Reply Brief — Walling v. General Industries Co.

In the Supreme Court of the United States .

OCTOBER TERM, ‘1946.

& . No. 564.

~L. METCALFE WALLING,

Administrator of the Wage and Your Division,

United States Department of Labor,

Petitioner,

a Vv. .

iis tas amare vice i COMPANY.

Os Warr or @entionant TO THE oe Srares Cinevrr Court

ok Appraus For tur Sixtu Circurr.

REPLY OF RESPONDENT TO REPLY BRIEF

FOR PETITIONER.. —

* GLENN O SMITH,

M. Reese Dina,

950 Union Commerce Building,

Cleveland, Ohio,

Counsel forsRespondent,

THE GATES LEGAL PUBLISHING CO CLEVELAND, OM1O——MAIN G647

INDEX.

I. Knportance of the Issue.............; aseeee a 1

Il. The: Right of the Respondent to Classify Em-

, ployees as Exempt Employees Under the <Aet

Without Having the Classification Thwarted by a

Refusal or Neglect by the Employees to Perform

- thes Duties Assigned. ....... Bol cease kab aweceee 3

Ifl. Conclusion .......... OE ORE ne ee ene 4

} Authorities.

Allen ev. Atlantic Company, 145 Fed. 2nd 761 (1944)... 3

Vol. 2 C. C. H. Labor Law Service Ff Seer

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Pa 4

‘to be-of paramount

In the Supreme Court of the United States

OCTOBER TERM, 1946.

No.564.

i‘ L. METCALFE WALLING,

Administrator of the, Wage and Hour Division,

United States Department of Labor,

Petitioner, ‘

VW.

THE ing INDUSTRIES COMPANY,

On Wait OF Cerriogani TO THE UNITED STATES Circurr Court -

or Appeats For THe Sixtu Circuit.

=

REPLY OF RESPONDENT TO ‘REPLY BRIEF

-. FOR -duiiinuko omuamn he

rane I,

IMPORTANCE OF THE ISSUE.

The Administrator secks\to minimize the importance ~

of the question presented in the cde with respect to the

exempt or non exempt character of Respondent’s employ-

ment of the three (3) Foremen Engineers. «He says in

effect that the issue is of no-general importance. It is be-

fore this Court for decision orily because the Administrator

believed the issue to be of sufficient’importance to justify

his suit, for a. permanent “injunction. Certainly the Ad-

ministrator would not seek to impose such a drastic remedy

upon the Respondent beeaus¢ of a desire to promote litiga-

tion or to/ase the Act for punitive purposes. Thus becayse

ent, like the Administrator, believed the issue

ance, the case has reached this

Court although only three (3) out of more than. Seventeen

Hundred (1,700) of. Rospondent’s employees are involved

J ® . r

~~

ahdethe pogsibke fiiiincial ability ’ Respondent to those

three (3) employees is relatively t ifling compared to the

cost of the defense of the case. ‘Sr

And entirely apart from the belief of the’ parties as to

the importance of the exemption issue, it is of grave im-

portance to emplovers in general to have an authoritative

decision by this Court on the test for determining the

exempt or non exempt character of executive employment.

There have .been scores of cases in the lower Courts in-

volving this @uestion. The Administrator, apparently, has

followed the course of ‘‘when in doubt file suit.””. There is,

of course, no record of the many instances jw here, the em-

ployer acceded to thee

was filed.

It is true that, particularly in questions involving the

executive exemption, t there is little or no reason for em-

ployers to treat their employees as exempt executives ‘in

order to. avoid the financial burden of overtime. Or as

stated another way by the Presiding Officer at the Hearings

. Preliminary to Redefinition of the Administrator’s Regula-

tions :> . fee Me.

\ ‘ .

‘Administrator’s demands before suit

~~

«“* * © The penalty payment requirement. for overtime

work in-the case of persons trv!y enggloyed in an execu-

tive capacity would not usually -haV® any considerable

effect in spreading Soar evens because in many in- |

stances the executive’s work can not be shared. * ° °”’.

(Vol. 2.C. C. H. Labor Law Service 31,319.) -

But,even though a penalty payment. for over rtime to execu- .

tive employees would not. place a gred® financial burden

upon employers, their exemption from the Act is of im-

portance to industry for many cther reasons. |

The most important of these “reasons is the sina

necessity for free and flexible employ: ment contracts be-

_ tween employers. and executives untrammeled by rigid re-

quirements of the Act designed to protect hourly | workers

_from substandard iabor conditions. The -Report .Recom-

“mendations of the Presiding Officer state further reasons

af or

4

. 3

why it is important that the restrictions of the Act should

. not apply.

“* *-* More important, as justification for unlimited

~ hours of work, the opportunities for promotion to

higher executive positionstare clearly greater for those

who already occupy sofne type of executive position.

These intangible advantages are normally, though not

always accompanied by more ae le advantages such

as paid vacation and sick leave. - Still more important

is the fact that exectitives have a‘greater security of

tenure than almost any other group of workers. When

a factory retains only a skeleton crew, the foreman is

normally a member of that crew; and the other mem-

e bers of the executive hierarchy also tend to retain

their positions. Thus — the lower paid executives

enjoy certain prerogatives ‘that may be given weight.

* *.* (Vol. 2 C. C. H. Labor Law Service 31,319) /

In addition to the general exemption question there is

an issye of importance presented by the facts of this par-

ticular case. |

THE RIGHT OF THE RESPONDENT TO CLASSIFY EM-

PLOYEES AS EXEMPT EMPLOYEES UNDER THE ACT

WITHOUT HAVING THE CLASSIFICATION THWARTED

BY A REFUSAL OR NEGLECT BY THE EMPLOYEES TO

PERFORM gPHE DUTIES ASSIGNED.

The facts found by the District Court after weighing

all of the evidence demonstrated that the Foremen Engi-

neers are clearly exempt under the Act and the Regulations

of the Administrator if, in fact, they perform the duties

assigned to them, The Fifth Cireuit Court of Appeals in :

Allen v. Atlantic Company, 145 Fed. 2nd 761 (1944) so a

ruled in a case presenting nearly identical facts. :

The Administrator says, however, that it is immaterial -

whether or not the Foremen Enginéers would have been “

exempt had they performed the duties assigned..to them ¥

since the determining factor is what, in fact, such. employees

testify they did or did not-do that determines their exempt

(~

&

4

status under the Administrator’s Regulations. It is signifi-

cant in this respect that the Administrator does not quote

from his Regulations to support this stand: Respondent

has been unable to-find any language in the Regulations °

dealing with the subject. But even if the Administrator’s.

Regulations would so provide, the Respondent would chal-

lenge them for this is not the intent of the Act. :

It is stated in the Act that its purpose is to eliminate

labor disputes and other burdens upon the free flow of

goods incommerce. The burdens upon the free flow of com-

meree: would be greatly increased -by this obvious induce-

ment to insubordination. ;

The issue is important to employers in general for if.

an employee may convert himself from an exempt employee

to a non exempt employee by testifying that he refused or

neglected to perform the duties assigned to him there may

be an avalanche of law suits by employees throughout the

country seeking to take advantage of the situation. If

successful in this regard, such employees would be entitled

to ‘a double allowance.of overtime. This overtime would be

‘computed on a compensation basis which is certainiv more -

liberal than would have been paid had those employees been

considered non exempt. There is nothing in the legislative

history of the Act indicating an intent by Congress to es--

tablish such an inequity. i

The reply. brief of the 2

to a diseussion of the

ministrator is largely devoted

: tatimony which, he asserts, demon-.

strates that the findings of. the District Court were clearly

erroneous. Respondent believes that ‘the uncontradicted

facts support the conclusions of the District Court. The

only conflict in the evidence Was with respect to whether or

not the Foremen Engineers performed their assigned duties

after they signed the “Agreement of July, 1944. The Dis-

-triet Court was able to weigh the evidence after personal

5

-. observ ration of the witnesses. Respondent respectfully as-

i Ke , *

.

janes . <a

_serts that the judgment of the District Court in this regard

"should be upheld.’

In conclusion, we submit that the issues dined by

the exemption question are of paramount importance and

should be authoritatively decided by this Court.

All of which is respectfully submitted. -

| GuENN O. Smiru,

M. Reuse Dit,

950 Union Commerce Building,

Cleveland, Ohio,

Counsel for Respondent.

oO"

SUPREME COURT OF THE UNITED STATES

, No. 564.—OcToBER TERM, 1046. <7

w

L. Metcalfe Walling, Administrator)On Writ of Cer- °°

‘of ‘the Wage and Hour Division, tiorari to the

United States Department of} United States

Labor, Petitioner, he We Circuit Court of

Se j Ap ) als for the

The General Industries Company/} ixth Circuit.

[March 31, 1947.] Nee

Mr. Curer Justice Vineos delivered the opinion of

| the Court.

_. In a complaint filed in the. District Court, petitioner.

‘ charged that respondent was violating the -Fair Labor

_ Standards Act by failing to pay some of its employees

time and one-half for statutory overtime, as required by

§ 7 (a) of the Act, and asked an injunction against con-

tinued -violation. ‘Respondent denied the charge, and

. separately alleged that any of its employees not compen-

- sated in accordance with the requirements of § 7 (a) were

exempt from the Act by § 13 (a). .

The Court; without a jury, heard witnesses for both

_— with respect to the compensation and status of

-engineers in respondent’s power plant. It made

a findings of fact, concluded that these men were

exempt employees, and entered judgment for respondent.”

- The Cirenit Court of Appeals thought the evidence did —

not sustain the District Court’s findings relative to the

engineers’ exempt status. But it thought, that. the .

District Court had also found the engineers’ compensa-

tion ‘to be in accordance with the Act. It. decided

1 52 Stat. 1060, 29 U.S.C. § 20K et seq: :

2 To. v. General eas Co, 60 F. Supp. 549,

°°

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A cae’ erie

2 WALLING v. (GENERAL INDUSTRIES CO.

that ‘the. evidence was’ equate to. this end, and -

* affirmed the ' Distriet Court's judgment. We granted

certiorari * to deterinirie whether the ruling of the Circuit -

Court of Appeals was not inconsistent with this Court’s

decision on computation .of « vertime in Overnight M otor |

Co. v. Missel, 316'U. S. 572. On argtment here, how-

“ever, respondent continued to urge that the District

Court was warranted in<its findings as to the engineers’

exempt status.* . Having heard the argument and exam-

ined the record, we agree that it was. , Therefore, we rieed

not consider further the question of’computation of over-

— and proceed only to state the considerations rele-

nt to the particular groufid of our decision:

)

There is no dispute as to the applicable law. Section

13 (a) exempts from the: overtime provisions of the Act

any persofi employed in an “executive capacity” as defined -

in regulations issued by the Administrator. The Regula- —

- tions prescribe six conjunctive conditions to an executive

capacity, which ate set forth in the margin. 4 a

"5 Walling v. General Industries Co., 155 F. 2d 711. ed

a 5 ee

* Respondent was entitled to ‘make this contention here without

filing. a crogs-petition for certiorari. Langnes v. Green, 282 U. 8.

531, 538; Public Service Commission of Puerto Rico v. Havemeyer,

296 U.S. 506,'509.

*29 Code Fed. ies § 541.1, 5 F. R.. 4077 (Regulgtions of the

Administrator, Wage and, Hour Division, U. 8 Dep't: of Labor,

Oct. 24, 1940, amended Jan. 17, 1942) provides as follows:

“Section 541.1—Executive.

“The term ‘employee, employed Gin a said fide executive .

capacity’ in section 13 (a) (1) of the’ act ¥ mean any

emiployee— -

:“(A) whose primary - duty consists of the ma t of the estab-

lishmient in which he is employed or of a customarily ecrecarn

department or subdivision thereof, and

“(B) who ‘customarily and regularly directs the ja: of other.

‘employees therein, and

“(C) who has the authority to hire or fire other employers or ——

suggestions and recommendation as to the — or firing and as to \

~ .

ae

WALLING v. GENERAL INDUSTRIES CO. 3

had the burden of proving the existence of these conditions, K

if it would rely on its defense that. the engineers were —

exempt employees.’ ©

There was evidence to the following effect. . Respondent

operates at Elyria, Ohio, a plant engaged in the produic- |

_ tion of small motors and plastic products. Part of this. -

besides the generators, are compressors, engines,

plant Sea oes & power-house containing a boiler room

and eMgjpeTdom. In the former are‘four-boilers. These

supply Mle steam required to won three large electrical

.generators which are the source of power for the entire

plant, and to create the high steam-pressures and air-pres-

sures employed in molding plastics. In the nae J room,

nd other’.

equipment. All this machinery, in both rooms, consti-

‘tutes an interrelated and interdependent system. - It must

be carefully arid skillfully tended at all times in order to

maintain the power and pressure required for continuous

24-hour operation .of the plant, to avoid damage to the

. tremendous investment in the machinery itsélf, and to

‘guard against the fearful consequences of an explosion.

‘ . During the period covered by the evidence, the power-

house was manned by the following personnel. At the top

_ the advancement and promotion or any other change of status of ‘

' other employees will be given particular weight, and °:

“(D) who customarily and regularly exercises discretionary powers, 3

an ‘

“(E) who is compensated for his sérvices on a salary basis at not

less than $30 per week (exclusive of board, lodging, or other facili-

ties), and . . aby ee AT :

“({F) whose hours of work-of the same nature as that performed by

Monexempt employees do not exceed 20 percent of the number of

hours worked in the workweek by the nonexempt employees under

his direction; provided that this subsection (F) shall not apply in

the case of an employee who is in sole charge of an. independent

establishment or a physicatly separated branch establishment.”

"See Helliwell v, Haberman, 140 F. 2d 833, 834 (C.C. A. 3);

Rletchér v. Grinnell Brothers, 150 F. 2d 337, 340-341 (C. C. A. 6);

Smith v. Porter, 143 F. 2d 292, 204 (C.C. As). ay pee

9

)

| 4 -WALLING v. GENERAL INDUSTRIES CO.

| was the chief engineer, who apparently adhered to no pre- -

duty-hours, but was customarily present most of the

‘morning and afternoon and subject to call, i. the event of

an emergency, twenty-four hours a day. Directly under

and “responsible to him were the three “operating en-

gineers” whose status is in issue. They worked eonsecu-

tive eight or eight and one-half hour shifts, one of them

being present in the powerhouse at qll times. Finally, ©

there were an unspecified number of firemen and coal- —

passers, who, collectively, were also on twenty-four hour

duty. . ; /

The engmeers in. question were paid regular monthly

galaries of more than $200 per month, for which they

regularly worked six-shift weeks. They received sick

» leave, vacations with pay, bonuses, insurance, and pen-

sion rights usually reserved for supervisory employees. *

The engineers were in charge of the powerhouse and

performed the duties generally incident to direct super-

vision of a highly mechanized operation. ndent’s

vice president and factory manager testified |

acted as foremen of the firemen and coal-passers. This

_ testimony was corroborated by other facets. . In July,

1944, two months before the complaint in this case was _

_ filed, the engineers signed agreements with respondent .

; stating their desire “to be regarded as foremen, as in the

past, with foremen privi and continue on a salary -

basis.” ‘ Three weeks r the International Brother-

hood of Firemen, Qilers and Helpers abandoned a long-

contested claim of right to represent ‘the engineers,

‘thereby formally recognizing their- supervisory status.

Indeed, the nature of the operations in the powerhouse

was such that the immediate and continuous supervision

of trained persons was indispensable, and there were con-

cededly no othér employees to give, such supervision.

The engineers were required to mairftain constant obser-

vation of all machinery in the powerhouse, and to make

“ ; oo

/ ps

¢

WALLING v. GENERAL INDUSTRIES CO. | 5

regular inspections and necessary repairs. In addition

they were required so anend a nell pack of DR time in

oiling and cleaning the engines. 13655 ae

_ The District Court, having made findings substantially

"as stated above, proceeded to make additional findings of

"the existence of each of the facts on which an executive

status, as defined by the Regulations, is made to

depend. : ue

We believe that the evidentiary facts afford an ade- -

quate basis for the inferences drawn by the Court in

making such additional findings. At the least, we,think

that in drawing such inferences the Court was not leat

wrong, and cgnelude that the findings should therefore

have been left undisturbed." The Circuit Court of

Appeals’ rejection of ‘those findings cannot rest on the

conflicting testimony of petitioner’s witnesses. The Dis-

trict Court heard the witnesses, gnd was the proper judge

of their credibility. .

* Rule 52 (a), Federal Rules of Civil Procedure; Lawson v. United

States Mining Co., 207 U.S. 1, 12: Butte & Superior Copper Co. v.

Clark-Montana Realty Co., 249 U. 8. 12,30. See District.of Colum- ‘

bia v. Pace, 320 U. S. 698, 701.

* Rule 52 ta), Federal Rulee-6f Civil Procedure: Adamson v. Gilli-

_ land, 42 U. 8. 350; United States-v. United Shoe Machinery Co.,

247 U.S. 32, 37, 38, 41. . ,

el ~

x , ‘

» J 7

SUPREME COURT OF THE UNITED STATES.

Ne.

No. 564.—OcToBER TERM, 1946,

L. Metcalfe Walling, Administrator]On Writ-of .Certi-

of the Wage and Hour Division,| orgfi to the

1 States Departm@t of} United States

Labor; Petitioner, — 3 Circuit Court of”

heer Appeals for ‘the

The General Industriés Company. } Sixth a

: [March 31, 1947.]

Mk. Justice Rutvence, dissenting.:

'In my opinion the Circuit Court of Appeals correctly

found that the evidence is not sufficient to sustain the

findings upompwhich the District Court concluded that

the operat engineers are éxempt under § 13 (a) (1)

of the Fair Labor Standards Act. It said, unanimously:

“The District Court found as a fact that Stegman,

Page and Spooner were employed as .foremen or

supervisors of the department, with power to super-

vise the work of firemen and ceal-passers in the boiler-

room; that they customarily and regularly directed

the work of other employees‘in’ the department, and

customarily exercised discretionary. powers. We

think these findings are not sustained by the evi-

dence. The work done by the engineers was highly

_ skilled mechanical work. While the machinery was

vital to the plant, dangerous and complicated, its

operation involved no exercise of discretion, but

merely the proper application of the skilled engineer-

ing .training which these men had received. Al-

though the three engineers were responsible for the

proper operation of the machinery during their shifts,

. and, as the factory manager testifies, ‘in charge of

management of the property,’ none of them could

a

t

* 2 WALLING ». ear am INDUSTRIES CO.

7 e “ent at the plant during one shiftjand on call 24 hours

es

v

‘fire or hina give orders to any ihe in the boiler-

room. Latteman, the chief engineer, who was pres--

a day and seven days a week, was in full ch of the

department. While Latteman might act 68 informa-

tion from Stegman, Page, or Spooner, during the...

period involved, arders emanated only from him. It

is not shown that Stegman, Page, or Spooner ever

made any recommendation concerning the change in

status of the boiler-men. It was essential to have

proper steam pressure in the boiler-room, but if the

three engineers desired in this conn to secure |

attion from the firemen and coal-passers, ey bef

to secure an order from Latteman. This evi

is not contradicted.” 155 F. 2d 711, 714.

An independent examination of the record confirms the

Coirt of Appeals’ conclusions, It discloses that ‘on.one

or two occasions an operating engineer tried to give orders

to firemen or coal passers in the boiler. room, but iheach

instance those men refused to follow them and took th¢ir

orders solely from Latteman. This falls far short at least

of the regular and customary supervision required by

§§ 541. x5 and (B) of the vontrolling regulations to

make the exemption operative.

‘Sinee the Court does not reach other questions pre-

sented on the record, I express no opinion concerning

them. le

oa

Mr JN STICE Buack and Mr. Justice Murpuy j join i in

this hand

Se ‘on