Francisco Soler v. G. & U., Inc., and Secretary, United States Department of Labor

OAKES, Circuit Judge

(dissenting):

I dissent.

The majority seems to approve the AU’s conclusion — adopted largely without comment by the Administrator — that the housing provided by these growers to migrant workers during the employment season was “primarily for the benefit of the employees,” and thus its fair value could be deducted from the minimum wage. The “benefit” these workers received was an extremely base level of shelter in substandard buildings, many of which were structurally unsound, unsanitary fire hazards, lacking indoor plumbing and adequate ventilation, surrounded by fields sprayed with pesticides. Soler v. G & U, Inc., 615 F.Supp. 736, 746 (S.D.N.Y.1985). According to the AU, the workers benefit from this housing through “worker comradeship” and reduced transportation costs, as indicated by the fact that no worker chose to live elsewhere. In the AU’s view, these benefits more than offset the benefit to the employer of the “mere presence of the workers on the farm.”

This analysis, however, ignores the most blatant evidence that the growers provided housing solely because their businesses could not function without it. For this reason I think the district court correctly found the Administrator’s decision “arbitrary and capricious.” See Motor Vehicles Mfrs. ’Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 , 103 S.Ct. 2856, 2866 , 77 L.Ed.2d 443 (1983) (reviewing court should “ ‘consider whether the [agency’s] decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment’ ” (quoting Bowman Transp., Inc. v. Arkansas-Best Freight Sys., 419 U.S. 281, 285 , 95 S.Ct. 438, 442 , 42 L.Ed.2d 447 (1974)); National Black Media Coalition v. FCC, 791 F.2d 1016 , 1024 (2d Cir.1986) (same).

I agree with the majority that, because in most cases housing and board primarily benefit the employee, 29 U.S.C. § 203 (m) establishes these as presumptively “reasonable costs” deductible from wages. Whether in a particular case that presumption has been rebutted is determined by balancing the relative benefits to an employer and employee. I cannot, however, agree with the majority that to overcome the presumption requires either a showing that the lodging “is of little benefit to an employee,” or “substantial evidence” that the housing is “a burden imposed upon the employee in furtherance of the employer’s business.” Both logic and case law dictate that a “facility” may benefit an employee substantially and yet primarily benefit the employer. 1 See Masters v. Maryland Management Co., 493 F.2d 1329, 1334 (4th Cir.1974); Schultz v. Hinojosa, 432 F.2d 259, 266-67 (5th Cir.1970).

The district court listed five measures of benefit to the employer — maintaining an adequate work force, increased efficiency, the nature of the job, accomplishing the job, and practice in the trade or business. Although the AU did not make specific factual findings on the extent to which the *1112 growers depended on migrant labor or on the availability of off-site housing, there was evidence in the record that clearly showed the growers more than 50% dependent on nonlocal labor and the very limited availability of alternative housing, at a price beyond the reach of the workers. 2 Moreover, the AU found that the payroll deductions covered in most cases only 60% of the cost of providing housing to workers. No profit-seeking business would furnish housing on this basis unless doing so would enable it to reap substantial efficiency benefits or unless it were necessary to attract an adequate number of workers. That the growers provided no more (and sometimes less) than was required to meet minimum standards of habitability leads inescapably to the conclusion that this housing was provided solely because it was the least that was absolutely necessary to the operation of the growers’ businesses.

Another benefit listed by the AU, “worker comradeship,” borders on the outrageous. The facts here showed that groups of five or more people sometimes cohabited in one small apartment, and that the state-approved occupancy levels were at times exceeded in the various camps. Clearly, one man’s “comradeship” is another man’s overcrowding. While, as the majority notes, “resident workers did not incur daily transportation costs to and from the farms,” it seems unlikely that on-site housing was provided primarily for the workers’ convenience. More plausibly, the growers locate housing on the farms to control costs associated with attracting an adequate work force. Moreover, the employer provides itself with a labor pool that is available at flexible hours and on short notice — an important consideration in a business subject to the notorious vicissitudes of nature. At most, the employees benefit only incidentally, and where off-site housing is nonexistent, any benefit from reduced transportation costs is illusory.

Of course, the workers do benefit from not having to secure and maintain alternative housing, but, again, the degree to which they benefit depends upon the existence of alternative housing and the quality of that housing. Though I concede that to some extent the statutory scheme already accounts for quality through the determination of the “fair value” of the housing provided, it does not dispose of the threshold question of whether the deduction of that “fair value” is authorized as “reasonable.” 3

Finally, that the growers, who had always provided housing for migrant workers, first began to deduct charges for that housing immediately following the extension of the FLSA’s coverage to agricultural workers, seems to me an obvious attempt to evade what the Government admits was the primary purpose of section 203(m): “to prevent increases in charges for rent, board, groceries, and merchandise, so as to offset the increase in wages provided and intended by the Act.” Walling v. Peavy-Wilson Lumber Co., 49 F.Supp. 846, 862 (W.D.La.1943); see also 83 Cong.Rec. 7408 (1938).

Applying the above considerations, I agree with Judge Tenney that “[t]he record indicates that although the plaintiffs received some benefit from the housing provided, the labor camps were set up primarily for the growers’ benefit since the housing was needed to ensure an adequate workforce to operate the farms.” 615 F.Supp. at 749 . Indeed, I believe this is the only conclusion that can be reached from *1113 these facts. Cf. Pollgreen v. Morris, 770 F.2d 1536, 1545 (11th Cir.1985). Therefore, I would affirm the decision of the district courk

. This principle is clearly demonstrated in cases dealing with 29 U.S.C. § 203 (m)’s analogue in the tax laws, 26 U.S.C. § 119 (a) (1982). See, e.g., Adams v. United States, 585 F.2d 1060, 1063-65 (Ct.C1.1978) (chief executive officer’s house furnished for employer’s convenience). I believe that even under the strictest formulation of this test, that is, whether the benefit given an employee is provided "solely because the employer’s business could not function properly unless an employee was furnished that benefit on the employer’s premises," Commissioner v. Kowalski, 434 U.S. 77, 85 , 98 S.Ct. 315, 320 , 54 L.Ed.2d 252 (1977), the housing given to these workers could not be considered "compensation." It appears anomalous to me that such housing could at the same time be considered "wages."

. The suggestion that “the growers offered housing to those workers who preferred to live on the farms rather than seek living accommodations in nearby areas," if not tragically unreal, is almost risible. As Judge Tenney noted, “[b]oth sides agree that the migrant workers could not afford to work for the growers if housing were not provided.” 615 F.Supp. at 739 .

. Nowhere does the Administrator account for the special nature of migrant labor; rather, the ALJ’s analysis appears to be founded on a stationary local work force model. In reality, however, the migrant worker may more closely approximate the model of the employee who travels to accomplish his employer’s business, the cost of whose out-of-town accommodations is specifically not recognized as "reasonable" and, therefore, may not be included in computing wages under 29 C.F.R. § 778.217 (b)(3) (1987).