Appendix — Maryland v. Wirtz

Supreme Court brief1968

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. APPENDIX A

“OpINIoN or Court

“= (Filed June 13, 1967)

‘In The United States District Court ‘eo the

District of Maryland

oe * |

Civil ne No. 18005

‘_,_--- "State of Maryland, et al., :

ay | an Plaintiffs,

oN v. “*)

W. Willard Wirtz, Secretary of Labor United States

Department - Labor, et al., — -

Before: Winter, Circuit Judge, Thomsen, Chief J —

and Northrop, District Judge.

WintTeER, Circuit Judge:

- ‘This is an action brought by the State of Maryland, in

‘which twenty-five other States have interven parties

plaintiff, asking the Court to ‘declare unconstitutional the

1966 Amendments to-the Fair Labor Standards Act! (the

“1966 Amendments”) insofar as they, apply to employees

of the plaintiff States, and to enjoin enforcement of the.

Act, as amended, against the States. Although the 1966

Amendments extend the Act’s coverage to employees ‘of

enterprises, whether public or private, engaged in the

operation of schools, hospitals and related yinstitutions,

“

- street, suburban or interurban electric railways, and local’

trolley and motorbus catriers, the States, in briefs and

1 Public Law, 89-601, 80 Stat. 830, ‘amending the Fair Labor

a of 1938, 29 U.S.C.A. . $5201, et seq. +

| % a

oral- argument, challenge ‘iihieatice of the ‘Act “tie to

public schools, hospitals and related institutions; and this _

Court will limit its consideration accordingly. Ae ai

Defendants. ‘have filed a motion-to~dismiss or, in thé

alternative, a motion for: summary judgment. .Plaintiffs

have. filed cross-motions for'summary judgment. The par-

ties have entered into extensive stipulations of fact with

: regard to Maryland, Texas and Ohio. It is agreed that _

these data may be taken as representative of the situation ©

in the other plaintiff States. Some objections to relevancy

and materiality have been raised, but the Court is satisfied

that the conclusions reached herein would not be affected

by the exclusion of any of the stipulation evidence. i

INTRODUCTION

The Fair Labor Standards Act, 29 U.S.C.A. 8§ 201, et seq.,

was first enacted in 1938 as a result of Congressional find-

ings, recited in § 2(a) of the Act, 29 USCA. § 202, that:

“the existence, in industries engaged in commercé or

in the production of goods for commerce, of labor

conditions detrimental to the maintenance of the

minimum standards of-living necessary for health,

efficiency, and general well-being of workers (1) ©

causes commerce and the channels and instrumentali-

ties of commerce to be used to‘spread and perpetuate

such laber conditions among the workers of the sev-

eral States; (2) burdens commerce and the free flow

of goods in commerce; (3) constitutes an unfair

method of competition in commerce; (4) leads to labor

. disputes burdening and ‘obstructing commerce and the -

' free flow of goods in commerce; and (5) interferes with

the orderly and fair marketing of goods in commerce. ~

It was therefore‘ declared to be the policy of Congres, ,

through the exercise of its power to regulate commerce

among the several states “to.correct and as rapidly as

practicable to eliminate the conditions above referred to

in such industries. without, substantially curtailing employ-

ments or earning power.” 29 U.S.C.A. § 202(b). Congress.

JARS ‘

accordingly provided that entployers must pay those em-

' pldyees who were “engaged in commerce or in the@*produc- -

tion of goods for commerce” a minimum hourly wage,

- 29 U.S.C.A. § 206(a), and one and one-half times their

regular hourly rate for weekly hours over a specified maxi- -

- mum, 29 U.S.C.A. § 207(a) (1). States and their political

subdivisions were excluded from. the Ags definition “of

“Employer.” 29 U.S.C:A. § 203(d).

‘The constitutionality of the original Act was snenned

in United States -v. Darby, 312 U.S. 100 (1941). The Court

stated, inter alia, that the power of Congress ove? commerce.

“extends to those activities intrastate which so affect inter- _

' State commerce or.the exercise of the power of Congress

over it as.to make. regulation of them appropriate means

to the attainment of a legitimate end, the exercise of the

4 granted power of Congress to regulate interstate /com-

merce.” ‘Id., at.p. 118.2 4

The Act has been amended several times,? but until the

1966 Amendments state ee were not brought within

its coverage.

In 1961 the “enterprise” concept was introduced. 29

U.S.C.A. § 203(r), 75 Stat. 65.. In addition to employees

previously covered.— those personally engaged in inter-

‘ state commerce or in the production of goods for commerce

— the Act was extended to cover “the related, activities

performed (either through unified operation er common

* ~ 2Subsequent decisions have pointed ‘out that “Congress did not

exercise in this Act the.éull stope of the gommerce power,” but rather

chose “to regulate only part of what<onstitutionally can regulate.”

Walling v. Jatksonville Paper Co., 317 U.S. 56%, 570-5¢1 (1943) ;

Kirschbaum Co. v. Walling, 316 US: 517, 521- 522 (1942). See also

Overstreet v. North Shore Corp., 318 U. S. 125, 128 (1943) ; Higgins

v. Carr. Bros. Co., 317 U.S. 572, 574 (1943) ; Mitchell v. H. B..

- Zachry Ca., 362 US. 310, 313 (1960).

--* 8 The principal amendatory enactments have been the Senile.

Portal Act of 1947 (61 Stat. 84), the Fair Labor Standards Amend-

ments of 1949 (63 Stat. 910), the Fair Labor Standards Amendments

of 1955 (69 Stat? 711), the Fair Labor Standards Amendments of -

. 1961 (75 Stat. 65), the Equal Pay Act of 1963 (77 Stat. 56), and

the Fair Labor Standards Amendments of 1966 (80 Stat. 830).

. *,

a i i ow

4a-

control) by any person or persoris for a common business

purpose, and includes all such activities whether performed .

in one or more establishments or by one or more corporate

or other organizational units including departments of an

establighment operated through leasing arrangements, but

. Shall not include the related activities’ performed for such

enterprise by an independent contractor.” An “enterprise

‘engaged in commerce or :in the production of goods ‘for ~

commerce,” and therefore covered by the Act, was defined

in terms of a minimum annual dollar volume of gross sales —

and, in some instances, the particular type of business in- .

volved. See 29 U.S.C.A. § 203(r) and (s). Thifvalidity and

scope of the enterprise concept has not yet been decided

‘by the Supreme Court.

_ The 1966 Amendments extended ‘the enterprise basis of

coverage and brought within the Act public as well as ©

- private enterprises engaged in operating schools, hospitals ©

and related institutions, street, suburban or interurban

electri¢ railways, and local trolley or motorbus carriers.*

The definition’ of “employer” in 29°U.S.C.A. § 203(d) was

amended to elintinate the existing exclusion of States and

their political subdivisions. insofar as they engaged in those

activities. In fitting employees first covered by the 1966

Amendments into the minimum wage and maximum hour

* scale of employees theretofore covered, the 1966 Amend-

‘In addition to amending the Act’s definition of “employer” (see

text, infra), other pertinent changes effected by the 1966 Amend-

ments were: an existing exemption for hospitals and certain related

institutions and schools for handicapped or gifted children, formerly

contained in 913(a)£2) (iii), was eliminated, and such institutions

and schools well as elementary and secondary schools and insti-

tutions of*higher learning, were designated in §3(s)(4) as types

coverage would not depénd on an annual gross -

istin oss volume test for local transit -

| er §3(s)(2)) was. ioweréd “from $1 million to .

$500,000 until Feb. 9 and to $250,000 thereafter (§3(s)(1));

and the definition of “enterprise” in §3(m) was amended to provide

that local transit operations, the above described schools and hospitals

and related institutidns, whether public or private or for profit or

not for profit, would .be regarded’ as operated for a “business”

purposé. = o

e ~ 5a

ments provide for‘an eggalation of the minimum wage and

of maximun? hours over a period of five years.5

The 1966 Amendments, which thus had the effect of ex-

tending the minimum wage‘and overtime provisions of the

Fair Labor Standards Act to a portion of the labor market

not theretofore, covered,® are attacked insofar as they ex-

tend coverage t6 certain employees of public schoo]s, hos- |

pitals and related titutions. Despite the imp ession 'e

sought to be creat by several of the plaintiff States;

extension of the Act to Fee groups of staté employees

_ was not a concept first advanced in the Second Session of

the 89th Congress, under circumstances which would have

prevented the Stgtes from presenting their views in oppo- -

sition, to the proposal, had they sought to keep eee of

matters under consideration by Congress.

_. The first legislative effort to extend coverage to some

state employees occurred in the First Session of the 89th

Congress. 7 During the wing 8 = of the 89th 7.

5 Thiis, while the minimum wage he employees theretofore.

covered by the Act is $1,40 per hour, for the first year after February

1, 1967, and $1.60 per hour thereafter, minimum wages for employees

newly covered are $1.00 per hour, -for the first year and increase 15¢.

per year for each year thereafter until the level of $1.60 is reached.

Similarly, overtime must be paid to employees theretofore covered

who work in excess of 40 hours per week, while overtime must be

paid to newly covered employees who work more than 44 hours,

the first year, 42 hours, the second year, and 40 hours each year -

thereafter, respectively, after Felruary 1, 1967.

® While the 1966 Amendments to the Fair Labor Standards Act,

inter alia, extend the Act’s coverage to employees of schools, hospitals

and related institutions, electric railways; trolley and motorbus sys-

tems, whether public or private, not every emplo yee of such enter-

prise is made subject to the Act. Section 13 of the Act, 29.U.S.C.A.

§213, as it existed prior to the effective date of the 1966 Amendments,

and as amended by the 1966 Amendments, exempts certain classes

~. .of emplayses. For our purposes, the significant exemption is that of

‘a person ‘employed i in a bona fide executive, administrative o¢-profes-

sional capacity (including any employee employed i in the capacity of aca-

demic, administrative personnel or teacher in elementary or ny

school * * *).”:

* During the 89th Congress, Ist Session, H. R. 8259, was intro-

duced in response to a special message of. President Johnson urging,

when H. R. 137 12, which, as amended, was enacted as the

1966 Amendments, was introduced into the House of Rep-

resentatives, it contained language which would have ex- _

tended coverage (subject to the exemptions in § 13)8 to -

any person “in connection with the operation of a hospital,

an institution primarily erigaged | in the care of the sick,

‘the aged, the mentally ill or defective who reside on the

premises of such institution, a school for mentally handi-

capped or gifted children, or an institution of higher ‘edu-

cation (regardless of whether or not such hospital; insti-

_ tution or school. is public or private or operated for proftt

or not for profit) * * *.”8 (Emphasis supplied.) During

legislative consideration of the bill, the only variation as

to‘the extent of coverage, pertinent to this law suit, was -

whether public or private school employees covered should

be limited to those employed by “an institution of higher

_education” or whether they should include persons em-

“ ployed by “an elementary, or secondary school. 10 The

inter alia,-extension of the Fair _n Standards ‘Act to an additional

4% million workers. H. R. 8260; introduced b at Mr. Roosevelt, also -

would have extended coverage of the Act. ither bill purported

to be applicable to state, employees. While hearings on both bills

were being conducted by the House Committee on Education and

Labor, to which they had been referred, Mr; Roosevelt introduced

another bill, H. R. 10518. This new bill extended coverage to certain

employees of public and private hospitals and institutions of higher

education regardless of whether public or private, profit or.non-profit.

' H.R. 10518 was referted to the Committee on Education and

Labor which, on August 25, 1965, reported the bill favorably, without

‘amendment, ‘and recommended that it be passed, House Rpt. No.

871, 89th Cong. ., lst Sess. H. R. 10518 was then committed ‘to the

Committee of the Whole House on the State of the Union and no

Zip. 861. was taken thereon. Cong. ‘Quart. Almanac, 1965, Vol.

ee, n. 6, supra.

The bill as originally introduced would have also extended

_ ¢overage to émployees of a “‘street, suburban or interurban electric

"railway, or local trolley or motorbus carrier, if the rates and services

of such railway or carrier are subject to regulation by a State or

local agency (regardless of whether or not such railway or carrier —

apis public.or private or operated for profit or not for profit) ——

“* (Emphasis supplied.).

10 As introduced, the bill did not apply to einplayeed- -of' elementary 7

~ and secondary schools, aknoven it did apply to employees of insti-

“

_ question was resolved by extending coverage to employees

of elementary and secondary schools, as well as institutions

of higher learning, subject, again, to the exemptions con-

tained in § 13 of the Act, as also amended by the 1966

Amendments.

tutions of higher learning, whether public or private. After the

House Educatioa and Labor Committee reported the bill favorably,

with amendments, the House resolved itself ‘into the Committee of

the Whole House on the State of the Union. At this point in the

legislative process, Mr. Collier, of Illinois, offered an amendment <¢

to extend coverage to employees ‘of elementary and secondary schools.

The amendment was adopted and the bill passed the: House as so

amended. He made the following statement about the rationale of

his amendment, viz.,

“(Mr. Collier) Mr. Chairman, these aiendméfits are simple and

sound and essential amendments. I do not believe that any meniber

of, this body who believes in the principle and»purpose of the biil

before us today can oppose them. -

’ “What we have done here, if Members will review with me

the language of the definition of ‘enterprise,’ is to ‘say that in sum

and substance the employee who works as a dishwasher in a home

for the sick or the aged or mentally ill, or one who works as a dish-

washer in a college or university cafeteria, or one who works as

iu dishwasher, for example, in a mental institution, is covered under

this bill. Yet, the.same employee working as a dishwasher in ast

elementary or high school cafeteria is not covered. -

. “All I want to do is to: establish equity in application of the bill.

Let me tell why. I believe I can best’explain it by giving an ange.

This is an actual case.

- “In a suburban area of one of our southern. States, school officials

were recently notified that poverty funds were availabl ‘to hire stu-

- dents who qualified under the. poverty family income vel at $1.25"

per hour. What happened was this: The same school had working

in the cafeteria women who had been employed for years — in

fact, one was a widow — drawing 85 cents an hour for working in

the school cafeteria. Yet, children'were handpicked and,given $1.25

~ an hour to wash blackboards in the,same school.

“I do not-believe there is anyone sitting in this House today who

can justify this type of situation realizing, as we all must, that there '

will be, under the poverty program a $1.25 hourly wage level. H

not, then I would have grave reservation as to the depth of the sin- ©

cerity such @ Member w maid | have in the principle of minimum wage.

. Pucinski) Mr. Chairman, will the gentleman yield?

. Collier) I yield to the gentleman oe m Illinois...

“Me Pucinski) Mr. Chairman, if I ynderstand this amendment

citi it will emene a different fair labor ‘standard | _——

The plaintiff States attack the constitutionality of the

1966 Amendments on the ground that the activities of the

States and various school districts in the operation of -

schools, hospitals and related institutions are not com-

-merce, 11 that the “enterprise” concept embodied in the |

Act. by. amendmehts adopted in 1961 is unconstitutional,

and that -the 1966 Amendments unconstitutionally impugn

state sovereignty. 12 _ &,

: / ‘ " fo a )

for people presently employed in elemen secondary schools”

and universities.

“(Mr. Collier) That is exactly correct. / ‘te not want. any inequi-

ties such as we have been talking about today. We are moving to

achieve ‘equity which means treating everyone alike.” (Emphasis

supplied.) 112 Congressional] Record (May 25, 1966), pp. 10820- .

10821.

The Senate a on Labor and Public Welfare reported the

bill favorably, with an amendment to exclude employees of elemen-

tary and secondary schools, and this amendment was adopted. Senate

Report No. 1 , August 23, 1966, 2 U.S.C. Congressignal and

Administrative News’ (89th Congress — Second Session, 1966), p.

- 3002. The Senate Committee, however, did not undertake to le

any other public employees from coverage under the Act. ex-,

cl om coverage was subsequently restored by the Conference

mittee appointed to iron out differences between the House and

Senate versions of the legislation. Conference Report No. 2004,

September 6, 1966, 2 U.S.C. Congressional and Administ ive News,

supra, p: 3047. It was with an extension of coverage to employees

of elementary and secondary schools ~ H. R. 13712 was finally

enacted and signed into law.

11 Texas words this point as follows: “A state in the performance

of the functions of its sovereignty is not engaged in commerce: within .

the meaning ‘of the commerce clause of ” constitution of the United

States.”

12 Maryland also. advances an argument based upon the Eleventh

Amendment and its asserted conflict with the provision of-the Fair

Labor Standards Act which permits an employee not paid in accord-

ance with the minimum wage or ovértime provisions of the Act to

bring suit if such suit is not brought by the Secretary. 29 U.S.C.A.

s2i6 This argument is beyond the scope of this consolidated pto-

and will not be further considered at this time.’ It may be-

re if and when the basic validity of the 1966 Amendments is

established and some State employee attempts to sue his employer.

Of course, when the argument is advanced and if it is: found valid,

due regard will be given to the other enforcement provisions con-

« .

nerndernarte aed. Sariget oh Sarddcesa

”

aa icin for the reasons hereafter stated, that all een

of these contentions should be resolved against the plain-

tiffs; that to the extent of the scope of this proceeding the

1966 Amendments‘ should be declared valid and constitu- -

tional, and that injunctive relief should be denied.

°@

COMMERCE POWER

_.. Maryland and Texas argue that the activities of a State

-do not constitute “commerce” which may be regulated

under the exclusive power vested in Congress to regulate

interstate and foreign commerce. Maryland argues more -

specifically that, with respect to the operation of public

schools, the State’s activity has three attributes which re-

move it from any legitimate definition of commerce, i. e.,

the activity is non-profit, it is purely governmental, and

there’is no non-governmental system to compete with or

substitute for it.

_ At the outset, it is well to note that these iii

‘are based upon a more restrictive premise than the decided

will support. United States v. Darby, supra, uphold-

ing the constitutionality of the Fair Labor Standards Act

generally, is only one of many decisions which holds that

the power of Congress over interstate commerce includes

not only ‘that which in itself is interstate commerce but _-

also “extends to’ those activities intrastate which so affect

_interstate commerce or the exercise of the power of Con-_ .

gress over it, as to make the regulation of thetn appropriate |

tained in 29 US.CA. §216 and the separabili language in 29

U.S.C.A. §219. 7

Maryland and Texas also argue that their schools and hospitals are -

the “ultimate consumers” of commodities. purchased from out-of-

state, that such commodities are not “goods” as defined by 29 -

U.S. CA. §203(1) and, as a consequence, the ‘Fair Labor Standards

Act is not applicable to them. Thisargument is one of statutory

construction, not of constitutional significance, and is also one beyond

the scope of this proceeding. It should be asserted in a suit in which .

the application of the Act to a particular school or hospital is brought

into question, so that after full development of the facts, it may be

determined if that particular capenpeses meets the statutory tests for

coverage.

- means to the attainmest ofa legitimate end.” Id., at p. 118.

See also, United States v. Wrighitwood Dairy Co., 315 US.

110, 119 (1942); Heart of Atlanta Motel, Inc. v. United

States, 379 U.S. 241, 258 (1964); Katzenbach v. McClung,

379 U.S. 294, 300-801 (1964). Among the decided cases,

the most extreme example of the reach. of the commerce

power of Congress to regulate local activity is Wickard v.

Filburn, 317 U.S. 11 (1942), where a: farmer’s consumption

of wheat raised on his own farm‘ was held within the reach

- of Congress to regulate under the commerce clause because

that consumption, and its counterpart on other farms, ex-

erted a substantial economic effect on interstate commerce.

Thus, the proper inquiry is not limited to a consideration

of whether the activities of the States ‘in operating public '

schools, schools of higher edueation or hospitals, are “com-

“merce” as such. The proper inquiry is much broader. It -

is whether such activities are commerce or affect commerce,

even though local in nature, and hence within the power _

) _ of Congress to regulate commerce. ,

Maryland’s claims that public schools are : saint.

purely governmental and not in direct competition with

non-governmental systems are not shibboleths to determine

what is and what.is not commerce. “Commerce” is not con-

fined to “business” activity in a conventional sense; it in-

cludes non-business and non-profit activities, whether pri-

vate or. governmental in nature and irrespective of whether

they compete with or may be substituted for by private

. enterprise. Powell v. U. S. Cartridge Co., 339 U.S. 497

(1950); Mitchell v. Lublin, McGaughy & Asso., 358 U.S.

207 (1959); ‘United States v. Ohio, 385 U.S. 9 (1966): Wirtz

wi. E: Lee Electric Company, 339 F. 2d 686 (4 Cir. 1964); .

Mitchell v. Owen, 292 F. 2d 71 (6 Cir. 1961); Goldberg v.

' Nolla, Galib & Cia., 291 F. 2d 371 (1 Cir. 1961), cert. den.,- -

368 U.S. 900 (1961): N.L.R.B. v. Central Disp, & E. Hosp.,

145 F. 2d 852 (D.C. Cir. 1945), cert. den., 324 U.S. 847 -

. (1945).13 In Public arene Authority of Birmingham v

18 Pertinent also are. ‘the following authorities which have” =

to be “commerce,” non-commercial interstate transportation of

sons and chattels; Edwards v. California, 314 U.S. 160 (1s41y

lla

Goldberg, 298 F. 2d 367, 370 (5 Cir. 1962), the Court, in

holding that federal employees engaged in processing ‘claims

for the payment of social séeurity benefits and preparing

government checks for beneficiaries were producing goods

for commerce, summarized prior holdings by declaring that ~

“there need be no private parties or profit motive present

to constitute commerce.” It will be noted that this was -

said in a case in which all.of the factors urged by Maryland

to render her activities not within the commerce power of

Congress were present: the activity was governmental,

—— ‘and. could not be performed al ee enter-

_ prise.

. The fost is that under the stipulations before us ieee

is abundant evidence that the States, in the performance

of the functions where certain employees are covered by

the Act, as artended by the 1966 Amendments, are not only

engaging.in commerce, or in the production of goods for

commerce, but are engaging in activities, local in nature,

which have a substantial effect on cOmmerce. A brief re-

cital of some of the stipulations between the parties is’

sufficient to demonstrate.

_ {In the current fiscal year an estimated $33. 3 billion will

be*spent by State and local public. educational institutions

_in the United States. In the fiscal year 1965, these same

authorities spent $3.9 billion operating public hospitals.

. Expenditures of this magnitude are bound to eshte an

‘- " enormous impact on interstate commerce.

For Maryland, which was stipulated to be typical of the

plaintiff States, 87% of the $8 million spent for supplies

(movement of indigent persons. across ‘state fines) ; Thornton v

United States, 271 U.S. 444 (1926) (diseased cattle ranging cadens

. State lines) ; Caminetti v. United States, 242 U. S. 470 (1917) (trans-

portation of women across state lines for non-commercial immoral

purposes) ; Brooks v. United States, 267 U.S. 432 (1925) (transpor-

_ tation of stolen articles) ; United Ss tates v. Hill, 248 U.S. 420 (1919)

(transportation. of liquor for one’s own Consumption). As a latest

expression of the state of the law, Heart of Atlanta Motel, Inc. v. .

United States, supra, at pp. 256-257, declares: “Nor does it make

any difference whether the transportation. is commercial in character.”

A 2

’ and equipment by its public school system during the fiscal ©

year 1965 represented direct ‘interstate purchases. Over

55% of the $576,000 spent for drugs, x-ray supplies and

equipment and hospital beds by the University of Maryland

Hospital and seven other state hospitals were out-of-state

purchases. With respect to seven other state hospitals

_° which spént $875,000 on such items during the comparable

period, the. parties have stipulated that all or “the most

part” of such items were manufactured outside of Maryland.

In Ohio, also’stipulated to be’ typical of all of the plaintiff

States, there are 708 School. districts, 3 of which (stipulated

to be typical of the other school districts) purchased a total

of $323,000 in supplies in the fiscal year 1966. Approxi-

mately 50% of these purchases were directly from outside

of the state. Ohio’s six state universities spent $9 ion

. ‘on certain specified supplies in that year, over 42 of

which were purchased directly from out-of-state,. with an

. undetermined portion of the remainder _— es

outside the state. a"

In Texas, all text books originate outside itis state, and -

it is stipulated that “the major portion” of drugs and hos-

pital equipment is either purchased directly from out of

the.state or is at least manufactured in other states.

The interstate flow of school and hospital supplies and

equipment is, in-large part, inevitable because of the non- -

diffusion of manufacturing supplies. For example, there

are no Maryland suppliers for fourteen out of eighteen 4

major. categories of. school supplies and equipment. Even .

larger States, such .as.Ohio and Texas, have no producers,

or very few ‘producers, of text books, science equipment

- and physical. education equipment.

Not only do public schools and hospitals give rise to a

large interstate flow of supplies.and equipment, having a

correspondingly substantial effect upon ‘interstate com-

merce, public schools and hospitals are directly engaged in

commerce and the production of goods for’ commerce by -

virtue of federal aid to education and health, involving

_ billions of dollars. Over $4 billion is spent each year in

federal grants, of which over $2 billion goes for.elementary.

’

1Ba

—_

and secondary public education, 50% of which is granted

directly to local school districts under programs requiring .

extefisive communications between local schools and re-

gional and national facilities of the United States Office of

Education. In the area of health services, federal expendi-

tures during fiscal year 1965 amounted to $5.billion, while

’ State and local. government expenditures amounted to $4.9

billion. Included in the total of federal expenditures, are

annual federal assistance of $260 million for the construc-

tion and enlargement of hospitals and other health facil-

__ ities,.annual medical research grants of over $600 million,

and public health grants of $65 million to support State‘and

local health agencies, both in operating costs and in pro-

grams for the control of disease. Additionally, the Social.

_ Security Administration ‘during fiscal 1967 will pay out

es sd billion for hospital services under the Medicare pro-——.—

which 94% of the hospitals in the country, both

Sublt c and private, currently participate. Another 1 billion

will be spent for direct reimbursement to hospitals and

physicians for services to eligible patients. These programs

create a regular in flow of funds to participating .

hospitals, erfensve inert communication and prepara- —

‘ tion of materials for in te transmission by both local

‘hospitals and state agencies, including engineering and.

architectural plans for ‘hospital construction and enlarge-

_ment, research data and reports, medical benefits claims, .

' and numerous other types of reports and records.

“Ideas, wishes, orders and intelligence” are “subjects of

- commerce,” Western Union v. Lenroot, 323 -U.S. 490,. 502-

_ 503. (1945), and the preparation of written documents and

other materials for out-of‘state transmission, as well as

the actual] interstate transmission of furids, documents and

other communications,. are all activities ‘in commerce.

Beneficial Finance Co. v. Wirtz, 346 F. 2d 340 (7 Cir. 1965);

Willmark Service System, Inc. v. Wirtz, 317 F. 2d 486

(8 Cir. 1963), cert. den., 375 U.S. 897 (1963); Public Build-

. ing Authority of Birmingham v. Goldberg, 298 F. 2d 307 |

(5 Cir. 1962); Mitchell v. Kroger Company, 248 F. 2d 935

. (8 Cir. 1957); Aetna Finance Co. v. Mitchell, 247 F. 2d 190

' (1 Cir. 1957). Thus, from these activities, as well as the

14a

out-of-state purchases and the receipt of interstate ship-

ments which are either stipulated or inescapably must be

inferred from the facts stated, the conclusion is inevitable

that the activities of the states are “in” commerce, consti-

tute the production of goods for commerce, or substantially —

affect commerce, although local in nature. Leaving aside _

for the moment the question of state sovereignty, I con-

clude that these activities are clearly within the power of

Congress to regulate commerce.

‘THE ENTERPRISE CONCEPT

The only authorities to pass on the constitutionality of

the enterprise concept, Wirtz v. Edisto Farms Dairy, 242

. F.S..1 (D. S.C. 1965), and Goldberg v: Ed’s Shopworth —

_ Supermarket, 214 FS. 781 (W.D. La. 1963), have both

sustained its validity. From my examination of,the perti-

nent authorities, I am in accord with the ™ reached

in those decisions and conclude that the enterprise concept

embodied in the Fair Labor Standards Act in 1961, 29

U.S.C.A. § 203(r), represents a constitutionally valid exer-

cise of the power of Congress to regulate commerce.

AsI have récited, prior to 1961 the Fair Labor Standards

Act applied only to those employees who themselves en-°

gaged in commerce or in the production of goods for com-_ -

merce, By the provisions of the 1961 Amendments, all —

employees of various enterprises whose activities related

_ to the movement of goods in commerce, including those

engaged in selling, distributing or using goods that had

previously moved in commerce became subject to the Act,

subject, of course, to the exemptions contained in § 13 of —

‘the Act, 29 US.C.A. § 213.14

14The 1961 extension of the Act’s coverage had the effect of

adding over four million workers to the twenty-four million pre-

viously within the Act’s protection. This extension of coverage was .

the result of deliberate and lengthy consideration by at least two

‘Congresses. (Senate Report No. 145, 87th Congress, First Session,

pp. 2, 10; House Report No: 75, 87th Congress, First Session, pp.

+ iF Exercise of the power to extend coverage was based upon ~

the conclusion, discussed in detail in the Committee Reports of both

the Senate and the House, that the additional coverage was necessary

Translated into a.concrete example, the enterprise con-

cept, as amended by the 1966 Amendments, means that in

a private or public hospital the nurse’s aid or maintenance

worker, even though not engaged in commerce or in the °

production of goods for commerce, is subject to the mini-

mum wage and overtime provisions of the Act if some

employee of the hospital is engaged in commerce or in the

production of goods for commerce, or handling goods in

commerce. That Congress may constitutionally so'extend __

coverage seems clear from the decided cases, of which

Congress was fully aware when it first adopted the enter- ©

.prise concept in 1961.15 Indeed, it may properly be con-

cluded that in adopting the enterprise concept Congress

did not exercise to the limit its full power to regulate com- —

merce, because application of the enterprise ‘concept is

conditioned upon the presence of some employee directly

engaging in commerce, producing goods for commerce or

handling goods in commerce. From the authorities it may

be concluded that the enterprise concept could have been

conditioned upon some employee engaging in local activity

“affecting commerce” short of the actual interstate activity

previously mentioned.!¢ |

One of ‘the leading authorities pointing to the conclu-

sions just stated is Labor Board v. Reliance Fuel Corp.,

371 U.S. 224 (1963), in which the National Labor Relations

’ Board’s jurisdiction over unfair labor practices committed ,

_ by a retail distributor of fuel oil, all of whose sales were.

local where the.retailer obtainec the oil from a whole-

saler who imported it from another state, was upheld. The

_ conclusion resulted from the Court’s construction of the

to accomplish the Act’s original purposes anc vas within the scope

of the federal commerce power as evidenced vy existing precedents

under the National Labor Relations Act and other regulatory statutes.

15 See e.g., Senate Report: No. 145, April 10, 1961, 87th Congress

First Session, 2 U.S. Code and Adm. News (87th Cong: i, Ist Sess.,

1961), pp. 1622-1623.

16 Tn this regard, the authorities cited in footnote 2, supra, all of

which were decided prior to the 1961 Amendments are pertinent.

They clearly indicate that prior to 1961, there were interstices in

the Act: which Congress could constitutionally fill. As pointed: out

in the text, they were only partially filled in 1961.

- 16a‘

- National Labor Relations Act to vest in the Board “* * *

the fullest jurisdictional breadth constitutionally permissi-

ble under the Commerce Clause” (Id., at p. 226), and the .

citation of Wickard v. Filburn, supra, to support. the con-

clusion that the -distributor’s acfivities affected commerce.

and were within the constitutional reach of. Congress to

regulate. Reference was also’ made to Polish Nat. Alliance

v. N.L.R.B., 322 U.S. 643 (1944), for the’ proposition that

in enacting the National Laber Relations Act “* * * Con-

gress had explicitly regulated nit merely transactions or —

goods in interstate commerce, but‘ectivities which in iso-

lation migMt be deemed to be meréTY local but in the

interlacings of business across state lines —- affect

such commerce.” Id., at p. 648.

Similarly, in N.L.R.B. v: Denver Bldg. & Constr. Trades

Council, 341 U.S. 675 (1951); Bldg. Trades Council v.

Kinard Const. Co., 346 U.S. 993 (1954); and Plumbers

Union v.'Door County, 359 U.S.. 354 (1959), the use of

materials from out-of-state provided the basis for National

Labor Relations Board jurisdiction with respect to the

_ construction, respectively, of an office building, a court

house and a housing project. See also, San Diego Unions v.

Garmon, 353 U.S. 26 (1957); Meat Cutters v. Fairlawn

Meats, 353 U.S. 20 (1957). See.also, Howell Chevrolet Co.

v. N.L.R.B., 346 U.S. 482 (1953). .

If the National Labor Relations Board may regulate the

acts of the employer toward each employee of the fuel oil *:

retail distributor and every construction worker on 4

building project without regard to whether. that employee

is directly engaged i in interstate commerce simply because

some goods are bought by the company out-of-state, it

cannot be doubted that the nyrse’s aid or hospital -mainte-

nance worker likewjse may/e brought under the coverage

of the Fair Labor Sta ds Act when someone employed

’ by the hospital purchases drugs and equipment out-of-state,

or purchases from local sources drugs. and equipment

which were produced out-of-state, or handles drugs and

equipment originating from out-of-state, or.the hospital

engages in commerce in administering and carrying out a

federal health grant or the program of Medicare, even

though the nurse’s aid or maintenance worker himself

does not carry on such activities. The same is true in

regard to employees of schools, elementary, secondary, or

institutions of higher learning, and specialized hospitals

engaged in treatment of the mentally ill, those suffering

from contagious diseases, the aged, or the handicapped.

'. It is a matter of elementary logic that the hospital and

the school function as a result of the sum of all of the

activities of all of their employees.\ The hospital adminis-

trator or the superintendent of

empt from the provisions of the Act), or his secretary,

or some other employees, would have no occasion to en-

gage in comrnerce, or the production of goods in commerce, .

if the services of the employees covered by the Act under

the 1966 Amendments were permanently withdrawn. Their

services are essential to the operation of the hospital or the

school and, hence, their activities, although local in nature,

substantially affect commerce;'so that Congress may regu-

late the minimum wages to be paid them as well as the

. maximum hours they may be required to work without

£o (ecu of overtime. :

' SraTe SOVEREIGNTY e

The precise claim of unconstitutional interference with

state sovereignty made in this case has not been adjudi-

cated by any court, because Congress has not heretofore

attempted to regulate minimum wages and maximum

hours (without overtime) for state employees. But

’ from what en decided in numerous other con-

texts analogous\.to the case at bar, ‘and from the

basis of those decisions, I can only conclude that the 1966

Amendments are valid and constitutional in their ey

I have already referred to the cases-in which the full

. tent of the power’of Congress generally to regulate com-

merce has been developed, In every instance in which the

exercise of this power has been applied to some state activ-

ity, the validity of the exercise has been upheld in lan- _

guage and on reasoning which.\J am satisfied, sustains the

validity of the 1966 Amendments. Because it.on this as-

pect of the case that the States most vigorously attack the

ac:

18a

validity of the 1966 Amendments, I am constrained to

_ discuss these ‘authorities fully.

' Since the States are most vociferous in conjuring up

the. possible “horribles” of an adverse adjudication to

them,!” it is necessary, at the outset, to define what is —

and what is not — presently before us. Before me is only

the question of whether Congress may prescribe minimum |

- wages and overtime for. non-executive, non-professional

and. non-adrninistrative employees of private and public ~

‘. hospitals, schools and related institutions. Congress has

' singled out this group which, experience has proved, is

often underpaid and subjected to unreasonable work sched-.

ules and has required that its members be paid a minimum

sum which, measured by the standards of contemporary

@ society, is deemed a decent wage and that they not: be

compelled to work longer hours in a work period without

payment of overtime than, by thase standards, are deemed

proper, These standards have been made applicable to pri-

. vate and public employees, alike. Congress has not sought

to cover doctors, nurses, principals, teachers, research

assistants, or the like. Nor has Congress sought to cover

the governors, attorneys general, legislators, judges or

. policemen, who, some of the States assert, could eventually

_ be covered if we upheld the validity of the 1966 Amend-

ments.

Our consideration of the constitutional issue presented

here cannot deal with hypothetical projections by the

States of regulations yet to come. Our consideration of

the States’ contention that their sovereignty is impaired,

and my conclusion that’ the 1966 Amendments are valid

and constitutional, are limited to the 1966 Amendments and

only those employees to which they extend, as are my

previous conclusions that the power to regulate under the

commerce clause exists and that the enterprise cuncept.

is constitutional. No court, and in particular. no lower

. federal court, should attempt to adjudicate that which is

’ not justiciable; all must steadfastly follow the rules set

down by the Supreme Court governing the process of

constitutional adjudication:

AT See New York v: United States, 326 U.S. 572, 583-584 (1946).

“The very foundation of the power of the federal

courts to declare Acts of Congress unconstitutional

lies in the power and duty of ‘those courts to decide

cases and controversies properly before them. This

was made patent in the first case here exercising that’

power — ‘the gravest and most delicate duty that this —

Court is called on to perform.’ Marbury v. Madison

(US) 1 Cranch 137, 177-180, 2 L. ed. 60, 73, 74. This

Court, as is the case with all federal courts, ‘has no

jurisdiction to pronounce any statute, either of a State

or of the United States, void, because irreconcilable

with the Constitution, except as it is called upon to

adjudge the legal- rights of litigants in actual contro-

versies. In the exercise of that jurisdiction, it is bound

by two rules, to which it has rigidly adhered, one,

“never to anticipate a question of constitutional law in

advance of the necessity of deciding it; the other never

to formulate a rule of constitutional law broader than

. is required by the precise facts to which it is to be

applied. ’ *.* * Kindred to these rules is the rule that

one to w application of a statute is constitutional

will not eard:to attack the statute on the ground

that impliedly it might also be taken as applying to

other persons or other situations in which its appli-

cation might be unconstitutional. * * * In Barrows v.

Jackson, 346 US 249, 97 L. ed. 1586, 73 S. Ct. 1031, this

Court developed various reasons for this rule. Very

significant is the incontrovertible proposition that it

. ‘would indeed be undesirable for this Court to consider _

every: conceivable situation - which might possibly

arise in the application of complex and comprehensive

legislation.’ Id. 346 U.S. at 256. The delicate power of

pronouncing an Act of Congress unconstitutional is

not to be exercised with reference to hypothetical cases

thus imagined.” (emphasis supplied; footnote elimi-

nated) United States v. Raines, 362 US. * 20-22

(1960) .18

18 Although one of the best expressions of judicial self-restraint

in the process of constitutional adjudication, United States v. Raines,

supra, does not stand alone. It is only one of a line of decisions -

20a

As a first step in the decision of the limited question

before me, it is necessary to put to rest any argument

based upon the Tenth Amendment, as such. The Tenth

Amendment is but a “truism” — “that all is retained

which has not been surrendered.” United States v. Darby,

supra, at p. 124. Besides stating this self-executing formula,

the decided cases are clear that the Tenth Amendment

neither adds to nor detracts from the essential question

to be decided in this case. United States v. Sprague, 282

U.S. 716, 733-734 (1931); United States v. Appalachian

Electric Power Company, 311 U.S. 377, 428. (1940); Okla-

homa ex rel Phillips v. Guy F. Atkinson Co., 313 U.S. 508,

534 (1941); Fernandez v. Wiener, 326 U.S. 340, 362 (1945);

Case v. Bowles, 327 U.S. 92, 101-103 (1946); United States

v. Oregon, 366 U.S. 643, 649 (1961). :

I turn directly to the cases where federal regulation :

under the Commerce Clause has been upheld, even when

-applied to an “essential” state activity. The principal

authorities which must be considered are Sanitary District

v. United States, 266 U.S. 405 (1925); Board of Trustees

v. United States, 289 U.S. 48 (1933); Case v. Bowles, 327

U.S. 92 (1946); and the four related cases of United States

v. California, 297 U.S. 175 (1936); California v. United

_ States, 320 U.S. 577 (1944); California v. Taylor, 353 U.S.

553 (1957); and Parden v. Terminal R. of Alabama Docks

Dept., 377 U.S. 184. (1964). Also of interest, because it

posed an issue of state sovereignty . dispositive of this

litigation, is United States v. Ohio, 385 U.S. 9 (1966).

The oldest and one of the most important cases is the

Sanitary District case. This was a suit by the Attorney

developing the concept which it so Geemait states: Flint v. Stone

Tracy Co., 220 U.S. 107 (1911) ; Village of Euclid v. Ambler Realty

Co., U. S. 365 (1926) ; Ashwonder v. Tennessee Valley Authority,

297 U.S. 288, 347 (1936) (concurring opinion, Brandeis, J.) ;

Alabama State Federation of Labor v. McAdory, 325 U.S. 450

(1945) ; United Public Workers v. Mitchell, 330 US. 75 (1947) ;

United States v. Spector, 343 U.S. 169 (1952) ; International L, &

W. Union v. Boyd, 347 U.S. 222 (1954). Additional authorities are

cited in the portion of the” opinion in United States v. Raines, supra,

from which the quotation is extracted.

2la

General of the United States to enjoin the Sanitary Dis-—

trict of Chicago from diverting a volume of water from

Lake Michigan in excess of that allowed by federal statute,

- although a state Statute set-a higher limit. The federal

government asserted: the taking to conflict with the power

of Congress to regulate interstate and foreign commerce,

and with a treaty with Great Britian concerning boundary

waters of the Dominion of Canada; the Sanitary District

defended on the grounds, inter alia, that public health

required the taking of the additional quantity of water in

accordance with the state statute, because otherwise it

would be impossible to carry the city’s sewage downstream.

_ Mr. Justice Holmes, speaking ‘for a unanimous. Court,

held that the injunction should issue. He declared, basing

the right to relief on the power of the federal government

to regulate interstate and foreign commerce: |

“The main ground is the authority of the United

States to remove obstructions to interstate and foreign

commerce. There is no question that this power is

superior to that of the states to provide for the welfare -

or necessities of their inhabitants. In matters where

the states may act, the action of Congress overrides

-what they have done. ss a re Id., at

p. 426.

Titinndin ti this he recited the evidence in detail, including

that which clearly showed the sanitary needs of Chicago

for the additional water, and concluded ‘the beset by

stating: _

“* * * a large part of the evidence is irrelevant and

immaterial to the issues that we have to decide. Prob-

ably. the dangers to which the city of Chicago will be

subjected if the decree is carried out are exaggerated;

, but, in any event, we are not at liberty to consider them

here as ugainst the edict of a paramount power.”

(Emphasis supplied.) Id., at p. 432.

Maryland argues that Chicago did not need the water ee

for an “essential state function,” but I conclu it difficult

to think of something more essentially sovereign or neces-

sary to the welfare of the State and its people than sewage

disposal; sewage disposal i is as much a part of public health

as hospitals for contagious diseases, and hospitals for the

_tInentally ill. Yet, the Court stated in this context that

‘when Congress exercised its power over interstate and

foreign commerce, the welfare or needs of the inhabitants

of the State could not even'be considered: Maryland also

argues that the case is distinguishable because it concerned

a direct burden on commerce. The afiswer is.that Congress

_ hag found that substandard wages and non-payment of -

Ov e are also burdens on commerce and this. finding

has been judicially approved.. United States v. Darby,

supra. |

Board of Trustees v. United States, supra, was a case

in which the alleged conflict between the exercise of the

power of Congress to regulate commerce and the concept _

of state sovereignty arose where the State was exercising

' its sovereignty to provide higher education. The University

of Illinois imported scientific apparatus for use in one of

. its educational departments, and it sued to obtain a refund

of duties exacted on the importations. For a unanimous

Court, Chief Justice Hughes held that the power of the

federal government over goods moving in foreign com-

merce is plenary, that the State in the performarice of

state functions might not limit the exercise by Congress

of its power, and that the duties were properly laid.

-. In arriving at this result; the Court recognized. that the

federal government has the power to tax, including the

power to lay duties; and that it has the power to regulate

commerce. The existence of the taxing power was stated

not to foreclose Congress from laying duties in the exercise

of its power to regulate commerce,‘ and the Court con-

cluded that the duties in question were laid in the exercise

of the power to regulate commerce and not in the ex

of the taxing power. Having’ reached that conclusion, the’

Court then dealt with the argument that in the exercise

of the commerce power, Congress was limited by notions

of state sovereignty as it was when it exercised its taxing

power: | ; j

” ba

23a

“The principle tuvieed by the petitioner, r the

unity of state instrumentalities from Federal Tax-

tion, has its inherent limitations. * * *- It is a :

principle implied from the necessity of maintaining

our dual system of government. * * * Springing frorn.

that necessity it does not extend beyond it. Protecting aa

the functions of government in its proper province, the

implication ceases when the boundary of that province

- eis reached. The fact that the.State in the performance

of stateyfunctions may use imported articles does not

mean that the importation is a function of the state

government independent of federal power. The control

of importation does not rest with the State but with the

Congress. In international relations and with respect ta

foreign intercourse and trade the people of the United

_ States act through a single government with unified

and adequate national power. There is thus no viola-

tion of the principle which petitioner inpokes, for there

is no encroachment on the potver of the State as none

exists with respect to the subject over which ‘the -

Federal power has been exerted. To permit the States

and their instrumentalities to import commodities for

their own use, regardless of the requirements imposed

by the Congress, would undermine, if not destroy, the

single control which it was one of thé dominant pur-

_ poses of the Constitution to create. It is for the Con- .

gress to decide to what extent, if at.all, the States and

their instrumentalities shall be relieved of the pay-

ment of duties on imported articles.” meu sup-

_ plied.) Id., at p. 59.

Significant also for the case at ber is the suiliee statement

of the Court in which it described the power of Congress : ise

over interstate and foreign commerce:-

“It is an essential attribute of the power that it ~

exclusive and‘ plenary. As an exclusive power, its

exercise may not be limited, qualified or — to -

any extent by state action. * * *.

“* * * Thé principle of duality i in our pat of govern-

ment does not touch the authority of the Congress in.

the regulation of foreign commerce.” (Emphasis sup-

plied.) ‘Id., at. PP. ‘56-57. es “

Maryland - seeks to escape the language in this opinion

a the apparent argument that the case involved Congress’

‘power over foreign commerce and the express argument

that the po of Congress over commerce would not be —

limited if recognition were’ given to state sovereignty over

‘public schools and hospitals. Of course, the Court was.

writing in the field of foreign commerce, but the power

of Congress over foreign commerce is no more plenary

and no more exclusive than its power over commerce be- .

tween: the states, the latter including the power to regulate

local activities which have a substantial ‘effect on inter- .

state commerce. Wickard v. Filburn, supra. The States

lack any power to regulate commerce as such; it follows

that there can be no interference with state sovereignty

over interstate commerce because’: none exists. Where

' Congress had extended the Act to certain employees of

_ public schools and hospitals, to hold that Congress may

not validly do so necessarily limits the power of Congress.

_ The opinion’s specific and peremptory rejection of the

assertion that “state functions” can isolate a state or. its

instrumentalities from federal regulation surely goes a

long way to.support the validity of the 1966 Amendments,

The specific and peremptory: rejectior® of the argument -

that the principle of duality in our system of: government .

may limit in any way the authority of Congress to regulate.

commerce is dispositive of the present case.

Case v. Bowles, supra, only repeats the clear implica-

tions of the Sanitary District and Board of Trustees cases. -

In Case, a suit for injunction was brought to restrain ‘the .

State of Washington from selling timber on school lands

at prices in excess of those fixed by regulation adopted

under the Emergency Price Control Act. The State alleged,

in defense of the action, that price controls could not be 3

‘applied to it because the sale was “for the purpose of

gaining revenue to carry out an essential governmental

. function — the education of its citizens.” Id., at p. 101.

aaa

This argument was rejected and price iis held

applicable to the. State in the following language:

“We now turn to petitioner’s Constitutional conten-

tion. Though as we have pointed out petitioners have

_ alleged that the Act applied to setting a maximum

price for school-land timber violates the Fifth and

Tenth Amendments, the argument here seems to

spring from implications of the Tenth Amendment

only. The contention rest on the premise that there .

i$ a ‘doctrine implied in the Federal Constitution that

the two governments, national and state, are each to

exercise its powers so as not to interfere with the free

and full exercise of the powers of the other.’ It is not

contended, and could not be under our prior decisions,

that -the ceiling price fixed by the Administrator is -

Constitutionally invalid.as applied to privately owned —

timber. * * * Nor is it denied that the Administrator _

could have fixed ceiling prices if the state had en-

gaged in‘a sales business ‘haying the incidents of ;

similar enterprises usually prosecuted for private gain.’

* * * But it is argued that the Act cannot. be applied

to this sale. bécause it was ‘for the purpose of gaining

revenue to carry out an essential governmental func- |

tion —'the education of its citizens.’ Since-the Emer-

gency Price Control. Act has been sustained as a.

Congressional exercise of the war power, the peti-

tioner’s argument is that the extent of the power as

applied to state functions depends on whether these

.are ‘essential’ to the state government: The use ,of

the ‘same criterion in measuring the Constitutional —

power of Congress to tax has proved to be unworkable,

_ and we reject it as a guide in the field,here ees -

; (footnote eliminated; emphasis supplied.) Id., at p..101.

A * he * * * .

“Where as here, Congress has enacted legislation

authorized by its granted powers, and where at the

same time, a state has a conflicting law which but for

the Congressional Act would be valid, the Constitu-_

* tion marks: the course for courts to follow. Article.

26a

VI provides that ‘The Constitution and the Laws of

the United States * * * made in pursuance thereof

‘* * * shall be the supreme Law of the Land * * *.’”

(footnote eliminated) Id., at pp. 102-103.

Case v. Bowles may not be summarily rejected, as it is

by Maryland, on the ground that “the real sovereignty of

the State was not infringed” and the case arose under the

war power of Congress. The power.of Congress to regulate

commerce is no. less plenary and no less exclusive. than

the power to make war under which the Emergency Price’ __

Control Act was adopted. While price limitation on the

sale of timber to support public education, in degree,

might be less discommoding than fixing wages of certain

- state employees, the Court’s rejection of the “essenti

functions argument is of extreme. a, the rejec- .

tion goes to the very heart of this case.

‘The line of cases beginning with United States v. Cali-

fornia, supra, may appear to be distinguishable from the

' instant case on the ground that each involved state activi-

ties which do not fall within the concept of essential ~

governmental functions. Yet the essential nature of the

‘state activity and the sovereignty of the state was inter-

posed as a defense in each of them and rejected by the .

Court, not on the ground that the activity was not essential.

but on the ground that the “essential” concept was not a

“good defense. Thus, the cases are additional authority for

concluding that the —_— argument here is ee in

| merit.

In United States v. California the ha was whether

a terminal railroad owned and operated by a State for the

purpose of facilitating the commerce of a port, all of the ~

revenues of which were used to improve port facilities,

could be subjected to: the Federal Safety Appliance Act,

so that the penalty prescribed by that Act for its violation

could be recovered from the State of California.!®

1® It is interesting that in an earlier suit, S. herman v. United S tates,

282 US. 25 (1930), involving the same belt meee, Mr. Justice

M i

-. (27a

California urged these activities were not subject to

the Act because “* * * it is said that as the state is oper-

ating the railroad without profit, for the purpose of facilitat-

ing the commerce of the port, and is using the net proceeds:

of operation for harbor improvement * * * it-is engaged

in performing a public function in its sovereign capacity

me for that reason cannot constitutionally be subjected |

to the provisions. of the federal Act.” Id., at p. 183. Mr.

Justice Stone (later Chief Justice), speaking for a unani-

mous Court, specifically rejected this argument and sus-

. tained the imposition of the penalty, stating:

« * * * we think it unimportant to say whether the

state conducts its railroad in its ‘sovereign’ or in its ~

‘private’ capacity. That in operating its railway it is

acting within’a power reserved to the states cannot be

doubted. * * * The only question we need consider: is

whether the exercise of that power, in whatever eapa-

city, must be in subordination to the power to regulate

interstate:commerce, which has been granted specifi-

cally to the national government. The sovereign power

of the states is necessarily diminished to the extent of

the grants of power to the federal government in the

‘Constitution. * * * In each case the power of tHe state

_ is subordinate to the constitutional exercise of the

granted federal power.” Id., at pp. 183-184. :

™" addition to announcing the absolute supremacy of °

the power. of Congress to exercise its authority to regulate _

commerce despite the defense. of. state sovereignty, the

Court rejected an argument that the commerce power is

circumscribed by state sovereignty, as is the taxing pone,

It said:

“The analogy of the’ constitutional immunity of state: |

instrumentalities from federal taxation, on which re-

z ——— relies, is not illuminating. That immunity is

_ Holmes said: “California has not gone into husinede generally as a -

common carrier, but simply has constructed the Belt Line as an

may of its control of the harbor — a state peoanerre:. oe

at’ p. :

SN wa ccna ys he Std

alta AMI 8

. v ¥ 2 2 5 n

MA inti Serres POE GORE GA! ORR TR ty RE

J ‘

28a

implied from the nature of our federal. system and the

relationship within it of. state and national govern-

ments, and is equally a restriction on taxation by

either of the instrumentalities of the other. Its nature

requires that it be so construed as to allow to each

-government reasonable scope for its taxing power * '* *.

which would be unduly curtailed if either by extend-

ing its activities could withdraw from the taxing

power of the other subjects of taxation traditionally -

within it. * * * Hence we look to the activities in

- which the states have traditionally engaged as mark-

ing the boundary of the restriction upon the federal

‘taxing power. But there is no such limitation upon the

plenary power to regulate commerce. -The state can

no more deny the power if its exercise has been author-

ized by Congress than can an individunt. ee Emphasis |

supplied. ) Id., at pp. 184-185.

In California v. United States, supra, an order of the

United States Maritime Commission requiring elimination

of preferential and unreasonable practices, i.e., excessive

free time and non-compensatory charges for services, was

held enforceable against the State of California and the

Board of State Harbor Commissioners for San Francisco

Harbor. California: defended its non-compliance with the

order on the ground that the Act under .which it was

- issued had no application to public owners or wharves

and’ piers. This question-of statutory construction was

decided against its contention, with the ourt acding:

“* * * it is too late in the day to scien tHe pewer

of Congress under the Commerce Clause to regulate

such an essential part of interstate and foreign’ trade

®.. as the activities and instrumentalities which were here

authorized to be regulated by the Commission, whether

they be the activities and instrumentalities of private

persons or of public agencies. ” Id., at P. 586.

The belt railway which-was the subject of litigation in

‘ United States v. California, supra, was also the subject of .

_ litigation in California v. Tayler, supra. In the latter the

29a

: question was winiie the Railway Labor Act was applic- |

able to the employer-employee relationship between the

State of California and its employees engaged in operating

the railroad. Notwithstanding that California provided

. that its employees had no right to bargain collectively

with it concerning terms and conditions of’ employment,

the Railway Labor Act was held applicable on the principle

’ that a state may not prohibit the exercise of rights which

the federal labor relation¢ acts protect. As in the earlier

cases, California asserted eat, if held to apply to it,

’ invalidly interfered with i vereign immunity, but the

Court rejected this contention, saying: . :

“Finally, the State suggests that Congress has no con-

-_stitutional power to interfere with the ‘sovereign right’

of a State to control its employment relationships on a

state-owned railroad engaged in interstate commerce. —

In United States v. California (U.S.), supra, this Court

. said that the State, although acting in its sovereign

capacity i in operating this Belt Railroad, necessarily so

acted ‘in subordination to the power to regulate inter-

"state commerce, which has been granted specifically to

the natidnal governmest.’ 297 U.S., at 184. ‘California,

by engaging in interstate commerce by rail, has sub-

jected itself to the commerce power, and is liable for

a violation of the Safety Appliance Act, as are other

carriers. ...’ Id. 297 U.S., at 185. That principle is no _

-*: Jess. applicable here. If California, by engaging in |

interstate commerce by rail, subjects itself to the com-

merce power so that Congress can make it conform to .

federal safety réquirements, it also has subjected itself

to‘that power so that Congress can regulate its er *

ment ———. ” Id., at p.. 568. ae

A similar result was reached in Parden v. Terminal R.

of. Alabama Docks Dept., supra, where Alabama’s plea of

sovereign immunity was rejected in a suit brought against

. it under the Federal Employer’s Liability Act by an em-

ployee of a railroad which it owned and operated. The de-_ .

cision proceeded on the dual grounds that when Congress

‘was empowered to regulate commerce, the States neces- _

30a

sarily lost any portion of their sovereignty that would stand

in the way, and that Alabama waived its protection against

suit by an individual, as embodied in the Eleventh Amend-

ment, by operating an interstate railroad approximately |

twenty years after enactment of the Federal Employers’

Liability Act.?° 2

In United States v. Ohio, supra, the question was whether

the State of Ohio was liable to the United States for -pen-

alties under the Agricultural Adjustment Act of 1938 for

growing wheat on state-owned farms in excess of federally- ©

imposed acreage allotments. Specifically, the wheat. was

grown on a prison farm as part of a-program of individual -

. therapy and rehabilitation. It was consumed exclusively

on the farm; indeed, by the Ohio Constitution it could

neither be “sold, farmed out, contracted or given away.”

’ The Sixth Circuit Court of Appeals held that the growing

‘of wheat and consumption of the | crop by the inmates of

the institution could not have any substantial effect on

interstate commerce and, hence; that the Act was inappli-

cable. 354 F. 2d 549 (1965). The judgment was summarily

reversed in a per curiam opinion on the authority of

en ®. Filburn, supra.

' The Ohio case had present all of th factors relied on

here by ead States ° to invalidate thé 1966 Amendments.

_ 2°Three decisions “tt United States Courts of Appeals in this

_area are worthy of note. United States v. Feaster, 330 F. 2d 671 (5 -

Cir. 1964), held that the National Mediation Board, acting under the

- Railway Labor Act, could require.the state agency which Operated

state-owned dock facilities to produce ‘its employment records for

inspection by a union. In State of Colorado v. United States, 219 F.

2d 474 (10 Cir. 1954), it was held that Colorado State Board of

Stock Inspection was subject to the registration requirements of the

Packers and Stockyards Act, and to the payment, of penalties under

the Act, “the same as are private persons or agencies,” notwith-

standing that inspection was-canducted “tin its sovereign capacity as

a state.” Jd., at p. 477. The most recent decision in this regard is

N.L.R.B. v. Local 254, Building Service Employees International

F. 2d —_, (1 Cir. 4/ 10/67), holding that for purposes

of the National Labor Relations Act the Department of Education

of the State of Massachusetts was “a person engaged in commerce”

and “an employer” as defined in the Act.

3la

Nothing could be more essential or a more sovereign gov-

ernmental function than providing places of detention for

those convicted of crimes. The performance of such a state |

function neither produces incésae-nor competes with any

__ private enterprise. Likewise, it is a functidn which can in_

no way be provided by private.enterprise. The case was ¥

decided by the Court of Appeals on the commerce’ issue -

without reaching the asserted issue of impairment of state

sovereignty and we are advised that in the briefs presented ©

to the Supreme Court the latter contention was not made.

While the case is conclusive authority for determination

of the scope of the power of Congress to regulate commerce,

it is not necessarily determinative on the issue of impair-

ment of state sovereignty.

_ In asserting boundaries to federal segiiition under the

Commerce Clause, the States claim support for the result

they. advocate in New York v. United States, 326 U.S. 572

(1946), and other cases which have. held the power of»

Congress to tax is subject to limitation. It should be noted

at the outset that in the New York case there was no opin-

_ion of the Court, and reliance is placed upon one of the

opinions concurred in by only four justices. But the weak-

-ness of this authority. lies not in the lack of unanimity of

the Court, but rather in the fact that other decisions before

and after New York establish that an unqualified analogy ~

KG between the taxing power and the commerce power cannot

‘be made. Parenthetically, it should also be noted that in

New York the claim of state sovereignty was rejected and

the validity of the tax upheld. The Sanitary District case,

supra, decided in 1925, and Board of Trustees v. United

States, decided in 1933, clearly imply that Congress’s power.

to regulate commerce and Congress’s power to tax are not

coterminus. Case v. Bowles, decided the same term as,

but after, New York v. United States, specifically rejects

limitations on the war power such as were suggested on

the taxing power by dictum in some of the opinions in the

New York case. On the other hand, when the power of

Congress to regulate commerce is being considered, United

States v. California, decided ten years before the New

York case, ‘is specific in meng that the. test of validity of .

| sua

regulation under the Commerce Clause is different from

‘the test of the validity of federal taxation touching upon °

state sovereignty. See also, United States v. ett 345

U.S. 22 (1953).

These cases demonstrate that the taxing power and the

commerce power have been viewed by the Supreme Court

as having different limitations, because of the concurrent

. nature of the former, and the plenary nature of the latter.

In sharp contrast, stand the statements of the Court that

the power of Congress over war and over commerce, both

foreign and interstate, are plenary. Because each is plenary,

the war and commerce powers of Congress are necessarily

coterminus, and Hopkins Federal.Sav. & L. Assn. v. Cleary,

. 296 U.S. 315, 343 (1935), so suggests. Thus, cases decided

under any of the plenary powers are precedents for similar

situations arising under one of the other plenary powers,

while cases decided under the taxing power are weak

authority for determining: the limits of the exercise of a

_plenary power. While an attempt is made to distinguish

Case v. Bowles on the grounds that it concerned the war

» power, and to distinguish the Board of Trustees case on the

grounds that it concerned’the power to regulate foreign

commerce, patently, these powers are plenary, coterminus

and indistinguishable from the power to regulate interstate

commerce. Indeed, while asserting that the cases are dis-

tinguishable, the States fail to cite one case holding that .

these powers are not equally plenary and coterminus; at —

the same time, the States fail to cite one case holding that -

the commerce power is restricted to the same area as the

taxing power. | ‘

Hopkins Federal Sav. & L. Assn. v. Cleary, 296 U.S. 315

(1935), urged on the Court by the States, should also be”

noticed. In the Hopkins case, a federal statute which per-.

_ mitted state building and loan associations to become fed-

eral building and loan associations without state consent

was held invalid. The Congressional power under which

the statute had been adopted was deemed by the Court to

~" be concurrent with a similar state power. As a consequence,

-. the Court, consonant with its approach in taxing cases,

where concurrent —— were also involved, drew a line

nerd Satie ra dee eiinitstinnidtanins Meta tenet toi :

7 Oren ed

. .

+ 2h oo

33a

‘Gi

between federal and’ state sovereignty in n holding that the .

statute unconstitufionally transgressed state sovereignty,

but in doing so, it was careful to:state: “We are not con-

cerned at this time with the applicable rule in situations. °

where the, central government is at liberty (as it is under

the Commerce Clause when such-a purpose is disclosed).

to exercise a power that is exclusive.as.well as paramount.”

(Emphasis supplied.) Id., at p. 338. Thus, not only does

the Hopkins case not constitute authority for the conten-

tion urged by the States, but the care with which the Court

delineated the problem before it strongly suggests -a con-

trary result had the legislation been an exercise of the

. power of Congress to regulate commerce. It is at most

additional authority for the result I would each.

The States, in the stipulations which be earlier men-

tioned, have presented. extensive evidence to show the far-

, reaching financial impact on them of the 1966 Amendments.

The proof tends to show that the graduated financial bur-

den, resulting from escalation. of the minimum wage and

contraction of maximum hours without payment of over-

time over a period of years, will necessitate either increased

taxes or a curtailment of essential services. There is before

us evidence that current budgetary appropriations will be

insufficient to meet the increased costs resulting from the

1966 Amendments during the current fiscal period, and that

in many instancés, politieal subdivisions, restricted by or-

ganic law to maximum limits of taxation and borrowing,

are currently operating at these maxima so that, absent

grants-in-aid or an amendment of organic law, they will

be required to curtail the amounts spent for ‘teachers, text

books and the like, or reduce the number of people served,

if they are required to comply with the 1966 Amendments.

’ As I said earlier, this data is not excluded on evidentiary

principles. It is properly before us — if only to put flesh

on the skeletal frame of this litigation. But, in the decision

of the constitutional issues presented to us, it, and the

arguments of unconstitutional impairment of state sover-

eignty predicated upon it, are largely irrelevant. I have

concluded that the 1966 Amendments are valid and ton- —

stitutional, as is the enterprise concept of the 1961 Amend-

. 4

ments, and that there is no eheemattbitionit impairment |

of the sovereignty of the plaintiff States.. The financial

impact of the 1966 Amendments on the States is an argu-

ment to be addressed to Congress and not to the courts.

' As Chief Justice Marshall semerngively Away in Gibbons

- . Ogden, 9 Wheat. 1 (1824): ,

ie has always been understood, the sovereignty

of Congress, though limited to specified objects, is

plenary as to those objects, the power over commerce |

with foreign nations, and among the several States,

is vested in Congress as absolutely as it would be in

a single government, having in its constitution the

same restrictions on the exercise of the power as are

found in the constitution of the United. States. The

wisdom and the discretion of Congress, their identity

with the people, and the influence which their con-_.

stituents possess at election, are, in this, as in many

other instances, as that, for example, of declaring war,

the sole restraints on which they have relied; to se-

cure them from its abuse. They are the restraints on

which the people must often rely solely, in all repre-

sentative governments.” — — ) Id., at

‘?P. 197. 21 .

Even more specific in stating the principle that the finan-

cial impact’ of the 1966 Amendments .is no guide to their

validity is Oklahoma ex rel Phillips v. Guy F. Atkinson

Co., 313 U.S. 508 (1941). In that case, the federal govern-

ment planned to flood certain lands belonging to Oklahoma.

. ,The state sought an injunction, arguing, inter alia, that the

project as planned would take much land unnecessarily,

without. serving the purpose of the dam. The Court de-

clared:

“Such matters raise not constitutional.issues but ques-

tions of policy. They relate to the wisdom, need, and

21 The: vitality of the principle announced has not been eroded by

time. Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241,

255 (1964) ; Polish Alliance v. N.L.R.B., 322 U.S. 643, 650 (1944) ;

~ Oklahoma ex rel Phillips v. Guy F, Atkinson Co., 313 US. 508, 527- -

- $28 ‘ 1941) ; Sanitary District v. United States, 266 U.S. 405, 432

_ (1925).

effectiveness of’a particular project. They are, there-

fore, questions for the Congress not the courts. * * *

Nor is it for us to determine whether the resulting

benefits to commerce as a result of this particular ex-

ercise by Congress of the commerce power outweighs

the costs of the undertaking.” (Emphasis supplied.)

Id., at pp. 527-528. —

To a further allegation that tax revenues of Oklahoma ~

would be diminishéd because of loss of property taxes qn

the seized land, and the public education might be ham-

pered because certain school buildings, on the condemned

land, would have to be rebuilt elsewhere, the Court said:

-£The possible adverse effect on the tax revenues of

Oklahoma .as a result of the exercise by the federal

government of its power of eminent domain is no bar-

rier to the exercise of that ee: ”. (Emphasis —

plied.) Id., at p. 534.22

e conclude that defendants’ motion tor summary iii

ment should be granted, but in view of the fact that my

conclusions are shared only in part by Chief Judge Thom- *

sen, and not at all by Judge Northrop, counsel may present

a form of decree declaring the minimum wage ‘provisions .

of the 1966 Amendments valid and constitutional and deny-

ing plaintiffs’ prayers for. injunctive relief.

Harrison L. Worres, oo ‘

United States Circuit J udge.

22 Although not as explicit, several of the authorities discussed in

the text support the rule that when the commerce power is exercised

the test of validity of the exercise is not the cost to the States. In

California v. Taylor, supra, the State was exposed to payment of the

higher wages for state employees arrived af as a result of collective -

bargaining rather than the scale prescribed by state fiat. The result of

the decision in United States v. Ohio, supra, would be presumably

to increase the state’s cost for wheat and flour supplies purchased

from the market place rather than grown on the prison farm. In

Case v. Bowles, supra, price controls on the sale of timber decreased

school revenues so that services would have to be reduced or school

taxes increased. The penalties exacted in United States'v. Ohio,

supra, and United States v. California, supra, represented a diminu-

tion of general state revenues otherwise available to support other

state activities.

, 36a

_ THOMSEN, Chiet J jalge, concurring in sia

I agree’ with the conclusion reached by Judge Winter —

that the injunction requested by plaintiff should be denied

— but for somewhat different reasons and with one im-

portant reservation. I agree that the operation of schools

and hospitals by the several StateS"and their subdivisions

affects interstate commerce to a_ substantial degree,

whether or not. such operations themselves constitute in-

terstate commerce, and that use of the “enterprise concept”

does not itself render unconstitutional the 1966 Amend-

- ments. to the Fair Labor Standards Act. The potential.

Eleventh Amendment problems, suggested by. the States, ©

should be considered as they may arise in subsequent ac-

tions against the several States. But I cannot agree that

the power‘of the federal government to regulate essential

sovereign functions of the States is absolute and unquali-

fied, despite the broad language of the opinions cited by

Judge Winter.

When the thirteen sovereign States, adopted the Con-

‘stitution they gave up only part of their severeignty to

the United States of America. The system created by. the

'. Constitution was and is a federal system; the States are.

not adininistrative divisions of a central government. For

- reasons whith were reviewed ,by Judge Wisdom in United

States v. Manning, W.D.,La., 215 F. Supp. 272 (1963), and

are not disputed, the Tenth Amendment was adopted in

< 1791. To characterize that Amendment as a “truism” does ~

‘not mean that it was’ intended to be devoid of meaning,

lulling the States into acceptance of a national government

.which may, without furtherfamendment to the Constitu-

‘tion, take away ‘from the States the substance, if not the

. trappings, of the sovereignty which ‘théy intended to pre-

serve. The Tenth Amendment makes explicit the principle

of federalism, which recognizes the supremacy of the -

'. federal government with respect to the powers delegated -

to it, but also recognizes that the. States retained certain

sovereign powers. The sovereign powers retained by the.

States are not specified in the Tenth Amendment or: in

any other provisions of the Constitution; they are limited

° .

- —

only by the scdpe and thrust of the powers s delegated to

the federal government. —

The power to regulate interstate commerce delegated to .

the federal government hasbeen held to be “plenary” and

has been accorded a very wide range by the Supreme —

Court. The cases in which the extent of the commerce

power has been discussed in relation to the Tenth Amend- .

ment fall into two categories: those in which the regulation

was being applied to and challenged by a party other than

a State or a political subdivision, and those in which the

regulation was being applied to and challenged by a State

itself or by a political subdivision ofa State. —

In the first category, the pendulum has.swung away from

decisions! which restricted the commérce power. Since

1937 the Supreme Court has.consistently held that the

federal regulatory power under the commerce clause may

control intrastate activities which merely affect com-

_ merce.” .:

. The cases involving federal regulation: of activities en-

gaged in by the States or their subdivisions have been

analyzed ‘in J udge Winter's opinion. Some of them in-

‘ volved the competing interests of several States,3 the treaty .

. . power,* the’ power over foteign commerce,® or the war

power. 6 eee involved the operation by a State of a

1 Hammer v. ines: 247 US. 251 (1918) ; poner Poultry

: Corp.’v. United States, 295 U.S. 495 .(1935) ; and Carter v. Carter -

Coal Co., 298 U.S. 238 (1936).°-

2'United States v. Darby, 312'W.S; 00 (1941) ; N.L.R.B. v. Jones

& Laughlin, 301-U,S. 1 (1937) ; see also Wickard v. Filburn, 317

- U.S. 111 (1942) ; Katzenbach v. McChyng, 379: U.S: 294 (1964) ;

_ Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964).

ad J obttary District of Chicago v. United States, 266 U.S. 405

‘€1925) ; United States v. Fs ie Electric Power Co., 311 U.S.

377 (1940).

; * Sanitary District sf Chicago + v. United States, want

5 Board of Trustees of University of Illinois v. United " States,

289 U.S. 48 (1933). +” .

® Case v. Bowles, 327 U.S. 92 (1946).

= - a ¥

. »

~ . < oes

° >

. 4 . &

‘ 7}

° ‘ ° ° -

° . . e . ;

railroad,’ a waterfront terminal® or the dominion which

the federal. government has, “to the exclusion of the

states,” over navigable waters of the United States.® ‘The

opinions in some of those cases state the power of the

federal government over interstate commerce in broad

and unqualified terms, indicating that when Congress ex-

ercises its power over interstate commerce, thewelfare or

needs of the States need not even be considered. The broad

language of the opinions must, however, be read in the

context of the cases in which they were rendered. In none | oe.

of those cases were the essential taxing and budgetary - E

functions of the States so seriously affected as they are by

the statute’ under consideration. We must heed the ad- _

monition in Gomillion v. Lightfoot, 364 t&S. 339, at 343- - :

344: “Particularly in dealing with claims under broad 4

provisions. of the Constitution, which derive content by

an interpretative process of inclusion and exclusion, it is

imperative that generalizations, based on and qualified by

‘the concrete situations that gave rise to them, must not

be «eh out of context in ear aia of variant asia

_ling facts. oes

The question remains: Does the ‘idaiate of federalism, <

implicit in the Constitution as originally drawn, and made

explicit by the Tenth Amendment, prevent Congress from

regulating, in the manner provided by the 1966 Amend-

-ments, the operation of public schools and — by

the States and their subdivisions?

The States cite a number of cases arising under the Max. ee

ing power, to the effect that the taxing power is subject

to: limitations imposed by the principle of federalistn, and .

argue that similar limitations apply ‘to the commerce

power. Limitations on the taxing power have been recog-

nized when the exercise of that power would reced _—

+e United States v. California, 297 U.S. 175 (1936) ; California v.

- Taylor, 353 U.S. 553 (1957) ; see also Parden v. Terminal R. oo. /

377 US. 184 (1964);

® California v. United States, 320 U.S. 577 (1944).

® City of Tacoma, v. Taxpayers, 357 U.S. 320 (1958) ; State of :

Oklahoma v. Guy F. Atkinson Le, 313 U.S. 508 oo

39a

fere with the governmental activities of the States.1° “This

' principle is implied from the independence of the national

and state governments within their respective spheres and

: from the provisions of the Constitution which look to the

maintenance of the dual system.” Indian Motorcycle Co. .

v. United States, 283 U.S. 570, 575 (1931).11 The- States ©

, argue that the reach of the commerce power is no greater

than the reach of the taxing power, citing a statement from

one of the opinions in New York v: United States, 326 U\S.* ©

572, 582 (1946) : “Surely the power of Congress to lay taxes

has impliedly no less a reach than the power of Congress

to regulate commerce.” It.must be recognized, however,

that a limitation has been ‘placed upon the taxing power

‘which has not yet been placed upon the commerce. power. °_

In another opinion in New York v. United States, Chief

Justice Stone, concurring for. re and three. other

Justices, stated: -

'. “* * * we-are not prepared to say that the national

government may constitutionally lay a non-discrimi-

natory tax on every class of Prope y and activities of .

States and individuals alike. *¥* * [A] federal: tax

-which is not discriminatory as to 5 ins subject matter. -

. may nevertheless so affect the State merely because

it is a State that is being taxed, as to interfere unduly

with the State’s performance. of its’ sovereign func-

tions of government. ** *” 326 U.S. at 586-587. © ~

“The problem. ‘i is, ve one to be solved by a fomula,

but we may look to. the: structure of the’Constitution

as our guide -to decision. * * *” 326 U.S. at 589.

The. limitation on the snide power — undue intérfer-

ence with.a State’s performance of its sovereign functions

of government —- responds to Chief Justice Marshall’s

_ famous dictum: “The power to tax involves the power to

destroy”. McCulloch. v. Maryland, + "Wheat. ; 316, 431

ase v. New York ex rel. O’Keefe, 306 U.S. 466, 477, 478

) :

_ 11 See also New York v. United States, 326 U.S. ites 577 (1946) ;

Willeuts v. Bunn, 282 U.S. 216 (1931).

40a

(1819). The potentially destructive power of taxation lies .

in the -ability of one sovereign to impose an economic

burden upon the functions of the other too great to be

born#, thereby — or eliminating a —

activity.

Taxation is not the wie way in viii the federal asia :

ment may destroy or cripple essential State functions.

There must be some limit beyond which the federal govern-

ment cannot go in its-attempt to exercise against the States

themselves the power ‘of the federal government over

interstate commerce. ‘Neither the Solicitor of Labor, who

argued the case for all the defendants, nor Judge Winter

in his*‘opinion, denies that there may be some limit, but

they argue and hold respectively that whatever limit there

‘may be has not been exceeded in this case.

The proper limit is indicated, though not fixed, by the

statement of Chief Justice. Stone, quoted above, that “a .

federal tax which is not discriminatory as to the subject

matter may nevertheless so affect the State merely because

it is a State that is being taxed, as to interfere unduly with’

the State’s performance of its sovereign functions of gov-

ernment.” The attempted exercise against'a State of the

power of the federal government over interstate commerce

should face the test: does it interfere unduly with the

State’s performance of its sovereign and indispensable

functions of government? If the concept of federalism is

to survive, it muS&t stand on constitutional limitations, not

_ on the sufferance of the federal. government.

When’ the federal government invokes ‘the commerce

power, unaided by the Fourteenth Amendment or any

other constitutional provision; to regulate the relations be- |

tween a State and state employees: who are not themselves ~

engaged in interstate commerce or in the production of -

goods for commerce, the Court should consider a number

of factors: in determining the constitutionality of the pro-.

posed regulation. The Court should give weight and ‘de- .

ference to any congressional findings with regard to the

- effect which the action sought to be regulated has on inter-

state commerce. The Court should also consider whether

the activity subject to the proposed regulation is an im-

portant function of the State and its political subdivisions; |

whether the ‘service in question is offered or might be »

offered to the same extent and on substantially the same

terms by private. enterprise or other non-state sources;.

and whether-such regulation. would seriously .interfere

with the State’s performance or regulation of its indis-

—— sovereign functions.

- The statute enacting the 1966 Animale contains no.

congressional findings with respect to the relationship be-

tween interstate commerce and the proposed coverage of

- state employees.!? © a

The operation of public ‘schools and snainlinn is un-

doubtedly one of the most important functions of State

governments. The Supreme Court in Brown v. Board of

Education, 347 U.S. 483, 493- (1954), stated flatly: “Today,

education is perhaps the most important function of state .

and local governments. ” The importance of public hospitals

to the comnfinity is also beyond dispute, |

Public hoWPitals i in many instances provide service other-

wise unavailable. 13 The public schools and hospitals eauld . .

a8 Findings with respect to labor conditions in industries engaged

in commerce or.in the production of goods for commerce, were in-

cluded in the original. Fair Labor Standards Act, see 29 USGA:

20,2(a).

-- 18In Maryland 867. beds, all. publicly mai and operated, consti-

tute the total facilities for tubercular care’ in the State of Maryland.

‘A similar situation exists in Texas. Under Texas law, on the dis-

covery of tuberculosis the patient can be committed.to a state hos-,

pital until the disease is no longer ‘communicable. But non-state hos-

pital. beds for tubercular patients are virtually non-existent and the .

few that are available are extremely expensive. Similarly, approxi-

mately 90% of the facilities for the, mentally disturbed and mentally

retarded in Maryland are provided by the State, and, undoubtedly,

‘much the same proportien applies in -other States. Moreover, it is

the public hospital which bears the main burden of providing care for

the indigent. In Texas, for example, most of the people in-State

mental institutions are charity or near charity patients. In the Texas

tubercular hospitals only nine out of 2,900 patients paid for the com-

plete cost of their hospital.care in 1966. The oe of keeping .

‘ :

. - oa

° a

42a

not be replaced by nongovernmental enterprises.!4 The al-

_ ternative would be federal schools and hospitals, and no

: one has argued for that. - paket

* From the mass of evidence submitted to the Court pur-

- suant to stipulation, it is clear that the impact of the 1966

' Amendments on the States is far-reaching. The Act im- -

. poses upon the States a graduated financial burden, which

will necessitate either increased taxes or a curtailment

q __ Of'the services now bing rendered by the States and their

| ~- political subdivisions. Most of the States must operate out

. of current funds provided by budgetary appropriations,!5

Sind Ms eit test Hig Fe és

’

ae ee

the mentally disturbed and those ill with ‘communicable diseases

away from the community at large is .too obvious to .require

+. elaboration. . ate

' -44In Maryland approximately 80% of the total number of sec-

.. ondary and elementary school students are enrolled in public schools. |

In Texas and Ohio the comparable figures aré approximately 86%

4 and 84% respectively. The great majority of the’ other schools are-

i either parochial or religiously. affiliated. In Maryland public insti-

tutions of higher education served 74% of. the students -enrolled

toward degree credit. In Texas and Ohio the comparable figures °

_ were.77% and 63% respectively. In 1965 over half the hospital beds

_.in Maryland were located in hospitals operated by State and local

governments. It is true, as defendants note, that these hospitals

accounted for only 15% of the total admissions, but that figure

reflects their role in treating the chronically ill and long-term mental

and tubercular patients. In Texas, State hospital beds account for

_ almost half the total number of beds in all Texas hospitals, and for

about 25% of the admissions. State and local government hospitals

in Ohio provided almost half the total number::of hospital beds in

the State and accounted for about 15% of the adniissions. :

18 Thus, Texas represents to the Court that in order to meet

.the standards of the Fair Labor Standards Act the expenditures

of the Texas Youth Council will be increased by over $3,000,000

annually ; the Department of ‘Mental Health and Mental Retarda-

tion will need an additional $7,500,000 annually; the cost of the

Institutions of Higher Education will go up over $3,250,000 annually ~

and the Fort Worth Independent School District will need by 1971

to find additional tax revenue sources for approximately $575,

annually. Even though the Fort Worth District is one df the larger

districts in the State, there are over 1,300 other Independent School , —

Districts whose’cost will be increased proportionately and who also

must. find additional sources of revenue. Many of these districts

have reached their constitutional tax rate limit as well as property

value limitations. — . J

= 4

Pee eee OD

.and in many instances the responsible political subdivi-

sions, notably school districts, are taxing at their constitu-

- tional maximum and would have to curtail the amounts

spent for teachers, textbooks and the like, or reduce the

number of people served, unless and until the State con-

stitution is amended. - >

Nevertheless, I cannot say that the.1 minimum wage pro-

visions interfere so unduly with the State’s performance of

their indispensable sovereign functions as to make those

provisions unconstitutional. It is of course true, as J udge

Northrop points out, that the minimum wage provisions

interfere with the budgetary function of the States. But

that interference must be weighed against the interest of

the federal government, representing all the people of the

United States, in seeing that all the people ate paid an ap-

propriate minimum wage. Serious problems are presented

"4 the possible, application of the Act to work done by

tes of correctional and other institutions: as <part. of

their education or rehabilitation programs, but I agree

with the Solicitor of Labor that these can best be handled

by the regulations or on a case by case basis, and do not

justify a sweeping injunction.

The overtime provisions present a more serious problem.

Unlike the minimum wage provisions, the overtime pro-

visions are not limited to the lowest paid employees. Many

| State functions, including some which are affected by the

1966: Amendments, require work arrangements other than

the standard 40-hour work week. Public school, college

and university personnel, who generally receive lengthy

vacations, must often work longer than 40 hours per week .

» during some part of the school year. The statute under

_ consideration makes some provision in this regard for the

-employees-of hospitals, whose round-the-clock require-

ments do not fit comfortably into a 40-hour work week.!¢ —

A common practice has been'to give these and other State >

employees compensatory time, or to make various other -

budgetary arrangements to keep i in fair balance State jobs

of the most diverse character. If the overtime provisions

16 29 U.S.C.A. 207(j) (1966 Cum. Supp.). +

of the 1966 Amendments | are valid, many of* those arrange-

ments may no longer be possible. The Act will seriously |

.. hamper the orgahizational and budgetary functions of the

States by forcing them to favor employees of their hospitals ~

and schools over other programs stich as welfare and law

- enforcement, unless the States rearrange their entire civil

service and appropriate additional sums for employees not

‘covered by. the Act.

’ For reasons stated above, I am satisf¥ed‘ that a line must

be drawn, and that with respect to sogpe if not all state

employees covered by the 1966 Amendments the overtime

requirenients of the Act-probably go beyond the permis-'

sible limits. The interference with the organizational and

budgetary functions of the States has been noted. On the

‘other hand, Congress has not stated, and neither the com- ©

mittee. hearings nor the stipulated facts in this case show,

what if any effect on interstate commerce the overtime

_ practices of the several States may have. The issue in each

instance is whether the particular regulation undzly inter-

feres with one or more indispensable sovereign functions of

the ‘State. This indicates that the question whether the

- application of the overtime provisions of the statute to’

state employees goes beyond the permissible limits should

be decidéd in the context, of particular cases, when the

_. extent of the interference with an indispensable-state func-

_ tion can be weighed against the effect, if any, which the

State’s overtime practices have en commerce.17

17 At the on of . this case the Solicitor’ ‘of Labor argued for

all of the defendants. He rsd asked from the Bench whether and

"* where a line should be d Without conceding that any line

should be. drawn in this ail without withdrawing from his - .

| oo on a

position that the plenary power of the federal government: over .

‘interstate commerce applies to the States as well as to individuals, the |

Solicitor suggested : “* * * we have such a variety of situations ‘that

it may not be the, path of wisdom to try to issue any blanket rule

[to cover] the variety of different situations demonstrated [by the

stipulacions with respect to] Maryland, Ohio and Texas, and which

can be assumed to exist in a-multipticity of cases throughout the

- fifty states.” Tr. p. 193. The Solicitor concluded “that this is not

' . the ge mye place and case for blanket injunctions or orders

b nket basis so far as | the application of this rule to schools _

I conclude that a sweeping ‘tijunetion at this time would

not -be Proper. ; s #4

The denial of relief in this case chin be. bain preju-

dice to the right of the several States and their political

subdivisions to challenge the overtfme provisions of th. °°

Act applicable to employees of the States and their political

subdivisidhs, in pte casés 8. presenting _— situations.

NORTHROP, District Judge, dissenting :

I am compelled to dissent from the conclusions: reached

by Judge Winter and Judge Thomsen that this Act is not

unconstitutional. .

-The majority recognizes that this is a case of first | im-

pression involving a conflict between Congress’ powér under

the Commerce Clause and state isi tit as recognized

_ in our Constitution. a ae ‘

. Judge Winter concludes, -that the: power of Congress

under the Commerce Clause has no boundaries:and Con-

gessional preemption in this field is supreme, it mattering

not*that it would destroy the constitutionally recognized

sovereignty of the states. To put it.simply, he holds that

from the beginning federalism, as embodied in our Con-

stitution, existed by the will of Congress rather than_by

the will of the people. No case has gone that far. It is sup-

ported neither by history nor by the structure of the -

Constitution. .° . 2 .

In his concurring opinion, Jedes Thomsen recognizes

that there is implicit within the concept of federalism em-

bodied in, the Constitution a limitation ‘on the power of

and hospitals are concerned. Instead, it would seem most appropriate

if such a new line were conceived and fashioned, if it should be, that

_ . the concept and the fashioning of it should not be for this Court,

but by the Supreme Court m any later proceédings, or perhaps, as

-I have suggested several times before, it should be done as cases -

actually come up in the future and action is taken where we cah

get a full exposure of all of the different facts and facets on issues © —

that may well be ee at that future time.” Tre PP. 204, 205.

on eS ’ bo ho em

. .

POE ALO ERLE HRS ROT LBP EMME IRE NEY TIE EE TIS IS SSS ORD ay ate ON Oe .

‘ ‘ . . f : ‘

Congress under the Commerce Clause. However, he feels

that the minimum wage provisions of the Act as they affect

the states do not transgress the limitation imposed by ‘the

Constitution upon Congress. But he expresses serious

doubts as to the constitutionality of the overtime provision

of the Act as it affects the states. Nevertheless he concludes —

_ that question is not yet ripe for adjudication. As to it, he

would wait until the Department of Labor promulgates and

applies its regulations to the states and decide constitution-

ality on a case-by-case basis.

Although I agree with J udge Thomsen’ . ND the

pertinent cases and some of his reasoning as to the effect

of the amendment on the states, I cannot agree. with, his

conclusions. Unless the Department of Labor emasculates

the Act, there will be no way for this or some other court

to avoid the constitutional question posed herein.

The question before us is whether this Congressional |

- exercise of power under the Commerce Clause constitutes

an undue infringement upon the “performance of [the

state’s] function as a government which the Constitution .

~ recognizes as sovereign.” ™. | , .

_ This quotation is from Chief Justice Stone’ S opinion in

New York v. United States, 326 U.S. 572, at 588, 66 S. Ct.

310, at 317, in reference to the limits on the taxing power .

of Congress. Although it is recognized that the power —

under the Commerce Clause may be broader, it must have

some limits. The language of Chief Justice Stone —

such a limitation.

We are concerned here with the: se

between national and state government gstablished by our

Constitution. This concept of federalj

fully preserved throughout our history by the courts, not

by exhorting the Congress on the one hand or the state

legislatures on the\other to restrain their actions so as not

to trespass on the rights, ee and duties of the

other.

I cannot agree that it is a political question for the.state

to importune the Congress not to raise the salaries of

. -«

has . been .care- ©

CA REESE

47a

., State employees, thus forcing .the state legislature to tax

its people to. pay those employees. This is a direct trans-

-. gression on the concept of federalism, whith must be deter-

mined by the courts. The case. before us is a perfect ex-

ample of the wisdom of Constitutional rather than‘Con-.’

gressional federalism. The amendment, through which the

_ states are subjected to the Fair Labor Standards Act, was.

- enacted without notice to the states so that‘ they might be

heard and without any thought being ‘given to the effect ©

of the Act on them. Surely the statement of one-Congress-

man, even in the committee. of the whole, did not alert the

states, or constitute a Congressional finding,.or give this

- Act a purpose as applied to the states as the majority would

wish. [Note 10, Judge Winter’s -: opinion.]

This case then brings into confrontation the powers of

Congress under the Commerce Clause with the concept of

dual -sovereignty-or-federalism-as embodied in our Con-

stitution, which is articulated in the Tenth Amendment.

' The effect of this Act must be measured. against the

Constitution precisely and its impact cannot be softened by

what regulation a department of the national government

might promulgate in its application. . ;

What then is its effect on the state government? |

By this Act Congress is forcing unger threat of civil

liability and criminal penalties, the state legislature or

the responsible political ' subdivision of the state

* ‘1. to increase taxes (an impossibility in some of the

political subdivisions without a state constitutional amend-

genre os ae Se ;

2: to curtail the extent and calibre of services in the

public hospitals and educational and related institutions

of the state; or Sie

3. to reduce indispensable services in other governmental

activities to meet the budgets of those activitigs favored

- by the United States Congress; or

4. to refrain from entering new fields of governmental

‘ sti necessitated by changing social conditions.

The allocation of the state’s revenue among government

a activities is the most important ‘function .of ‘state govern-

ment, for it determines the extent and calibre of service.

4 . which a state can ‘supply. State governments must provide ,

} $ services out of current tax funds. Thé state government

or pee its political subdivisions are particularly sensitive to the

2 of the people and their ability to pay for the in-° -

dis nsable governmental functions that must be furnished.

, The budget is, therefore, under constant study. by: both ©

the executive and legislative branches of the state’s govern- ©

-ment. Not only does the appropriation bill demand the

highest consideration of the legislature while it is in ses-

sion, but it also requires most of the attention of the ex“

ecutive and the interim legislative committees - between

'. Sessions.*:

' There is we so’ much revenue available. ‘The wise —

allocation of this money démands this constant up-to-the-

- * minute knowledge of state and local governmental officials —

\* intimately concerned with the requirements and priorities

' to be allotted among the health, welfare, education, law

enforcement, urban, pollution, and other demanding gov:

_ernmental functions, each of substantial importance. The

states’ Congressional delegations neither have the time, nor —

knowledge, nor is it their function to ‘become involved in

-_. -the-vitak details of state fiscal ‘policy. .

Perhaps all of the above can be expressed more ares:

‘cally by a recent news story in the Baltimore Sun, which

undoubtedly is. repeated bundreds of times . _ACTOSS — the

nation:

“Tt-is budget time again in Sinise County. .

“What particularly worries the commissioners is that |

the school ° budget [the largest expenditure of the

* For alae. consider the reports of the Maryland General As- .

sembly’ s Committee on Taxdtion and Fiscal Affairs from 1955 to

date, the Maryland Legislative Council’s Report for any year and

countless other such documents reflecting the prodigioys amount of

time and effort put forth by state officials to supply governmental

services. These documents may be found in the Archives of the

Council of State ne.

id ,

county government} has gone t up.on an average of 22

per cent each year while the taxable income goes _ up.

only 15 per cent and assessments only 9 per cent.” The

Evening Sun (Baltimore), April 6, 1967..

The impact of a mandatory allocation: of stute-collected

revenues by Congress among the indispensable state

governmental services is thus readily demonstrated. It

amounts to the national government rompelling state -

government action and controlling and Gperating the state

government with little or no. knowledge of the require-

ments of its citizens or the financial ss of those citizens

to pay the bill.

‘The Congress, under the theory of this Act, hi tinuten. )

late state governments by increasing - the state functions

to come under the “enterprise” concept or removing

- exemptions for classes of state employees at will without

notice te the state, and’ all at the expense of the state.

This Act'is thus an intrusion of first magnitude ‘into the |

functioning of state government now, is _potentially with-

’ out limif, and carries with it. the formula for the ne destruc: \,

tion. of the concept*of federalism.

Congress has heretofore carefully avoided interjecting

the national power into state or local governmental func-

tions. Although grants-in-aid and ‘matching funds might

have that effect, these have a contractual basis — a far

cry from mandatory direction. This Congressional reluc-

tance in and of itself: indicates a recognition of the Cén-

stifutional principle of federalism.

The careful nurturing of the. concept of federalism has

come to fruition since World War II in the increasing

initiative of the states) i in meeting new problems brought

about by the great social changes in our nation. The

" ‘momentous “Metropolitan Problem” has caused the crea-

tion of new forms-~of local governmept in: many of the’

affected areas. The wisdom of locah/administration has

been clearly demonstrated. We are seeing many more

govenmental activities being undertaken by the federal .

and state governments on a eagnees partnership basis

ie, 6,

‘ ; - ?

& © + : . t

50a ©

‘directed at solving our internal pectin. In light of the

' above examples of voluntary movement toward national . ..

and state partnership, rather than compulsion, it would -,

indeed be tragic at this point in history to expand and ..

si broaden the power of the federal government over the

State governments in the exercise of their necessary govern-

mental functions under the guise of the “Commerce

Clause” to a point never heretofore reached by any deci

‘sion. To substitute now the delayed and ponderous action .

- of a remote central government aaa atrophy and stifle

this progress.

Alexis de Tocqueville i in his Democracy in America said

it in this —

; “cannot conceive that a nation can. live and

prosper without a powerful centralization of govern-

ment. But I am of the opinion’that a centralized

administration ‘is fit only to. enervate the nations in:

which it-exists, by incessantly diminishing their lacal

spirit. Although such an administration, can bring

together at a given moment, on a given point, all the

_. . disposable ‘resources of.a people, it injures the renewal

* of those resources. It may insure'a victory in the hour _

of strife, but it gradually relaxes the sinews of strength.

~ It may help admirably the transient greatness: of a

‘man, but not the durable prosperity of a nation.” Vol.

I, pp. 86-87 tank Mia New York, 1946)..

Thus, the limitation upon’ ‘a power, whith’ ne been |

delegated ‘to the federal government —_ intluding the

power to regulate commerce among the States — and eae _

‘deals with the internal ‘affairs of this nation, is re

when Congress exercises that power so as to interfere |

unduly in some manner with the state’s performance of an ©

indispensable governmerital activity. The Act as applied -

to employees of public. schools, hospitals, and related. °

_ institutions is unconstitutional - ‘because it is an undue

infringement upon the performance of an indispensable

and fundamental governmental function (its taxing and

— budgetary function) of the state, which the Constitution

recognizes as sovereign. os

. ee

> ° : . 5la an

The proof of the wisdom of the federal concept is implicit

in the name of our government — the “United States”. It -

cannot be said more succinctly.

(Filed June 26, 1967)

This cause having come on for final argument and the

parties having agreed to present this case for final decision

on a stipulated record; and the plaintiffs th their complaints

having: prayefi for a declaratory judgment and a prelimi-

nary and permanent injunction; and the court having

received argument and briefs fronr the parties; now there-

fore, this 26th day of June, 1967, it ig |

OrpERED, ADsUDGED AND DECREED: Pky: ee

. ' Plaintiffs’ motion for summary judgment and prayers —

for interlocutory and permanent injunctive relief are

denied for the. reasons set forth in the opinions of the .

Court. :

Accordingly, this action is dismissed, ‘without costs .to.

either party. Mer | ‘

| _/s/ Harrison L. WinTER,

aay . ) Circuit Judge.

| \ /s/ Roszex C. ‘THOMSEN,

“District Judge.

"52a:

| APPENDIX B aie

Text OF Farr Lasor Stanparps Act As AMENDED IN 1966

Act of June 25, 1938, as amended by Fair Labor Standards

Amendments of 1949 (Public Law 393, 81st Congress),

effective January 25, 1950, and by Fair Labor Standards .

Amendments of 1955 (Public Law 381, Chapter 867, 84th

_ Congress, 1st Session), approved August 12, 1955, further.

. amended by H.R. 7458 (Public Law 85231, 85th Congress,.

‘1st Session), approved Atigust 30, 1957, effective November

28, 1957; amended by P.L. 85-750, approved August 25,

* 1958; by the Judicial Review Act, P.L. 85-791, approved

August 28, 1958; by the Fair Labor Standards Amendinents

of 1961, P.L. 87-30, approved May 5, 1961, effective. Septem-

ber 3, 1961; by the Equal Pay Act of 1963, approved June

10, 1963, effective June 11, 1964, and by P.L. 89-601, ap- —

proved September 23, 1966, effective February 1, 1967.

Annotations in brackets show aceand made by amend-

ments.

1. Title.

2. Finding and declaration of pay.

..°3. Definitions.

4. Administrator.

. Industry committees for Puerto Rico sad the Virgin

Islands;

6. Minimum wages. -

7. Maximum hours. -

8. Wage orders.

‘9. Attendance of witnesses.

10. Court review. :

11. Investigations, inspections, and records,

12. Child labor provisions.

13. Exemptions. —

14. Learners, apprentices, and handicapped workers.

15. Prohibited acts.

ERR a wie eh ee

ral si , ws - 53a

16. Penalties.

17. Injunction proceedings.

18.. Relations to other Jaws.

. 19. Separability of provisions.

a. Dan act

To PROviDE FOR THE ESTABLISHMENT OF Farr Lasor STANDy

ARDS IN EMPLOYMENT IN AND AFFECTING. INTERSTATE .

COMMERCE, AND FOR OTHER PURPOSES.

Be it enacted by the Senate and House of Representatives .

of the United States of America in Congress assembled,

Sec. 1. That this Act may be cited as the “Fair Sabor

| Standards Act of 1938.”

_ FINDINGs -AND DECLARATION or Po.icy

Sec..2. (a) The Congress hereby finds that the existence,

in industries’ engaged in ‘commerce or in the production

of goods for comrherce, of labor conditions detrimental to

the maintenance of the minimum standard of living

necessary for health, efficiency, and general well-being: of’

workers (1). causes commerce and the channels and in-

strumentalities of commerce to be used to spread and

perpetuate such labor conditions among the workers of

the several States; (2) burdens commerce and the free |

flow of goods in commerce; (3) constitutes an unfair

method of competition in commerce; (4) leads to labor. .

disputes burdening and obstructing commerce and the —

free flow of goods in commerce; and: (5). interferes with

the’ orderly and fair niarketing of goods in: commerce.

(b) It is hereby declired to be the policy of this Act,

through the exercise by Congress of its power to regulate

commerce . among’ the several States and with foreign —

nations, to correct and.as rapidly as practicable toeliminate .

the conditions above referréd to.in such industries without

‘substantially’ cugfailing employment or earning power.

'[Sec. 2 of P. L. 81-893, effective Jan. 25, 1950, added

the words “and with foreign nations” i in’ the fifth line

of subsection oe above)

—

EONS Ra § ee Tepe arngnnen cers — OP oe SELL EN NS RT Ss Po as

- Oe penn a | Dermvrrions: oN :

Sec. 3. As used in this Act— mo Meter wie. |

(a)-“Person” means an individual, partnership, a associa- .

tion, corporation, business trust, legal represéntative, or,

‘any organized group of persons. E | *,

‘(b) “Commerce” means trade, commerce, transporta-

tion, transmission, or communication among the several

States or between any State and any place outside thereof.

. . [The concluding words “between any State and any’

place outside thereof’ were substituted by Section,

3(a) of P. L. 81-393, effective Jan. 25, 1950, for the

original words “arodh any State to. titel place outside

thereof. ee

‘(ey “State” 1 means. any State of the United States or mone

_ District of Columbia or any Territory or possession of the.

United States.

(d) “Employer” includes any shinai acting divectty or

_ indirectly in the interest of an employer in relation to an

*“ employee but shall not include the United States or any

“State or: political subdivision of a State (except with ‘re-’

spect to employees of a State, or a political subdivision

thereof, employed (1). in a hospital, institution, ‘or school

referred to in the last sentence of subsection (r) of this

‘section, or (2) in the operation of a railway or carrier

. referred to in such sentence), or any labor organization

(other than. when acting as an employer), or anyone act- '

ing ‘in. the capacity of officer \or agent. of — labor —

i organization. | a, ' |

Section 3(d) was aniadis by P. . 89-601, ‘effective Ta

Feb. 1, 1967, by inserting after “of geo yell the phrase ae

. beginning “(except with Pe ee ending “such + *»

sentence)”. = |

_- (e) “Employee” includes any sindtobibenl employed by an

, employer, except that such term shall not,.for the purposes

' of sectiqgn 3( u) include— ,

vy”

f° ILO, OOO EE ras ds escaninads PE LEE ERP EL El POP LOSES BANE AE per es > po te y eM om a — - — ae al ,

. ” : . 2 Vara 9 top ERs enn” fey = y

? °

ROB HR ore rer anne rpr iy THOR aad PER OLL , 7 ~ LOO BOE BIRR TE

55a

tel (1) any individual employed by an tiatiaaia en- -

gaged in agriculture if such individual is the parent, .

spouse, child, or other member of the employer’s immediate

family, or

fe] (2) any individual who i is jiainaieel, by. an pra ae

engaged in agriculture if such individual (A) is employed

as a hand harvest laborer-and is paid on a piece rate basis"

in an operation which has been, and is customarily and

generally recognized as having been paid on a piece rate

basis in the region of e#{ployment, (B) commutes daily

from his permaneépt residence to the farm on which he

‘is so employed, and (C) has been employed in agriculture

less than thirteen weeks during the preceding calendar

year.

[Section 3(e) was amended by P. L. 89-601, effective

Feb. 1, 1967, to add the — provided in para-

graphs (1) and (2).] Bh

(£)-“Agriculture” includes farming in all its sei

and among other things includes the cultivation and tillage

-of the soil, dairying, the production, ¢ultivation, growing,

and harvesting of any agricultural or horticultural com-

-modities (including commodities defined as agricultural

' commodities in section 15 (g) of the Agricultural Market-

ing.Act, as amended), the raising of livestock, bees, fur-

bearing animals, or poultry, and any practices (including

any forestry, or lumbering operations) performed by a

- fariuer or on a farm as an incident to or in conjunction with

~ sueh farming operations, including. preparation for market,

delivery to storage or to market or to carriers for trans-

porte ion to market.

(g). “Employ” includes to. ole or pactnlt to wool:

(h) “Industry” means a trade} business, industry, or

branch thereof, or group of industries, in which individuals

are gainfully employed. .

(i¥ “Goods” means goods (including ships and marine.

equipment), wares, products, commodities, merchandise, or

articles or subjects of. commerce of any character, or any

~ .

part or cians thereof, but does not include ‘goods after

their delivery into the actual physical possession - of the

ultimate consumer thereof other than a producer, manu- —

facturer, or processor thereof.

(j) “Produced” means prdduced, manufactured, mined,

handled, or in any other manner worked on in any State;

and for the purposes of -this Act an employee shall be

deemed to have been engaged in the production of goods

- if such employee was employed in producing, manufactur-

ing, mining, handling, transporting, or in any other manner

working on such goods, or in any closely related process

or occupation — essential ‘to the production thereof, .

_in any State. — | 4

[Section 3(b) of P. L. 81-393, effective Jan. 25, 1950,

inserted, before the word “process” ‘in the third line .

‘from the end of this subsection, the words “closely:

related.” In addition, after the word “occupation” in

the same line, it deleted ‘the word “necessary” and.

substituted the words “directly essential.” The last:

any process or occupation, necessary to the —s

thereof, in any State.”] ae ;

(ic) “Sale” or “sell” includes any ial: exchange, con-

tract to sell, consignment for sale, shipment for sale, or

other disposition. —

(1) “Oppressive child labor” means a condition of em-

ployment under which (1) any employee under the age

of sixteen years is employed by an employer (other than

a parent or a person standing in place. of a parent em-

ploying his own child or a child in his custody under

the age of ‘sixteen years in an occupation other than

manufacturing or mining or an occupation found by the —

Secretary of Labor to be particularly hazardous for the

employment of children between the ages of sixteen and

eighteen years or detrimental to their health or well-being)

in any occupation, or (2) any employee between the ages

_ of sixteen and eighteen years is employed by anemployer_ -

in any occupation which the Secretary of Labor shall find _

Ie NA OO IEIOE LO SONAL VEE SLABS, VIG No 8 OE ie

ond by ‘eter parr to Lie perticaliety hazardous pie the

employment of children between such ages er detrimental

to their health or well-being; but oppressive child labor

shall not be deemed to exist by virtue of the employment

in any occupation. of any person with respect to whom the

employer shall have on file an unexpired certificate issued

‘ and held pursuant to regulations | of the Secretary of. Labor

certifying that such person is above the oppressive child-

labor age. The Secretary of Labor shall provide by regu-

lation or by order ‘that the employment of employees

between the ages of fourteen and ‘sixteen yéars in occupa-

tions other than manufacturing and mining shall not be

deemed to constitute oppressive child labor if and to thé

exterit that the Secretary of Labor determines:that such -

employment i is confined to periods which will not interfere

with their schooling and to conditions which will not

interfere with their health and well-being.

[Section 3(c) of P. L. 81-393, effective Jan. 25, 1950,

added the language inthe last part of the parentheses *

which occurs in lines 5 to 16 in subsection (1) above.

The language is: “or an occupation found by. the

Secretary. of Labor to be particularly hazardous for

the employment of children between the ages of six-

. teen afd eighteen years or r detrimental to their health

or well-bejng”) - |

(m) “Wage” paid to any selected includes the reason- -

| able. cost, _as determined by .the Administrator, to the

employer of furnishing such employ€e with board, lodging,

ar other facilities, if such board, lodging, or other facilities

gre customarily furnished by such employer to his em- °

ployees: Provided, That the cost of board, lodging, or other

facilities shall not be included as a part ‘of the wage paid

to any employee to. the extent it is: excluded therefrom

- under the terms of a bona fide collective-bargaining agree-

ment applicable to the particular employee: Provided

. further, That the Secretary is authorized to determine the

‘fair value of such board, lodging, or other facilities for

defined classes of employees and in defined areas, based on

average cost te the employer or to groups of employers

So PO PO RL i Rt AIA ERI EE OO EEO OB TOO ett Ree ee:

Salil

similarly aaiaasi or average value to groups of employees,

or other appropriate measures of fair value. Such evalua-

tions, where applicable and pertinent, ‘shall be used in

lieu of actual measiire of cost in determining the wage.

paid to any employee: In determining the wage of a tipped

employee, the amount paid such employee by his -em-

- ployer shall be deemed to be increased: on account of tips

by an amount determined by the employer, but not by an -

amount in excess of 50 per centum,of the applicable mini-

mum wage rate, except that in the case of an employee

who (either himself or acting through his representative) « ~

shows to the satisfaction of the Secretary that the actual

amount of tips received by him was less than the amount

determined by the employer as the amount by which the

wage paid him was deemed to be increased. undex this

sentence, the amount paid such employee by his employer |

shall. be deemed to have been increased by such lesser .

amount.

[Section 3(m) was amended to add the last two

roe by the Fair Labor Standards Amendments

. 1961 approved May 5,-1961, effective Sept. 3, 1961.

This section was further amended by P.L. 89-601, —

’ effective Feb. 1, 1967, by eee: the sentence begin-

ning “In determining 1 the...” and ending “such lesser:

amounts.”] ic

(n). “Resale” shall not include the sale of goods to be.

used in residential or farm building construction, repair,

or maintenarive: Provided, That.the sale, is — as

a bona fide retail sale in the industry.

[Section 3(n) was added by Section 3(d) of PL

81-393; it was further amended to add the phrase “ex- .

cept as used in subsection (s)(1)” after the term

“resale” by the Fair Labor Standards Amentnents

of 1961 approwed May 5, 1961, effective September 3;,

1961. Tak pecearaph was further amended by P.

89-601, effective Feb. 1, 1967, by striking out the words

“except as used in subsection. (s) (1),” immediately

. following “Resale.”]

“ ERG Ii PD ATE LA GEE LN AE OER RO MOE

58a

(0) Hours Worked — In Sisniiinititian for the purposes

of sections 6 and 7-the hours for Which an employee. is

~ employed, there shall be excluded any time spent 4n

changing clothés or washing at the beginning or end of

each workday which was excluded from measured: working

time during the week involved: by the express terms of.

or by custom or practice under a bona fide collective- |

bargaining oe applicable to the es em-

_ _ ployee.

[Subsection . (0) was added by Section 3(d) of P.L.

81-393, effective Jan. 25, 1980.1 -\— = = a

(ay. -ametican vol techie ahy vessel which is

documented - or numbered under the laws of the United |

States. ,

(q) “Secretary” means the Secretary of Labor.

(r) “Enterprise” means the related activities performed

(either through. unified operation or common control) by

any person or persons for a common business purpose, and

‘includes all such. activities whether performed in one or

more establishments or by one or more corporate or other

‘ . organizational units including departments of an estab-

_ lishment operated through leasing arrangements, but. shall

not include the related activities performed for such enter-

prise by an independent contractor: Provided, That, within

the meaning of this subsection, a retail or service establish-. . .

ment which is under independent ownership shall not be.

deemed to be so operated or controlled as to be other than

- a separate and distinct enterprise by reason of any arrange-

ment, which includes, but is not necessarily limited to, an

agreement, (1) that it will sell, or sell only, certain, goods

specified by a particular manufacturer, distributor, or

advertiser, or (2) that it will join with other such establish- _

ments in the same industry for the purpose of collective

purchasing, or (3) that it will have the exclusive right to: -

distributor, or advertiser within a specified area, or by

reason of the fact that it éccupies premises leaséd to. it

by a person who also leases premises to other retail or

60a

service establishments. For purposes of this subsection,

the activities performed by any person or persons—: .

(1) in connection, with the operation of. a hospital, an-

institution primarily engaged in the care of the sick, the

aged, the mentally ill or defective ‘who \reside on the

premises of, such institution, a school for mentally or physi-

“cally handi€apped or gifted children, an elementary or

secondary school, or an institution of higher education (re-”

- gardless ‘of whether or not such hospital, institution, or

- school is public or private or operated for ‘Profit or not —

for profit), or

(2) in connection with the operation of a’street, sub-

urban or interurban electric railway, or local trolley or

motorbus carrier, if the rates and services of such railway _

or carrier are subject to regulation by a State or local

agency (regardless of whether or not such railway or

carrier is public or private or. operated for profit or not

for profit), shall be deemed to be activities performed for

a business purpose.

[Section 3(r) was ‘qmended- ‘by P.L. 89-601, effective

Feb, 1, 1967, by adding at the end thereof the hee :

beginning “For the purposes . .’ and ending “... for -

a business purpose. wy

| (s) “Enterprise engaged in commerge or in the produc-

tion of goods for commerce” means an enterprise which

has employees engaged in commerce, including employees

handling, selling, or otherwise working on goods that have

been moved in or mee for commerce by any person,

and which— > :

€2) @uring, the period February .1, 1967, ‘ene

January 31, 1969, is an enterprise whose annual gross .

_ volume of sales made or business done is not less than

- $500,000 (exclusive of excise taxes at the retail level

ou which are separately stated) or is a gasoline servite

* establishment ‘whose @nnual. gross volume of sales is

not less ,than $250,000 (exclusive of éxcise taxes at

the retail level which are separately stated), and be-

ginning February 1, 1969, is an enterprise whose an-

——

a rBey a

61a. \

- nual gross’ volume. of sales made or business done is.

—Hot less than $250,000 (exclusive of excise taxes at

the retail level which are separately stated;

(2) is engaged in laundering, cleaning, ig repairing

clothing or fabrics;

(3) is engaged in the business of construction or

reconstruction, or both; or

- (4) is engaged in the operation of.a hospital, an *

institution primarily engaged in the care of the sick,

the aged, the mentally ill or defective who reside on

the premises of such institution, a school for mentally

or physically -handicapped or gifted children, an ele-

mentary or secondary school, or an institution of -

higher education (fegardless of whether or not. such

hospital, institution, or school is public or private or.

operated for profit or not for profit).

Any establishment which has as its only regular employee

_ -the owneg thereof or the parent, spouse, child, or other

member of the immediate family of such owner shall not

‘be considered to be an enterprise engaged in commerce or

_ in the production of goods for commerce or a paft of such -

an enterprise, and the sales of such establishment shall not

be included for the purpose of determining the annual

gross volume of sales of any ee for the purpose of

~ this subsection.

[Section 3 was ‘amendedl-to add subsections { p), (q),

(r), and 6s) by the Fair Labor Statidards Amend-’

ments of 1961 approved May 5, 1961, effective Se

3, 1961. Section 3(s) was’ amended by P.L. 89-601,

effective Feb. 1, 1967, to substitute virtually entirely

new language. Prior to the amendment, meee: 3(s)

read as follows: |

(s) “Enterprise engaged i in commerce or in the pro-

duction. of goods for commerce” means any of. the —

following in the activities of which’employees are so

engaged, including employees handling, selling, or

~ otherwise working on goods that have been moved in —

or produced for commerce by ‘any person:

€

62a,

“~

“(1) any such enterprise ‘whieh has one or more

retail or service establishments if the annual gross

volurne of sales of such egterprise’is not less than ~

$1,000,000, exclusive of excise taxes at the retail level

which are separately stated and if such enterprise

purchases or receives goods for resale’ that move or

have moved across State lines (not in deliveries from .

the-reselling establishment) which amount in total

annual volume to $250,000 or more; ’

_ “(2) any such enterprise which is animal in the

business of aperating a street, suburban or interurban

electric railway, or local ‘trolley or motorbus carrier

if the annual gross. volume of sales of such enterprise °

_ is not less than $1,Q00,000, exclusive of excise- taxes at

the retail level which are separately stated;

- “(3) any establishment of any such enterprise ¢ ex-

cept establishments and enterprises referred to in.

other paragraphs of this subsection, which has em-.

_ployees engaged in commerce or in tie production of

goods for commerce if the annual gross volume of

sales of such enterprise is not less than $1,000,000;

“(4) any such enterprise which is ‘engaged in the

- business of construction or reconstruction, or ‘both, if

the annual gross volume from the business of such ~~

enterprise is not less than $350,000;

“(5) any gasoline service esta ishm nt if the an-

nual gross volume of sales of suc blishment is

not less than $250,000, exclusive of &xcisés taxes at the

retail level which are separately stated:

“s “Provided, That:an.establishment shall nat_be eon-

- sidered to be an enterprise engaged in commerce or

__in the production of goods for commerce, #r ‘a part

of an enterprise engaged in commerce or in the pro-

duction of goods for commerce, and the sales of such

establishment shall not be included for the purpose of -

determining the annual gross. volume of sales of any

enterprise for the purpose of this: subsection, if the

only employees of such establishment are the owner

7 2 . © ©

+ ployee performs any aepleerel labor for not less than -

thereof : or persons standing in the relationship of

. parent, spouse, or child of such owner.?]

(t) “Tipped employee” means any employee engaged in

ceives more than $20 a month in tips.

(u) “Man-day” means any day during which an em-

one hour.

(v) “Elementary school” means a day, or ‘residential

school which provided elementary education, as determined

under State law.

(w) “Secondary school” means a day or ‘residential

school which provides mentee education, as determined

- under State law.

[Section 3. was ennnied by P.L. 89-601, effective

Feb. 1, 1967, to add subsections (t), (u), (v), and (w).]

_ADMINISTRATOR

Sec. 4. (a) There is hereby created in the Department

of Labor a Wage and Hour Division. which shall be under

‘the direction of an’Administrator to be known as the Ad-: |

ministrator of the Wage and. Hour Division (in this Act

referred to as the “Administrator”). The Administrator

shall be appointed by the President, by and with the advice

and consent of the Senate, and shall : receive. compensation

at the rate of $26,000 a year.

‘[Section 4 of P. L. 81-393 effective Jan. 25, 1950, sub-

stituted “$15,000” in the last line of the subsection

.. above for “$10,000” in the original statute. The salary

then was raised to _— and’ in: 1964 to er by

P. L. 88-426.]

(b) The Administrator may, subject to the civil-service

a — appoint such employees as he deems necessary

to carry out his functions and duties. under this Act

and shall ix their compensation in accordance with the

Classification Act. of 1923, as amended. _ an ace meee

‘

Cia

may establish and utilize such regional, local or other agen-

cies, and utilize such voluntary and uncompensated. serv-

-ices, as may from time to time be needed. Attorneys ap-

pointed under this section may a pear for and represent | |

‘the Administrator in any litigation, but all such litigation

.Shall be subject to the direction and control of the Attorney-

General. In the appointment, selection, classification and

promotion of officers and employees of the Administrator,

‘no political test or qualification shall be permitted or given:

_ consideration, but all such appointments and promotions

shall be given and made on the basis of merit and efficiency.

the District of Columbia, but he or his daily authorized

representative may exercise sed or all of his powers i in id

place.

(d) The Admtateeeter shall submit annually i in J anuary .

a report to the Congress covering his activities for the

- preceding year and including such information, data, and

recommendations for further legislation in connection with

the matters covered by this Act as he may find. advisable.

Such report shall contain an evaluation and appraisal by

- the Secretary of the minimum wages established by this

Act, together with his recommendations to the Congress.

In making such evaluation and appraisal, the Secretary

shall take into consideration any changes which may have

occurred in the cost of living ard in productivity and the

level of wages in manufacturing, the ability of employers to

absorb wage increases, and such other factors as he may

deem pertinent. .

[Sec. 4(d) was amended by Sec. 2 of the Fair Labor

Standards Amendments of 1955, effective August 12,

1955, to add the. last two sentences. ] 7.

Investigations of Effects on Employment, of Foreign Com-

petition .

(e) Whenever the Secretary has reason to believe that

in any industry under this Act the competition of foreign.

producers in United States markets or in markets abroad, |

- or both, has resulted, or is likely to result, in increased

LARGO PEPER LE OLE ELON VENI ES IE BEA IE AEP Se OLE AS AES

65a

unemployment in the United States, he shall undertake an

‘investigation to gain full information with respect to the

matter. If he determines such: increased unemployment —

has in fact resulted, or is in fact likely to result, from such .

competition, he shall make a full and tomplete report of

his findings d determinations to the President and to the

Con : Provided, That he may also include in such re-

port ¢nformation on the increased employment resulting

from additional exports in any industry under this Act as.

he may déterminé to be pertinent to such report.

[Sec, 4 was amended to add subsection (e) ‘by the

Fair Labor Standards Amendments of 1961, approved

May 5, 1961, effective Sept. 3, 1961.] .

' SpEcraL INDUSTRY ComMrrrezs FOR Puerto Rico

. AND VIRGIN ISLANDS

Sec. 5. (a) The Administrator shall as soon as practicable

appoint a special industry committee to recommend the

minimum rate or rates of wages'to be paid under section 6

to employees in Puerto Rico) or the Virgin Islands, engaged.

in commerce or in the production of goods for commerce, —

or employed in any enterprise engaged in commetce or in

the production of goods for commerée, or the Adminis-

trator may y appoint separate industry committees to recom-

mend the minimum rate or rates of wages to be paid: under

‘section 6 to employees therein engaged in commerce or in

the production of goads for commerce or employed in any

enterprise engaged in commerce or in the production: of _.

goods for commerce in particular industries. An industry

. committee ‘appointed under this subsection shall be com-

posed of residents of such island er islands where the em-

‘ployees with respect’ to whom'such committee was ap-

pointed are employed and gree of the United States

outside of Puerto Rico and the, Virgin Islands. \In deter-

; mining the minimum rate or rates of wages to be paid,

'’ ‘afd in détermining classifications, such industry‘ commit-_

tees shall be subject to the provisions of section 8.

[Sectién 5(a) was amended by the Fair Labor | Stand- —

_ ards Amendments of 1961 approved May 5, 1961, effec-

66a.

tive September 3, 1961, to insert after the words “pro-.

duction of goods for commerce” wherever they appear

the. phrase “or employed in any enterprise. engaged

in commerce or in the production of goods for com-

merce.”’] . / ; - ! es

" [Sec. 5(a) was amended by. Sec. 5(a)’ of the Fair

_ , Labor Standards Amendments of 1955, effective August

12, 1955, by striking out “and the administrator” in

the last sentence. The sentence previously read: “In

determining the minimum rate or rates of wages to be

paid, and imdetermining classifications, such industry

committee” and the Administrator shall be subject to

the provisions of section 8.] cS :

(b) An industry.committee shall be appojnted by the

Administrator without regard to any other provisions of

law regarding the appointment and compensation of em-

_ ployees of the United States. It shall include a number of

disinterested persons representing the public, one of whom.

the Administrator shall designate as chairman, a like num-

' ber of persons representing employees in the industry,

and a like number representing employers in the industry.

- Inthe appointment of the persohs representing each group,

‘ ° the Administrator shall give due regard to the geographical

regions in which the industry is carried on.

[This subsection was reenacted by Section 5 of P: L.

_81393-effective Jan. 25,1950.) . |

mittee shall constitute a quorum, and the decision of the

committee shall require a vote of not less than a majority

of all its members. Members of an industry committee

shall receive as compensation for their services. a reason-

able per diem, which the Administrator shall by rules and

' regulations prescribe, for each day actually spent in the

_ work of the committee, and shall in addition be reimbursed

for their necessary traveling and other expenses. The Ad-

ministrator shall furnish the committee with adequate

legal, stenographic, clerical, and other assistance, and shall

67a

by rules and vintiattdinn prescribe the Procedure to be

followed by the committee. ;

[This‘subsection was reenacted by Section 5 of P. / :

81-393 effective Jan. 25, 1950.) |

“(a) The Administrator shall submit to an sabi com-

mittee from time to time such data as he may have avail-

able onthe matters referred to it, and shall cause to be

brought before it in connectionjwith such matters any

‘witnesses whom he deems material. An industry commit-

tee may summon other witnesses or call upon the Adminis-

trator to furnish additional information to aid it in its

deliberations. . na

[Section 5 of P. L. 81-393 ellective Jan. 25, 1950,

reenacted the above subsection. It also deleted a sub-

- section (e) which read as-follows:

“(e) No industry committee appointed under sub-

- section (a) of this section shall have any power to |

recommend the minimum rate or rates of wages to be

id under section 6 to any employees in Puerto Rico

‘. or in the Virgin Tslande Notwithstanding any other

provision of tltis Act the.Administrator may appoint

. @ special industry committee to recommend the mini-

mum rate or rates of wages to be: paid under section 6

to all. employees in Puerto Rico or the Virgin Islands, .

or in Puerto Rico and the. Virgin Islands, engaged in

‘ commerce or in the production of goods for commerce, ~

or the Administrator may. appoint separate industry

committees to recommended the minimum rate or

_rates of wages to be paid under section 6 to employees

therein engaged in commerce or in the production of

goods for commerce in particular industries. An in-

_dustry committee appointed under ° this. subsection

shall be composed of residents of such island or islands

where the employees with respect to whom such

‘ committee was appointed are employed and residents ~

of the United States outside of Puerto Rico and the

Virgin Islands. In determining the minimum rate or

rates of wages to be paid, and in determining classifi-

og. {eee a

cations, such industry .committees ind the Adminis-

trator shall be subject to the provisions of section 8

and no such committee shall recommend, nor shall-the .

_ Administrator approve, a minimum wage rate which

will give any industry in Puerto Rico or in the Virgin

Islands a competitive advantage over any industry in

the United States outside of Puerto Rico and the

Virgin Islands. :

- “No wage orders iinet by the dilantin pur- _ :

suant to the recommendations of an industry commit- .

tee made prior to the enactment of this joint resolution’. i.

-pursuant to séction 8 of the Fair Labor Standards Act

of 1938 shall after such enactment be applicable with

‘respect to any employees engaged. in commerce or in: °

the production of goods for commerce in Puerto Rico

or the Virgin Islands.”]. . , |

Minimum _——

Sec. 6. (a) Every employer shall pay to. each of his

employees who if any workweek is engaged i in commerce «

_ or in the production of goods for commerce, or is employed

_in an enterprise engaged in commerce or in the production

of goods for commerce, wages at the following rates:

(1) not less than $1.40 an hour-during.the first year from

. the effective date of the Fair Labor Standards Amend- -

- ments of 1966-and not less than $1.60 an hour thereafter, oe

"except as otherwise provided in this section;

[Sections 6(a) and 6(a) (1) were amended by P PL

89-601, effective Feb., = 1967, by. deleting all existing -

material and inserting in its place the new material

—s “Every employer shall . . .” and ending

. provided in this section;” Sec. 6(a) (1) previously ~°

was amended by the Fair Labor Standards Amend- —

ments of 196% approved May 5, 1961, effective Sept.

3, 1961, to raise the minimum from $1.00 an hour to

$1.15 on Sept. 3, 1961, and to $1.25 in 1963.” The $1-an-

- hour minimum was incorporated into the law by Sec.’

3 of the Fair Labor Standards Amendments of 1955,

— siaall 12, 1955, and made effective March 1,

«69a

1956. This mfnirnum superseded an hourly minimum

of. 75 cents. * *

, : 2 ;

Previously, Sec? 6(a) of P. L. 81-393, effective Jan.

25, 1950, substituted “75 cents an hour” for the follow-

-.ing four subparagraphs in the original statute. _

“(1) during the first year from the effective-date of

this section, not less than 25 cents an hour.

“(2) during the next six years from such date, not

less than 30 cents an, hour. ‘¢

“(3) after the expiration of seven years from such

' daté, not less than 40 cents an hour, or the rate (not . ~

less than 30 cents an hour) prescribed in the appli-

cable order of the Administrator issued under section

8, whichever is lower, and . | |

_ “(4) at any time after the effective date of this sec-

tion, not less than the rate (not in excess of 40 cents.

an hour) prescribed in the applicable —_ of the Ad-.

ministrator issued under section 8.”]

(2) if such employee is on worker in Puerto ‘Rico

or the Virgin Islands, not less than the minimum piece

’ rate’prescribed by regulation or order; or, if no such mini-

mum piece rate is in effect, any piece rate adopted’by such °

employer which, shall‘yield, to the proportion or class ‘of *

employees préscribed by regulation or order,.not less than

the applicable minimum hourly wage rate. Such minimum

piece rates or employer piece rates shall be commensurate

with, and shall be paid-in lieu of, the minimum hourly

wage rate applicable under the provisions of this section.

The Administrator, or his authorized representative, shall

have power to make such regulations or’ orders as are

necessary or appropriate to carry out any of the provisions

of this: paragraph, including the power, without limiting

the generality of the foregoing, to define any operation or

occupation which is performed by such home work em-

ployees in Puerto Rico or thé Virgin Islands; to establish

minimum piece rates for any operation or occupation ‘so *

. defined; to- prescribe the methods and procedure for, ascer-

70a

‘taining and promulgating minimum piece rates; to pre-

scribe standards for employer piece rates, including the

proportion or class of employees who shall receive not

‘less than the minimum hourly wage rate; to define the

_ term “home worker”; and to prescribe the. conditions under

‘which employers, agents, contractors, and subcontractors

shall cause goods to be produced by home workers.

| [The above subparagraph, unchanged from the orig-

inal law, was renumbered as “(2)” 4#y Section “oe? of

P. L. 81-393, effective Jan. 25, 1950.) ce ag

(3) if ‘such employee is employed in American Samoa,

in lieu of the rate or rates provided. by this subsection ‘or

subsection (b), not less than the applicable rate. estab- .

lished by the Secretary of Labor in accordance with recom- —

‘ mendations of a special industry committee or committees

which he shall appoint i in the same manner and pursuant

to the same provisions as are applicable to the special in-

24 dustry committees provided for Puerto Rico and the Virgin

Islands by this Act as amended from time to time. Each

- such committee shall have the same powers and duties and: —

shall apply the same standards with. respect to the appli-

cation of the provisions of this Act to employees employed ~

in American Samoa as pertain to special industry commit-

tees established under section 5. with respect to employees ;

- mut. wage rate thus establishéd shall not exceed the rates

‘prescribed in paragraph (1) of this subsection;

(4) if such employee is employed as a seargan on an’ —

- American vessel, not less than the rate which will provide -

to the employee, for. the period covered by the wage pay-

’ ment, wages equal to compensation at the hourly rate pre-

scribed by paragraph (1) of this subsection for all hours.

during such period when he was actually’on duty (includ-

ing periods aboard ship when the employee was on watch

or. was, at the direction of a superior officer, performing

work ‘or standing by, but not-including off-duty periods —

which are mun — to the eatin sah agree-

ment); or

“Ta

(5). if oul employee is employed i in agriculture, not less

than $1 an hour during the first year from the effective.

date of the Fair Labor Standards Amendments of 1966, not

less- than $1.15 an hour during the second year from such

date, and not less than $1.30 an hour thereafter.

[Sec. 6(a)(3) was added by ‘amenidment approved

_ August 8, 1956 (Public Law 1023, Ch. 1035, S. 3956.

The subsection was further amended by the Fair

Labor Standards Amendments of 1961 to substitute

_ the first sentence for the following: “if such ernployee

is employed in American Samoa, at less than the ap-

plicable rate established by the Secretary of Labor in

accordance with recommendations of a special indus-

orn try committee or committees which he shall appoint

in the same manner and nage to the same provi-

sions as are now applicéble to the special industry

committees provided for Puerto Rico and the Virgin

Islands by this Act.” This section was further amended

: by P. 1z,89-601, effective Feb. 1, 1967, by changing the .

period at the end of the preceding paragraph to)a semi-

colon and adding paragraph (or.

(b) Every employer shall pay to each of his émployees —

“(other than’: an employee to whom ‘subsection (a) (5)

applies) who in any workweek is engaged in commerce or

in the production of goods for commerce, ors employed

in an erfterprise engaged in commerce or in the ‘production

of goods for commerce, and who in sach workweek is

brought within the purview of this section by the.amend-

ments make to this Act by the Fair Labor Standards

Amendments of 1966, wages at th following rates:

(1) not less than $1 an hour during the first yout "from

the effective date. of such amendments, .

_ (2) not less than $1.15 an hour during the second year

from such date, |

(3) not less than $1.30 an hour during the third year

from such —,

(4) not less than $1.45 an ie during the fourth year

from such date, and

~ [Section 6( b) was amended by P. L. 89-601, effective

Feb. 1, 1967, by deleting all existing. material and in-

serting in its place the new material beginning “Every

employer shall. . .” and ending with subsection 6(b)

(5). Prior. to the ‘amendment, Section 6(b) read as

follows:

- “(b) Every pourra shall pay to each of his em-

ployees who in any workweek (i) is employed. in an

enterprise engaged in commerce or in the production

_ of goods for commerce, as defined in section 3(s) (1),

. (2), or (4) or by an establishment described in section

3(s)(3) or (5), and who, except for the enactment of

the Fair Labor.Standards Amendments of 1961, would

- not be within the. purview of this section, or (ii). is

brought within the purview of this section by the

amendments made to section 13(a) of this Act by the

' Fair Labor Standards Amendments of 1961, wages at

rates—

“(1) not less than $1 an hour ae the first three

"years from the effective date of such amendments;. not

‘less than $1.15 an hour during the fourth year from

such date; and not less than the rate effective under

paragraph (1) of subsection (a) thereafter; — oa

“(2) if such employee is employed as a seaman on.

‘an’ American vessel, not less than the rate which will

_ provide. to the employee, for the period covered by

‘the wage payment, wages equal to compensation at

the hourly rate prescribed by paragraph (1) of this

was actually on duty (including periods aboard ship __

when the employee was on watch or was, at the di- ~-

~ rection of a superior officer, performing work or stand-

ing by, but not including off-duty periods which are

_, provided pursuant to the employment agreement).”]

73a -

(c)(1) The rate or rates provided by subsections (a)

and (b) of this section shall be superseded in the case of

any employee in Puerto Rico or the Virgin Islands. only

for so long as and insofar as such employee is covered by.

a wage order heretofore or hereafter issued by the Secre-

tary pursuant to the recommendations of a special indus-

try committee appointed pursuant to section 5..

(2) In the case of any such employee who is covered by

such a wage order and to whom the rate or rates prescribed

- by-subsection (a) would: otherwise apply, the ane ;

rates shall apply: _

(A) The rate or rates ‘cities under the most recent

wage order issued by the Secretary prior to the effective

date of the Fair Labor Standards Amendments of 1966,

Rocreased by 12 per centum, unless such rate or’ rates are

superseded by the rate or rates prescribed in a wage order

issued by the Secretary pursuant to the recommendations

of a review committee appointed under paragraph (C).

Such rate or rates shall become effective sixty days after

the effective dafe of the Fair Labor Standards Amendments

of 1966 or one year from the effective date of the most

recent wage order applicable to such employee theretoforé

issued by the Secretary pursuant to the recommendations

ofa special industry committee appointed under section 5,

- whichever is later.

(B) .Beginning one year after the applicable effective

date under paragraph (A), not less than the rate or rates |

prescribed by paragraph (A), increased by an amount

equal to 16 per centum of the rate or: ‘es applicable under

‘the most recent wage order issued by the Secretary prior .

- to the effective date of the Fair Labor Standards Amend-

ments of 1966, unless such rate or rates are superseded by _

the rate or'rates prescribed in a wage order issued by the

secretary pursuant to the recommendations of -a review

committee appointed under paragraph (C).

- (C) Any employer, or group of employers, employing a

majority of the employees in an industry. in. Puerto Rico

or the Virgin Islands, may apply to the Secretary in writing

for the appointment of a review committee to recommend

74a

the minimum rate or rates to be paid such employees in”

lieu of the rate or rates provided by paragraph (A) or |

(B). Any such application with respect to any rate‘or |

rates provided for under paragraph (A) shall be filed with-

in sixty days following the enactment of the Fair Labor

' Standards Amendments of 1966 and any :such application

_ with respect to any rate or rates provided for under para-

graph (B) shall be filed not more thfn one hundred and

twenty days and not less than sixty days prior to the

effective date of the applicable rate or rates under para-

graph (B). The Secretary shall promptly consider. such

application and may appoint a review committee if he has.

pe gare cause to believe, on the basis of financial and

information ‘contained in the application, that com-

‘ oases with any applicable rate or rates prescribed by

paragraph (A) or (B) will substantially curtail employ-

ment in such industry. The Secretary’s decision. upon any

such application shall be final. Any wage order issued pur-

suant to the recommendations of a review committee dap-

pointed under this paragraph shall take effect on the appli-

cable effective

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