Evening star., 1947-11-30
High Court to Rule on
REGULAR Rate Of Pay


Government, Private Employers Face
Heavy Claims for Premium Wages
By Gerard D. Reilly
Department Of Justice lawyers were hard at
work this week preparing for argument IN
Aaron vs.. Bay Ridge Operating Co., the most
important case which has come before the
Supreme Court under the Wage-Hour Act
since the fateful portal-to-portal pay decision
in the Mount Clemens Pottery suit. The case
itself involves merely claim for additional
overtime compensation by group of longshore-
men in the Port Of New York. But inasmuch
as the question involved requires the court
to render an authoritative Interpretation Of
the term regular rate Of pay" result ad-
verse to the Government may cost the Treasury
and private industry hundreds of millions of
dollars, according to an estimate of Edward H.
Hickey, chief of the Trial Section Of the Claims
Division. whose ONCE has had general charge
Of the litigation in the lower Federal courts
At the time that Congress passed the wage
hour law, the number Of unemployed persons
In the country was about 100000. The %
hour work-week provision which found its
way into the act was response to the popular
demand for spreading employment. In order
to grant sufficient hexibility to industries
where shortages of particular skill or occa-
sional emergency situations might require 4
longer work-week, the trainers Of the legisla-
ton did not make employment in excess Of
the ceiling on hours q criminal offense. The
statute merely discouraged such deviations by
providing that any employe working more
than 40 hours a week should receive "one and
one-half times the regular rate at which he
is employed"
This language indicated that the overtime
pay provision applied not only to employees re-
ceiving the minimum wage but also to workers
in the higher brackets But as there are many
kinds OF employment where compensation is
not based entirely upon an hourly rate, the
problem of determining what the regular" rate
was in such cases has been troublesome both
to the courts and the Wage and Hour Division.
In some firms, for example, where employees
on weekly salary generally worked six days .
week, employers assigned an arbitrary figure
for each of the first 40 hours. Then, even
though this rate was multiplied by one and one
half on the sixth day, the total for the week
was approximately the same as had been paid
on the prior weekly salary. Although the Wage
Hour Division attacked this system as a hct-
tious bookkeeping device the Supreme Court
in the Belo dallas News case found no viola
ton of law involved.
Other employers have had practice of in
creasing take home pay by giving individual
or group bonuses. In factories, where this is
a CUSTOM the division has ruled that since
payment Of the bonus was regular" it was
not enough when employees in such plants
worked overtime to pay them the base rate
They were entitled, 1t was held, to have the
bonuses apportioned over q 40-hour period In
order to arrive at the rate for which time and
one-half was to be paid. The courts were
hospitable to this ruling
The litigation now before the court repre-
sents an extension Of this idea. Many collec-
tive agreements contain clauses which make
time and one-hah mandatory for work done
on holidays or on night shifts. Such contracts
have been in effect in the stevedoring industry
for some years. Some lawyers developed the
notion that II . longshoreman worked the
whole or part of his first 40 hours on q night
shift and then was given an extra days work,
ne should be compensated, not 1T the rate Of
time and one-half times one but one and one
half times one and one-half The stevedorinR
Arms refused to agree to this proposal for pyra-
miding overtime and . number Of actions for
back pay, with double damages were COM
menced.
Almost all these claims arose out of wartime
employment, when the War Shipping Admin
lstration had cost-plus contracts with the steve
doring companies. This meant that II these
employers were wrong in their construction Of
the statute, the Government would have to
foot the bill. As the United States was the
real party in interest, Marvin Taylor, special
assistant to the Attorney General, was desig-
mated to defend the suits. He was successful
In obtaining q dismissal by Judge Rifkind in
the Federal Court for the Southern District
OF New York In an opinion rejecting the theory
Of the action. The United States Court in
Puerto Rico took . contrary view. A third
case. begun by the CIo longshoremen on the
West Coast, has been taken under advisement
by Federal judge in San Francisco.
The New York case, however, was taken to
the Circuit Court of Appeals where Judge
Rifkind's decision was reversed in an opinion
written by Judge Jerome Frank, former SEC
chairman. His reasoning was that the straight
time rate nxed by collective bargaining was
not the actual regular rate and that the extra
pay for Sunday, holiday and night work should
be averaged with the straight time earnings.
The significance Of this decision to other
industries can readily be understood by ref
erence to the practice among some OF the
skilled trades Of having . work-week shorter
than 40 hours nxed by collective agreement.
roi eAaAhpie, IL cIdlISMan was 10 receive %
an hour straight time and time and one-half
for all hours in excess Of &c. the implications
of this decision are that the overtime rate after
40 hours is not So but one and one half times
$2.l0, as the premium pay for the hours over
SO would have to be included in the computa-
ton Of the regular rate. Moreover, because
the policy of the War Labor Board in awarding
fringe increases" has been carried on in many
industries as q result Of collective bargaining.
a shift difierential rate may now be part Of
the regular rate.
An interesting feature of the Aaron case was
that Joseph Ryan, president of the Interna-
tional Longshoremen, who negotiated the con.
tract which created the difhculty under tho
statute, testified that 1t was the intent Of the