Sweatshop Army: Why does the Pentagon use low-road companies to feed and clothe our troops?

David Moberg
The American Prospect

During a 13-month tour in Iraq with her National Guard unit, Amber Hicks ate her share of the military rations known as "meals ready to eat," or MREs. Then, as chance would have it, she returned to her hometown of Cincinnati and found a job in the Wornick Company's factory -- making those familiar MREs.

Most of her fellow workers were immigrants -- African, Mexican, Vietnamese, and Cambodian -- and most of them made less than $10 an hour, with very few able to pay for the company's health insurance. The work was fast-paced and stressful, and conditions were worsened by frequent forced hours of overtime work, which caused day-care problems -- even job loss -- for workers with children. The pressures also likely contributed to the company's above-average injury rates. And on top of those problems, Hicks says, "there was a lot of favoritism from the 'good old boy' gang that ran the plant. It wasn't what you know but who you know, for getting promotions."

Every year the federal government spends half a trillion dollars on contracts for goods and services from private companies like Wornick. The total workforce of those companies -- including workers not on federal contracts -- accounts for 22 percent of American workers. And according to David Madland, director of the American Worker Project at the Center for American Progress, the military spends 69 percent of those contract dollars.

The military, then, through its procurement process has a huge potential influence, directly and indirectly, on the conditions of work and the rights of workers in this country. Unfortunately, all too often the work on military contracts is ill-paid and abusive, just as it is at Wornick, and not an expression of government's stated social policy, such as the 1935 Wagner Act's commitment to encourage collective bargaining.

In 2008, for example, the Wornick plant was abuzz with talk of forming a union with the United Food and Commercial Workers. The company, which earns about half its revenue from government contracts, was also going through bankruptcy. A group of its creditors, including the publicly bailed-out insurance giant American International Group, took control shortly afterward and received more than $6.5 million in state and local financial assistance.

Wornick's management responded to its employees' organizing with a classic anti-union campaign: supervisors meeting individually with workers to discourage pro-union sentiments, calling forced group anti-union meetings, harassing union sympathizers, posting flyers about closed unionized automobile plants, providing pizza for anti-union workers (whose names supervisors collected on petitions), distributing "no union" T-shirts, and threatening to move the factory if the workers unionized.

Hicks and her uncle, Kevin Phillips, were among the union stalwarts. Then late last October, Wornick fired Hicks, who was pregnant at the time, citing errors in her paperwork on monitoring operations, accusations she contested. The National Labor Relations Board did not restore her job, but the rest of the workers interpreted her firing as retaliation for union support.

"She fought for her country in Iraq. She was well-liked, did her work well. Are you serious?" Phillips recounts angrily. Workers, he says, concluded: "'Damn, if they'll fire this nine-month pregnant woman, they'll fire me.' They were scared. We were so close [to winning union recognition], but that turned everything around." Still unemployed nine months later, Hicks was caring for her son and planning to return to college, but the union drive is now on the back burner.


Since the presidency of Martin Van Buren, the federal government has set standards for work under public contracts that go beyond the basic rights guaranteed all workers. In the 1930s and 1960s, for example, Congress passed procurement laws that guarantee many construction and service workers are paid the prevailing wage for their area and occupation. That requirement prevents government contracts from driving down wage levels and sets a floor for government contract workers, unionized or not. Union organizing can raise that floor. And Presidents Franklin D. Roosevelt, John F. Kennedy, and Lyndon B. Johnson, using their executive power, issued orders requiring affirmative action by contractors that have had lasting effects.

Under George W. Bush, as government privatized more functions, federal contracting increased by about half, according to the Economic Policy Institute. The EPI also estimates that nearly one-fifth of federal contracted workers did not earn enough to raise a family of four above the poverty line. Federal prevailing-wage rules apply to only a third of contract workers, and in 2004, investigations by the Department of Labor found that 80 percent of service contractors failed to comply with the law.

Military-apparel contractors must operate in the U.S. or its territories (though insiders say the rule is often violated). But there is no prevailing-wage standard for the 50,000 workers who make $4 billion a year worth of uniforms, protective vests, packs, and related apparel for the military. A UNITE HERE! union survey in 2006 found that the average military -- contract sewing-machine operator earned $6.55 an hour -- wages that were not only below poverty but also below the median sewing wage in the industry. Higher minimum wages have since helped, but overall "conditions have not gotten better," says Edgar Romney, secretary-treasurer for Workers United and a vice president of the -Service Employees International Union.

Until three years ago, Michael Bianco, Inc., operated a factory that made military backpacks and vests in New Bedford, Massachusetts, that a U.S. attorney called a sweatshop with "deplorable" conditions for its workforce of mainly undocumented immigrant workers. The company docked workers heavily for minor infractions ($20 for spending more than two minutes in the restroom, where the company limited toilet paper), cheated them of overtime pay, locked fire exits, and provided no health insurance. Workers relied on food stamps, charity care, and whatever public assistance they could get. A military inspector worked in the plant but only monitored product quality, not the rampant labor-law abuses around him.

Other contractors took over the plant, but conditions remained virtually as bad until the latest owner moved work to Puerto Rico and shut down the plant. Then, at the urging of Workers United/SEIU, Mitch Cahn, president of Unionwear, opened a new plant nearby with plans to hire many of the displaced workers. Applying "lean manufacturing" principles and embracing the union as good for both his workers and his business, Cahn pays his workers $12 an hour (plus $4 to $5 per hour for benefits) and still beats out his low-road competition. The reason: Workers are very productive and committed to their jobs. Competing against anti-union sweatshops, his company won about $5 million in military contracts and subcontracts this year, up from nothing three years ago.

Unlike Cahn, the biggest military-apparel contractor, Propper International, has all eight of its factories and 3,000 production workers in Puerto Rico. It pays near the minimum wage and, according to a lawsuit filed by workers, fails to pay legally required sick and vacation days. Also, says Workers United organizing director Liz Gres, "from the get-go, they've kicked up an anti-union campaign, threatening to close the plant, retaliating against supporters."

For example, Albert Torres, one of the most vocal union supporters in Propper's Adjuntas plant, was not called back from lay-off this summer when workers in his job category with less experience were recalled. "The biggest thing [workers] fear is they'll close the factory," Torres says. "There are a lot of older ladies who work there, and the economy is not so good. So they remain quiet."


Proponents of a high-road procurement policy -- which would apply across the federal government, not just to military contracting -- argue that the government should certainly not be rewarding corporate lawbreakers or driving down working conditions. Instead it should be encouraging higher pay and better benefits.

When government picks low-road contractors, it often ends up paying more anyway through food stamps, Medicaid, children's health subsidies, and much more. Those subsidies for bad contractors in the military -- garment industry alone cost $300,000 for a typical factory or $45 million a year for that industry, union researchers estimate, and $16 billion for all federal contractors. Also, there's evidence -- much from state and local experience -- that high contractor standards improve quality of contracted goods and services, attract more bidders, and do not raise overall expenses significantly.

"It's not just about worker treatment but about fairness to taxpayers," says Rep. Patrick Murphy, a Democrat from Pennsylvania, who requested a Government Accountability Office investigation of federal contracting. While stopping a "race to the bottom," he adds, government needs to end a system where "taxpayers are essentially charged twice" for low-road contractors.

High-road proponents want the federal government to screen out bad companies and develop an employment -- standards scoring system. With such a scoring system, agencies would provide credits for good behavior on most government bids. It would include rating whether the company as a whole -- not just the unit bidding for the contract -- provides a livable wage, quality and affordable health insurance, adequate and affordable pensions, and leave for family and medical needs. In addition to creating an office in the Department of Labor to monitor compliance, the government would also place a procurement -- standards representative in each federal agency (much as each agency now has a small-business monitor).

The proposal drew predictable fire from contractors, business lobbies, and Republicans. But there's also some resistance from budget hawks and procurement officers within government, who worry about costs (although accounting for the full cost and value would make high-road standards look good) or about burdening the procurement process with more requirements.

If the United States had a higher minimum wage, widespread unionization, universal health insurance, more generous Social Security, and stronger, more vigorously enforced fair-labor standards, then high-road contracting rules might be less needed. But in fact, other advanced countries that have better general labor standards often have stronger contracting rules to protect workers as well, far more ambitious than anything now being considered in the U.S.

Australia, for example, now uses a procurement system based on "whole of life" value for money spent, not just the lowest immediate price for the good being purchased. And government -- even through its contracting -- aims to be a model employer. The policy requires compliance with Australia's 2009 Fair Work Act that bolsters collective bargaining where it exists, requires employers to respect freedom of association, and directly assists workers who have historically had difficulty organizing to form unions and bargain.

The proposed high-road standards in the U.S. -- which many observers believe the administration will adopt in a weakened form -- do not address explicitly the right of workers to unionize. Besides raising the legal issues of labor-law preemption, proponents believed that specifically protecting unionization at government contractors, as Australia does, would stir up a hornets' nest of opposition. Still, business and conservatives attacked even the stripped-down high-road plan as a union payback.


Ultimately, if government intends to act as a model employer, it must also nurture collective bargaining. Consider the case of U.S. Foodservice, a 25,000-employee national distributor of food to institutions owned by two private-equity firms. It received contracts of around $2 billion over the past decade, most from the military, while systematically using dirty tactics to fight both existing unions and workers trying to organize. In Phoenix, Arizona, during 2008, workers narrowly lost a vote for recognition of the Teamsters after a vicious management attack. Under pressure from the National Labor Relations Board for its multiple, serious unfair labor practices, USF agreed to recognize the union and after long delays, is now negotiating a first contract with its employees. By doing business with such a labor scofflaw, the government makes a mockery of its own policies.

President Barack Obama at times strongly endorses unions, and early on he restored the Clinton administration's policy of prohibiting contractors from billing the government for anti-union actions. But he has done virtually nothing to help workers organize, especially with temporary suspension of efforts to pass the Employee Free Choice Act. Some labor lawyers and activists argue that Obama could adopt a government strategy to support collective bargaining in two key sectors of military contracting -- food supplies and apparel.

Prevailing court doctrine does not permit government to use contracting to directly achieve regulatory objectives. But courts have allowed government broad latitude to assure supply. So purchasing officials could assess risk of labor unrest before contracting; then if there is a risk, require contractors to reach agreement with a union that represents or seeks to represent the workers to maintain "labor peace," that is, keep workers from striking, picketing, or disrupting production. Obviously, if companies want a contract, it's in their interest to reach a settlement if workers choose to unionize.

During the two World Wars, unions made a trade-off of labor peace for easier organization of workers (though not without controversy about surrendering workers' rights). And there are numerous state and local labor peace ordinances and orders. For example, New Jersey requires any uniform vendor selling to the state to agree to be neutral and recognize the union by checking membership cards. The military has the kind of proprietary interest in dependable supply of food and apparel making it likely to avoid preemption problems.

What would happen if the military contracts for food and apparel operated under these two procurement rules -- the first favoring high-road employers, the second requiring labor peace agreements with current or prospective unions? "The people who own apparel companies will make less money, because their employees will be making more money," says company owner Mitch Cahn. Prices probably wouldn't rise: "Our unit costs continue to go down as pay goes up and so does productivity," Cahn says. But quality would: "When workers are happy, they're more productive and have a positive view of clients," he says. "They produce better quality and more predictably."

Cahn has no doubts about his pro-union, but lean and efficient, approach to producing for the government. "I wouldn't do it any other way," he says. And that's what Obama, through military-contracting rules, should say as well.