns and when they sponsor seminars which instruct private and

362 public entities on how to prevent or defeat union organizing efforts.

Tederal reimbursement of anti-union costs incurred by private employers who pertorn government contracts is another incalculable dimension of this public funding phenomenon. In one well-documented instance, the United Automobile workers (UAW) discovered during a

358

representation election campaign at Rockwell International Corporation that the company charged the costs of employee time spent in "captive audience" meetings to its contracts with the Department of Defense. 363

In response to the union's protest, the Defense Contract Audit Agency stated:

Judged by a standard of reasonableness, an anti-union stance on the part of an employer should not be assumed to be unreasonable. Such an attitude may be taken for a sound business purpose. An employer may oppose a union for reasons of economy, as a result of a concept of a more efficient operation, or because of an honest belief that the employer is a better guardian of its employees' welfare than would

364/ be a union. Purther correspondence revealed that Air Force regulations did not *require contractors to submit a month by month breakdown of expenses such as industrial relations costs charged to government

365/ contracts"; therefore, the government could not even audit this practice. Moreover, the Department refused to consider the issue while union objections to the representation election were pending before the NLRB.

366/

The real issue, however, was the propriety of reimbursing costs for any anti-union activity, not merely unlawful anti-union activity. The NLRB subsequently set aside the election due to campaign misconduct by Rockwell. 367/ Unions also report other instances of federal contractors funding their anti-union

368/ drives with public money.

The absence of intra-governmental coordination in this area is demonstrated by the fact that the National Labor Relations Board learned only by accident of a Department of Defense practice permitting reimbursement of contractors for expenses and liabili

369/
ties incurred in suits brought against them by Federal agencies.
The Board takes the position that such arrangements contradict
national labor law policy:

The anomaly of another Federal Agency ab-
sorbing the liabilities and costs incurred by
private litigants who have violated the National
Labor Relations Act clearly frustrates the Act's
meaning and intent. Thus, employers who are
committed to a policy of interfering with the
protected rights of their employees are encour-
aged to violato those rights since their conduct
is free from economic sanctions. In addition
to the danger of increasing the severity and
number of unfair labor practices, the above-
described cost-plus arrangements can only en-
hance the benefits which private litigants
believe they can secure from delay, will dis-
courage the settlement of meritorious cases,
and will encourage the litigation of frivolous

370/
contentions and defenses.
Indirect subsidization of private anti-union activity takes
the form of Federal income tax deductions for the "business expenses"

371/ of employers or consultants in carrying out unlawful activity. But one court held that because of the express federal prohibition against

374/

certain employer payments to union officials 372/ an employer could not deduct such payments made by its labor consultant. 373/

What little is known about federal funding of consultants and other anti-union activity indicates a situation of potentially enormous proportions, given the billions of dollars that flow annually from the government to providers of benefits, contractors, and other private entities. Since statutory and regulatory controls remain haphazard and uncoordinated, the General Accounting office should undertake a comprehensive review of agency practices. Given the prevailing budgetary concerns, such an effort would likely garner considerable support. Unions should use the Freedom of Information Act in order to discover funding arrangements and disbursements whenever an entity which contracts with the federal government engages in anti-union activity. Meanwhile, legislation has been suggested to prohibit such

375/ expenditures. Also, the office of Federal Procurement Policy (OFPP) is currently drafting new "Federal Acquisition Regulations.' Contractors should be prohibited from spending federal funds for efforts including those of consultants, either for or against unionization, and from using such funds to defend unfair labor practice charges.

Distinguishing allowable from disallowable expenditures will 11kely prove the most sensitive drafting problem in any legislation or regulations. The Massachusetts statute, the HEW Medicare regulations, and the current federal procurement regulations all permit some labor relations expenses, including litigation and collective

bargaining expenses and other post-election labor costs. The task requires a strong commitment by the government to unearth the facts about this misdirected drain on public resources and to bring its expenditures in line with basic national policies of encouragement of collective bargaining and the promotion of the free exercise of employee organizational rights.

State and local funding of private anti-union activity is even less documented than that of the federal sector but there, too, rosearch will likely discover much involvement. A well-known pattern involves local Chamber of Commerce chapters which receive public funds to promote Industrial development. A suit filed against the Laurinburg-Scotland County, North Carolina, Chamber of Commerce alleged that this chapter used public funds in its efforts to lure only non-union business and to engage in surveillance of local union activities. The suit was settled with the Chamber promising to set up accounting and notice procedures for its use of public funds.

376/

It is uncertain as yet how this example fits in the broader context: the basic research on state and local funding of private efforts to suppress union organization remains to be done.

CONCLUSION The labor consultant industry has arisen because there is strong employer antipathy toward unions and, therefore, great demand for consultant services. Many consultants appear to perceive the law not as a system which has attempted to humanize, rationalize and democratize labor relations, but as a set of rules to be bent, evaded, and broken if necessary. Consultants have

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