Brief for Petitioner — Walling v. Halliburton Oil Well Cementing Co. (No. 74)

Supreme Court brief1946

Ask Donna

What actually matters in this document.

Text

wmamengens > > &

No. 74 | om *

In the Supreme Court of the Bnited States:

QerToBER TeRM, L946

L. Mercauee Waniine, ADMINISTRATOR .OF THE

Wace 4@No Hour Divisios, Uniren. States

DerakTMENT*OF Lanok, PETITIONER ae

° . v. .

Hauuibeeios Ou. Whii. CemMENTING Company,

A CORPORATION

ON WRIT OF CERTIORARI TO THE UNITED STATES CIRCUIT

' COURT OF APPEALS POR THE NINTH CIRCUIT -

a .

ee BRIEF FOR PETITIONER —

OWN N = =m

INDEX

: 5 Page

Be See ace wee

AIS cca dan vdibnstasacancducdanmakdesauraaee

Question. presented _____- es ee ee ee eh ES a re

J TNNNEN 5 5.3)c notin stinkn cen ncn anak enews Sioa ewe

li ct an i dan wesc dink cage as pence ane Seu awemnthe

Specification Of errors......-..-..-- iat ns casenes sansaununa 1

Summary of argument_-.-_-------- gree seene sens . ena 1

’ - Argument:

I. The hourly rates specified in respondent’ 4 employment

contracts is not the “regular rate’ within the meap-

ing of Section 7 of the Fair Labor Standards Act__._- 12

A. Specification of an hourly rate in an employment *

contract does not determine the “regula

I GIONS ao slo oes Ue ctawes 13

B. The hourly rates specified in the contracts did

not in fact control the compensation received

by respondent’s employete, . 7. ...-- dnd-<-<- 13

C. Respondent’s artificial wage plan frusttates the

: statutory purposes. =. iT y,

_ IL.” The decision of this Court in thie Belo . case “should no

~ Gomvtvel MONG. oo nok baci ds cen heed TOS Di ‘\ 29

A , .

WiGIION i oan canes ge eer ys Joy tek eee 4

‘ CITATIONS

Cases: :

Asselta v. 149 Madison Ave. Corp., 6 Wage Hr. Cases 99. 18, 19

* Castle v. Walling, pay wk: Ra gn oes a APS Tae 18

Overnight Motor Co. v. Missel, 316 U. 572. cans of eae 28 |

Patsy Oil & Gas Co. v. Roberts, 132 F. yt Pk Ratdeaea an 1

- Seneca Coal & Coke Co. v. Lofton, 136 F. 2d 360... .--- Feats / *

“¢ W ‘alling v. Alaska-Pacific Consolidated Mining Cov, 152 F, /

‘MBAS 6c ko wow eee ss dwan ke awe cea dee 34

Walling v. Belo Corp’, 316 C . 8. 62425... .. 2» 9,

wee AN, “16, 25, 27, 29, 30, 8h, 32, 33

Walling v. Harnischfeger Corp., 8p Us. 427 ).c a4? jnenat), SB,

: 13, 14,47,'20, 21, 29, 33

Walling v. Helmerich & Payne, 138 F. 2d 709..._--. 2 ee

@ Walling v. Helmerich & Payne, 322 BB. BEL recente ©

> ° AW ORT, 4B; 20, 21,22, 29, 33

Walling v. Richmend Screw Anchor Co., 184) F ‘#4, 180... eacs 3

Walling v. Uhlmann Grain Co., 151 F. 2d. 8812277. ied 4

+ Walling v: Voc thirtane Medachas Hardwood Co., 323 U.

| Re eee err sy BE 20, 21, an ce

Watkins v. Hudson Coal Co.,.151 Fe2d Pil. Spaeth ree 18.:

711402 eet eee * is 2!

” ‘

Federal Statutes:

er Labor Standards. Act of 1938, ec. 676, 52 Stat. 1060, 20

U.S. C. sec. 201:

ee: FO) OR in nn cdnds pannancnddedsneskg eee

, See. 7 (b) Pe hs women ene eecncteess Sa dig acca areal

Te > | liad Milka heed Ree eee

Ges. 7 Gb) GG) o...-ccecccsees TO 5 pata = EE PE

a _

Miscellaneous:

Barnett, George E., “The Printers”, American Economic

Association ee, October, 1909, Vol. X, No. 3,

OP BOF. cana ns cnn gesnchs ccddepdsscceccasacnnegpacs=

‘

Chernick, ‘ Jack, and. Hellickson, George C., GuaPanteed

Annual Wages, 1945, pp. 8, 29680... _...-_--.--.---. :

The Cotton Textile Institute, Current Information, Vol. 4,

No. 7, November 10, 1938, p. 71. ....--------:-----:-

Douglas, Paul H., Real Wages in the “nited States, 1890--

1926, 1930_- ct se da ti ca cla la aac eS ta oe

* Feldman, Edward 8., Algebra and the errene ‘Court, 40 Ill.

Law Rev. 512.513 (11°46)... ities

Feldman, Herman,’ Stabilizing Jobs ‘and Wages, 1940. iecehs

Fifth Annual Report of the Bureau of Statisties of Labor

of the Bhate GE Neel Beis Beet ake cad c ccnnccencesese

‘Gompers, Samuel, Report: of. the United States Industrial

Commission, Vol. VII, p. 614 (1901) __ _- °

Haber, Williams, /ndustrial Relations in the Building

Industry, 1930, pp. 117-119. Ay OR

Hubbell, W. C., How to Simplify Cotputing Overtime

Wages, Rand "MeNally Bankers Monthly, June 1943,

Dy Bs wencccoslascueesachotansngncgieetacehhnsese

Interpretative Bulletin No. 4, issued by the Administrator,

Wage and Hour Division, U. 8. Department of Labor. 7

Millis, Harry A., and Montgomery, Royal E., Labor's

Progress.and Some Basic Laber Problems, 1938, pp. 481

N. R. A. Division of Review, Work Materials No. 35, Part

B, Labor Provisions in the Codes (1936), pp. 84-93, 105. .

@Reeder, Robert P., Analysis of the Awards of the National

War Labor Board, 1919, pp. 22 and 48.............

Report & Proceedings of the 19th Convention of the 4nter-

national Ladies Garment Workers, 1928, p. 11... ..---

United States Department of Labor, Bureau of Labor

Statistics, Guaranteed- Employment Annual Wage Pr

visions in Union‘Agreements, 1945... A.

’

Misc#llaneous—Continued

United States Department of Labor, Bureau of Labor

Statistics, Tistory of Wages in the United States from

Coloniag ‘Times to 1928 (Bulletin No. 499, Oetober 1928),

pp. 491-498, 514-516 . F

United States Department of Labor, "Bureau of Labor

Statistics, Union Agreement Provisions, 1942. (Bulletin

No: 686, p. 91, par. A and B), _ ___. : maa

United States Depagtment of Labor, Bureau’ of Labor

- Statistics, Union Agreements in the Petroleum Refining

Industry in effect in 1044, p. 7 (Bulletin Ne. 823)

United States Department of Labor, Bureau of Labor

Statistics, Monthly Labor Kevi.w, March 1918, p. 71

United States Department of Lebor, Bureav of Labor

“Statistics, Monthly Labor ‘Review, — 1918, p. 183

United States Departnient of Labor® Bureau of Labor

Statistics, Monthly Labor Review, May 1918, pp. 127-128,

132, 137, 142... *

United States Department of daber. Bureau of «Labor

' ‘Statisties, Monthly Labor Reriew, February 1938, Vol. 46,

; Nd. Oy 8 ey er ee eee

United States Department of Labor, “Bure “au of kakee

Statistics, _ Monthly Labor Review, February 1945, p. 351-

Pace

ve,

| Inthe Supreme Gourtof the Gnited States

OcTOBER TERM, 1946-

" ’ No. 74

: Ss SS Pi . , +

L. MercaLre WaALLING, ‘ADMINISTRATOR OF THE

Wace. AND Hour Division, Unrrep States

DEPARTMENT Q& LABOR, PETITIONER

Vv. .

A CORPORATION

ON WRIT OF CERTIORARI TO THE UNITED STATES CIRCUIT

COURT OF APPEALS FOR os NINTH GIRCUIT™~ ©

BRIEF FOR PETITIONER .

;

OPINIONS BELOW om

‘fhe opinion of the District Court (R. 24-29) is

reported at 57 F.Supp. 408. The majority and

599 ? s ‘

. JURISDICTION

“.peals/(R. 480-483) are reported at 152 F. 2d

The judgment of: the Circuit’ Court of Appeals

Was entered on December 29, 1945 CR. 484). The

petition for a writ of certiofari was filed‘ on

March 29, 1946, and granted on May 13, 1946.

(1) yy

Haviierton Ow Weer Cementinc Company,

/dissenting opinions of the Circuit Court of Ap-

The jurisdiction of this Court is based. upon

Section 240 (a) of the Judicial Code, as amended

by the Act of February 13, 1925.

QUESTION PRESENTED

4, 3

Respondent’s employment contract guaranteed

“the-paytment of a fixed weekly amount to be paid

for all workweeks in which the hours worked did

not .execeed 84 The, contract als6 specified an

hourly rate’ and provided for the. payment of

compensation at not less than-one and one-half

times this rate for all hofirs,in excess of. 40 per.

week. The hourly rate was computed, however,

so that an employee would ‘have to work in excess

of 84 hours a week in order to earn more than fhe

guaranty. ‘The question presented is, whether the

hourly rate of pay specified -in the agreeme nt or

the weekly guaranty determines the ‘regular

rate” of pay upott which overtime compensation is

to be computed under Section 7 of the Fair Labor

Standards Act of 1938. -

STATUTE INVOLVED

, The ‘pertinent provisions of the Fair Labor

Standards Act of 1938 (e. 676, 52 Stat. 1060, 29

U.S.C, see. 20L) are as follows :

Sec. 7 (a). No employer shall, except as

bs otherwise provided in. this section, emproy

~ “any of his employees’ whe is. engaged

Pinmeree* or in the ‘proguction of goe

for commerce— -° . ’ K

- = * * oe *

sf : r °

(3) for a workweek longer than forty

hours after the ‘expiration of the--second

year from “* _* * [the effective] date

[of this ‘section],

' .

unless such maployee receives compensation

for his-employment, in excess of the hours

above specified at a rate of not less than one

and one-half times the regular rate at

which hé is employed.

STATEME

Respondent performs various services for‘ per-

coms engaged ‘in the drilling and operation of oil ,

> he (R. 63). This suit relates to a group.of re-

spondent’s _employees, consisting of cementers,

testers, cement’ equipme nt drivers, field mechanics

and others, who are know n “as «field employees”

(R: 31). Shortly after the enactment: of the Fair

Labor Standards’ Act, respondent adopted the em-

ployment plan involved in this suit which, except

for the period from March 1, 1942, until July 1,

1942)’ has continded” in effect until the present

time (R. 13; 68-70, \q1-73). The contract under

‘From March 1, 1942, until July 1, 1942, respondent's field

“employees were paid a weekl} salary and overtime@qompen-

sation“on the basis of aregulat rate computed by dividing

hours worked into the weekly salary (R. 17). Respondent’s

answer states that for this period the plait set forth in See- _

tion iz of the Administrator's Interpretative Bulletin No. 4

adopted (R.17).2 Section 12 (R. 285) reads as follows:

of an employee earns $23 per week But works & flue

nuuber of hours, his regular rate of pay will be the av

hourly rate each week. Suppose that during the cours

re ; “a

this plan provided for a weckly guaranty and

specified an hourly rate for the first 40 hours of

work each week and not less than one and one-half

times this rate for hours worked in excess of -40

(R. 13-14, 68-70, 71-73).’ . The guaranty .was

approximately 106 times the specified hourly rate

(R. 73-74): . As explained by respondent, ‘the

basic hourly rate has been, fixed so that each

employee * * * may work a total of 84 hours

in any single workweek before receiving com~

: pénsation m excess of the guaranteed weekly

’ salary:’ (R. 314-31 5). ,

Prior to the effective date of the Act the field

employees were paid on a monthly salary basis

four weeks the employee works 40, 46,50, and 41 hours. His *

regular hourly rate of pay each, week is approximately 57.5

cents, 50 cents, 46 ‘cents, and 56.1 cents, respectively. : For

the first week the employee is entitled to be paid $23; for the

second week, $24.50 ($2 3 + [| 6-hours * 25 cents]) or ( [40 hours »

. X50 cents | + [6 hours x 75 cents]) ; for the third week $25.30

(23+[10 hours x 23 cents]) or .({40 hours X46 cents] + [10

hourgx 69 gents] ) ; for the fourth week approximately $23.28

($23+ [1 hour X28 cents] ) or ([40 hours X 56.1 cents] + [1

hour X 84 cents]}).” os

2 The contract provision involved here is as follows: -

“Now, Therefore, the E eet and Employee mutually

covenant and igrée as fol :

“Employer agrees td e cig E mploy SY een

and te pay Employee for his services a regular basic rate

of _,.--- cents per hour for the first (40)° hours of any werk-

week, and not Jess than one and one-half times suc h, basic .

haurly rate of pay for all time over (40) hours-in any work-

week, with a guarantee that Employee shall. receive for

. regular time and fogssuch overtime as the necessities of the

business may demand a sum not less than $....-- for each

workweek.” (R. 63, {2-#2. )

of \

and received their compensation semimonthly

(R. 13, 64). - Notwithstanding the provisions in

the present contract for a basic. hourly “rate and

‘a weekly cuaranty, the field. employees continued

to receive monthly salaries, paid semimonthly |

in substantially the same manner as before CR. 64,_

78) Respondent stated that ‘field employtes

are now Working and will continue to work. on a

monthly mintmum salary basis; however, for con-

tract purposes, the monthly iieae is reduced to

an equivalent weekly salary’’ (R. 77-78). A pay-

rell chart was devised from which ‘the baste

hourly. rate and the guaranteed weekly salary

may be determined” for me particular “monthly

salary desired’? (R. 64, 65, 73-74; 316). Com-

‘pensation under the, plan was: referred to. by re-

_spondent’) as ‘paid on a monthly silary basis,

rather than oi an hourly basis’? (R. 276), and it .

was stated thatthe guaranteed: wage would b.

paid ‘even when the necessities of. the business

do not require the employee to work more than a

few hours in a given week"? (R. 312). Thus the

hourly rate specified in the contract was never

used (R, 114, 143-144, 160-178), and respondent

Althoiagh respondent's employment contract remained. ,

virtually the same for the entire period during which the

plan involved here was in use, several changes in the record-

keeping and payment practices under the plan did occur.

For example, on January 30, 1944, after the institution of

this litigation, respondent began to pay its e mployees on a bi-

Weekly instead of semimonthly basis (R. 115, 180, ik1-182),

‘Other changes will be referred to as they becotne relev: ant,

' 7114403—46--—2

, | 6

. ‘

—_

admitted thatthe overtime rate listed in the pay-

toll chart: ‘has no practical use unless the em-

ployee works in excess of 84 hours in a single

workweek”’ (R. 316). Employe ees were paid the

same salary whenever they worked less than 84

. hours a week, whether 20, 40, 60, 80,or any other

number of hours (R. 160-177). ‘ "

meqondelt’ s payroll records apparently disre-

garded the} hourly and overtime rates specified

in.its contfacts and payroll chart in workweeks

of less than st" ‘hoyrs. A sample payroll sheet,

forwarded by respondent to its superintendents

in connection with instructsens for paying em-

ployees, omitted entirely any’ refere ce to the

‘specified hourly and overtime-rates and contained

oniy the monthly salary together with the semi-

monthly payment (R. 64,.65, 105, 106). A later

sample payroll. sheet sent out with additional in-

structions also included the mortthly salary but.

not the hourly and overtime ratés (R. 65, 107,

114). Although ° this . payroll sheet provided

*The procedure to i followed was described in the in-

structions as follows: e :

“In the column headed ‘Rate’, Show the monthly salary

which is equivalent to the guaranteed weekly salary in the

employee's contract and in the column ‘Extensions’, show

the earnings for the semimonthly period based on the

monthly rate. No further posting by the field office is neces-

sary as the Duncan office will-compute and add to the guar-

anteed earnings any compensation for hours in excess of 84.

This procedure eliminates the use of columns ‘OT Pay’ and

‘Total Overtime’ by the field) pay roll offices for contract

employees.” (R. 82-83.)

‘columns’ for “regular time worked,” ‘overtime

worked”? and ‘overtime pay,” the superintend-

ents were iustrueted to consider ‘84 hours or

less”? ag regular time and ‘‘hours in OXCESS of 84

in a weck”’ as overtime (R. 111, #14). Overtime

pay was to be caleulated only for hours in excess

of 84 ‘*from the chart’ previously forwarded’’

(R. W1- 112). It was not until January 1944,

after the institution of this litigation,» -that the

hourly and overtime rates appearing in the con-

® tracts and payroll chart, as well as the guarantee,

were reflected on the payroll sheet ‘cand that the

hours worked in-excess of 40 were recorded ¢

jovertime hours (R. 65, 115, 120). :

“.

Wage inereases and deductions for absences

were considered in terms of the monthly. salaries

paid the. employees rather than t .e hourly rates

* The instructions issued were as follows:

* “The total hours worked during each we2k must be filled

in the proper coltimn, then the regular time worked (84 hours

dv less), will be, filledfin the next column and overtime hours

. (Hours in excess of 84 in a week) will be ente red in the over-

time hours worked column. * * *

Calculate overtime pey from the chart pre viously for-

warded to all Division offices of which one copy is enclosed.

Cojumn 4’, Overtime Hourly Rate, is the rate for one hour of

overtime to be multiplied by the number of overtime hours

in the week to determine the overtime pay entered on the

~ pay voll for each week.

“Enter the monthly rate in the nest column, éxtending the

proportionate part of the monthly rate (in most cases one-

helf of the monthly rate) to the bottom line of the column

‘Extensions’, On the line above enter the total Overtime

Pay, which is the sum of all overtime pay listed in the Over-

tin Pay column.” (R, 111-112.)

x .

specified in the contracts. When an increase was

effect thre employee was informed that the new

contract reflected “his change in salary from his

previous monthly rate to the new rate’ (R, 108,

121). When an employee was absent from work

for such reasons as sickness or ‘voluntary lay

off,” his pay was reduced in accordance with ‘the

‘same policy that has always been in effeet”’

(R. 318), not on the basis of his hourly or over-

time rate, but on the basis of a daily wage com-

puted as a proportionate amount of the contract

guaranty. This was. the regular and frequent

practice. whether payment under the contract was

made semimonthly or, as later, biweekly (R. 106,

110, 114, 120, 138, 150, 217-222). At first the

‘half month’s equivalent [of the monthly salary |

was divided by the number of days in that partitu-

lar payroll, either 15 or 16° to compute the daily

deductién rate (R. 138). Later, when respond-

ent’s field employeés were plaéed on a_ biweekly

pay basis, instructions provided that ‘one-sev-

euth of the weekly guarantee may be considered

a daily guarantee for the number of working days

in the week’? (R. 116). f

The 84-hour workweek established by the re-

spondent, as its cmployeey’ standard workweek did

net represent the regular or usual, or even the

average, number of hours worked by the tield.

employees. A tabulation of the, man-weeks

work performed from July 5, 1942, to March 11,

144, shows that »pproximately 80 percent were

weeks in which less than 84 hours Were worked

(R. 226, 384) and that approximately 13 percent

were weeks in which less than 40 hours were

worked (R. 384). According to respondent's esti-

. ,.mates, the average weekly hours of work ‘were

considerably less than 84 for all classes of workers.

The eaverage workweek of operators was 61.6,

hours, drivers 62.4 hours and mechanics 56.5 hours

(R. 357-362)! On the basis of the average-num-

her of hours worked, the average hourly rate re-

evivedl by‘ each class of employees was consid-

erably higher than the specified overtime rate.

The overtime rate employed was a fixed rather

than a fluctuating rate. Although the contracts. of

employment provided that overtime was to be paid

at ‘not less thin one and one-half times”’ the desig-

nated hourly rate (R. 70, 71), the payroll chart con-

tained a specific overtime rate to be used in com-

puting compensation (R. 73, 193, 111-112). This

fixed rate was entered on the

January 1944 (R. 116, AZ).

less than 84 hours were avorked in a given week,

the hourly and overtime rates did not equal the

guarantee, Since tins, = compensation

o 4 . Pp

Was not considered o

yayroll sheets after

As a result, when

ime, it wag recorded as

.* Additional Compensation Per Weekly Guar-

antee”’ without allocation to eithér regular time

or overtime (R. 116, 120)).

‘Phe District Court, relying on this Court's de-

cision mW athing v. Belo Corp., 316 U.S. 624, held

Pe,

that respondent did not violate the overtime re-

quirements of the Act in computing 6vertime com-

pensation on thfe basis’ of the rly rates speci- :

fied in the contracts (R. 28, 29, 34) and entered +.

a judgment. dismissing the complaint (R.,43-45).

The Cireuite Court of Appeals affirmed on: the

pr ound that the case presented neither a ‘sub-. -

~ stantial distinction” from the Brlo case nor “any

difference in principle’ (R. 481). Judge Garrecht “

‘dissented stating that in his view the contracts

“were for weekly wages, ‘for variable ‘fours

* *. *) The arbitrary fiourly rates written into

the contracts are fictitious and se A ate to. the’

faets dnd the evidence. * * * {The] grbi-

trarily chosen 84-hour week bore no relation tthe

reguiar or usual number of hours worked by the

7 ** oe

opthion the ‘tourly rates’ fixed in the contracts

employees under consideration,

in this case were fictitious and caleulated merely

to retain the employer’s prestatutory costs’’ (R.

482-483). i | i.

| _ * SPECIFICATION OF ERRORS

_The-court below erred: | “

1..In holding that the hourly rates speeified

-in the contracts between the respondent and its

field employees were the “regular rates”? at whieh

the employees were employed within the mefning

of Section 7 of the -Fair Labor Standards Act.

2. In affirming’ the judgment of the District

Court which\denied petitioner’s prayer for an

injunction.

- SUMMARY OF ARGUMENT

- The hourly rate’ specified in respondent’ Ss wage

contract is not the statutory- “regular rate”? be-

‘cause it is ‘not in” fact the Measure of the com-

pensation normally received by # respondght’ 8

einployees. It is cle: wr from the operation of P

_ respondent’s compe nsation plan that the contract

guaranity actually controls the ‘wages paid in the

normal workweek. , Hue only manner in which

the Sp ecified aise rate can be s guare “d with the

guaranty®is by assuming. a ‘thuctuating overtime

rate which would encompass all compensation in

excess of that paid for nonovertime work: But

this assumptian is contradicted by respondent’s

use of a fixed overtime rate. Also, it would not

‘account for the paymént of the guaranty in weeks

when: no overtime was workéd. ‘The artificiality

of the gontract rates is‘ obvious -beeause of their,

failure to compel the payment of additional eom-

pengation for hours worked in excess of the statu-

i,0 © ;

fory maximum. Moreover, recognition of ° the

“specified hourly rate as the regular rate’ would

frustrate the statutory policy of making more

expensive to the’ employer hours in excess of the

statutory maximum .and of reqhiring premium

pay to employees @or overtime hours. | .

The decision of this Court in Walling v. Belo

Corp. 316 U. 4 624, should not contrat here.

There’ are factual distinetions which: permit a

different result. For example, in the present case

additional compensation could not be earned until

12 es 2 ;

84 hours had been worked, in Belo this period was

limited to 5414 hours. “Unlike the employer in

the Belo case, respondent aised a fixed overtime:

rate which made it newessary to provide addi-

tional gompensation to equal the guaranty. If

the differences are nd, sufficient to distinguish

the cases, the Belo decision should not be. followed

because itsissinconsistent with the later deeisions

of the Court. |

ARGUMENT

< I | ee

“MENT CONTRACTS IS NOT. THE “REGULAR RATE WITHIN

THE MEANING OF SECTION Jj OF THE FAIR LABOR STAND-

ARDS ACT

THE HOURLY re pee IN RESPONDENTS EMBLOY

A. Specification of an hourly rate ‘i an employment. contract does”

not determine the “regular rate” under Section 7

The decisions of this Court have clearlyestab-

lished that: the hourly rates specified in contracts

of employment are “not necessarily the regular. .

rates at which the employees are employed within

the meaning of Section 7 of the Fair Labor Stand-

ards Act. Specified regular or hourly rates were

disregarded in determining the statutory regular

rate in Walling .v. Youngerman-Reynolds Hard-

wood Co., 325 U. 8. 419, where ‘the contract also

contained a’ piece rate guaranty, In Walling v:

Harnischfeger Corp., 325 U. S. 427, where the

employee was guaranteed a ** job preg ** known as

an ‘incentive bonus’? or “piece-work earnings,”

and in Walling v. Helmerich & Payne, 323 U.S.

37, where the specified regular rate was allocated

13 | >

to only part of a daily tour of duty and an over-—-~

time rate to the’ balance. In each of these eases

the Court emphasized that the*regular rate was

the rate actually paid for thestime regularly: spent

’ in Working, notwithstanding the contract designa--

tion of a dWferent rate. And, where guaranteed

rates yielded more than the prescribed hourly

rates, it was stated that the latter “lose their sig-

nificance in determining the actual rate’’ and that

the former “would actually be the rates paid.’ 1

Hurnisehfe ger case, supra, at 432; Youngerman-

Reynolds case, Supra, at 432. The allies: in the in-

“stant case, whether the contract hourly rates are”

the regular rates depends, not upon the terms of:

the contract, “Wut-upon whether the compensation

received by the employees is actually determined

by the specified rates or by the or provided

in the contract., g

B. The hourly rates ‘specjfiet-in the contracts did not in fact control

the compensation received by réppondent’s employees ‘

A realistic appratsal of respondent’ 8 compensa-

tion plan compels the conclusion that in intend-

men: and in practic e-the contract guaranty con-

trol! t the wages paid respondent % employees and

that the specified hourly rates did not genuinely ,

retleet the actual rateg at which the employees

were employed. As’ we have seen, prior to the

effective date of the Act, respondent's employees > —

/ were paid a monthly salary (R. 13). The’ wage

‘plan put into effeet after enactment of the statute

711402 46 3

and reintroduced in July 1942 continued, in prac-

tical effect, the monthly salaries previously paid -

without the payment of additional compensation

for hours in excess of the statutory maximum.

Although the wage contracts provided for hourly |

rates and overtime compensation at not les’ than

one and one-half, times the stated rate, these

rates were admittedly devised so that employees

might work 84 hours a week without receiving —

compensation in excess of the guaranteed amount

(R. 80, gitd4-315). However, less than 84 hours _

‘were worked in approximately 80 percent of the

weeks worked (R: 226, 384). Thus, in a sub-

stantial majority of cases the compensation to be

paid. was, and could be, ascertained only by ap-.

plication of the guaranty provided in the contract.

Payment “at the specified hourly’ and overtime

rates for weeks in which fewer than 84 hours were

y con-

vorked would have yielded a sum less be that .

actually paid. Sincé the guaranty actua

trolled the, compensation “paid, it must be von-

sidered, under the decisibns of this Court, as

determinative of the regular rate. Youngermég,

Reynolds case, supra; Harnischfeger case, supra.

The controlling importance of “the contract

guaranty in fixing compensation was recognized

in respondent’s own payroll praetices.. When

the guaranty plan was reipstituted in July 1942,

the sample payroll:sheet which accompanied the

respondent’s instructions did not éven contain

Gs :

‘

» 2)

the hourly rates but carried only We guaranteed

monthly salaries and the amount of ‘the semi-

monthly payment (R. 105, 106). A modified

sample payroll sheet, sent out shortly -thereafter

also contained the monthly salary but not the

hourly ‘rates (R. 114). This payroll sheet and

the accompanying instructions furnished further

evidence of the meaningless character of the spe-

cified hourly rates. Notwithstanding,the contract.

provision ‘that the “regular basie rate’? was to be

paid\for ve st 40 hours of a workweek and the ~

overtime Yate for all additional hours (R. /71),

respondent!s division superintendents ,were in-

structed to record 84 hours or less as regular time’

-worked and hours .in excess of 84 as overtime

(R. 111). These instructions realistically evalu-

ated the effect of the \employment contract

for, as stated by respon ent, the. ‘‘overtime

* *° * has no practical use unless. the

employee works in excess’ of 84 hours.in a single

workweek” (R. 316). And the designated reg-

ular rate has no greater’ practical use.

Other aspects . of respondent’4, compensation

practices demonstrate that the guaranty, rather —

than the specified hourly rate, was the governing

factor in the employmént contract. | |

made for absences Were pot calculated a

tine rates in an overtime e week or at: regular ratés

in a hon-overtime week, as they would have been

if the hourly rates were in fact employed as the

rate

“y

.138), and when payme

measure of compensation. Instead, the guaranty

was resorted to again to fix the amount of the

reduction. When employees were. paid on a semi-

monthly basis their pay was reduced by a pro

rata portion of the semimonthly salary (R. 110,

Ai changed to a bi-

weekly basis by a pro rata portion of the weekly

guaranty (R. 116, 150). net .

hus the methods of operation under respond-

ent{s employment contract clearly establishes the

guaranty as the principal effective element in

determining the wages actually paid and, there-

fore, as the measure df the statutory regular, rate.

It cannot be urged here that the guaranty does °

not control because a flexible overtime rate. of

not less than one and one-half times the basic

rate may account for the difference, in workweeks |

of less than 84' hours, ‘between the compensation

at, thespecified regular rate and the comperisa-

tion actually paid in accordance with the guar-

anty. Cf. Watling v. Belo Corp., 316 U. S.

624, 632. There are at least three obvious an-

swers to this argument. (1) The fixed overtime

rate employed by respondent, specifically negates

the use of a flexible overtime rate (R. 73, 103, 111-

112). (2) Evenif a fixed overtime rate were not em-

ployed the only means of ascertaining the amount

of overtime compensation payable-in workweeks of ¢

less than 84 hours would be by reference to the

guaranty and not to a hypothetical and undeter-

£,

ye > 17 e

\ . a,

‘mined overtime rate. (3) The payment of the guar-

anty in workweeks of less than 40 hours when no

overtime was worked preeludes the alloeation of

_ the additional compensation to overtime hours (R.

160-177). Since in actual prac tice the guaranty

determines the compensation paid for the first, 84

hours worked, it must be concluded that the guar--

anty necessarily furnishes the basis for determining

the regular rate of pay under: the Act. Walling v.

Youngerman-Reynolds, supra; Walling. v. ‘Har-

nischfeger Corp., supra. a

Even if we assume a situation contrary.to the

facts of ‘this case, in whichyfluctuating overtime

rates did account for all compensation paid, the

very artificiality of such rates would suffice ‘to

demonstrate their invalidity. Cf. Walling di

_ Helmerich & Payne, supra. The manner in which

x fluctuating/sovertime rate would operate illus-

trates its fiefional character. Under the terms of

respondent's guarantee, if an employee worked

only 41 hours he would be paid overtime at the

approximate rate of 6,600 percent of his specified

regular hourly rate; he would be paid at the ap-

proximate rate of 3,300 percent for two hours

“overtime, 2,200 percent for three.hours of over-

tirue, and at a decxtasjng overtime rate for addi-

tional hours of won (R. 73). This anomaly—a

decreasing ratio between the regular rate and the

overtime rate as the overtime hours increase—

dis regards not only the historiéal function which

b Pen ee ng

-™

4, Resa: ;

an overtime rate is intended to fulfill but also the

general practice in American industry today.'

A plan which depends upon a fluctuating over-

time rate for its validity is‘no less artificial than

so-ealled *‘x-plans’’ which incor porate a’ formula

for reducing a weekly salary to a regular rate.’

Under the x-pkins, application of the’ rates arrived

at by use of the formula will produce the prede-

termined salary which was ia fact paid. Such

plans have been consistently rejected by the

courts... Both the fluctuating overtime and ‘the

x-plans by ‘‘ingenious mathematical manipula-—

tions’’ | ( see Aebnerich & Payne case, 323 U. S.

41), apply varying rates to achieve a constant _

weekly wage for a workweek in excess of the |

statutory maximum. In the former a variable

overtime rate and a constant “regular”’ rate are

* See, for example, United States Bureau of Labor Sta-

- tistics, Bulletin No. 686, Union Agreement Provisions, 1942,

p. OL, partic ularly paragraphs A and’ B; and United

States Bureau of Labor Statistics, Bulletin No. 823, Union

pH ements in the Petroleum Refining Industry in Effect in >

D4, p- 7. ;

7 Under the x-plan the “regiilar” rate for employees em-

ployed more than forty hours per week is determined by

dividing their weckly earnings by the total number of hours

employed pius one-half of the number of hours employed in

excess Of 40 hours.

* Walling v. Helmerich & Pinter: 138 F. 9d 705 (CC. A.

10); Watkins v. Hudson Coal Co., 151 F. 2d 311 (GC. C. A. 3);

tastle v. Walling, 153 F. 2d 923 (C. C. A. 5); Asselta

v. 149 Madison Ave. Corp., June 17, 1946 (C.C. A. 2), 6 Wage

IIr. Cases 99; Patsy O71] & Gas Co. v. Roberts, 132 F. 2 R26 °

(C. C. A. 10); Seneca Coal & CokeCo. v. Lofton, 136 F, 2d

359 (C.C. A. 10).

; ‘amounts but toa

a forty-hour workweek because of overtime work

19 ,

manipulated’ to equal the weekly salary while in

the x-plan the formula utilizes a constant over-

time rate and a variable ‘‘regular”’ rate. In hoth-

instances the so-called regular rates are derived

in essentially the same manner. Under the fluctu-

ating overtime plan the “regular’’ rate is ‘com-

puted by dividing the’weekly salary by 40 plus

one and one-half times the number_of hours a

predetermined maximum. workweek exceeds 40.

Under the x-plan. the “regular’’ rate is computed.

by dividing the weekly wage by 40 plus one and.

yne-half’ times. the- number of hours actually

worked in exeessof 40. °

~'The-inherent deficiency of the x-plan was re-

cently described by the Circuit Court of Appeals’

for the Second Circuit as follows: “It does negate.

the statutory purposes to’ base employment upon

a regular unvarying weekly wage for a workweek

in excess of the statutory minimum hours and then

merely break that down into so-called regular and

overtime hourly rates by means of a formula so

the weekly wage

‘tually definitely fixed is seem-

ingly transferred ifito an hourly wage rate. hat

‘illusion of overtime pay: after

unless there is overtime not only in excess of the

statutory workweek but also in excess of the

agreed workweek.’’ Asselta y. 149 Madison Ave.

Corp. supra. Similaily, a fluctuating overtime —

}, . es

pian provides only an illusion of overtime com-

pensation for’ hours worked in excess of 40.

¢ x

rac]

"lie

C. Respondent's artificial wage plan. frustrates the statutory purposes

We. have shown that the specified regular and

_ overtime rates were artificial and ‘of no effect and

that the contract guaranty was intended to and

in faet did control the compensation received by

“respondent’s employees for the first 84 hours of a,

workweek. As we-have .seen, for these reasons

alone, the guaranty is the measure of the statutory

‘yegular rate. “But in. any event, since statutory

-* purposes would be defeated by respondent’s scheme

i . b

. the stated regular ‘ate can not be regarded as the

regular. rate under the statute. Cf. Helmerich &;

Payne case, supra, - ca :

In each of the three decisions of this Court pre-

viously cited (Walling v., HAmerich &. Payne,

supra; Walling Vv. Youngerman-Reynolds Hard-

wood .Co., supra; Walling v. Harnisch feger;

supra) the Court stressed the purposes of the

overtime requirements of the Act in invalidating —

the wage plans there involved. «As pointed out in

the Helmerich & Payne case, “The Congres-

sional purpose of enacting § 7 (a) was twofold:

(1) te spread employment by placing financial

pressure on the employer through the overtime:

* * *- and (2) to compensate

employees for the burden of a workweek in excess

of the hours fixed in the Act’? (323 U. S. at 40;